Annual Report • Mar 29, 2021
Annual Report
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| Directors' report at 31 December 2020 | 3 |
|---|---|
| Letter to the shareholders | 6 |
| CAREL Industries Group structure | 8 |
| Corporate bodies | 9 |
| Operations and markets | 11 |
| Other significant events | 19 |
| Overview of the group's performance | 23 |
| Overview of the parent's performance: CAREL Industries S.p.A. | 28 |
| HR and organisation | 31 |
| 2020 R&D activities | 35 |
| Outlook | 40 |
| Consolidated financial statements and notes thereto at 31 December 2020 | 43 |
| Statement of financial position | 45 |
| Statement of comprehensive income | 46 |
| Statement of cash flows | 47 |
| Statement of changes in equity | 48 |
| Notes to the consolidated financial statements | 50 |
| Other information on subsidiaries | 106 |
| Events after the reporting date | 107 |
| Statement on the consolidated financial statements pursuant to article | |
| 154-bis of Legislative decree no. 58/98 and article 81-ter of Consob regulation | |
| no. 11971 of 14 May 1999 as subsequently amended and supplemented | 108 |
| Independent auditors' report | 109 |
2020 was a challenging year that rocked the economic and social stability of many areas around the world due to the spread of Covid-19. Though Carel was hit hard by the pandemic, also due to the temporary closure of vital production sites in China and Italy, its reaction was prompt and effective. This was seen in the performance of the year which I am proud to present: consolidated revenue increased by 1.3% at current exchange rates (+2.8% at constant exchange rates), which is even more satisfactory considering that profitability, i.e., gross operating profit as a percentage of revenue (gross operating profit margin), grew on 2019 despite the fact that the operating leverage had not reached its full effect. This growth and profitability were then reflected in the substantial cash inflows that enabled the group to substantially cut its net debt by approximately 20% from roughly €62 million to less than €50 million.
The group's resilience and ability to quickly adapt to unforeseen and complex situations were proven in 2020. This capacity is founded on a series of strategic choices adopted over the years, with the prime example being production "mirroring", i.e., duplicating processes at several production sites so that a significant percentage of the group's product portfolio can be simultaneously assembled at a minimum of two sites. This enabled the group to swiftly switch production of certain items from one site to another during the various lockdowns imposed on different continents.
Another group strategy is diversifying its applications, sectors and geographical regions. As these follow different cycles and trends, they can naturally limit overall volatility. Finally, the group's operating cost containment plan enabled further efficiency in 2020 and will continue to reap benefits in the years to come.
However, Carel took it one step further. It did not settle for mere damage control during the pandemic, but instead sought to better understand the permanent changes that such a widespread event caused and will cause in the future. A growing attention to air quality, more prevalent usage of remote working and thus a huge demand for connectivity and a drive for eco-friendly behaviours and habits are orientations that will have a huge impact on trends in the group's sectors. This is why the group continued its ongoing investment in research, development and innovation in 2020 (roughly €17.5 million or 5.3% of revenue), so that it can continue to play a leading role in its market niches at a global level.
Finally, Carel's focus on sustainability, seen in the energy efficiency of its products and its push for transition to less environmentally harmful refrigerants, was further boosted by the formation of the "ESG team". This interdepartmental team was set up to raise awareness and respect of sustainability within the group.
All of the above is thanks to the group's long-term strategic vision supported by a solid human base. Often difficult to identify or define, this human factor is what the group considers its top asset. Passion, enthusiasm, optimism and focus on results. These are the characteristics that drive the men and women who have made and will continue to make Carel a success.
Chairperson Luigi Rossi Luciani
"...the results are based on three strategic pillars: organic growth, external expantion and a strong focus on connectivity and innovation..."
The following graph shows the group's structure at 31 December 2020:
*= 1% held by CAREL FRANCE SAS
9 Annual report Directors' report
| Board of directors | Chairperson | Luigi Rossi Luciani |
|---|---|---|
| Executive deputy chairperson | Luigi Nalini | |
| Chief executive officer | Francesco Nalini | |
| Executive director | Carlotta Rossi Luciani | |
| Independent director | Cinzia Donalisio | |
| Independent director | Marina Manna | |
| Independent director | Giovanni Costa | |
| Board of statutory auditors | Chairperson | Saverio Bozzolan |
| Standing statutory auditor | Paolo Ferrin | |
| Standing statutory auditor | Claudia Civolani | |
| Alternate statutory auditor | Giovanni Fonte | |
| Alternate statutory auditor | Fabio Gallio | |
| Independent auditors | Deloitte & Touche SpA | |
| Control and risks committee | Chairperson | Marina Manna |
| Member | Cinzia Donalisio | |
| Member | Giovanni Costa | |
| Remuneration committee | Chairperson | Cinzia Donalisio |
| Member | Marina Manna | |
| Member | Giovanni Costa | |
| Supervisory body as per Leg. dec. no. 231/2001 | Chairperson | Fabio Pinelli |
| Member | Arianna Giglio | |
| Member | Alessandro Grassetto |
Annual report Directors' report
The group is active in the design, manufacturing and global distribution of technologically innovative components and solutions (hardware and software) to achieve energyefficient control and regulation instruments for the air conditioning (Heating Ventilation Air Conditioning, "HVAC") and refrigeration markets (together "HVAC/R"). In this context, the group designs, manufactures and markets control and humidification solutions for the application segments:
With reference to the HVAC sector, the group offers solutions for integration into individual units, such as heat pumps, shelters, rooftops, computer room air conditioners (CRAC), chillers and air handling units. Its industrial applications for the air-conditioning sector are designed for data centres, the process industry, commercial applications mainly consisting of components for airconditioning systems in commercial buildings, and residential applications principally comprising control solutions for heat pumps.
The following charts show the Carel systems:
• for applications in Data Centre air-conditioning systems:
• for air treatment systems:
In the refrigeration sector, the group specialises in the design, manufacturing and distribution of control systems for the food retail and food service segments. Carel's offer is for:
Example application of Carel's solutions for commercial refrigeration in food retail (supermarkets):
Directors' report
Heez easy Refrigerant gas leak detector EVDice ColdWatch SmasterCella
easy wide ir33+ easy wide BlastChiller
Example application of CAREL's solutions for commercial refrigeration in Food Service (Quick Service Restaurants)
Example application of CAREL's solutions for commercial refrigeration in Food Service (Beverage Coolers)
The group's portfolio is complemented by services linked to Carel's solutions, such as commissioning (contract work), remote management and monitoring of the group's HVAC/R systems and application components, which allows for "dialogue" between the group's service centres and end customers, subscriptions for services dedicated to the remote management and monitoring of plant and
machinery through the processing of data collected using Internet of Things features.
The IoT solution has been developed to integrate the specific solutions of the HVAC/R markets via cloud and on-site solutions. The portfolio includes benchmarking, statistics, alarms and standard reporting, whereby users can optimise their daily activities and achieve their goals
more effectively in terms of services, energy, quality and marketing. The development of this business is crucial for Carel, including for its future.
Example IoT solutions for the HVAC and Refrigeration markets
The group operates through 27 subsidiaries, of which nine production sites in Italy, Croatia, Germany, China, the US and Brazil.
The commercial refrigeration market experienced a downturn in 2020 as a direct and tangible consequence of the Covid-19 pandemic and the restrictive measures adopted to curb the spread of the virus. The market contraction was mainly seen in the food service segment linked to the business models of the hospitality industry. The segment's end operators suffered huge slumps which naturally swept through the entire refrigerator unit OEM and dealer network.
The food retail segment was certainly less impacted by the pandemic, with the sales of large retail chains rising sharply during the first waves of lockdowns in 2020. Restrictions of movement and the switch in spending habits from food away from home to food at home led to a surge in retail and e-commerce sales. However, the supply chain comprised mainly of OEMs, contractors and system integrators saw investments plummet due to uncertainty and caution in the segment. Indeed, efforts and investments were more focused on improving safety and the buying experience during the pandemic. In terms of store format, buyers and, as a consequence, sector operators - once again showed a preference for small/medium stores and local shops.
The spread of the pandemic also impacted the HVAC market, though with varying effects depending on the specific market segment. The commercial segment saw a considerable slowdown in the comfort, hospitality and wellness market, offset by investments in healthcare and a new awareness of the importance of indoor air quality, an area in which HVAC systems play a prominent role. With regard to the industrial segment, the considerable acceleration of pre-existing macrotrends on the market (e.g., remote working, usage of video-conferences, development of cloud services such as streaming, etc.) boosted the vitality of the data centre sector. Finally, the residential segment continued to enjoy a development trend thanks to the implementation and spread of more environmentally sustainable technologies.
2020 was a positive year for the Carel Group with a 1.3% rise in turnover, while the increase would have been
2.8% using constant exchange rates.
The breakdown of revenue by business segment shows an increase in the HVAC segment (1.0% at current exchange rates and 2.1% at constant exchange rates). The refrigeration segment's revenue increased by 2.6% and 5.0% at current and constant exchange rates, respectively, in 2020. Overall, the core business's revenue (HVAC/R) rose by 1.5% (3.1% at constant exchange rates).
As explained above, the impact of the pandemic was felt mainly in the second quarter, especially April and May when the various lockdowns held back the group's production activities and its ability to serve end customers due to logistical issues. These negative effects were offset by a very positive performance in June which contained the downturn in revenue for the first half of the year (-0.1% in refrigeration and -5% in HVAC). The group's production and logistics restructuring had a positive impact in July, September and October, with revenue outperforming previous periods in both markets, thanks also to the concentration of sales activities in the market niches less touched by the pandemic.
Revenue by business segment is broken down in the following table (thousands of Euros):
| 2020 | 2019 | Variation % | FX variation % |
|
|---|---|---|---|---|
| HVAC revenue | 217,498 | 215,366 | 1.0% | 2.1% |
| REF revenue | 110,337 | 107,578 | 2.6% | 5.0% |
| Total core revenue | 327,836 | 322,943 | 1.5% | 3.1% |
| Non-core revenue | 3,775 | 4,415 | (14.5%) | (14.5%) |
| Total revenue | 331,610 | 327,358 | 1.3% | 2.8% |
In geographical terms, the most growth was seen in the EMEA area (+4.3% or +5.0% at constant exchange rates), driven, in particular, by the increase in revenue in Eastern European countries, even reaching double-digit growth in certain markets.
Specifically, the refrigeration market performed particularly well despite adverse sector conditions by consolidating new opportunities and implementing sales projects for high-efficiency solutions. The HVAC market benefited from the contribution of the healthcare and indoor air quality segments and continued to see a positive trend in the residential segment. These instances of outperforming the market offset the particularly negative situations in certain countries where the pandemic had a very strong
effect or where there is pronounced caution in making investments.
Revenue in North America dropped 9.4% (-7.7% at constant exchange rates), mainly due to the huge impact the pandemic had on the food service segment.
In South America, revenue increased by 10.1% at constant exchange rates in both business segments, especially in Brazil. On the other hand, the rest of the continent remained stagnant, most of all Argentina. The steep depreciation of the Brazilian Real had strong repercussions for the group's performance at current exchange rates, however, with the overall decrease in revenue reaching 12.8%.
Lastly, revenue in Asia decreased by 1.0% at current exchange rates but increased by 1.0% at constant exchange rates. Specifically, the refrigeration segment saw a significant upturn despite the slump suffered early in the year due to Covid-19. Indeed, the group clinched important orders once the economy was back up and running, especially in the second half of the year in the food retail, food service and HVAC segments and most of all in data centres.
A breakdown of revenue by geographical segments is provided below (thousands of Euros):
| 2020 | 2019 | Variation % | FX variation % |
|
|---|---|---|---|---|
| Europe, Middle East and Africa | 236,267 | 226,470 | 4.3% | 5.0% |
| APAC | 49,714 | 50,205 | (1.0%) | 1.0% |
| North America | 38,456 | 42,461 | (9.4%) | (7.7%) |
| South America | 7,173 | 8,222 | (12.8%) | 10.1% |
| Total | 331,610 | 327,358 | 1.3% | 2.8% |
Carel Industries S.p.A.'s ordinary shares were listed on the STAR segment of the stock market organised and managed by Borsa Italiana S.p.A. on 11 June 2018.
During 2020, the share price jumped by 38.4%, levelling off at €19.18 per share on the last trading day of the year. Considering the initial offering price of €7.20 per share, it rocketed by 166.4%. The average daily volume traded during 2020 was approximately 63,000 shares, while the maximum price reached in the same period was €20.50 per share.
| Stock exchange: | Borsa Italiana STAR segment |
|---|---|
| Isin code: | IT005331019 |
| Ticker: | CRL |
| Indexes: | FTSE All-share Capped, FTSE Italia All-Share, FTSE Italia Mid Cap, FTSE Italia Star, FTSE Italia Industria, FTSE Italia Edilizia e Materiali |
| Share capital: | 100,000,000.00 |
| Nominal amount: | Not assigned |
| Earnings per share: | 0.35 |
| Dividend per share: | 0.12 |
| Shareholders of Carel Industries S.p.A. | No. of shares | % of share capital |
Voting rights | % of voting rights |
|---|---|---|---|---|
| Luigi Rossi Luciani S.a.p.a. | 36,167,433 | 36.167% | 72,334,866 | 44.066% |
| Luigi Nalini S.a.p.a. | 23,582,567 | 23.583% | 47,165,134 | 28.733% |
| Capital Research & Management Company | 8,130,873 | 8.131% | 8,130,873 | 4.953%% |
| 7 Industries B.V. | 4,932,595 | 4.933% | 9,332,595 | 5.685% |
| Other * | 27,186,532 | 27.187% | 27,186,532 | 16.562% |
| Total | 100,000,000 | 100.00% | 164,150,000 | 100.00% |
* including 168,209 treasury shares
As reported in the interim financial report at 30 June, 2020 was characterised by the global spread of the coronavirus Covid-19. The pandemic and, specifically, the lockdown policies imposed by various governments have had far reaching repercussions in many sectors of the global economy, including those in which the group is active. Nevertheless, thanks to the diversification of its products and its presence on a number of niche markets, the group managed to recoup the 3.6% decrease in revenue incurred in the first half of the year by focusing on commercial actions in the segments least affected by the fallout of the pandemic. As also reported above, overall, revenue fell by 1.3% (2.8% at constant exchange rates) compared to the previous year.
The spread of the virus had a different impact, in terms of timing and significance, on the group's various production sites and companies, most of all affecting operations in the first half of the year; specifically:
• in February, the production site in China had to shut down for about one week; moreover, following the restrictions imposed by the Chinese authorities, which drastically limited freedom of movement, full production efficiency was only restored towards the end of March. In April and May, while the pandemic worsened in other continents, particularly in Europe, the site returned to full production capacity, internally saturating production lines to keep up with the demand for products, including outside Asia. Lastly, new production lines were set up and production continued as usual for the entire second half of the year;
pandemic throughout the whole of South America and the restrictions introduced at the site to curb the spread of the virus;
With regard to the group's commercial companies, the spread of the pandemic has required extensive use of remote working to allow operations, particularly commercial ones, to continue.
The main impacts of Covid-19 on group processes are shown below
In the first quarter, certain supplies of raw materials, mainly from China, were delayed due to the extended lockdown in the country. Consequently, the group had to speed up the process which had been under way for a few years, for so-called "double sources", i.e., the approval of a second supplier in addition to the first. Such process mitigates the risk of serious disruptions to procurement processes by creating a regional system also for the supply chain. In fact, at the moment, regional acquisitions make up over 75% of the main production sites' acquisitions.
In tandem with this process, the group is implementing so-called production "mirroring", i.e., duplicating processes and technologies at several production sites in order to guarantee business continuity for the greatest number of products.
From a logistical point of view, the strict restrictions on the movement of people and goods in China required greater use of air rather than sea transport in order to cut delivery times for both intragroup products and products for end customers. This led to higher transport costs, negatively affecting the first six months of the year, compared to the same period of the previous year.
As occupational health and safety is a fundamental value for the group, during the Covid-19 emergency, close attention was paid to the management of all work processes at different production sites in order to effectively mitigate the risk of contagion.
To this end, following an organisational, structural and behavioural risk analysis, a series of measures were introduced, anticipating the indications included in the national protocols. At a structural level, for example, wearing protective face masks in work areas, introducing social distancing by rearranging some work stations, using hand sanitisers, sanitising work areas at the end of a shift, sanitising different areas with an atomiser, limiting access and check everyone's temperature using a thermoscanner and limiting numbers in communal areas became mandatory. Lastly, although the work environment has continuous air intake, additional air circulation was facilitated in all work areas. At an organisational level, remote working was widely used in March, involving 90% of the group's Italian white collars, in-person meetings were limited and all national and international transfers were blocked. Thanks to a communication plan launched at the beginning of the emergency, the foreign commercial companies and production sites were guided by "Golden Rules" to prevent contagion in compliance with the local legislation.
For the purpose of behavioural improvement, in addition to the protocols, a series of documents and information pamphlets summarising the general and specific risk mitigation measures were produced and circulated, including with the group's main partners (suppliers and customers). Lastly, the Golden Rules were summarised in a short video which was shown to all group personnel from around the world in order to guarantee their quick and effective communication.
While reference should be made to the following paragraphs for a detailed description of the effects of the pandemic on the group's financial performance of the year, it is noted that, in 2020, the group made use of instruments provided by local governments to mitigate the effects of a global economic downturn. Such measures mainly comprised non-repayable grants received by the various companies, in accordance with local legislation. However, the impact of such grants on the group's financial figures was not material either individually or collectively. Group companies were fully eligible to receive this support.
The US group company received USD1.7 million in May as part of the Paycheck Protection Program enacted by the US government. Provided that the company meets certain conditions, that amount can be considered forgivable. The conditions are that the grant is used to pay remuneration, interest on loans, leases and utilities; furthermore, the workforce must remain employed and remuneration must stay the same for a defined period of time.
The request for repayment exemption was filed in January 2021 and was approved by the granting body and the relevant authorities (SBA – US Small Business Administration) on 26 January 2021.
As the request for repayment exemption was filed and the relevant checks by the granting body were completed leading to the loan being formally forgiven - in 2021, the directors considered them non-adjusting events as per IAS 10. Accordingly, the accounting effects will be recognised in 2021.
The group's main financing activities in 2020 were as follows:
The parent completed the following transactions during the year:
thousand at a floating rate and a duration of 36 months. To hedge the interest rate risk, the parent entered into
• an IRS with the same duration.
For more details on the contractual terms, reference should be made to note 14 to the consolidated financial statements.
In June, the parent distributed dividends of €11,980 thousand, in accordance with the shareholders' resolution of 20 April 2020.
In April and May 2020, in accordance with the shareholders' resolution of 20 April 2020, the parent repurchased 84,874 treasury shares for €958 thousand, which reduced its
equity. In total the parent holds 168,209 shares at the reporting date.
The shareholders approved the repurchase in order to (a) comply with obligations arising from share-based incentive plans for the employees and directors of the parent and its subsidiaries; (b) carry out transactions to support market liquidity to thereby facilitate regular trading and avoid price fluctuations that are not in line with market trends; and (c) undertake sale, exchange, trade-in, contribution transactions or other acts of disposal of treasury shares to acquire equity stakes and/or real estate and/or enter into agreements (including commercial ones) with strategic partners and/or implement industrial projects or extraordinary finance transactions that fall within the development goals of the parent and of the Carel Group. The board of directors set the maximum number of repurchasable treasury shares at 5 million, equal to 5% of the parent's share capital.
In compliance with the IFRIC agenda decision of November 2019 on the provisions of IFRS 16, in addition to the ESMA recommendations, in December, the parent deemed it necessary to restate financial assets and liabilities linked to certain leases, specifically those for buildings where the parent carries out its production activities. In restating the lease term of such contracts, the parent not only assessed the contractual expiry date but also the enforceable period, i.e., the period in which the lessee and the lessor each had the right to terminate the lease without any penalty or significant costs.
Based on the estimates made and the data available to date, the directors deemed it reasonable to presume that the lease will be renewed. Accordingly, the leases for the Brugine production site were renewed to 2033 (the first and main lease was due to expire in 2021). The leases for the Croatian production site and that of the subsidiary Recuperator, expiring respectively in 2030 and 2032, were not modified due to the considerable term remaining. This modification led to an increase in right-of-use assets and lease liabilities for a total of €12,812 thousand. There was no effect on profit or loss for the year.
The main performance figures for 2020 compared to the previous year are as follows:
| 2020 | 2019 | Delta | Delta % | |
|---|---|---|---|---|
| EBITDA1 | 65,194 | 63,132 | 2,062 | 3.3% |
| Adjusted EBITDA | 65,366 | 63,913 | 1,453 | 2.3% |
| EBIT | 46,713 | 46,363 | 350 | 0.8% |
| Profit for the year | 35,118 | 35,047 | 71 | 0.2% |
In 2020, EBITDA amounts to €65.2 million, equal to 19.7%2 of revenue, showing an increase of €2.1 million, or 19.3%, from €63.1 million in the previous year. This improvement is chiefly due to the rise in revenue compared to 2019, especially in the EMEA area, and the cost containment measures applied by management. These effects offset the higher logistics costs and production efforts to promptly meet the demand for Carel products.
Net of non-recurring items, which amounted to approximately €0.2 million in 2020 and referred to costs incurred for preliminary scouting activities, the adjusted EBITDA would have amounted to €65.4 million, or 19.7% of revenue, compared to 19.5% in the previous year when non-recurring items amounted to €0.8 million.
The FX adjusted EBITDA (i.e., at constant exchange rates) amounts to €67.8 million.
The profit for the year came to €35.1 million, in line with the previous year following higher amortisation and
1 (1) The group calculates EBITDA as the sum of the profit before tax, the gain or loss on equity-accounted investments, exchange differences, net financial income (expense), amortisation, depreciation and impairment losses. It uses EBITDA to assess its operating performance.
2 (2) The EBITDA margin is the ratio of EBITDA to revenue.
depreciation (€1.7 million) and net exchange losses (roughly €0.8 million). As a percentage of revenue, profit amounts to 10.6%, substantially in line with 2019.
The main financial position indicators at 31 December 2020 and 2019 are as follows:
| 31.12.2020 | 31.12.2019 | Delta | Delta % | |
|---|---|---|---|---|
| Non-current assets | 176,413 | 167,957 | 8,456 | 5.0% |
| Working capital | 41,007 | 45,232 | (4,225) | (9.3%) |
| Defined benefit plans | (8,189) | (7,844) | (345) | 4.4% |
| Net invested capital | 209,231 | 205,345 | 3,886 | 1.9% |
| Equity | 159,621 | 143,220 | 16,401 | 11.5% |
| Net financial debt | 49,610 | 62,124 | (12,514) | (20.1%) |
| Total | 209,231 | 205,345 | 3,866 | 1.9% |
Non-current assets amount to €176.4 million, up by €8.5 million from €168.0 million at the previous year end, mainly due to the impact of restating leases in accordance with IFRS 16.
Net of right-of-use assets, the group's investments amount to €13.3 million, compared to €23.6 million at the end of the previous year. Investments made in 2019 included the construction and expansion of Chinese and US production sites, as detailed in the notes to the 2019 consolidated financial statements.
The main investments were, in particular, for plant and machinery for a total of €5.5 million at the parent and the Chinese and Croatia production sites. Their breakdown by geographical segment is set out in the graph on the right. The investments in intangible assets, mostly made by the parent, amounted to €4.2 million and related to licences and research projects.
Amortisation and depreciation, including the effects of the application of IFRS 16, totalled €18.5 million in 2020 compared to €16.8 million in 2019.
Net working capital of €41.0 million fell by €4.2 million to €45.2 million at 31 December 2019. This improvement is principally affected by the increase in trade payables, mainly due to investments concentrated in the final months of the year, other current liabilities and tax liabilities which more than offset the rise in inventories. Trade receivables remained more or less unchanged.
The group's net financial debt amounts to €49.6 million compared to €62.1 million at 31 December 2019, showing an improvement of €12.5 million. Excluding the effects of application of IFRS 16, the net financial debt would have improved by €25.4 million. The reduction is mainly due to the group's cash inflows. Moreover, the parent paid dividends of roughly €12 million in 2020. Lease liabilities increased mainly as a result of restating certain leases as described above. Reference should be made to the statement of cash flows for more information on the cash flows for the year.
A breakdown of net financial debt is as follows:
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Non-current financial liabilities | 89,059 | 74,700 |
| Current financial liabilities | 45,492 | 35,031 |
| Cash and cash equivalents | (105,586) | (62,798) |
| Current financial assets | (7,540) | (56) |
| Net bank loans and borrowings | 21,425 | 46,876 |
| Non-current lease liabilities | 24,597 | 11,787 |
| Current lease liabilities | 3,588 | 3,461 |
| Net financial debt | 49,610 | 62,124 |
At 31 December 2020, the group's current financial assets included short-term investments of approximately €7.5 million.
At 31 December 2020, over 70% of cash and cash equivalents were held by Italian group companies and approximately 8% by the Chinese subsidiary. The remaining amount was split between the other group companies. Management designed processes which ensure that the cash and cash equivalents held by subsidiaries is promptly available to the group.
Cash flow forecasts prepared by management indicate that the resources available and expected cash flows will be sufficient for the group's normal operations and to repay amounts due at their due dates.
Given the above, the directors believe that the group is not exposed to a higher liquidity risk than usual due to Covid-19.
The main financial indicators for the two years are set out below:
| Indici | 2020 | 2019 |
|---|---|---|
| ROS (3) | 14.1% | 14.2% |
| ROI (4) | 22.3% | 22.6% |
| ROE (5) | 22.0% | 24.5% |
| ROA (6) | 11.3% | 13.2% |
| Inventory turnover (14) | 2.8 | 2.7 |
| Average DSO (15) | 64.0 | 66.1 |
| Average DPO (16) | 79.8 | 77.9 |
| Group tax rate (18) | 21.1% | 22.0% |
| R&D - investments (7) | 17,499 | 18,060 |
| R&D as % of revenue (8) | 5.3% | 5.5% |
| Capex as % of revenue (9) | 4.0% | 7.2% |
| Cash conversion (17) | 79.3% | 71.2% |
(3) The "Return on Sales" (ROS) is the ratio of operating profit (loss) to revenue.
(4) The "Return on Investment" (ROI) is the ratio of operating profit (loss) to net invested capital.
(5) The "Return on Equity" (ROE) is the ratio of the profit (loss) for the year to equity.
(6) The "Return on Assets" (ROA) is the ratio of the operating profit (loss) to total assets.
(7) The "R&D Investments" are the sum of Opex R&D and Capex R&D.
(8) The R&D investments as a percentage of revenue is the ratio of R&D investments to revenue.
(9) The "Capex" as a percentage of revenue is the ratio of cash flows from investing activities to revenue.
(10) The group calculates net financial debt using the method set out in paragraph 127 of the CESR recommendation 05/054b, which implemented Commission Regulation (EC) 809/2004 (see chapter X, paragraph 10.1).
(11) Net non-current assets is the sum of property, plant and equipment, intangible assets, equity-accounted investments and other non-current assets.
(12) Net working capital is the sum of trade receivables, inventories, tax assets, other assets, deferred tax assets, trade payables, tax liabilities, other current liabilities, deferred tax liabilities and provisions for risks.
(13) Net invested capital is the sum of (i) net non-current assets, (ii) net working capital and (iii) defined benefit plans.
(14) Inventory turnover is calculated as the ratio of (i) purchases of raw materials, consumables, goods and changes in inventories to (ii) average inventories at the end of the previous and current years. This ratio is multiplied by 365.
(15) Average DSO is the ratio of (i) the average of trade receivables at the end of the previous and current years to (ii) revenue. This ratio is multiplied by 365.
(16) Average DPO is the ratio of (i) the average of trade payables at the end of the previous and current years to (ii) the sum of purchases of raw materials, consumables and goods and changes in inventories and cost of services. This ratio is multiplied by 365.
(17) The cash conversion rate is calculated as the ratio of (i) operating cash flows net of cash flows from investing activities to (ii) EBITDA.
(18) The group tax rate is the ratio of income taxes to the profit before tax.
(19) The Capex as a percentage of revenue includes the increases relating to leases recognised after 1 January 2019.
Key cash flows are as follows:
| Cash flows from operations (indirect method) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Profit for the year | 35,118 | 35,047 |
| Profit for the year net of amortisation, depreciation and impairment losses, provisions, net financial (income) expense, income taxes and (gains)/losses on the sale of non-current assets |
62,349 | 64,532 |
| Cash flows before changes in net working capital | 3,908 | 4,015 |
| Interest and income taxes paid | (9,153) | (18,982) |
| Net cash flows from operating activities | 57,103 | 49,565 |
| Cash flows used in investing activities | (13,036) | (22,347) |
| Increase (decrease) in share capital | (925) | (807) |
| Sales (acquisitions) of equity investments | - | - |
| Dividends to owners of the parent and non-controlling investors | (12,030) | (10,066) |
| Cash flows from (used in) financing activities | 13,549 | (9,249) |
| Change in cash and cash equivalents | 44,662 | 7,096 |
| Opening cash and cash equivalents | 60,925 | 55,702 |
| Closing cash and cash equivalents | 105,586 | 62,798 |
Cash flows generated by operating activities amount to €57.1 million in 2020, which is a significant improvement on 2019 (€49.6 million).
In 2020, the group generated cash of €44.7 million after distributing dividends of €12 million and investing €13.0 million. Financing activities generated cash flows of €13.5 million.
The parent, Carel Industries S.p.A., has its offices at the main production site in Brugine (Padua).
The parent manufactures and markets products which it distributes to the end customers in the markets it manages directly (mostly Italy) and its foreign subsidiaries in the markets they manage.
The parent provides centralised treasury services to the group and the European entities have a cash pooling
system in which it acts as pooler. At year end, it had financial liabilities of €11.6 million related to the cash pooling account.
The parent's net financial debt amounts to €79.5 million (31 December 2019: €87.4 million).
It also distributed dividends of €12.0 thousand to its shareholders during the year.
| Carel Industries S.p.A. | 2020 | 2019 | delta % |
|---|---|---|---|
| Revenue from third parties | 98,437 | 97,766 | 0.7% |
| Intragroup revenue | 81,930 | 78,280 | 4.7% |
| Other revenue | 4,668 | 4,490 | 4.0% |
| Operating costs | (161,553) | (154,204) | 4.8% |
| EBITDA | 23,482 | 26,332 | (10.8%) |
| Amortisation, depreciation and impairment losses | (8,245) | (7,374) | 11.8% |
| Operating profit | 15,237 | 18,958 | (19.6%) |
| Net financial income | 10,188 | 9,224 | 10.5% |
| Profit before tax | 25,426 | 28,182 | (9.8%) |
| Income taxes | (4,530) | (5,473) | (17.1%) |
| Profit for the year | 20,896 | 22,708 | (8.0%) |
The parent performed well in 2020; revenue from third parties amounts to €98.4 million up by 0.7% on the previous year. Intragroup revenue increased by 4.7%. Other revenue mainly consists of royalties from group companies for know-how licences and tax assets for R&D activities as provided for by national laws.
Operating costs include the capitalisation of development expenditure of €1.9 million (compared to €2.5 million in 2019). The increase in operating costs is mainly due to higher costs to purchase raw materials and semi-finished products (approximately €4 million), personnel expense (approximately €2.8 million) and transport costs.
The number of employees increased from 680 to 682 at the reporting date.
Financial income includes dividends of €14.9 million (2019: €10.1 million) received from foreign companies, mainly the Chinese, Polish and UK subsidiaries.
Taxes decreased in absolute terms and as a percentage of profit before tax (to 17.8% in 2020 from 19.7% in 2019). This was mainly due to higher dividends received during the year (€14.9 million in 2020 compared to €10.0 million in 2019), the benefits deriving from the application of hyper and super-amortisation and the lower IRAP rate applied,
3.9% compared to 5.5% in 2019, as the parent no longer falls under the scope of Legislative decree no. 142 of 29 November 2018 at the reporting date.
The reclassified statement of financial position as at 31 December 2020 compared with the previous year end is as follows:
| Carel Industries S.p.A. | 31.12.2020 | 31.12.2019 | delta % |
|---|---|---|---|
| Non-current assets | 164,431 | 156,369 | 5.2% |
| Working capital | 10,157 | 17,621 | (42.4%) |
| Defined benefit plans | (5,141) | (5,256) | (2.2%) |
| Net invested capital | 169,447 | 168,734 | 0.4% |
| Equity | 89,916 | 81,335 | 10.5% |
| Net financial debt | 79,531 | 87,399 | (9.0%) |
The increase in non-current assets is mainly due to:
Working capital decreased, principally due to the increase in trade payables from €29.6 million to €37.6 million, mainly as a result of investments in and purchases of materials concentrated in the final months of the year, and the rise in other current liabilities.
Lastly, the net financial debt amounts to €79.5 million at 31 December 2020, comprising cash and cash equivalents of €70.5 million (31 December 2019: €25.6 million) and loan assets of €7.5 million, offset by financial liabilities of €157.7 million, including lease liabilities of €15.0 million.
The reconciliation of the parent's and group's equities at 31 December 2020 is provided below:
| 12_2020 | 12_2019 | |||||
|---|---|---|---|---|---|---|
| Equity | Profit for the year |
Equity | Profit for the year |
|||
| CAREL Industries S.p.A. | 89,916 | 20,896 | 81,335 | 22,708 | ||
| Profit and equity of consolidated entities | 136,748 | 29,665 | 128,840 | 23,674 | ||
| Derecognition of the carrying amount of investments in consolidated entities |
(128,402) | 3,242 | (131,429) | (325) | ||
| Derecognition of intragroup dividends | - | (15,145) | - | (10,666) | ||
| Derecognition of intragroup profits on inventories | (6,694) | (1,461) | (5,234) | 1,528 | ||
| Purchase price allocation | 67,656 | (2,089) | 69,275 | (1,981) | ||
| Other adjustments | 93 | 4 | 80 | 80 | ||
| Carel Industries Group | 159,317 | 35,112 | 142,868 | 35,019 |
There were no fatal injuries or cases of occupational diseases during the year, continuing the trend of previous years.
During 2020, at group level, 4 (four) incidents occurred in the workplace and 2 (two) during the commute to and from work, which resulted in more than three lost work days for the workers involved.
Compared to 2019, when there was a total of 13 injuries in the workplace and 14 during the commute to and from work, 2020 saw an over 70% fall in injuries despite the total number of hours worked being higher of 13% compared to the previous year.
The group did not receive any complaints nor was it ordered
to appear in court for alleged violations of occupational health and safety regulations or environmental crimes in 2020.
During 2020, Carel Industries S.p.A. confirmed its ISO 45001:2018 health and safety certification and ISO 14001:2015 environmental certification.
Partly to respond to the specific situation resulting from the Covid-19 pandemic, the group implemented a number of structural, organisational and behavioural measures at its various sites to improve the level of occupational health and safety. A detailed description is provided in its consolidated non-financial statement (NFS) prepared pursuant to Legislative decree no. 254/16, to which reference should be made.
The group's growth, also in terms of the total number of employees, continued in 2020, especially in Europe, the Middle East, Africa and North America.
At year end, a breakdown of the group's employees by geographical segment is as follows:
| 2020 | 2019 | Delta | |
|---|---|---|---|
| Europe, Middle East and Africa | 1,214 | 1,165 | 49 |
| APAC | 339 | 345 | (6) |
| North America | 146 | 133 | 13 |
| South America | 46 | 46 | - |
| Total | 1,745 | 1,689 | 56 |
The breakdown by geographical segment is shown in the graph on the right. Blue and white collars account for 35.7% and 64.3%, respectively.
Despite the effects of the Covid-19 pandemic on business and operations, the group continued to enhance its organisational structure in 2020, with an increased growth of the workforce involved in operating processes, especially to support the group's production capacity.
Overall, the group hired 210 resources, while 154 left. The Italian head office hired 32 employees during the year while 30 left the parent, some of whom had reached retirement age. So the high rate of turnover seen in recent years continued, especially at the group's production sites, in a global labour market marked by fierce competition especially for highly-qualified personnel. This trend was amplified even further by Covid-19, especially in the US and Brazil where the effects of the pandemic were particularly significant.
Prompted by the restrictions put in place to prevent the spread of the virus, the group encouraged and facilitated remote working for the employees of both Italian and foreign group companies. Remote working was the main method used by most of the white collar employees, ensuring they could continue to work effectively with maximum safety and supplied with the necessary IT equipment.
Specifically at the parent, almost all employees (approximately 90%) who were not involved in production or logistics activities worked remotely during the production shutdown period starting from late March 2020. This was initially full time (five out of five days). After the factories were reopened, remote working was then alternated with scheduled in-person days based on safety protocols agreed with the trade unions. Similar policies were then put in place at the group's other offices, where the production shift schedules were also revised, where necessary, to ensure social distancing.
Against this backdrop, the group developed projects to maintain engagement and the feeling of belonging, to support employee well-being and thus mitigate the risk of losing employees and their precious technical and managerial skills. The group also boosted internal communication, specifically by making greater use of social media and tools such as videos and webinars to keep personnel up to date about the group's performance. The group has always made a particular effort to offer solutions (e.g., flexible working hours, part-time hours for working mothers returning from maternity leave, support for children's education via contributions to crèche costs, study grants, etc.) aimed at simultaneously ensuring professional development and the possibility to achieve a better work-life balance. In line with this objective, the parent launched a new Welfare platform at the start of 2020. Available to all employees, the platform optimises and customises each employee's choices regarding the services available under contractual and company agreements as flexible benefits, allowing full discretion and decision-making autonomy. In addition to purchasing goods, employees can also use services related to the individual, family management and recreation, sports and well-being, as well as accessing training sessions and/or events.
Finally, in 2020, due to the worsening of the national public health emergency caused by the pandemic, the parent decided to introduce financial and health assistance for all employees at Italian offices by signing an insurance policy covering Covid-19.
Training of one of the key tools for developing the group's business strategy. It is fundamental given the rapidly developing markets and technologies of the HVAC/R segment.
Therefore, in order to ensure the utmost professionalism within all company areas, the group has always implemented top-class employee training and development programmes. In 2020, a total of 28,823 hours of training were provided at the various offices.
The decrease on the 2019 total (48,728 hours) is a natural consequence of the restrictions imposed by the public health emergency which inevitably hindered the possibility to provide face-to-face training. However, the group's ongoing investment in training programmes meant it reached a total of 15,588 hours of training provided to white collars and 13,235 hours to production personnel.
Due to Covid-19 and the resulting social distancing and lockdown measures, the group had to quickly adapt to new training methods in order to ensure ongoing growth and development of employees. It swiftly transformed courses traditionally provided in classrooms into a distance learning format. These included induction courses for new hires, training courses on technical/application skills and marketing and sales training.
In addition, the group launched the Carel Lean Academy programme in 2020 to continue its lean philosophy project rolled out in 2007 and to provide employees with tools to tackle and adapt to this new situation full of instability and uncertainty. The purpose of the academy is to promote lean principles and the lean philosophy, always considered a strategic asset for business growth at group level. The first courses began in late 2020 via e-learning. Training on lean issues accounted for roughly 5% of total courses provided during the year.
The group's main training courses were of a technical/ application, management and professional refresher nature, in addition to covering HSE (health, safety and environment) issues - even more critical this year - which accounted for 13.8% of total training hours.
Approximately 34% of the total training hours related to operations (production, logistics, procurement and industrialisation) while 15% focused on soft skills, specifically communication and management subjects, for resources across the different group areas. Finally, 11.4% of the hours were dedicated to developing skills and know-how on topics related to HVAC/R applications.
Due to the rapid developments in the crisis caused by the Covid-19 pandemic, there were frequent interactions between the trade unions and the HR departments of the group's Italian and foreign companies in 2020.
Specifically, in the first half of the year, the extreme uncertainties triggered by the impact of the spread of the virus on the group's business, along with the restrictions
BLACK BELT GREEN BELT YELLOW BELT WHITE BELT on the availability of the workforce and the need to apply strict safety protocols to mitigate the risk of infection, led to heated discussions and intense debates. It was only after weeks and months that these talks resulted in a shared vision of the prevention measures to be adopted without significant impacting the workers' ability to carry out their ordinary work activities.
Specifically, the parent set up a Covid-19 committee at its headquarters, which is also its main production site. The committee comprises the HR manager, HSE manager, trade union representatives, safety representatives and the company doctor. Its tasks are to regularly (at least once a month) update the employee healthcare protocol adopted by the parent, assess the best policies for employee access to offices (via a balanced mix of inperson and remote working) and provide policies and guidelines to be used as standards at group sites and offices abroad in compliance with local regulations and the ruling legislation of each country.
The finest results of this close collaboration between the parent and the trade unions were seen in the second half of the year. Also considering the dramatic upswing in economic activities, the employees' willingness to ensure that the greater production capacity needed to uphold the business was available enabled the group to bounce back from the first half of the year, leading to a growth in volumes that could never have been imagined just a few months earlier.
That being said and considering the anomaly that was 2020, not counting the trade union disputes at the start of the pandemic (with the stoppage of overtime and some unjustified absences especially in March), there were a total of six days of strike. Four of these were directly linked to the pandemic and two to actions implemented by the trade unions at national level for the renewal of the national collective labour contract for the metalworking industry. The average participation rate was 14.4%; with peaks of 40.5% for the blue collar workforce.
Lastly, the unionisation level (number of members compared to total employees) is slightly higher than the previous year at around 14.8% (compared to 14.3% in 2019). While increasing, this ratio confirms the parent's substantially positive industrial relations situation and the absence of conflicts or significant pending disputes. The most represented unions are FIOM Cgil (95.0% of members) and FIM Cisl (5.0% of members).
The unionisation level at group level also remained very low, proving that "direct" industrial relations, i.e., without the arbitration of an internal or external trade union representative, are often preferred, especially at local level. So, the atmosphere at the group remained largely harmonious via constructive and transparent collaboration styles. In this regard, there were only five individual cases in 2020 that lead to trade union disputes. These occurred at Carel USA (two at the Canadian subsidiary ENERSOL) and Carel South America. These disputes basically regard violations of the Code of Ethics (inappropriate behaviours and relations between co-workers and/or regarding a superior). Two of them were already resolved in 2020, while the remaining three are close to resolution.
The group has always put R&D at the centre of its business to retain its leadership position in the HVAC/R market, ensure its competitive edge and provide customers with technologically innovative solutions at advantageous prices.
The development teams continue to focus on solutions for more energy efficient products and the possibility to use natural refrigerants. The cost of refrigerants in Europe is sky-rocketing due to the restrictions on those with the greatest environmental impact.
In this context, the R&D centre implemented a conflict minerals (3TGs) policy, identifying the macro-categories of items that may contain the 3TGs, in order to make the investigation easier. The group commenced evaluating active raw material suppliers of the four production sites that use the 3TGs (for example, tin alloys for welding, electronic microchips, tantalum capacitors or LCD displays).
In 2020, the group procured 98% of its 3TG components from conflict-free sources and 94% of component manufacturers that source conflict-free 3TGs declare that they are committed to monitoring their upstream supply chain.
With respect to user health protection, the group has always paid particular attention to compliance with the applicable European legislation. More specifically, Carel applies the REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals) and RoHS (Restriction of Hazardous Substances Directive) European directives by actively involving its entire value chain and, through its internal chemicals compliance team, it continuously vouches the REACH compliance statements of the various manufacturers.
In addition, thanks to a specific project, the parent can state its compliance with the EU RoHS Directive of 21 July 2011 and the Commission Delegated Directive (EU) 2015/863 of 31 March 2015 restricting the use of certain hazardous substances in the production of electrical and electronic equipment.
In 2020, Carel addressed the compliance of its products with the US regulation, applied in California, Proposition 65 (officially called the Safe Drinking Water and Toxic Enforcement Act of 1986, decreed in paragraphs 25249.5- 14 of the California Health & Safety Code) which regulates the use of toxic or cancer-causing substances.
Carel Industries engaged a third-party expert in chemical compliance to assess the risk to human health of certain substances contained in the products (articles or components of articles). The products that Carel Industries supplies to customers do not contain chemical substances listed in Proposition 65 at a concentration liable to cause exposure levels exceeding the "safe harbor levels" .
Currently the R&D unit comprises the IoT division, the Knowledge Centre and the centres for electronics, mechanics and software tools competence centres.
At the end of 2018, thanks to the acquisition of HygroMatik GmbH and Recuperator S.p.A., the group's mechanics competence centre started to work in the passive heat recovery and isothermal and adiabatic humidification sectors.
In 2020, the R&D unit had an average of 224 employees (including 152 at the parent, 12 in the US, 51 in China, four at HygroMatik GmbH and five at Recuperator S.p.A.) who are very qualified and have a high educational level (roughly two thirds are university graduates).
Costs (personnel expense, opex and capex) of the R&D activities equalled 5.3% of turnover and amounted to €17.4 million, down slightly (3%) on the previous year.
As the IFRS requirements were met for some of the projects developed or underway, the group capitalised the related expenditure of roughly €2.2 million under intangible assets (31 December 2019: €3.0 million).
In 2020, in addition to those already created in 2018, the group introduced additional positions to improve its
organisational and management structure. It completed the systems manager structure, specifically in the mechanics (to help full integration with Recuperator) and humidification areas. It also created a technical integration development manager role in order to fully integrate with HydroMatik with regard to both market offer and development processes and organisational approaches. With respect to Recuperator, integration focused on encouraging sharing of the group's development process, the use of lean tools (visible planning, barashi, issue board and A3-T), the harmonisation of product certification processes and design, simulation and verification tools and methods. With respect to HygroMatik, the group mostly focused on the integration of product portfolios, in order to expand its offer in Germany, Switzerland and Austria.
The group confirmed its modular approach to product development in the various areas (electronic, mechanical and software) to encourage as far as possible the reuse and re-usability of the modules and thus reduce development times, achieve greater reliability and reduce product costs.
It focused especially on honing development skills at the other global production sites through its global competence centres to improve their ability to meet group design requirements. It maintained its development processes, methods and standards and circulated them throughout the group to be used as a basis for all design activities and guarantee identical quality levels at each site. A production part approval process (PPAP) has been put in place for suppliers of materials, in particular of customised materials, in order to improve the quality in terms of both the design and the reliability of the production flows. This will improve the reliability of the supply flows, with the resulting improvements in logistics and quality. Similarly, the group reinforced its production part approval process regarding customers, exploiting the market's move to using flammable refrigerants, investigating FEMEA techniques on the production process, in addition to formalising the process flow and process control plan.
Furthermore, R&D activities are also developed through long-standing partnerships with the Padua University, Udine University and Milan Politecnico University (in areas ranging from analogue and digital electronics, evolved calculation design, power electronics to the theory of systems and controls, thermodynamic applications, technical physics and mechanical production processes), CNR (National Research Institute) and the most important sector associations, such as EPEE (European Partnership for Energy and the Environment), AICARR (Italian Association of Air conditioning, Heating and Refrigeration), ASHRAE (American Society of Heating and Air-Conditioning Engineers), AHRI (Air-Conditioning, Heating and Refrigeration Institute), EHPA (European Heat Pump Association), CRAA (Chinese Refrigeration and Air Conditioning Industry Association) and CAR (Chinese Association of Refrigeration).
During the year, four guiding principles underpinned product development projects:
The four guiding principles led to:
Product development activities were hugely affected by the Covid-19 pandemic as could be expected given the scale of the event. Structured at company level, the group's approach allowed it to promptly react to the pandemic,
making the workforce (via flexible working methods) and business safe. Much energy was redirected from ordinary development activities to business protection actions. Subsequently, due to the pandemic's impact on certain business segments, the group rearranged development priorities, focusing activities towards more attractive prospects.
In 2020, the group continued the development plan for the new iJ refrigeration range, officially presented at Euroshop 2020. With a renewed and futuristic look, the product covers the more profitable food service market segments: merchandiser, food storage and display, food process, scientific application and distribution. The product is programmable, highly customisable, with a wide variety of formats and functionalities, able to withstand hostile environments and may be connected through NFC, BlueTooth and WiFi.
Again in the refrigeration segment, the group introduced HEOS BOX system refrigeration modules using HFC/ HFO refrigerants for food retail water loop systems. This solution is aimed at facilitating the HEOS water loop system's market penetration by directly supplying the finished refrigeration module with a data connection and REDoptimize data analysis system, as well as electronic systems for OEMs that prefer to develop the refrigeration units themselves. In addition, the group began developing HEOS BOX modules for natural CO2 refrigerant in 2020.
The HEOS system was completed with HEOSone for chest freezers and wall units as a solution for supermarkets and professional refrigeration seeking high energy efficiency solutions that use propane as a natural refrigerant.
The programming suite for the programmable range was extended to improve connectivity, with the introduction of the new commissioning and integration features.
The group continued the market launch of the advanced CloudGate gateway for both WiFi and LTE connections to the tERA portal, in order to allow the collection of information from field controls. With an affordable cost, it allows an extremely wide variety of LTE connections for the most important 4G standards (CAT1, CATM1 and NB-IoT), as well as the traditional 2G.
The gateway also led to the development of an additional control system called BOSS micro (joining BOSS and BOSS mini) for small stores, to optimise data connection and alarm monitoring costs.
Finally, the gateway range was extended with CloudGate mini for point-to-point WiFi and 2G connections to tERA, RED optimize or third-party clouds.
In terms of IoT, the centralised control systems tEra and remotePRo for both refrigeration (retail chain) and airconditioning (data centres) continue to be developed and upgraded, supporting the development of services for controlling plant, maintenance and energy saving, identifying the most critical devices and the measures to make them more efficient.
With regard to valves, the group optimised the production of the EmJ electronic modulating ejectors, that boost refrigeration and air-conditioning systems running on CO2 natural gas even in warmer climates.
The group upgraded the Compact Steam humidifier designed for residential applications, by simplifying its installation and maintenance and introducing connectivity functions. It was launched on the US market with the support of local production. Again in the humidification area, the group integrated the Carel and HygroMatik products to make the best of the group's portfolio. In
the adiabatic humidification area, due to the different priorities mentioned earlier, the Humifog product was only partially redesigned in order to increase its capacity, adapt it to the new efficiency standards, renew its user interface and usability of installation and maintenance and ensure connections to remote supervision systems.
pGDX 7'' was partially redesigned in order to cut costs and downgrade performance for simple applications in emerging markets.
In 2020, the group also rolled out a project to upgrade the main product ranges to use A3 flammable refrigerants and A2L slightly flammable refrigerants in line with market trends in terms of using low GWP and natural refrigerants. Nine new patents were added to the group's portfolio, bringing the total to 45 invention patents (approved filed) and 35 utility patents.
The first few months of 2021 were still impacted by the lasting pandemic in many of the group's markets. However, the measures put in place by the group ensured that ordinary production activities could continue at all sites.
2020 was marked by the onset and spread of Covid-19 which led to the widespread shuttering of production activities and severe limitations to social contact in many areas of the globe, though with varying timeframes and intensity. This led to a universal slowdown in the global economy and considerable tensions in the supply chains of many sectors and markets.
Despite the distribution of vaccines by various pharmaceutical companies, the start of 2021 was again pervaded by significant uncertainties. Indeed, it is far from clear how quickly the global population will be immunised and thus definitively emerge from the pandemic. In addition, there is a considerable global shortage of electronic material due to the combination of a strong upswing in the economy in many macro-areas (and expected in others) and limited upstream production capacity.
Considering the above, it is not currently possible or prudent to make precise forecasts on how 2021 will close. However, Carel remains optimistic as the positive trends seen in the group's sectors in the second half of last year have accelerated in these first few months of 2021.
at 31 December 2020
| (€'000) | Note | 31.12.2020 | 31.12. 2019 |
|---|---|---|---|
| Property, plant and equipment | 1 | 74,880 | 63,775 |
| Intangible assets | 2 | 89,498 | 90,534 |
| Equity-accounted investments | 3 | 724 | 536 |
| Other non-current assets | 4 | 11,311 | 13,111 |
| Deferred tax assets | 5 | 5,265 | 4,378 |
| Non-current assets | 181,678 | 172,335 | |
| Trade receivables | 6 | 57,728 | 58,552 |
| Inventories | 7 | 52,012 | 48,265 |
| Current tax assets | 8 | 2,156 | 1,711 |
| Other current assets | 9 | 7,445 | 6,613 |
| Current financial assets | 10 | 7,540 | 56 |
| Cash and cash equivalents | 11 | 105,586 | 62,798 |
| Current assets | 232,468 | 177,994 | |
| TOTAL ASSETS | 414,145 | 350,330 | |
| Equity attributable to the owners of the parent | 12 | 159,317 | 142,868 |
| Equity attributable to non-controlling interests | 13 | 304 | 353 |
| Total equity | 159,621 | 143,220 | |
| Non-current financial liabilities | 14 | 113,657 | 86,486 |
| Provisions for risks | 15 | 1,292 | 1,368 |
| Defined benefit plans | 16 | 8,189 | 7,844 |
| Deferred tax liabilities | 17 | 10,212 | 10,896 |
| Non-current liabilities | 133,350 | 106,595 | |
| Current financial liabilities | 14 | 49,080 | 38,492 |
| Trade payables | 18 | 43,234 | 38,200 |
| Current tax liabilities | 19 | 2,991 | 1,113 |
| Provisions for risks | 15 | 2,104 | 2,418 |
| Other current liabilities | 20 | 23,766 | 20,292 |
| Current liabilities | 121,175 | 100,515 | |
| TOTAL LIABILITIES AND EQUITY | 414,145 | 350,330 |
| (€'000) | Note | 2020 | 2019 |
|---|---|---|---|
| Revenue | 21 | 331,610 | 327,358 |
| Other revenue | 22 | 3,704 | 3,611 |
| Costs of raw materials, consumables and goods and changes in inventories | 23 | (139,644) | (138,637) |
| Services | 24 | (42,536) | (47,503) |
| Capitalised development expenditure | 25 | 2,227 | 2,970 |
| Personnel expense | 26 | (88,620) | (83,412) |
| Other expense, net | 27 | (1,548) | (1,255) |
| Amortisation, depreciation and impairment losses | 28 | (18,482) | (16,769) |
| OPERATING PROFIT | 46,713 | 46,363 | |
| Net financial expense | 29 | (1,489) | (1,431) |
| Net exchange losses | 30 | (921) | (152) |
| Share of profit (loss) of equity-accounted investees | 31 | 208 | 177 |
| PROFIT BEFORE TAX | 44,511 | 44,957 | |
| Income taxes | 32 | (9,393) | (9,910) |
| PROFIT FOR THE YEAR | 35,118 | 35,047 | |
| Non-controlling interests | 5 | 28 | |
| PROFIT FOR THE YEAR ATTRIBUTABLE TO THE OWNERS OF THE PARENT | 35,112 | 35,019 |
| ((€'000) | Note | 2020 | 2019 |
|---|---|---|---|
| PROFIT FOR THE YEAR | 35,118 | 35,047 | |
| Items that may be subsequently reclassified to profit or loss: | |||
| - Fair value losses on hedging derivatives net of the tax effect | (73) | (270) | |
| - Exchange differences | (6,279) | 926 | |
| Items that may not be subsequently reclassified to profit or loss: | |||
| - Actuarial losses on employee benefits net of the tax effect | (177) | (313) | |
| Comprehensive income | 28,589 | 35,390 | |
| attributable to: | |||
| - Owners of the parent | 28,619 | 35,333 | |
| - Non-controlling interests | (31) | 57 | |
| Earnings per share | |||
| Earnings per share (in Euros) | 12 | 0.35 | 0.35 |
| ((€'000) | 2020 | 2019 |
|---|---|---|
| Profit for the year | 35,118 | 35,047 |
| Adjustments for: | ||
| Amortisation, depreciation and impairment losses | 18,482 | 16,747 |
| Accruals to/utilisations of provisions | (560) | 2,426 |
| Non-monetary net financial expense | 1,187 | 1,341 |
| Income taxes | 8,122 | 9,821 |
| (Gains)/losses on the sale of non-current assets | - | (850) |
| 62,349 | 64,532 | |
| Changes in working capital: | ||
| Change in trade receivables and other current assets | 692 | 3,104 |
| Change in inventories | (4,348) | 5,283 |
| Change in trade payables and other current liabilities | 5,887 | (4,988) |
| Change in non-current assets | 1,592 | 515 |
| Change in non-current liabilities | 84 | 101 |
| Cash flows from operating activities | 66,256 | 68,547 |
| Net interest paid | (1,650) | (1,657) |
| Income taxes paid | (7,503) | (17,325) |
| Net cash flows from operating activities | 57,103 | 49,565 |
| Investments in property, plant and equipment | (8,260) | (17,736) |
| Investments in intangible assets | (5,086) | (5,823) |
| Investments in financial assets | - | 25 |
| Disinvestments of property, plant and equipment and intangible assets | 148 | 2,198 |
| Interest collected | 178 | 316 |
| Investments in equity-accounted investees | (15) | (25) |
| Business combinations net of cash acquired | - | (1,303) |
| Net cash flows used in investing activities | (13,036) | (22,348) |
| Disposals (acquisitions) of non-controlling interests | - | - |
| Capital increases | 33 | - |
| Repurchase of treasury shares | (958) | (807) |
| Dividend distributions | (11,980) | (9,992) |
| Dividends distributed to non-controlling interests | (50) | (74) |
| Investments in current financial assets | (7,500) | - |
| Increase in financial liabilities | 69,797 | 48,185 |
| Decrease in financial liabilities | (44,510) | (53,398) |
| Decrease in lease liabilities | (4,238) | (4,036) |
| Net cash flows from (used in) financing activities | 594 | (20,121) |
| Change in cash and cash equivalents | 44,662 | 7,096 |
| Cash and cash equivalents - opening balance | 62,798 | 55,319 |
| Exchange differences | (1,873) | 383 |
| Cash and cash equivalents - closing balance | 105,586 | 62,798 |
| Share capital | Legal reserve | Translation reserve |
|
|---|---|---|---|
| Balance at 01.01.2019 | 10,000 | 2,000 | 2,660 |
| Owner transactions | |||
| Allocation of prior year profit | - | - | - |
| Defined benefit plans | - | - | - |
| Repurchase of treasury shares | - | - | - |
| Dividend distributions | - | - | - |
| Total owner transactions | 10,000 | 2,000 | 2,660 |
| Profit for the year | - | - | - |
| Other comprehensive income | - | - | 897 |
| Comprehensive income | - | - | 897 |
| Balance at 31.12.2019 | 10,000 | 2,000 | 3,557 |
| Balance at 01.01.2020 | 10,000 | 2,000 | 3,557 |
| Owner transactions | |||
| Allocation of prior year profit | - | - | - |
| Balance at 31.12.2020 | 10,000 | 2,000 | (2,686) |
|---|---|---|---|
| Comprehensive income | - | - | (6,243) |
| Other comprehensive expense | - | - | (6,243) |
| Profit for the year | - | - | - |
| Total owner transactions | 10,000 | 2,000 | 3,557 |
| Dividend distributions | - | - | - |
| Repurchase of treasury shares | - | - | - |
| Defined benefit plans | - | - | - |
| Capital increases | - | - | - |
| Total equity | Equity att. to non-controlling interests |
Equity | Profit for the year |
Retained earnings |
Other reserves | Hedging reserve |
|---|---|---|---|---|---|---|
| 118.288 | 296 | 117.992 | 30.678 | 39.798 | 32.950 | (93) |
| - | - | (30,678) | 6,689 | 23,990 | ||
| 340 | 340 | - | - | 340 | ||
| (807) | (807) | - | - | (807) | ||
| (9,992) | (9,992) | - | - | (9,992) | ||
| 107,828 | 296 | 107,532 | 0 | 46,487 | 46,480 | (93) |
| 35,047 | 28 | 35,019 | 35,019 | |||
| 343 | 29 | 314 | - | - | (314) | (270) |
| 35,390 | 57 | 35,333 | 35,019 | - | (314) | (270) |
| 143,220 | 353 | 142,868 | 35,019 | 46,487 | 46,166 | (363) |
| 143,220 | 353 | 142,868 | 35,019 | 46,487 | 46,166 | (363) |
| - | - | (35,019) | 12,308 | 22,711 | - | |
|---|---|---|---|---|---|---|
| 33 | - | - | - | - | - | |
| 767 | - | 767 | - | - | 767 | - |
| (958) | - | (958) | - | - | (958) | - |
| (12,030) | (50) | (11,980) | - | - | (11,980) | - |
| 131,032 | 336 | 130,697 | (0) | 58,795 | 56,706 | (363) |
| 35,118 | 5 | 35,112 | 35,112 | - | - | - |
| (6,529) | (36) | (6,493) | - | - | (177) | (73) |
| 28,589 | (31) | 28,619 | 35,112 | - | (177) | (73) |
| 159,621 | 304 | 159,317 | 35,112 | 58,795 | 56,530 | (436) |
Carel Industries S.p.A. (the "parent") heads the group of the same name and has its registered office in Via Dell'Industria 11, Brugine (PD). It is a company limited by shares and its tax code and VAT number is 04359090281. It is included in the Padua company register.
The group provides control instruments to the airconditioning, commercial and industrial refrigeration markets and also produces air humidification systems. It has 27 commercial companies including nine production sites which serve all the main markets.
As it is required to prepare consolidated financial statements, on 28 November 2016, the parent opted to draw up separate and consolidated financial statements starting from 31 December 2017 under the International Financial Reporting Standards (IFRS) endorsed by the European Union as per Regulation (EC) no. 1606/2002 of 19 July 2002, transposed into Italian law by Legislative decree no. 38/2005.
The parent's board of directors approved the consolidated financial statements at 31 December 2020 on 4 March 2021.
The consolidated financial statements include the results of the parent and its subsidiaries, based on their updated accounting records.
The Carel Industries Group's consolidated financial statements at 31 December 2020 were prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Commission with the procedure set out in article 6 of Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of 19 July 2002.
The IFRS include all the standards as well as the interpretations of the International Financial Reporting Standards Interpretations Committee (IFRS IC), previously called the Standing Interpretations Committee (SIC), endorsed by the European Union at the reporting date and included in the related EU regulations published at that date.
The consolidated financial statements include the statement of financial position, statement of profit or loss, statement of comprehensive income, statement of changes in equity, statement of cash flows and these notes. They were prepared assuming the parent and its subsidiaries will continue as going concerns. The group deems that it could adopt a going concern assumption pursuant to IAS 1.25/26 given its strong market position, very satisfactory profits and solid financial structure.
The consolidated financial statements were prepared in thousands of Euro, which is the group's functional and presentation currency as per IAS 21 The Effects of Changes in Foreign Exchange Rates. There may be rounding differences when items are added together as the individual items are calculated in Euros.
Statement of financial position. Assets and liabilities are presented as current or non-current as required by paragraph 60 and following paragraphs of IAS 1.
An asset or liability is classified as current when it meets one of the following criteria:
All other assets and liabilities are classified as non-current.
Statement of profit or loss. The group has opted to present the statement of profit or loss classifying items by their nature rather than their function, as this best represents the transactions undertaken during the year and its business structure. This approach is consistent with the group's internal management reporting system and international best practices for its sector. Following adoption of revised IAS 1, the group decided to present the statement of profit or loss and other comprehensive income as two separate statements.
Statement of comprehensive income. This statement, prepared in accordance with the IFRS, presents other items of comprehensive income that are recognised directly in equity.
Statement of cash flows. The group prepares this statement using the indirect method. Cash and cash equivalents included herein comprise the statement of financial position balances at the reporting date. Interest income and expense, dividends received and income taxes are included in the cash flows generated by operating activities. The group presents cash flows from operating activities and investing activities and changes in noncurrent financial position, current liabilities and current financial assets separately. If not specified, exchange rate gains and losses are classified in the operating activities as they refer to the translation of trade receivables and payables into Euros.
Statement of changes in equity. This statement shows changes in the equity captions related to:
The consolidated financial statements include the separate financial statements and financial statements of the parent, Carel Industries S.p.A., and its Italian and foreign subsidiaries, respectively, at 31 December 2020. Subsidiaries are those entities over which the parent has control, as defined in IFRS 10 Consolidated financial statements. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of the subsidiaries are consolidated starting from the date when control exists until when it ceases to exist.
Note [33] "Other information" lists the entities included in the consolidation scope at 31 December 2020.
The consolidated financial statements include the separate financial statements and financial statements of Carel Industries S.p.A. and the Italian and foreign entities over which it has direct or indirect control, respectively. Specifically, the consolidation scope includes:
The parent adopted the following consolidation criteria:
• assets, liabilities, revenue and expenses of the consolidated entities are consolidated using the lineby-line approach where the carrying amount of the parent's investments therein is eliminated against its share of the investee's equity. Any differences are treated in accordance with IFRS 10 Consolidated financial statements and IFRS 3 Business combinations. The portions attributable to non-controlling interests are recognised at the fair value of the assets acquired and liabilities assumed without recognising goodwill;
Business combinations are treated using the acquisition method. The consideration is recognised at fair value, calculated as the sum of the acquisition-date fair values of the assets transferred and liabilities incurred by the acquirer and the equity interests issued in exchange for control of the acquiree. Transaction costs are usually recognised in profit or loss when they are incurred.
The assets acquired and the liabilities assumed are recognised at their acquisition-date fair value, except for the following items which are measured in line with the relevant IFRS:
Goodwill is calculated as the excess of the aggregate of the consideration transferred for a business combination, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of the acquirer's previously held equity interest in the acquiree and the net of the acquisition-date fair value of the assets acquired and liabilities assumed. If this fair value is greater than the consideration transferred, the amount of any noncontrolling interest in the acquiree and the acquisitiondate fair value of the acquirer's previously held equity interest in the acquiree, the resulting gain is recognised immediately in profit or loss.
The amount of any non-controlling interest in the acquiree at the acquisition date is the pre-combination carrying amount of the acquiree's net assets.
Contingent consideration is measured at its acquisitiondate fair value and included in the consideration exchanged for the acquiree to calculate goodwill. Any subsequent changes in fair value, which are measurement period adjustments, are included in goodwill retrospectively. Changes in fair value which are measurement period adjustments are those that arise due to additional information becoming available about facts and circumstances that existed at the acquisition date and was obtained during the measurement period (that cannot exceed one year from the acquisition date). Any subsequent change in contingent consideration is included in profit or loss.
The consolidated financial statements at 31 December 2020 were prepared in accordance with the IFRS issued by the IASB, endorsed by the European Commission and applicable at the reporting date. They are presented in Euros, which is the group's functional currency, i.e., the currency of the primary economic environment in which it mainly operates. Amounts are rounded to the nearest thousand.
The consolidated financial statements present the financial position and performance of the parent and its subsidiaries. The financial statements used for consolidation purposes are those prepared by the subsidiaries pursuant to the IFRS at 31 December 2020.
The consolidated financial statements include the statement of profit or loss, statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows and these notes, which are an integral part thereof.
They were prepared using the historical cost criterion,
except for derivative financial instruments hedging currency and interest rate risks and available-for-sale financial assets, which were measured at fair value as required by IFRS 9 Financial Instruments: Recognition and measurement.
Preparation of consolidated financial statements under the IFRS requires management to make estimates and assumptions that affect the amounts in the financial statements and the notes. Actual results may differ from these estimates. Reference should be made to the "Use of estimates" section for details of the captions more likely to be affected by estimates.
Following its decision to adopt the IFRS starting from the consolidated financial statements at 31 December 2017, the group referred to the standards applicable from 1 January 2017 to prepare its consolidated financial statements at 31 December 2020, in accordance with the provisions of IFRS 1.
The group applied the following standards, amendments and interpretations for the first time starting from 1 January 2020:
• On 31 October 2018, the IASB published the Definition of material (Amendments to IAS 1 and IAS 8). The document amended the definition of "material" contained in IAS 1 Presentation of financial statements and IAS 8 Accounting policies, changes in accounting estimates and errors. This amendment aims to make the definition of "material" more specific and introduced the concept of "obscured information" to flank the definitions of omitted or misstated information already present in the two standards subject to the amendment. The amendment clarifies that information is "obscured" if it has been described in such a way that it has the same effect as if it had been omitted or misstated. The adoption of this amendment did not affect the group's consolidated financial statements;
• On 29 March 2018, the IASB published an amendment to the References to the conceptual framework in IFRS standards, which applies to annual periods beginning on or after 1 January 2020 but earlier application is allowed. The conceptual framework sets out the fundamental concepts for financial reporting that guide the Board in developing IFRS standards. It helps to ensure that the standards are conceptually consistent and that similar transactions are treated the same way, so as to provide useful information for investors, lenders and other creditors. The conceptual framework also assists companies in developing accounting
policies when no IFRS standard applies to a particular transaction, and more broadly, helps stakeholders to understand and interpret the standards. The adoption of this amendment did not affect the group's consolidated financial statements;
presence of an integrated collection of assets/processes and goods. However, to be considered a business, an acquired set of activities/processes and assets must include at least one input and one substantive process, which, together, contribute significantly to the ability to create outputs. To this end, the IASB replaced the term "ability to create outputs" with "ability to contribute to the creation of outputs" to clarify that a business can exist without including all of the inputs and processes needed to create outputs. The amendment also introduced an optional test (the concentration test) to determine that an acquired set of activities and assets is not a business if the price paid substantially refers to a single asset or group of assets. The amendment applies to all business combinations and acquisitions subsequent to 1 January 2020 but earlier application is allowed. The adoption of this amendment did not affect the group's consolidated financial statements;
• On 28 May 2020, the IASB published Covid-19-Related Rent Concessions (Amendment to IFRS 16). The amendment allows lessees to recognise rent concessions granted as a result of Covid-19 without having to analyse the contracts to see if they meet the definition of lease modifications as per IFRS 16. Therefore, the lessees who apply this exemption can account for such rent concessions directly in profit or loss at the effective date of the concession. The adoption of this amendment did not affect the group's consolidated financial statements.
Insurance contracts; and – IFRS 16 Leases.
These amendments become effective on 1 January 2021. The directors do not expect these amendments to significantly affect the group's consolidated financial statements.
At the reporting date, the EU's relevant bodies had not yet completed the endorsement process for adoption of the following amendments and standards:
These amendments become effective on 1 January 2022. The directors do not expect these amendments to significantly affect the group's consolidated financial statements.
Revenue is measured based on the fee contractuallyagreed with the customer and does not include amounts collected on behalf of third parties. The group recognises revenue when control of the goods or services is transferred to the customer. Revenue is recognised to the extent it is probable the group will receive the economic benefits and it can be measured reliably. Most contracts with customers provide for commercial discounts and discounts based on volumes, which modify the revenue itself. In defining the amount of the variable consideration that may be included in the transaction price, the group calculates the amount of variable consideration that cannot yet be considered realised at each reporting date.
Revenue from the sale of HVAC products and services refer to sales of products for air control and humidification in the industrial, residential and commercial segment (heat ventilation and air conditioning), while refrigeration revenue refers to sales to the food retail and food service segment. The sales in both markets can be divided into the following three macro channels: OEM (Original Equipment
Manufacturers), Dealers and Projects. Non-core revenue is earned on products that do not make up the group's core business.
The warranties related to these categories of products are warranties for general repairs and in most cases, the group does not provide extended warranties. The group recognises warranties in compliance with IAS 37 Provisions, contingent liabilities and contingent assets.
There are no significant services provided for a lengthy period of time.
Advertising and research costs are expensed in full as required by IAS 38 Intangible assets. Revenue from services is recognised when the services are rendered.
Revenue and expenses are recognised on an accruals basis in line with the interest accrued on the carrying amount of the related financial assets and liabilities using the effective interest method.
They are recognised when the shareholder's right to receive payment is established, which normally takes place when the shareholders pass the related resolution. The dividend distribution is recognised as a liability in the financial statements of the period in which the shareholders approve such distribution.
They reflect a realistic estimate of the group's tax burden, calculated in accordance with the laws enacted in the countries where the Carel Industries Group operates; current tax liabilities are recognised in the statement of financial position net of any payments on account.
Deferred tax assets and liabilities arise on temporary differences between the carrying amount of an asset or liability pursuant to the IFRS and its tax base, calculated using the current tax rates or tax rates reasonably expected to be enacted in future years. Deferred tax assets are only recognised when their recovery is probable while deferred tax liabilities are always recognised, except in the situations in which recording a tax liability would not be appropriate under IAS 12 Income taxes (for example on initial recognition of goodwill or a situation in which the group does not anticipate the reversal of the liability in the foreseeable future). The group does not apply any netting of current and deferred taxes. A tax liability is accounted for in the year in which the liability to pay a dividend is recognised, if untaxed reserves are distributed.
Foreign currency receivables and payables are translated into Euros using the transaction-date exchange rate. Any gains or losses when the foreign currency receivable is collected or the payable settled are recognised in profit or loss.
Revenue, income, costs and expenses related to foreign currency transactions are recognised at the spot rate ruling on the transaction date. At the closing date, foreign currency assets and liabilities, excluding non-current assets (which continue to be recognised using the transaction-date exchange rate) are re-translated using the spot closing rate and the related exchange gains or losses are recognised in profit or loss.
The main exchange rates (against the Euro) used to translate the financial statements of foreign currency operations at 31 December 2020 and 2019 (comparative figures) are set out below:
| Currencies | Average rate | Closing rate | |||
|---|---|---|---|---|---|
| 2019 | 2020 | 31.12. 2019 | 31.12. 2020 | ||
| US dollar | 1.120 | 1.142 | 1.123 | 1.227 | |
| Canadian dollar | 1.486 | 1.530 | 1.460 | 1.563 | |
| Australian dollar | 1.611 | 1.655 | 1.600 | 1.590 | |
| Hong Kong dollar | 8.772 | 8.859 | 8.747 | 9.514 | |
| Brazilian real | 4.413 | 5.894 | 4.516 | 6.374 | |
| Pound sterling | 0.878 | 0.890 | 0.851 | 0.899 | |
| South African rand | 16.176 | 18.766 | 15.777 | 18.022 | |
| Indian rupee | 78.836 | 84.639 | 80.187 | 89.661 | |
| Chinese renminbi (yuan) | 7.736 | 7.875 | 7.821 | 8.023 | |
| South Korean won | 1,305.320 | 1,345.580 | 1,296.280 | 1,336.000 | |
| Russian ruble | 72.455 | 82.725 | 69.956 | 91.467 | |
| Swedish krona | 10.589 | 10.485 | 10.447 | 10.034 | |
| Japanese yen | 122.006 | 121.846 | 121.940 | 126.490 | |
| Mexican peso | 21.557 | 24.519 | 21.220 | 24.416 | |
| UAE dirham | 4.111 | 4.195 | 4.126 | 4.507 | |
| Croatian kuna | 7.418 | 7.538 | 7.440 | 7.552 | |
| Thai baht | 34.757 | 35.708 | 33.415 | 36.727 | |
| Polish zloty | 4.298 | 4.443 | 4.257 | 4.560 | |
| Singapore dollar | 1.527 | 1.574 | 1.511 | 1.622 | |
| Ukrainian hryvnia | 28.922 | 30.851 | 26.720 | 34.769 |
They are recognised at historical cost, including ancillary costs necessary to ready the asset for the use for which it has been purchased.
Maintenance and repair costs that do not extend the asset's life and/or enhance its value are expensed when incurred; otherwise, they are capitalised.
Property, plant and equipment are stated net of accumulated depreciation and impairment losses calculated using the methods described later in this section. The depreciable amount of an asset is allocated on a systematic basis over its useful life, which is reviewed once a year. Any necessary changes are applied prospectively.
The depreciation rates of the main categories of property, plant and equipment are as follows:
| Industrial buildings | from 3% to 5% |
|---|---|
| Plant and machinery | from 10% to 15.5% |
| Industrial and commercial equipment | from 12% to 40% |
Land has an indefinite useful life and therefore is not depreciated.
Assets held under finance lease are recognised as rightof-use assets at the present value of the minimum lease payments. The liability to the lessor is shown under financial liabilities. The assets are depreciated over the lease term. Lease payments for short-term leases or leases of low-value assets are recognised in profit or loss over the lease term.
In compliance with the IFRIC agenda decision of November 2019 on the provisions of IFRS 16, in addition to the ESMA recommendations, the directors deemed it necessary to restate financial assets and liabilities linked to certain leases, specifically those for buildings where the parent carries out its production activities. In restating the lease term of such contracts, the parent not only assessed the contractual expiry date but also the enforceable period, i.e., the period in which the lessee and the lessor each had the right to terminate the lease without any penalty or significant costs.
Based on the estimates made and the data available to date, the directors deemed it reasonable to presume that the lease will be renewed. Accordingly, the leases for the Brugine production site were renewed to 2033 (the first and main lease was due to expire in 2021). The leases for the Croatian production site and that of the subsidiary Recuperator, expiring respectively in 2030 and 2032, were not modified due to the considerable term remaining. This modification led to an increase in right-of-use assets and lease liabilities for a total of €12,812 thousand. There was no effect on profit or loss for the year.
When the asset is sold or there are no future economic benefits expected from its use, it is derecognised and the gain or loss (calculated as the difference between the asset's sales price and carrying amount) is recognised in profit or loss in the year of derecognition.
This is the excess of the aggregate of the consideration transferred for a business combination, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of the acquirer's previously held equity interest in the acquiree over the net of the acquisition-date fair value of the assets acquired and liabilities assumed. Goodwill is not amortised but is tested annually for impairment or whenever events take place that suggest it may be impaired.
These are identifiable, non-monetary assets without physical substance that are controlled by the group and from which future economic benefits are expected to flow to the entity. They are initially recognised at cost when this can be reliably determined using the same methods applied to property, plant and equipment.
These assets are subsequently presented net of accumulated amortisation and any impairment losses. Their useful life is reviewed regularly and any changes are applied prospectively. Costs incurred to internally generate an intangible asset are capitalised in line with the provisions of IAS 38.
Their estimated average useful life is between three and fifteen years.
Gains or losses on the sale of an intangible asset are calculated as the difference between the asset's sales price and its carrying amount. They are recognised in profit or loss at the sales date.
Assets with an indefinite useful life are not amortised but are tested for impairment at least once a year to check whether their carrying amount has undergone impairment. The board of directors adopted a policy that defines the criteria for the impairment test, the controls to
be carried out to guarantee the reliability of the process and the procedure to approve the test, in line with Consob recommendation no. 0003907 of 15 January 2015.
Amortisable assets are tested for impairment whenever events or circumstances suggest that their carrying amount cannot be recovered (trigger events). In both cases, the impairment loss is the amount by which the asset's carrying amount exceeds its recoverable amount, which is the higher of the asset's fair value less costs to sell and its value in use. If it is not possible to determine an asset's value in use, the recoverable value of the cash-generating unit (CGU) to which the asset belongs is calculated. Assets are grouped into the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The group calculates the present value of the estimated future cash flows of the CGU using a discount rate that reflects the time value of money and the risks specific to the asset.
If an impairment loss on an asset other than goodwill subsequently decreases or no longer exists, the carrying amount of the asset or the CGU is increased to the new estimate of its recoverable amount which will not, in any case, exceed the carrying amount the asset would have had if no impairment loss had been recognised.
Reversals of impairment losses are recognised immediately in profit or loss using the model provided for in IAS 16 Property, plant and equipment.
Investments in associates and joint ventures are measured using the equity method, while other investments are measured at fair value through other comprehensive income. If fair value cannot be reliably determined, the investments are measured at cost adjusted for impairment losses, which are recognised in profit or loss.
If the reasons for the impairment loss no longer exist, the equity investments recognised at cost are revalued with reversal of the impairment loss through profit or loss.
They are initially recognised at their fair value and subsequently measured at amortised cost. Financial assets are initially recognised at their fair value increased, in the case of assets other than those recognised at fair value through profit or loss, by ancillary costs. When subscribed, the group assesses whether a contract includes embedded derivatives. The embedded derivatives are separated from the host contract if this is not measured at fair value when the analysis shows that the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract.
The group classifies its financial assets after initial recognition and, when appropriate and permitted, reviews this classification at the reporting date. It recognises all purchases and sales of financial assets
at the transaction date, i.e., the date on which the group assumes the commitment to buy the asset.
All financial assets within the scope of IFRS 9 are recognised at amortised cost or fair value depending on the business model for managing the financial asset and the asset's contractual cash flow characteristics. Specifically:
subsequently measured at fair value through other comprehensive income (FVTOCI);
• all other debt and equity instruments are subsequently measured at fair value through profit or loss (FVTPL).
When a debt instrument measured at FVTOCI is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment. On the other hand, when an equity instrument measured at FVTOCI is derecognised, the cumulative gain or loss that was previously recognised in other comprehensive income is transferred to retained earnings, without affecting profit or loss.
Debt instruments subsequently measured at amortised cost or FVTOCI are tested for impairment.
Any impairment losses are recognised in profit or loss after use of the fair value reserve if this has been set up. Subsequent reversals of impairment losses are recognised in profit or loss except in the case of equity instruments for which the reversal is recognised in equity.
They are measured at the lower of purchase and/or production cost, calculated using the weighted average cost method, and net realisable value. Purchase cost comprises all ancillary costs. Production cost includes the directly related costs and a portion of the indirect costs that are reasonably attributable to the products.
Work in progress is measured at average cost considering the stage of completion of the related contracts.
Obsolete and/or slow-moving items are written down to reflect their estimated possible use or realisation through an allowance.
The write-down is reversed in subsequent years if the reasons therefor no longer exist.
They are initially recognised at fair value, which is the same as their nominal amount, and subsequently measured at amortised cost and impaired, if appropriate. Their carrying amount is adjusted to their estimated realisable amount through the loss allowance.
Foreign currency trade receivables are translated into Euros using the transaction-date exchange rate and subsequently retranslated using the closing rate. The exchange gain or loss is recognised in profit or loss.
They include cash, i.e., highly liquid investments (maturity of less than three months) that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
This caption includes the Italian post-employment benefits ("TFR") and other employee benefits covered by IAS 19 Employee benefits. As a defined benefit plan, independent actuaries calculate the TFR at the end of each reporting period. The liability recognised in the statement of financial position is the present value of the defined benefit obligation at the end of the reporting period. These benefits are calculated using the projected unit credit method.
As required by IAS 37 Provisions, contingent liabilities and contingent assets, the group recognises a provision when it has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Changes in estimates from one period to another are recognised in profit or loss.
Where the effect of the time value of money is material and the payment dates of the obligation can be estimated reliably, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. Any subsequent changes arising from the passage of time are recognised as financial income or expense in the statement of profit or loss.
No provision is made for possible but not probable risks but the group provides adequate disclosure thereon in the notes.
Trade payables and other current liabilities which fall due within normal trading terms are initially recognised at cost, which equals their nominal amount, and are not discounted. When their due date is longer than normal trading terms, the interest is separated using an appropriate market rate.
They are classified as current liabilities unless the group has an unconditional right to defer their payment for at least 12 months after the reporting date. The group removes the financial liability when it is extinguished and the group has transferred all the risks and rewards related thereto. Financial liabilities are initially recognised at their fair value and subsequently measured using the amortised cost method.
The group solely uses derivatives to hedge currency risk on foreign currency commercial transactions and interest risk on its medium to long-term debt.
Initial recognition and subsequent measurement is at the derivatives' fair value, applying the following accounting treatments:
When the conditions for application of hedge accounting are no longer met, the group reclassifies the fair value gains or losses on the derivative directly to profit or loss.
Preparation of the consolidated financial statements requires management to apply accounting policies and methods that, in certain circumstances, are based on difficult and subjective judgements, past experience or assumptions that are considered reliable and realistic at that time depending on the related circumstances.
Application of these estimates and assumptions affects the amounts recognised in the statement of financial position, the statement or profit or loss and the statement of cash flows as well as the disclosures. Actual results may differ from those presented in the consolidated financial statements due to the uncertainty underlying the
assumptions and the conditions on which the estimates were based. As detailed later on, the estimates took into consideration the uncertainties generated by the ongoing Covid-19 pandemic, also beyond the reporting date.
The captions that require the greater use of estimates and for which a change in the conditions underlying the assumptions may affect the consolidated financial statements are:
to exercise. The incremental borrowing rate is calculated by considering the type of leased asset, the jurisdictions in which it is acquired and the currency in which the lease is denominated. Any changes in the reference scenarios or market trends could require a review of the above components. The continuation of the pandemic could impact the estimates related to leases, changing the directors' decisions on determining the lease term in addition to affecting the incremental borrowing rate.
At least once a year, the group tests goodwill for impairment. It calculates the recoverable amount of the CGU as the value in use using the discounted cash flow method applying assumptions, such as estimates of future increases in sales, operating costs, the growth rate of the terminal value, investments, changes in working capital and the weighted average cost of capital (discount rate).
The value in use may change if the main estimates and assumptions made in the plan change and, hence, the impairment test. Therefore, the realisable value of the recognised assets may also change.
The impairment test took into consideration the effects of the Covid-19 pandemic, especially with regard to forecast cash flows which were estimated using the information available to the directors regarding market conditions and the prospects of recovery from the crisis.
IFRS 13 is the only reference source for fair value measurement and the related disclosures when this measurement is required or permitted by another standard. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard replaces and extends
the disclosure required about fair value measurement in other standards, including IFRS 7 Financial instruments: disclosures.
IFRS 13 establishes a fair value hierarchy that categorises into three levels the inputs to valuation techniques used to measure fair value in hierarchical order as follows:
The method used to estimate fair value is as follows:
based on broker prices and is calculated considering the present value of the future cash flows discounted using the reporting-date interest rates (level 2).
Reference should be made to the specific comments provided in the notes to the assets or liabilities for more information about the assumptions used to determine fair value.
The fair value of financial instruments not quoted on an active market is calculated in accordance with valuation techniques generally adopted by the financial sector and specifically:
The objective of IFRS 7 is to require entities to provide disclosures in their financial statements that enable users to evaluate:
The principles in this standard complement the principles for recognising, measuring and presenting financial assets and financial liabilities in IAS 32 Financial instruments: presentation and IFRS 9.
This section presents the supplementary disclosures required by IFRS 7.
The accounting policies applied to measure financial instruments are described in the section on the Accounting policies.
The group's operations expose it to a number of financial risks that can affect its financial position, financial performance and cash flows due to the impact of its financial instruments.
Tali rischi sono così riassumibili:
The parent's board of directors has overall responsibility for the design and monitoring of a financial risk management system. It is assisted by the various units involved in the operations generating the different types of risk.
The units establish tools and techniques to protect the group against the above risks and/or transfer them to third parties (through insurance policies) and they assess the risks that are neither hedged nor insured pursuant to the guidelines established by the board of directors for each specific risk.
The degree of the group's exposure to the different financial risk categories is set out below.
The group operates on various national markets with a high number of medium and large-sized customers, mostly regional or local distributors. Therefore, it is exposed to credit risk in conjunction with its customers' ability to obtain credit from banks.
The group's credit risk management policy includes rating its customers, setting purchase limits and issuing periodic reports, to ensure tight control over credit collection.
Each group company has a credit manager in charge of credit collection on sales made in their markets. Companies active in the same market (e.g., the Italian companies) exchange information about common customers electronically and coordinate delivery blocks or the commencement of legal action.
The loss allowance is equal to the nominal amount of the uncollectible receivables after deducting the part of the receivables secured with bank collateral. The group analyses all the collateral given to check collectability. Impairment losses are recognised considering past due receivables from customers with financial difficulties and receivables for which legal action has commenced.
The directors did not detect a deterioration in credit quality or collection times due to the spread of Covid-19, as can be seen in the breakdown below. Furthermore, the group did not modify payment terms applied to customers or its credit risk management policies, while it prudently reinforced monitoring of credit positions with customers.
The following table shows a breakdown of trade receivables by past due bracket:
| 31.12.2020 | 31.12.2019 | ||||
|---|---|---|---|---|---|
| Trade receivables |
Loss allowance |
Trade receivables |
Loss allowance |
||
| Not yet due | 53,284 | (278) | 50,423 | (246) | |
| Past due < 6 months | 4,608 | (40) | 8,153 | (65) | |
| Past due > 6 months | 225 | (74) | 376 | (102) | |
| Past due > 12 months | 632 | (630) | 725 | (712) | |
| Total | 58,750 | (1,022) | 59,677 | (1,125) |
The group has not recorded significant changes in credit management and related risks caused by the Covid-19 pandemic.
The group has a high level of liquidity and limited net financial debt. During the year, despite the complicated situation arisen in 2020 caused by the spread of Covid-19, the group had easy access to additional funding, without additional costs, even during the lockdown period. Regardless of the considerable contraction in the second quarter of the year, the group was profitable and able to generate significant liquidity. Therefore, it is not believed that liquidity risk was increased by the pandemic.
The group mainly deals with well-known and reputable customers. Its policy is to constantly monitor those customers that request payment extensions.
As required by IFRS 7, the next table shows the cash flows of the group's financial liabilities by maturity:
| 31.12.2020 | TOTAL | Total cash flows |
Within one year |
From one to five years |
After five years |
|---|---|---|---|---|---|
| Bank loans and borrowings at amortised cost | 86,975 | 87,681 | - | 87,681 | - |
| Lease liabilities | 24,597 | 26,155 | - | 11,420 | 14,735 |
| Effective designated derivative hedges | 578 | 578 | - | 578 | |
| Other loans and borrowings at amortised cost | 1,506 | 1,534 | - | 1,436 | 99 |
| Non-current financial liabilities | 113,657 | 115,948 | - | 101,114 | 14,834 |
| 31.12.2020 | TOTAL | Total cash flows |
Within one year |
From one to five years |
After five years |
|---|---|---|---|---|---|
| Current portion of bank loans at amortised cost | 44,767 | 45,302 | 45,302 | - | - |
| Lease liabilities | 3,588 | 3,606 | 3,606 | ||
| Bank borrowings at amortised cost | 148 | 148 | 148 | - | - |
| Other loans and borrowings at amortised cost | 523 | 538 | 538 | - | - |
| Derivatives held for trading at fair value through profit or loss |
55 | 55 | 55 | - | - |
| Current financial liabilities | 49,080 | 49,649 | 49,649 | - | - |
As the group sells its products in various countries around the world, it is exposed to the risk deriving from changes in foreign exchange rates. This risk mainly arises on sales in currencies like the US dollar, the Chinese renminbi and the Polish zloty.
In addition, the parent has investments in subsidiaries
denominated in foreign currency. Changes in equity due to fluctuations in exchange rates are recognised in the translation reserve. The group does not currently hedge against the risk arising on the translation of equity. The following table shows the group's exposure arising from foreign currency assets and liabilities, highlighting the most significant for each year:
| 31.12.2020 | EUR | USD | PLN | CNY | Other currencies | Total |
|---|---|---|---|---|---|---|
| Total assets | 314,661 | 48,930 | 12,812 | 28,637 | 9,105 | 414,145 |
| Total liabilities | 217,648 | 21,143 | 2,980 | 7,128 | 5,626 | 254,525 |
The next table shows a sensitivity analysis of the risk arising on the translation of foreign currency financial statements of the consolidated entities assuming a 10% increase or decrease in the average annual exchange rate. The effect is calculated considering the impact of this increase or decrease on the key performance indicators used by management:
| 31.12.2020 | 31.12.2019 | |||||
|---|---|---|---|---|---|---|
| Net revenue | Average annual rate |
Rate +10% | Rate -10% | Average annual rate |
Rate +10% | Rate -10% |
| USD | 41,129 | 37,390 | 45,699 | 44,880 | 40,800 | 49,867 |
| GBP | 6,686 | 6,078 | 7,429 | 7,399 | 6,727 | 8,221 |
| CNY | 30,004 | 27,276 | 33,338 | 27,829 | 25,299 | 30,921 |
| AUD | 5,302 | 4,820 | 5,891 | 8,102 | 7,366 | 9,002 |
| ZAR | 3,429 | 3,117 | 3,810 | 4,183 | 3,803 | 4,648 |
| BRL | 5,568 | 5,062 | 6,187 | 5,552 | 5,047 | 6,169 |
| PLN | 22,751 | 20,683 | 25,279 | 18,757 | 17,052 | 20,841 |
| Other currencies | 6,531 | n.a | n.a | 7,464 | n.a | n.a |
| EURO | 210,210 | 210,210 | 210,210 | 203,192 | 203,192 | 203,192 |
CAREL INDUSTRIES Group 2020 Annual Report
| 31.12.2020 | 31.12.2019 | |||||
|---|---|---|---|---|---|---|
| Profit before tax | Average annual rate |
Rate +10% | Rate -10% | Average annual rate |
Rate +10% | Rate -10% |
| USD | 26,124 | 23,749 | 29,026 | 13,541 | 12,310 | 15,045 |
| GBP | 4,896 | 4,450 | 5,439 | 4,723 | 4,293 | 5,247 |
| CNY | (9,855) | (8,959) | (10,950) | (7,878) | (7,162) | (8,753) |
| AUD | 3,447 | 3,133 | 3,830 | 5,988 | 5,444 | 6,654 |
| ZAR | 2,498 | 2,271 | 2,776 | 3,057 | 2,779 | 3,397 |
| BRL | 3,794 | 3,449 | 4,216 | 3,016 | 2,742 | 3,351 |
| PLN | 7,349 | 6,681 | 8,165 | 10,847 | 9,861 | 12,053 |
| Other currencies | (12,218) | n.a | n.a | (9,039) | n.a | n.a |
| EURO | 18,477 | 18,477 | 18,477 | 20,702 | 20,702 | 20,702 |
The group agrees currency hedges to set the exchange rate in line with forecast sales and purchases volumes to protect itself against currency fluctuations with respect to its foreign currency transactions. The hedges are based on the group's net exposure using currency forwards, to hedge the transaction risk and/or plain vanilla options to cash flows.
hedge the economic risk in line with its financial policy. The hedged risk is part of the global risk and the hedges are not speculative.
Moreover, as the parent prepares its consolidated financial statements in Euros, fluctuations in the exchange rates used to translate the financial statements of the foreign subsidiaries into the presentation currency could affect the group's financial position, financial performance and
Exchange rates were more volatile in 2020, mainly due to the uncertainties caused by the Covid-19 pandemic. As a result, there was an increase in financial statements captions linked to the translation of amounts into Euro, specifically from the Brazilian real, US dollar and Chinese renminbi. Management constantly monitors exchange rates and the exposure of current assets and liabilities in foreign currencies so that it can put suitable hedges in place to mitigate the risk.
This is the risk that the fair value and/or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The group is exposed to interest rate risk due to its need to finance its operating activities, both production and financial (the purchase of assets), and to invest its available liquidity. Changes in market interest rates may negatively or positively affect the group's results and, hence, indirectly the cost of and return on financing and investing activities. The group regularly checks its exposure to interest rate fluctuations and manages such risks through the use of derivatives, in accordance with its financial policies. With regard to such policies, the use of derivatives is reserved exclusively for the management of interest rate fluctuations connected to cash flows and they are not agreed or held for trading purposes.
It solely uses interest rate swaps (IRS), caps and collars to do so.
The group's debt mainly bears floating interest rates. When deemed significant, the group agrees hedging instruments to neutralise fluctuations in interest rates and agrees a set future expense to cover up to 100% of its future cash outflows. Given its ample liquidity, it has an immaterial liquidity risk with respect to its short-term deadlines and, therefore, this risk principally refers to its medium to long-term financing. In 2020, notwithstanding the difficult market conditions caused by Covid-19, the group had significant access to credit at reduced interest rates. Therefore, it is not believed that interest rate risk increased during the year.
The derivatives used to hedge such risk are generally cash flow hedges in order to set the interest to be paid on financing and obtain an optimum blend of floating and fixed interest rates applied to its financing.
The counterparties are major banks. Derivatives are measured at fair value.
The group is subjected to increasing competitive pressure due to the entry of new players into the OEM market (large international groups) and the development of new organised markets which constantly push prices down, especially in the electronics sector.
Demand for the group's products is also affected by fluctuations affecting the distribution channels of products and applications which, as noted, are mostly the OEM operating indirectly in the construction sector and operators linked to the food distribution sector (for the refrigeration business).
The group protects itself from the business risks deriving from its normal involvement in markets with these characteristics by focusing on technological innovation and geographical diversification and expansion leading to the group gaining international status as it is active on all the continents either directly or through exclusive third party franchisees.
The production sites in Italy, China, Brazil, the United States, Croatia and Germany aim to optimise production. They will also act as potential disaster recovery centres to deal with catastrophes that shut down production at the main site in Italy, where the parent has its registered office. The group's strategy is also to base its production near its markets and customers to provide faster time-to-market services and increase its production output to serve the rapidly growing markets.
The ongoing production structure reorganisation, the related cost savings, geographical diversification and, last but not least, the group's constant commitment to searching for innovative technological solutions make it easier to be competitive.
In 2020, demand for group products did not significantly slow down due to the Covid-19 pandemic. The dynamics of the different markets, in terms of both their geographical size and product families, included in legislative
measures, were closely monitored, both in order to adjust commercial, procurement and production policies and to identify opportunities to develop new products.
The increasing attention paid to environmental issues and climate change by the main global institutions, as well as the growing awareness among the world's population of the climate impacts that industries have both at production level and in terms of consumption of their products, have led the directors to assess the possible effects that these changes could have on the management of the group's business.
Dedicated resources at Carel Industries S.p.A., HygroMatik and Carel Electronic (Suzhou) Co. Ltd. manage environmental issues as these sites have the international ISO 14001:2015 certification and, accordingly, draw up specific environmental policies to accompany the policy defined at group level.
The directors do not currently believe that there are specific risks that the climate change could impact the group's assets that should be considered, for example, as part of the forward-looking information underlying impairment testing, since there are no production and commercial sites in high-risk areas.
At 31 December 2020, property, plant and equipment amount to €74,880 thousand compared to €63,775 thousand at 31 December 2019.
The following table provides a breakdown of the caption and the changes of the year.
| Land and buildings |
Plant and machinery |
Industrial and commercial equipment |
Other items of property, plant and equipment |
Assets under construction and payments on account |
Total | |
|---|---|---|---|---|---|---|
| Balance at 31 December 2018 | 7,799 | 14,300 | 7,379 | 4,178 | 3,904 | 37,560 |
| - Historical cost | 12,274 | 31,475 | 35,415 | 14,438 | 3,904 | 97,505 |
| - Accumulated depreciation | (4,474) | (17,176) | (28,036) | (10,260) | - | (59,946) |
| Changes in 2019 | ||||||
| - Right-of-use assets at 1 January 2019 |
14,137 | 0 | 388 | 1,300 | - | 15,824 |
| - Investments | 438 | 2,668 | 4,460 | 1,814 | 8,355 | 17,735 |
| - Investments in right-of-use assets | 2,307 | - | 110 | 594 | - | 3,011 |
| - Business combinations (historical cost) |
- | - | - | 34 | - | 34 |
| - Reclassifications (historical cost) | 12,401 | 914 | 250 | (168) | (11,459) | 1,938 |
| - Sales (historical cost) | (1,826) | (1,360) | (615) | (846) | (14) | (4,662) |
| - Exchange differences on historical cost |
12 | 5 | 24 | 84 | 52 | 177 |
| - Exchange differences on accumulated depreciation |
(46) | (1) | (47) | (50) | - | (144) |
| - Exchange differences on right of-use assets |
5 | 3 | - | 8 | ||
| - Depreciation | (512) | (2,152) | (2,996) | (1,452) | - | (7,112) |
| - Depreciation of right-of-use assets | (3,066) | (165) | (601) | - | (3,831) | |
| - Reclassifications (accumulated depreciation) |
(385) | (101) | 3 | 109 | - | (374) |
| - Restatement of right-of-use assets | 204 | - | - | 1 | - | 205 |
| - Sales (accumulated depreciation) | 985 | 1,062 | 578 | 779 | - | 3,404 |
| Total changes | 24,654 | 1,034 | 1,991 | 1,602 | (3,066) | 26,214 |
| Balance at 31 December 2019 | 32,453 | 15,334 | 9,370 | 5,780 | 838 | 63,775 |
| including: | ||||||
| - Historical cost | 39,747 | 33,702 | 40,032 | 17,253 | 838 | 131,572 |
| - Accumulated depreciation | (7,294) | (18,368) | (30,662) | (11,473) | - | (67,798) |
| Land and buildings |
Plant and machinery |
Industrial and commercial equipment |
Other items of property, plant and equipment |
Assets under construction and payments on account |
Total | |
|---|---|---|---|---|---|---|
| Balance at 31 December 2019 | 32,453 | 15,334 | 9,370 | 5,780 | 838 | 63,775 |
| - Historical cost | 39,747 | 33,702 | 40,032 | 17,253 | 838 | 131,572 |
| - Accumulated depreciation | (7,294) | (18,368) | (30,662) | (11,473) | - | (67,798) |
| Changes in 2020 | ||||||
| - Investments | 579 | 3,118 | 2,374 | 1,127 | 1,062 | 8,260 |
| - Investments in right-of-use assets |
3,436 | - | - | 987 | - | 4,423 |
| - Reclassifications (historical cost) | 33 | (163) | 443 | 36 | (845) | (496) |
| - Impairment losses | - | (150) | (16) | - | - | (166) |
| - Sales (historical cost) | - | (40) | (69) | (708) | (3) | (821) |
| - Sales - Right-of-use assets historical cost |
(588) | - | - | (161) | - | (749) |
| - Exchange differences on historical cost |
(679) | (697) | (260) | (397) | (67) | (2,099) |
| - Exchange differences on accumulated depreciation |
122 | 268 | 156 | 250 | - | 796 |
| - Exchange differences on right of-use assets |
(324) | - | - | (19) | - | (343) |
| - Depreciation | (716) | (2,302) | (3,300) | (1,414) | - | (7,733) |
| - Depreciation of right-of-use assets |
(3,230) | - | (165) | (695) | - | (4,090) |
| - Reclassifications (accumulated depreciation) |
(20) | (7) | 2 | - | - | (24) |
| - Restatement of right-of-use assets |
12,812 | - | - | - | - | 12,812 |
| - Sales (accumulated depreciation) |
- | 23 | 36 | 650 | - | 709 |
| - Sales - Right-of-use assets (accumulated depreciation) |
563 | - | - | 64 | - | 627 |
| Total changes | 11,988 | 51 | (798) | (281) | 146 | 11,106 |
| Balance at 31 December 2020 | 44,441 | 15,385 | 8,572 | 5,499 | 984 | 74,880 |
| including: | ||||||
| - Historical cost | 42,204 | 35,770 | 42,504 | 18,118 | 984 | 139,580 |
| - Accumulated depreciation | 2,237 | (20,385) | (33,932) | (12,619) | 0 | (64,700) |
Land and buildings" increased as a result of investments in right-of-use assets after new leases were signed. Moreover, as mentioned in the directors' report, the directors deemed it necessary to restate financial assets and liabilities linked to certain leases, specifically those for buildings where the parent carries out its production activities. In restating the lease term of such contracts, the parent not only assessed the contractual expiry date but also the enforceable period, i.e., the period for which the lessee and the lessor each had the right to terminate the lease without any penalty or significant costs. Based on the estimates made and the data available to date, the directors deemed it reasonable to renew the lease contract beyond the current term. Accordingly, the leases for the Brugine production site were renewed to 2033 (the first and main lease was due to expire in 2021). This modification led to an increase in the caption for a total of €12,812 thousand classified as "Restatement of right-of-use assets".
"Plant and machinery" include the specific assets of the production lines and infrastructures; the increase mainly related to investments at the Croatian site to increase the production capacity on the inverter line and to improve the business continuity on programmable products. Investments were made at the US site in order to boost local production and make the region more independent. Investments continued in the SMT lines at the Chinese site. Further investments were made by Recuperator to increase the production capacity for high efficiency plates. "Industrial and commercial equipment" principally include production equipment and the main investments were at the parent's site and the Chinese site.
Increases in "Other items of property, plant and equipment" are mainly due to improvements and investments made in Italy.
A breakdown of property, plant and equipment by geographical segment is as follows:
| 2020 | 2019 | |
|---|---|---|
| Europe, Middle East and Africa | 50,380 | 38,124 |
| APAC | 16,280 | 16,716 |
| North America | 7,451 | 7,986 |
| South America | 770 | 949 |
| Total | 74,880 | 63,775 |
The group's property, plant and equipment were not mortgaged or pledged in either year. They are suitably hedged for risks deriving from losses and/or damage thereto through insurance policies taken out with leading
The group did not capitalise borrowing costs, in line with previous years.
At 31 December 2020, this caption amounts to €89,498 thousand compared to €90,534 thousand at the end of 2019. The following table presents changes in these assets:
| Development expenditure |
Trademarks, industrial patents and software licences |
Goodwill | Other assets |
Assets under development and payments on account |
Total | |
|---|---|---|---|---|---|---|
| Balance at 31 December 2018 | 3,282 | 11,516 | 47,628 | 25,181 | 3,519 | 91,126 |
| - Historical cost | 18,880 | 22,501 | 47,628 | 25,877 | 3,519 | 118,405 |
| - Accumulated amortisation | (15,598) | (10,985) | - | (697) | - | (27,279) |
| Changes in 2019 | ||||||
| - Investments | 946 | 2,327 | - | - | 2,550 | 5,823 |
| - Reclassifications | 2,625 | (897) | - | - | (3,294) | (1,566) |
| - Business combinations (historical cost) |
- | 16 | 980 | - | - | 996 |
| - Sales (historical cost) | - | (159) | - | - | - | (159) |
| - Exchange differences on historical cost |
- | 31 | 14 | 11 | (3) | 52 |
| - Exchange differences on accumulated amortisation |
- | 21 | - | (3) | - | 18 |
| - Amortisation | (1,643) | (2,169) | - | (1,992) | - | (5,804) |
| - Business combinations (accumulated amortisation) |
- | (8) | - | - | - | (8) |
| - Reclassifications (accumulated amortisation) |
- | 1 | - | - | - | 1 |
| - Sales (accumulated amortisation) |
- | 56 | - | - | - | 56 |
| Total changes | 1,928 | (782) | 994 | (1,984) | (747) | (592) |
| Balance at 31 December 2019 | 5,210 | 10,734 | 48,622 | 23,196 | 2,772 | 90,534 |
| including: | ||||||
| - Historical cost | 22,451 | 23,818 | 48,622 | 25,888 | 2,772 | 123,550 |
| - Accumulated amortisation | (17,241) | (13,084) | - | (2,691) | - | (33,016) |
| Development expenditure |
Trademarks, industrial patents and software licences |
Goodwill | Other assets |
Assets under development and payments on account |
Total | |
|---|---|---|---|---|---|---|
| Balance at 31 December 2019 |
5,210 | 10,734 | 48,622 | 23,196 | 2,772 | 90,534 |
| - Historical cost | 22,451 | 23,818 | 48,622 | 25,888 | 2,772 | 123,550 |
| - Accumulated amortisation | (17,241) | (13,084) | - | (2,691) | - | (33,016) |
| Changes in 2020 | ||||||
| - Investments | 210 | 2,198 | 469 | - | 2,208 | 5,086 |
| - Reclassifications | 1,330 | 165 | - | (2) | (992) | 501 |
| - Sales (historical cost) | - | - | - | - | (37) | (37) |
| - Exchange differences on historical cost |
(9) | (46) | (52) | (25) | (12) | (142) |
| - Exchange differences on accumulated amortisation |
1 | 20 | - | 8 | - | 29 |
| - Amortisation | (1,795) | (2,708) | - | (1,990) | - | (6,493) |
| - Reclassifications (accumulated amortisation) |
- | 20 | - | - | 20 | |
| Total changes | (262) | (350) | 418 | (2,008) | 1,167 | (1,036) |
| Balance at 31 December 2020 |
4,948 | 10,384 | 49,040 | 21,188 | 3,939 | 89,498 |
| including: | ||||||
| - Historical cost | 23,983 | 26,135 | 49,040 | 25,861 | 3,939 | 128,958 |
| - Accumulated amortisation | (19,035) | (15,751) | - | (4,673) | - | (39,460) |
A breakdown of intangible assets by geographical segment is as follows:
| 2020 | 2019 | |
|---|---|---|
| Europe, Middle East and Africa | 86,025 | 87,671 |
| APAC | 1,896 | 1,686 |
| North America | 1,574 | 1,173 |
| South America | 3 | 4 |
| Total | 89,498 | 90,534 |
With reference to intangible assets:
• the balance of development expenditure shows the expenditure related to projects developed almost entirely by the parent and partially by the Chinese subsidiary that have been capitalised and refer to the production of new innovative products or substantial
improvements to existing products incurred before the start of commercial production or use. This expenditure is capitalised when all the requirements of IAS 38.57 are met. Investments made in 2019 and 2020 related to the projects developed and available for use in those years. Assets under development and payments on account include costs incurred for projects that had not been completed at the reporting date. The reclassifications refer to completed projects, for which amortisation has commenced. Impairment losses are recognised as Amortisation, depreciation and impairment losses in the statement of profit or loss;
At 31 December 2020, goodwill amounts to €49,040 thousand, compared to €48,622 thousand at 31 December 2019. The increase is due to completion of the purchase price allocation procedure in relation to the consolidation of Enersol Inc which led to the identification of a variable price component.
Furthermore, the caption includes amounts that are not material individually or collectively, shown in the caption Other goodwill.
| 31.12.2020 | Increase | Change in translation reserve |
31.12.2019 | |
|---|---|---|---|---|
| HygroMatik GmbH | 38,499 | - | - | 38,499 |
| Recuperator S.p.A. | 6,326 | - | - | 6,326 |
| Carel Thailand CO Ltd | 2,004 | - | (50) | 2,054 |
| Enersol Inc. | 1,449 | 469 | - | 980 |
| Other goodwill | 763 | - | - | 763 |
| Total | 49,040 | 469 | (50) | 48,622 |
As required by IAS 36, the group tests goodwill recognised in its consolidated financial statements for impairment at least once a year, including if there are no indicators of impairment.
Goodwill is recognised on the acquisitions shown in the previous table considered as the CGUs for impairment testing purposes. Therefore, the group only tested those CGUs to which goodwill had been allocated as impairment factors were not identified for the other CGUs. The principal test methods and results for the following main CGUs are shown below:
The recoverable amount of goodwill of each CGU is determined by calculating their value in use.
The methods and assumptions underlying the impairment tests of the CGUs included:
(ten year) of the countries/markets in which the CGUs are based, adjusted by the market risk premium of each country to account for the investment risk.
The plan used for testing the Recuperator CGU for impairment covers the 2021-2024 period and was approved by the subsidiary's board of directors on 17 February 2021, while that used for testing the HygroMatik CGU for impairment covers the 2021-2024 period and was approved by the subsidiary's board of directors on 11 February 2021. Both plans were modified with respect to the impairment test of 31 December 2019 also to reflect the effects of Covid-19 on the business of the two CGUs, in addition to how and when the CGUs can return to pre-Covid-19 volumes.
| CGU | Periodo di piano | Tasso g | WACC |
|---|---|---|---|
| Recuperator | 2021-2024 | 1.96% | 8.08% |
| HygroMatik | 2021-2024 | 2.00% | 7.89% |
| Enersol | 2021-2023 | 1.50% | 8.14% |
| Thailand | 2021-2023 | 1.00% | 8.40% |
As per the guidelines set by the regulators, the financial parameters were not modified to consider Covid-19 as the uncertainties related to the continuation of the pandemic are already reflected in the cash flow forecasts.
The value in use, calculated using the discounted cash flows, confirmed the carrying amount of goodwill. Specifically, the test shows respective coverage of €1.6 million and €3.1 million for the Recuperator and HygroMatik CGUs which were allocated the highest goodwill.
Although the directors believe that the assumptions used are reasonable and represent the most probable scenarios based on the available information, the result of the test could differ should the above assumptions significantly change. Specifically, the growth estimates could change considerably due to the continuation of the pandemic or in the event of an upsurge of the pandemic in certain geographical segments.
Accordingly, stress tests were carried out, related, in particular, to:
• the gross operating profit estimated over the explicit period of the plans, assuming that the possible deterioration of the macroeconomic scenario will affect that period;
• certain variables, such as government bond yield and market risk premium, used to determine the WACC discount rate.
These stress tests reveal that:
Therefore, there was no indication of impairment of goodwill at 31 December 2020.
At 31 December 2020, this caption amounts to €724 thousand compared to €536 thousand at 31 December 2019. It may be analysed as follows:
| Registered office |
Investment % | 31.12.2020 | Increase | Change in translation reserve |
Equity accounting |
31.12.2019 | |
|---|---|---|---|---|---|---|---|
| Arion S.r.l. | Brescia (IT) | 40% | 29 | - | - | (42) | 71 |
| Free Polska s.p.z.o.o. | Krakow (PL) | 23% | 659 | - | (35) | 250 | 444 |
| Others | 36 | 15 | - | - | 21 | ||
| Total | 724 | 15 | (35) | 208 | 536 |
At 31 December 2020, other non-current assets amount to €11,311 thousand compared to €13,111 thousand at 31 December 2019; they are broken down as follows:
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Related parties | 160 | 160 |
| Guarantee deposits | 419 | 407 |
| Third parties | 1,008 | 1,412 |
| Other assets | 9,725 | 11,132 |
| Other non-current assets | 11,311 | 13,111 |
"Third parties" mainly comprise a non-current VAT asset recognised by the South American group company.
"Other assets" include the credit deriving from the parent's payment of the substitute tax on the higher values allocated and recognised in the consolidated financial statements at 31 December 2018, implicit in the equity investment amount, pursuant to article 15.10-bis of Decree law no. 185/2008. Starting from 2021, the parent will deduct, for both IRES and IRAP purposes, one fifth of the amortisation of the above-mentioned amounts per year. As a result, the portion of the credit recognised
will be reclassified to profit or loss on a straight-line basis. Therefore, the amount related to 2021 was recognised under "Other current assets".
At 31 December 2020, deferred tax assets amount to €5,264 thousand compared to €4,378 thousand at 31 December 2019. The group has recognised deferred tax assets and liabilities on temporary differences between the carrying amount of assets and liabilities and their tax base.
It calculates taxes using the rates enacted in the countries where it operates when the temporary differences reverse. A breakdown of deferred tax assets is as follows:
| 2020 tax base | Deferred tax assets at 31 December 2020 |
2019 tax base | Deferred tax assets at 31 December 2019 |
|
|---|---|---|---|---|
| Allowance for inventory write-down | 5,438 | 1,217 | 2,793 | 660 |
| Non-deductible accruals | 3,553 | 922 | 3,763 | 964 |
| Amortisation of goodwill | 839 | 188 | 645 | 132 |
| Consolidation adjustments to intragroup inventory transactions |
8,343 | 1,905 | 6,648 | 1,415 |
| Carryforward tax losses | 1,254 | 207 | 2,207 | 449 |
| Other | 3,131 | 825 | 2,757 | 758 |
| Total | 22,557 | 5,264 | 18,812 | 4,378 |
Changes in deferred tax assets and liabilities are presented in the next table:
| 31.12.2020 | Recognised in profit or loss |
Recognised in other comprehensive income |
31.12.2019 | |
|---|---|---|---|---|
| Deferred tax assets | 5,265 | 980 | (94) | 4,378 |
| Deferred tax liabilities | (10,212) | 592 | 92 | (10,896) |
| Total | (4,947) | 1,572 | (2) | (6,518) |
The Hong Kong group company recognised deferred tax assets of €207 thousand on carryforward tax losses. The group believed that these losses can be recovered over time based on the cash flows that the group company will generate in future years. The Japanese and South American companies did not recognise deferred tax assets on carryforward tax losses, which total €718 thousand.
At 31 December 2020, this caption amounts to €57,728 thousand compared to €58,552 thousand at 31 December 2019. It may be analysed as follows:
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Trade receivables | 58,750 | 59,677 |
| Loss allowance | (1,022) | (1,125) |
| Total | 57,728 | 58,552 |
The next table breaks down gross trade receivables by geographical segment:
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Europe, Middle East and Africa | 40,342 | 41,318 |
| APAC | 11,594 | 11,379 |
| North America | 4,883 | 5,308 |
| South America | 1,931 | 1,672 |
| Total | 58,750 | 59,677 |
The group does not usually charge default interest on past due receivables. Reference should be made to the section on risks and financial instruments for details of the receivables that are not yet due and/or are past due.
The group's receivables are not particularly concentrated. It does not have customers that individually account for more than 5% of the total receivables at each maturity date.
The loss allowance comprises management's estimates
about credit losses on receivables from end customers and the sales network. Management estimates the allowance on the basis of the expected losses, considering past experience for similar receivables, current and historical past due amounts, losses and collections, the careful monitoring of credit quality and projections about the economy and market conditions. It recognises the resulting impairment losses in Other expense (net).
Changes in the allowance are shown in the following table:
| 31.12.2019 | Accruals | Utilisations | Exchange differences |
31.12.2018 | |
|---|---|---|---|---|---|
| Loss allowance | (1,125) | (12) | 187 | (2) | (1,298) |
| Exchange | |||||
| 31.12.2020 | Accruals | Utilisations | differences | 31.12.2019 | |
| Loss allowance | (1,022) | (262) | 327 | 38 | (1,125) |
At 31 December 2020, this caption amounts to €52,012 thousand compared to €48,265 thousand at 31 December 2019. It may be analysed as follows:
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Raw materials | 26,299 | 24,032 |
| Allowance for inventory write-down | (2,067) | (1,592) |
| Semi-finished products and work in progress | 4,153 | 2,802 |
| Finished goods | 26,893 | 24,840 |
| Allowance for inventory write-down | (3,348) | (1,888) |
| Payments on account | 82 | 71 |
| Total | 52,012 | 48,265 |
Inventories, gross of the allowance for inventory writedown, increased by a total of €5,682 thousand. The group recognised an allowance for inventory write-down (€5,415 thousand) to cover the difference between the cost and estimated realisable value of obsolete raw materials and finished goods. The accrual to the statement of profit or loss was recognised in the caption "Costs of raw materials, consumables and goods and changes in inventories"
This caption amounts to €2,156 thousand, compared to €1,711 thousand at the previous year end. It includes direct tax assets offset, where possible, against the tax liabilities at the same date.
At 31 December 2020, this caption amounts to €7,445 thousand compared to €6,613 thousand at 31 December 2019. It may be analysed as follows:
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Payments on account to suppliers | 384 | 498 |
| Other tax assets | 2,693 | 1,000 |
| VAT assets | 1,550 | 1,311 |
| Prepayments and accrued income | 1,868 | 2,220 |
| Other | 950 | 1,584 |
| Total | 7,445 | 6,613 |
Other tax assets mainly consist of the tax credit for research and development expenditure in addition to the current portion of the tax asset arising from aligning the higher values allocated upon consolidation as detailed in note 4.
At 31 December 2020, this caption amounts to €7,540 thousand compared to €56 thousand at 31 December 2019. It may be analysed as follows:
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Derivatives | 17 | 49 |
| Other financial assets | 7,523 | 7 |
| Total | 7,540 | 56 |
"Other financial assets" refer to temporary deposits of liquidity, including accrued interest income gross of tax withholdings. Such deposits were agreed as a form of investment of part of the parent's temporary excess liquidity. They do not have an active market and are highly liquid without any additional cost to the group.
The deposits' reimbursement value equals the invested principal plus part of the accruing interest. Due to the lack of an active market and a method to determine the reimbursement amount based on the contractual terms, the directors initially recognised the investments at the invested capital, increased by the accrued unpaid interest at the reporting date. Based on these reasons, management deems that the carrying amount of these investments equals their fair value.
The derivatives are forwards and currency options agreed to hedge commercial transactions but which do not qualify for hedge accounting. Fair value gains and losses are recognised in profit or loss. More information is available in the paragraph on financial instruments in note [33] "Other information".
At 31 December 2020, this caption amounts to €105,586 thousand compared to €62,798 thousand at 31 December 2019. Reference should be made to the statement of cash flows for details of changes in the group's cash and cash equivalents.
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Current accounts and post office deposits | 105,549 | 62,764 |
| Cash | 38 | 33 |
| Total | 105,586 | 62,798 |
Current accounts and post office deposits are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to immaterial currency risk.
At the reporting date, the group's current account credit balances were not pledged in any way.
The parent's fully paid-up and subscribed share capital consists of 100,000,000 ordinary shares. Equity may be analysed as follows:
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Share capital | 10,000 | 10,000 |
| Legal reserve | 2,000 | 2,000 |
| Translation reserve | (2,685) | 3,558 |
| Hedging reserve | (436) | (363) |
| Other reserves | 56,530 | 46,166 |
| Retained earnings | 58,795 | 46,487 |
| Profit for the year | 35,112 | 35,019 |
| Total | 159,317 | 142,868 |
The hedging reserve includes the fair value gains and losses on interest rate hedges.
The translation reserve decreased by €6,243 thousand, mainly due to the depreciation of the US dollar, Brazilian real and Chinese renminbi against the Euro.
Other reserves include a reserve related to the sharebased long-term incentive (LTI) plan of €1,184 thousand, approved by the shareholders on 7 September 2018. Note 33 provides more information about this plan.
Following the shareholders' resolution of 15 April 2019, during the year, the board of directors repurchased treasury shares totalling €958 thousand to service the LTI plan. They are recognised as a reduction in other reserves. The earnings per share are calculated by dividing the profit attributable to the owners of the parent by the weighted average number of outstanding ordinary shares. There are no potentially dilutive ordinary shares (e.g., stock options or convertible bonds).
The earnings per share are as follows:
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Number of shares (in thousands) | 99,851 | 99,929 |
| Profit for the year (in thousands of Euros) | 35,112 | 35,019 |
| Earnings per share (in Euros) | 0.35 | 0.35 |
The shareholders resolved to distribute a dividend of €0.12 per share on 20 April 2020, which resulted in the distribution of €11,980 thousand in June 2020.
At 31 December 2020, this caption amounts to €304 thousand compared to €353 thousand at 31 December 2019 and comprises the non-controlling interest in Carel Thailand Co. Ltd (20%).
| 31.12.2020 | Profit for the year |
Other comprehensive income |
Dividends distributed |
Capital increases |
31.12.2019 | |
|---|---|---|---|---|---|---|
| Equity attributable to non controlling interests |
304 | 5 | (37) | (50) | 33 | 353 |
These captions may be analysed as follows:
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Bank loans and borrowings at amortised cost | 86,975 | 72,648 |
| Lease liabilities | 24,597 | 11,787 |
| Effective designated derivative hedges | 578 | 513 |
| Other loans and borrowings at amortised cost | 1,506 | 1,539 |
| Non-current financial liabilities | 113,657 | 86,486 |
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Current portion of bank loans at amortised cost | 44,767 | 34,236 |
| Lease liabilities | 3,588 | 3,461 |
| Bank borrowings at amortised cost | 148 | 123 |
| Derivatives held for trading at fair value through profit or loss | 55 | 37 |
| Other loans and borrowings at amortised cost | 523 | 635 |
| Current financial liabilities | 49,080 | 38,492 |
31.12.2019 Currency Original amount Maturity Interest rate Outstanding liability Current Noncurrent Deutschebank EUR 400 2023 Fixed 152 42 110 MedioCredito Italiano EUR 15,000 2021 Floating 5,002 3,333 1,667 BNP Paribas EUR 15,000 2020 Fixed 2,511 2,512 - Unicredit EUR 20,000 2023 Fixed 15,556 4,444 11,111 Unicredit EUR 20,000 2023 Floating 20,000 3,333 16,667 Mediobanca EUR 30,000 2021 Fixed 17,989 12,000 5,989 BNP Paribas EUR 30,000 2022 Floating 25,676 8,571 17,104 BNP Paribas EUR 20,000 2023 Floating 20,000 - 20,000 Total 106,884 34,236 72,648
The following tables show the main characteristics of the bank loans by maturity at 31 December 2020 and 2019:
| 31.12.2020 | Currency | Original amount |
Maturity | Interest rate |
Outstanding liability |
Current | Non current |
|---|---|---|---|---|---|---|---|
| Deutschebank | EUR | 400 | 2023 | Fixed | 109 | 43 | 66 |
| Bper Banca | EUR | 1,000 | 2021 | Fixed | 1,000 | 1,000 | - |
| MedioCredito Italiano | EUR | 15,000 | 2021 | Floating | 1,666 | 1,666 | - |
| Unicredit | EUR | 20,000 | 2023 | Fixed | 11,111 | 4,444 | 6,667 |
| Unicredit | EUR | 20,000 | 2023 | Floating | 16,666 | 6,666 | 10,000 |
| Intesa San Paolo | EUR | 6,000 | 2021 | Fixed | 6,000 | 6,000 | - |
| Mediobanca | EUR | 25,000 | 2023 | Floating | 24,964 | - | 24,964 |
| BNP Paribas | EUR | 30,000 | 2023 | Floating | 21,372 | 8,572 | 12,800 |
| BNP Paribas | EUR | 20,000 | 2023 | Floating | 19,974 | - | 19,974 |
| BNP Paribas | EUR | 10,000 | 2021 | Fixed | 10,000 | 10,000 | - |
| Intesa San Paolo | EUR | 10,000 | 2024 | Fixed | 8,735 | 2,487 | 6,248 |
| Credit Agricole | EUR | 10,000 | 2024 | Fixed | 8,740 | 2,484 | 6,256 |
| PNC Bank | USD | 1,723 | 2020 | Fixed | 1,404 | 1,404 | - |
| Total | 131,741 | 44,767 | 86,975 |
All loans except for the Deutschebank loan bear a fixed interest rate of less than 1%.
The PNC Bank loan was taken out by the US company as part of the US government's Paycheck Protection Program to support companies during the Covid-19 pandemic.
The following loans require compliance with covenants:
At 31 December 2020, such covenants have been respected.
The derivatives included under current financial liabilities are forwards and currency options agreed to hedge commercial transactions which do not qualify for hedge accounting. The effective designated derivative hedges include the fair value of five IRSs agreed to hedge interest rate risk on the Banca Nazionale del Lavoro, Unicredit and Mediobanca loans. More information is available in note [33] "Other information".
A breakdown of other loans and borrowings at amortised cost is provided below, with indication of whether they are current or non-current:
| 31.12.2019 | Currency | Original amount |
Maturity | Interest rate |
Outstanding liability |
Current | Non current |
|---|---|---|---|---|---|---|---|
| Simest Middle East | EUR | 1,000 | 2021 | Fixed | 375 | 250 | 125 |
| MedioCredito Centrale Progetto Horizon 2020 |
EUR | 1,241 | 2026 | Fixed | 1,250 | 188 | 1,062 |
| Other loans | 549 | 197 | 352 | ||||
| Total | 2,174 | 635 | 1,539 |
| 31.12.2020 | Currency | Original amount |
Maturity | Interest rate |
Outstanding liability |
Current | Non current |
|---|---|---|---|---|---|---|---|
| Simest Middle East | EUR | 1,000 | 2021 | Fixed | 125 | 125 | - |
| MedioCredito Centrale Progetto Horizon 2020 |
EUR | 1,241 | 2026 | Fixed | 1,062 | 190 | 872 |
| Other loans | 843 | 209 | 634 | ||||
| Total | 2,030 | 523 | 1,506 |
The following tables show changes in current and non-current financial liabilities, comprising lease liabilities (including cash and non-cash changes:
| 31.12.2020 | Net cash flows |
Fair value gains or losses |
Reclassification | Change in translation reserve |
31.12.2019 | |
|---|---|---|---|---|---|---|
| Bank loans | 44,767 | (12,576) | - | 23,106 | - | 34,236 |
| Bank borrowings | 148 | 24 | - | - | - | 123 |
| Other loans and borrowings | 523 | (426) | - | 315 | - | 635 |
| Derivatives | 55 | (37) | 55 | - | - | 37 |
| Current financial liabilities | 45,492 | (13,015) | 55 | 23,421 | - | 35,031 |
| 31.12.2020 | Net cash flows |
Fair value gains or losses |
Reclassification | Change in translation reserve |
31.12.2019 | |
|---|---|---|---|---|---|---|
| Bank loans and borrowings at amortised cost |
86,975 | 37,433 | - | (23,106) | - | 72,648 |
| Effective designated derivative hedges |
578 | (232) | 298 | - | - | 513 |
| Other loans and borrowings at amortised cost |
1,506 | 282 | - | (315) | - | 1,539 |
| Non-current financial liabilities |
89,059 | 37,483 | 298 | (23,421) | - | 74,700 |
| 31.12.2020 | Increases | Restatement of financial liabilities |
Repayments | Interest | Termination of contracts |
Change in translation reserve |
31.12.2019 | |
|---|---|---|---|---|---|---|---|---|
| Lease liabilities | 28,185 | 4,422 | 12,812 | (4,238) | 416 | (131) | (344) | 15,248 |
At 31 December 2020, provisions for risks amount to €3,396 thousand compared to €3,786 thousand at 31 December 2019 and they are broken down as follows:
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Provision for agents' termination benefits | 808 | 767 |
| Provision for legal and tax risks | 35 | 28 |
| Provision for commercial complaints | 104 | 284 |
| Provision for product warranties | 337 | 280 |
| Other provisions | 8 | 9 |
| Total - non-current | 1,292 | 1,368 |
| Provision for legal and tax risks | - | 320 |
| Provision for commercial complaints | 2,104 | 2,098 |
| Total - current | 2,104 | 2,418 |
| Total | 3,396 | 3,786 |
The following table shows changes in this caption:
| 31.12.2019 | Accruals | Utilisations | Reversals | Reclassif. | Exchange differences |
31.12.2018 | |
|---|---|---|---|---|---|---|---|
| Provision for agents' termination benefits |
767 | 70 | (2) | - | - | - | 698 |
| Provision for legal and tax risks | 28 | 8 | (18) | - | - | - | 39 |
| Provision for commercial complaints |
284 | 24 | (43) | - | - | 2 | 301 |
| Provision for product warranties | 280 | 9 | (4) | - | - | - | 274 |
| Other provisions | 9 | (11) | - | - | - | 19 | |
| Total - non-current | 1,368 | 111 | (78) | - | - | 2 | 1,332 |
| Provision for legal and tax risks | 320 | 320 | (405) | - | - | - | 405 |
| Provision for commercial complaints |
2,098 | 1,364 | (510) | - | - | - | 1,244 |
| Total - current | 2,418 | 1,684 | (915) | - | - | - | 1,649 |
| Total | 3,786 | 1,795 | (993) | - | - | 2 | 2,981 |
| 31.12.2020 | Accruals | Utilisations | Reversals | Reclassif. | Exchange differences |
31.12.2019 | |
|---|---|---|---|---|---|---|---|
| Provision for agents' termination benefits |
808 | 51 | (11) | - | - | - | 767 |
| Provision for legal and tax risks | 35 | 17 | - | - | - | (9) | 28 |
| Provision for commercial complaints |
104 | - | (5) | (168) | - | (7) | 284 |
| Provision for product warranties | 337 | 85 | (77) | - | 47 | 3 | 280 |
| Other provisions | 8 | - | - | - | - | (1) | 9 |
| Total - non-current | 1,292 | 153 | (93) | (168) | 47 | (14) | 1,368 |
| Provision for legal and tax risks | - | - | - | (320) | - | - | 320 |
| Provision for commercial complaints |
2,104 | 1,206 | (165) | (1,305) | - | - | 2,098 |
| Total - current | 2,104 | 1,206 | (165) | (1,355) | - | - | 2,418 |
| Total | 3,396 | 1,359 | (258) | (1,523) | 47 | (14) | 3,786 |
The provision for agents' termination benefits includes the estimated liability arising from application of the current regulations and contractual terms covering the termination of agency agreements. Unlike the accruals to the provisions for risks and product warranties and the other provisions, the accrual to this provision is classified under services in the statement of profit or loss.
The provision for commercial complaints increased due to the estimated larger costs that the group might occur on claims with customers. With regard to the provision at 31 December 2019, due to the estimated larger cost for reconditioning certain products which, for reasons related to the technical characteristics of the electrical network in which they are installed, have lost functionality, the group revised the estimate of the costs to be incurred and, accordingly, released a portion of the provision.
The provision for legal and tax risks represents management's best estimate of the liabilities arising from legal and tax procedures related to ordinary operating activities, estimated with the support of legal consultants. The provision for legal and tax risks, which at 31 December 2019 mainly referred to the risk that the Chinese authorities may challenge the tax deduction of certain intragroup service costs, was fully released following the positive outcome of the audit.
This caption mainly consists of the group's liability for postemployment benefits and post-term of office benefits for directors recognised by the Italian group companies and the German subsidiary, HygroMatik GmbH. These benefits qualify as defined benefit plans pursuant to IAS 19 and the related liabilities are calculated by an independent actuary. Changes in the liability in both years are shown below.
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Opening balance | 7,844 | 7,333 |
| Interest cost | 54 | 78 |
| Other variations | 164 | 15 |
| Employee benefits paid | (357) | (202) |
| Exchange differences | (32) | 32 |
| Accruals | 2463 | 2,455 |
| Transfer to pension plans | (2,237) | (2,184) |
| Actuarial gain (loss) | 290 | 317 |
| Closing balance | 8,189 | 7,844 |
The group also performed sensitivity analyses to assess reasonable changes in the main assumptions underlying the calculations. Specifically, it assumed an increase or decrease of 0.25% in the discount rate. The resulting change in the liability would be immaterial.
At 31 December 2020, this caption amounts to €10,212 thousand, compared to €10,896 thousand at 31 December 2019. Changes in deferred tax liabilities are available in note [5] "Deferred tax assets". A breakdown of deferred tax liabilities is as follows:
| 2020 tax base | 2020 deferred tax liabilities |
2019 tax base | 2019 deferred tax liabilities |
|
|---|---|---|---|---|
| Discounting of non-current liabilities | 90 | 25 | 87 | 27 |
| Differences from consolidation adjustments | 29,664 | 8,716 | 32,677 | 9,544 |
| Differences on amortisation and depreciation and other differences in standards |
6,645 | 1,266 | 5,172 | 1,022 |
| Other | 1,100 | 204 | 1,584 | 304 |
| Total | 37,498 | 10,212 | 39,520 | 10,896 |
The largest amount is due to the allocation of nontaxable amounts upon the first-time consolidation of Recuperator S.p.A. and HygroMatik GmbH and differences on amortisation/depreciation, mainly of the parent and the US subsidiary.
Trade payables amount to €43,234 thousand, compared to €38,200 thousand at 31 December 2019 due to investments and purchases performed in the last months of the year.
There are no significant past due amounts at 31 December 2020.
At 31 December 2020, this caption amounts to €2,991 thousand compared to €1,113 thousand at the end of the previous year. It entirely consists of direct income tax liabilities.
This caption is broken down in the following table and mostly includes personnel-related liabilities (wages and salaries, tax withholdings and social security contributions).
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Social security contributions | 4,760 | 4,156 |
| Tax withholdings | 1,978 | 1,854 |
| Other current tax liabilities | 403 | 242 |
| VAT liabilities | 1,445 | 1,017 |
| Wages and salaries, bonuses and holiday pay | 13,959 | 11,770 |
| Other | 1,220 | 1,254 |
| Total | 23,766 | 20,292 |
Revenue amounts to €331,610 thousand, compared to €327,358 thousand in 2019, with a year-on-year increase of 1.3%.
Revenue generated by services amounts to €2,210 thousand compared to €2,828 thousand in 2019. A breakdown of revenue by market is as follows:
It is shown net of discounts and allowances.
| 2020 | 2019 | Variation % | |
|---|---|---|---|
| HVAC revenue | 217,498 | 215,366 | 1.0% |
| REF revenue | 110,337 | 107,578 | 2.6% |
| Total core revenue | 327,836 | 322,943 | 1.5% |
| Non-core revenue | 3,775 | 4,415 | (14.5%) |
| Total revenue | 331,610 | 327,358 | 1.3% |
There are no group companies that individually contribute more than 5% to the group's revenue. A breakdown of revenue by geographical segment is as follows:
| 2020 | 2019 | Variation % | |
|---|---|---|---|
| Europe, Middle East and Africa | 236,267 | 226,470 | 4.3% |
| APAC | 49,714 | 50,205 | (1.0%) |
| North America | 38,456 | 42,461 | (9.4%) |
| South America | 7,173 | 8,222 | (12.8%) |
| Total | 331,610 | 327,358 | 1.3% |
Other revenue amounts to €3,704 thousand, an increase on the €3,611 thousand balance in 2019. The caption may be broken down as follows:
| 2020 | 2019 | Variation % | |
|---|---|---|---|
| Grants related to income | 1,381 | 986 | 40.1% |
| Sundry cost recoveries | 1,583 | 1,767 | (10.4%) |
| Other revenue and income | 740 | 858 | 13.8%) |
| Total | 3,704 | 3,611 | 2.6% |
The grants related to income of €1,381 thousand (2019: €986 thousand) mainly relate to the tax credit for development activities carried out as provided for by Law no. 190 of 23 December 2014 (the 2015 Stability Law)
in addition to grants given by various governments to support companies during the Covid-19 pandemic. Sundry cost recoveries mostly refer to the recovery of transport and other costs.
Other revenue and income principally comprise amounts charged to suppliers and customers.
This caption amounts to €139,644 thousand, compared to €138,637 thousand in 2019. A breakdown of the caption is as follows:
| 2020 | 2019 | Variation % | |
|---|---|---|---|
| Costs of raw materials, consumables and goods and changes in inventories | (139,644) | (138,637) | 0.7% |
| % of revenue | (42.1%) | (42.4%) | (0.6%) |
The group incurred costs of €42,536 thousand for services in 2020, down 10.5% on the previous year. The main decrease related to "Business trips and travel", which was mostly due to actions implemented by management to contain costs and restrictions on movement imposed by the various governments.
Consultancies and marketing and advertising fees also
decreased as a result of the aforementioned actions. Such decreases were only partially offset by higher outsourcing and transport costs incurred in order to overcome the reduced production capacity of certain sites and to mitigate the longer delivery times for products and raw materials due to the shutdown in China.
The caption may be broken down as follows:
| 2020 | 2019 | Variation % | |
|---|---|---|---|
| Transport | (12,076) | (9,925) | 21.7% |
| Consultancies | (6,533) | (7,909) | (17.4%) |
| Business trips and travel | (1,529) | (4,829) | (68.3%) |
| Use of third party assets | (1,406) | (1,711) | (17.9%) |
| Maintenance and repairs | (4,379) | (3,887) | 12.6% |
| Marketing and advertising | (1,361) | (2,388) | (43.0%) |
| Outsourcing | (2,774) | (1,956) | 41.8% |
| Agency commissions | (1,847) | (2,045) | (9.7%) |
| Utilities | (1,619) | (1,769) | (8.5%) |
| Fees to directors, statutory auditors and independent auditors | (2,062) | (2,187) | (5.7%) |
| 2020 | 2019 | Variation % | |
|---|---|---|---|
| Insurance | (1,283) | (1,113) | 15.3% |
| Telephone and connections | (928) | (1,089) | (14.8%) |
| Other services | (4,741) | (6,693) | (29.2%) |
| Total | (42,536) | (47,503) | (10.5%) |
This caption amounts to €2,227 thousand, compared to €2,970 thousand in 2019 and is almost entirely related to development projects capitalised under intangible assets. Part of the capitalised costs refer to equipment and machinery constructed internally and recognised under property, plant and equipment.
The caption may be analysed as follows:
| 2020 | 2019 | Variation % | |
|---|---|---|---|
| Development expenditure | 2,120 | 2,859 | (25.8%) |
| Plant and machinery constructed on a time and materials basis | 107 | 111 | (3.9%) |
| Total | 2,227 | 2,970 | (25.0%) |
The group incurred research and development expenditure of €17,499 thousand and €18,060 thousand in 2020 and 2019, respectively. Only the amounts described above were capitalised, as they met the requirements of IAS 24.
This caption amounted to €88,620 thousand for 2019 compared to €83,412 thousand for the previous year. A breakdown of this caption and of the workforce by employee category is as follows:
| 2020 | 2019 | Variation % | |
|---|---|---|---|
| Wages and salaries, including bonuses and accruals | (69,375) | (64,744) | 7.2% |
| Social security contributions | (15,198) | (14,962) | 1.6% |
| Defined benefit plans | (2,463) | (2,455) | 0.3% |
| Other costs | (1,584) | (1,251) | 26.6% |
| Total | (88,620) | (83,412) | 6.2% |
| 2020 | 2019 | ||||
|---|---|---|---|---|---|
| year end | average | year end | average | ||
| Managers | 62 | 62 | 62 | 53 | |
| White collars | 1,059 | 1,056 | 1,052 | 1,020 | |
| Blue collars | 624 | 600 | 575 | 563 | |
| Total | 1,745 | 1,717 | 1,689 | 1,633 |
This caption amounted to €1,548 thousand, compared to €1,255 thousand for the previous year. It may be broken down as follows:
| 2020 | 2019 | Variation % | |
|---|---|---|---|
| Gains on the sale of non-current assets | 72 | 873 | (91.7%) |
| Prior year income | 493 | 435 | 13.3% |
| Release of provisions for risks | 1,203 | 0 | >100% |
| Other income | 1,768 | 1,308 | 35.1% |
| Losses on the sale of non-current assets | (19) | (34) | (44.3%) |
| Prior year expense | (360) | (386) | (6.7%) |
| Other taxes and duties | (1,059) | (918) | 15.4% |
| Accrual to the loss allowance | (262) | (12) | >100% |
| Accrual to the provisions for risks | (1,310) | (655) | 99.9% |
| Credit losses | (26) | (51) | (49.4%) |
| Other costs | (280) | (507) | (44.8%) |
| Other expense | (3,316) | (2,563) | 29.4% |
| Other expense, net | (1,548) | (1,255) | 23.3% |
The gains on the sale of non-current assets in 2019 mainly relate to the sale of the Chinese site, which was replaced by the new site opened in July 2019.
"Accruals to the provisions for risks" mainly comprise accruals to the provision for commercial complaints. Reference should be made to note 15 for more information.
Amortisation and depreciation amount to €18,315 thousand, up from €16,747 thousand in the previous year. This increase is principally due to the significant investments made in 2019 that were fully up and running in 2020. The caption also includes depreciation and amortisation arising from the purchase price allocation (€2,551 thousand).
The caption may be broken down as follows:
| 2020 | 2019 | Variation % | |
|---|---|---|---|
| Amortisation | (6,493) | (5,804) | 11.9% |
| Depreciation | (11,822) | (10,944) | 8.0% |
| Impairment losses | (166) | (22) | >100% |
| Total | (18,482) | (16,769) | 10.2% |
Net financial expense amounts to €1,489 thousand compared to €1,431 thousand in the previous year. The caption may be broken down as follows:
| 2020 | 2019 | Variation % | |
|---|---|---|---|
| Interest income | 178 | 316 | (43.5%) |
| Gains on derivatives | 28 | 13 | >100% |
| Other financial income | 145 | 205 | (29.2%) |
| Financial income | 351 | 534 | (34.2%) |
| Bank interest expense | (933) | (948) | (1.6%) |
| Lease interest expense | (416) | (399) | 4.3% |
| Other interest expense | (33) | (45) | (27.2%) |
| Losses on derivatives | (61) | (123) | (50.7%) |
| Other financial expense | (399) | (450) | (11.4%) |
| Financial expense | (1,841) | (1,965) | (6.3%) |
| Net financial expense | (1,489) | (1,431) | 4.1% |
Net exchange losses amount to €921 thousand compared to €152 thousand in 2019 mainly due to the US Dollar fluctuation. They are made up as follows:
| 2020 | 2019 | Variation % | |
|---|---|---|---|
| Exchange losses | (5,853) | (3,522) | 66.2% |
| Exchange gains | 4,932 | 3,370 | 46.4% |
| Net exchange losses | (921) | (152) | >100% |
This caption shows a net profit of €208 thousand, compared to €177 thousand in 2019. It comprises the group's share of the profit or loss of equity-accounted investees.
This caption amounts to €9,393 thousand compared to €9,910 thousand in the previous year. It may be broken down as follows:
| 2020 | 2019 | |
|---|---|---|
| Current taxes | (11,713) | (10,214) |
| Deferred taxes | 1,572 | 945 |
| Taxes relative to prior years | 748 | (641) |
| Total | (9,393) | (9,910) |
Taxes relative to prior years mostly refer to reimbursements of the Chinese subsidiary's 2019 income taxes.
A reconciliation of the tax expense for the year is as follows using the profit before tax shown in the statement of profit or loss:
| 2020 | 2019 | |
|---|---|---|
| Profit before tax | 44,511 | 44,957 |
| Income taxes calculated using the theoretical IRES rate | (10,683) | (10,790) |
| IRAP | (819) | (1,041) |
| Effect of the different rates applied by the group companies operating in other countries | 2,092 | 2,183 |
| Withholding tax on dividends | (1,250) | (587) |
| Taxes relative to prior years | 748 | (641) |
| Effect of the different rates applied by the group companies operating in other countries and other changes |
519 | 966 |
| Total | (9,393) | (9,910) |
Reference should be made to note [5] for information about changes in deferred tax assets and liabilities and their composition.
The tax rate applied for the reconciliation of the tax burden
is 24%, in line with the IRES rate in Italy, the country in which most of the group's taxable profit is earned.
Under IFRS 8, an entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. Based on the group's internal reporting system, the business activities for which it earns revenue and incurs expenses and the operating results which are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated and to assess its performance, the group has not identified individual operating segments but is an operating segment as a whole.
The group is active on international markets and, hence, is exposed to currency and interest rate risks. Specifically, the currencies generating these risks are the US dollar, the Polish zloty and the Chinese renminbi.
The group has a hedging policy to mitigate the risks which involves the use of derivatives, options and forwards, mostly with maturities of less than one year. Transactions in place at the reporting date involving currency hedging transactions are as follows:
| 31.12.2020 | 31.12.2019 | |||||||
|---|---|---|---|---|---|---|---|---|
| forward | Purchases | Sales | Positive fair value |
Negative fair value |
Purchases | Sales | Positive fair value |
Negative fair value |
| USD/EUR | - | - | - | - | - | 1,200 | 10 | - |
| JPY/EUR | - | 12,500 | - | (1) | 37,431 | - | - | (3) |
| USD/CNY | - | - | - | - | - | 5,500 | 38 | - |
| EUR/ZAR | - | 228 | - | - | 165 | - | - | (1) |
| ZAR/USD | - | 8,800 | - | (47) | - | 3,400 | - | (9) |
| USD/ZAR | - | - | - | - | - | 147 | - | (9) |
| PLN/EUR | - | - | - | - | - | 6,921 | - | (14) |
| THB/USD | - | 6,200 | - | (3) | - | 3,500 | - | (1) |
| Total forwards | (51) | 48 | (37) | |||||
| Options | ||||||||
| ZAR/USD | 18,000 | 12 | - | 12,000 | 1 | - |
| Total | 17 | (51) | 49 | (37) | ||
|---|---|---|---|---|---|---|
| Total options | 17 | - | 1 | - | ||
| THB/USD | 46,000 | 5 | - | 26,000 | - | - |
Notional amount Floating interest rate Fixed interest rate Maturity Fair value 31.12.2020 Fair value 31.12.2019 BNL 15,000 3m Euribor > -0.55% -0.55% > 3m Euribor -0.10% 30/06/2021 (3) (13) BNL 30,000 6m Euribor > -0.78% / -0.78% if 6m Euribor < -0.78% -0.78% 19/11/2022 (135) (180) BNL 20,000 3m Euribor > -0.98% / -0.98% if 3m Euribor < -0.98% -0.02% 30/04/2023 (262) (192) Unicredit 20,000 3m Euribor > -0.92% / -0.92% if 3m Euribor < -0.92% -0.04% 30/04/2023 (113) (128) Mediobanca 25,000 3m Euribor > -0.95% / -0.95% if 3m Euribor < -0.95% -0.42% 04/08/2023 (68) n.a.
The next table provides information about the interest rate swaps hedging the related risk:
Derivatives hedging foreign currency assets and liabilities are recognised at fair value with any gains or losses recognised in profit or loss. They are natural hedges of the related risks, which are recognised pursuant to IFRS 9.
The "2018-2022 share-based performance plan" resolved by the shareholders on 7 September 2018 is an equitysettled incentive plan, with the free allocation of shares to members of boards of directors and/or group employees. The plan is divided into three rolling cycles (vesting period), each lasting three years (2018-2020, 2019-2021 and 2020- 2022), at the end of which the shares will be distributed, after checking that the performance objectives have been reached and based on the date of the board of directors' resolution. The third vesting period that refers to 2019- 2021 began in 2020.
The number of shares allocated is subject to achieving specific performance objectives based on adjusted EBITDA and cash conversion ratios. The performance objectives are independent of one another and will be calculated separately for each vesting period.
In accordance with IFRS 2 Share-based payments, the fair value of the shares calculated at the allocation date applying the Black Scholes method is recognised in profit or loss as personnel/directors expense, on a systematic basis over the vesting period with a balancing entry in equity.
In 2020, the group recognised an expense of €766 thousand in profit or loss and the same amount was also recognised as an increase in equity. This amount represents the amount attributable to 2020 for the first, second and third cycles of the plan, the fair values of which amount to €691 thousand, €855 thousand and €865 thousand, respectively.
categories established by IFRS 9 at 31 December 2019 and 2020 and their fair value:
The next table shows the financial assets and liabilities recognised in accordance with IFRS 7, broken down by the
| IFRS 9 category | Carrying amount |
Level 1 | Level 2 | Level 3 |
|---|---|---|---|---|
| Available-for-sale financial assets | ||||
| Financial instruments held for trading |
49 | 49 | ||
| Loans and receivables | 7 | 7 | ||
| 56 | ||||
| Loans and receivables | 58,552 | 58,552 | ||
| 58,608 | ||||
| Available-for-sale financial assets |
||||
| Financial instruments held for trading |
49 | |||
| Loans and receivables | 58,560 | |||
| Financial liabilities at amortised cost | 72,648 | 72,648 | ||
| Financial liabilities at amortised cost | 1,539 | 1,539 | ||
| Financial liabilities at amortised cost | 11,787 | 11,787 | ||
| Financial instruments held for trading |
513 | 513 | ||
| 86,486 | ||||
| Financial liabilities at amortised cost | 123 | 123 | ||
| Financial liabilities at amortised cost | 34,236 | 34,236 | ||
| Financial liabilities at amortised cost | 3,461 | 3,461 | ||
| Financial instruments held for trading |
37 | 37 | ||
| Financial liabilities at amortised cost | 635 | 635 | ||
| 38,492 | ||||
| Financial liabilities at amortised cost | 38,200 | 38,200 | ||
| 163,178 | ||||
| Financial liabilities at amortised cost |
162,629 | |||
| Financial instruments held for trading |
550 | |||
| Fair Value |
| Fair Value | |||||
|---|---|---|---|---|---|
| 31.12.2020 | IFRS 9 category | Carrying amount |
Level 1 | Level 2 | Level 3 |
| Securities | Available-for-sale financial assets | ||||
| Derivatives | Financial instruments held for trading |
17 | 17 | ||
| Other financial assets | Loans and receivables | 7,523 | 7,523 | ||
| Other current financial assets | 7,540 | ||||
| Trade receivables | Loans and receivables | 57,728 | 57,728 | ||
| Total financial assets | 65,268 | ||||
| including: | Available-for-sale financial assets |
0 | |||
| Financial instruments held for trading |
17 | ||||
| Loans and receivables | 65,251 | ||||
| Bank loans and borrowings | Financial liabilities at amortised cost | 86,975 | 86,975 | ||
| Other loans and borrowings | Financial liabilities at amortised cost | 1,506 | 1,506 | ||
| Lease liabilities | Financial liabilities at amortised cost | 24,597 | 24,597 | ||
| Effective designated derivative hedges | Financial instruments held for trading |
578 | 578 | ||
| Non-current financial liabilities | 113,657 | ||||
| Bank borrowings | Financial liabilities at amortised cost | 148 | 148 | ||
| Bank loans | Financial liabilities at amortised cost | 44,767 | 44,767 | ||
| Lease liabilities | Financial liabilities at amortised cost | 3,588 | 3,588 | ||
| Derivatives | Financial instruments held for trading |
55 | 55 | ||
| Other loans and borrowings | Financial liabilities at amortised cost | 523 | 523 | ||
| Current financial liabilities | 49,080 | ||||
| Trade payables | Financial liabilities at amortised cost | 43,234 | 43,234 | ||
| Total financial liabilities | 205,971 | ||||
| including: | Financial liabilities at amortised cost |
205,338 | |||
| Financial instruments held for trading |
633 |
€2,150 thousand, including €132 thousand in favour of subsidiaries.
At the reporting date, the parent issued sureties of
During 2020 and 2019, the group carried out commercial transactions with related parties as follows:
| 31.12.2019 | Trade receivables |
Loan assets |
Trade payables |
Financial liabilities |
Revenue | Costs | Financial expense |
|---|---|---|---|---|---|---|---|
| Arion S.r.l. | - | 160 | - | - | 1 | (1,147) | - |
| Free Polska s.p.z.o.o. | - | - | (31) | 10 | (3,293) | - | |
| Total associates | 160 | (31) | - | 11 | (4,440) | - | |
| RN Real Estate S.r.l. | 3 | - | (95) | (2,468) | 27 | (19) | |
| Nastrificio Victor S.p.A. | - | - | (13) | - | (36) | - | |
| Eurotest laboratori S.r.l. | 11 | - | (83) | - | 37 | (265) | - |
| Carel Real Estate Adratic d.o.o. | - | - | (2,704) | 2 | (1) | (107) | |
| Agriturismo Le Volpi | - | - | (6) | - | - | (17) | - |
| Eurotec Ltd | 132 | - | (7) | - | 586 | (27) | - |
| Panther S.r.l. | - | - | (6) | - | - | (12) | - |
| Gestion A.Landry Inc | - | - | (41) | (28) | - | (1) | - |
| Humide Expert | - | - | (15) | - | - | (32) | - |
| Others | 6 | - | (11) | - | 8 | (41) | - |
| Total other related parties | 152 | - | (277) | (5,200) | 660 | (432) | (126) |
| Total | 152 | 160 | (308) | (5,200) | 671 | (4,872) | (126) |
| 31.12.2020 | Trade receivables |
Loan assets |
Trade payables |
Financial liabilities |
Revenue | Costs | Financial expense |
|---|---|---|---|---|---|---|---|
| Arion S.r.l. | - | 160 | (74) | - | 1 | (1,692) | - |
| Free Polska s.p.z.o.o. | 227 | - | - | - | 7 | (8,006) | |
| Total associates | 227 | 160 | (74) | - | 8 | (9,698) | - |
| RN Real Estate S.r.l. | 3 | - | - | (14,684) | 20 | - | (15) |
| Arianna S.p.A. | 5 | - | - | - | 5 | - | - |
| Nastrificio Victor S.p.A. | - | - | (9) | - | - | (28) | - |
| Eurotest laboratori S.r.l. | 11 | - | (73) | - | 38 | (296) | - |
| Carel Real Estate Adratic d.o.o. | - | - | - | (2,465) | 2 | (1) | (96) |
| Agriturismo Le Volpi | - | - | (9) | - | - | (6) | - |
| Eurotec Ltd | 254 | - | - | - | 623 | (22) | - |
| Panther S.r.l. | - | - | (7) | - | - | (6) | - |
| Gestion A.Landry Inc | - | - | - | (5) | - | (2) | (0) |
| Humide Expert | - | - | - | - | - | (25) | - |
| Others | 2 | - | (10) | - | 1 | (48) | - |
| Total other related parties | 274 | - | (108) | (17,154) | 689 | (435) | (112) |
| Total | 501 | 160 | (182) | (17,154) | 696 | (10,133) | (112) |
Transactions with RN Real Estate S.r.l. and Carel Real Estate Adriatic d.o.o. relate to the lease of the industrial buildings where the parent and the Croatian subsidiary carry out their business. Financial liabilities and expense have been recognised following the application of IFRS 16. Liabilities with RN Real Estate S.r.l. at 31 December 2020 are impacted by the restatement of lease liabilities as described earlier.
Costs from Arion relate to purchases of pressure sensors and those from Free Polska relate to non-group products purchased and resold by the group company Alfaco Polska.
All the related party transactions take place on an arm's length basis.
The following table shows the investees directly and indirectly controlled by the parent as well as all the legallyrequired disclosures necessary to prepare consolidated financial statements.
| Registered office | Country | Currency | Share/quota capital |
|
|---|---|---|---|---|
| 31/12/2019 | ||||
| Parent: | ||||
| CAREL INDUSTRIES S.p.A | Brugine (Padua) | Italy | EUR | 10,000,000 |
| Group companies: | ||||
| C.R.C. S.r.l. | Bologna | Italy | EUR | 98,800 |
| Carel Deutschland Gmbh | Frankfurt | Germany | EUR | 25,565 |
| Carel France Sas | St. Priest, Rhone | France | EUR | 100,000 |
| Carel U.K. Ltd | London | United Kingdom | GBP | 350,000 |
| Carel Sud America Instrumentacao Eletronica Ltda |
San Paolo | Brazil | BRL | 31,149,059 |
| Carel Usa Inc | Wilmington Delaware | United States | USD | 5,000,000 |
| Carel Asia Ltd | Hong Kong | Honk Kong | HKD | 15,900,000 |
| Carel HVAC&R Korea Ltd | Seul | South Korea | KRW | 550,500,000 |
| Carel South East Asia Pte. Ltd. | Singapore | Singapore | SGD | 100,000 |
| Carel Australia PTY Ltd | Sydney | Australia | AUD | 100 |
| Carel Electronic Suzhou Ltd | Suzhou | People's Republic of China |
CNY | 75,019,566 |
| Carel Controls Iberica SI | Barcelona | Spain | EUR | 3,005 |
| Carel Controls South Africa (Pty) Ltd | Johannesburg | South Africa | ZAR | 4,000,000 |
| Carel ACR System India (Pvt) Ltd | Mumbai | India | INR | 1,665,340 |
| Carel RUS Llc | St. Petersburg | Russia | RUB | 6,600,000 |
| Carel Nordic AB | Hoganas | Sweden | SEK | 550,000 |
| Carel Middle East | Dubai | Dubai | AED | 4,333,877 |
| Carel Mexicana, S. DE R.L. DE C.V. | Guerra, Tlalpan | Mexico | MXN | 12,441,149 |
| Carel Adriatic D.o.o. | Rijeka | Croatia | HRK | 54,600,000 |
| Carel (Thailand) Co. Ltd. | Bangkok | Thailand | THB | 10,000,000 |
| Alfaco Polska Sp.z.o.o. | Wrocław | Poland | PLN | 420,000 |
| Carel Japan | Tokyo | Japan | JPY | 60,000,000 |
| Recuperator S.p.A. | Rescaldina (MI) | Italy | EUR | 500,000 |
| Hygromatik G.m.b.H. | Hamburg | Germany | EUR | 639,115 |
| Carel Ukraine LLC | Kiev | Ukraine | UAH | 700,000 |
| Enersol | Beloeil | Canada | CAD | 100 |
| Profit for 2019 | Profit for 2020 |
Consolidation method |
Share/quotaholder | Investment % | Share/quota capital |
|---|---|---|---|---|---|
| EURO | EURO | Azionista-Socio | 31/12/2020 | 31/12/2020 | |
| 22,249,135 | 20,895,918 | 10,000,000 | |||
| 277,785 | 564,583 | line by line | Carel Industries S.p.A. | 100% | 98,800 |
| 584,126 | 1,105,460 | line by line | Carel Industries S.p.A. | 100% | 25,565 |
| 288,379 | 406,458 | line by line | Carel Industries S.p.A. | 100% | 100,000 |
| 1,096,413 | 1,132,770 | line by line | Carel Industries S.p.A. | 100% | 350,000 |
| 639,737 | 1,057,697 | line by line | Carel Industries S.p.A. | 53.02% | 31,149,059 |
| Carel Electronic Suzhou Ltd | 46.98% | ||||
| 2,093,438 | 2,749,057 | line by line | Carel Industries S.p.A. | 100% | 5,000,000 |
| 182,947 | 336,342 | line by line | Carel Industries S.p.A. | 100% | 15,900,000 |
| 120,867 | (20,519) | line by line | Carel Electronic Suzhou Ltd | 100% | 550,500,000 |
| 59,631 | 72,516 | line by line | Carel Asia Ltd | 100% | 100,000 |
| 271,438 | 441,974 | line by line | Carel Electronic Suzhou Ltd | 100% | 100 |
| 6,354,520 | 6,267,260 | line by line | Carel Industries S.p.A. | 100% | 75,019,566 |
| 574,596 | 768,405 | line by line | Carel Industries S.p.A. | 100% | 3,005 |
| 156,457 | 112,713 | line by line | Carel Electronic Suzhou Ltd | 100% | 4,000,000 |
| Carel France Sas | 0,01% | ||||
| 51,285 | 66,270 | line by line | Carel Electronic Suzhou Ltd | 99,99% | 1,665,340 |
| Carel Industries S.p.A. | 99% | ||||
| 306,092 | 963,081 | line by line | Carel France Sas | 1% | 6,600,000 |
| 107,327 | 208,364 | line by line | Carel Industries S.p.A. | 100% | 550,000 |
| (230,818) | (7,067) | line by line | Carel Industries S.p.A. | 100% | 4,333,877 |
| 47,299 | (150,973) | line by line | Carel Usa LCC | 100% | 12,441,149 |
| 4,276,597 | 7,680,717 | line by line | Carel Industries S.p.A. | 100% | 54,600,000 |
| Carel Electronic Suzhou Ltd | 50% | ||||
| 138,956 | 26,246 | line by line | Carel Australia PTY Ltd | 30% | 16,000,000 |
| 2,031,509 | 2,628,957 | line by line | Carel Industries S.p.A. | 100% | 420,000 |
| (15,501) | 23,252 | line by line | Carel Industries S.p.A. | 100% | 60,000,000 |
| 804,544 | 674,619 | line by line | Carel Industries S.p.A. | 100% | 500,000 |
| 3,539,284 | 2,868,867 | line by line | Carel Industries S.p.A. | 100% | 639,115 |
| (90,855) | (100,649) | line by line | Alfaco Polska Zoo | 100% | 700,000 |
| 36,055 | (206,465) | line by line | Carel Usa Inc | 100% | 100 |
The subsidiaries Carel Deutschland GmbH and HygroMatik GmbH, both included in these consolidated financial statements, used the exemption provided for by section 264 (3) of the German Commercial Code (HGB) for the disclosures, audit and the preparation of the notes to and directors' report on their financial statements at 31 December 2020.
The fees paid to directors and statutory auditors for the year ended 31 December 2020 are as follows:
| Directors | 2020 | 2019 |
|---|---|---|
| Remuneration and fees | 1,256 | 1,092 |
| Other non-monetary benefits | 16 | 17 |
| Other fees | - | - |
| Fair value of share-based payments | 308 | 149 |
| Total directors | 1,580 | 1,258 |
| Statutory auditors | 2020 | 2019 |
|---|---|---|
| Fixed fees and fees for participation in committees | 103 | 103 |
| Total statutory auditors | 103 | 103 |
| Key management personnel | 2020 | 2019 |
|---|---|---|
| Remuneration and fees | 1,243 | 952 |
| Other non-monetary benefits | 22 | 23 |
| Other fees | - | - |
| Post-employment benefits or termination benefits | 26 | - |
| Fair value of share-based payments | 318 | 151 |
| Total key management personnel | 1,609 | 1,126 |
See the relevant section of the directors' report.
The following table, prepared pursuant to article 149-duodecies of Consob Issuers' Regulation, highlights the fees pertaining to the year for audit services and nonaudit services provided by the independent auditors.
| Services | Independent auditor | Recipient | 2020 fees | 2019 fees |
|---|---|---|---|---|
| Deloitte & Touche S.p.A. | Carel Industries S.p.A. | 205 | 195 | |
| Audit | Deloitte & Touche S.p.A. | Subsidiaries | 42 | 37 |
| Deloitte & Touche network | Subsidiaries | 150 | 212 | |
| Attestation services | Deloitte & Touche S.p.A. | Carel Industries S.p.A. | 41 | 42 |
| Deloitte & Touche S.p.A. | Subsidiaries | 5 | 9 | |
| Other services | Deloitte & Touche S.p.A. | Carel Industries S.p.A. | - | - |
| Deloitte & Touche network | Subsidiaries | - | 2 | |
| Total | 443 | 495 |
A list of the subsidies, grants, paid positions and any type of economic benefits received from public administrations and subjects defined as such by Article 1.125 of Law no. 124 of 2017, that the parent received in 2020 is set out below: Decree law no. 34/2020, converted into Law no. 77/2020, regarding tax assets to the extent of 60% of costs incurred in 2020 to sanitise work areas and tools and to purchase personal protective equipment (PPE) and other equipment needed to ensure the health and safety of workers and users amounting to €28 thousand.
During the year, the subsidiary Recuperator S.p.A. received: €2 thousand under the Sabatini law and €300 from the Italian bilateral metalworking body as a grant to purchase PPE due to the Covid-19 emergency.
Statement on the consolidated financial statements pursuant to article 154-bis of Legislative decree no. 58/98 and article 81 ter of Consob regulation no. 11971 of 14 May 1999 as subsequently amended and supplemented
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Brugine, 4 marzo 2021
International Financial Reporting Standards endorsed by the European Community pursuant to Regulation (EC) no. 1606/2002 of the European Parliament and of the Council on 19 July 2002;
3.2 the directors' report contains a reliable analysis of the performance results and the position of the issuer and group companies included in the consolidation scope and a description of the main risks and uncertainties to which the group is exposed.
Chief executive officer Manager in charge of financial reporting
Francesco Nalini Nicola Biondo
CAREL INDUSTRIES Group 2020 Annual Report
Deloitte & Touche S.p.A. Via N. Tommaseo, 78/C int. 3 35131 Padova Italia
Tel: +39 049 7927911 Fax: +39 049 7927979 www.deloitte.it
INDEPENDENT AUDITOR' AUDITOR'S REPORT S REPORT PURSUANT TO ARTICLE 14 OF LEGISLATIVE DECREE No. 39 OF JANUARY 27, 2010 OF ANDARTICLE ARTICLE ARTICLE10 OF THE EU REGULATION 537/2014 10 OF THE EU REGULATION 537/2014 10 OF THE 537/2014
To the Shareholders Shareholdersof Carel Industries IndustriesS.p.A.
We have audited the consolidated financial statements of Carel Industries S.p.A. and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2020, and the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of national regulations issued pursuant to art. 9 of Italian Legislative Decree no. 38/05.
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of Carel Industries S.p.A. (the "Company") in accordance with the ethical requirements applicable under Italian law to the audit of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Ancona Bari Bergamo Bologna Brescia Cagliari Firenze Genova Milano Napoli Padova Parma Roma Torino Treviso Udine Verona
Sede Legale: Via Tortona, 25 - 20144 Milano | Capitale Sociale: Euro 10.328.220,00 i.v.
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| Impairment of goodwill allocated to the Recuperator Impairment of goodwill allocated the Recuperator and Hygromatik CGU's uperator and Hygromatik CGU's |
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|---|---|---|---|---|
| Description the Description of the key audit matter matter |
As disclosed in Note 2, as of 31 December 2020 the Group presents goodwill related to the Recuperator and Hygromatik CGU's for Euro 6.3 million and 38.5 million respectively. These amounts were recognized as a result of the acquisition of the two companies in 2018 and, as required by IAS 36 "Impairment of assets", they are not amortized but are subject to an impairment test, performed at least on an annual basis, which compares the recoverable value of the CGUs – based on the value in use methodology – and the carrying value which includes goodwill and other tangible and intangible assets allocated to the CGUs. Note 2 presents the main assumptions applied by the Directors in performing the test, together with the indication of the break-even analyses that they prepared for each key input to evaluate the uncertainties. |
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| In their disclosure, the Direcotrs explain that the process of performing the impairment test is complex and is based on assumptions related, among others, to the expectations in term of cash flows for the CGU and the determination of appropriate discount rates (WACC) and long-term growth (g-rate). Those estimates depend on factors which may change in time, also as a consequence of the potential impacts of the persistence of Covid 19 pandemic, with possible effects which may be significant on Management's assessment. |
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| We considered the significance of the amount of the goodwill, the subjectivity of the estimates underlying the determination of the cash flows for the CGU and the key variables of the impairment test. As a result we assessed that the impairment test represents a key audit matter for the audit of Carel Group's consolidated financial statements. |
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| Audit procedures procedures |
As part of our audit, among other things, we performed the following audit procedures, supported by the experts belonging to our network: • understanding of the process and relevant controls designed and implemented by Management related to the process of performing and approving the impairment test; • analysis of the main assumptions adopted to prepare the expectations in terms of cash flows, also using industry data, and obtaining information from Group Management; • analysis of the actual performance compared to the expectations, in order to investigate the nature of the variations and evaluate the reliability of the planning process; • analysis of of the reasonableness of the discount rates (WACC) and long |
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| term growth (g-rate); • test of the clerical accuracy of the model used to calculate the value in use for the CGU; |
Finally we verified the appropriateness and the compliance of the disclosure on the impairment test provided by the Group to the requirements of IAS 36.
The Directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of national regulations issued pursuant to art. 9 of Italian Legislative Decree no. 38/05, and, within the terms established by law, for such internal control as the Directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they have identified the existence of the conditions for the liquidation of the Company or the termination of the business or have no realistic alternatives to such choices.
The Board of Statutory Auditors is responsible for overseeing, within the terms established by law, the Group's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with International Standards on Auditing (ISA Italia), we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
We communicate with those charged with governance, identified at an appropriate level as required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence applicable in Italy, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report.
The Shareholders' Meeting of Carel Industries S.p.A. appointed us on 13 April 2018 as auditors of the Company for the years from 31 December 2018 to 31 December 2026.
We declare that we have not provided prohibited non-audit services referred to in art. 5 (1) of EU Regulation 537/2014 and that we have remained independent of the Company in conducting the audit.
We confirm that the opinion on the consolidated financial statements expressed in this report is consistent with the additional report to the Board of Statutory Auditors, in its role of Audit Committee, referred to in art. 11 of the said Regulation.
The Directors of Carel Industries S.p.A. are responsible for the preparation of the report on operations and the report on corporate governance and the ownership structure of Carel Group as at 31 December 2020, including their consistency with the related consolidated financial statements and their compliance with the law.
We have carried out the procedures set forth in the Auditing Standard (SA Italia) n. 720B in order to express an opinion on the consistency of the report on operations and some specific information contained in the report on corporate governance and the ownership structure set forth in art. 123-bis, n. 4 of Legislative Decree 58/98, with the consolidated financial statements of Carel Group as at 31 December 2020 and on their compliance with the law, as well as to make a statement about any material misstatement.
In our opinion, the above-mentioned report on operations and some specific information contained in the report on corporate governance and the ownership structure are consistent with the consolidated financial statements of Carel Group as at 31 December 2020 and are prepared in accordance with the law.
With reference to the statement referred to in art. 14, paragraph 2 (e), of Legislative Decree 39/10, made on the basis of the knowledge and understanding of the Group and of the related context acquired during the audit, we have nothing to report.
Statement Statementpursuant to art. 4 of the Consob Regulation for the ant Consob for the impl ant the implementation of Legislat ementation Legislative Decree Decree ive 30December 2016, no December no.254
The Directors of Carel Industries S.p.A. are responsible for the preparation of the non-financial statement pursuant to Legislative Decree 30 December 2016, no. 254.
We verified the approval by the Directors of the non-financial statement.
Pursuant to art. 3, paragraph 10 of Legislative Decree 30 December 2016, no. 254, this statement is subject of a separate attestation issued by us.
DELOITTE & TOUCHE S.p.A.
Signed by Cristiano Nacchi Nacchi Cristiano Nacchi Partner
Padova, Italy March 26, 2021
This report has been translated into the English language solely for the convenience of international readers.
CAREL INDUSTRIES HQs Via dell'Industria, 11 35020 Brugine - Padova (Italy) Tel. (+39) 0499 716611 Fax (+39) 0499 716600 [email protected]
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