Annual Report • Mar 31, 2023
Annual Report
Open in ViewerOpens in native device viewer
This report has been translated into English from the original Italian version, in case of doubt the Italian version shall prevail. PDF courtesy copy. This version has been prepared for convenience of use and does not contain the ESEF information as specified in the ESEF regulatory technical standards (Delegated Regulation (EU) 2019/815).
Chairman and Chief Executive Officer Mario Rizzante
Chief Executive Officer Tatiana Rizzante
Filippo Rizzante Daniele Angelucci Marco Cusinato Elena Maria Previtera Patrizia Polliotto (1) (2) (3) Secondina Giulia Ravera (1) (2) Francesco Umile Chiappetta (1) (2)
President Ciro Di Carluccio
(1) Directors not invested with operational proxies (2) Independent Directors according to the Corporate Governance code drawn up by the Committee for Corporate Governance (3) Lead Independent Director
| ECONOMIC FIGURES (THSD EUROS) |
2022 | % | 2021 | % | 2020 | % |
|---|---|---|---|---|---|---|
| Revenue | 1,891,114 | 100.0 | 1,483,803 | 100.0 | 1,250,191 | 100.0 |
| Gross operating income | 340,312 | 18.0 | 262,784 | 17.7 | 207,936 | 16.6 |
| Operating income | 285,473 | 15.1 | 209,283 | 14.1 | 169,531 | 13.6 |
| Income before taxes | 268,695 | 14.2 | 213,279 | 14.4 | 162,054 | 13.0 |
| Group net income | 191,016 | 10.1 | 150,673 | 10.2 | 123,598 | 9.9 |
| FINANCIAL FIGURES (THSD EUROS) | 2022 | 2021 | 2020 | |||
| Group equity | 970,291 | 813,269 | 675,039 | |||
| Non-controlling interest | 1,579 | 2,625 | 918 | |||
| Total assets | 2,228,150 | 1,857,597 | 1,506,568 | |||
| Net working capital | 46,590 | (42,614) | (21,565) | |||
| Net invested capital | 901,298 | 622,683 | 517,296 | |||
| Operating cashflow | 184,573 | 207,578 | 229,028 | |||
| Net financial managerial position (*) | 70,572 | 193,212 | 158,661 | |||
| DATA PER SHARE (EUROS) | 2022 | 2021 | 2020 | |||
| Number of shares | 37,411,428 | 37,411,428 | 37,411,428 | |||
| Operating income per share | 7.63 | 5.59 | 4.53 | |||
| Net income per share | 5.13 | 4.03 | 3.30 | |||
| Cash flow per share | 4.93 | 5.55 | 6.12 | |||
| Shareholders' equity per share | 25.94 | 21.74 | 18.04 | |||
| OTHER INFORMATION | 2022 | 2021 | 2020 | |||
| Number of employees | 13,467 | 10,579 | 9,059 |
2022 was very positive for Reply, both in terms of turnover growth and margins. These results were possible thanks to our exclusive focus on new niches of technological specialisation and the resilience of our network model which allowed us to react, adapting almost instantly, to an epochal transformation.
The last two years, in their complexity and difficulty, have given rise to an incredible acceleration in the introduction of innovation in all sectors. Even the more traditional and conservative sectors have reacted to the pandemic, investing in technology and digitising processes and services. This new way of living and working is irreversible and, although dramatic for some, it opens up new opportunities for growth and development for companies like ours.
In the near future, industries such as Automotive will continue to evolve towards connected systems, self-driving vehicles, and widespread electrical distribution networks. The Banking and Insurance sector will also have to evolve its consolidated models based on the digitisation of assets and the ever-increasing centrality of the customer, investing in technologies such as the cloud and AI. Advanced sectors in
the use of digital technologies, such as Retail, will further invest in data-based behavioural analysis, customer relationship platforms, and the design of new interfaces based on AR/VR.
High-speed communication software infrastructures, electronic commerce, new digital experiences, and a strong push towards artificial intelligence will represent the founding elements of the economy in the coming years. Automation, robotics, and the Internet of Things will change not only products, but also the way they are conceived and manufactured, significantly modifying factories and production, distribution, and after-sales processes.
Sustainability will be another area that affects all sectors, becoming increasingly predominant in the choices of companies. At Reply, we feel a strong responsibility towards future generations and are committed to reducing our emissions in the coming years as well as offering consultancy and technological services to support companies in the transition towards net-zero.
The future remains still uncertain, with the war on the eastern borders of Europe increasing the tension in the main markets.
The coming months will be crucial for the recovery of the economy and our commitment will be total in supporting our customers in using new technologies to emerge from the crisis more quickly and seize the new business opportunities offered by an increasingly digital, connected, and automated world.
Today more than ever, agility and speed are key variables for the success of any company. Our ability to be competitive will be closely linked to the ability to experiment and innovate, learn quickly from our experiences, and then bring new offers to the market just as quickly.
The results obtained until now combined with the financial solidity of our group allow us, in any case, to face the challenges that the market will pose with serenity.
Mario Rizzante
Reply is a group specialised in consulting, system integration and digital services, dedicated to creating innovative solutions based on new communication channels and digital media.
With its network of companies, Reply supports large industrial groups in defining business models enabled by new technological and digital communication paradigms, such as Artificial Intelligence, Cloud Computing and the Internet of Things (IoT). With distinguished technological and market skills, Reply is able to conceive, design and develop unique solutions to innovate its customers' processes, services and products.
Reply is characterised by:
With over 13,000 employees (December 31, 2022), Reply operates with a network structure made up of companies specialised in the field of processes, applications and technologies, constituting excellence in their respective fields of expertise.
For Reply, understanding and using technology means introducing a new enabling factor to processes, thanks to an indepth knowledge of the market and specific industrial implementation contexts.
Reply designs and creates software solutions aimed at responding to the needs of the company's core business, in several industrial sectors.
Reply optimises the use of innovative technologies, creating solutions capable of guaranteeing customers maximum efficiency and operational flexibility.
Strategy, creativity and consulting are three elements that feed each other and shape each other in each Reply project, providing concrete and effective solutions to the challenges of each sector.
Strategic consulting, communication, design, process, and technology consulting; System Integration to make the most of the potential of technology, combining business consulting with innovative technological solutions with high-added value;
Digital Services based on new communication channels and digital trends.
At Reply we combine a strategic and creative approach with the opportunities offered by the most advanced technologies, to obtain concrete results from day one.
Thanks to its network model, Reply combines a deep knowledge of industrial sectors with the ability to support customers' technological evolution.
In 2022, Reply solidified its role as a partner of the main automotive groups in the evolution of production and logistics activities, as well as in the development of services onboard the vehicle through the design of advanced connectivity systems. In a highly competitive context due to the entry into the market of new players, the Group is supporting the main car manufacturers with integrated projects covering all phases of the supply chain
Reply's support ranges from the management of raw materials to the programming of production, from logistics to distribution and after-sales phases. Taking advantage of the proprietary platforms (Lea Reply for logistics and Brick Reply as a Manufacturing Execution System) and its strong skills in the cloud computing field, the Group is contributing to the transformation
Reply
of the entire supply chain with a holistic vision and personalised solutions.
The pervasiveness of the ACES paradigm (Autonomous, Connected, Electric, Shared) is increasingly conditioning the automotive sector, pushing it towards greater sustainability of industrial activity and vehicles themselves. An important development area concerns the design of autonomous and semi-autonomous driving systems, where Reply sits alongside the manufacturers in designing architecture and application solutions.
Reply is also active in the development of V2i connectivity platforms (Vehicle to Infrastructure) that exploit innovative endto-end architectures for the management of the next generation of integrated services with traffic and electric charging infrastructures. With its cross-industry skills, the Group supports the dialogue between car manufacturers, utilities and third-party
players in the creation of advanced mobility ecosystems.
Integrating data-driven marketing solutions, augmented/virtual reality and 3D systems, Reply is supporting the sector in the digitisation of pre-sales and sales processes. Virtual showrooms, e-commerce, and open finance solutions guide the potential buyer in relation to the configuration of the model, the subscription of value-added services, and requesting instant credit.
Reply has consolidated experience in the energy & utility sector, with its knowledge of the main market dynamics and the ability to design, implement and manage solutions for some of the main operators in the sector. This ranges from energy & demand management to the management of new mobility services and charging of electric
vehicles, up to smart grid solutions, asset management, forecasting and generation from renewables.
In 2022, the trend towards a global energy crisis that began to emerge during the pandemic, has accelerated the transition by energy producers and distributors towards a more sustainable and secure energy system, Driven by global carbon neutrality objectives, the main operators are investing in technological innovation projects, to become increasingly resilient.
Leveraging skills and solutions based on the cloud, IoT, big data, advanced analytics and artificial intelligence, Reply is supporting operators in developing new tools to evolve energy component forecasting and monitoring processes, optimise operations, and activate new services and interaction patterns with consumer and enterprise customers.
Reply supports the main European players in the banking and insurance sector, combining a distinctive specialisation in the most relevant technologies, with significant knowledge of the regulatory framework, market dynamics and the evolving needs of operating and business models. In 2022, its leadership has been consolidated in European markets, by expanding its presence in Germany and France.
In addition to regulatory developments, technology has been the main driver of change in recent years, obtaining benefits in terms of the income statement and the balance sheet. In fact, financial institutions are increasingly becoming "tech companies" and to be successful they must innovate the entire value chain they manage (sales/ distribution, operations, procurement).
Artificial intelligence, digital assets, and re-platforming of legacy infrastructures are key themes in the investment plans of banks, insurance companies, asset managers and other financial operators. Cloud computing plays the role of supporting innovation projects. This ranges from payments to wealth management, from customer onboarding to process optimisation and efficiency.
Reply's activity in the government context is strongly oriented towards the design and implementation of an interoperable public administration, with the integration of big data and open data, artificial intelligence and deep learning, cloud and new architectures. The technologies are applied to improve the relationship with users and govern internal business processes.
In the healthcare and pharmaceutical fields, Reply has developed a suite of services based on territory-based healthcare, combining traditional skills in healthcare services (cost optimisation, process digitisation, electronic health records, management of healthcare materials and logistics), with skills in life science innovation, and solutions based on artificial intelligence at the service of new areas of bioinformatics
(genomics, radiomics, predictive and precision medicine, digital pathology). It has also strengthened its offering to hospitals and telemedicine services and products, implementing its vision on the patient journey and health population management, improving the efficiency of monitoring and treatment processes from a connected care perspective and through promoting the "One-Health" model. The model aims to enhancing the possibilities of treatment and prevention deriving from the connection between data, technologies and applications of the health sector with those of the pharmaceutical, environmental, food and welfare industries.
In 2022, Reply developed solutions aimed at the logistics processes of various industries, including fashion, retail, automotive, healthcare and food & beverage. These solutions specialised in the management of flows of raw materials, finished products, fleets and automated warehouses. Reply's logistics expertise is recognised by several analysts, including Gartner, which included the LEA Reply platform in the "Magic Quadrant for Warehouse Management Systems 2022".
Reply is supporting customers in the design and rollout of new distribution methods for e-commerce and quick-commerce, thanks to the implementation of micro-fulfilment centres and "just in time" processes. This support also includes the adoption of electric vehicles, robots and drones in intra-logistics contexts, enabled by the Internet of Things.
In 2022, the areas of intervention have been further extended to sustainability and de-carbonisation of the supply chain, omnichannel models, and the adoption of flexible working models in the logistics and transport fields. Thanks to partnerships with leading industrial and logistics companies, experiments in the field of computer vision, autonomous goods delivery and wearables have also been strengthened.
The digitisation of industrial procurement, production and maintenance processes is increasingly transforming production plants into open and flexible ecosystems, capable of improving management communication flows and supply chains, obtaining benefits of cost reduction and maximising results.
Following this trend, in 2022 Reply supported numerous European industrial groups in the process of adopting specific cloud-native Digital Manufacturing Platforms. Reply has supported customers in a number of other relevant areas in relation to this complex transformational process: Procurement; control and planning systems based on the new cloud-native generations of ERP, MOM and MES; production planning and control; and in the integration with supply logistics networks.
Reply's skills extend from planning and control to product lifecycle management, with significant experience in implementing solutions from partner vendors such as Microsoft, Oracle and SAP, and from its own portfolio of platforms and accelerators,
Reply
such as Brick Reply (MES) and Axulus Reply (Industrial Internet of Things). Particular attention is dedicated to the development of Industrial IoT solutions, as well as underlying new generations of connected products and services.
In 2022, retailers invested significantly in evolving business models, driven by pressure on margins due to rising costs (energy, transport and human resources). Customers have been price-sensitive but at the same time have shown a need for personalised experiences, high-quality services and fast delivery.
Reply has been involved in several initiatives to address these challenges by creating consistent and personalised omnichannel experiences and supporting relevant brands in the implementation, launch and management of engagement and sales platforms.
Reply is also supporting operators in this sector to understand the potential of the new Web3 models. Leveraging its technical capabilities and industry knowledge, Reply has developed several accelerators, including a virtual point of sale solution in the metaverse connected as a new channel to customer engagement platforms. This "showcase" in the metaverse is allowing retailers to gain a better understanding of the future dynamics in their industry.
In recent years, as hyperscalers were progressively expanding their presence in the traditional telco space with business models based on innovative technological capabilities, players in the industry have made massive investments in conventional assets, without redefining the underlying technologies. To overcome this trend, Reply is now supporting telcos in their transformation to software-based operators, starting with the redefinition of their technological foundations and creating cloud platforms capable of managing the entire technological stack, from network access to front-end channels, and in the definition of new business models enabled by composable architectures.
The evolution of the Telco market requires not only the massive adoption of technologies such as Artificial Intelligence, Cloud and Edge Computing and the Internet of Things, but also the renewal of Business Support Systems (BSS), so that they can be integrated into a technological context oriented towards value-added services where Telco operators become increasingly Service Providers. Reply has significant specialist experience in these areas and has also built a strong positioning not only on BSSs but also in infrastructure areas, specializing in Network Engineering, Network Operations and Network Testing & Validation.
In the Media sector, publishers are reacting to the profound crisis of traditional channels, which is leading to a search for innovative digital solutions and new products that
can satisfy customer preferences. Reply is supporting relevant European players in the process of converging offers, contributing to the design and implementation of new bundles made up of fixed/mobile broadband connectivity, value-added services and premium editorial or TV content.
Over the years, Reply consolidated its leadership in different markets by combining a constant vocation for innovation with an offer structured on the main pillars of digital evolution.
Artificial Intelligence is the technological area that saw the greatest acceleration in 2022. The market's attention on the results of generative AI systems, such as Dall-e and ChatGPT, and the search for efficiency has prompted companies to deepen their knowledge and adopt systems for the automatic creation of images, texts, and videos. Reply capitalised on the work done in the last two years on leading platforms such as GPT-3, offering customers the possibility of using artificial intelligence as an accelerator of both business processes and operations.
Reply has also consolidated its experience in the field of artificial intelligence applied to industrial contexts with specific projects related to quality control, predictiveness, cybersecurity, and automation of operational tasks. This is supporting the
introduction of efficient and flexible business processes, in a concept of "hybrid work".
Projects combining machine learning and natural language processing have been developed in the field of financial services, e.g. in the field of fraud detection and for real-time credit score/rating calculation. In the healthcare sector Reply has developed specific applications based on AI models aimed at the analysis of radiological images, drug research, and personalised treatment plans.
In the field of customer interaction, AI technologies have been used to analyse data or customer sentiment, but above all, to create the intelligence component linked to digital humans. In 2022, the development of digital human beings guided by artificial intelligence has enriched a catalogue of solutions aimed, in particular, at customer relationship management.
Reply research "Generative AI", in collaboration with PAC (Teknowlogy Group) Scope: Italy, Germany, UK, USA, Brazil, France, Belgium, China, India, Netherlands
The development of edge AI solutions, which involve running artificial intelligence algorithms directly on edge devices instead of sending data to the cloud for processing, has also seen a significant increase in 2022. In recent months, Reply has participated in the development of edge AI solutions for the manufacturing and energy/utilities sectors.
A particular field of artificial intelligence is the automation applied to business processes. The insurance sector has been among the most active in this regard, particularly in the automation of back offices and document management services. Thanks to a large ecosystem of partnerships with vendors and start-ups, the creation of accelerators allowed Reply to support customers in areas where automation makes it possible to deal with enormous amounts of data. This includes extracting key information and reacting
quickly, even in an automated manner, such as in procurement, supply chain, and risk management.
The push towards hyperautomation has also seen the enhancement of AI-powered software engineering. Developers are benefiting from greater efficiency and reliability of the code, which is completed, evaluated, and made secure in near-real time by automatic systems. Therefore, artificial intelligence is increasingly intervening in the development, testing, and deployment phases of software solutions, improving the efficiency of teams.
Reply
FinOps Other investments in Cloud Operations Management Other investments in IT Operations Management
Source: Reply research "Cloud Governance: Focus on FinOps", in collaboration with PAC (Teknowlogy Group) Scope: Italy, Germany, UK, USA, Brazil, France, Belgium, China, India, Netherlands
Cloud computing is the architectural reference in all the solutions developed by Reply for its customers. With significant experience in the design and deployment of complex multi-cloud and hybrid architectures, Reply supports companies operating in several industries like manufacturing, financial services, automotive, utilities, and retail in the migration from legacy systems to the cloud and launch of innovative cloudnative projects.
Global strategic partnerships with AWS, Microsoft, Google and Oracle support Reply's ability to maintain and evolve solutions and services in the Infrastructureas-a-Service, Platform-as-a-Service and Function-as-a-Service models. Reply's proven ability to work with multi-platform
architectures allows companies to easily integrate proprietary cloud-native platforms and Software-as-a-Service offered by global partners such as Adobe, Salesforce, and SAP.
As part of its commitment to sustainable technology, Reply is investing in GreenOps methodology and technologies like edge computing, which brings computation and data storage closer to the user, resulting in reduced data transfer and lower energy consumption. This move towards edge computing has opened up new opportunities for the development of innovative applications and services, with faster response times and improved user experiences.
In 2022, Reply consolidated its expertise in fields like observability and site reliability engineering (SRE) and of the CAFFE (Cloud
Reply
Adoption Framework for Enterprise) structured cloud adoption methodology. In addition, Reply strengthened its ability to design, implement and evolve cloud governance and FinOps solutions, helping optimise investments and recurring infrastructure costs for customers.
In the last two years, to deal with a continuous increase in cybercrime and geopolitical tensions, Reply has responded with a significant expansion in its ability to assist its customers in the protection, security, and compliance of applications, infrastructures, data, and IoT devices.
In the area of detection and response to cyber threats, Reply has developed significant experience in setting up systems such as Endpoint Detection and Response (EDR) and Extended Detection and Response (XDR), providing customers with high reaction speed and risk containment.
With the adoption of the DevSecOps paradigm, the joint Reply-customer development teams instil the culture of IT security in the application design and development cycle. Furthermore, the automation of test activities supported by artificial intelligence strengthens the reliability of the code.
In 2022, in addition to the technical skills of information risk management, Reply consolidated a strong knowledge of the legal and regulatory context. In the enterprise and consumer sectors, particular attention was paid to the world of data
Cybersecurity Automation Market Growth, 2022-2026
Reply research "Cybersecurity Automation", in collaboration with PAC (Teknowlogy Group) Scope: Italy, Germany, UK, USA, Brazil, France, Belgium, China, India, Netherlands
protection and privacy, as well as data from IoT devices.
Through its global network of communications agencies and specialised technological companies, Reply offers a range of digital solutions that help organisations build exceptional digital experiences for all their stakeholders, including customers and employees. From defining brand strategies to creating omnichannel experiences and deploying underlying processes, Reply leverages its distinctive capacity to link technology, data, and creativity, with solid methodologies and relevant partnerships with major vendors.
By supporting the design of engaging "phygital" user experiences that are consistent with brands' values, Reply helps companies create flexible and modular digital experience platforms (DXP) and sales solutions that can manage content, communications, and the commerce of goods and services. Reply's technological capacity supports companies in adopting headless architectures, where the digital experience is combined with efficient order management and delivery processes, regardless of the goods delivery channel.
To ensure that both customers and operators have complete visibility into their operations, Reply integrates customer data platforms (CDP), ERP, and supply chain systems, creating a fluid, people-centric, and hyper-personalised brand experience. Partnerships with leading CRM solution
providers allow companies to enhance customer interactions with advanced analytics solutions leveraging zero-party and first-party data while safeguarding customer privacy.
For Reply, one area of particular focus is the adoption of artificial intelligence and machine learning to drive greater personalisation in digital experiences, boosting engagement and driving sales. On top of this focus is the integration of social media and messaging systems into digital experience platforms. By enabling customers to interact with brands through multiple channels and touchpoints, Reply helps clients create a seamless and cohesive brand experience that deepens customer loyalty.
In 2022, Reply supported clients in the entertainment, fashion, and gaming sectors with the launch of digital experiences based on Web3 pillars such as NFT, spatial computing, mixed reality, 3D, and blockchain. As the "Decentralised Web" continues to evolve, companies and consumers will increasingly experience immersive experiences in the metaverse. The development of more secure and flexible digital identities will be supported by the adoption of avatars and 3D photo-realistic digital humans interacting with natural voices.
Source: Reply study "Digital Experience Trends in 2023"
For Reply, IoT is one of the most mature technological domains, thanks to significant experience in both the industrial and consumer fields. The widespread diffusion of sensors is enabling new business models, especially in the enterprise environment. The market is seeing a growing diffusion of connected products and devices, supported by cloud-based services and increasingly sophisticated IT security systems, again with links to artificial intelligence.
The growth of edge computing has made possible a new era of connected products, primarily cars and industrial vehicles. Connected vehicles make it possible to improve safety, energy optimisation, comfort and onboard entertainment. They are also an important first step towards autonomous driving.
In manufacturing contexts, Industrial IoT systems are used to collect data on machinery, company fleets and connected products, to favour the predictability of maintenance, the improvement of production processes and the efficiency of logistics systems They can also gather useful information for the design of new products and services.
In 2022, in addition to developing numerous projects in the manufacturing, energy and insurance fields, Reply strengthened the laboratories dedicated to the safety and testing of connected products. Reply also continued the development of the Breed Reply incubator, operating globally in the selection of internationally promising startups and scale-ups in the Internet of Things and deep-tech space.
Reply's in-depth knowledge of the industries in which its customers operate ensures it can design, implement and evolve numerous solutions featuring a rapid time to market and broad customisation flexibility.
Axulus Reply is the Reply solution for cloud-based Industrial IoT operations management, which provides different predefined frameworks on specific use cases for the digitisation of manufacturing companies. The tool offers a modular approach, with templates and libraries that allow companies to identify possible scenarios, simulate the added value, configure the most suitable technical solutions and implement them through the adoption of scalable workflows, up to the production environment.
Brick Reply is the platform dedicated to the digital transformation of industrial operations. Thanks to its micro-service architecture, a set of vertical applications that can be used on the move, and the strong connectivity capacity with machinery and sensors, Brick Reply provides a flexible tool for supervising and controlling production activities. The platform allows predictive management of operations, exploiting artificial intelligence techniques applied to data collected from the field and managed in the cloud. Among the various innovations introduced in 2022, connectors were implemented to link the main ERP solutions on the market, primarily SAP 4HANA and Microsoft Dynamics 365 solutions.
Reply
China Beats Reply is Reply's marketing intelligence and social listening platform dedicated to understanding the Chinese market and its vast data ecosystem. It connects to all major Chinese e-commerce platforms, search engines and social media. News streams, patent databases, and publicly available open data sources are also integrated. The platform collects relevant data related to different industries, including automotive, fashion, consumer goods, and technology.
Discovery Reply is Reply's Enterprise Digital Experience Management platform, which centralises the management of images, video, audio, documents and data in a secure, fast and complete way it maintains full control over the entire life cycle of digital assets and products, from loading to enrichment to distribution on the different channels. Integrating artificial intelligence technologies simplifies the management of content classification processes with the aim of making it easily searchable and improving team collaboration in terms of workflow effectiveness and efficiency.
LEA Reply is the Reply platform designed for making supply chains efficient, agile and connected. It is built as a suite of micro-services that cover different supply chain execution processes, including warehouse management, inventory, distribution, delivery and store logistics. LEA Reply integrates AI technologies, robotics, machine learning and IoT with a roadmap of constant extension of the service offerings.
For example, the new "Resource Planning" service is dedicated to the efficiency and optimisation of available resources.
Pulse Reply is a data-driven insight solution. The platform combines data science and marketing intelligence into one dashboard and includes advanced data modelling and visualisation capabilities. Pulse Reply is designed to allow users to monitor business performance and support forecasting. With the integration of machine learning algorithms, Pulse Reply can automatically notify users when changes in a KPI are detected, as well as providing evidence for the reasons behind these changes and explaining their potential impact.
Sonar Reply is the Reply platform dedicated to data-driven trend research, developed in collaboration with the German Research Centre for Artificial Intelligence (DFKI). The solution was designed to offer a user experience similar to that of search engines and is intended not only for data analysis professionals but also for researchers and journalists. The core element of Sonar Reply's architecture is an ever-expanding database that currently includes over 40 million indexed scientific publications, patents, expert blogs, news articles and other documents.
Conceived as an Enterprise Social Network platform to facilitate communication and collaboration within companies, TamTamy now supports several projects dedicated to training and human resource management. Among the specialisations, some TamTamy versions are dedicated to sales networks, online event management and the creation of supplier portals. In 2022, the "Digital Experience Platform" cloud solution was launched for the construction of secure, fast and easy-to-manage public sites using a no-code visual editor.
Ticuro Reply enables processes to support prevention and continuity of care even remotely, according to the connected care model for digital healthcare. Delivered in SaaS mode, it takes advantage of IoMT (Internet of Medical Things)
technology to connect to medical devices, multi-parameter and environmental wearable sensors greater and continuous collaboration between patients, caregivers and healthcare staff from remote locations, both in the prevention phase and the more critical treatment and rehabilitation phases.
X-RAIS Reply is Reply's artificial intelligence solution to support radiological diagnosis processes through deep learning. It is specialised in different diagnostic methods and specific anatomical regions and can support medical diagnosis processes through medical techniques of image recognition. In 2022, the training of the identification model of micro-calcifications in mammography was completed.
To offer the most suitable solutions for the different needs of companies, Reply has established important partnerships with the main global vendors. In particular, Reply presents the highest level of certification on leading enterprise technologies from partners such as Adobe, AWS, Google, Microsoft, Oracle, Salesforce, and SAP.
The main areas of collaboration between Adobe and Reply are marketing automation, digital information management and digital asset management. In these domains, Reply develops solutions that allow optimised targeting, personalisation, and optimisation of content, while ensuring efficient marketing operations and high-level user experience.
The growing geographical coverage of the Reply/Adobe partnership (Italy, Germany, United Kingdom, and USA) allows client companies to have a single partner capable of integrating application developments, customisations of Adobe products and knowledge of different industries. With significant experience on the Adobe Experience Platform, Reply is an Adobe Platinum Partner and AEM Specialised Partner at the EMEA level.
Reply has been confirmed by AWS, for the ninth consecutive year, in the restricted global circle of Premier Consulting Partners. Particular experience has been gained over the years in the cloud migration of large company systems. Reply offers cloud computing services, content processing and Reply
distribution and end-to-end support ranging from the creation and integration of custom applications and platforms to 24/7 maintenance and management services.
Reply has certified skills in Data & Analytics, DevOps, Oracle, Migration, IoT, Industrial Software, SaaS, Machine Learning, Financial Services, Security, Retail and Energy, as well as those related to the Managed Service Program and Well-Architected Program. In 2022, AWS recognised Reply as the 'best system integrator' and 'best security partner' for the EMEA area.
Reply consolidated its partnership with Google at the Premier level through specialised companies operating in Europe, the United Kingdom and the USA, collaborating with the Google Ads and Google Cloud divisions. With Google Ads, Reply has obtained certifications in Search, Display, Video, Shopping, and Apps.
In relation to consulting services and system integration on Google Cloud technologies, Reply has been recognised for its specialisations in Machine Learning, Infrastructure, Cloud Migration and Expertise in Conversational Design, Data Lake Modernisation, Data Warehouse Modernisation, Application Modernisation, and Security Analytics & Operations. Through its partner companies of Google Cloud, Reply has been confirmed as part of the Managed Services Provider initiative for 2023.
Reply is a global partner of Microsoft, thanks to a large network of highly specialised companies in terms of industries and technologies. It operates in Europe, the United Kingdom, the USA and Brazil. Reply designs, builds and distributes solutions on the three Microsoft clouds: Azure, Microsoft 365 and Dynamics 365. In 2022, based on close collaboration and delivered projects, Reply obtained the status of Microsoft Globally Managed Partner, becoming one of the few Global Microsoft partners to earn all Microsoft Solutions Partner designations in the new Microsoft Cloud Partner Program.
Over the years, the collaboration between Reply and Microsoft developed significantly in different fields: from migrations to the cloud, to the development of solutions based on IoT, metaverse, artificial intelligence and robotics. Furthermore, it is built upon a strong specialisation in the implementation of modern work platforms to help companies support rapidly evolving hybrid working models.
Reply has seen a growing recognition of "Service Expertise" for the OCI and Oracle Cloud Application offerings, confirming itself among the leading Oracle Cloud Service Providers in the world, and representing a point of reference for managed services on Oracle Cloud Infrastructure.
Reply also stood out for its time to market of the new Oracle Lakehouse platform, being nominated among the
Oracle strategic partners for the projects implemented on this solution. The Group has developed several strategic projects based on Oracle Xstore, CX Unity and marketing automation solutions. It has also confirmed its leadership in the ERP and SCM fields thanks to several international deployments based on ERP Cloud and Netsuite technologies.
Reply is a Salesforce Consulting Partner with certifications and experts in Europe and the USA. Reply's skills cover the entire Salesforce offer: Sales, Service and Marketing, Commerce for B2B and B2C, Integration with Mulesoft, Analytics with Tableau and Collaboration with Slack. Furthermore, Reply's experts work with various Salesforce extensions for CPQ, Field Service Lightning, Pardot and Einstein AI.
Reply is one of the few Salesforce experts in the world in the automotive sector and has been recognised as an Automotive Cloud Launch Partner by Salesforce. In addition, Salesforce awarded Reply "Implementation Partner of the Year" for the DACH region in 2022 and "Community Impact Partner" for its commitment to equality, diversity and sustainable development, as well as its active participation in the Salesforce Talent Alliance.
In 2022 Reply extended its SAP offer to the US market, becoming one the most competent global SAP service providers, and recognised as a leading innovator among over 20,000 SAP partners. This development led to the victory of the SAP Pinnacle Award 2022 in the Customer Excellence category, which recognises Reply's outstanding contributions as an SAP partner. In addition, Reply received the "SAP Quality Award" for the ninth consecutive year in recognition of the quality and relevance of its activities.
Reply is investing in the new SAP sustainability portfolio and its integration into the entire digital value chain. Together, Reply and SAP are collaborating in the IT Sustainability User Group, an initiative started in 2022 by Reply and co-founders like SAP.
Our culture focused on technological innovation and a highly flexible structure allow us to anticipate market evolutions and interpret new technological drivers.
Reply
33
In 2022, Reply activated different international working groups between IT professionals, user experience experts and industry specialists. Their research and development activity allows them to monitor innovations on the market and accelerate new solutions' time to market.
The metaverse and digital human technologies are rapidly maturing, allowing companies to re-design their interaction with customers. To support customers from different sectors in exploiting these new virtual worlds, Reply leverages its significant expertise in real-time 3D, artificial intelligence and blockchain, as well as international experience with Reply Game Studios in games and augmented, virtual, and mixed reality applications.
Reply started various initiatives to help its customers adopt the different technologies and new operational and organisational
methods needed to establish themselves on the main platforms of the metaverse. These areas include 3D modelling, 3D reconstruction of environments, custom world creation, branded experiences, avatar creation, NFTs, and other resources based on extended reality technologies.
Reply is also developing distinctive experiences in the AI-powered Digital Humans area, with customised virtual presence solutions based on real-time tracking and the use of advanced natural language interpretation and generation models. These solutions will support the next generation of brand ambassadors and digital assistants for their stakeholders, including customers and employees.
The technologies that lay the foundation for digital assets, such as blockchain, are growing in importance at an international level, offering new opportunities in various sectors and primarily within the financial industry, both at the banking and insurance level and in more specific areas of asset & wealth management.
Payment tokens, security tokens, utility tokens and NFTs are the main kinds of digital assets. Reply has developed a deep understanding of the specific properties of each asset, allowing its customers to navigate this new phenomenon and supporting them in building journeys and innovative elements in their industries. Reply's consolidated experience in the key elements of this technology (distributed
ledger technology and blockchain) and in the underlying strategic and operational dynamics, enabled it to structure a continuous observatory on digital assets at an international level and to build accelerators that can support and accompany its customers in the definition and subsequent implementation of new services and business models.
Thanks to the global drive towards ever more sustainable vehicles, electric mobility is rapidly gaining momentum as a solution to everyday transportation needs. With advances in battery technology and a growing charging infrastructure, electric vehicles are becoming more accessible and affordable.
Carmakers are collaborating with major players in the energy & utilities sector to create connected ecosystems, in which cars and commercial vehicles can use the potential offered by "Vehicle to Infrastructure" connectivity, optimising their ecological footprint and at the same time increasing the reliability and durability of electric and hybrid mobility.
Reply founded international working groups focused on the development of solutions for charging networks, bi-directional charging, battery lifecycle management and e-mobility platforms. Together with major carmakers, it is advancing autonomous driving experimentations, leveraging its distinctive capabilities in AI, cloud, and edge computing.
The production and use of computer devices and systems are energy intensive and have a significant impact on the environment. It is important to consider the sustainability of ICT throughout its life cycle, from production to disposal, and in terms of hardware and software. Measuring energy consumption and applying recognised standards such as the GHG Protocol ICT Sector Guidance to assess the impact of ICT are crucial steps towards improving sustainability in the sector.
By focusing on energy-efficient programming and developing best practices in software engineering, cloud and web design, Reply is taking a proactive approach to mitigate the environmental impact of ICT. Matcha Reply, Reply's proprietary methodology for managing sustainability in projects, follows the principle of integrating sustainability issues into the planning, execution and monitoring of ICT projects, improving their environmental and social impacts and promoting long-term sustainability.
Reply also believes that addressing sustainability in ICT requires collaboration between companies, governments and other stakeholders and actively promotes knowledge sharing, development of new partnerships and co-creation of innovative solutions. With this spirit, Reply has launched the IT Sustainability User Group, in which relevant players from different sectors investigate and test methodologies.
Historically, telecommunications companies have been heavily tied to their network equipment vendors. This condition has consolidated a model in which architectures are composed of vertical silos and characterised by significant vendor lock-in, with a huge impact on rigidity and costs.
Network softwarisation and Telco Cloud are some of the areas of innovation that are consolidating, now supported by the paradigm of network disaggregation and the availability of edge computing sites, distinctive assets of telcos. Network cloudification aims to implement the network as cloud-native software and leverage established cloud mechanisms to support performance, reliability, and security needs.
After standing out through support with the rollout of numerous network unbundling initiatives, Reply is collaborating with the main international organisations and the major European telcos in the design and standardisation of solutions based on open source and collaborative ecosystems. These solutions can increase the efficiency of broadband and mobile networks, while improving the sustainability of networks and enabling new business and service models.
REPLY LABS
In the Reply laboratories, prototypes and innovative ideas are developed to have a strategic value for our customers.
In Area42 we explore the potential of the most innovative robotics, advanced mobility, virtual reality and metaverse technologies to find areas of application capable of innovating our customers' business models.
Area360 is the laboratory dedicated to the development and testing of real-time 3D interactive immersive experiences and virtual and augmented reality solutions. The focus of the testing is for use in contexts such as training, collaboration, and virtual review of products or projects or to create experiential contact points in the metaverse.
Thanks to a proprietary framework and AI/ML-based validation and monitoring techniques, the automation centre monitors the quality of business-critical products and services throughout their entire life cycle, anticipating potential critical issues and setting corrective actions.
IoT validation laboratories are used to design, integrate, validate and implement IoT connectivity solutions and related products, in an integrated way with assessments of environmental sustainability and energy efficiency.
The cybersecurity lab makes it possible to evaluate different security scenarios applied to contexts such as adaptive cloud security, secure software development lifecycle, network security infrastructure, application and data security and security assessment.
the lab tests various areas of application of extended reality. This range from sales to marketing, from design to production, from maintenance to operations, and up to professional training.
Innovation will remain an idea if you can't make it tangible.
Reply
Building a sustainable future is possible, and we are convinced that technology plays a key role in this challenge.
As a leader in digital transformation, Reply promotes change towards a more sustainable world and operates in compliance with the highest ethical standards and the rights of future generations. To take concrete action and make change happen, Reply has defined its Green Approach, an ambitious plan to reduce the environmental impact of its business by achieving carbon neutrality by 2025 and net-zero emissions by 2030.
To meet these objectives, Reply is integrating key environmental practices into its business strategy and operations, promoting social and environmental awareness and responsibility among employees, customers, suppliers and all other business stakeholders. Understanding and using technology is the basis of Reply's mission, with increasing commitment to the creation of IT solutions that are inherently sustainable (green tech) and the development of sustainable projects with the use of IT solutions (for example, solutions based on artificial intelligence to achieve sustainability goals).
Reply's focus on sustainability issues is also expressed through the management and reporting of activities compliant with the United Nations Global Compact (UNGC), the Communication on Progress (COP), and the standards of the Global Reporting Initiative (GRI), for increasingly broad and transparent reporting as well as through CDP reporting. The Reply Green Approach is made up of concrete actions in various areas.
Since its inception, Reply has stood out as a network of professionals from the best universities who have grown together based on strong shared values. Today, this approach has been taken on a global scale. In 2022, with an international market context marked by strong turbulence, Reply vigorously carried forward its plan to insert resources with great potential, supported by a strong link with the academic world of each operating country.
The selection criteria for young graduates are rigorous and concern both the relevance of their university and the distinctiveness of individual curricula. Alongside the selected professionals recruited in particular in emerging markets, they are asked to fully adhere to the Reply value system.
ȯ Excellence is the guiding thread of this value system. The search for quality must be daily and constant, focused on the continuous improvement of own work and the benefits brought to customers. A strong merit-based evaluation system makes it possible to value and reward excellent results every year.
ȯ Innovation must be the essential and daily element of all projects, which must be carried out with a pragmatic approach, combining courage in choices and the ability to discern the most suitable solutions for the context, not only from an IT perspective. Internal reward systems reward the most innovative ideas and projects.
Reply
The result of the integration between a strong value system and constant attention to the enhancement of competence and knowledge has always allowed Reply to grow organically, putting its people at the centre as protagonists of its offer in the technological, consulting and creative fields.
Having diverse teams, with people of different genders, ages, ethnicities, cultures, backgrounds, educations, experiences and preferences, represents a valuable asset for Reply. Consistent with its values, it has implemented procedures to ensure that employees are compensated fairly and consistently considering the type of job, position and career level and is committed to guaranteeing gender pay equity, while guaranteeing all its employees a wage adjusted to the cost of living in all the countries in which it operates.
To develop a community open to diversity, inclusion, and accessibility, the Reply All-Uniquely Diverse program has been defined, which aims to discuss issues related to inclusion and diversity to stimulate continuous improvement. Guided by principles of transparency, fairness and openness to dialogue, new ways of collaborating and learning from each other are proposed. There is a clear awareness that the best solutions and the most innovative ideas arise from this diversity.
The health and safety of its employees are of fundamental importance to Reply. For this reason, Reply pays particular attention to protecting the health and safety of its employees, by adopting the necessary measures to ensure the safety of the workplace and through training and information activities aimed at preventing and effectively managing the occupational risks associated with the performance of activities. The Covid-19 emergency was managed through recourse to home-based working, an approach already inherent in the Group's model, without significant changes in normal operations.
The Reply Wellness program has been active since 2018, with various activities divided into three domains: nutrition, fitness and prevention. For each of these categories, there are annual programs and specific activities, linked to global campaigns or specific events.
Aware of the importance of a diversified, inclusive and rewarding workplace, Reply constantly invests in the growth and enhancement of its people, guaranteeing professional development paths and creating the conditions for a collaborative and motivating work environment. Making everyone feel equally involved and supported is important for improving everyday working life and for creating an environment in which to nurture ideas and innovation.
The professional development of people is consistently promoted by continuous training activities. For this reason, in 2022, Reply continued to invest in skills development and professional career development support programs, specialisation and technical refresher courses, and soft skills workshops. Furthermore, the internal "Social Network" office acts as an enabler for skills improvement thanks to a training program with user-generated content, allowing Reply employees to act as lecturers and speakers on trending topics of interest to the company.
Attention to the development of talents and skills is encouraged and applied not only within the employee community but also externally, to students and professionals who participate in a variety of activities aimed at them. Among the various programs, there are post-graduate masters, online team competitions on the main themes of innovation or for the production of innovative projects, and collaborations with teams of university students during their academic careers.
Continuous research and innovation are essential to be able to help customers and partners adopt new technologies.
Climate change and environmental sustainability represent a challenge for everyone, but also an opportunity. For this reason, Reply has defined guidelines and a road map of actions to reduce its emissions and achieve carbon neutrality targets by 2025 and net-zero emissions by 2030.
The main initiatives of this plan concern:
In 2022 we achieved 82% use of electricity from renewable sources across all our locations.
Reply sees compliance with regulations as an indispensable foundation in the management of commercial relations with public and private entities. The Group, in addition to acting in compliance with the national regulations in force in the countries in which it operates, carries out its activities by pursuing sustainable and inclusive growth, operating in line with the Universal Declaration of Human Rights, the Conventions of the International Labor Organization (ILO) and adhering to the principles promoted by the United Nations Global Compact.
The Code of Ethics establishes, explains and formalises Reply's values and guides all its staff on how to behave and act in the right way in their daily activities, with customers, suppliers, and business partners. Its adoption by all employees makes it possible to create and maintain a common ethical culture among the teams, allowing everyone to act in line with Reply's values.
In all the countries in which Reply operates, specific channels have been set up for sending reports. In particular, the Whistleblowing Policy is active, aimed at encouraging employees to promptly report incorrect conduct, guaranteeing the possibility of reporting any problem without any consequences on their working activity.
In addition to compliance with laws and regulations, there is the security of information systems, which is a fundamental requirement for guaranteeing the reliability of the processed information, as well as the effectiveness and efficiency of the services provided by the company. To ensure information security and privacy aspects in the services provided, Reply has adopted a framework, which is aimed in particular at preserving:
Reply
Reply also involves its suppliers in sustainability initiatives aimed at raising awareness of these issues and gathering ideas for internal sustainability projects. In 2021, the Supplier Code of Conduct was introduced, which integrates the provisions already present in the Code of Ethics and defines the standards that suppliers must respect in terms of labour laws and human rights, worker safety, and environmental sustainability. Reply implements all actions aimed at requesting and monitoring compliance with the rules and practices of the Code of Conduct and, in the event of non-compliance with these minimum criteria, the appropriate countermeasures to be implemented are evaluated.
To assess the compliance of the supply chain with the Code of Conduct, the first Self Evaluation campaign was launched in 2022, managed by suppliers through completion of a self-assessment questionnaire.
Finally, Reply is constantly updated on the latest insights on ESG issues from nongovernmental organisations, the academic world, and industry trends. This allows the Group to update its frameworks and best practices and be at the forefront in terms of sustainability.
The Reply Group adopts specific procedures in managing risk factors that can have an influence on company results. Such procedures are a result of an enterprise management that has always aimed at maximizing value for its stakeholders putting into place all necessary measures to prevent risks related to the Group activities.
Reply S.p.A., as Parent Company, is exposed to the same risks and uncertainties as those to which the Group is exposed, and which are listed below.
The risk factors described in the paragraphs below must be jointly read with the other information disclosed in the Annual Report.
The informatics consultancy market is strictly related to the economic trend of industrialized countries where the demand for highly innovative products is greater. An unfavourable economic trend at a national and/or international level or high inflation could alter or reduce the growth of demand and consequently could have negative effects on the Group's activities and on the Group's economic, financial and earnings position. It should also be noted that Russia's recent invasion of Ukraine creates uncertainties and tensions particularly within the Eurozone. Although the relative evolutions and impacts are still uncertain and difficult to assess, the intensification of war hostilities, ongoing geopolitical tensions and trade war, including the imposition of international economic sanctions against companies, banks and Russians, could have significant negative repercussions on the global, international and Italian economy, on the performance of the financial markets and on the energy sector.
The ICT consulting services sector in which the Group operates is characterised by rapid and profound technological changes and by a constant evolution of the mix of professional skills and expertise to be pooled in the provision of the services themselves, with the need for continuous development and updating of new products and services, and a prompt go to market. Therefore, the future development of the Group's activities will also depend on its ability to foresee technological developments and the content of its services, also through significant investments in research and development activities, or through effective and efficient extraordinary operations.
The ICT market is highly competitive. Competitors could expand their market share squeezing out and consequently reduce the Group's market share. Moreover the intensification of the level of competition is also linked with possible entry of new entities endowed with human resources and financial and technological capacities in the Group's reference sectors, offering largely competitive prices which could condition the Group's activities and the possibility of consolidating or amplifying its own competitive position in the reference sectors, with consequent repercussions on business and on the Group's economic, earnings and financial situation.
The Group's solutions are subject to rapid technological changes which, together with the growing or changing needs of customers and their own need for digitalisation, could translate into requests for the development of increasingly complex activities that sometimes require excessive commitments that are not economically proportionate, or could result in the cancellation, modification or postponement of existing contracts. This could, in some cases, have repercussions on the Group's business and on its economic and financial situation.
The Group is subject to the laws and regulations applicable in the countries in which it operates, such as, among the main ones, regulations on the protection of occupational health and safety, the environment and the protection of intellectual property rights, tax regulations, regulations on the protection of privacy, the administrative liability of entities pursuant to Legislative Decree No. 231/01 and responsibilities under Law 262/05. The Group operates in accordance with applicable legal requirements and has established processes to ensure that it is aware of the specific local regulations in the areas in which it
operates and of regulatory changes as they occur.
Violations of these regulations could result in civil, tax, administrative and criminal sanctions, as well as the obligation to carry out regularisation activities, the costs and responsibilities of which could adversely affect the Group's business and its results.
Reply's business model considers its employees as the maximum expression of its resources, as the Group specialises in consulting, system integration and digital services, and is dedicated to the conception, design and development of solutions based on new communication channels and digital media.
However, the risks associated with:
may have a direct impact on the Group and its supply chain.
With reference to the main climatic risks for the company, any significant damage to the Group's offices could have an impact on critical processes, such as the e-mail service, however these impacts are subject to analysis of the aspects of business continuity and are safeguarded by appropriate security and organizational measures to preserve the business from disruptions. The occurrence of a serious accident would hardly have a significant negative impact on the Group's activities.
Extreme weather events that have occurred in the last decade have caused minor impacts for business activities based on digital and cloud services, for which the home-based working approach is widespread and well established and constitutes a good strategy to mitigate the unavailability of locations, for example in the event of an extreme climatic event. It is important to remember that the majority of the services provided by the Group are based on systems and data centres of Customers or Third Parties, outside the direct responsibility of Reply, which does not manage any data centre of significant size. Diversely, the risk of generating negative impacts on the climate by the Group is mainly linked to the ability to adopt effective measures to reduce emissions that partly depend also on the energy that the company buys to manage its activities and that can be produced from fossil fuels or renewable sources. In this case, the Russian invasion of Ukraine generates negative impacts on security of supply and, while making clear the need for an energy transition, causes the use of fossil fuels in the short term. This context could make it more difficult to achieve the defined environmental targets.
This could be compounded by reputational risk, such as the difficulty of attracting and retaining customers, employees, business partners and investors if Reply fails to meet its climate protection targets.
The measures taken to prevent and mitigate environmental risks are the ISO14001 certified environmental management system and all initiatives to reduce greenhouse gas emissions related to the Group's operations (mainly due to locations and business travel), which can lead in the short term to an increase in capital expenditures before obtaining financial benefits in the long term and the use of renewable energy. In most cases, however, the Group does not own all the buildings where the offices are located: this condition could hinder in terms of feasibility, time and costs the implementation of energy efficiency
measures that should generate an improvement in environmental performance. The ESG Team, with the support of the local Operations functions, collects and analyses environmental data, periodically monitors indicators and helps to create awareness and train employees on these issues thanks to events and internal communication initiatives, coordinated by the Social Network function.
Our most relevant suppliers share a similar exposure as Reply.
The Group's success is largely due to certain key figures who have contributed in a decisive way to its development, such as the Chairman, the Chief Executive Officer and the executive directors of the Parent Company Reply S.p.A.. Reply also has a management team with many years of experience in the sector, which plays a decisive role in the management of the Group's activities. The loss of the services of one of the aforementioned key figures without adequate replacement, as well as the inability to attract and retain new and qualified personnel, could have a negative impact on the Group's prospects, maintenance of critical know-how, activities and economic and financial results. The Management believes, in any event, that the Company has an operational and managerial structure capable of ensuring continuity in the management of corporate affairs.
The Group offers consulting services mainly to medium and large size companies operating in different market segments (Telco, Manufacturing, Finance, etc.).
A significant part of the Group's revenues, although in a decreasing fashion in the past years, is concentrated on a relatively limited number of clients. If such clients were lost this could have an adverse effect on the Group's activities and on the Group's economic, financial and earnings position.
The Group, with an internationalization strategy, could be exposed to typical risks deriving from the execution of its activities on an international level, such as changes in the political, macro-economic, fiscal and/or normative field, along with fluctuations in exchange rates. These could negatively influence the Group's growth expectations abroad.
The constant growth in the size of the Group presents new management and organisational challenges.
The Group constantly focuses its efforts on training employees and maintaining internal controls to prevent possible misconduct (such as misuse or non-compliance with laws or regulations on the protection of sensitive or confidential information and/or inappropriate use of social networking sites that could lead to breaches of confidentiality, unauthorised disclosure of confidential company information or damage to reputation).
If the Group does not continue to make the appropriate changes to its operating model as needs and size change, if it does not successfully implement the changes, and if it does not continue to develop and implement the right processes and tools to manage the business and instil its culture and core values in its employees, the ability to compete successfully and achieve its business goals could be compromised.
The Group plans to continue to pursue strategic acquisitions and investments to improve and add new expertise, service offerings and solutions, and to enable expansion into certain geographic areas and other markets.
Any investment made as part of strategic acquisitions and any other future investment in Italian or international companies may involve an increase in complexity in the Group's operations and there is no guarantee that such investments will generate the expected return on the acquisition or investment decision and that they will be properly integrated in terms of quality standards, policies and procedures in a manner consistent with the rest of the Group's operations. The integration process may require additional costs and investments. Inadequate management or supervision of the investment made may adversely affect the business, operating results and financial matters.
The Group develops high-tech, high-value solutions; the underlying contracts, which may involve both internal staff and external contractors, may provide for the application of penalties for failure to meet agreed deadlines and quality standards. The application of such penalties could have negative effects on the Group's economic and financial results and reputation. However, the Group has taken out insurance policies, deemed adequate, to protect itself against risks arising from professional liability for an aggregate annual maximum amount deemed adequate in relation to the underlying risk. However, if the insurance coverage is inadequate and the Group is required to pay damages in excess of the maximum amount provided, the Group's financial position, results of operations and cash flows could be materially adversely affected.
In order to offer the most suitable solutions to differing customer needs, the Group has established important partnerships with leading global vendors.
The business that the Group conducts through these partnerships may decline or not grow for a number of reasons, as the priorities and objectives of technology partners may differ from those of the Group and they are not prohibited from competing with the Group or entering into closer agreements with its competitors. Decisions the Group makes with respect to a technology partner may affect the ongoing relationship. In addition, technology partners may experience reduced demand for their technology or software, which could decrease the related demand for the Group's services and solutions. The risk of failing to adequately manage and successfully develop relationships with key partners, or of failing to foresee and establish effective alliances in relation to new technologies, could adversely affect the ability to differentiate services, offer cutting-edge solutions to customers or compete effectively in the market, with possible consequent repercussions on the business and on the economic and financial situation.
The Group's success depends, in part, on its ability to obtain intellectual property protection for its proprietary platforms, methodologies, processes, software and other solutions. The Group relies on a combination of confidentiality, non-disclosure and other contractual agreements, and patent, trade secret, copyright and trademark laws and procedures to protect its intellectual property rights. Even where we obtain intellectual property protection, the Group's intellectual property rights cannot prevent or discourage competitors, former employees or other third parties from reverse engineering their own solutions or proprietary methodologies and processes or independently developing similar or duplicate services or solutions.
In addition, the Group may unwittingly infringe the rights of others and be liable for damages as a result. Any claims or litigation in this area could cost time and money and lead to damage the Group's reputation and/or require it to incur additional costs to obtain the right to continue offering a service or solution to its customers.
The occurrence of such risks could adversely affect the Group's competitive advantage and market positioning, its economic, financial and capital position, as well as its reputation and prospects for future business development.
The Group's business relies on IT networks and systems to process, transmit and store electronic information securely and to communicate with its employees, customers, technology partners and suppliers. As the scale and complexity of this infrastructure continues to grow, not least due to the increasing reliance on and use of mobile technologies, social media and cloud-based services, and as increasingly more of our employees are working remotely during the coronavirus pandemic, the risk of security
incidents and cyber-attacks increases. Such breaches could result in the shutdown or disruption of the Group's systems and those of our customers, technology partners and suppliers, and the potential unauthorised disclosure of sensitive or confidential information, including personal data.
In the event of such actions, the Group could be exposed to potential liability, litigation and regulatory or other actions, as well as loss of existing or potential customers, damage to brand and reputation, and other financial losses. In addition, the costs and operational consequences of responding to violations and implementing corrective measures could be significant.
To date, there hasn't been a cybersecurity attack that has had a material effect on the Group, although there is no guarantee that there won't be a material impact in the future. As the business and cyber security landscape evolves, the Group may also find it necessary to make significant additional investments to protect data and infrastructure. However, if the insurance coverage, which includes IT insurance, is inadequate and the Group is required to pay damages in excess of the maximum amount provided, the Group's financial position, results of operations and cash flows could be materially adversely affected.
In recent years, the growing community focus on social, environmental and business ethics issues, as well as the evolution of national and international regulations, have given impetus to the disclosure and measurement of non-financial performance, which is now fully included among the qualifying factors of corporate management and competitive capacity of a company.
In this regard, socio-environmental issues and business ethics are increasingly integrated into the strategic choices of companies and are increasingly attracting the attention of various stakeholders concerned with sustainability issues.
The Group is committed to managing its business activities with a particular focus on respect for the environment, social issues, labour relations, the promotion of human rights and the fight against corruption, contributing to the spread of a culture of sustainability in respect of future generations.
Failure to adequately address these issues could subject the Group to risks of sanctions as well as reputational risks.
For a more specific discussion of sustainability/ESG risks, please refer to the Disclosure of Non-Financial Information (NFI), published on the Reply website in the Investor Corporate Governance section.
For business purposes, specific policies are adopted to assure its clients' solvency. With regards to financial counterparty risk, the Group does not present significant risk in credit-worthiness or solvency.
The Group's exposure to credit risk is the potential losses that could result from nonfulfilment of the obligations assumed by both commercial and financial counterparties. In order to measure this risk over time, as part of the impairment of its financial assets (including trade receivables), the Group has applied a model based on expected credit losses pursuant to IFRS.
This exposure is mainly due to general economic and financial items, the possibility of specific insolvency situations of some debtor counterparties and more strictly technicalcommercial or administrative elements.
The maximum theoretical exposure to credit risk for the Group is the book value of financial assets and trade receivables. The risk related to trade receivables is managed through the application of specific policies aimed to ensure the solvency of customers.
Provisions to the allowance for doubtful accounts are made specifically on creditor positions with specific risk elements. On creditor positions which do not have such characteristics, provisions are made on the basis of the average default estimated on the basis of statistical indicators.
The group is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time.
The cash flows, funding requirements and liquidity of the Group's companies are monitored or centrally managed under the control of the Group Treasury, with the objective of guaranteeing effective and efficient management of capital resources (maintaining an adequate level of liquid assets and funds obtainable via an appropriate committed credit line amount).
The difficult economic and financial context of the markets requires specific attention as regards the management of liquidity risk and in such a way that particular attention is given to shares tending to generate financial resources with operational management and to maintaining an adequate level of liquid assets. The Group therefore plans to meet its requirements to settle financial liabilities as they fall due and to cover expected capital expenditures by using cash flows from operations and available liquidity, renewing or refinancing bank loans.
The Group entered into most of its financial instruments in Euros, which is its functional and presentation currency. Although it operates in an international environment, it has a limited exposure to fluctuations in the exchange rates.
The exposure to interest rate risk arises from the need to fund operating activities and M&A investments, as well as the necessity to deploy available liquidity. Changes in market interest rates may have the effect of either increasing or decreasing the Group's net profit/(loss), thereby indirectly affecting the costs and returns of financing and investing transactions.
The interest rate risk to which the Group is exposed mainly derives from bank loans; to mitigate such risks, the Group, when necessary, has used derivative financial instruments designated as "cash flow hedges".
The use of such instruments is disciplined by written procedures in line with the Group's risk management strategies that do not contemplate derivative financial instruments for trading purposes.
The risk of any changes in tax law and its application or interpretation could have a negative or positive impact on the Group's results of operations, affecting the effective tax rate. The Company adheres to the National Tax Consolidation scheme pursuant to articles 117/129 of the Consolidated Income Tax Act (TUIR). Reply S.p.A., the Parent Company, acts as consolidating company and determines a single taxable income for the Group of companies participating in the Tax Consolidation, benefiting from the possibility of offsetting taxable income with tax losses in a single declaration. The tax risk limitation measures put in place by Management, in terms of verifying the adequacy and correctness of tax compliance, obviously cannot completely exclude the risk of tax audits.
The financial statements commented on and illustrated in the following pages have been prepared on the basis of the Consolidated financial statements as at 31 December 2022 to which reference should be made, prepared in compliance with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and adopted by the European Union, as well as with the provisions implementing Article 9 of Legislative Decree No. 38/2005.
The Group closed 2022 with a consolidated turnover of €1,891.1 million, an increase of 27.5% compared to €1,483.8 million in 2021.
All indicators are positive for the period. Consolidated EBITDA was €340.3 million, an increase of 29.5% compared to €262.8 million recorded in 2021.
EBIT, from January to December, was at €285.5 million, which is an increase of 36.4% compared to €209.3 million in 2021.
The Group net profit was at €192.2 million, an increase of 26.1% compared to the €150.7 million recorded in 2021.
As at 31 December 2022, the Group's net financial managerial position was positive, at €70.6 million. As at 31 December 2021, the net financial managerial position was positive, at €193.2 million.
2022 was a very positive year for Reply, both in terms of turnover growth and margins. In the past few months, Reply has continued to invest and has acquired additional market shares in Europe, the UK and North America. Reply has also upgraded its core offerings in artificial intelligence, robotics and connected vehicles with new components.
Today Reply is known for its ability to interpret digital innovation and make it work in the interests of companies seeking transformation. In particular, in 2022 Reply has seen strong growth in demand in the areas of Cloud, IoT, data platforms and digital experiences. Furthermore, the use of artificial intelligence is becoming increasingly widespread. Reply has a leading position in this market thanks to the investments made over the last two years. In the near future we will see the rise of a fusion of automation, artificial intelligence, digital interfaces and connected objects, but it will require a great deal of work to make it possible and useful to enterprises. In this scenario, Reply stands as a niche player with a very high technological expertise capable of supporting its clients in the creation of the new digital economy.
Reply's performance is shown in the following reclassified consolidated statement of income and is compared to corresponding figures of the previous year:
| (THOUSAND EUROS) | 2022 | % | 2021 | % |
|---|---|---|---|---|
| Revenues | 1,891,114 | 100.0 | 1,483,803 | 100.0 |
| Purchases | (27,328) | (1.4) | (21,500) | (1.4) |
| Personnel | (986,744) | (52.2) | (759,567) | (51.2) |
| Services and other costs | (587,402) | (31.1) | (445,147) | (30.0) |
| Other operating (costs)/income | 50,671 | 2.7 | 5,195 | 0.4 |
| Operating costs | (1,550,802) | (82.0) | (1,221,018) | (82.3) |
| Gross operating income (EBITDA) | 340,312 | 18.0 | 262,784 | 17.7 |
| Amortization, depreciation and write-downs |
(58,612) | (3.1) | (48,391) | (3.3) |
| Other non/recurring (costs)/income | 3,774 | 0.2 | (5,110) | (0.3) |
| Operating income (EBIT) | 285,473 | 15.1 | 209,283 | 14.1 |
| (Loss)/gain on investments | (12,102) | (0.6) | 8,164 | 0.6 |
| Financial income/(expenses) | (4,676) | (0.2) | (4,168) | (0.3) |
| Income before taxes | 268,695 | 14.2 | 213,279 | 14.4 |
| Income taxes | (76,511) | (4.0) | (60,871) | (4.1) |
| Net income | 192,184 | 10.2 | 152,408 | 10.3 |
| Non/controlling interests | (1,168) | (0.1) | (1,735) | (0.1) |
| Net income of the Parent company | 191,016 | 10.1 | 150,672 | 10.2 |
(*)
Region 1: ITA, USA, BRA, POL, ROU, CHN (Nanjing), NZL Region 2: DEU, CHE, CHN (Bejing), HRV Region 3: GBR, LUX, BEL, NLD, FRA, BLR, SGP, HKG, MYS
REVENUES BY BUSINESS LINES
The Group's financial structure is set forth below as at 31 December 2022, compared to 31 December 2021:
| (THOUSAND EUROS) | 31/12/2022 | % | 31/12/2021 | % | CHANGE |
|---|---|---|---|---|---|
| Current assets | 843,276 | 623,749 | 219,526 | ||
| Current liabilities | (796,686) | (666,363) | (130,323) | ||
| Working capital, net (A) | 46,590 | (42,614) | 89,204 | ||
| Non-current assets | 1,070,572 | 873,006 | 197,566 | ||
| Non-current liabilities | (215,864) | (207,709) | (8,155) | ||
| Fixed capital (B) | 854,708 | 665,297 | 189,411 | ||
| Invested capital, net (A+B) | 901,298 | 100.0 | 622,683 | 100.0 | 278,614 |
| Shareholders' equity (C) | 971,869 | 107.8 | 815,895 | 131.0 | 155,974 |
| NET FINANCIAL MANAGERIAL POSITION (A+B-C) |
(70,572) | (7.8) | (193,212) | (31.0) | 122,640 |
Net invested capital on 31 December 2022, amounting to 901,298 thousand Euros, was funded by Shareholders' equity for 971,869 thousand Euros and by available overall funds of 70,572 thousand Euros.
It is to be noted that net invested capital includes Due to minority shareholders and Earn-out for a total of 141,502 thousand Euros (129,558 thousand Euros at 31 December 2021); this item is not included in the net financial managerial position. For the ESMA net financial indebtedness see note 30.
The following table provides a breakdown of net working capital:
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Work in progress | 83,880 | 86,787 | (2,907) |
| Trade receivables | 657,568 | 471,560 | 186,008 |
| Other assests | 101,828 | 65,403 | 36,425 |
| Current operating assets (A) | 843,276 | 623,749 | 219,526 |
| Trade payables | 168,835 | 139,921 | 28,914 |
| Other liabilities | 627,850 | 526,442 | 101,408 |
| Current operating liabilities (B) | 796,686 | 666,363 | 130,323 |
| Working capital, net (A-B) | 46,590 | (42,614) | 89,204 |
| % return on investments | 2.5% | -2.9% | |
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Cash and cash equivalents, net | 263,252 | 314,681 | (51,429) |
| Current financial assets | 30,608 | 31,791 | (1,183) |
| Due to banks | (22,643) | (406) | (22,237) |
| Due to other providers of finance | (660) | (904) | 245 |
| Financial liabilities IFRS 16 | (27,829) | (26,508) | (1,320) |
| Short-term financial position | 242,729 | 318,653 | (75,924) |
| Due to banks | (74,533) | (23,313) | (51,220) |
| Financial liabilities IFRS 16 | (97,624) | (102,129) | 4,504 |
| M/L term financial position | (172,157) | (125,442) | (46,715) |
| Total net financial managerial position | 70,572 | 193,212 | (122,640) |
Change in the item cash and cash equivalents is summarized in the table below:
| (THOUSAND EUROS) | 2022 |
|---|---|
| Cash flows from operating activities (A) | 184,573 |
| Cash flows from investment activities (B) | (234,350) |
| Cash flows from financial activities (C) | (1,651) |
| Change in cash and cash equivalents (D) = (A+B+C) | (51,429) |
| Cash and cash equivalents at beginning of period (*) | 314,680 |
| Cash and cash equivalents at year end (*) | 263,252 |
| Total change in cash and cash equivalents (D) | (51,429) |
(*) Liquid assets and cash equivalents net are net of current account overdrafts
The complete consolidated cash flow statement and the details of cash and other cash equivalents net are set forth below in the financial statements.
In addition to conventional financial indicators required by IFRS, presented herein are some alternative performance measures, in order to allow a better understanding of the trend of economic and financial management.
These indicators, that are also presented in the periodical Interim management reports must not, however, be considered as replacements to the conventional indicators required by IFRS.
Set forth below are the alternative performance indicators used by the Group with relevant definition and basis of calculation:
Amortization and depreciation
Write-downs
Other costs/(income)
Cash and cash equivalents
Financial assets (short-term)
Financial liabilities (long-term)
Financial liabilities (short-term)
In the month of July 2022 Reply S.p.A. acquired 100% of the share capital of Fincon Unternehmensberatung GmbH (www.fincon.eu) - a German consulting company leader in digital transformation projects for the banking and the insurance industry – for an initial consideration amounting to 119 million Euros.
FINCON, headquartered in Hamburg, is a pure consulting company specialized on the core processes and systems for the financial services industry such as, mobile banking, payments, core banking, internal control system and regulatory compliance, BIPRO and insurance systems. Among the customers of FINCON there are the main German banking and insurance institutions and many of the German Sparkasse.
The investment in FINCON is part of Reply's international growth strategy, particularly in Germany, where Reply is already a leading player in consulting, system integration and digital services.
Fincon mixes a great expertise on banking and insurance processes with a constant attention to technological innovation. With Fincon the goal is to expand Reply footprint into the German banking and insurance sector.
The closing of the transaction, which obtained the authorization from the German Federal Competition Office in June, took place on July 1st.
In the month of October 2022 Reply S.p.A. acquired 100% of the share capital of Weamanity Group, a leader in France and Benelux in agile & digital transformations, for an initial consideration amounting to 55 million Euros.
Founded in 2013 in Paris, and having expanded its activities to Lille, Brussels, Antwerp, The Hague, Luxembourg, and Casablanca, Wemanity's purpose is to reinvent the future of work thanks to Agile, innovation, and cooperation, combining skills range from new management methods to the design and delivery of digital products.
Wemanity's clients include the largest French and European groups in all industry sectors, with a predominance in the financial, luxury, retail, media and energy sectors.
The investment in Wemanity is part of Reply's international growth strategy, in particular in France.
Wemanity is characterised by a strong entrepreneurial drive and a constant focus on management and technological innovation. With Wemanity, the goal is to expand the Reply footprint into the French and Benelux markets with a focus on digital transformation projects, an area where all the main industry players are concentrating most of their investments.
Wemanity, that had already created an ecosystem of startups in the fields of AI, Design, training, cyber security and digital delivery, today, by joining Reply, enters a new dimension and gives itself the means to stay ahead of the market and to offer its customers ever more innovative, global and transformative solutions
For investors, 2022 has been a year of firsts and worsts. Few could have predicted the scale of the economic, political and social problems of recent months. Multiple crises, closely intertwined and mutually reinforcing, have had a profound impact on everyone's lives. This environment - in particular persistently high inflation and aggressive central bank tightening - also left its mark on financial markets, which were extremely volatile throughout the year. The total return on global equities was -22%. Global government bonds and credit also performed poorly, with total returns even worse. Fears of economic overheating weighed on equity markets at the beginning of the year, as economic data were already strong. Inflation figures had risen sharply on the back of strong demand for raw materials and labour. This triggered fears of interest rate hikes by central banks, which led to significant corrections in equity markets, particularly in technology and growth stocks. The situation changed dramatically again at the end of February with the outbreak of war in Europe and its impact on commodity prices, especially energy prices. Stock markets reacted accordingly, especially as US investors appeared to be withdrawing funds from Europe. In October and November we saw a marked recovery. However, many growth stocks and, in particular, small caps benefited only to a lesser extent.
In this context, the evolution of Reply's business and the evolution of the capital markets were completely decoupled. In 2022 Reply lost a significant part of its capital market performance, the share price and the market capitalisation fell back to the levels of May 2021. The announcement of the results for the 2021 financial year and the first and second quarters of the 2022 financial year led to an improvement in the share price performance, but this was short-lived and the share price then fell back into line with the general state of the markets. Right from the start, the share entered a downward corridor, with the share price falling to EUR 129 on 8 March 2022. On 16 June 2022 the share reached its low for the year at EUR 101. The Reply share closed the year at EUR 107. The share closed the year down 40%. Reply's market capitalisation returned to EUR 4.0 billion. In January 2023, the Reply share partially recovered. At the time of writing this chapter, the Reply share was trading at EUR 121, with a market capitalisation of EUR 4.5 billion. The relative performance of the Reply share was also affected in 2022. As one of the more highly valued companies, Reply, like other peers focused on digital innovation, was hit harder than various country indices (MIB: -13%, FTSE Italy STAR: -28%, FTSE Italia Mid Cap: -21%), sector indices (EuroSTOXX Technology: -27%, S&P 500/IT: -29%) or peers also involved in traditional services such as outsourcing.
Taking December 6, 2000, the date of the Reply IPO, as a reference, the Italian main index MIB lost 13% in 2022 and stood at 52% of its starting value. In the same period Reply increased its IPO value by 2,575%. The outperformance of the Reply share versus the MIB reduced in 2022 but is still significant with more than 2,600%.
Report on operations
Following the weak share price performance in 2022, the trading activity of the Reply share also decreased. The trading volume decreased by 28% to EUR 1.3 billion. The impact of the lower share price exacerbated the reduction in the number of shares traded, which decreased by 22%. In 2022, 10.2 million shares were traded compared to 13.0 million shares in 2021.
Despite the downward trend, the Reply share continued to trade at a valuation premium compared to its peers, considering profitability measures. The enterprise value to EBITDA ratio and the enterprise value to EBIT ratio at the end of 2022 were 30% higher than the average of the peer group companies. In terms of enterprise value to revenue, Reply was 23% higher than the peer group average at the end of 2022.
Performance-related remuneration is an essential pillar of Reply's partnership-based business model. Like employees, Reply's shareholders should participate in the Group's sustainable operational performance in the form of dividends. Every year this principle is balanced with the need for internal financing to finance Reply's investments (in new startup companies, new technologies and potential acquisitions to further elaborate Reply's offering portfolio in Germany, UK, US, France as Reply's strategic regions). In 2022 Reply achieved earnings per share of EUR 5.17, an increase of 27.3% compared to 2021. For the financial year 2022 the corporate bodies of Reply propose to the shareholders' meeting to approve the payment of a dividend of EUR 1.00 (dividend 2021: EUR 0.80). Referred to the share price of Reply at the end of 2022 this corresponds to a dividend yield of 0.93%. Assuming the approval of the shareholders' meeting, Reply will pay to its share-holders a dividend amount of EUR 37.3 million. For financial year 2021 EUR 29.9 million were distributed. In total this equates to a pay-out ratio of 20% of the net profit of the year.
The subsequent table gives an overview on the main parameters of the Reply share and their substantial developments during the last 5 years.
| 2022 | 2021 | 2020 | 2019 | 2018 | ||
|---|---|---|---|---|---|---|
| Share price | ||||||
| Year-end | Euro | 107.00 | 178.70 | 95.30 | 69.45 | 44.08 |
| High for the year | Euro | 178.70 | 185.50 | 105.50 | 74.80 | 61.30 |
| Low for the year | Euro | 101.60 | 92.50 | 43.30 | 42.20 | 42.00 |
| Trading | ||||||
| Number of shares traded (year) | # thousand | 10,164.3 | 13,005.5 | 15,669.5 | 11,360.1 | 12,587.7 |
| Number of shares traded (day) | # thousand | 39.7 | 50.4 | 59.9 | 44.9 | 48.2 |
| Trading volume (year) | Euro million | 1,313.9 | 1,834.2 | 1,203.4 | 668.9 | 591.0 |
| Trading volume (day) | Euro million | 5.156 | 7.109 | 4.611 | 2.623 | 2.548 |
| Capital structure | ||||||
| Number of shares | # thousand | 37,411.4 | 37,411.4 | 37,411.4 | 37,411.4 | 37,411.4 |
| Share capital | Euro million | 4.864 | 4.864 | 4.864 | 4.864 | 4.864 |
| Free Float | % | 53.4 | 53.4 | 53.4 | 53.4 | 53.4 |
| Market capitalization | Euro million | 3,980.4 | 6,660.1 | 3,565.3 | 2,598.2 | 1,650.0 |
| Allocation of net income | ||||||
| Earnings per share | Euro | 5.13 | 4.03 | 3.30 | 3.04 | 2.38 |
| Dividend(1) | Euro | 1.00 | 0.80 | 0.56 | 0.52 | 0.40 |
| Dividend payment | Euro million | 31.278 | 29.872 | 20.911 | 19.454 | 16.835 |
| Dividend yield(2) | % | 0.93 | 0.45 | 0.59 | 0.75 | 1.00 |
(1) Amount proposed for shareholder approval for 2022 (2)Related to year-end closing price
At the end of 2022, 43% of Reply's shares were owned by Reply's founders. Institutional shareholders owned 41% of the shares at the end of 2022, while retail shareholders owned 16% of the shares. Reply's institutional shareholder base has undergone some significant changes. US investors, the main investor country in Reply, slightly increased their ownership in Reply to 31% of the institutional shareholding compared to 26% in the previous year. Italian investors continued to increase their positions and are now the second largest investors, holding approximately 22% (2021: 20%). UK investors halved their position to 10%
of institutional holdings. French investors also significantly reduced their position to 10.1% of the shares, down from 18.9% in 2021.
According to the Shareholders' Ledger, on the date of this report the shareholders that directly or indirectly, also through an intermediary person, trust companies and subsidiaries, hold stakes greater than 3% of the share capital having the right to vote are the following:
| SHAREHOLDER | OWNERSHIP % OVER SHARE CAPITAL |
OWNERSHIP % OVER VOTING CAPITAL |
|---|---|---|
| Rizzante Mario through Iceberg S.r.l. and Alika S.r.l. | 39.754% | 56,891% |
In 2022, the number of analysts regularly covering the Reply share remained unchanged at 8. In line with the market and the evolution of the Reply share valuation, the analysts covering the share became more optimistic. 5 ratings remained "outperform" while 3 analysts took a "neutral" stance on the share. The average price target for Reply shares by analysts in January 2023 was 135 euros.
An active and open communication policy, which ensures the timely and continuous dissemination of information, is an essential part of Reply's IR strategy. In 2022 Reply maintained its high level of activity with the capital markets. During 14 conferences and 6 road shows, Reply actively explained its equity story. The number of virtual meetings with investors stood at 214, while Reply increased the number of physical investor meetings to 143. The majority of communication contacts were with French, Italian and UK investors. The number of brokers involved in Reply's IR activities remained unchanged at 11. In the 2022 Institutional Investor Survey, Reply won the award for the most improved IR among Italian mid-cap issuers.
The tables presented and disclosed below were prepared on the basis of the financial statements as at 31 December 2022 to which reference should be made, prepared in accordance with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and endorsed by the European Union, as well as with the regulations implementing Article 9 of Legislative Decree No. 38/2005.
The Parent Company Reply S.p.A. mainly carries out the operational co-ordination and the technical and quality management services for the Group companies as well as the administration, finance and marketing activities.
As at 31 December 2022 the Parent Company had 109 employees (95 employees in 2021). Reply S.p.A. also carries out commercial fronting activities (pass-through revenues) for some major customers, whereas delivery is carried out by the operational companies. The economic results achieved by the Company are therefore not representative of the Group's overall economic trend and the performances of the markets in which it operates. Such activity is instead reflected in the item Pass-through revenues of the Income Statement set forth below.
The Parent Company's income statement is summarized as follows:
| (THOUSAND EUROS) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Revenues from operating activities | 135,767 | 105,500 | 30,267 |
| Pass-through revenues | 599,230 | 514,599 | 84,632 |
| Purchases, services and other expenses | (692,207) | (582,455) | (109,752) |
| Personnel and related expenses | (26,536) | (27,693) | 1,157 |
| Other unusual operating (expenses)/income | 2,855 | 2,367 | 489 |
| Amortization, depreciation and write-downs | (3,881) | (3,037) | (843) |
| Operating income | 15,229 | 9,280 | 5,948 |
| Financial income/(expenses) | 12,648 | 23,485 | (10,837) |
| Gain on equity investments | 92,266 | 87,689 | 4,577 |
| Loss on equity investments | (18,852) | (322) | (18,530) |
| Income before taxes | 101,291 | 120,132 | (18,842) |
| Income taxes | (7,149) | (8,888) | 1,740 |
| NET INCOME | 94,142 | 111,244 | (17,102) |
Revenues from operating activities mainly refer to:
Operating income 2022 marked a positive result of 15,229 thousand Euros after having deducted amortization expenses of 3,881 thousand Euros (of which 230 thousand Euros referred to tangible assets, 3,067 thousand Euros to intangible assets and 583 thousand Euros related to RoU assets arising from the adoption of IFRS 16).
Financial income amounted to 12,648 thousand Euros and included interest income on bank accounts for 14,802 thousand Euros, interest expenses for 1,956 thousand Euros mainly relating to financing for the M&A operations and the non-effective portion of the IRS for positive 2,396 thousand Euros. Such result also includes net positive exchange rate differences amounting to 1,283 thousand Euros.
Income from equity investments which amounted to 92,266 thousand Euros refers to dividends received from subsidiary companies in 2022.
Losses on equity investments refer to write-downs and losses reported in the year by some subsidiary companies that were considered to be unrecoverable.
Net income for the year ended 2022, amounted to 94,142 thousand Euros after income taxes of 7,149 thousand Euros.
Reply S.p.A.'s financial structure as at 31 December 2022, compared to that as at 31 December 2021, is provided below:
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Tangible assets | 534 | 311 | 224 |
| Intangible assets | 7,622 | 7,690 | (68) |
| RoU assets | 938 | 616 | 322 |
| Equity investments | 177,989 | 140,758 | 37,231 |
| Other fixed assets | 7,316 | 6,723 | 592 |
| Non/current liabilities | (7,735) | (8,513) | 778 |
| Fixed capital | 186,663 | 147,585 | 39,078 |
| Net working capital | 72,557 | 28,278 | 44,280 |
| INVESTED CAPITAL | 259,220 | 175,862 | 83,358 |
| Shareholders' equity | 608,298 | 551,043 | 57,256 |
| Net financial managerial position | (349,078) | (375,181) | 26,102 |
| TOTAL SOURCES | 259,220 | 175,862 | 83,358 |
The net invested capital on 31 December 2022, amounting to 259,220 thousand Euros, was funded by Shareholders' equity in the amount of 608,298 thousand Euros and by available overall funds of 349,078 thousand Euros.
Changes in balance sheet items are fully analyzed and detailed in the explanatory notes to the financial statements.
The Parent Company's net financial managerial position as at 31 December 2022, compared to 31 December 2021, is detailed as follows:
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Cash and cash equivalents, net | 61,663 | 172,541 | (110.,78) |
| Financial loans to subsidiaries | 66,596 | 52,797 | 13,799 |
| Financial investments | 27,201 | 29,631 | (2,430) |
| Loans to third party | 116 | 231 | (115) |
| Due to banks | (20,168) | (82) | (20,085) |
| Due to subsidiaries | (226,238) | (192,868) | (33,370) |
| Financial liabilities IFRS 16 | (515) | (325) | (190) |
| Net financial position short term | (91,343) | 61,926 | (153,269) |
| Long term financial assets | 508,173 | 335,317 | 172,856 |
| Due to banks | (67,320) | (21,769) | (45,551) |
| Financial liabilities IFRS 16 | (432) | (294) | (138) |
| Net financial position long term | 440,421 | 313,255 | 127,167 |
| Total net financial managerial position | 349,078 | 375,181 | (26,102) |
Change in the net financial managerial position is analyzed and illustrated in the explanatory notes to the financial position.
In accordance with Consob Communication no. DEM/6064293 dated 28 July 2006, Shareholders' equity and the Parent Company's result are reconciled below with the related consolidated amounts.
| 31/12/2022 | 31/12/2021 | |||
|---|---|---|---|---|
| (THOUSAND EUROS) | NET EQUITY | NET INCOME | NET EQUITY | NET INCOME |
| Reply S.p.A.'s separate financial statements | 608,298 | 94,142 | 551,043 | 111,244 |
| Results of the subsidiary companies, net of minority interest |
561,938 | 197,883 | 438,844 | 195,570 |
| Cancellation of the carrying value of investments in consolidated companies net of any write-offs |
(182,031) | - | (142,100) | - |
| Cancellation of dividends from subsidiary companies |
- | (92,265) | - | (97,835) |
| Consolidated adjustments included those to accounting principles and elimination of unrealized intercompany gains and losses, net of related tax effect |
(14,759) | (7,576) | (29,267) | (56,571) |
| Non-controlling interests | (1,579) | (1,168) | (2,625) | (1,735) |
| Net Group consolidated financial statement | 971,869 | 191,016 | 815,895 | 150,672 |
The Corporate Governance system adopted by Reply – issuer listed at Euronext Star Milan - adheres to the new Corporate Governance Code for Italian Listed Companies issued by Borsa Italiana S.p.A..
In compliance with regulatory obligations the annually drafted "Report on Corporate Governance and Ownership Structures" contains a general description of the corporate governance system adopted by the Group, reporting information on ownership structures and compliance with the Code, including the main governance practices applied and the characteristics of the risk management and internal control system also with respect to the financial reporting process.
The aforementioned Report, related to 2022, is available on the website www.reply.com. The Corporate Governance Code is available on the website of Borsa Italiana S.p.A. https://www.borsaitaliana.it/comitato-corporate-governance/codice/2020.pdf.
The company, in accordance with the provisions of article 5 (3) (b) of Legislative Decree No 254/2016, has prepared the consolidated declaration of a non-financial nature which constitutes a separate report. The consolidated declaration of non-financial data 2022, drafted in accordance with the "GRI Standards" reporting standard, is available on the Group website www.reply.com.
Reply offers high technology services and solutions in a market where innovation is of primary importance.
Reply considers research and continuous innovation a fundamental asset in supporting clients with the adoption of new technology.
Reply dedicates resources to Research and Development activities in order to project and define highly innovative products and services as well as possible applications of evolving technologies. In this context, Reply has developed of its own platforms.
Reply has important partnerships with major global vendors so as to offer the most suitable solutions to different company needs. Specifically, Reply boasts the highest level of certification amongst the technology leaders in the Enterprise sector.
Human resources constitute a primary asset for Reply which bases its strategy on the quality of products and services and places continuous attention on the growth of personnel and in-depth examination of professional necessities with consequent definitions of needs and training courses.
The Reply Group is comprised of professionals originating from the best universities and polytechnics. The Group intends to continue investing in human resources by bonding special relations and collaboration with major universities with the scope of attracting highly qualified personnel.
The people who work at Reply are characterized by enthusiasm, expertise, methodology, team spirit, initiative, the capability of understanding the context they work in and of clearly communicating the solutions proposed. The capability of imagining, experimenting and studying new solutions enables more rapid and efficient innovation.
The group intends to maintain these distinctive features by increasing investments in training and collaboration with universities.
At the end of 2022 the Group had 13,467 employees compared to 10,579 in 2021.
The governance model of the Group privacy policy reflects what is required by the existing code for the protection of personal data and the European Regulation 679/16 (GDPR). Privacy fulfilments are managed uniformly at the Reply Group level in order to maintain adequate levels of internal coherence and to facilitate external relations, in particular with authorities, customers and suppliers.
To ensure compliance the Group has adopted a GDPR program which provides several activities including:
During the period, there were no transactions with related parties, including intergroup transactions, which qualified as unusual or atypical. Any related party transactions formed part of the normal business activities of companies in the Group. Such transactions are concluded at standard market terms for the nature of goods and/or services offered, these transactions took place in accordance with the internal procedures containing the rules aimed at ensuring transparency and fairness, under Consob Regulation 17221/2010.
The company in the notes to the financial statements and consolidated financial statements provides the information required pursuant to Art. 154-ter of the TUF [Consolidated Financial Act] as indicated by Consob Reg. no. 17221 of 12 March 2010 and subsequent Consob Resolution no. 17389 of June 23, 2010, indicating that there were no significant transactions concluded during the period as defined by Art. 4, paragraph 1, let a) of the aforementioned regulation that have significantly affected the Group's financial or economic position. The information pursuant to Consob communication of 28 July 2006 are presented in the annexed tables herein.
At the balance sheet date, the Parent Company holds 133,192 treasury shares amounting to 17,122,489 Euros, nominal value equal to 17,315 Euros; at the balance sheet item net equity, the company has posted an unavailable reserve for the same amount. At the balance sheet date the Company does not hold shares of other holding companies.
In relation to the use of financial instruments, the company has adopted a policy for risk management through the use of financial derivatives, with the scope of reducing the exposure to interest rate risks on financial loans.
Such financial instruments are considered as hedging instruments as they can be traced to the object being hedged (in terms of amount and expiry date).
In the notes to the financial statements more detail is provided to the above operations.
No significant events have occurred since year ended December 31, 2022.
The strong social and economic consequences linked to the two years of pandemic, combined with the incidence of war on European borders, are certainly the most striking indicators, but not the only ones, of a profound transformation taking place in our society. Despite the complexity of the current situation, since the beginning of the year Reply has further consolidated its leadership in new technologies and digital transformation, investing in new skills and extending its geographical presence.
The evolution in the introduction of technology is now defined and touches all sectors, with artificial intelligence, AR / VR, cloud robotics and cybersecurity that are revolutionizing not only products, but also the way they are conceived, manufactured and sold, significantly changing factories, production processes and entire value-chains.
Sustainability is another area that has affected all sectors, becoming in recent months even more predominant in the choices of companies. As Reply, we feel a strong responsibility towards future generations and we are committed to reducing our emissions in the coming years and offering consulting and technological services to support companies in the transition to net-zero.
The future still remains, in part, conditioned by the evolution of the Russian-Ukrainian war that increases tension on the main markets. In any case, the transformation process towards the new digital economy, which began in 2020, is now unstoppable and opens up opportunities for growth and development for companies like ours. In particular, we expect an increasingly pervasive diffusion of artificial intelligence on board products, processes and services and it is here that we intend to position ourselves as niche players, with very high technological content.
The financial statements at year end 2022 of Reply S.p.A. prepared in accordance with International Financial Reporting Standards (IFRS), recorded a net income amounting to 94,141,693 Euros and net shareholders' equity on 31 December 2022 amounted to 608,298,477 Euros thus formed:
| (IN EUROS) | 31/12/2022 |
|---|---|
| Share Capital | 4,863,486 |
| Legal reserve | 972,697 |
| Reserve for treasury shares on hand | 17,122,489 |
| Other reserves | 491,198,112 |
| Total share capital and reserves | 514,156,784 |
| Net income | 94,141,693 |
| Total | 608,298,477 |
The Board of Directors in submitting to the Shareholders the approval of the financial statements (Separate Statements) as at 31 December 2022 showing a net result of 94,141,693 Euros, proposes that the shareholders resolve:
a unit dividend to shareholders amounting to 1.00 Euros for each ordinary share with a right, therefore excluding treasury shares, with payment date fixed on 24 May 2023, coupon cutoff date 22 May 2023 and record date, determined in accordance with Article 83-terdecies of Legislative Decree no. 58/1998 set on 23 May 2023;
having the Legal reserve reached the limit of one fifth of the share capital pursuant to article 2430 of the Italian Civil Code, the residual amount to be allocated to the Retained earnings reserve;
Turin, 14 March 2023 /s/ Mario Rizzante For the Board of Directors The Chairman Mario Rizzante
| (THOUSAND EUORS) | NOTE | 2022 | 2021 |
|---|---|---|---|
| Revenues | 5 | 1,891,114 | 1,483,803 |
| Other income | 6 | 19,452 | 17,631 |
| Purchases | 7 | (27,328) | (21,500) |
| Personnel | 8 | (986,744) | (759,567) |
| Service costs | 9 | (606,853) | (462,779) |
| Amortization, depreciation and write-downs | 10 | (58,612) | (48,391) |
| Other operating and non-recurring (cost)/income | 11 | 54,445 | 85 |
| Operating income | 285,473 | 209,283 | |
| (Loss)/gain on investments | 12 | (12,102) | 8,164 |
| Financial income/(expenses) | 13 | (4,676) | (4,168) |
| Income before taxes | 268,696 | 213,279 | |
| Income taxes | 14 | (76,511) | (60,871) |
| Net income | 192,184 | 152,408 | |
| Non-controlling interest | (1,168) | (1,735) | |
| Net result of the Parent company | 191,016 | 150,672 | |
| Basic and diluted earnings per share | 15 | 5.13 | 4.03 |
(*) Pursuant to Consob Regulation No. 15519 of 27 July 2006, the effects of related-party transactions on the Consolidated statement of income are reported in the Annexed tables herein and fully described in Note 38.
| (THOUSAND EUROS) | NOTE | 2022 | 2021 |
|---|---|---|---|
| Profit of the period (A) | 192,184 | 152,408 | |
| Other comprehensive income that will not be reclassified subsequently to profit or loss: |
|||
| Actuarial gains/(losses) from employee benefit plans |
6,963 | (763) | |
| Total Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax (B1): |
28 | 6,963 | (763) |
| Other comprehensive income that may be reclassified subsequently to profit or loss: |
|||
| Gains/(losses) on cash flow hedges | 3,632 | 407 | |
| Gains/(losses) on exchange differences on translating foreign operations |
(627) | 16,957 | |
| Total Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax (B2): |
3,005 | 17,364 | |
| Total other comprehensive income, net of tax | 9.968 | 16.601 | |
| (B) = (B1) + (B2): | 28 | 9,968 | 16,601 |
| Total comprehensive income (A)+(B) | 202,152 | 169,008 | |
| Total comprehensive income attributable to: | |||
| Owners of the parent | 200,984 | 167,273 | |
| Non-controlling interests | 1,168 | 1,735 |
| (THOUSAND EUROS) | NOTE | 31/12/2022 | 31/12/2021 (**) |
|---|---|---|---|
| Tangible assets | 17 | 98,069 | 80,919 |
| Goodwill | 18 | 630,255 | 445,345 |
| Intangible assets | 19 | 105,173 | 83,386 |
| RoU Assets | 20 | 112,341 | 119,549 |
| Equity investments | 21 | 51,049 | 66,361 |
| Other financial assets | 22 | 11,706 | 8,556 |
| Deferred tax assets | 23 | 61,979 | 68,889 |
| Non-current assets | 1,070,572 | 873,006 | |
| Inventories | 24 | 83,880 | 86,787 |
| Trade receivables | 25 | 657,568 | 471,560 |
| Other receivables and current assets | 26 | 101,828 | 65,403 |
| Financial assets | 22 | 30,608 | 31,791 |
| Cash and cash equivalents | 22, 27 | 283,695 | 329,051 |
| Current assets | 1,157,579 | 984,592 | |
| TOTAL ASSETS | 2,228,150 | 1,857,597 | |
| Share Capital | 4,864 | 4,864 | |
| Other reserves | 774,411 | 657,733 | |
| Net result of the period | 191,016 | 150,673 | |
| Equity of the Parent company | 970,291 | 813,269 | |
| Non-controlling interest | 28 | 1,579 | 2,626 |
| NET EQUITY | 28 | 971,870 | 815,895 |
| Due to minority shareholders and earn-out | 29 | 112,828 | 107,493 |
| Finacial liabilities | 30 | 74,533 | 23,313 |
| Financial liabilities from RoU | 30 | 97,624 | 102,129 |
| Employee benefits | 31 | 42,831 | 48,601 |
| Deferred tax liabilities | 32 | 44,964 | 34,690 |
| Provisions | 33 | 15,242 | 16,925 |
| Non-current liabilities | 388,021 | 333,150 | |
| Due to minority shareholders and earn-out | 29 | 28,675 | 22,066 |
| Finacial liabilities | 30 | 43,745 | 15,681 |
| Financial liabilities from RoU | 30 | 27,829 | 26,508 |
| Trade payables | 34 | 168,835 | 139,921 |
| Other current liabilities | 35 | 598,557 | 502,990 |
| Provisions | 33 | 619 | 1,387 |
| Current liabilities | 868,260 | 708,552 | |
| TOTAL LIABILITIES | 1,256,281 | 1,041,702 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 2,228,150 | 1,857,597 |
(*)Pursuant to Consob Regulation No. 15519 of 27 July 2006, the effects of related-party transactions on the Statement of Financial Position are reported in the annexed Tables and further described in Note 38.
(*) As a result of the completion of the PPA process, the Group has restated the data as at 31 December 2021. For firther detail see Notes 18, 19 and 32.
| (THOUSAND EUROS) |
SHARE CAPITAL |
TREASURY SHARES |
CAPITAL RESERVES |
EARNING RESERVES |
CASH FLOW HEDGE RESERVE |
TRANSLATION RESERVE |
RESERVE FOR ACTUARIAL GAINS/ (LOSSES) |
NON CONTROLLING INTERESTS |
TOTAL |
|---|---|---|---|---|---|---|---|---|---|
| On 1 January 2021 |
4,863 | (25) | 199,533 | 498,899 | (1,440) | (19,989) | (6,803) | 918 675,957 | |
| Dividends distributed |
- | - | - | (20,911) | - | - | - | (710) | (21,621) |
| Change in own shares |
- | (7,195) | - | - | - | - | - | - | (7,195) |
| Increase for acquisition of treasury shares |
- | - | 100,000 | (100,000) | - | - | - | - | - |
| Total profit (loss) |
- | - | - | 150,672 | 407 | 16,957 | (763) | 1,735 169,008 | |
| Other changes |
- | - | - | (937) | - | - | - | 682 | (225) |
| On 31 December 2021 |
4,863 | (7.220) | 299,533 | 527,724 | (1,033) | (3,032) | (7,566) | 2,625 815,595 |
| (THOUSAND EUROS) |
SHARE CAPITAL |
TREASURY SHARES |
CAPITAL RESERVES |
EARNING RESERVES |
CASH FLOW HEDGE RESERVE |
TRANSLATION RESERVE |
RESERVE FOR ACTUARIAL GAINS/ (LOSSES) |
NON CONTROLLING INTERESTS |
TOTAL |
|---|---|---|---|---|---|---|---|---|---|
| On 1 January 2022 |
4,863 | (7.220) | 299,533 | 527,724 | (1,033) | (3,032) | (7,566) | 2,625 815,595 | |
| Dividends distributed |
- | - | - | (29,760) | - | - | - | (875) (30,635) | |
| Change in own shares |
- | (9,902) | - | - | - | - | - | - | (9,902) |
| Increase for acquisition of treasury shares |
- | - | - | - | - | - | - | - | - |
| Total profit (loss) |
- | - | - | 191,016 | 3,632 | (627) | 6,963 | 1,168 | 202,152 |
| Other changes |
- | - | - | (4,301) | - | - | - | (1,340) | (5,641) |
| On 31 December 2022 |
4,863 | (17,122) | 299.533 | 684,679 | 2,599 | (3,659) | (603) | 1,579 | 971,869 |
| (THOUSAND EUROS) | 2022 | 2021 (*) |
|---|---|---|
| Group net income | 192,184 | 152,408 |
| Income taxes | 71,664 | 76,550 |
| Amortization and depreciation | 58,612 | 48,391 |
| Other non-monetary expenses/(income) | (29,356) | 6,089 |
| Change in inventories | (8,280) | (26,694) |
| Change in trade receivables | (47,693) | (37,919) |
| Change in trade payables | 1,654 | 25,772 |
| Change in other assets and liabilities | 9,282 | 15,875 |
| Change in deferred tax liabilities | 15,913 | 7,707 |
| Change in employee benefits and provisions | (1,259) | 8,662 |
| Income tax paid | (76,550) | (68,532) |
| Interest paid | (1,797) | (791) |
| Interest collected | 200 | 63 |
| Net cash flows from operating activities (A) | 184,573 | 207,578 |
| Payments for tangible and intangible assets | (41,771) | (37,122) |
| Payments for financial assets | (2,562) | (29,812) |
| Payments for the acquisition of subsidiaries net of cash acquired | (190,018) | (93,157) |
| Net cash flows from investment activities (B) | (234,350) | (160,092) |
| Dividends paid | (30,635) | (21,621) |
| Payments for treasury shares | (9,902) | (7,195) |
| Financing granted | 80,396 | 3,900 |
| Reimbursement of lease liabilities | (30,343) | (29,970) |
| Repayment of loans | (11,166) | (10,419) |
| Net cash flows from financing activities (C) | (1,651) | (65,305) |
| Net cash flows (D) = (A+B+C) | (51,428) | (17,819) |
| Cash and cash equivalents at the beginning of period | 314,680 | 332,500 |
| Cash and cash equivalents at period end | 263,252 | 314,680 |
| Total change in cash and cash equivalents (D) | (51,428) | (17,819) |
| DETAIL OF CASH AND CASH EQUIVALENTS | 2022 | 2021 |
| (THOUSAND EUROS) | ||
| Cash and cash equivalents at beginning of period: | 314,680 | 332,500 |
| Cash and cash equivalents | 329,051 | 333,819 |
| Bank overdrafts | (14,371) | (1,320) |
| Cash and cash equivalents at period end: | 263,252 | 314,680 |
| Cash and cash equivalents | 283,695 | 329,051 |
| Bank overdrafts | (20,443) | (14,371) |
(*) For a better comprehensibility of the cash flow statement, it should be noted that some reclassifications of the values shown in the comparative figures have been made, which have not in any case changed the cash flows originally exposed.
| General information | NOTE 1 | General information |
|---|---|---|
| NOTE 2 | Accounting principles and basis of consolidation | |
| NOTE 3 | Risk management | |
| NOTE 4 | Consolidation | |
| Income statement | NOTE 5 | Revenue |
| NOTE 6 | Other revenues | |
| NOTE 7 | Purchases | |
| NOTE 8 | Personnel | |
| NOTE 9 | Service costs | |
| NOTE 10 | Amortization, depreciation and write-downs | |
| NOTE 11 | Other operating and non-recurring (cost)/income | |
| NOTE 12 | (Loss)/gain on investments | |
| NOTE 13 | Financial income/(expenses) | |
| NOTE 14 | Income taxes | |
| NOTE 15 | Earnings per share | |
| NOTE 16 | Other information | |
| Statement of financial position - Assets | NOTE 17 | Tangible assets |
| NOTE 18 | Goodwill | |
| NOTE 19 | Other intangible assets | |
| NOTE 20 | RoU Assets | |
| NOTE 21 | Equity Investments | |
| NOTE 22 | Financial assets | |
| NOTE 23 | Deferred tax assets | |
| NOTE 24 | Work-in-progress | |
| NOTE 25 | Trade receivables | |
| NOTE 26 | Other receivables and current assets | |
| NOTE 27 | Cash and cash equivalents | |
| Statement of financial position - Liabilities and equity |
NOTE 28 | Shareholders' equity |
| NOTE 29 | Due to minority shareholders and Earn-out | |
| NOTE 30 | Financial liabilities | |
| NOTE 31 | Employee benefits | |
| NOTE 32 | Deferred tax liabilities | |
| NOTE 33 | Provisions | |
| NOTE 34 | Trade payables | |
| NOTE 35 | Other current liabilities | |
| Other information | NOTE 36 | Segment Reporting |
| NOTE 37 | Additional disclosures to financial instruments and risk management policies |
|
| NOTE 38 | Transactions with related parties | |
| NOTE 39 | Emoluments to Directors, Statutory Auditors and Directors with Key responsibilities |
|
| NOTE 40 | Guarantees, commitments and contingent liabilities | |
| NOTE 41 | Events subsequent to 31 December 2022 | |
| NOTE 42 | Approval of the Consolidated financial statements and authorization to publish |
Reply [EXM, STAR: REY] specialises in the design and implementation of solutions based on new communication channels and digital media. Reply is a network of highly specialised companies supporting key European industrial groups operating in the telecom and media, industry and services, banking, insurance and public administration sectors in the definition and development of business models enabled for the new paradigms of AI, cloud computing, digital media and the Internet of Things. Reply services include: Consulting, System Integration and Digital Services (www.reply.com).
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and endorsed by the European Union. The designation "IFRS" also includes all valid International Accounting Standards ("IAS"), as well as all interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"), formerly the Standing Interpretations Committee ("SIC"). Following the coming into force of European Regulation No. 1606 of July 2002, starting from 1 January, 2005, the Reply Group adopted International Financial Reporting Standards (IFRS).
The consolidated financial statements have been prepared in accordance with Consob regulations regarding the format of financial statements, in application of Art. 9 of Legislative Decree 38/2005 and other CONSOB regulations and instructions concerning financial statements.
The consolidated financial statement is prepared on the basis of the historic cost principle, modified as requested for the appraisal of some financial instruments for which the fair value criterion is adopted in accordance with IFRS 9.
The consolidated financial statements have been prepared on the going concern assumption. In this respect, despite operating in a difficult economic and financial environment, the Group's assessment is that no material uncertainties (as defined in paragraph 25 of IAS 1) exist with regards its ability to continue as a going concern. These consolidated financial statements are expressed in thousands of Euros and are compared to the consolidated financial statements of the previous year prepared in accordance with the same principles. Further indication related to the format of the financial statements respect to IAS 1 is disclosed here within as well as information related to significant accounting principles and evaluation criteria used in the preparation of the following consolidated report.
The consolidated financial statements include statement of income, statement of comprehensive income, statement of financial position, statement of changes in shareholders' equity, statement of cash flows and the explanatory notes.
The income statement format adopted by the Group classifies costs according to their nature, which is deemed to properly represent the Group's business.
The Statement of financial position is prepared according to the distinction between current and non-current assets and liabilities. The statement of cash flows is presented using the indirect method.
The most significant items are disclosed in a specific note in which details related to the composition and changes compared to the previous year are provided.
It should be noted that in order to comply with the indications contained in Consob Resolution no. 15519 of 27 July 2006 "as to the format of the financial statements", additional statements: income statement and statement of financial position have been added showing the amounts of related party transactions.
The financial statements of subsidiaries are included in the consolidated financial statements as at 31 December of each year and consolidated on a line-by-line basis. The Consolidated Financial Statements comprise the financial statements of the parent Company Reply S.p.A. and those of its subsidiaries, being those entities over which the Company has control, either directly or indirectly, through exposure or rights to their variable returns and the ability to affect those returns through its power over the investees. To have power over an investee, the investor must have existing rights that give it the current ability to direct the relevant activities of the investee, i.e. the activities that significantly affect the investee's returns.
Subsidiaries are consolidated, on the basis of consistent accounting policies, from the date on which control is obtained until the date that control ceases. Assets, liabilities, income and expenses of consolidated subsidiaries are fully recognized with those of the parent in the Consolidated Financial Statements; the parent's investment in each subsidiary is eliminated against the corresponding parent's portion of equity of each subsidiary.
All significant intercompany transactions and balances between group companies are eliminated on consolidation.
Non-controlling interest is stated separately with respect to the Group's net equity. Such Non-controlling interest is determined according to the percentage of the shares held of the fair values of the identifiable assets and liabilities of the company at the date of acquisition and post-acquisition adjustments. According to IAS 27, overall loss (including the profit/(loss)
for the year) is attributed to the owners of the Parent and minority interest also when net equity attributable to minority interests has a negative balance.
Difference arising from translation of equity at historical exchange rates and year-end exchange rates are recorded at an appropriate reserve of the consolidated shareholders' equity.
All significant intercompany balances and transactions and any unrealized gains and losses arising from intercompany transactions are eliminated in preparing the consolidated financial statements. Unrealized gains and losses arising from transactions with associates and jointly controlled entities are eliminated to the extent of the company's interest in those entities.
Business combinations are accounted for by applying the acquisition method. The consideration transferred in a business combination is the sum of the acquisition-date fair value of the assets transferred, the liabilities incurred and the equity interests issued by the acquirer. Acquisition-related costs are accounted for as expenses when incurred. The acquirer shall measure the identifiable assets acquired and liabilities assumed at their acquisition-date fair values, unless another measurement basis is required by IFRSs. The excess of the consideration transferred over the Group's share of the net of the acquisitiondate amounts of the identifiable assets acquired and liabilities assumed is recognized, in the balance sheet, as goodwill; conversely, a gain on a bargain purchase is recognized in the profit and loss account.
Minority interest in the company acquired is initially measured to the extent of their shares in the fair value of the assets, liabilities and contingent liabilities recognized. The accounting of the put and call options on the minority shareholdings of the subsidiary company are recorded according to IAS 32, taking into account therefore, depending on the case, the existence and the determinability of the consideration to the minority shareholders if the option was exercised.
An associate is a company over which the Group is in a position to exercise significant influence, but not control, through the participation in the financial and operating policy decisions of the investee.
The results and assets and liabilities of associates are incorporated in the consolidated financial statements using the equity method of accounting, with the exception of investments held for future disposal.
Where a group company transacts with an associate of the Group, unrealized profits and losses are eliminated to the extent of the Group's interest in the relevant associate, except to the extent that unrealized losses provide evidence of an impairment of the asset transferred.
With regard to investments in associated companies held, either directly or indirectly through venture capital or similar entities, in order to realize capital gains, these are carried at fair value. This treatment is permitted by IAS 28 "Investments in Associates", which requires that these investments are excluded from its scope and are designated, from the time of initial recognition, at fair value through profit or loss and accounted for in accordance with IFRS 9 "Financial instruments: recognition and measurement "and any change therein is recognized in profit and loss.
Transactions in foreign currencies are recorded at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rate prevailing at that date. Exchange differences arising on the settlement of monetary items or on reporting monetary items at rates different from those at which they were initially recorded during the period or in previous financial statements, are recognized in the income statement.
All assets and liabilities of foreign consolidated companies with a functional currency other than the Euro are translated using the exchange rates in effect at the balance sheet date. Income and expenses are translated at the average exchange rate for the period. Translation differences resulting from the application of this method are classified as equity until the disposal of the investment. Average rates of exchange are used to translate the cash flows of foreign subsidiaries in preparing the consolidated statement of cash flows. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are recorded in the relevant functional currency of the foreign entity and are translated using the period end exchange rate. In the context of IFRS First-time Adoption, the cumulative translation difference arising from the consolidation of foreign operations was set at nil, as permitted by IFRS 1; gains or losses on subsequent disposal of any foreign operation only include accumulated translation differences arising after 1 January 2004.
The following table summarizes the exchange rates used in translating the 2022 and 2021 financial statements of the foreign companies included in consolidation:
| AVERAGE 2022 | ON 31 DECEMBER 2022 | AVERAGE 2021 | ON 31 DECEMBER 2021 | |
|---|---|---|---|---|
| GBP | 0.85276 | 0.88693 | 0.8596 | 0.84028 |
| Brazilian Real | 5.4399 | 5.6386 | 6.3779 | 6.3101 |
| Rumenian Leu | 4.9313 | 4.9495 | 4.9215 | 4.949 |
| Belorusian Ruble | - | - | 3.0045 | 2.886 |
| US Dollar | 1.053 | 1.0666 | 1.1827 | 1.1326 |
| Chinese Yuan | 7.0788 | 7.3582 | 7.6282 | 7.1947 |
| Polish Zloty | 4.6861 | 4.6808 | 4.5652 | 4.5969 |
| Kuna | 7.5349 | 7.5345 | 7.5284 | 7.5156 |
| Hong Kong Dollar | 8.2451 | 8.3163 | 9.1932 | 8.8333 |
| New Zealand Dollar | 1.6582 | 1.6798 | 1.6724 | 1.6579 |
| Singapore Dollar | 1.4512 | 1.43 | 1.5891 | 1.5279 |
| Malaysian Ringgit | 4.6279 | 4.6984 | - | - |
Tangible fixed assets are stated at cost, net of accumulated depreciation and impairment losses.
Goods made up of components, of significant value, that have different useful lives are considered separately when determining depreciation.
Depreciation is charged so as to write off the cost or valuation of assets, over their estimated useful lives, using the straight-line method, on the following bases:
| Buildings | 3% - 6% |
|---|---|
| Equipment | 15% - 30% |
| Plants | 20% - 40% |
| Hardware | 40% |
| Furniture and fittings | 12% - 24% |
The recoverable value of such assets is determined through the principles set out in IAS 36 and outlined in the paragraph "Impairment" herein.
Ordinary maintenance costs are fully expensed as incurred. Incremental maintenance costs are allocated to the asset to which they refer and depreciated over their residual useful lives.
Improvement expenditures on rented property are allocated to the related assets and depreciated over the shorter between the duration of the rent contract or the residual useful lives of the relevant assets.
Assets held under finance leases, which provide the Group with substantially all the risks and rewards of ownership, are recognized as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the financial statement as a debt. The assets are amortized over their estimated useful life or over the duration of the lease contract if lower.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in income.
Goodwill is an intangible asset with an indefinite life, deriving from business combinations recognized using the purchase method, and is recorded to reflect the positive difference between purchase cost and the Group's interest at the time of acquisition, after having recognized all assets, liabilities and identifiable contingent liabilities attributable to both the Group and third parties at their fair value.
Goodwill is not amortized but is (tested for impairment) annually or more frequently if events or changes in circumstances indicate that it might be impaired. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Impairment losses are recognized immediately as expenses that cannot be recovered in the future.
On disposal of a subsidiary or associate, the attributable amount of unamortized goodwill is included in the determination of the profit or loss.
According to IFRS 16, the accounting representation of leases (which do not establish the provision of services) takes place through the inclusion in the financial position of a financial liability, represented by the present value of future rents, against the inclusion in the assets of the 'right of use of the leased asset'.
Leases that were previously accounted for under IAS 17 as financial leases, have not changed compared to the current accounting representation, in full continuity with the past.
Contracts that are within the scope of IFRS 16 relate mainly to:
With reference to the options and exemptions provided by IFRS 16, the Group has made the following choices:
Intangible fixed assets are those lacking an identifiable physical aspect, are controlled by the company and are capable of generating future economic benefits.
Other purchased and internally-generated intangible assets are recognized as assets in accordance with IAS 38 – Intangible Assets, where it is probable that the use of the asset will generate future economic benefits and where the costs of the asset can be determined reliably.
Such assets are measured at purchase or manufacturing cost and amortized on a straightline basis over their estimated useful lives, if these assets have finite useful lives.
Other intangible assets acquired as part of an acquisition of a business are capitalized separately from goodwill if their fair value can be measured reliably.
In case of intangible fixed assets purchased for which availability for use and relevant payments are deferred beyond normal terms, the purchase value and the relevant liabilities are discounted by recording the implicit financial charges in their original price.
Expenditure on research activities is recognized as an expense in the period in which it is incurred.
Development costs can be capitalized on condition that they can be measured reliably and that evidence is provided that the asset will generate future economic benefits.
An internally-generated intangible asset arising from the Group's e-business development (such as informatics solutions) is recognized only if all of the following conditions are met:
These assets are amortized when launched or when available for use. Until then, and on condition that the above terms are respected, such assets are recognized as construction in progress. Amortization is determined on a straight line basis over the relevant useful lives on the following basis:
| Development costs | 33% |
|---|---|
| Software | 33% |
| Customer list (PPA) | 10% |
When an internally-generated intangible asset cannot be recorded at balance sheet, development costs are recognized in the statement of income in the period in which they are incurred.
Intangible assets with indefinite useful lives consist principally of acquired trademarks which have no legal, contractual, competitive, economic, or other factors that limit their useful lives. Intangible assets with indefinite useful lives are not amortized; in accordance with IAS 36 criteria, are tested for impairment annually or more frequently whenever there is an indication that the asset may be impaired. Any impairment losses are not subject to subsequent reversals.
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually or more frequently, whenever there is an indication that the asset may be impaired. The recoverable amount of an asset is the higher of fair value, less disposal costs and its value in use. In assessing its value in use, the pre-tax estimated future cash flows are discounted at their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Its value in use is determined net of tax in that this method produces values largely equivalent to those obtained by discounting cash flows net of tax at a pre-tax discount rate derived, through an iteration, from the result of the post-tax assessment. The assessment is carried out for the individual asset or for the smallest identifiable group of cash generating assets deriving from ongoing use, the so-called Cash generating unit.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than
its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognized as an expense immediately.
Where the value of the Cash generating unit, inclusive of goodwill, is higher than the recoverable value, the difference is subject to impairment and attributable firstly to goodwill; any exceeding difference is attributed on a pro-quota basis to the assets of the Cash generating unit.
Where an impairment loss subsequently reverses, the carrying amount of the asset, (or cash-generating unit), with the exception of goodwill, is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount that would have been determined had no impairment loss been recognized for the asset. A reversal of an impairment loss is recognized as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Investments in other companies that are available-for-sale financial assets are measured at fair value, when this can be reliably determined. Gains or Losses arising from change in fair value are recognized in Other comprehensive income/(losses) until the assets are sold or are impaired, at that time, the cumulative Other comprehensive income/(losses) are recognized in the Income Statement. Investments in other companies for which fair value is not available are stated at cost less any impairment losses.
Dividends received are included in Other income/(expenses) from investments.
In the event of write-down for impairment, the cost is recognized in the income statement; the original value is restored in subsequent years if the assumptions for the write-down no longer exist.
The risk resulting from possible losses beyond equity is entered in a specific provision for risks to the extent to which the Parent Company is committed to fulfil its legal or implicit obligations towards the associated company or to cover its losses.
Financial assets are classified, on the basis of both contractual cash flow characteristics and the entity's business model for managing them, in the following categories:
Consolidated financial statement as at 31 December 2022
At initial recognition, a financial asset is measured at its fair value; at initial recognition, trade receivables that do not have a significant financing component are measured at their transaction price. After initial recognition, financial assets whose contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding are measured at amortized cost if they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows (the so-called hold to collect business model). For financial assets measured at amortized cost, interest income determined using the effective interest rate, foreign exchange differences and any impairment losses (see the accounting policy for "Impairment of financial assets") are recognized in the profit and loss account.
Conversely, financial assets that are debt instruments are measured at fair value through OCI (hereinafter also FVTOCI) if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets (the socalled hold to collect and sell business model).
In these cases:
The accumulated changes in fair value, recognized in the equity reserve related to other comprehensive income, is reclassified to the profit and loss account when the financial asset is derecognized. A financial asset represented by a debt instrument that is neither measured at amortized cost nor at FVTOCI, is measured at fair value through profit or loss (hereinafter FVTPL); financial assets held for trading fall into this category. Interest income on assets held for trading contributes to the fair value measurement of the instrument and is recognized in "Finance income (expense)", within "Net finance income (expense) from financial assets held for trading".
When the purchase or sale of a financial asset is under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned, the transaction is accounted for on the settlement date.
The Group removes financial assets from its balance sheet when, and only when, the contractual rights to the cash flows from the assets expire or the Group transfers the financial asset. In the case of transfer of the financial asset
ȯ if the Group substantially retains all the risks and rewards of ownership of financial assets, it continues to recognize the financial asset;
ȯ if the Group neither transfers nor substantially retains all the risks and rewards of ownership of the financial asset, it determines whether or not it has retained control of the financial asset. In this case:
if the Group has not retained control, it removes the asset from its balance sheet and separately recognizes as assets or liabilities any rights and obligations created or retained in the transfer;
if the Group has retained control, it continues to recognize the financial asset to the extent of its residual involvement in the financial asset.
At the time of removal of financial assets from the balance sheet, the difference between the carrying value of assets and the fees received or receivable for the transfer of the assets is recognized in the income statement.
Work in progress mainly comprise construction contracts; when the result of a specific order can be reliably estimated, proceeds and costs referable to the related order are indicated as proceeds and costs respectively in relation to the state of progress of activities on the date of closure of the financial statement, based on the relationship between costs sustained for activities taking place up to the date of the financial statement and total costs estimated from the order, except for that which is not considered as representative of the state of progress of the order.
Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized to the extent of contract costs that it is probable will be recoverable. Contract costs are recognized as expenses in the period in which they are incurred. When it is probable that the total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately. Any advance payments are subtracted from the value of work in progress within the limits of the contract revenues accrued; the exceeding amounts are accounted as liabilities.
Product inventories are stated at the lower of cost and net realizable value. Cost comprises direct material and, where applicable, direct labor costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method.
Trade receivables are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.
At initial recognition they are measured at fair value adjusted for transaction costs and subsequently measured at amortized cost determined using the effective interest rate, to account for foreign exchange differences and any impairment losses.
At each reporting date, all financial assets, with the exception of those measured at fair value through profit and loss, are analyzed for any impairment indicators.
Under IFRS 9, an entity calculates the allowance for credit losses by considering on a discounted basis the cash shortfalls it would incur in various default scenarios for prescribed future periods and multiplying the shortfalls by the probability of each scenario occurring. The allowance is the sum of these probability weighted outcomes. Because every loan and receivable carries with it some risk of default, every such asset has an expected loss attached to it from the moment of its origination or acquisition.
Trade payables and other liabilities are measured at amortized cost.
Receivables and payables denominated in non EMU currencies are stated at the exchange rate at period end provided by the European Central Bank.
The item cash and cash equivalents includes cash, banks, reimbursable deposits on demand and other short term financial investments readily convertible in cash and are not subject to significant risks in terms of change in value.
Treasury shares are presented as a deduction from equity. The original cost of treasury shares and proceeds of any subsequent sale are presented as movements in equity.
Financial liabilities and equity instruments issued by the Group are presented according to their substance arising from their contractual obligations and in accordance with the definitions of financial liabilities and equity instruments. The latter are defined as those contractual obligations that give the right to benefit in the residual interests of the Group's assets after having deducted its liabilities.
Financial liabilities, other than derivative instruments, are presented initially at fair value of the sums collected, corrected to any transaction costs directly attributable, and subsequently valued at amortized cost using the effective interest criterion. For short-term liabilities, such as commercial debts, the amortized cost actually coincides with the nominal value.
The accounting standards adopted for specific financial liabilities or equity instruments are outlined below:
ȯ Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs and subsequently stated at its amortized cost, using the prevailing market interest rate method.
ȯ Equity instruments
Equity instruments issued by the Group are stated at the proceeds received, net of direct issuance costs.
ȯ Non-current financial liabilities.
Liabilities are stated according to the amortization cost.
In accordance with IFRS 9, derivative financial instruments qualify for hedge accounting only when at the inception of the hedge there is formal designation and sufficient documentation that the hedge is highly effective and that its effectiveness can be reliably measured. The hedge must be highly effective throughout the different financial reporting periods for which it was designated.
All derivative financial instruments are measured in accordance with IFRS 9 at fair value. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows relating to the Group's contractual commitments and forecast transactions are recognized directly in Shareholders' equity, while any ineffective portion is recognized immediately in the Income Statement.
If the hedged company commitment or forecasted transaction results in the recognition of an asset or liability, then, at the time the asset or liability is recognized, associated gains or losses on the derivative that had previously been recognized in equity are included in the initial measurement of the asset or liability.
For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognized in the income statement in the same period in which the hedge
commitment or forecasted transaction affects net profit or loss, for example, when the future sale actually occurs.
For effective hedging against a change in fair value, the hedged item is adjusted by the changes in fair value attributable to the risk hedged with a balancing entry in the Income Statement. Gains and losses arising from the measurement of the derivative are also recognized at the income statement.
Changes in the fair value of derivative financial instruments that no longer qualify as hedge accounting are recognized in the Income Statement of the period in which they arise.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognized in equity is retained in equity until the forecasted transaction is no longer expected to occur; the net cumulative gain or loss recognized in equity is transferred to the net profit or loss for the period. Implicit derivatives included in other financial instruments or in other contractual obligations are treated as separate derivatives, when their risks and characteristics are not strictly related to the underlying contractual obligation and the latter are not stated at fair value with recognition of gains and losses in the Income Statement.
The scheme underlying the employee severance indemnity of the Italian Group companies (the TFR) was classified as a defined benefit plan up until 31 December 2006. The legislation regarding this scheme was amended by Law No. 296 of 27 December 2006 (the "2007 Finance Law") and subsequent decrees and regulations issued in the first part of 2007. In view of these changes, and with specific reference to those regarding companies with at least 50 employees, this scheme only continues to be classified as a defined benefit plan in the Consolidated financial statements for those benefits accruing up to 31 December 2006 (and not yet settled by the balance sheet date), while after that date the scheme is classified as a defined contribution plan.
For Italian companies with less than 50 employees, severance pay ("TFR") remains a "post-employment benefit", of the "defined benefit plan" type, who's already matured amount must be planned to estimate the amount to settle at the time of annulment of working relations and subsequently updated, using the "Projected unit credit method". Such actuarial methodology is based on an assumption of demographic and financial nature in order to carry out a reasonable estimate of the amount of benefits that each employee had already matured based on his employment performances.
Through actuarial valuation, current service costs are recognized as "personnel expenses" in the Income Statement and represent the amount of rights matured by employees at the reporting date, and the interest cost is recognized as "Financial gains or losses" and
represents the figurative expenditure the Company would bear by securing a market loan for an amount corresponding to the Employee Termination Indemnities ("TFR"). Actuarial income and losses that reflect the effects resulting from changes in the actuarial assumptions used are directly recognized in Shareholders' equity without being ever included in the consolidated income statement.
According to local conditions and practices, some employees of the Group benefit from pension plans of defined benefits and/or a defined contribution.
In the presence of defined contribution plans, the annual cost is recorded at the income statement when the service cost is executed.
The Group's obligation to fund defined benefit pension plans and the annual cost recognized in the Income Statement is determined on an actuarial basis using the "ongoing single premiums" method. The portion of net cumulative actuarial gains and losses which exceeds the greater of 10% of the present value of the defined benefit obligation and 10% of the fair value of plan assets at the end of the previous year is amortized over the average remaining service lives of the employees.
The post-employment benefit obligation recognized in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses, arising from the application of the corridor method and past service costs to be recognized in future years, reduced by the fair value of plan assets.
The Group has applied the standard set out by IFRS 2 "Share-based payment". Share-based payments are measured at fair value at granting date. Such amount is recognized in the Income Statement, with a balancing entry in Shareholders' equity, on a straight-line basis over the "vesting period". The fair value of the option, measured at the granting date, is measured through actuarial calculations, taking into account the terms and conditions of the options granted. Following the exercise of the options assigned in previous years, the Group has no more stock option plans.
For cash-settled share-based payment transactions, the Group measures the goods and services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the Group is required to remeasure the fair value of the liability at each reporting date and at the date of settlement, with the changes in value recognized in profit or loss for the period.
Provisions for risks and liabilities are costs and liabilities having an established nature and the existence of which is certain or probable that at the reporting date the amount cannot be determined or the occurrence of which is uncertain. Such provisions are recognized when a commitment actually exists arising from past events of legal or contractual nature or arising from statements or company conduct that determine valid expectations from the persons involved (implicit obligations).
Provisions are recognized when the Group has a present commitment arising from a past event and it is probable that it will be required to fulfil the commitment. Provisions are accrued at the best estimate of the expenditure required to settle the liability at the balance sheet date, and are discounted when the effect is significant.
Revenues represent the gross flows of economic benefits for the year deriving from the performance of the ordinary business.
Revenue from contracts with customers is recognized on the basis of the following steps pursuant to IFRS 15:
A promised good or service is transferred when (or as) the customer obtains control of it. Control can be transferred over time or at a point in time.
Revenue is measured at the fair value of the consideration to which the Group expects to be entitled in exchange for transferring promised goods and/or services to a customer, excluding amounts collected on behalf of third parties. Therefore, revenue is recognized when control over the goods or services is transferred to the customer either a) "over time" or b) "at a point in time". Following are the major types of services and products that the Group provides.
Turnkey projects: The Group fulfils its obligations and recognizes revenue "over time", based on the percentage of the accrued costs or the progress of the services provided. The unconditional right to payment by the customer emerges as a result of the accrual of the costs or the underlying progress of each contract.
Other services: The Group fulfils its obligations and recognizes revenue "at a point in time" based on the underlying events of the supply of products and services. The unconditional right to receive payment from the customer emerges as a result of these events occurring.
In determining the transaction price, the promised amount of consideration is adjusted for the effects of the time value of money if the timing of payments agreed to by the parties to the contract provides the customer or the entity with a significant benefit of financing the transfer of goods or services to the customer. The promised amount of consideration is not adjusted for the effect of the significant financing component if, at contract inception, it is expected that the period between the transfer of a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Revenue recognition can generate the accounting of an asset or liability deriving from contracts. More specifically:
Financial income and expenses are recognized and measured in the income statement on an accrual basis.
Government grants are recognized in the financial statements when there is reasonable assurance that the company concerned will comply with the conditions for receiving such grants and that the grants themselves will be received. Government grants are recognized as income over the periods necessary to match them with the related costs which they are intended to compensate.
Income tax represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit defers from the profit as reported in the income statement because it excludes items of income or
expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
Current income tax is entered for each individual company based on an estimate of taxable income in compliance with existing legislation and tax rates or as substantially approved at the period closing date in each country, considering applicable exemptions and tax credit.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and associates and interests arising in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the liability is settled or the asset realized. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
In the event of changes to the accounting value of deferred tax assets and liabilities deriving from a change in the applicable tax rates and relevant legislation, the resulting deferred tax amount is entered in income statement, unless it refers to debited or credited amounts previously recognized to Shareholders' equity.
Dividends are entered in the accounting period in which distribution is approved.
Basic earnings per share is calculated with reference to the profit for the period of the Group and the weighted average number of shares outstanding during the year. Treasury shares are excluded from this calculation.
Diluted earnings per share is determined by adjusting the basic earnings per share to take account of the theoretical conversion of all potential shares, being all financial instruments that are potentially convertible into ordinary shares, with diluting effect.
The accounting standards newly adopted by the Group and their effects are described in the following paragraph " "Newly issued accounting standards". There have been no further changes further to those described in the above paragraph.
At the reporting date there are no significant estimations related to uncertain future events and other causes of uncertainty that could cause significant adjustments to the values of assets and liabilities within the following year.
It should be noted that some amounts recorded in the financial statements published at 31 December 2021 have been restated as a result of the conclusion of the PPA process for the acquisition of Comwrap GmbH, Enowa LLC, The Spur Group and G-Force Demco Ltd, which led to the allocation to assets and liabilities and the residual recognition of a goodwill. As a result of this process, the data published at 31 December 2021 were restated. For more details of the transaction and the consequent effects on the data restated at 31 December 2021, please refer to note 18 "Goodwill", note 19 "Other intangible assets" and note 32 "Deferred tax liabilities".
The preparation of the Financial Statements and relative notes under IFRS requires that management makes estimates and assumptions based also on subjective judgments, past experiences and assumptions considered reasonable and realistic in relation to the information at the time of estimation. These estimates shall affect items reported in the consolidated financial balance sheet and income statement and the disclosure of contingent assets and liabilities. The results of the financial statements may differ, even significantly, from these estimates as a result of possible changes in the factors considered in the determination of these estimates. Estimates are periodically reviewed.
The estimates are mainly referred to:
Checking for the reduction in the value of goodwill is carried out by comparing the book value of the cash flow generating units and their recoverable value; the latter is represented by the greater of the fair value, minus the selling costs, and the value in use of the same unit. This complex valuation process involves, among other things, the use of methods such as discounted cash flow with the related assumptions on the estimation of cash flows and the determination of market multiples. The recoverable value depends on the discount rate used in the discounted cash flow model as well as the expected cash flows in the future and the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable value for the different cash flow generating units, including a sensitivity analysis, are detailed in the Goodwill Note.
The fair value of investments in other non-controlling companies is, in line with the provisions of the International Private Equity and Venture Capital valuation guideline (IPEV), determined both by valuation models that also take into account subjective valuations such as, for example, those estimates of cash flows, and on the basis of external information such as multiples and quotes provided by new investment rounds.
The reduction in value of trade receivables and of work in progress is carried out through the simplified approach, which provides for the estimation of the expected loss over the entire life of the credit at the time of initial recognition and in subsequent evaluations. For each customer segment, the estimate is made mainly through the determination of the expected default, based on historical-statistical indicators, possibly adjusted using prospective elements. For some categories of loans characterized by specific risk elements, detailed assessments are carried out on the individual credit positions.
The recognition of business combinations entails the recognition of the assets and liabilities of the acquired company at their fair value on the date of acquisition of control as well as the possible recognition of goodwill. The determination of these values is carried out through a complex estimation process.
Due to minority shareholders and earn-out represents the valuation of the obligations assumed by the Reply Group as part of the acquisitions made. These liabilities are linked either to the commitments to purchase shares from minority shareholders or to the deferred component of the consideration to be paid to the sellers – Earn-out. These liabilities are remeasured at fair value at each balance sheet date and adjusted through the income statement. The fair value of the liabilities is determined on the basis of evaluation models
based on the acquisition contracts and on the economic and financial parameters derived from the budgets of the acquired companies. These are therefore also based on subjective assessments such as, for example, estimates of future cash flows.
The determination of the value of the lease liability and the corresponding right of use asset is carried out by calculating the present value of the lease payments, also considering the estimate on the reasonable certainty of the renewal of the lease contracts.
The provisions related to litigation are the result of a complex estimation process that is also based on the probability of failure. The provisions related to personnel provisions, and in particular to the employee severance indemnity, are determined on the basis of actuarial assumptions; changes in these assumptions could have significant effects on those provisions.
The fair value of derivatives and equity instruments is determined through valuation models that also take into account subjective valuations such as, for example, cash flow estimates, expected price volatility, etc., and/or through market values or quotes provided by financial counterparties.
Pursuant to IAS 8 (Accounting Standards, changes in accounting estimates and errors) paragraph 10, in the absence of a principle or interpretation applicable specifically to a certain transaction, Management defines, through subjective assessments, the accounting methodologies to be adopted in order to provide a financial statements that faithfully represent the financial position, the economic result and the financial flows of the Group, reflects the economic substance of the operations, is neutral, drafted on a prudential basis and comprehensive in all relevant aspects.
ȯ With Regulation no. 2021/2036 issued by the European Commission on 19 November 2021, IFRS 17 "Insurance contracts" published by the IASB on 18 May 2017 and subsequent amendments published on 25 June 2020 were approved. The standard provides a comprehensive approach to the accounting of insurance contracts and applies to issued insurance contracts, reinsurance contracts issued or held and investment contracts with discretionary participation characteristics issued.
The provisions of IFRS 17 and its subsequent amendments are effective from financial years beginning on or after 1 January 2023.
address an important issue related to accounting mismatches between insurance contract liabilities and financial assets arising from comparative information submitted with the initial application of IFRS 17 and IFRS 9.
Amendments are effective from financial years starting on or after 1 January 2023.
The Group has assessed that these changes will not have a significant impact on the consolidated financial statements.
ȯ The amendments clarify the situations that are considered liquidation of a liability. Due to the COVID-19 pandemic, the IASB has proposed to postpone the effective date of the document to 1 January 2024, to give companies more time to implement any classification changes resulting from the changes.
ȯ On 22 September 222, the IASB issued the document "Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback". This amendment specifies the criteria that the lessee must use to measure the lease liability arising from a leaseback transaction, in order to avoid recognition of gains or losses on the right of use recognised in the balance sheet.
Amendments are effective from financial years starting on or after 1 January 2023.
The Group operates at a world-wide level and for this reason its activities are exposed to various types of financial risks: market risk (broken down in exchange risk, interest rate risk on financial flows and on "fair value", price risk), credit risk and liquidity risk.
For business purposes, specific policies are adopted to assure its clients' solvency. With regards to financial counterparty risk, the Group does not present significant risk in credit-worthiness or solvency.
The group is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time.
The cash flows, funding requirements and liquidity of the Group companies are monitored and centrally managed under the control of the Group Treasury. The aim is to guarantee the efficiency and effectiveness of the management of current and perspective capital resources (maintaining an adequate level of reserves of liquidity and availability of funds via a suitable amount of committed credit lines).
The difficult economic situation of the markets and of financial markets necessitates special attention being given to the management of the liquidity risk, and in that sense particular emphasis is being placed on measures taken to generate financial resources through operations and maintaining an adequate level of liquid assets. The Group therefore plans to meet its requirements to settle financial liabilities as they fall due and to cover expected capital expenditures by using cash flows from operations and available liquidity, renewing or refinancing bank loans.
The Group entered into most of its financial instruments in Euros, which is its functional and presentation currency. Although it operates in an international environment, it has a limited exposure to fluctuations in the exchange rates.
The exposure to interest rate risk arises from the need to fund operating activities and M&A investments, as well as the necessity to deploy available liquidity. Changes in market interest rates may have the effect of either increasing or decreasing the Group's net profit/(loss), thereby indirectly affecting the costs and returns of financing and investing transactions. The interest rate risk to which the Group is exposed derives from bank loans; to mitigate such risks, the Group, when necessary, has used derivative financial instruments designated as "cash flow hedges".
The use of such instruments is disciplined by written procedures in line with the Group's risk management strategies that do not contemplate derivative financial instruments for trading purposes.
Companies included in consolidation are consolidated on a line-by-line basis.
Change in consolidation compared to 31 December 2021 are related to:
Change in the consolidation as at December 31, 2022 affected Group's revenues by 8.5% and profits before tax by 3.7%.
Furthermore, the list of the Reply Group companies, presented as an annex herein include the start-up companies, compared to 31 December 2021, Net Reply S.r.l., Nexi Digital S.r.l., Nexi Digital Polska Sp. z o.o., Next Reply S.r.l., Next Reply GmbH, Net Reply LLC, Ki Reply GmbH, Spike Digital Reply GmbH, Spike Reply Ltd.
Revenues from sales and services, including changes in work in progress on contracts, amounted to 1,891,114 thousand Euros (1,483,803 thousand Euros in 2021). This item includes consulting services, fixed price projects, assistance and maintenance services and other minor revenues.
The following table shows the percentage breakdown of revenues by geographic area. Moreover, the breakdown reflects the business management of the Group by Management and the allocation approximates the localization of services provided:
| REGION (*) | 2022 | 2021 |
|---|---|---|
| Region 1 | 63.5% | 64.0% |
| Region 2 | 19.2% | 19.7% |
| Region 3 | 17.3% | 16.3% |
| IoT Incubator | 0.0% | 0.0% |
| Total | 100.0% | 100.0% |
| (*) |
Region 1: ITA, USA, BRA, POL, ROU, CHN (Nanjing), NZL Region 2: DEU, CHE, CHN (Beijing), HRV Region 3: GBR, LUX, BEL, NLD, FRA, BLR, SGP, HKG, MYS
Disclosure required by IFRS 8 ("Operating segment") and breakdown of revenues by type are provided in Note 36 herein.
Other revenues, amounted to 19,452 thousand Euros (17,631 thousand Euros in 2021), refer to miscellaneous income, non-recurring income and R&D contributions.
Detail is as follows:
| (THOUSAND EUROS) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Software licenses for resale | 16,394 | 15,181 | 1,213 |
| Hardware for resale | 3,830 | 1,937 | 1,893 |
| Other | 7,104 | 4,381 | 2,723 |
| Total | 27,328 | 21,500 | 5,828 |
Purchases of Software licenses and Hardware licenses for resale are recognized net of any change in inventory.
The item Other includes the purchase of fuel for 4,748 thousand Euros, the purchase of tangible assets for 1,279 thousand Euros and the purchase of office stationery for 732 thousand Euros.
| (THOUSAND EUROS) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Payroll employees | 909,937 | 683,934 | 226,003 |
| Executive Directors | 76,807 | 75,633 | 1,175 |
| Total | 986,744 | 759,567 | 227,177 |
The increase in the cost of employees, amounting to 227,177 thousand Euros, is attributable to the increase in the number of employees due to an overall increase in the Group's business.
Detail of personnel by category is provided below:
| (NUMBER) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Directors | 418 | 364 | 54 |
| Managers | 1,438 | 1,288 | 150 |
| Staff | 11,611 | 8,927 | 2,684 |
| Total | 13,467 | 10,579 | 2,888 |
On 31 December 2022 the Group had 13,467 employees compared with 10,579 at the end of 2021.
Change in consolidation brought an increase of 958 employees.
The average number of employees in 2022 was 11,862 marking an increase with respect to 9,704 of the previous year.
Payroll employees comprise mainly electronic engineers and economic, computer science, and business graduates from the best Universities.
Service costs comprised the following:
| (THOUSAND EUROS) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Commercial and technical consulting | 416,551 | 341,069 | 75,481 |
| Travelling and professional training expenses | 36,058 | 20,471 | 15,588 |
| Other services costs | 104,824 | 66,524 | 38,300 |
| Office expenses | 21,256 | 14,211 | 7,045 |
| Lease and rentals | 6,721 | 4,688 | 2,033 |
| Other | 21,444 | 15,816 | 5,629 |
| Total | 606,853 | 462,779 | 144,074 |
The change in Services and other costs, amounting to 144,074 Euros, is attributable to an overall increase in the Group's business.
The item Other services costs mainly include marketing services, software license fees, administrative and legal services, telephone and canteen; the increase is linked to the return to pre-pandemic levels.
Office expenses include services rendered by related parties referred to service contracts for the use of premises, domiciliation and provision of secretarial services for 767 thousand Euros and rent charged by third parties for 3,503 thousand Euros, utility costs for 11,863 thousand Euros, cleaning expenses for 2,463 thousand Euros and maintenance expenses for 1,505 thousand Euros.
Depreciation of tangible assets, calculated on the basis of economic-technical rates determined in relation to the residual useful lives of the assets, resulted in an overall charge as at 31 December 2022 of 13,789 thousand Euros. Details of depreciation are provided in the notes to tangible assets.
Amortization of intangible assets for the year ended 2022 amounted to an overall loss of 15,716 thousand Euros. Details of depreciation are provided in the notes to tangible assets.
Amortization related to right of use assets arising from the adoption of IFRS 16 amounted to 29,107 thousand Euros.
Other operating and non-recurring net income are related to events and operations that because of their nature do not occur continuously in normal operations, at 31 December 2022 they amounted to 54,445 thousand Euros (85 thousand Euros in 2021) and refer to:
This item amounting to negative 12,202 thousand Euros is related to the fair value adjustments to equity investments in start-up companies made by the Investment company Breed Investments Ltd..
Detail is as follows:
| (THOUSAND EUROS) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Financial income | 1,835 | 772 | 1,062 |
| Interest expenses | (2,938) | (1,426) | (1,513) |
| Other | (3,572) | (3,514) | (57) |
| Total | (4,676) | (4,168) | (508) |
Financial income mainly includes interest on financial investments amounting to 923 thousand Euros, interest income on tax refunds amounting to 426 thousand Euros, interest on convertible loans amounting to 217 thousand Euros and interest on bank accounts amounting to 200 thousand Euros.
Interest expenses mainly include expenses related to loans for M&A operations. The item Other includes:
Income taxes for the financial year ended 2022 amounted to 76,511 thousand Euros and are detailed as follows:
| (THOUSAND EUROS) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| IRES and other taxes | 63,989 | 66,179 | (2,190) |
| IRAP (Italy) | 10,238 | 9,310 | 928 |
| Current taxes | 74,227 | 75,489 | (1,262) |
| Deferred tax expenses | 729 | 2,861 | (2,131) |
| Deferred tax income | 4,118 | (18,540) | 22,658 |
| Deferred taxes | 4,848 | (15,679) | 20,527 |
| Corporate tax - previous years | (2,564) | 1,061 | (3,624) |
| Total income taxes | 76,511 | 60,871 | 15,640 |
The tax burden on the result before taxes was equivalent to 28.5% (the same of 2021).
The reconciliation between the tax charges recorded in the consolidated financial statements and the theoretical tax charge, calculated on the basis of the theoretical tax rate in effect in Italy, is the following:
| Profit/(loss) before taxes from continuing operations | 268,695 | |
|---|---|---|
| Theoretical income taxes | 64,487 | 24.0% |
| Effect of fiscal permanent differences | (324) | |
| Effect of difference between foreign tax rates and the theoretical Italian tax rate | 2,110 | |
| Current and deferred income tax recognized in the financial statement excluding IRAP |
66,273 | 24.7% |
| IRAP current and deferred | 10,238 | 3.8% |
| Current and deferred income recognized in the financial statements | 76,511 | 28.5% |
In order to render the reconciliation between income taxes recognized in the financial statements and theoretical income taxes more meaningful, IRAP tax is not taken into consideration since it has a taxable basis that is different from the result before tax of continuing operations. Theoretical income taxes are therefore calculated by applying only the tax rate in effect in Italy ("IRES"), equal to 24.0%, on the result before tax of continuing operations.
The basic and diluted earnings per share as at 31 December 2022 was calculated on the basis of the Group's net result amounting to 191,016 thousand Euros (150,672 thousand Euros as at 31 December 2021) divided by the weighted average number of shares, net of treasury shares, as at 31 December 2022 which amounted to 37,252,650 (37,356,344 as at 31 December 2021).
| (EUROS) | 2022 | 2021 |
|---|---|---|
| Group net result | 191,016,000 | 150,672,000 |
| Average no. shares | 37,252,650 | 37,356,344 |
| Earnings per share | 5.13 | 4.03 |
The basic earnings per share and diluted earnings per share are the same as there are no financial instruments potentially convertible in shares (stock options).
Pursuant to Article 1, paragraph 125 of Law 124/2017, the Group has received the following public contributions in 2022:
| CLIENT | THOUSAND EUROS |
|---|---|
| SOGEI AND OTHE PUBLIC ENTITIES | 18,995 |
| AZIENDA REGIONALE PER L'INNOVAZIONE E GLI ACQUISTI SPA | 14,847 |
| AGENZIA DELLE ENTRATE-RISCOSSIONE | 1,742 |
| AZIENDA SOCIO SANITARIA TERRITORIALE | 1,346 |
| ENTE PUBBLICO NAZIONALE DI RICERCA | 1,023 |
| FOUNDATIONS | 807 |
| PREVIDENZA SOCIALE | 629 |
| AGENZIA DI TUTELA DELLA SALUTE REGIONALE | 449 |
| AZIENDA ZERO | 437 |
| MINISTRIES | 374 |
| BANKS | 298 |
| UNIVERSITIES | 237 |
| AZIENDA ULSS | 158 |
| SPORT E SALUTE SPA | 156 |
| ANAC | 117 |
| INNOVAPUGLIA S.P.A. | 75 |
| ARPA-AGENZIA REGIONALE PROTEZIONE AMBIENTE | 69 |
| ANAS S.P.A. | 55 |
| REGIONI E PROVINCE | 54 |
| INAIL | 53 |
| CONINET SPA | 33 |
| MIBACT GALLERIA NAZIONALE D'ARTE MODERNA E CONTEMPORANEA | 22 |
| LEONARDO LOGISTICS S.P.A. | 20 |
| TS - WAY S.R.L. | 19 |
| COMUNI | 14 |
| ENI | 4 |
| GARANTE PER LA PROTEZIONE DEI DATI PERSONALI - GP | 1 |
| ANPAL - AGENZIA NAZIONALE PER LE POLITICHE ATTIVE DEL LAVORO | 1 |
| AGENZIA REGIONALE PER LA PROTEZIONE DELL'AMBIENTE | 1 |
| CORTE COSTITUZIONALE | 1 |
| TOTAL | 42,038 |
In accordance to the above mentioned regulation, the following table shows the public grants received by some group companies.
| ENTITY | THOUSAND EUROS |
|---|---|
| COMMISSION EUROPEENNE | 572 |
| MINISTERO SVILUPPO ECONOMICO | 408 |
| EIT DIGITAL ITALY | 77 |
| REGIONE PIEMONTE | 57 |
| TOTAL | 1,113 |
The beneficiary companies are: Reply S.p.A., Bside S.r.l., Consorzio Reply Public Sector, Santer Reply S.p.A., Eos Reply S.r.l., Storm Reply S.r.l., Xister S.r.l., Cluster Reply Roma S.r.l., Security Reply S.r.l., Forge Reply S.r.l., Tamtamy Reply S.r.l., Xenia Reply S.r.l. and Whitehall Reply S.r.l.. For further details, please refer to the individual company's 2022 annual report.
Tangible assets as at 31 December 2022 amounted to 98,068 thousand Euros and are detailed as follows:
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Buildings | 58,592 | 48,892 | 9,700 |
| Plant and machinery | 6,665 | 6,164 | 501 |
| Hardware | 12,102 | 8,810 | 3,292 |
| Other | 20,710 | 17,053 | 3,657 |
| Total | 98,068 | 80,919 | 17,149 |
| (THOUSAND EUROS) | BUILDINGS | PLANT AND MACHINERY |
HARDWARE | OTHER | TOTAL |
|---|---|---|---|---|---|
| Historical cost | 52,333 | 18,013 | 51,528 | 46,236 | 168,110 |
| Accumulated depreciation | (3,441) | (11,849) | (42,718) | (29,184) | (87,191) |
| 31/12/2021 | 48,892 | 6,164 | 8,810 | 17,053 | 80,919 |
| Historical costs | |||||
| Increases | 10,804 | 2,586 | 9,939 | 10,869 | 34,198 |
| Disposals | (6) | (1,566) | (8,521) | (2,797) | (12,890) |
| Change in consolidation | - | 225 | 1,353 | 994 | 2,572 |
| Other changes | (2) | 598 | 299 | (740) | 156 |
| Accumulated depreciations | |||||
| Increases | (1,075) | (1,830) | (6,012) | (4,872) | (13,789) |
| Disposals | - | 1,197 | 7,424 | 1,710 | 10,331 |
| Change in consolidation | - | (160) | (1,205) | (1,044) | (2,409) |
| Other changes | (22) | (550) | 15 | (462) | (1,020) |
| Historical cost | 63,130 | 19,856 | 54,598 | 54,562 | 192,147 |
| Accumulated depreciation | (4,538) | (13,191) | (42,496) | (33,852) | (94,078) |
| 31/12/2022 | 58,592 | 6,665 | 12,102 | 20,710 | 98,068 |
During the financial year the Group carried out total investments for 34,198 thousand Euros (39,002 thousand Euros at 31 December 2021).
The item Buildings mainly includes:
Increases in the item Buildings refers to the restructuring costs of the buldings.
Increase in the item Plant and machinery mainly refers to purchases of general devices and to plant systems for the offices in which the Group operates.
Change in the item Hardware is due to investments made by companies included in Region 1 for 4,898 thousand Euros, 4,130 thousand Euros for purchases made by the companies included in Region 2 and 906 thousand Euros for purchases made by the companies included in Region 3.
The item Other as at 31 December 2022 mainly includes office furniture and leasehold improvements. The increase of 10,869 thousand Euros mainly refers to the purchase of office furniture for 2,812 thousand Euros, leasehold improvements for 6,263 thousand Euros and the purchase of other for 1,794 thousand Euros. The item Other is mainly related to mobile phones.
Other changes mainly refer to translation differences.
As at 31 December 2022 tangible assets were depreciated by 49.0% of their value, compared to 51.9% at the end of 2021.
This item includes goodwill arising from consolidation of subsidiaries purchased against payment made by some Group companies.
It should be noted that the goodwill values stated in the financial statements published at 31 December 2021 have been restated as a result of the conclusion of the PPA process for the acquisition of Comwrap GmbH, Enowa LLC, The Spur Group and G-Force Demco Ltd, which resulted in the allocation to assets and liabilities and the residual recognition of a goodwill for 109 million euros. As a result of this process, the data published at 31 December 2021 was restated.
The effects of changes on the value of goodwill, compared to the financial statements published at 31 December 2021, are detailed below:
| (THOUSAND EUROS) | 31/12/2021 | PPA EFFECT | 31/12/2021 RESTATED |
|---|---|---|---|
| Region 1 | 217,186 | (21,197) | 195,989 |
| Region 2 | 135,239 | (5,234) | 130,005 |
| Region 3 | 121,693 | (2,344) | 119,349 |
| Total | 474,118 | (28,775) | 445,345 |
Goodwill in 2022 developed as follows:
| (THOUSAND EUROS) | ||
|---|---|---|
| Beginning balance | 445,345 | |
| Increases | 179,910 | |
| Impairment | - | |
| Total | 625,254 | |
| Exchange rate differences | 5,001 | |
| Ending balance | 630,255 |
Increase in Goodwill compared to 31 December 2021 owes to:
The following table summarizes the calculation of goodwill and the aggregate book value of the companies as at the acquisition date.
| (THOUSAND EUROS) | FAIR VALUE (*) |
|---|---|
| Tangible and intangible assets | 3,334 |
| Trade receivables and other current assets | 36,775 |
| Financial assets | 2,942 |
| Cash and cash equivalents | 14,275 |
| Financial liabilities, net | (12,113) |
| Trade payables and other current liabilities | (27,273) |
| Deferred tax liabilities, net | (1,225) |
| Net assets acquired (A) | 16,714 |
| Transaction value including the deferred component (B) | 219,801 |
| Difference allocated to other intangible assets (C) | 23,177 |
| Goodwill (B-A+C) | 179,910 |
(*) book value is equal to fair value
The above situation is to be considered definitive.
Goodwill was allocated to the cash generating units ("CGU"), identified in the Region in which the Group operates (Region 1 includes the CGU related to American companies). The breakdown reflects the business management of the Group by Top Management and is summarized as follows:
| (THOUSAND EUROS) | AT 31/12/2021 | INCREASES | TRANSLATION DIFFERENCES |
AT 31/12/2022 |
|---|---|---|---|---|
| Region 1 | 195,989 | 380 | 9,058 | 205,427 |
| Region 2 | 130,005 | 103,048 | - | 233,053 |
| Region 3 | 119,349 | 76,482 | (4,057) | 191,774 |
| Total | 445,344 | 179,910 | 5,001 | 630,255 |
Reply has adopted a structured and periodic planning and budgeting system aimed at defining objectives and business strategies in order to draft the annual budget.
The impairment model adopted by the Reply Group is based on future cash flows calculated using the Discounted cash flow analysis.
In applying this model, Management uses different assumptions, which are applied to the single CGU over two years of extrapolation subsequent to the annual budget, in order to estimate:
The recoverable value of the CGU, to which the single goodwill is referred, is determined as the highest between the fair value less any selling costs (net selling price) and the present value of the estimated future cash flows expected from the continuous use of the good (value in use). If the recoverable value is higher than the carrying amount of the CGU there is no impairment of the asset; in the contrary case, the model indicates a difference between the carrying amount and the recoverable value as the effect of impairment.
The following assumptions were used in calculating the recoverable value of the Cash Generating Units:
| REGION 1 | REGION 2 | REGION 3 |
|---|---|---|
| 2% | 2% | 2% |
| 8.09% | 6.38% | 7.52% |
| 10.99% | 9.11% | 10.02% |
| 10.2 | 10.2 | 10.2 |
As to all CGUs subject to the impairment tests at 31 December 2022 no indications emerged that such businesses may have been subject to impairment.
On 31 December 2022 the difference between the headroom estimated and the book value of the net invested capital inclusive of the goodwill initially recognized, is equal to 351.5% for Region 1, 85.5% for Region 2 and 26.4% for Region 3.
Reply has also developed a sensitivity analysis of the estimated recoverable value. The Group considers that the growth rate of revenues and the discount rate are key indicators in estimating the fair value and has therefore determined that:
This analysis would not lead to an excess of the carrying value of the CGU compared to its recoverable value, which tends to be always significantly high.
In addition to the above analyses, for Region 1, which includes US company goodwill for a total amount of €159 million, the company carried out a specific impairment test, which did not reveal any indication that such goodwill may have suffered a loss in value.
| ASSUMPTIONS | REGION 1 – US |
|---|---|
| Terminal value growth rates: | 2% |
| Discount rate, net of taxes: | 8.00% |
| Discount rate, before taxes: | 10.95% |
| Multiple of EBIT | 10.20 |
Finally, it is appropriate to note that the estimates and budget data to which the above mentioned parameters have been applied are those determined by management on the basis of past performance and expectations of developments in the markets in which the Group operates, also pursuant to CONSOB and ESMA recommendations, significant attention has been placed on the planning process to account for the possible impacts deriving from the current geo-political situation, and to the sensitivity analysis of the recoverable value, which is always significantly higher despite a 30% increase in key parameters (reduction of turnover and discount rate).
Moreover, estimating the recoverable amount of the Cash-Generating Units requires discretion and the use of estimates by Management. The Group cannot guarantee that there will be no goodwill impairment in future periods. Circumstances and events which could potentially cause further impairment losses are constantly monitored by Reply management.
Net intangible assets as at 31 December 2022 amounted to 105,173 thousand Euros (83,386 thousand Euros on 31 December 2021).
It should be noted that the values of intangible assets stated in the financial statements published at 31 December 2021 have been restated as a result of the conclusion of the PPA process for the acquisition of Comwrap GmbH, Enowa LLC, The Spur Group and G-Force Demco Ltd, which resulted in the allocation to assets and liabilities and the recognition of Customer Lists for 39,350 thousand Euros. As a result of this process, the data published at 31 December 2021 was restated.
Other intangible assets are detailed as follows:
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 RESTATED |
CHANGE |
|---|---|---|---|
| Development costs | 2,422 | 1,853 | 569 |
| Software | 4,892 | 5,272 | (380) |
| Trademark | 537 | 537 | - |
| Other intangible assets | 97,323 | 75,724 | 21,598 |
| Total | 105,173 | 83,386 | 21,787 |
| (THOUSAND EUROS) | DEVELOPMENT COSTS |
SOFTWARE | TRADEMARK | OTHER INTANGIBLE ASSETS |
TOTAL |
|---|---|---|---|---|---|
| Historical cost | 31,768 | 31,002 | 537 | 86,403 | 149,710 |
| Accumulated depreciation | (29,915) | (25,730) | - | (10,679) | (66,324) |
| 31/12/2021 | 1,853 | 5,272 | 537 | 75,724 | 83,386 |
| Historical costs | |||||
| Increases | 1,918 | 2,592 | - | 32,714 | 37,224 |
| Disposals | (100) | (2,157) | - | - | (2,257) |
| Change in consolidation | - | 1,136 | - | 59 | 1,195 |
| Other changes | (6) | (5,335) | - | 976 | (4,365) |
| Accumulated depreciations | |||||
| Increases | (1,354) | (2,333) | - | (12,029) | (15,716) |
| Disposals | 100 | 2,151 | - | - | 2,252 |
| Change in consolidation | - | (913) | - | (28) | (941) |
| Other changes | 10 | 4,479 | - | (93) | 4,396 |
| Historical cost | 33,580 | 27,238 | 537 | 120,151 | 181,506 |
| Accumulated depreciation | (31,158) | (22,346) | - | (22,829) | (76,333) |
| 31/12/2022 | 2,422 | 4,892 | 537 | 97,323 | 105,173 |
Development costs refer to the development of software products and are accounted for in accordance with provisions of IAS 38.
The item Software mainly refers to software licenses purchased and used internally by the Group companies. This item includes 1,498 thousand Euros related to software development for internal use in 2022.
The item Trademark mainly refers to the value of the "Reply" trademark granted on 9 June 2000 to the Parent Company Reply S.p.A. (at the time Reply Europe Sàrl), in connection with the share capital increase that was resolved and subscribed to by the Parent Company. Such amount is not subject to systematic amortization and the expected future cash flows are deemed adequate.
The change in the item Other intangible assets is related to the completion of the PPA procedure of Fincon GmbH and Wemanity Group, as described in note 18.
The application of the IFRS 16 accounting standard, in use since 1 January 2019, resulted in the accounting of the book value of the right-of-use asset ("RoU Asset") that is equal to the book value of the liabilities for leasing on the date of first application, net of any accrued income/costs or deferred revenue/expenses related to the lease. The table below shows the RoU Assets divided by category:
| (THOUSAND EUROS) | 31/12/2021 | NET CHANGES | AMORTIZATION | EXCHANGE DIFFERENCE |
31/12/2022 |
|---|---|---|---|---|---|
| Buildings | 107,482 | 11,071 | (22,171) | 288 | 96,670 |
| Vehicles | 10,726 | 10,351 | (6,544) | 128 | 14,660 |
| Office equipment | 1,341 | 61 | (391) | - | 1,010 |
| Total | 119,549 | 21,483 | (29,107) | 416 | 112,341 |
The net changes mainly refer to the signing of new financial leasing agreements, resulting in an increase in the value of the right of use, the redetermination of certain liabilities, increases in rents and the renegotiation of existing contracts and to the change in consolidation due to Wemanity Group.
The item Equity investments amounts to 51,049 thousand Euros and includes for 50,823 thousand Euros investments in start-up companies principally in the IoT field made by the Investment company Breed Investments Ltd.
Note that the investments in equity investments mainly held through an Investment Entity are designated at fair value and accounted for in accordance with IFRS 9 "Financial Instruments: Recognition and Measurement" Through Profit & Loss. The fair value is determined using the International Private Equity and Venture Capital valuation guideline (IPEV) and any change therein is recognized in profit (loss) in the period in which they occurred.
Detail is as follows:
| (THOUSAND | VALUE AT 31/12/2021 | NET INCREASES/ | NET FAIR VALUE | EXCHANGE | VALUE AT |
|---|---|---|---|---|---|
| EUROS) | DISPOSALS | ADJUSTMENTS | DIFFERENCES | 31/12/2022 | |
| Investments | 66,361 | (1,221) | (12,102) | (2,215) | 50,823 |
The net fair value adjustment amounting to 12,102 thousand Euros reflects the market values of the last rounds that took place in 2022 on investments already in portfolio.
All fair value assessments shall be part of the hierarchy level 3.
Current and non-current financial assets amounted to a total of 42,314 thousand Euros with compared to 40,347 thousand Euros as at 31 December 2021.
Detail is as follows:
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Short term securities | 1,451 | 1,913 | (462) |
| Financial investments | 27,201 | 29,631 | (2,430) |
| Loans to third parties | 156 | 247 | (91) |
| Receivables from factor | 1,800 | - | 1,800 |
| Total current financial assets | 30,608 | 31,791 | (1,183) |
| Receivables from insurance companies | 3,250 | 3,186 | 64 |
| Guarantee deposits | 1,808 | 1,118 | 690 |
| Other financial assets | 358 | 328 | 30 |
| Convertible loans | 6,289 | 3,925 | 2,365 |
| Total non-current financial assets | 11,706 | 8,556 | 3,149 |
| Total financial assets | 42,314 | 40,347 | 1,967 |
Short term securities mainly refer to Time Deposit investments.
The item Financial investments refers to the bonds held by the parent company Reply S.p.A.. The valuation of short-term investments, based on fair value at 31 December 2022, showed a negative difference amounting to 3,311 thousand Euros compared to the purchase cost of the same.
Receivables from factor refer to the receivable related to the sale of non-recourse invoices for 2,700 thousand Euros, net of advances received of 900 thousand Euros.
The item Receivables from insurance companies mainly refers to the insurance premiums paid against pension plans of some German companies and to directors' severance indemnities.
Convertible loans relate to the option to convert into shares of the following start-up company in the field of IoT, detail is as follows:
| (THOUSAND | VALUE AT | INCREASES/ | CAPITALIZED | NET FAIR VALUE | EXCHANGE | VALUE AT |
|---|---|---|---|---|---|---|
| EUROS) | 31/12/2021 | DISPOSALS | INTERESTS | ADJUSTMENTS | DIFFERENCES | 31/12/2022 |
| Convertible loans | 3,925 | 1,801 | 217 | 416 | (70) | 6,289 |
The change is referred to new investments in convertible loans during the year.
Note that the items Receivables from insurance companies, Convertible loans, Guarantee deposits and Other financial assets are not shown in Net financial position.
Cash and cash equivalents at 31 December 2022 is detailed as follows:
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Bank accounts | 283,653 | 329,010 | (45,357) |
| Cash | 42 | 42 | - |
| Total | 283,695 | 329,051 | (45,357) |
Cash and cash equivalents is disclosed at Note 27.
Deferred tax assets, amounting to 61,979 thousand Euros, of which 24,472 thousand Euros are current, as at 31 December 2022 (68,889 thousand Euros as at 31 December 2021), include the fiscal charge corresponding to the temporary differences originating among the pre-tax result and taxable income relating to entries with deferred deductibility.
Detail of Deferred tax assets is provided at the table below:
| (THOUSAND EUROS) | 31/12/2021 | ACCRUALS | UTILIZATION | OTHER CHANGES |
31/12/2022 |
|---|---|---|---|---|---|
| Prepaid tax on costs that will become deductible in future years |
10,147 | 3,963 | (2,093) | - | 12,017 |
| Prepaid tax on greater provisions for doubtful accounts |
27,254 | 6,540 | (15,108) | - | 18,687 |
| Deferred fiscal deductibility of amortization |
2,169 | 420 | (301) | - | 2,288 |
| Consolidation adjustments and other items |
29,320 | 12,292 | (12,805) | 181 | 28,988 |
| Total | 68,889 | 23,215 | (30,306) | 181 | 61,979 |
The decision to recognize deferred tax assets is taken by assessing critically whether the conditions exist for the future recoverability of such assets on the basis of expected future results.
There are no deferred tax assets on losses carried forward.
Contract work in progress, amounting to 83,880 thousand Euros, is recognized net of a provision amounting to 54,726 thousand euros (43,539 thousand euros at 31 December 2021) detailed as follows:
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Contract work in progress | 161,262 | 131,681 | 29,581 |
| Advance payments from customers | (77,382) | (44,894) | (32,488) |
| Total | 83,880 | 86,787 | (2,907) |
Any advance payments from customers are deducted from the value of the inventories, within the limits of the accrued consideration, representing the assets deriving from the contracts; the exceeding amounts, as well as the advance payments related to work in progress not yet started, are accounted as liabilities.
Change in the provision is mainly due to the accrual made during the fiscal year amounting to 11,226 thousand euros.
Trade receivables as at 31 December 2022 amounted to 657,568 thousand Euros with a net increase of 186,008 thousand Euros.
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Domestic client | 528,069 | 322,742 | 205,326 |
| Foreign trade receivables | 143,329 | 157,368 | (14,039) |
| Credit notes to be issued | (8,225) | (4,414) | (3,811) |
| Total | 663,173 | 475,696 | 187,477 |
| Allowance for doubtful accounts | (5,605) | (4,136) | (1,469) |
| Total trade receivables | 657,568 | 471,560 | 186,008 |
Trade receivables are shown net of allowances for doubtful accounts, calculated by using the expected credit loss approach pursuant to IFRS 9, amounting to 5,605 thousand Euros on 31 December 2022 (4,136 thousand Euros at 31 December 2021).
The Allowance for doubtful accounts developed in 2022 as follows:
| (THOUSAND EUROS) | 31/12/2021 | ACCRUALS | UTILIZATION | REVERSAL | OTHER CHANGES |
31/12/2022 |
|---|---|---|---|---|---|---|
| Allowance for doubtful accounts |
4,136 | 1,134 | (11) | (529) | 875 | 5,605 |
The item Other changes mainly refer to the change in consolidation and in particular to Wemanity Group.
It should also be noted that the item includes write-downs for losses on working capital amounts.
Over-due trade receivables and the corresponding allowance for doubtful accounts, compared to 2021, are summarized in the tables below:
| (THOUSAND EUROS) | TRADE RECEIVABLES |
CURRENT | 0 - 90 DAYS |
91 - 180 DAYS |
181 - 360 DAYS |
OVER 360 DAYS |
TOTAL OVERDUE |
|---|---|---|---|---|---|---|---|
| Trade receivables | 663,173 | 573,637 | 71,587 | 8,591 | 5,844 | 3,513 | 89,536 |
| Allowance for doubtful accounts |
(5,605) | (1,618) | (551) | (247) | (793) | (2,396) | (3,987) |
| Total trade receivables | 657,568 | 572,020 | 71,036 | 8,344 | 5,052 | 1,117 | 85,548 |
| (THOUSAND EUROS) | TRADE RECEIVABLES |
CURRENT | 0 - 90 DAYS |
91 - 180 DAYS |
181 - 360 DAYS |
OVER 360 DAYS |
TOTAL OVERDUE |
|---|---|---|---|---|---|---|---|
| Trade receivables | 475,696 | 401,825 | 57,653 | 8,863 | 4,345 | 3,011 | 73,871 |
| Allowance for doubtful accounts |
(4,136) | (721) | (363) | (176) | (707) | (2,169) | (3,415) |
| Total trade receivables | 471,560 | 401,104 | 57,289 | 8,687 | 3,638 | 842 | 70,456 |
The carrying amount of trade receivables, that at initial recognition is equal to its fair value adjusted for attributable transaction costs, is subsequently valued at the amortised cost appropriately adjusted to take into account any write-downs.
Trade receivables are all collectible within one year.
Detail is as follows:
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Tax receivables | 54,255 | 35,960 | 18,295 |
| Advances to employees | - | 168 | (168) |
| Accrued income and prepaid expenses | 30,780 | 20,155 | 10,625 |
| Other receivables | 16,793 | 9,119 | 7,674 |
| OTHER RECEIVABLES AND CURRENT ASSETS | 101,828 | 65,402 | 36,425 |
The item Tax receivables mainly includes:
The item Other receivables mainly includes the contributions receivable in relation to research projects for 7,142 thousand Euros (5,198 thousand Euros at 31 December 2021) and receivables from foreign tax administrations for 5,455 thousand Euros.
The balance of 283,695 thousand Euros, with a decrease of 45,357 thousand Euros compared to 31 December 2021, represents cash and cash equivalents as at the end of the year.
Changes in cash and cash equivalents are fully detailed in the Consolidated statement of cash flow.
On 31 December 2022 the share capital of Reply S.p.A, wholly undersigned and paid up, amounted to 4,863,486 Euros and is composed of n. 37,411,428 ordinary shares with nominal value of 0.13 Euros each.
The number of shares in circulation as at 31 December 2022 totaled 37,278,236 (37,340,600 as at 31 December 2021).
The value of the Treasury shares, amounting to 17,123 thousand Euros, refers to the shares of Reply S.p.A. held by the parent company, that at 31 December 2022 were equal to n. 133,192 (70,828 as at 31 December 2021).
During 2022 Reply S.p.A. acquired 140,800 treasury shares and sold 78,436 treasury shares. The change in treasury shares was entirely attributed to equity.
On 31 December 2022 Capital reserves, amounting to 299,533 thousand Euros, were mainly comprised as follows:
Earnings reserves amounted to 684,679 thousand Euros and were comprised as follows:
Other comprehensive income can be analysed as follows:
| (THOUSANDS EUROS) | 31/12/2022 | 31/12/2021 |
|---|---|---|
| Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax: |
||
| Actuarial gains/(losses) from employee benefit plan | 6,963 | (763) |
| Total Other comprehensive income that will not be classified subsequently to profit or loss, net of tax (B1): |
6,963 | (763) |
| Other comprehensive income that may be reclassified subsequently to profit or loss: |
||
| Gains/(losses) on cash flow hedges | 3,632 | 407 |
| Gains/(losses) from the translation of assets in foreign currencies | (627) | 16,957 |
| Total Other comprehensive income that may be classified subsequently to profit or loss, net of tax (B2): |
3,005 | 17,364 |
| Total other comprehensive income, net of tax (B) = (B1) + (B2): | 9,968 | 16,601 |
Non-controlling interest refer to the participation of non-controlling shareholders in the capital of companies included in consolidation and as at 31 December 2022 amounted to 1,579 thousand Euros (2,625 thousand Euros on 31 December 2021).
Due to minority shareholders and Earn-out as at 31 December 2022 amounted to 141,502 thousand Euros (129,558 thousand Euros on 31 December 2021), of which 28,675 thousand Euros were current.
This item refers to the variable consideration defined in the business combination. The distinction between Due to Minority Shareholders and Earn-Out stems solely from whether or not there is any legal minority interest related to the initial transition. Detail is as follows:
(THOUSAND EUROS) 31/12/2021 INCREASES FAIR VALUE ADJUSTMENTS PAYMENTS EXCHANGE DIFFERENCES 31/12/2022 Payables to minority shareholders 17,959 - (9,227) - 807 9,539 Payables for earn-out 111,601 46,570 5,809 (33,078) 1,063 131,963 Total due to minority shareholders and Earn-out 129,558 46,570 (3,419) (33,078) 1,870 141,502
The increase in this item amounting to 46,570 thousand Euros reflects the best estimate of future considerations for earn-outs in relation to the original contracts signed. In particular:
The item Fair value adjustments in 2022 amounted to 3,419 thousand Euros with a balancing entry in Profit and loss, reflects the best estimate in relation to the deferred consideration originally posted at the time of acquisition.
Total payments made amounted to 33,078 thousand Euros and refer to the consideration paid in relation to the original contracts signed at the time of acquisition.
Due to minority shareholders and Earn-out are included in the invested capital and in the net financial indebtedness.
| 31/12/2022 | 31/12/2021 | ||||||
|---|---|---|---|---|---|---|---|
| (THOUSAND EUROS) | CURRENT | NON CURRENT |
TOTAL | CURRENT | NON CURRENT |
TOTAL | |
| Bank overdrafts | 20,443 | - | 20,443 | 14,371 | - | 14,371 | |
| Bank loans | 22,643 | 74,533 | 97,175 | 406 | 23,313 | 23,718 | |
| Total due to banks | 43,086 | 74,533 | 117,618 | 14,776 | 23,313 | 38,089 | |
| Other financial borrowings | 660 | - | 660 | 904 | - | 904 | |
| IFRS 16 financial liabilities | 27,829 | 97,624 | 125,453 | 26,508 | 102,129 | 128,637 | |
| Total financial liabilities | 71,574 | 172,157 | 243,731 | 42,188 | 125,442 | 167,630 |
The following illustrates the distribution of financial liabilities by due date:
| 31/12/2022 | 31/12/2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| (THOUSAND EUROS) | DUE IN 12 MONTHS |
FROM 1 TO 5 YEARS |
OVER 5 YEARS |
TOTAL | DUE IN 12 MONTHS |
FROM 1 TO 5 YEARS |
OVER 5 YEARS |
TOTAL |
| Bank overdrafts | 20,443 | - | - | 20,443 | 14,371 | - | - | 14,371 |
| M&A loans | 20,952 | 51,214 | - | 72,167 | 83 | 417 | - | 500 |
| Mortgage loans | 325 | 11,459 | 8,960 | 20,744 | 323 | 8,827 | 11,916 | 21,066 |
| Bank loans | 2,150 | 5,991 | - | 8,141 | - | - | - | - |
| Other financial borrowings | 660 | - | - | 660 | 904 | - | - | 904 |
| IFRS 16 financial liabilities | 27,829 | 79,053 | 18,571 | 125,453 | 26,508 | 78,833 | 23,296 | 128,637 |
| Derivative financial instruments |
(785) | (2,076) | (1,016) | (3,876) | - | 430 | 1,722 | 2,152 |
| Total | 71,574 | 145,642 | 26,515 | 243,731 | 42,188 | 88,508 | 36,934 | 167,630 |
M&A financing refers to credit lines to be used for acquisition operations carried directly by Reply S.p.A. or via companies controlled directly or indirectly by the same.
Summarized below are the existing contracts entered into for such a purpose:
ȯ On 19 May 2022 Reply S.p.A. entered into a line of credit with Unicredit S.p.A. for a total amount of 50,000 thousand Euros to be used by 29 May 2024. As at 31 December 2022 this line had been used for 500 thousand Euros.
Interest rates are also applied according to certain predetermined ratios (Covenants) of economic and financial nature calculated on the consolidated financial statements as at 31 December of each year and/or the consolidated interim report.
As contractually defined, such ratios are as follows:
At 31 December 2022 the Covenants under the various contracts were satisfied.
The item Mortgages refers to:
It should also be noted that on 24 May 2018 Reply S.p.A. undersigned with Unicredit S.p.A. a mortgage loan secured by guarantee for the purchase and renovation of the property De Sonnaz for a total amount of 40,000 thousand Euros. On November 15, 2021, an amendment was signed with the same institution, agreeing to extend the period of use from 36 to 66 months, without prejudice to the maximum total duration of 156 months (13 years). The mortgage is disbursed in relation to the progress of the work. Such credit line was used for 19,200 thousand Euros at 31 December 2022.
The item IFRS 16 financial liabilities is related to the financial lease liabilities at 31 December 2022 related to the adoption of the Accounting Standard IFRS 16.
The item Derivative financial instruments refers to several loans established with Unicredit S.p.A. to hedge changes in floating interest rates on loans and/or mortgages; the total underlying notional amounts to 75,667 thousand Euros. The effective component of the instrument is stated in the Statement of changes in net equity whereas the ineffective portion of the Derivative instrument is recorded at the income statement.
The carrying amount of Financial liabilities is deemed to be in line with its fair value.
For further details related to the risk management policies please see Note 37.
The net financial indebtedness reported below was prepared according to CONSOB communication no. DEM / 6064293 of July 28, 2006, updated with the provisions of ESMA guideline 32-382-1138 of March 4, 2021 as implemented by the CONSOB warning no. 5/21 of 29 April 2021:
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| A Cash | 283,695 | 329,052 | (45,357) |
| B Cash equivalents | - | - | - |
| C Current financial assets | 30,608 | 31,791 | (1,183) |
| D Cash (A+B+C) | 314,303 | 360,842 | (46,539) |
| E Current financial liabilities | 48,147 | 41,783 | 6,364 |
| F Short-term portion of long term financial liability | 23,428 | 407 | 23,021 |
| G Financial liabilities short-term (E+F) | 71,574 | 42,189 | 29,385 |
| H Net financial debt short-term (G-D) | (242,729) | (318,653) | 75,924 |
| I Financial liabilities long-term | 175,251 | 123,289 | 51,962 |
| J Financial instruments | (3,095) | 2,152 | (5,247) |
| K Other liabilities long-term | 141,502 | 129,558 | 11,944 |
| L Financial debt long-term (I+J+K) | 313,659 | 255,000 | 58,659 |
| Total financial debt | 70,930 | (63,653) | 134,584 |
Net financial indebtedness includes IFRS 16 financial liabilities amounting to 125,453 thousand Euros, of which 97,264 thousand Euros were non-current and 27,829 were current. The item Commercial and other non-current liabilities is related to liabilities to minority shareholders and Earn-out assimilated to unpaid debts with a significant implicit financial component.
For further details with regards to the above table see Note 27 as well as Note 30. Pursuant to the aforementioned recommendations long term financial assets are not included in the net financial indebtedness.
As previous mentioned in Note 29, Due to minority shareholders and Earn-out are included in the invested capital and are not included in the net financial managerial position.
Change in financial liabilities during 2022 is summarized below:
| (THOUSAND EUROS) | |
|---|---|
| Total financial liabilities 2021 | 167,630 |
| Bank overdrafts | (14,371) |
| IRS | (2,152) |
| Non current financial liabilities 2021 | 151,107 |
| IFRS 16 financial liabilities | (3,184) |
| Cash flows | 69,230 |
| Total non-current financial liabilities 2022 | 217,153 |
| Bank overdrafts | 20,443 |
| Change in consolidation | 10,011 |
| IRS | (3,876) |
| Total financial liabilities 2022 | 243,731 |
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Employee severeance indemnities | 33,830 | 35,417 | (1,588) |
| Employee pension funds | 7,316 | 11,569 | (4,254) |
| Directors severance indemnities | 1,670 | 1,599 | 71 |
| Other | 16 | 16 | - |
| Total | 42,831 | 48,601 | (5,770) |
The Employee severance indemnity represents the obligation to employees under Italian law (amended by Law 296/06) that has accrued up to 31 December 2006 and that will be settled when the employee leaves the company. In certain circumstances, a portion of the accrued liability may be given to an employee during his working life as an advance. This is an unfunded defined benefit plan, under which the benefits are almost fully accrued, with the sole exception of future revaluations.
The procedure for the determination of the Company's obligation with respect to employees was carried out by an independent actuary according to the following stages:
ȯ Projection of the Employee severance indemnity already accrued at the assessment date and of the portions that will be accrued until when the work relationship is terminated or when the accrued amounts are partially paid as an advance on the Employee severance indemnities;
Reassessment of Employee severance indemnities in accordance with IAS 19 was carried out "ad personam" and on the existing employees, that is analytical calculations were made on each employee in force in the company at the assessment date without considering future work force.
The actuarial valuation model is based on the so called technical bases which represent the demographic, economic and financial assumptions underlying the parameters included in the calculation.
| DEMOGRAPHIC ASSUMPTIONS | |
|---|---|
| Mortality | RG 48 survival tables of the Italian population |
| Inability | INPS tables divided by age and gender |
| Retirement age | Fulfilment of the minimum requisites provided by the General Mandatory Insurance |
| Advances on Employee severance indemnities |
Annual frequency of advances and employee turnover were assumed from historical data of the company: frequency of advances in 2022: 2.50% frequency of turnover in 2022: 10% |
The assumptions adopted can be summarized as follows:
| ECONOMIC AND FINANCIAL ASSUMPTIONS | ||||
|---|---|---|---|---|
| Annual inflation rate | Average annual rate of 2.30% | |||
| Annual discount rate | Calculated with reference to the valuation date of primary shares on the stock market in which the company belongs and with reference to the market yield of Federal bonds. An annual constant rate equal to 3.77% was used for the year 2022. |
|||
| Annual growth rate of the Employee severance indemnities |
Annual increase in the growth rate of the Employee severance indemnities equal to 3.23% | |||
| Annual increase in salaries | The annual increase of salaries used was calculated in function of the employee qualifications and the Company's market segment, net of inflation, from 1.0% to 1.50% |
From a sensitivity analysis concerning the hypotheses related to the parameters involved in the calculation a:
would not have determined a significant effect on the calculation of the liability.
In accordance with IAS 19, Employment severance indemnities at 31 December 2022 are summarized in the table below:
| (THOUSAND EUROS) | |
|---|---|
| Balance at 31/12/2021 | 35,417 |
| Change in consolidation | 6,005 |
| Cost relating to current (service cost) work | (4,090) |
| Actuarial gain/loss | 679 |
| Interest cost | (4,181) |
| Indemnities paid during the year | 6,005 |
| Balance at 31/12/2022 | 33,830 |
The Pension fund item mainly relates to liability as regards the defined benefit pensions of some German companies and is detailed as follows:
| (THOUSAND EUROS) | |||
|---|---|---|---|
| Present value at beginning of the year | 11,569 | ||
| Service cost | 42 | ||
| Interest cost | 102 | ||
| Actuarial gains/(losses) | (4,164) | ||
| Indemnities paid during the year | (385) | ||
| Present value at year end | 7,164 |
| Discount rate | 3.6% |
|---|---|
| Rate of future compensation increases | 2.6% |
| Rate of pension increases | 1.0% - 2.6% |
This amount is related to Directors severance indemnities paid during the year. Change amounting to 71 thousand Euros refers to the resolution made by the Shareholders Meeting of several subsidiary companies to pay an additional indemnity to some Members of the Board in 2022.
Deferred tax liabilities at 31 December 2022 amounted to 44,964 thousand Euros, of which 27,609 thousand Euros are current, and are referred mainly to the fiscal effects arising from temporary differences deriving from statutory income and taxable income related to deferred deductibility.
As a result of the conclusion of the PPA process for the acquisition of Comwrap GmbH, Enowa LLC, The Spur Group and G-Force Demco Ltd, the item Deferred tax liabilities was restated in the figures published at 31 December 2021 for 10,577 thousand Euros.
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 RESTATED |
|---|---|---|
| Deductible items off the books | 7,321 | 4,098 |
| Deferred tax on PPA | 25,219 | 18,307 |
| Other | 12,424 | 12,285 |
| Total | 44,964 | 34,690 |
The item Other mainly includes the measurement of contract work in progress, employee benefits, capitalization of development costs and reversal of amortization of intangible assets.
Deferred tax liabilities have not been recognized on retained earnings of the subsidiary companies as the Group is able to control the timing of distribution of said earnings and in the near future does not seem likely.
Provisions amounted to 15,860 thousand Euros (of which 15,242 thousand Euros are noncurrent).
Change in 2022 is summarized in the table below:
| (THOUSAND EUROS) |
BALANCE AT 31/12/2021 |
ACCRUALS | UTILIZATION | REVERSALS | OTHER CHANGES |
BALANCE AT 31/12/2022 |
|---|---|---|---|---|---|---|
| Fidelity fund | 752 | 249 | (50) | (137) | - | 814 |
| Provision for risks | 17,651 | 1,674 | (1,147) | (3,073) | 32 | 15,046 |
| Total | 18,312 | 1,922 | (1,197) | (3,210) | 32 | 15,860 |
Employee fidelity provisions refer mainly to provisions made for the employees of some German companies in relation to anniversary bonuses. The liability is determined through actuarial calculations applying a 5.5% rate.
The Provision for risks is related to the accrual of the year referred to the update of this estimate and to new legal ongoing controversies, lawsuits with former employees and other liabilities in Italy and abroad.
Other changes mainly refer to translation differences.
Trade payables at 31 December 2022 amounted to 168,835 thousand Euros and are detailed as follows:
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Domestic suppliers | 147,271 | 111,671 | 35,601 |
| Foreign suppliers | 22,436 | 29,130 | (6,694) |
| Advances to suppliers | (871) | (879) | 8 |
| Total | 168,835 | 139,921 | 28,914 |
Trade payables are initially recognised at fair value, adjusted for any transaction costs directly attributable to and are subsequently valued at amortised cost. The amortised cost of current trade payables corresponds to the nominal value.
Other current liabilities at 31 December 2022 amounted to 598,557 thousand Euros with an increase of 95,567 thousand Euros with respect to the previous financial year. Detail is as follows:
| (THOUSAND EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Income tax payable | 17,515 | 11,533 | 5,982 |
| VAT payable | 31,870 | 36,039 | (4,169) |
| Withholding tax and other | 6,962 | 9,579 | (2,618) |
| Total due to tax authorities | 56,346 | 57,151 | (805) |
| National social insurance payable | 69,306 | 41,050 | 28,256 |
| Other | 7,276 | 3,923 | 3,352 |
| Total due to social securities | 76,582 | 44,973 | 31,608 |
| Employee accruals | 115,484 | 108,898 | 6,587 |
| Other payables | 290,623 | 241,711 | 48,912 |
| Accrued expenses and deferred income | 59,523 | 50,257 | 9,266 |
| Total other payables | 465,629 | 400,865 | 64,764 |
| Other current liabilities | 598,557 | 502,990 | 95,567 |
Due to tax authorities amounting to 56,346 thousand Euros, mainly refers to payables due to tax authorities for withholding tax on employees and professionals' compensation.
Due to social security authorities amounting to 76,582 thousand Euros, is related to both Company and employees contribution payables.
Other payables at 31 December 2022 amount to 465,629 thousand Euros and mainly include:
Accrued Expenses and Deferred Income, that increase in 2022 by 9,266 thousand Euros, mainly relate to advance invoicing in relation to T&M consultancy activities to be delivered in the subsequent financial year.
Other current payables and liabilities are initially recognised at fair value, adjusted for any transaction costs directly attributable to and are subsequently valued at amortised cost. The amortised cost of these liabilities corresponds to the nominal value.
Segment reporting has been prepared in accordance with IFRS 8, determined as the area in which the services are executed.
| (THOUSAND EUROS) |
REGION 1 | % REGION 2 | % REGION 3 | % | IOT INCUBATOR |
% INTERSEGMENT | 2022 | % | |||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues | 1,223,567 | 100 | 370,040 | 100 | 334,040 | 100 | 29 | 100 | (36,561) | 1,891,114 | 100 |
| Operating costs | (975,815) | (79.8) | (309,520) | (83.6) (300,489) | (90,0) | (1,540) | (5,380.7) | 36,561 (1,550,802) | (82.0) | ||
| Gross operating income |
247,752 | 20.2 | 60,520 | 16.4 | 33,551 | 10,0 | (1,511) (5,280.7) | - | 340,312 | 18.0 | |
| Amortization, depreciation and write downs |
(31,919) | (2.6) | (16,288) | (4.4) | (10,396) | (3,1) | (10) | (34.2) | (58,612) | (3.1) | |
| Other non recurring (costs)/income |
4,546 | - | (314) | (0.1) | (459) | (0,1) | - | - | 3,774 | - | |
| Operating income |
220,379 | 18,0 | 43,918 | 11.9 | 22,697 | 6,8 | (1,521) (5,314.9) | 285,473 | 15.1 | ||
| Gain/(loss) on investments |
- | - | - | - | - | - | (12,102) (42,295.2) | (12,102) | (0.6) | ||
| Financial income/(loss) |
1,660 | - | (4,636) | (1.3) | (1,442) | (0,4) | (258) | (902.9) | (4,676) | (0.2) | |
| Income before taxes |
222,039 | 18.1 | 39,282 | 10.6 | 21,255 | 6,4 | (13,881)(48,513.0) | 268,695 | 14.2 |
| (THOUSAND EUROS) |
REGION 1 | % REGION 2 | % REGION 3 | % | IOT INCUBATOR |
% INTERSEGMENT | 2021 | % | |||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues | 967,148 | 100 | 298,269 | 100 | 246,541 | 100 | 118 | 100 | (28,273) | 1,483,803 | 100 |
| Operating costs | (793,596) | (82.1) (240,544) | (80.6) | (213,317) | (86.5) | (1,835) | (1,559.7) | 28,273 | (1,221,018) | (82.3) | |
| Gross operating income |
173,552 | 17.9 | 57,725 | 19.4 | 33,224 | 13.5 | (1,717) | (1,459.7) | - | 262,784 | 17.7 |
| Amortization, depreciation and write downs |
(27,398) | (2.8) | (12,189) | (4.1) | (8,796) | (3.6) | (8) | (6.9) | (48,391) | (3.3) | |
| Other non recurring (costs)/income |
(95) | - | (698) | (0.2) | (4,318) | (1.8) | - | - | (5,110) | (0.3) | |
| Operating income |
146,059 | 15.1 | 44,838 | 15.0 | 20,111 | 8.2 | (1,725) | (1,466.7) | 209,283 | 14.1 | |
| Gain/(loss) on investments |
- | - | - | - | - | - | 8,164 | 6,940 | 8,164 | 0.6 | |
| Financial income/(loss) |
4,648 | 0.5 | (2,779) | (0.9) | (3,959) | (1.6) | (2,078) | (1,766.3) | (4,168) | (0.3) | |
| Income before taxes |
150,708 | 15.6 | 42,059 | 14.1 | 16,152 | 6.6 | 4,360 | 3,706.7 | 213,279 | 14.4 |
| REGION 1 | REGION 2 | REGION 3 | IOT INCUBATOR | |||||
|---|---|---|---|---|---|---|---|---|
| BUSINESS LINE | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| T&M | 18.2% | 17.9% | 56.4% | 49.5% | 52.3% | 57.2% | - | - |
| FIXED PRICE PROJECTS | 81.8% | 82.1% | 43.6% | 50.5% | 47.7% | 42.8% | - | - |
| OTHER BUSINESS | - | - | - | - | - | - | 100.0% | 100.0% |
| TOTAL | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% |
| REGION 1 | REGION 2 | REGION 3 | IOT INCUBATOR |
INTERSEG. | 31/12/2022 |
|---|---|---|---|---|---|
| 657,942 | 135,430 | 115,496 | 942 | (66,534) | 843,276 |
| (591,634) | (116,629) | (136,529) | (18,426) | 66,534 | (796,686) |
| 66,307 | 18,801 | (21,033) | (17,485) | - | 46,590 |
| 420,089 | 340,389 | 250,562 | 59,531 | 1,070,572 | |
| (109,781) | (59,850) | (46,460) | 227 | (215,864) | |
| 310,308 | 280,539 | 204,102 | 59,758 | - | 854,708 |
| 376,615 | 299,340 | 183,069 | 42,274 | - | 901,298 |
| (THOUSAND EUROS) | REGION 1 | REGION 2 | REGION 3 | IOT INCUBATOR |
INTERSEG. | 31/12/2021 |
|---|---|---|---|---|---|---|
| Current operating assets | 483,229 | 103,028 | 76,849 | 191 | (39,547) | 623,749 |
| Current operating liabilities | (514,692) | (108,203) | (65,569) | (17,446) | 39,547 | (666,363) |
| Net working capital (A) | (31,464) | (5,175) | 11,280 | (17,255) | - | (42,614) |
| Non current assets | 414,673 | 213,204 | 174,814 | 70,315 | 873,006 | |
| Non financial liabilities long term |
(131,740) | (32,794) | (43,175) | - | (207,709) | |
| Fixed capital (B) | 282,932 | 180,410 | 131,639 | 70,315 | - | 665,297 |
| Net invested capital (A+B) | 251,468 | 175,235 | 142,919 | 53,060 | - | 622,683 |
Breakdown of employees by Region is as follows:
| REGION | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Region 1 | 8,612 | 7,376 | 1,236 |
| Region 2 | 2,834 | 1,952 | 882 |
| Region 3 | 2,016 | 1,246 | 770 |
| IoT Incubator | 5 | 5 | - |
| Total | 13,467 | 10,579 | 2,888 |
Reply S.p.A. has determined the guide lines in managing financial risks. In order to maximize costs and the resources Reply S.p.A. has centralized all of the groups risk management. Reply S.p.A. has the task of gathering all information concerning possible risk situations and define the corresponding hedge.
As described in the section "Risk management", Reply S.p.A. constantly monitors the financial risks to which it is exposed, in order to detect those risks in advance and take the necessary action to mitigate them.
The following section provides qualitative and quantitative disclosures on the effect that these risks may have upon the company.
The quantitative data reported in the following do not have any value of a prospective nature, in particular the sensitivity analysis on market risks, is unable to reflect the complexity of the market and its related reaction which may result from every change which may occur.
The maximum credit risk to which the company is theoretically exposed at 31 December 2022 is represented by the carrying amounts stated for financial assets in the balance sheet.
Balances which are objectively uncollectible either in part or for the whole amount are written down on a specific basis if they are individually significant. The amount of the writedown takes into account an estimate of the recoverable cash flows and the date of receipt, the costs of recovery and the fair value of any guarantees received. General provisions are made for receivables which are not written down on a specific basis, determined on the basis of historical experience.
Refer to the note on trade receivables for a quantitate analysis.
Reply S.p.A. is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time.
The two main factors that determine the company's liquidity situation are on one side the funds generated by or used in operating and investing activities and on the other the debt lending period and its renewal features or the liquidity of the funds employed and market terms and conditions.
As described in the Risk management section, Reply S.p.A has adopted a series of policies and procedures whose purpose is to optimize the management of funds and to reduce the liquidity risk, as follows:
Management believes that the funds and credit lines currently available, in addition to those funds that will be generated from operating and funding activities, will enable the Group to satisfy its requirements resulting from its investing activities and its working capital needs and to fulfil its obligations to repay its debts at their natural due date.
Reply S.p.A. has a limited exposure to exchange rate risk, therefore the company does not deem necessary hedging exchange rates.
Reply S.p.A. makes use of external funds obtained in the form of financing and invest in monetary and financial market instruments. Changes in market interest rates can affect the cost of the various forms of financing, including the sale of receivables, or the return on investments, and the employment of funds, causing an impact on the level of net financial expenses incurred by the company. To mitigate such risks, the Group, when necessary, has used derivative financial instruments designated as "cash flow hedges".
In assessing the potential impact of changes in interest rates, the company separates fixed rate financial instruments (for which the impact is assessed in terms of fair value)) from floating rate financial instruments (for which the impact is assessed in terms of cash flows).
Floating rate financial instruments include principally cash and cash equivalents and part of debt.
A hypothetical, unfavorable and instantaneous change of 100 basis points in short-term interest rates at 31 December 2022 applied to floating rate financial assets and liabilities, operations for the sale of receivables and derivatives financial instruments, would have caused increased net expenses before taxes, on an annual basis, of approximately 772 thousand Euros.
This analysis is based on the assumption that there is a general and instantaneous change of 100 basis points in interest rates across homogeneous categories. A homogeneous category is defined on the basis of the currency in which the financial assets and liabilities are denominated.
The IFRS 13 establishes a fair value hierarchy which classifies the input of evaluation techniques on three levels adopted for the measurement of fair value. Fair value hierarchy attributes maximum priority to prices quoted (not rectified) in active markets for identical assets and liabilities (Level 1 data) and the non-observable minimum input priority (Level 3 data). In some cases, the data used to assess the fair value of assets or liabilities could be classified on three different levels of the fair value hierarchy. In such cases, the evaluation of fair value is wholly classified on the same level of the hierarchy in which input on the lowest level is classified, taking account its importance for the assessment. The levels used in the hierarchy are:
The following table presents the assets and liabilities which were assessed at fair value on 31 December 2022, according to the fair value hierarchical assessment level.
| (THOUSAND EUROS) | NOTE | LEVEL 1 | LEVEL 2 | LEVEL 3 |
|---|---|---|---|---|
| Investments | 21 | - | - | 51,049 |
| Convertible loans | 22 | - | - | 6,289 |
| Financial securities | 22 | 28,652 | - | - |
| Total financial assets | 28,652 | - | 57,338 | |
| Derivative financial liabilities (IRS) | 30 | (3,876) | ||
| Liabilities to minority shareholders and earn out | 29 | - | - | 141,502 |
| Total finacial liabilities | - | (3,876) | 141,502 | |
The valuation of investments in start-up within the Internet of Things (IoT) business, through the acquisition of equity investments and through the issuance of convertible loans, is based on data not directly observable on active stock markets, and therefore falls under the fair value hierarchical Level 3.
The item Financial securities is related to securities listed on the active stock markets and therefore falls under the fair value hierarchical level 1.
To determine the effect of interest rate derivate financial instruments Reply refers to evaluation deriving from third parties (banks and financial institutes). The latter, in the calculation of their estimates made use of data observed on the market directly (interest rates) or indirectly (interest rate interpolation curves observed directly): consequently, for the purposes of IFRS 7 the fair value used by the Group for the exploitation of hedging derivatives contracts in existence as at 31 December 2022 enters under the hierarchy profile in level 2.
The fair value of Liabilities to minority shareholders and earn out was determined by Group management on the basis of the sales purchase agreements for the acquisition of the company's shares and on economic parameters based on budgets and plans of the purchased company. As the parameters are not observable on stock markets (directly or indirectly) these liabilities fall under the hierarchy profile in level 3.
As at 31 December 2022, there have not been any transfers within the hierarchy levels.
In accordance with IAS 24 Related parties are Group companies and persons that are able to exercise control, joint control or have significant influence on the Group and on its subsidiaries.
Transactions carried out by the group companies with related parties that as of the reporting date are considered ordinary business and are carried out at normal market conditions.
The main economic and financial transactions with related parties is summarized below.
| (THOUSAND EUROS) | |||
|---|---|---|---|
| Financial transactions | 31/12/2022 | 31/12/2021 | Nature of transaction |
| Trade receivables | - | 4 | Receivables from professional services |
| Trade payables and other | 326 | 128 | Payables for professional services and official rentals offices |
| Other payables | 13,626 | 11,692 | Payables for emoluments to Directors and Managers with strategic responsibilities and Board of Statutory Auditors |
| Economic transactions | 2022 | 2021 | Nature of transaction |
| Revenues from professional services | 19 | 19 | Receivables from professional services |
| Services from Parent company and related parties |
1,312 | 1,304 | Service contracts relating to office rental, and office administration |
| Personnel | 13,354 | 13,790 | Emoluments to Directors and Key Management with strategic responsibilities |
| Services and other costs | 148 | 148 | Emoluments to Statutory Auditors |
With reference to the Cash flows statement, the above mentioned transactions impact the change in working capital by 2,133 thousand Euros.
In accordance with IAS 24, emoluments to Directors, Statutory Auditors and Key Management are also included in transactions with related parties (please see the Annual Report on remuneration).
In accordance with Consob Resolution no. 15519 of 27 July 2006 and Consob communication no. DEM/6064293 of 28 July 2006 the financial statements present the Consolidated Income statement and Balance Sheet showing transactions with related parties separately, together with the percentage incidence with respect to each account caption. Pursuant to Art. 150, paragraph 1 of the Italian Legislative Decree n. 58 of 24 February 1998, no transactions have been carried out by the members of the Board of Directors that might be in potential conflict of interests with the Company.
The fees of the Directors and statutory Auditors of Reply S.p.A. for carrying out their respective function, including those in other subsidiary companies, are as follows:
| (THOUSAND EUROS) | 2022 | 2021 |
|---|---|---|
| Executive Directors | 7,677 | 8,268 |
| Statutory auditors | 148 | 148 |
| Total | 7,825 | 8,416 |
Emoluments to Key management amounted to approximately 5,677 thousand Euros (5,522 thousand Euros at 31 December 2021).
Guarantees and commitments where existing, have been disclosed at the item to which they refer.
Note that:
minority shareholder was able to present a petition for the purpose of commencing, in compliance with German law, before a Judge qualified in Germany – who shall have exclusive jurisdiction – the assessment inherent in the Share Swap ratio and the corresponding amount in cash. Some minority shareholders have commenced the aforementioned procedures and, following exchanges with the minority shareholders and their appointed representative, the Company has reached a settlement agreement where the payment of an additional amount. The expenses arising from this agreement amounting to approximately 5 million Euros is covered by specific provisions (please see Note 33). In relation to the above accruals, as a result of the utilizations, the provision for risks has a residual amount of 87 thousand Euros at 31 December 2022.
As an international company, the Group is exposed to numerous legal risks, particularly in the area of product liability, environmental risks and tax matters. The outcome of any current or future proceedings cannot be predicted with certainty. It is therefore possible that legal judgments could give rise to expenses that are not covered, or not fully covered, by insurers' compensation payments and could affect the Group financial position and results.
Instead, when it is probable that an overflow of resources embodying economic benefits will be required to settle obligations and this amount can be reliably estimated, the Group recognises specific provision for this purpose.
The future still remains, in part, conditioned by the evolution of the Russian-Ukrainian war that increases tension on the main markets. In any case, the transformation process towards the new digital economy, which began in 2020, is now unstoppable and opens up opportunities for growth and development for companies like ours. In particular, we expect an increasingly pervasive diffusion of artificial intelligence on board products, processes and services and it is here that we intend to position ourselves as niche players, with very high technological content.
The Consolidated financial statements at 31 December 2022 were approved by the Board of Directors on March 14, 2023 which authorized the publication within the terms of law.
| (THOUSAND EUROS) | 2022 | OF WHICH WITH RELATED PARTIES |
% | 2021 | OF WHICH WITH RELATED PARTIES |
% |
|---|---|---|---|---|---|---|
| Revenues | 1,891,114 | 19 | 0% | 1,483,803 | 19 | 0% |
| Other income | 19,452 | - | - | 17,631 | - | - |
| Purchases | (27,328) | - | - | (21,500) | - | - |
| Personnel | (986,744) | (13,354) | 1.4% | (759,567) | (13,790) | 1.8% |
| Services costs | (606,853) | (1,460) | 0.2% | (462,779) | (1,452) | 0.3% |
| Amortization, depreciation and write-downs |
(58,612) | - | - | (48,391) | - | - |
| Other operating and non recurring (cost)/income |
54,445 | - | - | 85 | - | - |
| Operating income | 285,473 | - | - | 209,283 | - | - |
| (Loss)/gain on investments | (12,102) | - | - | 8,164 | - | - |
| Financial income/(expenses) | (4,676) | - | - | (4,168) | - | - |
| Income before taxes | 268,696 | - | - | 213,279 | - | - |
| Income taxes | (76,511) | - | - | (60,871) | - | - |
| Net income | 192,184 | - | - | 152,408 | - | - |
| Non-controlling interest | (1,168) | - | - | (1,735) | - | - |
| Net result of the Parent company |
191,016 | - | - | 150,672 | - | - |
| (THOUSAND EUROS) | 31/12/2022 | OF WHICH WITH RELATED PARTIES |
% | 31/12/2021 | OF WHICH WITH RELATED PARTIES |
% |
|---|---|---|---|---|---|---|
| Tangible assets | 98,069 | - | - | 80,919 | - | - |
| Goodwill | 630,255 | - | - | 445,345 | - | - |
| Intangible assets | 105,173 | - | - | 83,386 | - | - |
| RoU Assets | 112,341 | - | - | 119,549 | - | - |
| Equity investments | 51,049 | - | - | 66,361 | - | - |
| Other financial assets | 11,706 | - | - | 8,556 | - | - |
| Deferred tax assets | 61,979 | - | - | 68,889 | - | - |
| Non-current assets | 1,070,572 | - | - | 873,006 | - | - |
| Inventories | 83,880 | - | - | 86,787 | - | - |
| Trade receivables | 657,568 | - | 471,560 | - | - | |
| Other receivables and current assets |
101,828 | - | - | 65,403 | - | - |
| Financial assets | 30,608 | - | - | 31,791 | - | - |
| Cash and cash equivalents | 283,695 | - | - | 329,051 | - | - |
| Current assets | 1,157,579 | - | - | 984,592 | - | - |
| TOTAL ASSETS | 2,228,150 | - | - | 1,857,597 | - | - |
| Share Capital | 4,864 | - | - | 4,864 | - | - |
| Other reserves | 774,411 | - | - | 657,733 | - | - |
| Net result of the period | 191,016 | - | - | 150,673 | - | - |
| Equity of the Parent company | 970,291 | - | - | 813,269 | - | - |
| Non-controlling interest | 1,579 | - | - | 2,626 | - | - |
| NET EQUITY | 971,870 | - | - | 815,895 | - | - |
| Due to minority shareholders and earn-out |
112,828 | - | - | 107,493 | - | - |
| Finacial liabilities | 74,533 | - | - | 23,313 | - | - |
| Financial liabilities from RoU | 97,624 | 102,129 | ||||
| Employee benefits | 42,831 | - | - | 48,601 | - | - |
| Deferred tax liabilities | 44,964 | - | - | 34,690 | - | - |
| Provisions | 15,242 | - | - | 16,925 | - | - |
| Non-current liabilities | 388,021 | - | - | 333,150 | - | - |
| Due to minority shareholders and earn-out |
28,675 | - | - | 22,066 | - | - |
| Finacial liabilities | 43,745 | - | - | 15,681 | - | - |
| Financial liabilities from RoU | 27,829 | - | - | 26,508 | - | - |
| Trade payables | 168,835 | 326 | 0.2% | 139,921 | 128 | 0.1% |
| Other current liabilities | 598,557 | 13,626 | 2.3% | 502,990 | 11,692 | 2.3% |
| Provisions | 619 | - | - | 1,387 | - | - |
| Current liabilities | 868,260 | - | - | 708,552 | - | - |
| TOTAL LIABILITIES | 1,256,281 | - | - | 1.041.702 | - | - |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
2,228,150 | - | - | 1,857,597 | - | - |
| COMPANY NAME | HEADQUARTERS | GROUP INTEREST |
|---|---|---|
| Parent company | ||
| Reply S.p.A. | Turin – Corso Francia, 110 - Italy | |
| COMPANIES CONSOLIDATED ON A LINE-BY-LINE BASIS | ||
| 4brands Reply GmbH & CO. KG. (**) | Minden, Germany | 51.00% |
| Air Reply S.r.l. (*) | Turin, Italy | 85.00% |
| Airwalk Holding Ltd. | Kent, United Kingdom | 100.00% |
| Airwalk Consulting Ltd. | Edinburgh, Scotland | 100.00% |
| Airwalk Consulting Ltd. (Hong Kong) | Shueng Wan, Hong Kong | 100.00% |
| AWC Partners Ltd. | London, United Kingdom | 100.00% |
| Alpha Reply GmbH | Guetersloh, Germany | 100.00% |
| Arlanis Reply S.r.l. | Turin, Italy | 100.00% |
| Arlanis Reply AG | Potsdam, Germany | 100.00% |
| Arlanis Reply Ltd (formerly Forcology Ltd) | London, United Kingdom | 100.00% |
| Aktive Reply S.r.l. | Turin, Italy | 100.00% |
| Atlas Reply S.r.l. | Turin, Italy | 100.00% |
| Autonomous Reply GmbH | Guetersloh, Germany | 100.00% |
| Auxulus Reply GmbH (formerly Industrie Reply GmbH) | Munich, Germany | 100.00% |
| Atomic Reply Ltd. | London, United Kingdom | 100.00% |
| Avantage Reply Ltd. | London, United Kingdom | 100.00% |
| Avantage Reply (Belgium) Sprl | Brussels, Belgium | 100.00% |
| Avantage Reply (Luxembourg) Sarl | Itzig, Luxembourg | 100.00% |
| Avantage Reply (Netherlands) BV | Amsterdam, Netherland | 100.00% |
| Avvio Reply Ltd. | London, United Kingdom | 100.00% |
| Avvio Reply S.r.l. | Turin. Italy | 100.00% |
| Blowfish Digital Holdings Ltd. | London, United Kingdom | 100.00% |
| Blue Reply S.r.l. | Turin, Italy | 100.00% |
| Blue Reply GmbH | Guetersloh, Germany | 100.00% |
| Bridge Reply S.r.l. | Turin, Italy | 100.00% |
| Business Elements Group BV | Belgium | 100.00% |
| Business Reply S.r.l. | Turin, Italy | 100.00% |
| Breed Reply Ltd. | London, United Kingdom | 100.00% |
| Breed Reply Investment Ltd. | London, United Kingdom | 100.00% |
| Bside S.r.l. | Rome, Italy | 100.00% |
| Canvas Reply GmbH (formerly Neveling.net GmbH) | Hamburg, Germany | 100.00% |
| Cluster Reply S.r.l. | Turin, Italy | 100.00% |
| Cluster Reply Dynamics GmbH | Guetersloh, Germany | 100.00% |
| Cluster Reply Informatica LTDA. | San Paolo, Brazil | 100.00% |
| Cluster Reply Roma S.r.l. | Turin, Italy | 100.00% |
| Comwrap Reply GmbH | Frankfurt, Germany | 100.00% |
| Comsysto D.O.O. | Zagreb, Croatia | 100.00% |
| ComSysto Reply GmbH | Munich, Germany | 100.00% |
| Concept Reply GmbH | Munich, Germany | 100.00% |
| Concept Reply LLC | Michigan, USA | 100.00% |
| Consorzio Reply Public Sector | Turin, Italy | 100.00% |
|---|---|---|
| Core Reply S.r.l. | Turin, Italy | 100.00% |
| Data Reply S.r.l. | Turin, Italy | 100.00% |
| Data Reply GmbH | Munich, Germany | 100.00% |
| Discovery Reply S.r.l. | Turin, Italy | 100.00% |
| e*finance consulting Reply S.r.l. | Turin, Italy | 100.00% |
| Ekip Reply S.r.l. | Turin, Italy | 100.00% |
| Elbkind Reply GmbH | Hamburg, Germany | 100.00% |
| Enowa LLC | Philadelphia, USA | 100.00% |
| Eos Reply S.r.l. | Turin, Italy | 100.00% |
| Fincon Reply GmbH | Hamburg, Germany | 100.00% |
| Forge Reply S.r.l. | Turin, Italy | 100.00% |
| France Reply Ltd. | London, United Kingdom | 100.00% |
| G-Force Demco Ltd. | London, United Kingdom | 100.00% |
| Go Reply S.r.l. | Turin, Italy | 100.00% |
| Go Reply GmbH | Guetersloh, Germany | 100.00% |
| Gray Matter Ltd | London, United Kingdom | 100.00% |
| Hermes Reply S.r.l. | Turin, Italy | 100.00% |
| Hermes Reply Consulting (Nanjing) Co. Ltd. | China | 100.00% |
| Industrie Reply LLC | Michigan, USA | 100.00% |
| Infinity Reply GmbH | Düsseldorf, Germany | 100.00% |
| IrisCube Reply S.r.l. | Turin, Italy | 100.00% |
| Ki Reply GmbH | Guetersloh, Germania | 100,00% |
| Laife Reply GmbH | Munich, Germany | 100.00% |
| Leadvise Reply GmbH | Darmstadt, Germany | 100.00% |
| Lid Reply GmbH | Guetersloh, Germany | 100.00% |
| Like Reply GmbH | Guetersloh, Germany | 100.00% |
| Like Reply S.r.l. | Turin, Italy | 100.00% |
| Liquid Reply GmbH | Guetersloh, Germany | 100.00% |
| Live Reply GmbH | Düsseldorf, Germany | 100.00% |
| Logistics Reply S.r.l. | Turin, Italy | 100.00% |
| Logistics Reply GmbH | Munich, Germany | 100.00% |
| Lynx Recruiting Ltd. | London, United Kingdom | 100.00% |
| Machine Learning GmbH | Guetersloh, Germany | 100.00% |
| Macros Reply GmbH | Munich, Germany | 100.00% |
| Mansion House Consulting Ltd | London, United Kingdom | 100.00% |
| Mansion House Consulting PTE Limited | Singapore | 100.00% |
| MHC Holding Us Ltd. | London, United Kingdom | 100.00% |
| Mansion House Consulting Inc. | Wilmington, USA | 100.00% |
| MCG Systems AG | Colony, Germany | 100.00% |
| Modcomp GmbH | Colony, Germany | 100.00% |
| Net Reply LLC | Michigan, USA | 100.00% |
| Net Reply S.r.l. | Turin, Italy | 100.00% |
| Nexi Digital S.r.l. | Turin, Italy | 51.00% |
| Nexi Digital Polska Sp. z o.o. | Warsaw, Poland | 51.00% |
| Next Reply S.r.l. | Turin, Italy | 100.00% |
| Next Reply GmbH | Guetersloh, Germany | 100.00% |
| Open Reply GmbH | Guetersloh, Germany | 100.00% |
|---|---|---|
| Open Reply S.r.l. | Turin, Italy | 100.00% |
| Pay Reply S.r.l. | Turin, Italy | 100.00% |
| Portaltech Reply Ltd. | London, United Kingdom | 100.00% |
| Portaltech Reply S.r.l. | Turin, Italy | 100.00% |
| Power Reply S.r.l. | Turin, Italy | 100.00% |
| Power Reply GmbH & CO. KG. (**) | Munich, Germany | 100.00% |
| Protocube Reply S.r.l. | Turin, Italy | 70.00% |
| Red Reply GmbH | Frankfurt, Germany | 100.00% |
| Reply Consulting S.r.l. | Turin, Italy | 100.00% |
| Reply Deutschland SE | Guetersloh, Germany | 100.00% |
| Reply GmbH | Zurich, Switzerland | 100.00% |
| Reply do Brasil Sistemas de Informatica Ltda | Belo Horizonte, Brazil | 100.00% |
| Reply Inc. | Michigan, USA | 100.00% |
| Reply Ltd. | London, United Kingdom | 100.00% |
| Reply Belgium Sprl | Mont Saint Guibert, Netherland | 100.00% |
| Reply Digital Experience S.r.l. | Turin, Italy | 100.00% |
| Reply France Sarl | Paris, France | 100.00% |
| Reply NL Ltd. | London, United Kingdom | 100.00% |
| Reply Sarl | Luxembourg | 100.00% |
| Reply Services S.r.l. | Turin, Italy | 100.00% |
| Reply Polska Sp. z o.o. (formerly Hermes Reply Polska Sp. z o.o.) Katowice, Poland | ||
| Retail Reply S.r.l. | Turin, Italy | 100.00% |
| Ringmaster S.r.l. | Turin, Italy | 50.00% |
| Riverland Reply GmbH | Munich, Germany | 100.00% |
| Roboverse Reply GmbH | Guetersloh, Germany | 100.00% |
| Sagepath LLC (*) | Atlanta, USA | 70.00% |
| Santer Reply S.p.A. | Milan, Italy | 100.00% |
| Security Reply S.r.l. | Turin, Italy | 100.00% |
| Sense Reply S.r.l. | Turin, Italy | 100.00% |
| Sensor Reply S.r.l. (formerly Envision) | Turin, Italy | 100.00% |
| Solidsoft Reply Ltd. | London, United Kingdom | 100.00% |
| Spark Reply S.r.l. | Turin, Italy | 100.00% |
| Spark Reply GmbH | Germany | 100.00% |
| Spike Reply GmbH | Colony, Germany | 100.00% |
| Spike Digital Reply GmbH | Guetersloh, Germany | 100.00% |
| Sprint Reply SA (formerly Brightknight SA) | Belgium | 100.00% |
| Sprint Reply S.r.l. | Turin, Italy | 100.00% |
| Sprint Reply GmbH | Munich, Germany | 100.00% |
| Spot Digital Ltd. | London, United Kingdom | 100,00% |
| Storm Reply S.r.l. | Turin, Italy | 100.00% |
| Storm Reply GmbH | Guetersloh, Germany | 100.00% |
| Syskoplan Reply S.r.l. | Turin, Italy | 100.00% |
| Syskoplan Reply GmbH | Guetersloh, Germany | 100.00% |
| Syskoplan LLC (formerly Enowa LLC) | Philadelphia, USA | 100.00% |
| Syskoplan IE Reply GmbH | Guetersloh, Germany | 100.00% |
| Sytel Reply Roma S.r.l. | Turin, Italy | 100.00% |
| Sytel Reply S.r.l. | Turin, Italy | 100.00% |
|---|---|---|
| Target Reply S.r.l. | Turin, Italy | 100.00% |
| Target Reply GmbH | Guetersloh, Germany | 100.00% |
| TamTamy Reply S.r.l. | Turin, Italy | 100.00% |
| Technology Reply S.r.l. | Turin, Italy | 100.00% |
| Technology Reply Roma S.r.l. | Turin, Italy | 100.00% |
| Technology Reply S.r.l. | Bucharest, Romania | 100.00% |
| TD Reply GmbH | Berlin, Germany | 100.00% |
| TD Marketing Consultants, Beijing Co. Ltd. | China | 100.00% |
| Threepipe Reply Ltd. | London, United Kingdom | 100,00% |
| The Spur Group LLC | Seattle, USA | 100.00% |
| Tool Reply GmbH | Guetersloh, Germany | 100.00% |
| Triplesense Reply GmbH | Frankfurt, Germany | 100.00% |
| Up Reply GmbH (formerly Portaltech Reply Süd GmbH) | Munich, Germany | 100.00% |
| Valorem LLC | Kansas City, USA | 100.00% |
| Valorem Private Ltd | India | 99.99% |
| Valorem GmbH | Zurich, Switzerland | 100.00% |
| Vanilla Reply GmbH (formerly Portaltech Reply GmbH) | Guetersloh, Germany | 100.00% |
| Vivametric Reply GmbH | Guetersloh, Germany | 100.00% |
| Wemanity Group SAS | Paris, France | 100.00% |
| WM Reply Inc. | Illinois, USA | 80.00% |
| WM Reply Ltd | Auckland, NZ | 80.00% |
| WM Reply LLC | Minsk, Belarus | 100.00% |
| WM Reply Ltd | London, United Kingdom | 100.00% |
| WM Reply Malaysia Ltd | Malaysia | 100.00% |
| Whitehall Reply S.r.l. | Turin, Italy | 100.00% |
| Xenia Reply S.r.l. | Turin, Italy | 100.00% |
| Xister Reply S.r.l. | Turin, Italy | 100.00% |
(*) For these companies an option exists for the acquisition of their minority shares; the exercise of such option in future reporting periods is subject to the achievement of profitability parameters. The accounting reflects Management's best estimate as at the closing date of the 2022 Annual Financial Report.
(**) These companies are exempt from filing statutory financial statements in Germany under the German law § 264b HGB.
| COMPANIES CARRIED AT FAIR VALUE | ||
|---|---|---|
| BlueGrove AS (formerly CageEye AS) | Norway | 11.60% |
| Callsign Inc. | England | 3.61% |
| Canard Drones Ltd | Spain | 35.41% |
| Connecterra BV | Belgium | 16.00% |
| Dcbrain SAS | Frances | 8.46% |
| FoodMarble Digestive Health Ltd | England | 18.50% |
| Gymacraft Ltd. | England | 0.02% |
| iNova Design Ltd | England | 27.25% |
| Iotic Labs Ltd | England | 16.28% |
| Kokoon Technology Ltd | England | 26.22% |
| Metron Sas | France | 8.32% |
| RazorSecure Ltd | England | 30.73% |
| Sensoria Inc. | USA | 24.00% |
| TAG Sensors AS | Norway | 19.67% |
| Ubirch GmbH | Germany | 18.51% |
| We Predict Ltd | England | 16.64% |
| Zeetta Networks Ltd | England | 24.00% |
The following table, prepared in accordance with Art. 149-duodeciesof Consob's Regulations for Issuers reports the amount of fees charged in 2022 for the audit and audit related services provided by the Independent Auditors and by entities that are part of the Independent Auditors' network.
| (THOUSAND EUROS) | SERVICE PROVIDER | GROUP ENTITY | FEE 2022 |
|---|---|---|---|
| Audit | PwC S.p.A. | Parent company - Reply S.p.A. | 56 |
| PwC S.p.A. | Subsidiaries | 554 | |
| PwC GmbH | Subsidiaries | 239 | |
| Total | 849 | ||
| PwC S.p.A. | Parent company - Reply S.p.A.(1) | 28 | |
| PwC S.p.A. | Parent company - Reply S.p.A.(2) | 43 | |
| Audit related services | PwC S.p.A. | Subsidiaries(1) | 57 |
| Total | 128 | ||
| Total | 977 |
(1) Signed tax forms (Modello Unico, IRAP and Form 770)
(2) DNF
The undersigned, Mario Rizzante, in his capacity as Chairman and Chief Executive Officer, and Giuseppe Veneziano, Director responsible for drawing up Reply S.p.A.'s financial statements, hereby attest, pursuant to the provisions of Article 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of 24 February 1998:
of the administration and accounting procedures applied in the preparation of the Consolidated financial statements for the year ended 2022.
The assessment of the adequacy of administrative and accounting procedures used for the preparation of the statutory financial statements at 31 December 2022 was carried out on the basis of regulations and methodologies defined by Reply prevalently coherent with the Internal Control – Integrated Framework model issued by the Committee of Sponsoring Organisations of the Treadway Commission, an internationally-accepted reference framework.
The undersigned also certify that:
1 the Consolidated Financial Statements
2 the report on operations includes a reliable operating and financial review of the Company and of the Group as well as a description of the main risks and uncertainties to which they are exposed.
Chairman and Chief Executive Officer Director responsible of drawing up
Turin, 14 March 2023 /s/ Mario Rizzante /s/ Giuseppe Veneziano Mario Rizzante the accounting documents Giuseppe Veneziano
| pwc | |
|---|---|
| (EUROS) | NOTE | 2022 | 2021 |
|---|---|---|---|
| Revenue | 5 | 709,328,790 | 604,160,429 |
| Other income | 6 | 25,668,033 | 15,938,379 |
| Purchases | 7 | (37,856,490) | (28,463,783) |
| Personnel | 8 | (26,535,763) | (27,693,075) |
| Services and other costs | 9 | (654,350,573) | (553,990,835) |
| Amortization, depreciation and write-downs | 10 | (3,880,483) | (3,037,301) |
| Other operating and non-recurring income/(expenses) | 11 | 2,855,100 | 2,366,500 |
| Operating income | 15,228,615 | 9,280,313 | |
| Gain/(loss) on equity investments | 12 | 73,413,842 | 87,367,000 |
| Financial income/(expenses) | 13 | 12,648,115 | 23,484,746 |
| Income before taxes | 101,290,573 | 120,132,059 | |
| Income taxes | 14 | (7,148,880) | (8,888,365) |
| Net income | 94,141,693 | 111,243,694 | |
| Basic and diluted income per share | 15 | 2.53 | 2.98 |
(*) Pursuant to Consob Regulation No. 15519 of 27 July 2006, the effects of related-party transactions on the Income Statement are reported in the annexed Tables and further described in Note 35.
| (EUROS) | NOTE | 2022 | 2021 | |
|---|---|---|---|---|
| Profit of the period (A) | 94,141,693 | 111,243,694 | ||
| Other comprehensive income that will not be reclassified subsequently to profit or loss |
||||
| Actuarial gains/(losses) from employee benefit plans | 28 | 73,785 | (15,149) | |
| Total Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax (B1): |
(15,149) | |||
| Other comprehensive income that may be reclassified subsequently to profit or loss: |
||||
| Gains/(losses) on cash flow hedges | 28 | 3,632,208 | 406,646 | |
| Total Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax (B2): |
3,632,208 | 406,646 | ||
| Total other comprehensive income, net of tax | 3.705.993 | 391.497 | ||
| (B) = (B1) + (B2): | 3,705,993 | 391,497 | ||
| Total comprehensive income (A)+(B) | 97,847,686 | 111,635,191 | ||
| (IN EURO) | NOTA | 31/12/2022 | 31/12/2021 |
|---|---|---|---|
| Tangible assets | 17 | 534,336 | 310,808 |
| Goodwill | 18 | 86,765 | 86,765 |
| Intangible assets | 19 | 7,535,237 | 7,603,348 |
| Right of Use Assets | 20 | 937,764 | 615,816 |
| Equity investments | 21 | 177,988,453 | 140,757,778 |
| Other financial assets | 22 | 508,760,401 | 335,871,495 |
| Deferred tax assets | 23 | 6,728,474 | 6,169,056 |
| Non-current assets | 702,571,430 | 491,415,065 | |
| Trade receivables | 24 | 532,386,689 | 400,894,555 |
| Other receivables and current assets | 25 | 61,379,942 | 57,379,333 |
| Financial assets | 26 | 93,913,784 | 82,659,515 |
| Cash and cash equivalents | 27 | 82,017,473 | 182,545,754 |
| Current assets | 769,697,889 | 723,479,157 | |
| TOTAL ASSETS | 1,472,269,318 | 1,214,894,222 | |
| Share Capital | 4,863,486 | 4,863,486 | |
| Other reserves | 509,293,298 | 434,935,691 | |
| Net income | 94,141,693 | 111,243,694 | |
| NET EQUITY | 28 | 608,298,477 | 551,042,871 |
| Finacial liabilities | 29 | 67,319,609 | 21,768,594 |
| IFRS 16 financial liabilities | 29 | 432,456 | 294,318 |
| Employee benefits | 30 | 889,438 | 817,905 |
| Deferred tax liabilities | 31 | 6,012,577 | 4,003,473 |
| Provisions | 34 | 833,180 | 3,691,780 |
| Non-current liabilities | 75,487,260 | 30,576,071 | |
| Finacial liabilities | 29 | 266,759,565 | 202,954,457 |
| IFRS 16 financial liabilities | 29 | 514,766 | 324,727 |
| Trade payables | 32 | 443,813,330 | 358,497,709 |
| Other current liabilities | 33 | 68,170,921 | 70,618,388 |
| Provisions | 34 | 9,225,000 | 880,000 |
| Current liabilities | 788,483,582 | 633,275,281 | |
| TOTAL LIABILITIES | 863,970,842 | 663,851,351 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 1,472,269,318 | 1,214,894,222 |
(* )Pursuant to Consob Regulation No. 15519 of 27 July 2006, the effects of related-party transactions on the Statement of Financial Position are reported in the annexed Tables and further described in Note 35.
| (EUROS) | SHARE CAPITAL |
TREASURY SHARES |
CAPITAL RESERVES |
EARNING RESERVES |
CASH FLOW HEDGE RESERVE |
RESERVE FOR ACTUARIAL GAINS/(LOSSES) |
TOTAL |
|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 |
4,863,486 | (24,502) | 205,880,909 | 258,289,291 | (1,439,951) | (55,323) | 467,513,909 |
| Dividends distributed | - | - | - | (20,910,735) | - | - | (20,910,735) |
| Change in own shares | - | (7,195,494) | - | - | - | - | (7,195,494) |
| Increase for acquisition of treasury shares |
- | - | 100,000,000 (100,000,000) | - | - | - | |
| Total income | - | - | - | 111,243,694 | 406,646 | (15,149) | 111,635,191 |
| Balance at 31 December 2021 |
4,863,486 | (7,219,996) | 305,880,909 | 248,622,250 | (1,033,305) | (70,472) | 551,042,871 |
| (EUROS) | SHARE CAPITAL |
TREASURY SHARES |
CAPITAL RESERVES |
EARNING RESERVES |
CASH FLOW HEDGE RESERVE |
RESERVE FOR ACTUARIAL GAINS/(LOSSES) |
TOTAL |
|---|---|---|---|---|---|---|---|
| Balance at 1 January 2022 |
4,863,486 | (7,219,996) | 305,880,909 | 248,622,250 | (1,033,305) | (70,472) | 551,042,871 |
| Dividends distributed | (29,759,840) | (29,759,840) | |||||
| Change in own shares | (9,902,493) | (9,902,493) | |||||
| Total income | 94,141,693 | 3,632,208 | 73,785 | 97,847,686 | |||
| Other changes | (929,747) | (929,747) | |||||
| Balance at 31 December 2022 |
4,863,486 (17,122,489) | 305,880,909 | 312,074,355 | 2,598,903 | 3,313 | 608,298,476 |
| (EUROS) | 2022 | 2021 |
|---|---|---|
| Result | 94,141,693 | 111,243,694 |
| Income taxes | 7,148,880 | 8,888,365 |
| Amortization and depreciation | 3,880,483 | 3,037,301 |
| Other non-monetary expenses/(income) | (1,604,018) | 186,260 |
| Change in trade receivables | (131,492,135) | (80,104,019) |
| Change in trade payables | 85,315,622 | 68,816,192 |
| Change in other assets and liabilities | 4,036,383 | 7,963,828 |
| Income tax paid | (8,888,365) | (421,464) |
| Interest paid | (1,788,177) | (774,374) |
| Interest cashed | 50,821 | 3,410 |
| Net cash flows from operating activities (A) | 50,801,186 | 118,839,194 |
| Payments for tangible and intangible assets | (3,452,728) | (3,543,120) |
| Payments for financial assets | (170,344,295) | (116,919,511) |
| Change in right of use assets | (38,862,833) | 2,435,746 |
| Payments for the acquisition of subsidiaries net of cash acquired | (212,659,855) | (118,026,885) |
| Net cash flows from investment activities (B) | (29,759,840) | (20,910,735) |
| Payments for treasury shares | (9,902,493) | (7,195,494) |
| Financing granted | 80,000,000 | 3,900,000 |
| Payment of financial liabilities | (8,333,333) | (9,071,428) |
| Reimbursement of lease liabilities | (594,817) | (442,419) |
| Net cash flows from financing activities (C) | 31,409,516 | (33,720,076) |
| Net cash flows (D) = (A+B+C) | (130,449,154) | (32,907,768) |
| Cash and cash equivalents at the beginning of period | 32,471,139 | 65,378,907 |
| Cash and cash equivalents at period end | (97,978,014) | 32,471,139 |
| Total change in cash and cash equivalents (D) | (130,449,153) | (32,907,768) |
| (EUROS) | ||||
|---|---|---|---|---|
| 32,471,139 | 65,378,907 | |||
| 182,545,754 | 184,012,136 | |||
| 52,797,469 | 27,066,257 | |||
| (192,867,526) | (145,699,486) | |||
| (10,004,558) | - | |||
| (97,978,014) | 32,471,139 | |||
| 82,017,473 | 182,545,754 | |||
| 66,596,349 | 52,797,469 | |||
| (226,237,713) | (192,867,526) | |||
| (20,354,123) | (10,004,558) | |||
| General information | NOTE 1 | General information |
|---|---|---|
| NOTE 2 | Accounting principles | |
| NOTE 3 | Financial risk management | |
| NOTE 4 | Other | |
| Income statement | NOTE 5 | Revenues |
| NOTE 6 | Other revenues | |
| NOTE 7 | Purchases | |
| NOTE 8 | Personnel | |
| NOTE 9 | Services and other costs | |
| NOTE 10 | Amortization, depreciation and write-downs | |
| NOTE 11 | Other operating and non-recurring income/(expenses) | |
| NOTE 12 | Gain/(loss) on equity investments | |
| NOTE 13 | Financial income/(expenses) | |
| NOTE 14 | Income taxes | |
| NOTE 15 | Earnings per share | |
| NOTE 16 | Contributions | |
| Financial position- Assets | NOTE 17 | Tangible assets |
| NOTE 18 | Goodwill | |
| NOTE 19 | Other intangible assets | |
| NOTE 20 | RoU Assets | |
| NOTE 21 | Equity Investments | |
| NOTE 22 | Non current financial assets | |
| NOTE 23 | Deferred tax assets | |
| NOTE 24 | Trade receivables | |
| NOTE 25 | Other receivables and current assets | |
| NOTE 26 | Current financial assets | |
| NOTE 27 | Cash and cash equivalents | |
| Financial position- Liabilities and shareholders' equity |
NOTE 28 | Shareholders' equity |
| NOTE 29 | Financial liabilities | |
| NOTE 30 | Employee benefits | |
| NOTE 31 | Deferred tax liabilities | |
| NOTE 32 | Trade payables | |
| NOTE 33 | Other current liabilities | |
| NOTE 34 | Provisions | |
| Other information | NOTE 35 | Transactions with related parties |
| NOTE 36 | Additional disclosures to financial instruments and risk management policies |
|
| NOTE 37 | Significant non-recurring transactions | |
| NOTE 38 | Transactions resulting from unusual and/or abnormal operations | |
| NOTE 39 | Guarantees, commitments and contingent liabilities | |
| NOTE 40 | Emoluments to Directors, Statutory Auditors and Directors with Key responsibilities |
|
| NOTE 41 | Events subsequent to 31 December 2022 | |
| NOTE 42 | Approval of the financial statements and authorization for publication |
Reply is specialized in the implementation of solutions based on new communication and digital media. Reply, consisting of a network of specialized companies, assists important European industries belonging to Telco & Media, Manufacturing & Retail, Bank & Insurances and Public Administration sectors, in defining and developing new business models utilizing Big Data, Cloud Computing, CRM, Mobile, Social Media and Internet of Things paradigms. Reply's services include: consulting, system integration, application management and Business Process Outsourcing. (www.reply.com)
The company mainly carries out the operational coordination and technical management of the group and also the administration, financial assistance and some purchase and marketing activities.
Reply also manages business relations for some of its main clients.
The 2022 Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and endorsed by the European Union, and with the provisions implementing Article 9 of Legislative Decree No. 38/2005.
The designation "IFRS" also includes all valid International Accounting Standards ("IAS"), as well as all interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"), formerly the Standing Interpretations Committee ("SIC").
In compliance with European Regulation No. 1606 of 19 July 2002, beginning in 2005, the Reply Group adopted the International Financial Reporting Standards ("IFRS") for the preparation of its Consolidated Financial Statements. On the basis of national legislation implementing the aforementioned Regulation, those accounting standards were also used to prepare the separate Financial Statements of the Parent Company, Reply S.p.A., for the first time for the year ended 31 December 2006.
It is hereby specified that the accounting standards applied conform to those adopted for the preparation of the initial Statement of Assets and Liabilities as at 1 January 2005 according to the IFRS, as well as for the 2005 Income Statement and the Statement of Assets and Liabilities as at 31 December 2005, as re-presented according to the IFRS and published in the special section of these Financial Statements.
The Financial Statements were prepared under the historical cost convention, modified as required for the measurement of certain financial instruments. The criterion of fair value was adopted as defined by IFRS 9.
The Financial Statements have been prepared on the going concern assumption. In this respect, despite operating in a difficult economic and financial environment, the Company's assessment is that no material uncertainties (as defined in paragraph 25 of IAS 1) exist relative to its ability to continue as a going concern.
These Financial Statements are expressed in Euros and are compared to the Financial Statements of the previous year prepared in accordance with the same principles.
These Financial Statements have been drawn up under the general principles of continuity, accrual based accounting, coherent presentation, relevancy and aggregation, prohibition of compensation and comparability of information.
The fiscal year consists of a twelve (12) month period and closes on the 31 December each year.
The Financial Statements include statement of income, statement of comprehensive income, statement of financial position, statement of changes in shareholders' equity, statement of cash flows and the explanatory notes.
The income statement format adopted by the company classifies costs according to their nature, which is deemed to properly represent the company's business.
The Statement of financial position is prepared according to the distinction between current and non-current assets and liabilities. The statement of cash flows is presented using the indirect method.
The most significant items are disclosed in a specific note in which details related to the composition and changes compared to the previous year are provided.
It is further noted that, to comply with the indications provided by Consob Resolution No. 15519 of 27 July 2006 "Provisions as to the format of Financial Statements", in addition to mandatory tables, specific supplementary Income Statement and Balance Sheet formats have been added that report significant amounts of positions or transactions with related parties indicated separately from their respective items of reference.
Tangible fixed assets are stated at cost, net of accumulated depreciation and impairment losses.
Goods made up of components, of significant value, that have different useful lives are considered separately when determining depreciation.
In compliance with IAS 36 – Impairment of assets, the carrying value is immediately remeasured to the recoverable value, if lower.
Depreciation is charged so as to write off the cost or valuation of assets, over their estimated useful lives, using the straight-line method, on the following bases:
| Equipment | 30% |
|---|---|
| Plant and machinery | 20% |
| Hardware | 40% |
| Furniture and fittings | 12% |
Ordinary maintenance costs are fully expensed as incurred. Incremental maintenance costs are allocated to the asset to which they refer and depreciated over their residual useful lives.
Improvement expenditures on rented property are allocated to the related assets and depreciated over the shorter between the duration of the rent contract or the residual useful lives of the relevant assets.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in income.
Goodwill is an intangible asset with an indefinite life, deriving from business combinations recognized using the purchase method, and is recorded to reflect the positive difference between purchase cost and the Company's interest at the time of acquisition of the fair value of the assets, liabilities and identifiable contingent liabilities attributable to the subsidiary.
Goodwill is not amortized, but is tested for impairment annually or more frequently if specific events or changes in circumstances indicate that it might be impaired. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Impairment losses are recognized immediately as expenses that cannot be recovered in the future.
Goodwill deriving from acquisitions made prior to the transition date to IFRS are maintained at amounts recognized under Italian GAAP at the time of application of such standards and are subject to impairment tests at such date.
Intangible fixed assets are those lacking an identifiable physical aspect, are controlled by the company and are capable of generating future economic benefits.
Other purchased and internally-generated intangible assets are recognized as assets in accordance with IAS 38 – Intangible Assets, where it is probable that the use of the asset will generate future economic benefits and where the costs of the asset can be determined reliably.
Such assets are measured at purchase or manufacturing cost and amortized on a straightline basis over their estimated useful lives, if these assets have finite useful lives.
Other intangible assets acquired as part of an acquisition of a business are capitalized separately from goodwill if their fair value can be measured reliably.
In case of intangible fixed assets purchased for which availability for use and relevant payments are deferred beyond normal terms, the purchase value and the relevant liabilities are discounted by recording the implicit financial charges in their original price.
Expenditure on research activities is recognized as an expense in the period in which it is incurred.
Development costs can be capitalized on condition that they can be measured reliably and that evidence is provided that the asset will generate future economic benefits.
An internally-generated intangible asset arising from the company's e-business development (such as informatics solutions) is recognized only if all of the following conditions are met:
These assets are amortized when launched or when available for use. Until then, and on condition that the above terms are respected, such assets are recognized as construction in progress. Amortization is determined on a straight line basis over the relevant useful lives, on the following basis:
| Development costs | 33% |
|---|---|
| Software | 33% |
When an internally-generated intangible asset cannot be recorded at balance sheet, development costs are recognized to the statement of income in the period in which they are incurred.
According to IFRS 16, the accounting representation of leases (which do not establish the provision of services) takes place through the inclusion in the financial position of a financial liability, represented by the present value of future rents, against the inclusion in the assets of the 'right of use of the leased asset'.
Leases that were previously accounted for under IAS 17 as financial leases, have not changed compared to the current accounting representation, in full continuity with the past.
Contracts that are within the scope of IFRS 16 relate mainly to long term car-rental.
With reference to the options and exemptions provided by IFRS 16, the Company has made the following choices:
Intangible assets with indefinite useful lives consist principally of acquired trademarks which have no legal, contractual, competitive, economic, or other factors that limit their useful lives. Intangible assets with indefinite useful lives are not amortized, as provided by IAS 36, but are tested for impairment annually or more frequently whenever there is an indication that the asset may be impaired. Any impairment losses are not subject to subsequent reversals.
At each balance sheet date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually or more frequently, whenever there is an indication that the asset may be impaired.
The recoverable amount of an asset is the higher of fair value less disposal costs and its value in use. In assessing its value in use, the pre-tax estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. Its value in use is determined net of tax in that this method produces values largely equivalent to those obtained by discounting cash flows net of tax at a pre-tax discount rate derived, through an iteration, from the result of the post-tax assessment. The assessment is carried out for the individual asset or for the smallest identifiable group of cash generating assets deriving from ongoing use, (the so-called Cash generating unit). With reference to goodwill, Management assesses return on investment with reference to the smallest cash generating unit including goodwill.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognized as an expense immediately. When the recognition value of the Cash generating unit, inclusive of goodwill, is higher than the recoverable value, the difference is subject to impairment and attributable firstly to goodwill; any exceeding difference is attributed on a pro-quota basis to the assets of the Cash generating unit.
Where an impairment loss subsequently reverses, the carrying amount of the asset, (or cash-generating unit), with the exception of goodwill, is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount that would have been determined had no impairment loss been recognized for the asset. A reversal of an impairment loss is recognized as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Investments in subsidiaries and associated companies are valued using the cost method. As implementation of such method, they are subject to an impairment test if there is any objective evidence that these investments have been impaired, due to one or more events that occurred after the initial measurement if such events have had an impact on future cash flows, thus inhibiting the distribution of dividends. Such evidence exists when the subsidiary's and associate's operating margins are repetitively and significantly negative. If such is the case, impairment is recognized as the difference between the carrying value and the recoverable value, normally determined on the basis of fair value less disposal costs, normally determined through the application of the market multiples to prospective EBIT or to the value in use.
At each reporting period, the Company assesses whether there is objective evidence that a write-down due to impairment of an equity investment recognized in previous periods may be reduced or derecognized. Such evidence exists when the subsidiary's and associate's operating margins are repetitively and significantly positive. In this case, the recoverable value is re-measured and eventually the investment is restated at initial cost.
Equity investments in other companies, comprising non current financial assets not held for trading, are measured at fair value, if it can be determined. Any subsequent gains and losses resulting from changes
in fair value are recognized directly in Shareholders' equity until the investment is sold or impaired; the total recognized in equity up to that date are recognized in the Income Statement for the period.
Minor investments in other companies for which fair value is not available are measured at cost, and adjusted for any impairment losses.
Dividends are recognized as financial income from investments when the right to collect them is established, which generally coincides with the shareholders' resolution. If such dividends arise from the distribution of reserves prior to the acquisition, these dividends reduce the initial acquisition cost.
Financial assets are classified, on the basis of both contractual cash flow characteristics and the entity's business model for managing them, in the following categories:
At initial recognition, a financial asset is measured at its fair value; at initial recognition, trade receivables that do not have a significant financing component are measured at their transaction price. After initial recognition, financial assets whose contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding are measured at amortized cost if they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows (the so-called hold to collect business model). For financial assets measured at amortized cost, interest income determined using the effective interest rate, foreign exchange differences and any impairment losses (see the accounting policy for "Impairment of financial assets") are recognized in the profit and loss account.
Conversely, financial assets that are debt instruments are measured at fair value through OCI (hereinafter also FVTOCI) if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets (the socalled hold to collect and sell business model).
In these cases:
The accumulated changes in fair value, recognized in the equity reserve related to other comprehensive income, is reclassified to the profit and loss account when the financial asset is derecognized. A financial asset represented by a debt instrument that is neither measured at amortized cost nor at FVTOCI, is measured at fair value through profit or loss (hereinafter FVTPL); financial assets held for trading fall into this category. Interest income on assets held for trading contributes to the fair value measurement of the instrument and is recognized in "Finance income (expense)", within "Net finance income (expense) from financial assets held for trading".
When the purchase or sale of a financial asset is under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned, the transaction is accounted for on the settlement date.
The Company derecognizes financial assets from its Financial Statements when, and only when, the contractual rights to the cash flows deriving from the assets expire or the Company transfers the financial asset. In the case of transfer of the financial asset:
If the Company has not maintained control, it derecognizes the financial asset from its Financial Statements and recognizes separately as assets or liabilities any rights or obligations originated or maintained through the transfer;
If the Company has maintained control, it continues to recognize the financial asset to the extent of its residual involvement with such financial asset.
At the time of removal of financial assets from the balance sheet, the difference between
the carrying value of assets and the fees received or receivable for the transfer of the asset is recognized in the income statement.
Trade receivables are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.
At initial recognition they are measured at fair value adjusted for transaction costs and subsequently measured at amortized cost determined using the effective interest rate, to account for foreign exchange differences and any impairment losses.
At each reporting date, all financial assets, with the exception of those measured at fair value through profit and loss, are analyzed for any impairment indicators.
Under IFRS 9, an entity calculates the allowance for credit losses by considering on a discounted basis the cash shortfalls it would incur in various default scenarios for prescribed future periods and multiplying the shortfalls by the probability of each scenario occurring. The allowance is the sum of these probability weighted outcomes. Because every loan and receivable carries with it some risk of default, every such asset has an expected loss attached to it from the moment of its origination or acquisition.
Receivables and payables denominated in non EMU currencies are stated at the exchange rate at period end provided by the European Central Bank.
The item cash and cash equivalents includes cash, banks and reimbursable deposits on demand and other short term financial investments readily convertible in cash and are not subject to significant risks in terms of change in value.
Treasury shares are presented as a deduction from equity. All gains and losses from the sale of treasury shares are recorded in a special Shareholders' equity reserve.
Financial liabilities and equity instruments issued by the Company are presented according to their substance arising from their contractual obligations and in accordance with the definitions of financial liabilities and equity instruments. The latter are defined as those contractual obligations that give the right to benefit in the residual interests of the Company's assets after having deducted its liabilities.
The accounting standards adopted for specific financial liabilities or equity instruments are outlined below:
ȯ Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs and subsequently stated at its amortized cost, using the prevailing market interest rate method.
ȯ Equity instruments
Equity instruments issued by the Company are stated at the proceeds received, net of direct issuance costs.
ȯ Non current financial liabilities
Liabilities are stated according to the amortization cost.
The Company's activities are primarily subject to financial risks associated with fluctuations in interest rates. Such interest rate risks arise from bank borrowings; In order to hedge such risks the Company's policy consists of converting fluctuating rate liabilities in constant rate liabilities and treating them as cash flow hedges. The use of such instruments is disciplined by written procedures in line with the Company risk strategies that do not contemplate derivative financial instruments for trading purposes.
In accordance with IFRS 9, derivative financial instruments qualify for hedge accounting only when at the inception of the hedge there is formal designation and sufficient documentation that the hedge is highly effective and that its effectiveness can be reliably measured. The hedge must be highly effective throughout the different financial reporting periods for which it was designated.
All derivative financial instruments are measured in accordance with IFRS 9 at fair value. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows relating to Company commitments and forecasted transactions are recognized directly in Shareholder's equity, while the ineffective portion is immediately recorded in the Income Statement. If the hedged company commitment or forecasted transaction results in the recognition of an asset or liability, then, at the time the asset or liability is recognized, associated gains or losses on the derivative that had previously been recognized in equity are included in the initial measurement of the asset or liability.
For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognized in the income statement in the same period in which the hedge commitment or forecasted transaction affects net profit or loss, for example, when the future sale actually occurs.
For effective hedging against a change in fair value, the hedged item is adjusted by the changes in fair value attributable to the risk hedged with a balancing entry in the Income Statement. Gains and losses arising from the measurement of the derivative are also recognized at the income statement.
Changes in the fair value of derivative financial instruments that no longer qualify as hedge accounting are recognized in the Income Statement of the period in which they arise.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognized in equity is retained in equity until the forecasted transaction is no longer expected to occur; the net cumulative gain or loss recognized in equity is transferred to the net profit or loss for the period. Embedded derivatives included in other financial instruments or in other contractual obligations are treated as separate derivatives, when their risks and characteristics are not closely related to those of the financial instrument that houses them and the latter are not measured at fair value with recognition of the relative gains and losses in the Income Statement.
The scheme underlying the employee severance indemnity of the Italian Group companies (the TFR) was classified as a defined benefit plan up until 31 December 2006. The legislation regarding this scheme was amended by Law No. 296 of 27 December 2006 (the "2007 Finance Law") and subsequent decrees and regulations issued in the first part of 2007. In view of these changes, and with specific reference to those regarding companies with at least 50 employees, this scheme only continues to be classified as a defined benefit plan in the Financial Statements for those benefits accruing up to 31 December 2006 (and not yet settled by the balance sheet date), while after that date the scheme is classified as a defined contribution plan.
Employee termination indemnities ("TFR") are classified as a "post-employment benefit", falling under the category of a "defined benefit plan"; the amount already accrued must be projected in order to
estimate the payable amount at the time of employee termination and subsequently be discounted through the "projected unit credit method", an actuarial method based on demographic and finance data that allows the reasonable estimate of the extent of benefits that each employee has matured in relation to the time worked. Through actuarial measurement, interest cost is recognized as financial gains or losses and represents the figurative expenditure that the Company would bear by securing a market loan for an
amount corresponding to the Employee Termination Indemnities ("TFR"). Actuarial income and losses that reflect the effects resulting from changes in the actuarial assumptions used are directly recognized in Shareholders' equity.
The Company has applied the standard set out by IFRS 2 "Share-based payment". Share-based payments are measured at fair value at granting date. Such amount is recognized in the Income Statement, with a balancing entry in Shareholders' equity, on a straight-line basis and over the (vesting period). The fair value of the option, measured at the granting date, is assessed through actuarial calculations, taking into account the terms and conditions of the options granted.
The stock options resolved in the previous financial years have been exercised and therefore the Company does not have existing stock option plans.
Provisions for risks and liabilities are costs and liabilities having an established nature and the existence of which is certain or probable that at the reporting date the amount cannot be determined or the occurrence of which is uncertain. Such provisions are recognized when a commitment actually exists arising from past events of legal or contractual nature or arising from statements or company conduct that determine valid expectations from the persons involved (implicit obligations).
Provisions are recognized when the Company has a present commitment arising from a past event and it is probable that it will be required to fulfil the commitment. Provisions are accrued at the best estimate of the expenditure required to settle the liability at the balance sheet date, and are discounted when the effect is significant.
Revenue from contracts with customers is recognized on the basis of the following five steps:
A promised good or service is transferred when (or as) the customer obtains control of it. Control can be transferred over time or at a point in time.
Revenue is measured at the fair value of the consideration to which the Company expects to be entitled in exchange for transferring promised goods and/or services to a customer, excluding amounts collected on behalf of third parties. Therefore, revenue is recognized when control over the goods or services is transferred to the customer either "over time" or "at a point in time".
Revenues from services include the activities the Company carries out directly with respect to some of its major clients in relation to their businesses. These activities are also carried out in exchange for services provided by other Group companies, and the costs for such services are recognized as Services and other costs.
Financial income and expenses are recognized and measured in the income statement on an accrual basis.
Government grants are recognized in the financial statements when there is reasonable assurance that the company concerned will comply with the conditions for receiving such grants and that the grants themselves will be received. Government grants are recognized as income over the periods necessary to match them with the related costs which they are intended to compensate.
Income tax represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit defers from the profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
Current income tax is entered for each individual company based on an estimate of taxable income in compliance with existing legislation and tax rates or as substantially approved at the period closing date in each country, considering applicable exemptions and tax credit.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the Financial Statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and associates and interests arising in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the liability is settled or the asset realized. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
In the event of changes to the accounting value of deferred tax assets and liabilities deriving from a change in the applicable tax rates and relevant legislation, the resulting deferred tax amount is entered in income statement, unless it refers to debited or credited amounts previously recognized to Shareholders' equity.
Basic earnings per share is calculated with reference to the profit for the period of the Company and the weighted average number of shares outstanding during the year. Treasury shares are excluded from this calculation.
Diluted earnings per share is determined by adjusting the basic earnings per share to take account of the theoretical conversion of all potential shares, being all financial instruments that are potentially convertible into ordinary shares, with diluting effect.
The preparation of the Financial Statements and relative notes under IFRS requires that management makes estimates and assumptions based also on subjective judgments, past experiences and assumptions considered reasonable and realistic in relation to the information at the time of estimation. These estimates shall affect items reported in the consolidated financial balance sheet and income statement and the disclosure of contingent assets and liabilities. The results of the financial statements may differ, even significantly, from these estimates as a result of possible changes in the factors considered in the determination of these estimates. Estimates are periodically reviewed. The estimates are mainly referred to:
At each balance sheet date, the company verifies whether there are indications that the investments may have suffered a reduction in value. For this purpose, both internal and external sources of information are considered. The identification of value reduction indicators, the estimation of future cash flows and the determination of the fair value of each investment requires Management to make significant estimates and assumptions about the determination of the discount rate to be applied, the useful life and the residual value of the assets. These estimates can have a significant impact on the value of assets and the amount of any write-downs.
The reduction in value of trade receivables is carried out through the simplified approach, which provides for the estimation of the expected loss over the entire life of the credit at the time of initial recognition and in subsequent evaluations. For each customer segment, the estimate is made mainly through the determination of the expected default, based on historical-statistical indicators, possibly adjusted using prospective elements. For some categories of loans characterized by specific risk elements, detailed assessments are carried out on the individual credit positions.
The determination of the value of the lease liability and the corresponding right of use asset is carried out by calculating the present value of the lease payments, also considering the estimate on the reasonable certainty of the renewal of the lease contracts.
The provisions related to litigation are the result of a complex estimation process that is also based on the probability of failure. The provisions related to personnel provisions, and in particular to the employee severance indemnity, are determined on the basis of actuarial assumptions; changes in these assumptions could have significant effects on those provisions.
The fair value of derivatives and equity instruments is determined through valuation models that also take into account subjective valuations such as, for example, cash flow estimates, expected price volatility, etc., and/or through market values or quotes provided by financial counterparties.
Pursuant to IAS 8 (Accounting Standards, changes in accounting estimates and errors) paragraph 10, in the absence of a principle or interpretation applicable specifically to a certain transaction, Management defines, through subjective assessments, the accounting methodologies to be adopted in order to provide a financial statements that faithfully represent the financial position, the economic result and the financial flows of the Company, reflects the economic substance of the operations, is neutral, drafted on a prudential basis and comprehensive in all relevant aspects.
It should be noted that at the balance sheet date there are no significant estimates related to uncertain future events and other causes of uncertainty that may cause significant adjustments to the values of assets and liabilities within the following year.
ȯ With Regulation no. 2021/2036 issued by the European Commission on 19 November 2021, IFRS 17 "Insurance contracts" published by the IASB on 18 May 2017 and subsequent amendments published on 25 June 2020 were approved. The standard provides a comprehensive approach to the accounting of insurance contracts and applies to issued insurance contracts, reinsurance contracts issued or held and investment contracts with discretionary participation characteristics issued.
The provisions of IFRS 17 and its subsequent amendments are effective from financial years beginning on or after 1 January 2023.
Amendments are effective from financial years starting on or after 1 January 2023. Early application is allowed.
ȯ With Regulation no. 2022/1491 issued by the European Commission on 8 September 2022, the document "Amendments to IFRS 17 Insurance contracts: initial application of IFRS 17 and IFRS 9 – Comparative information" was approved. The narrow-scope amendments address an important issue related to accounting mismatches between insurance contract liabilities and financial assets arising from comparative information submitted with the initial application of IFRS 17 and IFRS 9.
Amendments are effective from financial years starting on or after 1 January 2023.
The Company has assessed that these changes will not have a significant impact on the financial statements.
the amendments specify that the conditions existing at the end of the reporting period are those that must be used to determine whether there is a right to defer settlement of a liability;
management's expectations regarding events after the balance sheet date, for example in the event of a breach of a covenant or in the event of early settlement, are not material;
The amendments clarify the situations that are considered liquidation of a liability. Due to the COVID-19 pandemic, the IASB has proposed to postpone the effective date of the document to 1 January 2024, to give companies more time to implement any classification changes resulting from the changes.
ȯ On 22 September 222, the IASB issued the document "Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback". This amendment specifies the criteria that the lessee must use to measure the lease liability arising from a leaseback transaction, in order to avoid recognition of gains or losses on the right of use recognised in the balance sheet.
Amendments are effective from financial years starting on or after 1 January 2023. Ear
Reply S.p.A. operates at a world-wide level and for this reason its activities are exposed to various types of financial risks: market risk (broken down in exchange risk, interest rate risk on financial flows and on "fair value", price risk), credit risk and liquidity risk. To minimize risks Reply utilizes derivative financial instruments. At a central level it manages the hedging of principle operations. Reply S.p.A. does not detain derivate financial instruments for negotiating purposes.
For business purposes, specific policies are adopted in order to guarantee that clients honor payments.
With regards to financial counterparty risk, the company does not present significant risk in credit-worthiness or solvency. For newly acquired clients, the Company accurately verifies their capability in terms of facing financial commitments. Transactions of a financial nature are undersigned only with primary financial institutions.
The Company is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time.
The cash flows, funding requirements and liquidity of companies are monitored and managed on a centralized basis through the Group Treasury. The aim of this centralized system is to optimize the efficiency and effectiveness of the management of the Group's current and future capital resources (maintaining an adequate level of cash and cash equivalents and the availability of reserves of liquidity that are readily convertible to cash and committed credit).
The difficulties both in the markets and in the financial markets require special attention to the management of liquidity risk, and in that sense particular emphasis is being placed on measures taken to generate financial resources through operations and on maintaining an adequate level of available liquidity. The Company therefore plans to meet its requirements to settle financial liabilities as they fall due and to cover expected capital expenditures by using cash flows from operations and available liquidity, renewing or refinancing bank loans.
As the company operates mainly in a "Euros area" the exposure to currency risks is limited. The exposure to interest rate risk arises from the need to fund operating activities and M&A investments, as well as the necessity to deploy available liquidity. Changes in market interest rates may have the effect of either increasing or decreasing the Company's net profit/(loss), thereby indirectly affecting the costs and returns of financing and investing transactions.
The interest rate risk to which the Company is exposed derives from bank loans; to mitigate such risks, Reply S.p.A., when useful, uses derivative financial instruments designated as "cash flow hedges". The use of such instruments is disciplined by written procedures in line with the Company's risk management strategies that do not contemplate derivative financial instruments for trading purposes.
No exceptions allowed under Article 2423, paragraph 4, of the Italian Civil Code were used in drawing up the annexed Financial Statements.
The Company has decided to enter into the National Fiscal Consolidation pursuant to articles 117/129 of the TUIR.
Reply S.p.A., Parent Company, acts as the consolidating company and determines just one taxable income for the Group companies that adhere to the Fiscal Consolidation, and will benefit from the possibility of compensating taxable income having fiscal losses in just one tax return.
Each company adhering to the Fiscal Consolidation transfers to Reply S.p.A. its entire taxable income, recognizing a liability with respect to the Company corresponding to the payable IRES; The companies that transfer fiscal losses can register a receivable with Reply, corresponding to IRES on the part of the loss off-set at a Group level and remunerated according to the terms established in the consolidation agreement stipulated among the Group companies.
| 2022 | 2021 | CHANGE |
|---|---|---|
| 599,230,362 | 514,598,880 | 84,631,481 |
| 53,610,718 | 44,179,519 | 9,431,199 |
| 32,879,154 | 27,519,041 | 5,360,112 |
| 23,608,557 | 17,862,988 | 5,745,568 |
| 709,328,790 | 604,160,429 | 105,168,361 |
Reply manages business relationships on behalf of some of its major clients. Such activities were recorded in the item Revenues from services to third parties which increased by 84,631,481 Euros.
Revenues from Royalties on the "Reply" trademark refer to charges to subsidiaries, corresponding to 3% of the subsidiaries' turnover with respect to third parties.
Revenues from Intercompany services and Other intercompany revenues refer to activities that Reply S.p.A. carries out for the subsidiaries, and more specifically:
Other revenues that as at 31 December 2022 amounted to 25,668,033 Euros (15,938,379 Euros at 31 December 2021) mainly refer to expenses incurred by Reply S.p.A. and recharged to the Group companies and include expenses for social events, telephone and training courses.
| (EUROS) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Software licenses for resale | 15,850,165 | 15,482,864 | 367,301 |
| Hardware for resale | 21,454,671 | 12,606,258 | 8,848,413 |
| Other | 551,654 | 374,662 | 176,992 |
| Total | 37,856,490 | 28,463,783 | 9,392,707 |
The items software and hardware licenses for resale refer to the costs incurred for software licenses for resale to third parties carried out for the Group companies.
The item Other mainly includes the purchase of supplies, e-commerce material, stationary and printed materials (217,626 Euros) and fuel (302,627 Euros).
Personnel expenses amounted to 26,535,763 Euros, with an increase of 1,157,312 Euros and are detailed in the following table:
| (EUROS) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Employees | 21,447,886 | 19,761,476 | 1,686,410 |
| Directors | 5,087,877 | 7,931,599 | (2,843,722) |
| Total | 26,535,763 | 27,693,075 | (1,157,312) |
Detail of personnel by category is provided below:
| (NUMBER) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Directors | 90 | 76 | 14 |
| Managers | 6 | 6 | - |
| Staff | 13 | 13 | - |
| Total | 109 | 95 | 14 |
The average number of employees in 2022 was 106 (in 2021 96).
Services and other costs comprised the following:
| (EUROS) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Commercial and technical consulting | 6,227,758 | 5,145,309 | 1,082,449 |
| Travelling and training expenses | 2,478,381 | 1,711,449 | 766,931 |
| Professional services from group companies | 580,430,560 | 500,994,779 | 79,435,780 |
| Marketing expenses | 7,239,857 | 4,824,047 | 2,415,810 |
| Administrative and legal services | 2,822,525 | 3,258,839 | (436,315) |
| Statutory auditors and Independent auditors fees | 296,159 | 244,521 | 51,638 |
| Leases and rentals | 1,351,499 | 1,129,994 | 221,505 |
| Office expenses | 4,386,564 | 3,214,295 | 1,172,269 |
| Other services from group companies | 19,302,832 | 15,162,355 | 4,140,477 |
| Expenses incurred on behalf of group companies | 23,341,928 | 11,992,828 | 11,349,100 |
| Other | 6,472,510 | 6,312,418 | 160,092 |
| Total | 654,350,573 | 553,990,835 | 100,359,738 |
Professional Services from Group companies, which increased during the year by 79,435,780 Euros, are mainly related to revenues from services to third parties.
Reply S.p.A. carries out commercial fronting activities for some of its major clients, whereas delivery is carried out by the operational companies.
Office expenses include services rendered by related parties in connection with service contracts for the use of premises, legal domicile and secretarial services, as well as utility costs.
Depreciation of tangible assets was calculated on the basis of technical-economic rates determined in relation to the residual useful lives of the assets, and which amounted in 2022 to an overall cost of 230,614 Euros. Details of depreciation are provided at the notes to tangible assets.
Amortization of intangible assets amounted in 2022 to an overall cost of 3,066,697 Euros. Details of depreciation are provided at the notes to intangible assets.
Amortization related to right of use assets arising from the application of IFRS 16 amounted to 583,172 thousand Euros.
Other operating and non-recurring income, related to events and transactions that do not occur in the regular course of business, amounted to 2,855,100 and mainly refer to provisions for risks and reversal in relation to contractual, commercial and legal disputes.
Detail is as follows:
| (EUROS) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Dividends | 92,266,000 | 87,689,000 | 4,577,000 |
| Loss on equity investments | (18,852,158) | (322,000) | (18,530,158) |
| Total | 73,413,842 | 87,367,000 | (13,953,158) |
Dividends include proceeds received by Reply S.p.A. from subsidiary companies during the year.
| (EUROS) | 2022 |
|---|---|
| Aktive Reply S.r.l. | 1,830,000 |
| Arlanis Reply S.r.l. | 940,000 |
| Atlas Reply S.r.l. | 745,000 |
| Blue Reply S.r.l. | 8,720,000 |
| Bridge Reply S.r.l. | 285,000 |
| Business Reply S.r.l. | 2,745,000 |
| Cluster Reply S.r.l. | 10,880,000 |
| Cluster Reply Roma S.r.l. | 1,015,000 |
| Data Reply S.r.l. | 2,590,000 |
| Discovery Reply S.r.l. | 1,520,000 |
| E*finance Consulting S.r.l. | 2,545,000 |
| Ekip Reply S.r.l. | 20,000 |
| Eos Reply S.r.l. | 270,000 |
| Go Reply S.r.l. | 1,085,000 |
| Hermes Reply S.r.l. | 920,000 |
| Iriscube Reply S.r.l. | 4,980,000 |
| Logistics Reply S.r.l. | 970,000 |
| Open Reply S.r.l. | 3,325,000 |
| Pay Reply S.r.l. | 260,000 |
| Power Reply S.r.l. | 3,190,000 |
| Reply Consulting S.r.l. | 1,135,000 |
| Reply Digital Experience S.r.l. | 1,205,000 |
| Retail Reply S.r.l. | 1,570,000 |
| Ringmaster S.r.l. | 686,000 |
| Santer Reply S.p.a. | 5,720,000 |
| Security Reply S.r.l. | 8,490,000 |
| Sprint Reply S.r.l. | 545,000 |
| Storm Reply S.r.l. | 4,075,000 |
| Syskoplan Reply S.r.l. | 1,520,000 |
| Sytel Reply Roma S.r.l. | 3,450,000 |
| Tamtamy Reply S.r.l. | 510,000 |
| Target Reply S.r.l. | 2,475,000 |
| Technology Reply S.r.l. | 7,495,000 |
| Technology Reply Roma S.r.l. | 1,460,000 |
| Whitehall Reply S.r.l. | 2,585,000 |
| Xister Reply S.r.l. | 510,000 |
| Total | 92,266,000 |
Net losses on equity investments refer to write-downs and the year-end losses of several subsidiary companies that were prudentially deemed as non-recoverable with respect to the value of the investment.
For further details, see Note 21 herein.
Detail is as follows:
| (IN EURO) | 2022 | 2021 | CHANGES |
|---|---|---|---|
| Interest income from subsidiaries | 13,924,364 | 7,932,069 | 5,992,296 |
| Financial income | 86,825 | 3,410 | 83,415 |
| Interest expenses | (1,956,188) | (1,016,979) | (939,210) |
| Other | 629,118 | 16,566,246 | (15,937,128) |
| Total | 12,648,115 | 23,484,746 | (10,836,631) |
Interest income from subsidiaries refers to the interest yielding cash pooling accounts of the Group companies included in the centralized pooling system.
Financial income include interest in bank accounts amounting to 50,821 Euros and interest income on tax refunds amounting to 36,004 Euros.
Interest expenses refer to the interest expenses on the use of credit facilities with Intesa Sanpaolo and Unicredit.
The item Other mainly includes:
The details are provided below:
| 2021 | CHANGE |
|---|---|
| 4,898,947 | 727,695 |
| 611,000 | 77,000 |
| 207,914 | (823,362) |
| 5,717,861 | (18,667) |
| 3,227,272 | (1,218,168) |
| (56,768) | (502,650) |
| 3,170,504 | (1,720,818) |
| 8,888,365 | (1,739,485) |
| 2,009,104 (559,418) 1,449,686 7,148,880 |
The following table provides the reconciliation between the IRES theoretical rate and the fiscal theoretical rate:
| TAXABLE INCOME | TAX |
|---|---|
| 101,290,573 | |
| 24.0% | 24,309,737 |
| (78,827,862) | |
| 22,462,711 | |
| 5,396,000 | |
| 230,642 | |
| 5,626,643 | |
| 101,290,573 | |
Temporary differences, net refer to:
| (EUROS) | TAXABLE INCOME | TAX |
|---|---|---|
| Difference between value and cost of production | 15,228,615 | |
| IRAP net | 1,692,074 | |
| Taxable IRAP | 16,920,689 | |
| Total IRAP | 688,000 |
Temporary differences, net refer to:
Basic earnings and diluted earnings per share as at 31 December 2022 is calculated with reference to the net profit which amounted to 94,141,693 Euros (111,243,694 Euros at 31 December 2021) divided by the weighted average number of shares outstanding as at 31 December 2022, net of treasury shares, which amounted to 37,252,650 (37,356,344 at 31 December 2021).
| (EUROS) | 2022 | 2021 |
|---|---|---|
| Net profit of the year | 94,141,693 | 11,243,694 |
| Weighted number of shares | 37,252,650 | 37,356,344 |
| Basic earning per share | 2.53 | 2.98 |
Reply does not have any financial instruments potentially convertible in shares (stock options) therefore the basic earnings per share corresponds to the diluted earnings per share.
Pursuant to Article 1, paragraph 125 of Law 124/2017, the Company in 2021 has received the following public contributions:
| ENTITY (EUROS) | 2022 |
|---|---|
| AGENZIA DELLE ENTRATE-RISCOSSIONE | 525,749 |
| AUTORITA' NAZIONALE ANTICORRUZIONE - ANAC | 116,773 |
| AZIENDA SOCIO SANITARIA TERRITORIALE DELLA BRIANZA | 113,944 |
| CSI PIEMONTE | 30,772 |
| ENI SPA | 3,816 |
| LEONARDO LOGISTICS S.P.A. | 19,766 |
| MINISTERO DELLA DIFESA-STATO MAGGIORE DELL'AERONAUTICA MILITARE | 120,344 |
| MINISTERO DELL'INTERNO | 18,000 |
| UNIVERSITA' DEGLI STUDI DI BERGAMO | 150,530 |
| TOTAL | 1,099,694 |
Tangible assets as at 31 December 2022 amounted to 534,336 Euros are detailed as follows:
| (EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Plant and machinery | 99,866 | 87,628 | 12,238 |
| Hardware | 277,070 | 79,421 | 197,649 |
| Other | 157,400 | 143,759 | 13,641 |
| Total | 534,336 | 310,808 | 223,528 |
The item Other mainly includes mobile phones and furniture and fittings.
Change in Tangible assets during 2022 is summarized below:
| (EUROS) | PLANT AND MACHINERY | HARDWARE | OTHER | TOTAL |
|---|---|---|---|---|
| Historical cost | 902,597 | 1,817,178 | 1,410,171 | 4,129,946 |
| Accumulated depreciation |
(814,969) | (1,737,757) | (1,266,412) | (3,819,138) |
| 31/12/2021 | 87,628 | 79,421 | 143,759 | 310,808 |
| Historical cost | ||||
| Increases | 63,617 | 309,770 | 80,754 | 454,142 |
| Disposals | (2,738) | (10,045) | (760) | (13,543) |
| Accumulated depreciation |
||||
| Depreciation | (51,379) | (112,121) | (67,113) | (230,614) |
| Utilized | 2,738 | 10,045 | 760 | 13,543 |
| Historical cost | 963,476 | 2,116,903 | 1,490,165 | 4,570,544 |
| Accumulated depreciation |
(863,610) | (1,839,833) | (1,332,765) | (4,036,208) |
| 31/12/2022 | 99,866 | 277,070 | 157,400 | 534,336 |
During the year under review the Company made investments amounting to 454,142 Euros, which mainly refer to hardware, mobile phones and general devices.
Goodwill as at 31 December 2022 amounted to 86,765 Euros and refers to the value of business branches (consulting activities related to Information Technology and management support) acquired in July 2000.
Goodwill recognized is deemed adequately supported in terms of expected financial results and related cash flows.
Intangible assets as at 31 December 2022 amounted to 7,535,237 Euros (7,603,348 Euros at 31 December 2021) and are detailed as follows:
| (EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Software | 6,999,173 | 7,067,2843 | (68,111) |
| Trademark | 536,064 | 536,064 | - |
| Total | 7,535,237 | 7,603,348 | (68,111) |
Change in intangible assets in 2022 is summarized in the table below:
| (EUROS) | SOFTWARE | TRADEMARK | TOTAL |
|---|---|---|---|
| Historical cost | 18,174,964 | 536,064 | 18,711,028 |
| Accumulated amortization | (11,107,680) | - | (11,107,680) |
| 31/12/2021 | 7,067,284 | 536,064 | 7,603,348 |
| Historical cost | |||
| Increases | 2,998,585 | - | 2,998,585 |
| Accumulated amortization | |||
| Ammortization | (3,066,697) | - | (3,066,697) |
| Historical cost | 21,173,549 | 536,064 | 21,709,613 |
| Accumulated amortization | (14,174,377) | - | (14,174,377) |
| 31/12/2022 | 6,999,173 | 536,064 | 7,535,237 |
The item Software and increase in software is related mainly to software licenses purchased and used internally by the company.
The item Trademark expresses the value of the "Reply" trademark granted to the Parent Company Reply S,p,A, (before Reply Europe Sàrl) on 9 June, 2000, in connection to the Company's share capital increase that was resolved and undersigned by the Parent Company Alister Holding SA, Such amount is not subject to systematic amortisation, and the expected future cash flows are deemed adequate.
The application of the IFRS 16 accounting standard, in use since 1 January 2019, resulted in the accounting of the book value of the right-of-use asset ("RoU Asset") that is equal to the book value of the liabilities for leasing on the date of first application, net of any accrued income/costs or deferred revenue/expenses related to the lease. The table below shows the RoU Assets for the vehicles category:
| (EUROS) | 31/12/2021 | NET CHANGES | AMORTIZATION | 31/12/2022 |
|---|---|---|---|---|
| Vehicles | 615,815 | 905,121 | (583,172) | 937,764 |
The net change mainly refers to the signing of new lease agreements.
The item Equity investments at 31 December 2022 amounted to 177,988,453 Euros, with an increase of 37,230,675 Euros compared to 31 December 2021.
| (EUROS) | BALANCE AT 31/12/2021 |
ACQUISITIONS AND SUBSCRIPTIONS |
FINANCIAL REMISSION |
WRITE DOWNS |
OTHER | BALANCE AT 31/12/2022 |
INTEREST |
|---|---|---|---|---|---|---|---|
| Air Reply S.r.l. | 558,500 | 558,500 | 85.00% | ||||
| Aktive Reply S.r.l. | 512,696 | 512,696 | 100.00% | ||||
| Arlanis Reply S.r.l. | 588,000 | 588,000 | 100.00% | ||||
| Atlas Reply S.r.l. | 12,575 | 12,575 | 100.00% | ||||
| Avvio Reply S.r.l. | 446,000 | 270,000 | (270,000) | 446,000 | 100.00% | ||
| Blue Reply S.r.l. | 527,892 | 527,892 | 100.00% | ||||
| Breed Reply Investment Ltd. | 2,081,443 | 481,715 | (2,562,158) | 1,000 | 100.00% | ||
| Bridge Reply S.r.l. | 6,000 | 1,200,000 | 1,206,000 | 100.00% | |||
| Bside S.r.l. | - | 557,000 | 50,000 | (50,000) | 557,000 | 100,00% | |
| Business Reply S.r.l. | 268,602 | 268,602 | 100.00% | ||||
| Cluster Reply S.r.l. | 2,540,848 | 2,540,848 | 100.00% | ||||
| Cluster Reply Roma S.r.l. | 296,184 | 296,184 | 100.00% | ||||
| Consorzio Reply Public Sector |
39,500 | 39,500 | 24.76% | ||||
| Core Reply S.r.l. | 9,000 | 589,018 | 9,000 | 100.00% | |||
| Data Reply S.r.l. | 317,662 | 317,662 | 100.00% | ||||
| Discovery Reply S.r.l. | 1,311,669 | 1,311,669 | 100.00% | ||||
| e*finance Consulting Reply S.r.l. |
3,076,385 | 3,076,385 | 100.00% | ||||
| Ekip Reply S.r.l. | 30,000 | 30,000 | 100.00% | ||||
| Eos Reply S.r.l. | 495,369 | 495,369 | 100.00% | ||||
| Forge Reply S.r.l. | 1,000 | 2,200,000 | (2,200,00) | 1,000 | 100.00% | ||
| Go Reply S.r.l. | 1,920,000 | 1,920,000 | 100.00% | ||||
| Hermes Reply S.r.l. | 199,500 | 199,500 | 100.00% | ||||
| Hermes Reply Consulting Nanjing Co. |
1,000,000 | 1,000,000 | 100.00% | ||||
| IrisCube Reply S.r.l. | 6,724,952 | 6,724,952 | 100.00% | ||||
| Lid Reply GmbH | 28,000 | 28,000 | 100.00% | ||||
| Like Reply S.r.l. | 87,317 | 87,317 | 100.00% | ||||
| Logistics Reply S.r.l. | 1,049,167 | 1,049,167 | 100.00% | ||||
| Nexi Digital S.r.l. | - | 5,100 | 5,100 | 51.00% | |||
| Net Reply S.r.l. | - | 10,000 | 1,625,633 | 1,635,633 | 100.00% | ||
| Next Reply S.r.l. | - | 10,000 | 560,000 | 570,000 | 100.00% | ||
| Open Reply S.r.l. | 1,625,165 | 1,625,165 | 100.00% |
In the month of May 2022 100% of the share capital of Bside S.r.l. was acquired for an amount of 557,000 Euros.
In the month of January 2022 Nexi Digital S.r.l. was constituted, a company in which Reply S.p.A. holds 51% of the share capital.
In the month of March 2022 Net Reply S.r.l. was constituted, a company in which Reply S.p.A. holds 100% of the share capital.
In the month of March 2022 Next Reply S.r.l. was constituted, a company in which Reply S.p.A. holds 100% of the share capital.
It should be noted that in 2022 Reply S.p.A. acquired the investments in Reply France Sas from the subsidiary Reply Sarl for a total value of 2,010,000 Euros. Reply S.p.A. subsequently recapitalized the subsidiary for an amount of 33,000,000 Euros.
The other changes refer to the acquisition of additional shares in the share capital of investments already held in previous years.
The amounts are referred to the waiver of financial loan receivables from some subsidiaries in order to increase their equity position.
The amounts recorded reflect losses on some equity investments that are deemed not to be recoverable.
The list of equity investments in accordance with Consob communication no, 6064293 of 28 July 2006 is included in the attachments.
The negative differences arising between the carrying value of the investments and the corresponding portion of their shareholders' equity are not related to permanent impairment of value, as the carrying value is supported by positive economic and financial forecasts that guarantee the recoverable amount of the investment.
Detail is as follows:
| (EUROS) | 2022 | 2021 | CHANGE |
|---|---|---|---|
| Guarantee deposits | 244,048 | 241,058 | 2,990 |
| Loans to subsidiaries | 508,173,353 | 335,317,437 | 172,855,916 |
| Investments in other parties | 343,000 | 313,000 | 30,000 |
| Total | 508,760,401 | 335,871,495 | 172,888,906 |
Financial receivables from subsidiaries are referred to loans, underwritten and granted to the following companies:
| COMPANY | AMOUNT |
|---|---|
| Breed Reply Investments Ltd | 52,691,482 |
| Cluster Reply Informatica Ltda | 1,215,000 |
| Lid Reply GmbH | 7,425,000 |
| Reply Deutschland SE | 140,000,000 |
| Reply do Brasil Sistema De Informatica Ltda | 2,181,740 |
| Reply France Sas | 22,000,000 |
| Reply Inc. | 163,781,215 |
| Reply Ltd | 67,136,469 |
| Reply Polska Sp. z o.o. | 319,500 |
| Reply Sarl | 25,008,135 |
| Reply Services S.r.l. | 24,714,813 |
| Technology Reply S.r.l. (Romania) | 200,000 |
| Wemanity Group | 1,500,000 |
| Total | 508,173,353 |
This item amounted to 6,728,474 Euros at 31 December 2022 (6,169,056 Euros at 31 December 2021), and included the fiscal charge corresponding to the temporary differences on statutory income and taxable income related to deferred deductible items.
| TEMPORARY DEDUCTIBLE DIFFERENCES | TAXABLE AMOUNT | TAX |
|---|---|---|
| Total deferred tax assets at 31/12/2021 | 24,663,298 | 6,169,056 |
| Accrued | 9,525,084 | 2,287,771 |
| Utilization | (6,729,654) | (1,728,353) |
| Total deferred tax assets at 31/12/2022 | 27,458,729 | 6,728,474 |
| Of which: | ||
| - directors fees and employee bonuses accrued but not yet paid | 8,204,667 | 1,969,120 |
| - unrealized foreign exchange losses | 15,047,797 | 3,611,471 |
| - taxable amounts greater than book value | 4,206,265 | 1,147,883 |
| Total | 27,458,729 | 6,728,474 |
The decision to recognize deferred tax assets is taken by assessing critically whether the conditions exist for the future recoverability of such assets on the basis of expected future results.
There are no deferred tax assets on losses carried forward.
Trade receivables at 31 December 2022 amounted to 532,386,689 Euros and are all collectible within 12 months.
Detail is as follows:
| (EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Third party trade receivables | 293,943,304 | 235,820,081 | 58,123,223 |
| Credit notes to be issued | (8,223,845) | (4,413,950) | (3,809,895) |
| Allowance for doubtful accounts | (550,560) | (753,535) | 202,976 |
| Third party trade receivables | 285,168,899 | 230,652,596 | 54,516,304 |
| Receivables fro subsidiaries | 247,217,790 | 170,238,515 | 76,979,275 |
| Receivables from Parent Company | - | 3,444 | (3,444) |
| Trade receivables from subsidiaries and Parent Company |
247,217,790 | 170,241,959 | 76,975,831 |
| Total trade receivables | 532,386,689 | 400,894,555 | 131,492,135 |
Reply manages business relationships on behalf of some of its major clients. This activity is reflected in the item Third party trade receivables which increased by 54,516,304 Euros.
Receivables from subsidiaries are related to services that the Parent Company Reply S.p.A. carries out in favor of the subsidiary companies at normal market conditions.
Trade receivables are all due within 12 months and do not include significant overdue balances.
In 2022 the provision for doubtful accounts, following a specific risk analysis of all the trade receivables, was reversed by 202,975 Euros and calculated using the expected credit loss approach pursuant to IFRS 9; detail is as follows:
| AMOUNT AT 31/12/2021 | 753,535 |
|---|---|
| Reversal | (202,975) |
| AMOUNT AT 31/12/2022 | 550,560 |
The carrying amount of trade receivables, that at initial recognition is equal to its fair value adjusted for attributable transaction costs, is subsequently valued at the amortised cost appropriately adjusted to take into account any write-downs.
Detail is as follows:
| (EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Tax receivables | 1,643,601 | 1,811,745 | (168,145) |
| Other receivables from subsidiaries | 31,921,953 | 28,673,559 | 3,248,393 |
| Other receivables | 131,641 | 2,103,416 | (1,971,775) |
| Accrued income and prepaid expenses | 27,682,748 | 24,790,613 | 2,892,135 |
| Total | 61,379,942 | 57,379,333 | 4,000,609 |
The item Tax receivables mainly includes IRES receivables and advances for withholding taxes suffered amounting to 1,438,599 (1,609,875 Euros at 31 December 2021) and VAT receivables net amounting to 8,948 Euros (8,903 Euros at 31 December 2021).
Other receivables from subsidiary companies mainly refer to IRES receivables which are calculated on taxable income, and transferred by the Italian subsidiaries under national fiscal consolidation.
Accrued income and prepaid expenses refer to prepaid expenses arising from the execution of services, lease contracts, insurance contracts and other utility expenses, which are accounted for on an accrual basis.
The carrying amount of Other receivables, that at initial recognition is equal to its fair value adjusted for attributable transaction costs, is subsequently valued at the amortised cost appropriately adjusted to take into account any write-downs.
This item amounted to 93,913,784 Euros (82,659,515 Euros at 31 December 2021) and mainly referred to:
This item amounted to 82,017,473 Euros, with a decrease of 100,528,281 Euros compared to 31 December 2021 and is referred to cash at banks and on hand at year-end.
As at 31 December 2022 the fully subscribed paid-in share capital of Reply S.p.A., amounted to 4,863,486 Euros and is made up of no. 37,411,428 ordinary shares having a nominal value of euro 0.13 each.
The number of shares in circulation as at 31 December 2022 totaled 37,278,236 (37,340,600 as at 31 December 2021).
The value of the Treasury shares, amounting to 17,122,489 Euros, refers to the shares of Reply S.p.A. that at 31 December 2022 were equal to no. 133,192 (70,828 as at 31 December 2021). During 2022 Reply S.p.A. acquired 140,800 treasury shares and sold 78,436 treasury shares. The change in treasury shares was entirely attributed to equity.
At 31 December 2022 amounted to 305,880,909 Euros, and included the following:
Share swap surplus reserve amounting to 3,445,485 Euros;
Surplus annulment reserve amounting to 2,902,479 Euros.
Earning reserves amounted to 312,074,355 Euros and were comprised as follows:
Other comprehensive income can be analysed as follows:
| (EUROS) | 31/12/2022 | 31/12/2021 |
|---|---|---|
| Other comprehensive income that will not be reclassified subsequently to profit or loss: |
||
| Actuarial gains/(losses) from employee benefit plans | 73,785 | (15,149) |
| Total Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax (B1): |
73,785 | (15,149) |
| Other comprehensive income that may be reclassified subsequently to profit or loss: |
||
| Gains/(losses) on cash flow hedges | 3,632,208 | 406,646 |
| Total Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax (B2): |
3,632,208 | 406,646 |
| Total Other comprehensive income, net of tax (B) = (B1) + (B2) | 3,705,993 | 391,497 |
| (EUROS) | 31/12/2022 | 31/12/2021 | ||||
|---|---|---|---|---|---|---|
| CURRENT | NON CURRENT |
TOTAL | CURRENT | NON CURRENT |
TOTAL | |
| Bank overdrafts | 20,354,123 | - | 20,354,123 | 10,004,558 | - | 10,004,558 |
| Bank loans | 20,952,381 | 70,410,783 | 91,363,164 | 83,333 | 19,616,667 | 19,700,000 |
| Transaction accounts | 226,237,713 | - | 226,237,713 | 192,866,566 | - | 192,866,566 |
| Derivative financial instruments | (784,652) | (3,091,173) | (3,875,825) | - | 2,151,927 | 2,151,927 |
| IFRS 16 financial liabilities | 514,765 | 432,456 | 947,221 | 324,727 | 294,318 | 619,045 |
| Total financial liabilities | 267,274,331 | 67,752,065 | 335,026,396 | 203,279,184 | 22,062,912 | 225,342,095 |
The future out payments of the financial liabilities are detailed as follows:
| 31/12/2022 | 31/12/2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| (EUROS) | DUE IN 12 MONTHS |
FROM 1 TO 5 YEARS |
OVER 5 YEARS |
TOTAL | DUE IN 12 MONTHS |
FROM 1 TO 5 YEARS |
OVER 5 YEARS |
TOTAL |
| Bank overdrafts | 20,354,123 | - | - | 20,354,123 | 10,004,558 | - | - | 10,004,558 |
| Bank loans | 20,952,381 | 51,210,783 | - | 72,163,164 | 83,333 | 416,667 | - | 500,000 |
| Mortgage loans | - 10,240,000 | 8,960,000 | 19,200,000 | - | 7,680,000 | 11,520,000 | 19,200,000 | |
| Transaction accounts | 226,237,713 | - | - | 226,237,713 | 192,866,566 | - | - | 192,866,566 |
| Derivative financial instruments |
514,765 | 432,456 | - | 947,221 | 324,727 | 294,318 | - | 619,045 |
| IFRS 16 financial liabilities |
(784,652) (2,075,477) | (1,015,697) | (3,875,826) | - | 430,544 | 1,721,383 | 2,151,927 | |
| Total | 267,274,331 59,807,762 | 7,944,303 335,026,395 203,279,184 | 8,821,529 | 13,241,383 225,342096 |
M&A loans refers to credit lines to be used for acquisition operations carried directly by Reply S.p.A. or via companies controlled directly or indirectly by the same.
Following and summarized by main features the ongoing contracts entered into for such a purpose:
Interest rates are also applied according to certain predetermined ratios (Covenants) of economic and financial nature calculated on the consolidated financial statements as at 31 December of each year and/or the consolidated interim report. As contractually defined, such ratios are as follows:
At the balance sheet date, Reply fulfilled the Covenants under the various contracts. It should also be noted that on 24 May 2018 Reply S.p.A. undersigned with Unicredit S.p.A. a mortgage loan secured by guarantee for the purchase and renovation of the property De Sonnaz for a total amount of 40,000,000 Euros. On November 15, 2021, an amendment was signed with the same institution, agreeing to extend the period of use from 36 to 66 months, without prejudice to the maximum total duration of 156 months (13 years). The mortgage is disbursed in relation to the progress of the work. Such credit line was used for 19,200,000 Euros at 31 December 2022.
The item IFRS 16 financial liabilities is related to the financial lease liabilities at 31 December 2022 related to the adoption of IFRS 16 starting from 1st January 2019.
The item Derivative financial instruments refers to several loans established with Unicredit S.p.A. to hedge changes in floating interest rates on loans and/or mortgages; the total underlying notional amounts to 75,666,667 Euros. The effective component of the instrument is stated in the Statement of changes in net equity whereas the ineffective portion of the Derivative instrument is recorded at the income statement. The carrying amount of Financial liabilities is deemed to be in line with its fair value.
The carrying amount of the Financial Liabilities estimates the value determined through the application of the amortised cost method.
The net financial indebtedness reported below was prepared according to CONSOB communication no. DEM / 6064293 of July 28, 2006, updated with the provisions of ESMA guideline 32-382-1138 of March 4, 2021 as implemented by the CONSOB warning no. 5/21 of 29 April 2021:
| Total financial debt | 159,095,138 | (39,863,174) | 198,958,312 |
|---|---|---|---|
| Financial debt long-term (I+J+K) | 67,752,065 | 22,062,912 | 45,689,153 |
| Other liabilities long-term | - | - | - |
| Financial instruments | (3,094,676) | 2,151,927 | (5,246,603) |
| Financial liabilities long-term | 70,846,741 | 19,910,985 | 50,935,756 |
| Net financial debt short-term (G-D) | 91,343,073 | (61,926,086) | 153,269,159 |
| Financial liabilities short-term (E+F) | 267,274,331 | 203,279,184 | 63,995,147 |
| Short-term portion of long term financial liability | 20,952,381 | 83,333 | 20,869,048 |
| Current financial liabilities | 246,321,950 | 203,195,851 | 43,126,099 |
| Cash (A+B+C) | 175,931,257 | 265,205,269 | (89,274,012) |
| Current financial assets | 93,913,784 | 82,659,515 | 11,254,269 |
| Cash equivalents | - | - | - |
| Cash | 82,017,473 | 182,545,754 | (100,528,281) |
| (EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
Net financial debt includes IFRS 16 financial liabilities amounting to 974,221 thousand Euros, of which 432,456 thousand Euros were non-current and 514,765 were current.
Pursuant to the aforementioned recommendations long term financial assets are not included in the net financial position.
For further details with regards to the above table see Notes 26 and 27 as well as Note 29.
Change in Financial liabilities during 2022 is summarized below:
| (EUROS) | |
|---|---|
| Total financial liabilities 2021 | 225,342,096 |
| Bank overdrafts | (10,004,558) |
| Transaction accounts, liability | (192,867,526) |
| Fair value IRS | (2,151,927) |
| IFRS 16 financial liabilities | (619,045) |
| Non current financial liabilities 2021 | 19,699,040 |
| Cash flows | 71,664,123 |
| Non current financial liabilities 2022 | 91,363,163 |
| Bank overdrafts | 20,354,123 |
| Transaction accounts, liability | 226,237,713 |
| Fair value IRS | (3,875,825) |
| IFRS 16 financial liabilities | 947,221 |
| Total financial liabilities 2022 | 335,026,395 |
The Employee severance indemnity represents the obligation to employees under Italian law (amended by Law no. 296/06) accrued by employees up to 31 December 2006 which will be paid when the employee leaves the company. In certain circumstances, a portion of the accrued liability may be given to an employee during his working life as an advance. This is an unfunded defined benefit plan, under which the benefits are almost fully accrued, with the sole exception of future revaluations.
The procedure for the determination of the Company's obligation with respect to employees was carried out by an independent actuary according to the following stages:
Reassessment of Employee severance indemnities in accordance with IAS 19 was carried out "ad personam" and on the existing employees, that is analytical calculations were made on
each employee in force in the company at the assessment date without considering future work force.
The actuarial valuation model is based on the so called technical bases which represent the demographic, economic and financial assumptions underlying the parameters included in the calculation.
The assumptions adopted can be summarized as follows:
| DEMOGRAPHIC ASSUMPTIONS | |
|---|---|
| Mortality | RG 48 survival tables of the Italian population |
| Inability | INPS tables divided by age and gender |
| Retirement age | Fulfilment of the minimum requisites provided by the General Mandatory Insurance |
| Advances on Employee severance indemnities |
Annual frequency of advances and employee turnover were assumed from historical data of the company: frequency of advances in 2022: 2.50% frequency of turnover in 2022: 10% |
| ECONOMIC AND FINANCIAL ASSUMPTIONS | ||||
|---|---|---|---|---|
| Annual inflation rate | Constant average annual rate equal to 2.3% | |||
| Annual discount rate | Calculated with reference to the valuation date of primary shares on the stock market in which the company belongs and with reference to the market yield of Federal bonds. The annual discount used for 2022 was 3.77% |
|||
| Annual growth rate of the Employee severance indemnities |
Annual increase in salaries equal to 3.23% | |||
| Annual increase in salaries | The annual increase of salaries used was calculated in function of the employee qualifications and the Company's market segment, net of inflation, from 1.0% to 1.50% |
| 31/12/2021 | 817,905 |
|---|---|
| Acturial gains/(losses) | (73,785) |
| Interest cost | 18,609 |
| Indemnities paid | (99,630) |
| Transfers | 226,339 |
| 31/12/2022 | 889,438 |
Deferred tax liabilities at 31 December 2022 amounted to 6,012,577 Euros and were referred mainly to the fiscal effects arising from temporary differences between the statutory income and taxable income.
| TEMPORARY TAXABLE DIFFERENCES | TAXABLE | TAX |
|---|---|---|
| Balance at 31/12/2021 | 16,579,929 | 4,003,473 |
| Accruals | 8,371,265 | 2,009,106 |
| Total at 31/12/2022 | 24,951,194 | 6,012,577 |
| - deduction allowance for doubtful accounts | 718,806 | 172,513 |
| - different goodwill/trademark measurements | 622,828 | 173,770 |
| - gains on unrecognized differences and other minor differences | 23,609,560 | 5,666,294 |
| Total at 31/12/2022 | 24,951,194 | 6,012,577 |
Trade payables at 31 December 2022 amounted to 443,813,330 Euros with an increase of 85,315,622 Euros.
Detail is as follows:
| (EUROS) | 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|---|
| Due to suppliers | 12,629,440 | 10,033,294 | 2,596,146 |
| Due to subsidiaries | 296,035,430 | 244,375,642 | 51,659,788 |
| Due to Parent Company | 128,100 | 128,100 | - |
| Advance payments from customers - asset | 135,020,361 | 103,960,672 | 31,059,688 |
| Total | 443,813,330 | 358,497,709 | 85,315,622 |
Due to suppliers mainly refers to services from domestic suppliers.
Due to subsidiaries recorded a change of 51,659,788 Euros, and refers to professional services in connection to third party agreements with Reply S.p.A..
Reply S.p.A. carries out commercial fronting activities for some of its major clients, whereas delivery is carried out by the operational companies.
Advance payments from customers include amounts invoiced to customers for contracts subcontracted to subsidiary companies, which at the balance sheet date were not yet
completed.
Trade payables are initially recognised at fair value, adjusted for any transaction costs directly attributable to and are subsequently valued at amortised cost. The amortised cost of current trade payables corresponds to the nominal value.
Detail is as follows:
| 31/12/2022 | 31/12/2021 | CHANGE |
|---|---|---|
| 428,244 | 4,713,241 | (4,284,997) |
| 9,489,133 | 14,464,151 | (4,975,018) |
| 9,917,377 | 19,177,392 | (9,260,015) |
| 1,535,619 | 1,309,984 | 225,635 |
| 422,978 | 353,254 | 69,724 |
| 1,958,597 | 1,663,238 | 295,359 |
| 5,645,549 | 5,267,846 | 377,704 |
| 5,681,305 | 4,373,457 | 1,307,848 |
| 18,548,880 | 18,290,220 | 258,660 |
| 26,419,214 | 21,846,237 | 4,572,977 |
| 56,294,947 | 49,777,759 | 6,517,188 |
| 68,170,921 | 70,618,388 | (2,447,468) |
Due to tax authorities mainly refers to payables due for withholding tax on employees and free lancers' compensation.
Due to social security authorities is related to both Company and employees contribution payables. Employee accruals mainly include payables to employees for remunerations due but not yet paid at year-end.
Due to subsidiary companies represents the liability on tax losses recorded by subsidiaries under national tax consolidation for 2022 and for the tax credits that subsidiaries transferred to Reply S.p.A. as part of the tax consolidation.
Miscellaneous payables mainly refer to remuneration and bonus of directors recognized as participation in the profits of the company.
Accrued expenses and deferred income are mainly related to advance invoicing in relation to fronting activities carried out for subsidiaries.
Other current payables and liabilities are initially recognised at fair value, adjusted for any transaction costs directly attributable to and are subsequently valued at amortised cost.
The amortised cost of these liabilities corresponds to the nominal value.
The item Provisions amounting to 10,058,180 Euros is summarized as follows:
| (EUROS) | 31/12/2021 | ACCRUALS | REVERSAL | UTILIZED | 31/12/2022 |
|---|---|---|---|---|---|
| Provision for risks | 3,691,780 | 44,900 | (2,900,000) | (3,501) | 833,180 |
| Provision for losses on equity investments | 880,000 | 9,225,000 | (880,000) | - | 9,225,000 |
| Total | 4,571,789 | 9,269,900 | (3,780,000) | (3,501) | 10,058,180 |
The item Provision for risks reflects the best estimate of contingent liabilities deriving from ongoing legal litigations; at 31 December 2022 an accrual of 44,900 Euros and a reversal of 2,900,000 Euros was made.
The item Provision for losses on equity investments has been reversed for 880,000 Euros; moreover an accrual of 9,225,000 Euros was posted.
With reference to CONSOB communications no. DAC/RM 97001574 of 20 February 1997 and no. DAC/RM 98015375 of 27 February 1998 concerning relations with related parties, the economic and financial effects on Reply S.p.A.'s year ended 2022 Financial Statements related to such transactions are summarised below.
Transactions carried out by Reply S.p.A. with related parties are considered ordinary business and are carried out at normal market conditions.
Financial and business transactions among the Parent Company Reply S.p.A. and its subsidiaries and associate companies are carried out at normal market conditions.
| (THOUSAND EUROS) |
WITH SUBSIDIARY AND ASSOCIATE COMPANIES |
WITH RELATED PARTIES |
WITH SUBSIDIARY AND ASSOCIATE COMPANIES |
WITH RELATED PARTIES |
NATURE OF TRANSACTION |
|---|---|---|---|---|---|
| Financial transactions |
31/12/2022 | 31/12/2021 | |||
| Financial receivables |
508,173 | 335,317 | Financial loans | ||
| Guarantee deposits |
80 | 80 | Guarantee deposits | ||
| Transaction accounts, net |
(159,641) | (140,070) | Transaction accounts held by the Parent company |
||
| Trade receivables and other |
279,140 | 198,912 | 3 | Royalties, administration services, marketing, quality management services and office rental |
|
| Trade payables and other |
301,717 | 128 | 248,749 | 128 | Services carried out in relation to contracts signed by the Parent company and subsequently committed to subsidiary companies |
| Other payables | 7,638 | 6,791 | Compensation paid to Directors, Key Management and Statutory Auditors |
||
| Economic transactions |
2022 | 2021 | |||
| Revenues from Royalties |
53,611 | 44,180 | Licensing of the "Reply" trademark consisting in a 3% fee on third party revenues |
||
| Revenues from services |
74,683 | 18 | 57,272 | 18 | Administrations services, marketing, quality management and office rental |
| Revenues from management services |
9,372 | 7,786 | Strategic management services | ||
| Costs for professional services |
637,044 | 542,734 | Services carried out in relation to contracts signed by the Parent company and subsequently committed to subsidiary companies |
||
| Other services | 1,971 | 420 | 1,831 | 420 | Services related to office rental and office of the secretary |
| Personnel | 7,677 | 8,268 | Emoluments to Directors and Key Management |
||
| Other services and costs |
148 | 148 | Statutory Auditors fee | ||
| Interest income, net |
13,924 | 7,932 | Interest on financial loans: 3 month Euribor + spread of 3 percentage points |
With reference to the Cash flows statement, the above mentioned transactions impact the change in working capital by 28 thousand Euros.
In accordance with Consob Resolution no. 15519 of 27 July 2006 and Consob communication no. DEM/6064293 of 28 July 2006, in the annexed tables herein, the Statement of income and the Statement of financial position reporting transactions with related parties separately, together with the percentage incidence with respect to each account caption has been provided.
Pursuant to art. 150, paragraph 1 of the Italian Legislative Decree n. 58 of 24 February 1998, no transactions have been carried out by the members of the Board of Directors that might be in potential conflict of interests with the Company.
Reply S.p.A. has determined the guide lines in managing financial risks. In order to maximize costs and the resources Reply S.p.A. has centralized all of the groups risk management. Reply S.p.A. has the task of gathering all information concerning possible risk situations and define the corresponding hedge.
As described in the section "Risk management", Reply S.p.A. constantly monitors the financial risks to which it is exposed, in order to detect those risks in advance and take the necessary action to mitigate them.
The following section provides qualitative and quantitative disclosures on the effect that these risks may have upon the company.
The quantitative data reported in the following do not have any value of a prospective nature, in particular the sensitivity analysis on market risks, is unable to reflect the complexity of the market and its related reaction which may result from every change which may occur.
The maximum credit risk to which the company is theoretically exposed at 31 December 2022 is represented by the carrying amounts stated for financial assets in the balance sheet. Balances which are objectively uncollectible either in part or for the whole amount are written down on a specific basis if they are individually significant. The amount of the writedown takes into account an estimate of the recoverable cash flows and the date of receipt, the costs of recovery and the fair value of any guarantees received. General provisions are made for receivables which are not written down on a specific basis, determined on the basis of historical experience.
Refer to the note on trade receivables for a quantitate analysis.
Reply S.p.A. is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time.
The two main factors that determine the company's liquidity situation are on one side the funds generated by or used in operating and investing activities and on the other the debt lending period and its renewal features or the liquidity of the funds employed and market terms and conditions.
As described in the Risk management section, Reply S.p.A has adopted a series of policies and procedures whose purpose is to optimize the management of funds and to reduce the liquidity risk, as follows:
Management believes that the funds and credit lines currently available, in addition to those funds that will be generated from operating and funding activities, will enable the Group to satisfy its requirements resulting from its investing activities and its working capital needs and to fulfil its obligations to repay its debts at their natural due date.
Reply S.p.A. has a limited exposure to exchange rate risk; therefore the company does not deem necessary hedging exchange rates.
Reply S.p.A. makes use of external funds obtained in the form of financing and invest in monetary and financial market instruments. Changes in market interest rates can affect the cost of the various forms of financing, including the sale of receivables, or the return on investments, and the employment of funds, causing an impact on the level of net financial expenses incurred by the company.
In order to manage these risks, the Reply S.p.A uses interest rate derivative financial instruments, mainly interest rate swaps, with the object of mitigating, under economically acceptable conditions, the potential variability of interest rates on the net result.
In assessing the potential impact of changes in interest rates, the company separates fixed rate financial instruments (for which the impact is assessed in terms of fair value) from floating rate financial instruments (for which the impact is assessed in terms of cash flows). Floating rate financial instruments include principally cash and cash equivalents and part of debt.
A hypothetical, unfavourable and instantaneous change of 100 basis points in short-term interest rates at 31 December 2022 applied to floating rate financial assets and liabilities, operations for the sale of receivables and derivatives financial instruments, would have caused increased net expenses before taxes, on an annual basis, of approximately 726 thousand Euros.
This analysis is based on the assumption that there is a general and instantaneous change of 100 basis points in interest rates across homogeneous categories. A homogeneous category is defined on the basis of the currency in which the financial assets and liabilities are denominated.
Evaluation techniques on three levels adopted for the measurement of fair value. Fair value hierarchy attributes maximum priority to prices quoted (not rectified) in active markets for identical assets and liabilities (Level 1 data) and the non-observable minimum input priority (Level 3 data). In some cases, the data used to assess the fair value of assets or liabilities could be classified on three different levels of the fair value hierarchy. In such cases, the evaluation of fair value is wholly classified on the same level of the hierarchy in which input on the lowest level is classified, taking account its importance for the assessment. The levels used in the hierarchy are:
The following table presents the assets and liabilities which were assessed at fair value on 31 December 2022, according to the fair value hierarchical assessment level.
| (THOUSANDS EUROS) | NOTE | LEVEL 1 | LEVEL 2 | LEVEL 3 |
|---|---|---|---|---|
| Financial securities | 26 | 26,904 | - | - |
| Other assets | - | - | - | |
| Total Assets | 26,904 | - | - | |
| Derivative financial liabilities (IRS) |
29 | - | (3,876) | - |
| Total Liabilities | - | (3,876) | - |
The item Financial securities is related to securities listed on the active stock market and therefore falls under the fair value hierarchical level 1.
To determine the effect of interest rate derivate financial instruments Reply refers to evaluation deriving from third parties (banks and financial institutes). The latter, in the calculation of their estimates made use of data observed on the market directly (interest rates) or indirectly (interest rate interpolation curves observed directly): consequently, for the purposes of IFRS7 the fair value used by Reply for the exploitation of hedging derivatives contracts in existence as at 31 December 2022 enters under the hierarchy profile in level 2.
As at 31 December 2022, there have not been any transfers within the hierarchy levels.
Pursuant to Consob communication no. 6064293 of 28 July 2006, there were no significant non-recurring transaction during 2022.
Pursuant to Consob communication no. 6064293 of 28 July 2006, in 2019 Reply S.p.A. has not taken part in any unusual and/or abnormal operations as defined in that Communication, under which unusual and abnormal transactions are those which because of their significance or importance, the nature of the parties involved, the object of the transaction, the means of determining the transfer price or of the timing of the event (close of the year end) may give rise to doubts regarding the accuracy/completeness of the information in the Financial Statements, conflicts of interest, the safeguarding of the entity's assets or the protection of minority interests.
Guarantees and commitments where existing, have been disclosed at the item to which they refer.
Note that:
As an international company, Reply is exposed to numerous legal risks, particularly in the area of product liability, environmental risks and tax matters. The outcome of any current or future proceedings cannot be predicted with certainty. It is therefore possible that legal judgments could give rise to expenses that are not covered, or not fully covered, by insurers' compensation payments and could affect the Company financial position and results. Instead, when it is probable that an overflow of resources embodying economic benefits will be required to settle obligations and this amount can be reliably estimated, the Company recognises specific provision for this purpose.
The fees of the Directors and Statutory Auditors of Reply S.p.A. for carrying out their respective functions, including those in other consolidated companies, are fully explained in the Annual Report on Remuneration in the dedicated table.
The future still remains, in part, conditioned by the evolution of the Russian-Ukrainian war that increases tension on the main markets. In any case, the transformation process towards the new digital economy, which began in 2020, is now unstoppable and opens up opportunities for growth and development for companies like ours. In particular, we expect an increasingly pervasive diffusion of artificial intelligence on board products, processes and services and it is here that we intend to position ourselves as niche players, with very high technological content.
The financial statements for the year-ended 31 December 2022 were approved by the Board of Directors on March 14, 2023 which approved their publication.
| (EUROS) | 2022 | OF WHICH RELATED PARTIES |
% | 2021 | OF WHICH RELATED PARTIES |
% |
|---|---|---|---|---|---|---|
| Revenues | 709,328,790 | 119,359,338 | 16.8% | 604,160,429 | 101,413,783 | 16.8% |
| Other income | 25,668,033 | 24,403,416 | 95.1% | 15,938,379 | 13,423,191 | 84.2% |
| Purchases | (37,856,490) | (36,802,395) | 97.2% | (28,463,783) | (26,144,914) | 91.9% |
| Personnel | (26,535,763) | (7,677,000) | 28.9% | (27,693,075) | (8,268,000) | 29.9% |
| Services and other costs | (654,350,573) | (602,631,986) | 92.1% (553,990,835) | (518,839,255) | 93.7% | |
| Ammortization and depreciation | (3,880,483) | (3,037,301) | ||||
| Other operating and non-recurring income/(expenses) |
2,855,100 | 2,366,500 | ||||
| Operating income (EBIT) | 15,228,615 | 9,280,313 | ||||
| Gain/(loss) on equity investments | 73,413,842 | 87,367,000 | ||||
| Financial income/(loss) | 12,648,115 | 13,924,364 | 110.1% | 23,484,746 | 7,932,069 | 33.8% |
| Income before taxes | 101,290,573 | 120,132,059 | ||||
| Income taxes | (7,148,880) | (8,888,365) | ||||
| Net income | 94,141,693 | 111,243,694 | ||||
| Basic and diluted income per share | 2.53 | 2.98 |
| (EUROS) | 31/12/2022 | OF WHICH RELATED PARTIES |
% | 31/12/2021 | OF WHICH RELATED PARTIES |
% |
|---|---|---|---|---|---|---|
| Tangible assets | 534,336 | 310,808 | ||||
| Goodwill | 86,765 | 86,765 | ||||
| Intangible assets | 7,535,237 | 615,815 | ||||
| RoU Assets | 937,764 | 7,603,348 | ||||
| Equity investments | 177,988,453 | 140,757,778 | ||||
| Other financial assets | 508,760,401 | 508,173,353 | 99.9% | 365,502,283 | 335,317,437 | 91.7% |
| Deferred tax assets | 6,728,474 | 6,169,056 | ||||
| Non current assets | 702,571,429 | 521,045,853 | ||||
| Trade receivables | 532,386,689 | 247,217,790 | 46.4% 400,894,555 | 170,241,959 | 42.5% | |
| Other receivables and current assets | 61,379,942 | 57,182,639 | 93.2% | 57,379,333 | 49,868,641 | 86.9% |
| Financial assets | 93,913,784 | 66,596,349 | 70.9% | 53,028,726 | 52,797,469 | 99.6% |
| Cash and cash equivalents | 82,017,473 | 182,545,754 | ||||
| Current assets | 769,697,889 | 693,848,369 | ||||
| TOTAL ASSETS | 1,472,269,318 | 1,214,894,222 | ||||
| Share Capital | 4,863,486 | 4,863,486 | ||||
| Other reserves | 509,293,298 | 434,935,691 | ||||
| Net income | 94,141,693 | 111,243,694 | ||||
| NET EQUITY | 608,298,477 | 551,042,871 | ||||
| Finacial liabilities | 67,319,609 | 21,768,594 | ||||
| IFRS 16 financial liabilities | 432,456 | 294,318 | ||||
| Employee benefits | 889,438 | 817,905 | ||||
| Deferred tax liabilities | 6,012,577 | 4,003,473 | ||||
| Provisions | 833,180 | 3,691,780 | ||||
| Non current liabilities | 75,487,260 | 30,576,071 | ||||
| Finacial liabilities | 266,759,565 | 226,237,713 | 84.8% | 202,954,457 | 192,867,526 | 95.0% |
| IFRS 16 financial liabilities | 514,765 | 324,727 | ||||
| Trade payables | 443,813,330 | 296,163,530 | 66.7% | 358,497,709 | 244,503,742 | 68.2% |
| Other current liabilities | 68,170,921 | 14,578,468 | 21.4% | 70,618,388 | 13,535,796 | 19.2% |
| Provisions | 9,225,000 | 880,000 | ||||
| Current liabilities | 788,483,582 | 633,275,281 | ||||
| TOTAL LIABILITIES | 863,970,842 | 663,851,351 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
1,472,269,318 | 1,214,894,222 |
| COMPANY | REGISTERED OFFICE |
CURRENCY | SHARE CAPITAL |
TOTAL SHAREHOLDERS' EQUITY |
NET RESULT | INTEREST | CARRYING VALUE AT 31/12/2022 |
|---|---|---|---|---|---|---|---|
| Air Reply S.r.l. | Turin | € | 10,000 | 1,560,136 | 949,130 | 85.00% | 558,500 |
| Arlanis Reply S.r.l. | Turin | € | 10,000 | 2,213,168 | 1,890,296 | 100.00% | 588,000 |
| Aktive Reply S.r.l. | Turin | € | 10,000 | 3,006,605 | 2,900,705 | 100.00% | 512,696 |
| Atlas Reply S.r.l. | Turin | € | 10,000 | 1,320,656 | 1,246,002 | 100.00% | 12,575 |
| Avvio Reply S.r.l. | Turin | € | 10,000 | 17,837 | (263,328) | 100.00% | 446,000 |
| Blue Reply S.r.l. | Turin | € | 10,000 | 18,878,742 | 18,807,919 | 100.00% | 527,892 |
| Breed Reply Investment Ltd. | London | GBP | 100 | (8,178,680) | (9,873,707) | 100.00% | 1,000 |
| Bridge Reply S.r.l. | Turin | € | 10,000 | 670,364 | 626,354 | 100.00% | 1,206,000 |
| Bside S.r.l. | Rome | € | 10,000 | 19,288 | (234,659) | 100.00% | 557,000 |
| Business Reply S.r.l. | Turin | € | 78,000 | 5,007,221 | 4,855,884 | 100.00% | 268,602 |
| Cluster Reply S.r.l. | Turin | € | 139,116 | 19,042,251 | 18,797,977 | 100.00% | 2,540,848 |
| Cluster Reply Roma S.r.l. | Turin | € | 10,000 | 1,785,520 | 1,734,537 | 100.00% | 296,184 |
| Consorzio Reply Public Sector | Turin | € | 159,500 | 97,320 | - | 24.76% | 39,500 |
| Core Reply S.r.l. | Turin | € | 10,000 | 2,101,784 | 1,413,755 | 100.00% | 598,018 |
| Data Reply S.r.l. | Turin | € | 10,000 | 5,260,582 | 5,217,364 | 100.00% | 317,662 |
| Discovery Reply S.r.l. | Turin | € | 10,000 | 4,284,677 | 2,073,787 | 100.00% | 1,311,669 |
| e*finance Consulting Reply S.r.l. | Turin | € | 34,000 | 5,287,816 | 5,137,741 | 100.00% | 3,076,385 |
| Ekip Reply S.r.l. | Turin | € | 10,400 | 245,348 | 224,044 | 100.00% | 30,000 |
| Eos Reply S.r.l. | Turin | € | 200,000 | 1,330,945 | 1,071,197 | 100.00% | 495,369 |
| Forge Reply S.r.l. | Turin | € | 10,000 | 12,939 | (2,197,854) | 100.00% | 1,000 |
| Go Reply S.r.l. | Turin | € | 50,000 | 2,187,856 | 2,086,694 | 100.00% | 1,920,000 |
| Hermes Reply S.r.l. | Turin | € | 10,000 | 2,100,760 | 1,716,275 | 100.00% | 199,500 |
| Hermes Reply Consulting (Nanjing) Co. Ltd. |
China | CNY | 7,932,875 | 12,059,801 | (33,446) | 100.00% | 1,000,000 |
| IrisCube Reply S.r.l. | Turin | € | 651,735 | 11,143,790 | 10,258,132 | 100.00% | 6,724,952 |
| Lid Reply GmbH | Germany | € | 25,000 | (1,894,078) | (1,205,640) | 100.00% | 28,000 |
| Like Reply S.r.l. | Turin | € | 10,000 | 1,101,296 | 1,087,136 | 100.00% | 87,317 |
| Logistics Reply S.r.l. | Turin | € | 78,000 | 13,544,881 | 2,866,193 | 100.00% | 1,049,167 |
| Open Reply S.r.l. | Turin | € | 10,000 | 6,697,355 | 6,563,963 | 100.00% | 1,625,165 |
| Net Reply S.r.l. | Turin | € | 10,000 | 2,278,920 | (1,249,193) | 100.00% | 1,635,633 |
| Nexi Digital S.r.l. | Turin | € | 10,000 | 1,272,779 | 1,262,779 | 51.00% | 5,100 |
| Next Reply S.r.l. | Turin | € | 10,000 | 12,644 | (557,356) | 100.00% | 570,000 |
| Pay Reply S.r.l. | Turin | € | 10,000 | 919,875 | 884,283 | 100.00% | 10,000 |
| EMARKET ЖR |
|---|
| CERTIFIED |
| COMPANY | REGISTERED OFFICE |
CURRENCY | SHARE CAPITAL |
TOTAL SHAREHOLDERS' EQUITY |
NET RESULT | INTEREST | CARRYING VALUE AT 31/12/2022 |
|---|---|---|---|---|---|---|---|
| Portaltech Reply S.r.l. | Turin | € | 10,000 | 28,725 | (42,094) | 100.00% | 106,000 |
| Power Reply S.r.l. | Turin | € | 10,000 | 5,147,686 | 4,928,168 | 100.00% | 2,708,265 |
| Protocube Reply S.r.l. | Turin | € | 10,200 | 440,592 | 370,687 | 70.00% | 1,000 |
| Reply Consulting S.r.l. | Turin | € | 10,000 | 1,424,737 | 1,366,183 | 100.00% | 3,518,434 |
| Reply Deutschland SE | Guetersloh | € | 120,000 | 86,901,939 | (28,723,177) | 100.00% | 57,855,581 |
| Reply Digital Experience S.r.l. | Turin | € | 29,407 | 2,230,361 | 2,181,054 | 100.00% | 4,227,019 |
| Reply Do Brasil Sistema De Informatica Ltda |
Belo Horizonte – Brasil |
R\$ | 650,000 | 5,677,856 | 591,995 | 100.00% | 206,816 |
| Reply France Sas | France | € | 35,010,000 | 33,830,749 | (221,478) | 100.00% | 35,010,000 |
| Reply Inc. | Michigan – USA |
\$ | 3,406,420 | (1,734,183) | (9,174,126) | 100.00% | 2,814,625 |
| Reply Ltd. | London | GBP | 54,175 | 13,824,833 | (3,254,841) | 100.00% | 11,657,767 |
| Reply Polska Sp. z o.o. | Katowice Poland |
ZLT | 40,000 | 13,305,239 | 2,339,715 | 100.00% | 10,217 |
| Reply Sarl | Luxembourg | € | 12,000 | (2,636,713) | (1,781,081) | 100.00% | 12,000 |
| Reply Services S.r.l. | Turin | € | 10,000 | 76,841 | (5,096,885) | 100.00% | 1,000 |
| Retail Reply S.r.l. | Turin | € | 10,000 | 2,927,790 | 2,886,770 | 100.00% | 100,000 |
| Ringmaster S.r.l. | Turin | € | 10,000 | 1,100,325 | 1,006,203 | 50.00% | 5,000 |
| Santer Reply S.p.A. | Milan | € | 2,209,500 | 20,199,880 | 13,282,079 | 100.00% | 11,386,966 |
| Security Reply S.r.l. | Turin | € | 50,000 | 14,473,014 | 14,302,760 | 100.00% | 392,866 |
| Sense Reply S.r.l. | Turin | € | 10,000 | 4,493,621 | 2,521,105 | 100.00% | 1,015,700 |
| Sensor Reply S.r.l. | Turin | € | 10,000 | 15,989 | (277,284) | 100.00% | 12,800 |
| Spark Reply S.r.l. | Turin | € | 10,000 | 206,030 | 193,991 | 100.00% | 1,042,500 |
| Sprint Reply S.r.l. | Turin | € | 10,000 | 2,095,519 | 2,078,139 | 100.00% | 155,000 |
| Storm Reply S.r.l. | Turin | € | 10,000 | 6,390,390 | 6,286,323 | 100.00% | 986,000 |
| Syskoplan Reply S.r.l. | Turin | € | 32,942 | 3,339,838 | 3,219,360 | 100.00% | 949,571 |
| Sytel Reply S.r.l. | Turin | € | 115,046 | 14,797,453 | 10,506,773 | 100.00% | 3,887,599 |
| Sytel Reply Roma S.r.l. | Turin | € | 10,000 | 3,989,591 | 3,974,115 | 100.00% | 894,931 |
| TamTamy Reply S.r.l. | Turin | € | 10,000 | 2,728,854 | 1,333,936 | 100.00% | 263,471 |
| Target Reply S.r.l. | Turin | € | 10,000 | 3,791,193 | 3,706,736 | 100.00% | 600,338 |
| Technology Reply Roma S.r.l. | Turin | € | 10,000 | 2,403,508 | 2,070,947 | 100.00% | 10,000 |
| Technology Reply S.r.l. | Turin | € | 79,743 | 15,873,757 | 15,573,275 | 100.00% | 216,658 |
| Technology Reply S.r.l. (Romania) | Romania | RON | 44,000 | 5,304,717 | 2,652,310 | 100.00% | 9,919 |
| Whitehall Reply S.r.l. | Turin | € | 21,224 | 3,088,028 | 2,949,968 | 100.00% | 160,212 |
| Xenia Reply S.r.l. | Turin | € | 10,000 | 9,997 | (370,130) | 100.00% | 380,000 |
| Xister Reply S.r.l. | Rome | € | 10,000 | 4,483,949 | 1,386,760 | 100.00% | 9,150,465 |
| SUMMARY OF THE AMOUNT USED IN THE PRIOR THREE FISCAL YEARS |
|||||
|---|---|---|---|---|---|
| NATURE/DESCRIPTION | AMOUNT | POSSIBILITY OF UTILIZATION |
AVAILABLE | FOR COVERAGE OF LOSSES |
OTHER |
| Capital | 4,863,486 | ||||
| Capital reserves | |||||
| Reserve for treasury share | 17,122,489 | ||||
| Reserve for purchase of treasury shares | 43,391,072 | A,B,C | 43.391.072 | ||
| Income reserves | |||||
| Legal reserve | 972,697 | B | |||
| Extraordinary reserve | 214,137,264 | A,B,C | 214,137,264 | ||
| Surplus merger reserve | 6,347,964 | A,B,C | 6,347,964 | ||
| Retained earnings | 674,740 | A,B,C | 674,740 | ||
| Reserve for purchase of treasury shares | 239,486,439 | A,B,C | 239,486,439 | ||
| Total | 504,037,479 | ||||
| Not available amount | - | ||||
| Residual available amount | 504,037,479 | ||||
| Reserves from transictions to IAS/IFRS | |||||
| FTA reserve | 303,393 | ||||
| Retained earnings | 2,147,961 | ||||
| Reserve for cash flow hedge | 2,598,903 | ||||
| Reserve for treasury share | (17,122,489) | ||||
| IAS reserve | 3,313 | ||||
| Accounting expenses according to IAS 32 | (770,448) | ||||
| (12,839,366) |
Legend
A: for share capital increase
B: for coverage of losses
C: distribution to shareholders
The following table, prepared in accordance with Art. 149-duodecies of the Regolamento Emittenti issued by Consob, reports the amount of fees charged in 2022 for the audit and audit related services provided by the Audit Firm and by entities that are part of the Audit Firm network. There were no services provided by entities belonging to its network.
| (EUROS) | SERVICE PROVIDER | 2022 FEES |
|---|---|---|
| Audit | PwC S.p.A. | 55,800 |
| Audit related services | PwC S.p.A. (1) | 28,200 |
| PwC S.p.A. (2) | 43,000 | |
| Total | 127,000 |
(1) Attestation of tax forms (tax return, IRAP and Form 770)
(2) DNF attestation
The undersigned, Mario Rizzante, in his capacity as Chairman and Chief Executive Officer, and Giuseppe Veneziano, Director responsible for drawing up Reply S.p.A.'s financial statements, hereby attest, pursuant to the provisions of Article 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of 24 February 1998:
of the administration and accounting procedures applied in the preparation of the financial statements for the year ended 2022.
The assessment of the adequacy of administrative and accounting procedures used for the preparation of the statutory financial statements at 31 December 2022 was carried out on the basis of regulations and methodologies defined by Reply prevalently coherent with the Internal Control – Integrated Framework model issued by the Committee of Sponsoring Organisations of the Treadway Commission, an internationally-accepted reference framework. The undersigned also certify that:
1 the Financial Statements
2 the report on operations includes a reliable operating and financial review of the Company and of the Group as well as a description of the main risks and uncertainties to which they are exposed.
Chairman and Chief Executive Officer Director in charge of signing the
Turin, 14 March 2023 /s/ Mario Rizzante /s/ Giuseppe Veneziano Mario Rizzante financial statements Giuseppe Veneziano
Dear Shareholders,
pursuant to art. 153 of Legislative Decree no. 58/1998, and in compliance with current regulations, the Board of Statutory Auditors is called upon to report to the Shareholders' Meeting on the supervisory activity carried out during the year, on the omissions and reprehensible facts detected and can make observations and proposals regarding the financial statements, its approval and the matters within its competence.
During the year, the Board of Statutory Auditors carried out its supervisory tasks in compliance with the Civil Code, Legislative Decree 58/1998 (TUF), Legislative Decree 39/2010, the statutory rules and the rules issued by the Authorities that carry out supervisory and control activities, also taking into account the principles of conduct recommended by the National Council of Chartered Accountants and Accounting Experts.
In particular, the Board of Statutory Auditors has supervised: (i) compliance with the law and the articles of association, (ii) compliance with the principles of proper administration, (iii) the adequacy of the Company's organizational structure, the internal control and risk management system and the administrative-accounting system, as well as the reliability of the latter in correctly representing the management facts, (iv) the methods of concrete implementation of the governance rules adopted by the Company in adherence to the Corporate Governance Code of Listed Companies, (v) on the adequacy of the indications given to subsidiaries pursuant to art. 114, paragraph 2°, TUF, and (vi) on the obligations relating to non-financial information referred to in Legislative Decree 254/2016.
The Board of Statutory Auditors, in its capacity as Committee for Internal Control and Auditing, has performed the functions provided for by art. 19 of Legislative Decree no. 39/2010, supervising the following aspects:
The independent auditor, periodically encountered in accordance with the provisions of art. 150, paragraph 3, of the TUF for the purpose of exchanging mutual information, has not highlighted to the Board of Statutory Auditors acts or facts considered reprehensible or irregularities that have required the formulation of specific reports pursuant to art. 155, paragraph 2, of the TUF.
During the meetings, particular attention was paid to the application of the impairment test procedure to investments and to goodwill arising in business combinations. The Board acknowledges that the impairment procedure has not changed compared to that adopted in the previous financial year.
The Control and Risk Committee examined the results of the impairment test at 31 December 2022 prepared in application of the aforementioned procedure. The Board of Directors therefore approved the results of the application of the impairment procedure, including the 2023-2025 prospective financial statements used.
The Board of Statutory Auditors held a meeting with the Quality Review Partner of PricewaterhouseCoopers S.p.A. in charge of the activities with reference to the Reply Group. During the meeting, the Statutory Auditors were presented with all the activities carried out with reference to the quality controls of the audit for the Reply Group.
The Board of Statutory Auditors also requested the independent auditor to provide support for the assessment of the quality of the audit, with particular focus on the quantitative and qualitative dimensions of the audit service, on the assessment of the necessary skills of the auditor and on the safeguards implemented by the auditor in terms of independence.
The Board of Statutory Auditors has also taken note of the Transparency Report prepared by the independent auditors, published on its website pursuant to Article 13 of EU Regulation no. 537/2014.
The Board of Statutory Auditors has supervised in compliance with the provisions contained in Legislative Decree no. 254 of 30 December 2016, in particular with reference to both the drafting process and the contents of the Non-Financial Information. The activity was carried out through periodic meetings with the corporate structure in charge of this and dealing with the company in charge of the statutory audit of the accounts.
The Non-Financial Information report is subject to a limited assurance activity by PriceWaterhouseCoopers S.p.A. which has issued the attestation regarding the compliance of the information provided with respect to the requirements of Legislative Decree 254/2016 and with respect to the principles, methodologies and methods provided for by the reporting standard adopted.
Having examined the report issued by the independent auditors pursuant to Article 3, paragraph 10, of Legislative Decree no. 254/2016 and the declaration made by the Company in the context of the Report to the Consolidated Financial Statements pursuant to Article 4 of the Consob Regulation implementing the aforementioned Decree, the Board did not detect elements of non-compliance and/ or violation of the relevant regulations.
During the first months of 2023, the Board of Statutory Auditors put in place the annual evaluation process, the outcome of which must be transmitted to the Board of Directors so that it can include the related conclusions in the Report on Corporate Governance and Ownership Structure.
To this end, the Board requested and acquired information from the individual members, collected individual statements and prepared a questionnaire with regard to the document "The Self-Assessment of the Board of Statutory Auditors – Rules of Conduct of the Board of Statutory Auditors of listed companies – Rule Q.1.1", of the National Council of Chartered Accountants and Accounting Experts.
During the self-assessment activities, the Board of Statutory Auditors verified and confirmed to all its members the continued ownership of:
ȯ the independence requirements provided for both by law (Article 148, paragraph 3, TUF) and by the Corporate Governance Code (Article 2, Recommendation No. 7). Mrs. Ada Alessandra Garzino Demo was considered independent despite having held the position of statutory auditor for more than nine years and this because of the authority, reputation, moral stature, as well as the professionalism and balance shown in the performance of the office. The Board of Statutory Auditors has prepared its own Protocol of Conduct to identify specific corrective measures to be taken to adequately address
any circumstances that may compromise the independence of its members. During the year, there were no circumstances that triggered the measures provided for in the aforementioned Protocol of Conduct.
It was also verified that each of the members of the Board of Directors still complied with the provisions of the applicable legislation in relation to the limits on the accumulation of assignments.
In light of the information in its possession, the Board of Statutory Auditors has therefore assessed, at present, the adequacy of its composition, having reference to the requirements of professionalism, diversity, competence, integrity and independence required by law.
* * *
The information referred to in the provisions contained in Consob Communication no. DEM 1025564 of 6 April 2001 and subsequently amended is provided below.
We have obtained timely and adequate information from the Directors regarding the most significant economic, financial and equity transactions carried out by the Company and/or its subsidiaries during the 2022 financial year or following year-end.
These transactions, for which the Board has no observations, are adequately indicated in the documentation concerning the financial statements submitted for your approval.
The documents submitted for your approval, the information received during the meetings of the Board of Directors and those received from the Chairman and the Chief Executive Officer, the management, the Boards of Statutory Auditors, where present, of the companies directly controlled by Reply S.p.A. and the independent auditor, have not shown the existence of atypical and/or unusual transactions, including intra-group transactions or with related parties, implemented in the 2022 financial year, nor after the year-end close. With reference to intra-group transactions, we inform you that during the 2021 financial year Reply S.p.A.:
ȯ issued guarantees in favour of subsidiaries;
ȯ has granted its subsidiaries loans without constraint of purpose aimed at supporting their activities;
The transactions with other related parties during 2022 relate to compensation to directors, statutory auditors, and managers with strategic responsibilities and to "office services" for the use of the building of the Turin office, Corso Francia 110, provided by Alika S.r.l.. For these transactions, the Procedure for Transactions with Related Parties has not been applied as they are exempt transactions as defined respectively by articles 4.1 and 4.4 of the Procedure.
During 2022, a transaction of minor importance, as defined pursuant to the Procedure, concerning the use of a property located in London, was submitted to the Committee for examination.
The information provided by the Directors in the Report on Operations accompanying the Financial Statements as at 31 December 2022 and in the Notes to the Consolidated Financial Statements of the Reply Group and to the Financial Statements as at 31 December 2022 regarding the most significant transactions from an economic, financial and earnings standpoint, as well as transactions with subsidiaries, associated companies and related parties, are adequate.
The Report on Operations, the information received by the Board of Directors and those received by the Chairman and the managing Directors, by management, by the supervisory bodies of the subsidiaries and the auditors have not revealed the existence of atypical and/or unusual transactions, including intercompany or related parties, which have been completed during the year or following year-end close.
The Board of Statutory Auditors examined the following reports prepared by the statutory auditor PricewaterhouseCoopers S.p.A.:
The aforementioned audit reports show that:
In addition, in the opinion of the Independent auditor, the Report on operations and information referred to in paragraph 1, letters c), d), f), I), m) and paragraph 2, letter b) of art. 123-bis of the TUF contained in the Report on corporate governance and ownership structure are consistent with the financial statements.
With reference to the possible identification of significant errors in the annual report (Article 14, paragraph 2, letter e) of Legislative Decree 39/2010), the auditor declared that there was nothing to report.
With regard to the additional report issued pursuant to Article 19 of Legislative Decree 39/2010, the Board has verified that the same indicates:
separate financial statements;
In the same document, the independent auditor also attested that no significant audit differences were detected on the consolidated and separate financial statements, nor have significant deficiencies in the internal control system in relation to the financial reporting process been identified, listing the mandatory disclosures made to the corporate bodies, and finally acknowledging that, from the checks on the regular bookkeeping and the correct detection of management facts in the accounting records, no significant aspects have emerged to be reported.
The Board of Statutory Auditors examined the declaration on the independence of the independent auditor, in accordance to Article 17 of Legislative Decree 39/2010, issued on 30 March 2023, which does not highlight situations that have compromised independence or causes of incompatibility, pursuant to articles 10 and 17 of the same decree and the related implementing provisions.
No complaints have been acknowledged pursuant to Article 2408 of the Italian Civil Code in 2022 and further to year-end close.
The Company's Directors did not advise us of any complaints filed against the Company in the financial year, nor subsequent to the year-end close.
During 2022, in addition to the statutory audit of the financial statements at 31 December 2022, PricewaterhouseCoopers S.p.A. was appointed with the following assignments for audit related services:
| ASSIGNMENT | FEE €/000 |
|---|---|
| Attestation of tax returns (Modelli Unico, IRAP, 770) of Reply S.p.A. | 7 |
| Agreed verification procedures aimed at confirming compliance with the accounting records of Reply Public Sector Consortium of the turnover details declared in the technical offer formulated for Poste Italiana and AqA tenders |
21 |
| Limited review of the Consolidated Disclosure of Non-Financial information ex D.Lgs. 254/2016 | 43 |
| Attestation of tax returns for Reply S.p.A.'s subsidiaries (modelli Redditi, IRAP, 770) | 57 |
Agreed verification procedures aimed at confirming compliance with the accounting records of Reply Public Sector Consortium of the turnover details declared in the technical offer formulated for Poste Italiana's tender.
During 2022, no further appointments were assigned to PricewaterhouseCoopers S.p.A.
During the year, the opinions requested from the Board of Statutory Auditors were issued as required by law.
During the year, the Board of Directors held 6 meetings and the Board of Statutory Auditors held 18 meetings.
The Control and Risk Committee met no. 4 times, the Remuneration Committee no. 1 time, the Committee for Transactions with Related Parties (identified within the Control and Risk Committee) met no. 1 time and the Sustainability Committee met once.
The Board of Statutory Auditors participated in the meetings of the Board of Directors and, through its Chairman, in the meetings of the Control and Risk Committee, the Remuneration Committee and the Committee for Transactions with Related Parties.
The Board of Statutory Auditors, having participated in the meetings of the Board of Directors, from the information obtained therein, acknowledges that it has verified, with the exception of the substantive control over the appropriateness and convenience of the choices made by this body, that the operations carried out and carried out by the Company have been based on principles of correct administration, are in compliance with the law and the Articles of Association, they are not contrary to the shareholders' resolutions or such as to compromise the integrity of the company's assets and have been adequately supported by information, analysis and verification processes.
The Board assessed the timeliness of updating and the completeness of the organizational structure as well as the correspondence of the organizational structure to the needs of business and governance in terms of both professionalism and ability to achieve strategic and operational objectives, taking into account the adequacy of the delegation system and the principles of adequate "separation of duties".
In this sense, the Board has supervised the adequacy of the composition, size and functioning of the Board of Directors and the Board Committees, participating in the meetings and analysing the documentation produced by these bodies in the performance of their functions and in its collegiality considers that it does not have to make comments on the matter.
The Board of Statutory Auditors also points out that:
The above limits, in the opinion of the Chairman of the Board of Statutory Auditors, the leading role of the Board of Directors, as also recommended by the Corporate Governance Code, as regards in particular to the definition of the strategies of the Company and the Group and the monitoring of its implementation. In this context, the Chairman of the Board of Statutory Auditors, whilst acknowledging that the key to the company's and Group's success stems from the roles of Chief Executive Officers, hopes that through the sharing and approval of an industrial plan, that is the result of discussions by the Board, the Board of Directors can exercise the role of guidance and strategic direction of the Group, recommended by the Corporate Governance Code, aimed at the full enhancement of all the resources available to the Company. At the same time, the Board of Directors can thus count on an essential point of reference to position the returns of the extensive powers
assumed by the Chairman and the Chief Executive Officer of the Company.
The Standing Auditors acknowledge that the executive directors report promptly on the activities carried out and on the transactions of greater economic and financial importance as provided for in Article 150 of the TUF. In accordance with the provisions of Recommendation no. 13 of the Corporate Governance Code, the Board of Directors has appointed an Independent Lead Director.
The Board of Statutory Auditors has also examined the documentation concerning the additional components of the overall organisational structure of Reply S.p.A. and took note of the existence of:
Overall, on the basis of the above analysis, these additional components of the organizational structure were mainly based on structured and effective management practices.
The Board of Statutory Auditors, in taking note of what was resolved by the Board of Directors and reported in the Report on corporate governance and ownership structures regarding the adequacy and effective functioning of the internal control system, examined the 2021 reports of the Internal Audit function.
In particular, the Board of Statutory Auditors points out that:
ȯ during the year, the head of the Internal Audit function, the Control and Risk Committee and the Supervisory Body maintained the necessary functional and informative relations on the methods of carrying out the evaluation, supervision and control tasks entrusted to them concerning, as far as their respective competences are concerned, the adequacy, operation and effective functioning of the internal control and risk management system, as well as the results of the verification activities carried out by the Internal Audit function, in accordance with the audit plan approved by the Board of Directors, and
the risk assessment carried out by the Company with the support of a specialised Reply Group company;
The head of the Internal Audit function periodically updated the Board of Statutory Auditors on the activities carried out and the main results of the controls, underlining no corrective action.
The documents presented during the periodic exchange of information with the Board of Statutory Auditors summarized the results of the audits which, for all the completed audits, did not highlight any findings, suggestions or recommendations.
The Board of Statutory Auditors noted that the Internal Audit analysis of the overall Internal Control and Risk Management System for the purpose of assessing its suitability was carried out and did not highlight any aspects to be reported.
As part of its supervisory activities, the Board of Statutory Auditors also considered the current effectiveness of the environmental, safety and quality management of the energy system in place in the Reply Group.
During these audits, no particular critical issues were detected and the integrated quality, environment and safety management system is evaluated by the competent function of the parent company as effective and adequate.
The Board also found that the Company incorporates, in its internal processes, the measures envisaged by the Guarantor for the protection of personal data and acts in substantial
compliance with the provisions of EU Regulation no. 679 of 27 April 2016 (GDPR), of Legislative Decree no. 196 of 30 June 2003, as amended by Legislative Decree no. 101 of 10 August 2018, and other applicable rules on the protection of personal data.
The Board of Statutory Auditors has taken note that the Data Protection Officer, during the periodic discussions, has not highlighted any critical elements to be reported in this report.
The Board has not received any news of reporting violation of the Organization and Management Model pursuant to Legislative Decree 231/01 by the Supervisory Body.
Overall, in sharing and appreciating the initiatives launched by management in the field of Risk Management and Internal Control System, the Board recommends the timely completion of its implementation with a view to the evolution of a progressive advancement of its development. In this regard, during 2022, the Board of Auditors communicated to the company's management some considerations and areas for improvement that emerged during the supervisory activity 2021 of which the Chairman of the Board of Directors informed the Board itself, illustrating the actions that will be taken with a view to continuous improvement in response to the aspects raised by the Board.
The Board of Statutory Auditors considers it useful to note that the external assessment of the degree of adherence to the International Standards for the professional practice of Internal Audit (EQR), carried out in 2021, has shown the need to expand the interventions of the function in the areas of "operations" and anti-fraud, required by international standards.
In this respect, the Board acknowledges that the Company has started the implementation of a multi-year process for the purpose of full compliance with international standards and greater compliance with the specific recommendation on the Corporate Governance Code to which the Company has adhered. In particular, at the request of the Board of Statutory Auditors, Internal Audit has planned for 2023 the first operational audit interventions that will concern the processes relating to the risks identified by the Company and by Internal Audit itself as most relevant.
The Board also acknowledges that during the year the hierarchical dependence of the Internal Audit Manager was attributed to the Lead Independent Director, in order to guarantee substantial independence from company management and the allocation of the resources necessary for the performance of his mandate and that the Board of Directors resolved, upon the positive opinion of the Control and Risk Committee, the remuneration of the Head of Internal Audit.
The Board as a whole considers that there are no further elements to bring to the attention of the Shareholders.
The Board of Statutory Auditors has examined the internal legislation concerning the internal control system for financial reporting, i.e. all the activities for identifying risks/ controls and the procedures adopted to ensure, with reasonable certainty, the achievement of the objectives of reliability, accuracy and timeliness of financial reporting. This system is the prerequisite that allows the Manager in charge of preparing the accounting and corporate documents, together with the Chief Executive Officer, to issue the declaration provided for by art. 154-bis of the TUF.
The Board of Statutory Auditors periodically met with the Manager in charge and the Independent Auditors for an exchange of information that involved, among other topics, the management and control model of the Reply Group pursuant to Law 262/2005.
During these meetings, no significant deficiencies were reported in the operational and control processes that could affect the judgment of adequacy and effective application of administrative-accounting procedures, in order to correctly represent the management of economic, equity and financial facts in accordance with international accounting standards.
Similarly, during the periodic meetings aimed at exchanging information, as well as in the additional report prepared pursuant to art. 19 of Legislative Decree 39/2010, even the independent auditor has not, in turn, reported significant critical issues of the internal control system related to the financial reporting process.
The Chairman and the Manager in charge of preparing the company's accounting documents have issued, pursuant to art. 81 – ter of Consob Regulation no. 11971/1999 subsequent amendments and additions, the attestation provided for by art. 154-bis paragraphs 3 and 4 of Legislative Decree 58/1998.
The instructions given by Reply S.p.A. to subsidiaries, pursuant to the second paragraph of Article 114 of Legislative Decree 58/1998 appear to be adequate; similarly, the subsidiaries provided the Parent Company with the necessary information for its timely knowledge of the business situation.
We advise you that in order to guarantee the timely communication of the information requested, Mr. Daniele Angelucci, Executive Director and Chief Financial Officer of Reply S.p.A., and also acts as advisor within all of the administrative bodies of the Italian subsidiaries, with the exception of the company Ringmaster S.r.l., is Director of Nexi Digital S.r.l. as well as Director in numerous foreign subsidiaries, Director in some American subsidiaries and is also a member of the Supervisory Board of Reply Deutschland SE (formerly Reply AG).
We further advise you that:
During the meetings held with the representatives of the auditing firm, no acts or facts deemed to be reprehensible or relevant emerged or are worthy of mention pursuant to art. 155, paragraph 2, of Legislative Decree 58/1998.
Since 2000, the Company adheres to the Corporate Governance Code, which was last revised in January 2020 and entered into force in 2021.
On March 14, 2023, the Board of Directors approved the annual report commenting on the Corporate Governance and Ownership Structure prepared pursuant to art. 123-bis of Legislative Decree 58/1998.
The Board has taken note of the report on the remuneration policy and on the remuneration paid (Remuneration Report), prepared pursuant to art. 123 - ter of Legislative Decree 58/98, art. 84 - quarter of the Issuers' Regulations and of the relative annex 3 A, schemes no. 7-bis and 7-ter. This report was approved by the Board of Directors, on the proposal of the Remuneration Committee.
As recommended by the Corporate Governance Code, in defining the remuneration of executive directors, the Board of Directors took into account the remuneration practices widespread in the reference sector and for companies of similar size.
With regard to the supervision carried out on the implementation of the Corporate Governance Code, the Board has no observations to note.
In relation both to the provision of the second paragraph of Article 153 of Legislative Decree 58/1998 and the general supervisory obligation pursuant to Article 149 letter a) of such Decree, as well as the agenda of the Shareholders' meeting which includes discussion of the Financial Statements for the reporting period, the Board of Statutory Auditors states that it has supervised compliance with the procedural rules and law with respect to their preparation.
We note that:
On the basis of the controls made directly and the information exchanged with the Independent Auditor, and also in view of the latter's report pursuant to Article 14 of Legislative Decree 39/2010 which expresses a judgment without reservations, the Board of Statutory Auditors has no comments or proposals with respect to the Financial Statements or Report on Operations and the proposals set forth therein, which it consequently considers, to the extent of its specific expertise, should meet your approval.
Similarly, with specific reference to the provision of the second paragraph of Article 153 of Legislative Decree 58/1998, the Board does not have any proposals to make with respect to the other matters within its scope of expertise.
With reference to the point on the agenda concerning the purchase and disposal of treasury shares, recalling disclosures made by the Directors, the Board states that the resolution proposed is in accordance with articles 2357, 2357-ter of the Italian Civil Code, in accordance with Article 132 of Legislative Decree 58/1998, as well as those of Art. 144-bis of Consob's Issuers Regulation no. 11971 of 14 May 1999.
The control activity carried out by the Board, in addition to the above, took place through:
The Board acknowledges the existence of the organizational conditions for compliance with the statutory rules, law and regulations governing the matter, and the continuous evolution and search for improvement.
In particular, it is made known to shareholders that:
ȯ we verified compliance with the laws on "Market abuse" and "Protection of savings" in matters of corporate disclosures of information and "Internal Dealings" based on the information provided by the Company
On the basis of the supervisory activities carried out during the year, the Board does not identify reasons impeding the approval of the financial statements at 31 December 2022 and the resolution proposals formulated by the Board of Directors.
Rome -Turin, 30 March 2023 THE STATUTORY AUDITORS (Dott. Ciro Di Carluccio) (Prof. Piergiorgio Re) (Dott.ssa Ada Alessandra Garzino Demo)
Reply S.p.A. Corso Francia, 110 10143 TURIN – ITAL Tel. +39-011-7711594 Fax +39-011-7495416 www.reply.com
Share capital: Euro 4,863,485.64 i.v. Fiscal code and Company register of Turin no. 97579210010 VAT no. 08013390011 REA of Turin 938289
E-mail: [email protected] Tel. +39-011-7711594 Fax +39-011-7495416
E-mail: [email protected] Tel. +39-02-535761 Fax +39-02-53576444
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.