Annual Report • Apr 12, 2019
Annual Report
Open in ViewerOpens in native device viewer
at 31 December 2018
| Corporate bodies | 7 |
|---|---|
| Separate Financial Statements and Notes thereto | 9 |
| Statement of Financial Position | 11 |
| Statement of Profit or Loss | 12 |
| Statement of Comprehensive Income | 12 |
| Statement of Cash flows | 13 |
| Statement of Changes in Equity | 14 |
| Notes to the separate financial statements as at | |
| and for the year ended 31 december 2018 | 16 |
| Notes to the Statement of Financial Position | 45 |
| Notes to the Statement of Profit or Loss | 79 |
| Annexes to the Separate Financial Statements as at and for the year ended | 99 |
| Board of directors | Chairperson Executive deputy chairperson Chief executive officer Director Director Director Director |
Luigi Rossi Luciani Luigi Nalini Francesco Nalini Carlotta Rossi Luciani Cinzia Donalisio Marina Manna Giovanni Costa |
|---|---|---|
| Board of statutory auditors | Chairperson Standing statutory auditor Standing statutory auditor Alternate statutory auditor Alternate statutory auditor |
Saverio Bozzolan Claudia Civolani Paolo Ferrin Fabio Gallo Giovanni Fonte |
| Independent auditors | Deloitte & Touche S.p.A. | |
| Audit and risk committee | Chairperson Member Member |
Marina Manna Cinzia Donalisio Giovanni Costa |
| Remuneration committee | Chairperson Member Member |
Cinzia Donalisio Marina Manna Giovanni Costa |
| Supervisory body pursuant to Legislative decree no. 231/2001 |
Chairperson Member Member |
Fabio Pinelli Alessandro Grassetto Andrea Baggio |
Separate Financial Statements and Notes thereto
at 31 December 2018
10 Separate Financial Statements and Notes thereto
| Note | 31.12.2018 | 31.12.2017 | |
|---|---|---|---|
| Property, plant and equipment | 1 | 8.564.370 | 7.551.197 |
| Intangible assets | 2 | 9.388.650 | 8.818.112 |
| Equity investments | 3 | 118.704.276 | 26.058.137 |
| Other non-current assets | 4 | 2.580.287 | 162.071 |
| Deferred tax assets | 5 | 1.021.419 | 870.153 |
| Non-current assets | 140.259.002 | 43.459.670 | |
| Trade receivables | 6 | 37.585.416 | 41.163.031 |
| Inventories | 7 | 22.169.746 | 17.246.525 |
| Current tax assets | 8 | 4.952.774 | 386.648 |
| Other assets | 9 | 2.390.495 | 3.472.057 |
| Current financial assets | 10 | 7.484.227 | 51.710.408 |
| Cash and cash equivalents | 11 | 24.006.224 | 18.681.301 |
| Total current assets | 98.588.882 | 132.659.970 | |
| Attività detenute per la vendita | - | - | |
| TOTAL ASSETS | 238.847.884 | 176.119.640 | |
| Equity | 12 | 69.600.773 | 75.599.221 |
| Patrimonio netto - terzi | - | - | |
| Equity | 69.600.773 | 75.599.221 | |
| Non-current financial liabilities | 13 | 68.347.236 | 20.969.022 |
| Provisions for risks | 14 | 1.129.019 | 1.453.867 |
| Defined benefit plans | 15 | 4.979.488 | 5.054.955 |
| Deferred tax liabilities | 16 | 445.543 | 783.277 |
| Non-current liabilities | 74.901.286 | 28.261.121 | |
| Current financial liabilities | 13 | 47.190.995 | 29.615.924 |
| Trade payables | 17 | 34.877.504 | 32.359.095 |
| Current tax liabilities | 18 | 288.649 | 1.174.657 |
| Provisions for risks | 14 | 1.649.254 | - |
| Other current liabilities | 19 | 10.339.423 | 9.109.622 |
| Current liabilities | 94.345.825 | 72.259.298 | |
| Passività detenute per la vendita | - | - | |
| TOTAL LIABILITIES AND EQUITY | 238.847.884 | 176.119.640 |
(in Euros)
| Note | 2018 | 2017 | |
|---|---|---|---|
| Revenue | 20 | 180.276.448 | 166.164.434 |
| Other revenue | 21 | 3.971.337 | 3.140.212 |
| Costs of raw materials, consumables and goods and change in inventories | 22 | -92.915.245 | -83.527.039 |
| Services | 23 | -31.563.708 | -23.519.797 |
| Capitalised development expenditure | 24 | 2.171.373 | 1.601.526 |
| Personnel expense | 25 | -37.903.856 | -34.925.765 |
| Other net income (expense) | 26 | -1.321.058 | -38.627 |
| Amortisation, depreciation and impairment losses | 27 | -5.783.792 | -5.771.963 |
| OPERATING PROFIT | 16.931.499 | 23.122.981 | |
| Net financial income (expense) | 28 | 10.008.508 | 12.374.088 |
| Net exchange rate gains / losses | 29 | -149.279 | -95.903 |
| Impairment of financial assets | 30 | - | -360.614 |
| PROFIT BEFORE TAX | 26.790.728 | 35.040.552 | |
| Income taxes | 31 | -2.803.670 | -7.426.446 |
| PROFIT FOR THE YEAR | 23.987.058 | 27.614.106 |
| Note | 2018 | 2017 | |
|---|---|---|---|
| PROFIT FOR THE YEAR | 23.987.058 | 27.614.106 | |
| Items that may be subsequently reclassified to profit or loss: | |||
| Variation in hedging reserve | 12 | -165.210 | 11.617 |
| Variation in hedging reserve - tax effect | 12 | 39.650 | -2.788 |
| Total items that may be subsequently reclassified to profit or loss | -125.560 | 8.829 | |
| Other items that may not be subsequently reclassified to profit or loss: | |||
| IAS 19 - Actuarial gains /(losses) from discounting of post-employment benefits | 12 | 110.970 | -19.270 |
| IAS 19 - Actuarial gains /(losses) from discounting of post-employment benefits - tax effect | 12 | -30.961 | 5.377 |
| IAS 19 - Actuarial losses from discounting of post-term of office benefits for directors | 12 | -23.873 | -32.073 |
| IAS 19 - Actuarial gains /(losses) from discounting of post-term of office benefits for directors - tax effect |
12 | 6.661 | 8.948 |
| Total other items that may not be subsequently reclassified to profit or loss | 62.797 | -37.018 | |
| COMPREHENSIVE INCOME | 23.924.295 | 27.585.917 |
| 2018 | 2017 | |
|---|---|---|
| 2018 | 2017 | |
| Profit for the year | 23.987.058 | 27.614.106 |
| Amortisation, depreciation and impairment losses | 5.783.792 | 6.132.577 |
| Accruals to provisions | 875.436 | 669.750 |
| Net financial income | (10.037.224) | (12.408.198) |
| Income taxes | 3.686.272 | 7.426.446 |
| Gains on the sale of non-current assets | 2.542 | 1.853 |
| 24.297.876 | 29.436.534 | |
| Change in trade receivables and other current assets | 2.436.725 | (2.719.120) |
| Change in inventories | (4.597.350) | (2.942.765) |
| Change in trade payables and other current liabilities | 3.696.246 | 7.559.863 |
| Change in non-current liabilities | (134.641) | (466.118) |
| Cash flows from operations | 25.698.856 | 30.868.394 |
| Net interest paid | (292.075) | (175.443) |
| Income taxes paid | (7.103.553) | (7.621.928) |
| Net cash flows generated by operating activities | 18.303.228 | 23.071.023 |
| Investments in property, plant and equipment | (3.731.488) | (3.397.108) |
| Investments in intangible assets | (3.662.692) | (2.960.555) |
| Investments in financial assets | (3.244.019) | (1.916.139) |
| Repayment of current financial assets | 47.469.446 | 365.065 |
| Disinvestments of property, plant and equipment and intangible assets | 24.135 | 18.547 |
| Investments in investees | (92.646.139) | (8.670.595) |
| Cash flows used in investing activities | (55.790.757) | (16.560.785) |
| Dividend distributions | (30.000.000) | (15.000.000) |
| Dividends collected | 9.915.452 | 11.871.349 |
| Interest collected | 459.063 | 3.450 |
| Increase in financial liabilities | 91.565.303 | 38.935.893 |
| Decrease in financial liabilities | (26.709.072) | (30.246.557) |
| Investments in non-current financial assets | (2.418.294) | - |
| Cash flows from financing activities | 42.812.452 | 5.564.135 |
| Change in cash and cash equivalents | 5.324.923 | 12.074.373 |
| Cash and cash equivalents - opening balance | 18.681.301 | 6.606.928 |
| Cash and cash equivalents - closing balance | 24.006.224 | 18.681.301 |
| Share capital | Legal reserve | Hedging reserve | Actuarial reserve |
|
|---|---|---|---|---|
| 2016 | 10.000.000 | 2.000.000 | 23.929 | (385) |
| Allocation of prior year profit | ||||
| - Dividend distributions | ||||
| - Other allocations | ||||
| Profit for the year | ||||
| Other comprehensive income | 8.829 | (37.018) | ||
| 2017 | 10.000.000 | 2.000.000 | 32.758 | (37.403) |
| Allocation of prior year profit | ||||
| - Dividend distributions | ||||
| - Other allocations | ||||
| Incentive plans | ||||
| Profit for the period | ||||
| Other comprehensive income | (125.560) | 62.797 | ||
| 2018 | 10.000.000 | 2.000.000 | (92.802) | 25.394 |
| Total | Profit (loss) for the year |
Retained earnings (losses carried forward) |
Stock grant reserve |
IFRS reserve | Equity-related reserves |
Income-related reserves and other reserves |
|---|---|---|---|---|---|---|
| 63.013.304 | 26.595.911 | 517.139 | - | 2.145.495 | 10.397.335 | 11.333.880 |
| - | ||||||
| (15.000.000) | (15.000.000) | |||||
| - | (11.595.911) | (40.990) | 11.636.901 | |||
| 27.614.106 | 27.614.106 | |||||
| (28.189) | ||||||
| 75.599.221 | 27.614.106 | 476.149 | - | 2.145.495 | 10.397.335 | 22.970.781 |
| - (30.000.000) |
(30.000.000) | |||||
| - | (27.614.106) | 27.614.106 | ||||
| 77.257 | 77.257 | |||||
| 23.987.058 | 23.987.058 | |||||
| (62.763) | ||||||
| 69.600.773 | 23.987.058 | 476.149 | 77.257 | 2.145.495 | 10.397.335 | 20.584.887 |
CAREL INDUSTRIES S.p.A. (the "company"), is an Italian company limited by shares, with registered office in Via Dell'Industria 11, Brugine (PD). It is registered with the Padua company registrar.
CAREL INDUSTRIES S.p.A. provides control instruments to the air-conditioning and commercial and industrial refrigeration markets and also produces air humidification systems.
On 28 November 2016, the company 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.
Il bilancio separato al 31 dicembre 2018 è stato approvato dal Consiglio di Amministrazione di CAREL INDUSTRIES S.p.A. in data 07 marzo 2019.
The separate financial statements have been prepared in accordance with the updated accounting records.
The separate financial statements at 31 December 2018 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 separate 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 using the historical cost principle and assuming the company will continue as a going concern. The company assumed that it could adopt the going concern assumption pursuant to IAS 1.25/26 given its strong market position, very satisfactory profits and solid financial structure.
The separate financial statements were prepared in thousands of Euro, which is the company's functional and presentation currency as per IAS 21, unless indicated otherwise.
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 company 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 company's internal management reporting system and international best practices for its sector. Following adoption of revised IAS 1, the company decided to present the statement of profit or loss and other comprehensive income in 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 company 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, except for interest accrued on available-for-sale financial assets, which is presented under cash flows from financing activities. The company presents cash flows from operating activities, and investing activities and changes in non-current 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:
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 non-controlling interest in the acquiree and the acquisition-date 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 interests 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 acquisition-date 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 separate financial statements at 31 December 2018 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 company's functional currency, i.e., the currency of the primary economic environment in which it mainly operates. Amounts are rounded to the nearest unit.
The separate financial statements at 31 December 2018 reflect the company's financial position, in accordance with the International Financial Reporting Standards.
The separate 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, 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 separate 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 separate financial statements at 31 December 2017, the company referred to the standards applicable from 1 January 2017 to prepare its separate financial statements at 31 December 2018, in accordance with the provisions of IFRS 1.
The company applied the following standards, amendments and interpretations for the first time starting from 1 January 2018:
The company applied the standard starting from 1 January 2018 using with the modified retrospective transition method. It analysed the existing contracts using the criteria and logical steps listed above and, on the basis of the checks carried out, did not identify any elements that would require a different treatment of such contracts under the new standard.
The characteristics of the contracts in place with customers, therefore, did not require changes to be made to the financial statements schedules, nor did the adoption of the new standard have a numerical impact. Therefore, assets from contracts with customers, incremental costs for the acquisition of contracts and the right to returns or liability for future reimbursements have not been recognised.
• On 24 July 2014, IASB published the final version of IFRS 9 Financial Instruments: recognition and measurement. This document includes the results of the IASB's project to replace IAS 39. The new standard applies to annual periods beginning on or after 1 January 2018.
The standard introduces new criteria for the classification and measurement of financial assets and liabilities. Specifically, for financial assets, the new standard uses a single approach based on the management of financial instruments and characteristics of the contractual cash flows of the financial assets themselves in order to determine the measurement criteria, replacing the provisions of IAS 39.
However, for financial liabilities, the main amendment concerns the accounting treatment of changes in the fair value of a financial liability recognised as a financial liability measured at fair value through profit or loss, in the case in which these changes are due to the credit rating of the issuer of the loan. In accordance with the new standard, these changes should be recognised in other comprehensive income and no longer in profit or loss. In the case of a non-substantial modification of a financial liability, it is no longer permitted to spread the effects of the renegotiation throughout the residual term of the payable modifying the effective interest rate at that date, but the relative effect must be recognised in profit or loss.
With respect to impairment, it requires that estimated credit losses be measured using the expected credit loss model rather than the incurred losses model provided for by IAS 39, using supportable information that is available without undue cost or effort about past events, current conditions and forward-looking information. The standard requires that the impairment model is applied to all financial instruments, i.e. financial assets measured at amortised cost, those measured at fair value through other comprehensive income, lease assets and trade receivables.
Lastly, the standard introduces a new hedge accounting model, with the aim of adjusting the requirements of IAS 39, which are sometimes considered too strict and not suitable for reflecting the risk management policies of companies. The main changes relate to:
The company applied the standard starting from 1 January 2018 using the modified retrospective transition method. With regard to the effects of the application of IFRS 9, the main items affected are summarised below:
– insurance policies: at the signing date they were held to collect the contractual cash flows (IFRS 9.4.1.2), but they did not meet the definition of paragraph 4.1.3, as the contractual interest is calculated considering the return on a complex portfolio. Therefore, these policies were classified as financial assets through profit or loss. The directors determined that the fair value of the policies was known at the reporting date as the insurance policies can be paid out in just a few days at an amount known to the company. The carrying amount of the policies at 31 December 2017 approximated their fair value recognised as per IAS 39. During 2018, these policies were terminated, with repayment of the principal increased by accrued interest, as described in note 10.
Based on the above, the classification and measurement criteria introduced by IFRS 9 did not have any effects on opening equity at 1 January 2018 or the profit for the year;
Based on the above, therefore, there was no need to change the financial statements schedules, nor did the adoption of the new standard have a numerical impact.
– IFRS 12 Disclosure of Interests in Other Entities – Clarification of the scope of the Standard. The amendment clarifies the scope of IFRS 12, specifying that the disclosure requirements, except for those set out in paragraphs B10-B16, apply to all the entity's interests classified as held for sale or as held for distribution to shareholders or as discontinued operations in accordance with IFRS 5. This amendment has been applied since 1 January 2018.
The adoption of these amendments did not affect the separate financial statements.
The interpretation clarifies that the date of transaction is the first of:
If there are multiple payments or receipts in advance, a date of transaction is established for each one. IFRIC 22 has been applied since 1 January 2018. The adoption of this interpretation did not affect the separate financial statements.
• On 13 January 2016, the IASB published IFRS 16 - Leases which replaces IAS 17 - Leases and IFRIC 4 - Determining whether an arrangement contains a lease, SIC-15 - Operating leases - incentives and SIC-27 - Evaluating the substance of transactions involving the legal form of a lease.
This standard provides a new definition of a lease and introduces a criterion based on control (right of use) of an asset to differentiate leases from service contracts based on the identification of the asset, right of substitution, the right to obtain substantially all the benefits from the use of the asset and, lastly, the right to identify the asset's use.
The standard establishes a single model for the recognition and measurement of leases by the lessee. It provides for the recognition of the leased asset, including assets under operating lease, under assets, and a lease liability. The standard does not provide for significant changes for lessors.
IFRS 16 applies to annual periods beginning on or after 1 January 2019 but earlier application is allowed. The company completed the preliminary assessment of the potential impacts of the application of the new standard at the transaction date (1 January 2019). This process involved different phases, including the complete mapping of contracts potentially suitable to contain a lease and the analysis thereof for the purposes of understanding the main clauses relevant for the purposes of IFRS 16.
The company chose to apply the standard retrospectively, recognising the cumulative effect of the application of the standard on equity at 1 January 2019, in accordance with IFRS 16.C7-C13. Specifically, with regard to the leases formerly classified as operating leases, the company will recognise:
| Impacts at the transition date 01.01.2019 |
|---|
| 3.203 |
| 655 |
| 3.858 |
| 2.457 |
| 1.401 |
| 3.858 |
The following table details the estimated impacts of the adoption of IFRS 16 at the transition date:
In adopting IFRS 16, the company intends to use the exemption provided by IFRS 16.5(a) in relation to short-term leases for categories of assets related to buildings and vehicles.
Similarly, the company intends to use the exemption provided by IFRS 16.5(b) with regard to leases for which the underlying asset is of a low value (that is that they are worth less than €5 thousand when new). The leases to which the exemption has been applied mainly fall within the following categories:
For such leases, the introduction of IFRS 16 does not require the recognition of a financial liability and the related right-of-asset use, but the lease payments will be recognised in profit or loss on a straight-line basis over the lease term.
The company does not intend to use the following practical expedients provided by IFRS 16:
Furthermore, with reference to the transition rules, the group elected to use the following practical expedients available in the case of the selection of the modified retrospective transition method:
Reconciliation with lease commitments.
In order to provide a better understanding of the impacts of the first-time application of the standard, the following table provides a reconciliation of the future commitments related to the leases at 31 December 2018, information about which is provided in note 32 hereto, and the expected impact of the adoption of IFRS 16 at 1 January 2019:
| (in thousands of Euros) | Impacts at the transition date 01.01.2019 |
|---|---|
| Operating lease commitments | 3.858 |
| Low value lease payments (exemption) | 129 |
| Commitments for payments not covered by the standard | 282 |
| Discounting effect | 73 |
| Future commitments 31.12.2018 | 4.342 |
IFRIC 23 applies to annual periods beginning on or after 1 January 2019 but earlier application is allowed. The directors are assessing the impact of the adoption of this interpretation on the company's separate financial statements.
CAREL Group Separate financial statements at 31 December 2018
At the reporting date, the EU's relevant bodies had not yet completed the endorsement process for adoption of the following amendments and standards.
• On 18 May 2017, the IASB published IFRS 17 Insurance contracts, which will supersede IFRS 4 Insurance contracts.
The directors do not expect its adoption will significantly affect the company's separate financial statements.
• On 12 October 2017, the IASB published "Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)". This document clarifies the need to apply IFRS 9, including the requirements related to impairment, to the other long-term interests in associates and joint ventures for which the equity method does not apply. The amendment applies to annual periods beginning on or after 1 January 2019 but earlier application is allowed.
The directors do not expect that these amendments will significantly affect the company's separate financial statements.
The amendment applies to annual periods beginning on or after 1 January 2019 but earlier application is allowed. The directors do not expect its adoption will significantly affect the separate financial statements.
• On 7 February 2018, the IASB published "Plan Amendment, Curtailment or Settlement (Amendment to IAS 19)". The document clarifies how a company accounts for a plan event (i.e. a curtailment or settlement) to defined benefit plans. This requires a company to update its assumptions and remeasure its net defined benefit liability or asset. The amendments clarify that after a plan event, a company would use these updated assumptions to measure current service cost and net interest for the remainder of the reporting period after the plan event.
The directors do not expect that these amendments will significantly affect the company's separate financial statements.
• On 22 October 2018, the IASB published "Definition of a Business (Amendments to IFRS 3)". The document provides clarification regarding the definition of a business for the purposes of the correct application of IFRS 3. Specifically, the amendment clarifies that while a business usually produces output, the presence of output is not strictly necessary to identify a business in the 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, IASB replaced the term "ability to create outputs" with "ability to contribute to the creation of output" to clarify that a business can exist without the presence of all the input and processes necessary to create an output.
Considering that this amendment will be applied to new acquisitions which will be completed after 1 January 2020, any effects will be recognised in the separate financial statements subsequent to that date.
• 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 directors do not expect the amendment will significantly affect the company's separate financial statements.
• On 11 September 2014, the IASB published amendments to IFRS 10 and IAS 28 Sales or contribution of assets between an investor and its associates or joint venture. The amendments were published to resolve the current conflict between IAS 28 and IFRS 10 about the measurement of gains or losses on the sale or contribution of a non-monetary asset to a joint venture or an associate in exchange for a share of its capital.
The IASB has currently deferred application of these amendments.
Revenue and costs. Revenue is measured based on the fee contractually-agreed with the customer and does not include amounts collected on behalf of third parties. The company recognises revenue when control of the goods or services is transferred to the customer. Revenue is recognised to the extent it is probable the company 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 company calculates the amount of variable considerations 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: (i) OEM (Original Equipment Manufacturers), (ii) Dealers and (iii) Projects. Non-core revenue is earned on products that do not make up the company's core business.
The warranties related to these categories of products are warranties for general repair and in most cases, the company does not provide such warranties. The company 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.
Interest. 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.
Dividends. 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.
Income taxes. They reflect a realistic estimate of the group's tax burden, calculated in accordance with the current regulations; 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 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 as required by IAS 12 Income taxes. The company does not
apply any netting of current and deferred taxes. Deferred tax liabilities on untaxed reserves are accounted for in the year in which the liability to pay the dividend is recognised. Income taxes relative to prior years include prior year tax income and expense.
Translation criteria. 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 noncurrent assets (which continue to be recognised using the transaction-date exchange rate) are re-translated using the spot closing rate (except for non-current assets) and the related exchange rate gains or losses are recognised in profit or loss.
Property, plant and equipment. 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.
| Category of assets | Rate % |
|---|---|
| Buildings: | |
| - Light constructions | 10,00% |
| - Industrial buildings | 3,00% |
| Plant and machinery: | |
| - Generic plant | 10,00% |
| - Automatic operating machinery | 10.00%-15.50% |
| Industrial and commercial equipment | 25,00% |
| Other items of property, plant and equipment: | |
| - Office furniture and equipment | 12.00%-20.00% |
| - Hardware | 20,00% |
| - Cars | 25,00% |
| - Telecommunication systems | 20,00% |
| - Other items of property, plant and equipment | 20,00% |
The depreciation rates of the main categories of property, plant and equipment are as follows:
Land has an indefinite useful life and therefore is not depreciated.
Assets held under finance lease, when all the risks and rewards of ownership have been substantially transferred to the company, are recognised at their fair value or, if lower, the present value of the minimum lease payments.
The liability to the lessor is shown under financial liabilities. The leased assets are depreciated using the above rates.
Leases where the lessor maintains substantially all the risks and rewards of ownership are classified as operating leases. The related costs are expensed over the lease term.
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.
Leasehold improvements that are not economically separable from the assets in use are depreciated over their useful life and the costs incurred, from the moment they are incurred or when they become available for use.
Intangible assets. These are identifiable, non-monetary assets without physical substance that are controlled by the entity 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 ten 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.
Goodwill. 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 amounts of the assets acquired and liabilities assumed. Goodwill is not amortised but is tested annually for impairment. For the purposes of impairment testing, goodwill is allocated to each of the company's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
Development expenditure. This is for the development of new products and the improvement of existing products and for the development and improvement of production processes. It is capitalised in accordance with IAS 38 if the innovations introduced create processes that are technically feasible and/or marketable products provided that they are aimed at completing development projects and the resources necessary for the completion and the costs and economic benefits of such innovations can be reliably measured. The expenses that are capitalised include internal and external design costs (including personnel expense and the cost of the services and materials used) reasonably attributable to the projects. As development expenditure is an intangible asset with a finite useful life, it is amortised in line with the period in which the economic benefits are expected to be obtained, generally identified as five years. The expenses are adjusted for impairment losses that could occur after first recognition. Amortisation begins from the moment that the products become available for use. The useful life is reviewed and adjusted in line with the expected future use.
Impairment losses on non-financial assets. Assets with an indefinite useful life are not amortised but are tested for impairment once a year to check whether their carrying amount has been impaired.
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 company 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.
Equity investments. Equity investments in subsidiaries and associates are recognised as financial assets based on the acquisition cost criterion, including ancillary costs and are adjusted for impairment in accordance with IAS 36.
The carrying amount is adjusted for impairment, the effect of which is recognised in profit or loss as an impairment loss (when the carrying amount of the investment is greater than the interest in equity) which are recognised in the provision for risks and charges. If these losses no longer exist or they decrease, the carrying amount is increased in line with the new recoverable amount, which must not exceed the original cost. The reversal of impairment is recognised in profit or loss.
Equity investments in other companies are recognised at acquisition or subscription cost, net of any impairment losses, the effect of which is recognised in profit or loss.
Financial assets. 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 company 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 company 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 company 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 within which the financial asset is held and the characteristics related to the contractual cash flows of the financial asset.
Specifically:
When an investment in a debt instrument measured through 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 investment in an equity instrument is measured through other comprehensive income (expense) is derecognised, the cumulative gain or loss that was previously recognised through other comprehensive income is subsequently transferred to retained earnings, without going through profit or loss.
Debt instruments subsequently measured at amortised cost or FVTOCI are subject to 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.
The company has zero-balance cash pooling contracts with certain European group companies. These instruments are intended to ensure optimal management of cash flows, allowing for the centralised management of the group's financial needs by transferring to a pooler, namely Carel Industries S.p.A., the credit and debit balances of current accounts of the individual group companies. The main aim is to use the cash surplus of one or more group companies to eliminate or reduce the debt exposure of the other companies. Following the transfer of the balances to the pool account, the individual companies must recognise a liability in the case of a negative balance and an asset in the case of a positive balance. Subsequently, the pooler recognises the individual transactions, sending a statement to the group companies on a regular basis. At the agreed expiry, the pooler manages the payment of the assets/liabilities.
The companies that take part in the cash pooling scheme are: CAREL INDUSTRIES S.p.A. (pooler) and the subsidiaries Carel U.K. Ltd, Carel France s.a.s., Carel Deutschland GmbH, Carel Control Iberica Sl; Carel Adriatic D.o.o. and Alfaco Polska Sp.z.o.o..
Inventories. Inventories 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.
Trade receivables. They are initially recognised at fair value, which is usually 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 allowance for impairment.
Foreign currency trade receivables are translated into Euros using the transaction-date exchange rate and subsequently retranslated using the closing rate. The exchange rate gain or loss is recognised in profit or loss.
Cash and cash equivalents. 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.
Employee benefits. 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. Law no. 296/06 changed the Italian post-employment benefits scheme and benefits accrued after 1 January 2007 now classify as defined contribution plans (using the terminology provided in IAS 19), regardless of whether the employee decides to have them transferred
to INPS' (the Italian social security institution) treasury fund or an external pension plan. Benefits vested up until 31 December 2006 continue to be recognised as part of a defined benefit plan and are subject to actuarial valuation, excluding the future salary increase component. The group does not have plan assets. It recognises actuarial gains and losses in the period in which they arise. Pursuant to IAS 19 (revised), they have been recognised directly in other comprehensive income starting from 2015.
Provisions for risks. As required by IAS 37 - Provisions, contingent liabilities and contingent assets, the company recognises a provision when it has a present legal or constructive obligation to third parties as a result of a past event, (i) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and (ii) 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 company provides adequate disclosure thereon in the notes.
Trade payables and other current liabilities. 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.
Financial liabilities. They are classified as current liabilities unless the company has an unconditional right to defer their payment for at least 12 months after the reporting date. The company removes the financial liability when it is extinguished and the company 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.
Derivative financial instruments. The company 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 treatment:
Fair value hedge - if a derivative is designated as a hedge of the group's exposure to changes in fair value of a recognised asset or liability that could affect profit or loss, the gain or loss from remeasuring the hedging instrument at fair value is recognised in profit or loss as is the gain or loss on the hedged item.
Cash flow hedge - if a derivative is designated as a hedge of the exposure to variability in cash flows of a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income; the cumulative gain or loss is reclassified to profit or loss in the same period during which the hedged forecast cash flows affect profit or loss; the gain or loss on the hedge or the ineffective portion of the gain or loss on the hedging instrument is recognised in profit or loss. 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.
Use of estimates. Preparation of the separate 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. The end results of the measurements for which the estimates and assumptions were used may differ from those presented in the financial statements due to the uncertainty underlying the assumptions and the conditions on which the estimates were based. The captions that require the greater reliance on the use of estimates and for which a change in the conditions underlying the assumptions may affect the separate financial statements are:
Impairment testing of goodwill. At least once a year, the company 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.
Loss allowance. This 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. An extension and worsening in the current economic and financial crisis could trigger an additional deterioration of the financial conditions of the company's debtors compared to the deterioration already considered when calculating the allowances recognised in the separate financial statements.
Allowance for inventory write-down. This allowance reflects management's estimates about expected write-downs based on past experience and the market's historical and forecast performance. A worsening in the economic and financial conditions could trigger an additional deterioration in the market conditions compared to the deterioration already considered when calculating the allowances recognised in the separate financial statements.
Fair value. 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:
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:
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 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 Financial instruments: recognition and measurement.
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 company'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.
These risks include:
a. credit risk;
b. liquidity risk;
c. market risk (currency risk, interest rate risk and other price risk).
The company's board of directors has overall responsibility for the design and monitoring of a financial risk management system. It is assisted by the various departments involved in the operations generating the different types of risk.
The departments establish tools and techniques to protect the company 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 company's exposure to the different financial risk categories is set out below.
The company 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 company's credit risk management policy includes rating its customers, setting purchase limits and taking legal action. It prepares periodic reports to ensure tight control over credit collection.
The company has a credit manager in charge of credit collection on sales made in their markets. Group 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 uncollectable 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 following table provides a breakdown of trade receivables and related loss allowance by ageing bracket:
| 31.12.2018 | 31.12.2017 | ||||
|---|---|---|---|---|---|
| (in Euros) | Trade rec. | Provision | Trade rec. | Provision | |
| Not yet due | 35.364.159 | (575.522) | 38.029.730 | (649.603) | |
| Past due < 6 months | 2.429.629 | (44.761) | 2.959.743 | (44.906) | |
| Past due > 6 months and < 12 months | 377.016 | (34.901) | 751.808 | (11.407) | |
| Past due > 12 months | 203.591 | (133.795) | 229.660 | (101.994) | |
| Total | 38.374.395 | (788.979) | 41.970.941 | (807.910) |
The company's debt mainly bears floating interest rates. 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. When deemed significant, the company agrees hedging instruments to neutralise fluctuations in interest rates and agree a set future expense to cover up to 100% of its future cash outflows. The company mainly deals with well-known and reputable customers. Its policy is to constantly monitor those customers that request payment extensions.
It is exposed to capital risk with respect to its current financial assets given the risk instruments in which it invests. However, in line with the company's policy, any excess liquidity is deposited with leading banks that mostly offer low risk instruments of investment grade issuers.
As required by IFRS 7, the next table shows the cash flows of the company's financial liabilities by maturity:
| 31.12.2018 (in Euros) | TOTAL | Total cash flows |
Within one year |
From one to five years |
After five years |
|---|---|---|---|---|---|
| - Bank loans and borrowings | 66.700.924 | 67.740.173 | 67.740.173 | - | |
| - Effective designated derivative hedges |
170.079 | 170.079 | - | 170.079 | - |
| - Other loans and borrowings | 1.476.233 | 1.509.309 | 1.247.980 | 261.329 | |
| Non-current financial liabilities | 68.347.236 | 69.419.561 | - | 69.158.232 | 261.329 |
| - Current bank loans | 43.268.246 | 43.857.921 | 43.857.921 | - | - |
| - Other loans and borrowings | 414.410 | 427.035 | 427.035 | - | - |
| - Derivatives | 11.922 | 11.922 | 11.922 | - | - |
| - Financial liabilities with group companies |
3.496.417 | 3.496.417 | 3.496.417 | - | - |
| Current financial liabilities | 47.190.995 | 47.793.295 | 47.793.295 | - | - |
| 31.12.2017 (in Euros) | TOTAL | Total cash flows |
Within one year |
From one to five years |
After five years |
|---|---|---|---|---|---|
| - Bank loans and borrowings | 19.172.070 | 19.311.222 | - | 19.311.222 | - |
| - Effective designated derivative hedges |
6.559 | 6.559 | - | 6.559 | - |
| - Other loans and borrowings | 1.790.393 | 1.832.712 | - | 1.271.305 | 561.407 |
| Non-current financial liabilities | 20.969.022 | 21.150.493 | - | 20.589.086 | 561.407 |
| - Current bank loans | 26.024.257 | 26.121.701 | 26.121.701 | - | - |
| - Other loans and borrowings | 325.245 | 339.228 | 339.228 | - | - |
| - Derivatives | 78.388 | 78.388 | 78.388 | - | - |
| - Financial liabilities with group companies |
3.188.034 | 3.188.034 | 3.188.034 | - | - |
| Current financial liabilities | 29.615.924 | 29.727.351 | 29.727.351 | - | - |
The next table shows the categorisation of financial assets and liabilities at the reporting date in accordance with IFRS 9 and their fair value:
| Carrying | Fair value | |||||
|---|---|---|---|---|---|---|
| 31.12.2018 (in Euros) | IFRS 9 category | amount | Level 1 | Level 2 | Level 3 | |
| Other loan assets | Loans and receivables | 1.993 | 1.993 | |||
| Financial assets with the group | Loans and receivables | 2.578.294 | 2.578.294 | |||
| Other non-current financial assets | 2.580.287 | |||||
| Securities | Available-for-sale financial assets |
- | - | |||
| Derivatives | Financial instruments held for trading |
12.897 | 12.897 | |||
| Financial assets with the group | Loans and receivables | 7.471.330 | 7.471.330 | |||
| Other current financial assets | 7.484.227 | |||||
| Trade receivables | Loans and receivables | 37.585.416 | 37.585.416 | |||
| Total financial assets | 47.649.930 | |||||
| including: | Available-for-sale financial assets |
- | - | - | - | |
| Financial instruments held for trading |
12.897 | - | 12.897 | - | ||
| Loans and receivables | 47.637.033 | - | - | 47.637.033 | ||
| Bank loans and borrowings | Financial liabilities at amortised cost |
(66.700.924) | (66.700.924) | |||
| Effective derivatives | Derivatives | (170.079) | (170.079) | |||
| Other loans and borrowings | Financial liabilities at amortised cost |
(1.476.233) | (1.476.233) | |||
| Non-current financial liabilities | (68.347.236) | |||||
| Current bank loans | Financial liabilities at amortised cost |
(43.268.246) | (43.268.246) | |||
| Other loans and borrowings | Financial liabilities at amortised cost |
(414.410) | (414.410) | |||
| Derivatives | Financial instruments held for trading |
(11.922) | (11.922) | |||
| Financial liabilities with group companies | Financial liabilities at amortised cost |
(3.496.417) | (3.496.417) | |||
| Current financial liabilities | (47.190.995) | |||||
| Trade payables | Financial liabilities at amortised cost |
(32.359.095) | (32.359.095) | |||
| Total financial liabilities | (147.897.326) | |||||
| including: | Financial liabilities at amortised cost |
(147.715.325) | - | (111.859.813) | (35.855.512) | |
| Financial instruments held for trading |
(11.922) | - | (11.922) | - | ||
| Derivatives | (170.079) | - | (170.079) | - |
| Carrying | Fair value | |||||
|---|---|---|---|---|---|---|
| 31.12.2017 (in Euros) | IAS 39 categories | Level 1 | Level 2 | Level 3 | ||
| Other loan assets | Loans and receivables | 2.071 | 2.071 | |||
| Financial assets with the group | Loans and receivables | 160.000 | 160.000 | |||
| Other non-current financial assets | 162.071 | |||||
| Securities | Available-for-sale financial assets |
47.062.788 | 47.062.788 | |||
| Derivatives | Financial instruments held for trading |
13.651 | 13.651 | |||
| Financial assets with the group | Loans and receivables | 4.633.969 | 4.633.969 | |||
| Total | 51.710.408 | |||||
| Total | Loans and receivables | 41.163.031 | 41.163.031 | |||
| Total financial assets | 93.035.510 | |||||
| including: | Available-for-sale financial assets |
47.062.788 | - | 47.062.788 | - | |
| Financial instruments held for trading |
13.651 | - | 13.651 | - | ||
| Loans and receivables | 45.959.071 | - | - | 45.959.071 | ||
| Bank loans and borrowings | Financial liabilities at amortised cost |
(19.172.070) | (19.172.070) | |||
| Effective derivatives | Derivatives | (6.559) | (6.559) | |||
| Other loans and borrowings | Financial liabilities at amortised cost |
(1.790.393) | (1.790.393) | |||
| Non-current financial liabilities | (20.969.022) | |||||
| Current bank loans | Financial liabilities at amortised cost |
(26.024.258) | (26.024.258) | |||
| Other loans and borrowings | Financial liabilities at amortised cost |
(325.245) | (325.245) | |||
| Derivatives | Financial instruments held for trading |
(78.388) | (78.388) | |||
| Financial liabilities with group companies | Financial liabilities at amortised cost |
(3.188.033) | (3.188.033) | |||
| Current financial liabilities | (29.615.924) | |||||
| Trade payables | Financial liabilities at amortised cost |
(32.359.095) | (32.359.095) | |||
| Total financial liabilities | (82.944.041) | |||||
| including: | Financial liabilities at amortised cost |
(82.859.094) | - | (47.311.966) | (35.547.128) | |
| Financial instruments held for trading |
(78.388) | - | (78.388) | - | ||
| Derivatives | (6.559) | - | (6.559) | - |
As the company 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 Polish zloty, the South African rand and the Japanese yen.
The company 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 company's net exposure using currency forwards and/or plain vanilla options in line with its financial policy. The hedged risk is part of the global risk and the hedges are not speculative.
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 company 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 company regularly checks its exposure to interest rate fluctuations and manages such risks through the use of derivatives, in accordance with its risk management 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 company agrees derivatives to hedge part of its financing (cash flow hedges) to set the interest to be paid thereon and obtain an optimum blend of floating and fixed interest rates applied to its financing.
Its counterparties are major banks.
Derivatives are measured at fair value.
The company 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 strengthening of the production sites in China and the US and the additional facilities in Croatia and Brazil are intended 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 company'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 group has the necessary certifications (CE and UL) to operate on various markets. To date, no legislative or regulatory changes are expected in the countries that it serves which could significantly affect the group's activities. The group sees the current focus on the environment and energy savings in nearly all the countries around the world as an opportunity to be grasped, including in terms of its R&D strategy.
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.
The changes shown below are calculated using the balances at 31 December 2017 related to the statement of financial position and for 2017 with regard to the statement of profit or loss. As already mentioned, amounts are in Euros.
The following table provides an analysis of the changes in property, plant and equipment over the two years:
| (in Euros) | Buildings | Light constructions |
Plant and machinery |
Industrial and commercial equipment |
Other items of property, plant and equipment |
Assets under construction and payments on account |
Total |
|---|---|---|---|---|---|---|---|
| Historical cost | 15.568 | 7.095 | 11.922.974 | 22.683.102 | 6.756.821 | 409.950 | 41.795.510 |
| Accumulated depreciation and impairment losses |
(191) | (3.390) | (9.773.943) | (19.116.102) | (5.350.687) | - | (34.244.313) |
| Balance at 31 December 2017 |
15.377 | 3.705 | 2.149.031 | 3.567.000 | 1.406.134 | 409.950 | 7.551.197 |
| Changes in 2018 | |||||||
| Investments | 202.973 | - | 818.397 | 1.854.991 | 460.908 | 270.437 | 3.607.706 |
| Reclassifications | 80.474 | 191.125 | 134.197 | (405.796) | - | ||
| Internal cost capitalisation | 123.782 | 123.782 | |||||
| Disinvestments | (241.890) | (105.892) | (4.154) | (351.936) | |||
| Disinvestments (accumulated depreciation) |
223.243 | 102.016 | 325.259 | ||||
| Depreciation | (690) | (709) | (526.494) | (1.683.333) | (480.412) | - | (2.691.638) |
| Total changes | 202.283 | (709) | 372.377 | 467.918 | 110.817 | (139.513) | 1.013.173 |
| Balance at 31 December 2018 |
217.660 | 2.996 | 2.521.408 | 4.034.918 | 1.516.951 | 270.437 | 8.564.370 |
| including: | |||||||
| Historical cost | 218.541 | 7.095 | 12.821.845 | 24.611.110 | 7.246.034 | 270.437 | 45.175.062 |
| Accumulated depreciation and impairment losses |
(881) | (4.099) | (10.300.437) | (20.576.192) | (5.729.083) | - | (36.610.692) |
| 217.660 | 2.996 | 2.521.408 | 4.034.918 | 1.516.951 | 270.437 | 8.564.370 |
Buildings refer to leasehold improvements that are not economically separable from the assets in use. Plant and machinery include generic and specific plant related to production lines for a total of €2,521 thousand. Among the increases during the year, €340 thousand relates to the purchase of two Pick&Place machines for the automated assembly of printed circuits, €122 thousand for the purchase of a cell for the resining of components, €210 thousand for a welding system to be installed in the valve production line
and €75 thousand to purchase a screen printing machine, in addition to the normal renovation of plant and infrastructures.
With regard to investments, €666 thousand relates to the construction of a new interconnected network architecture for the management of events that benefit from the tax relief for Industry 4.0. The increase in Industrial and commercial equipment mainly relates to moulds, testing machines and other production equipment. It also relates to the acquisition of a robotised component assembly island for €240 thousand, €220 thousand for helium-tightness testing bench with leak test station, €196 thousand for plastic moulds, €101 thousand for warehouse shelving, €50 thousand for the laser marking system for the valve production line, €37 thousand for heat pumps and fans for the valve production line, €47 thousand for a power source, €40 thousand for an inverter and €15 thousand for an oscilloscope as well as the normal renovation of production equipment.
With regard to investments, €515 thousand relates to the construction of a new interconnected network architecture for the management of events that benefit from the tax relief for Industry 4.0.
Other items of property, plant and equipment mainly include furniture and furnishings of €41 thousand, office ad electronic machines of €454 thousand, cars and internal transport for €67 thousand and telephone systems for €11 thousand. The increases and decreases are mainly due to the replacement of electronic office equipment (mainly for the renovation of company information systems), cars and telephone systems. Assets under construction include payments on account and ongoing investments in machinery constructed internally, not yet completed at 31 December 2018.
Depreciation amounted to €2,692 thousand and was calculated based on depreciable assets at 31 December 2018, applying the criteria and rates indicated in the section on Property, plant and equipment. The company's property, plant and equipment were not mortgaged or pledged at 31 December 2018. They are suitably hedged for risks deriving from losses and/or damage thereto through insurance policies taken out with leading insurers.
Lastly, in line with previous years, the company did not capitalise borrowing costs.
The following table provides an analysis of the changes in intangible assets over the two years.
| (in Euros) | Development expenditure |
Software | Goodwill | Assets under development and payments on account |
Other assets | Total |
|---|---|---|---|---|---|---|
| Historical cost | 17.983.341 | 10.930.925 | 1.618.357 | 2.092.092 | 80.216 | 32.704.931 |
| Accumulated amortisation and impairment losses |
(13.685.120) | (8.922.771) | (1.259.765) | - | (19.163) | (23.886.819) |
| Balance at 31 December 2017 |
4.298.221 | 2.008.154 | 358.592 | 2.092.092 | 61.053 | 8.818.112 |
| Changes in 2018 | ||||||
| Investments | 1.586.379 | 1.618.045 | 3.204.424 | |||
| Reclassifications | 345.082 | 40.803 | (385.885) | - | ||
| Internal cost capitalisation | 458.268 | 458.268 | ||||
| Amortisation | (1.819.638) | (1.167.115) | (12.514) | (2.999.267) | ||
| Impairment losses | (92.887) | (92.887) | ||||
| Total changes | (1.016.288) | 460.067 | - | 1.139.273 | (12.514) | 570.538 |
| Balance at 31 December 2018 |
3.281.933 | 2.468.221 | 358.592 | 3.231.365 | 48.539 | 9.388.650 |
| including: | - | - | - | |||
| Historical cost | 18.786.691 | 12.558.107 | 1.618.357 | 3.324.252 | 80.216 | 36.367.623 |
| Accumulated amortisation and impairment losses |
(15.504.758) | (10.089.886) | (1.259.765) | (92.887) | (31.677) | (26.978.973) |
| 3.281.933 | 2.468.221 | 358.592 | 3.231.365 | 48.539 | 9.388.650 |
Development expenditure: in 2018, the company capitalised development expenditure related to projects developed internally for a total of €803 thousand, of which €458 thousand related to 2018 and €345 thousand related to projects that were ongoing at 31 December 2017 and completed in 2018.
Amortisation is applied over the estimated useful life of five years.
Capitalised development expenditure refers entirely to the development of projects for the production of new innovative products or substantial improvements to existing products. The capitalisation is based on feasibility studies and business plans approved by management.
Software refers to management programs and network applications. During the year, new management software was acquired to support the relevant functions.
With regard to investments, €24 thousand relates to the construction of a new interconnected network architecture for the management of events that benefit from the Industry 4.0 tax relief.
Goodwill refers to the goodwill arising on the merger of the fully-controlled subsidiary Carel Applico S.r.l. on 1 September 2015.
The increase in Assets under development and payments on account refers to the expenditure for the development of innovative products not completed at 31 December 2018.
Furthermore, following the regular update of the business plans for the development projects that are not yet complete, the company recognised impairment losses of €93 thousand on projects, which were no longer expected to be recovered in the future.
Lastly, intangible assets were not revalued during the year, nor in previous years and the acquisition cost does not include financial expense.
This caption may be broken down as follows:
| (in Euros) | Investments in subsidiaries |
Other equity investments (associates and others) |
Total |
|---|---|---|---|
| Balance at 31 December 2017 | 25.918.092 | 140.045 | 26.058.137 |
| Changes in 2018 | |||
| Initial cost: | |||
| Increases | 92.646.139 | - | 92.646.139 |
| Total changes | 92.646.139 | - | 92.646.139 |
| Balance at 31 December 2018 | 118.564.231 | 140.045 | 118.704.276 |
Changes in the carrying amount of equity investments during the year refer to the following investees:
| Investments in subsidiaries (in Euros) | 2018 |
|---|---|
| Recuperator S.p.A. | 25.743.625 |
| Carel Adriatic D.o.o. | 3.048.213 |
| HygroMatik GmbH | 57.216.335 |
| Carel Asia Ltd | 826.096 |
| Carel Electronic (Suzhou) Co. Ltd | 2.500.000 |
| Carel Usa Llc | 2.581.761 |
| Carel Middle East DWC Llc | 300.000 |
| Carel Japan Co. Ltd | 430.108 |
| Total increases | 92.646.139 |
As part of the group's strategy which provides for external expansion, with the objective of strengthening its core business, the company acquired the following equity investments:
• on 3 December 2018 the company completed the acquisition of 100% of Hygromatik Gmbh, the German company active in the design, production and marketing of humidifiers and related accessories in the industrial, commercial and wellness field. The transaction is part of the Carel Industries Group strategy to consolidate its presence in the German-speaking markets and in Northern Europe, thanks to the strong market penetration of the newly-acquired company, leveraging the strength of the brand and the industrial excellency.
The total price paid for the acquisition was €57,216 thousand (of which €1,074 thousand for ancillary costs connected to the acquisition) financed through own funds and bank loans.
At the end of June 2018, the company acquired the remaining 51% of share capital of Carel Japan Co. Ltd (Japan), which is an active distributor on the Japanese market, for JPY 5,100 thousand (equal to €40 thousand), paid for using own funds.
Lastly, to improve its investees' financial structures, the company made the following capital increases in: (i) Carel Adriatic D.o.o for a total of €3,048 thousand, (ii) Carel Asia Ltd for €826 thousand, (iii) Carel Electronic (Suzhou) co. Ltd for €2,500 thousand, (iv) Carel USA Llc for a total of €2,582 thousand, (v) Carel Middle East DVC Llc for €300 thousand and (vi) Carel Japan Co. Ltd for €390 thousand.
Using the comparison between the carrying amount of the equity investments and the company's share of each investee, the directors of the companies for which the carrying amount had been previously impaired despite the positive difference, prudently decided not to recognise an impairment gain on the equity investment until positive results continue to be recognised.
On the other hand, for certain investees the difference was negative. The subsequent measurement of the individual positions with regard to the recoverability of the difference led the directors to believe that no impairment had taken place and, therefore, the difference was recoverable based on the outlook for the investees.
At 31 December 2018, the company had not accrued a provision for equity investment risks, recognised in the medium-long term provisions for the recapitalisation obligations of the investees.
| 31.12.2018 | ||||||
|---|---|---|---|---|---|---|
| (in Euros) | Historical cost | Loss allowance | Carrying amount | |||
| Subsidiaries: | ||||||
| Recuperator S.p.A. | 25.743.625 | - | 25.743.625 | |||
| Carel Deutschland GmbH | 138.049 | - | 138.049 | |||
| Carel Adriatic D.o.o. | 7.370.289 | - | 7.370.289 | |||
| C.R.C S.r.l. | 1.600.000 | - | 1.600.000 | |||
| HygroMatik Gmbh | 57.216.335 | - | 57.216.335 | |||
| Carel France Sas | 91.469 | - | 91.469 | |||
| Carel South America Ltda | 5.396.848 | (1.983.740) | 3.413.108 | |||
| Carel U.K. Ltd | 1.624.603 | - | 1.624.603 | |||
| Carel Asia Ltd | 1.761.498 | (935.402) | 826.096 | |||
| Carel Electronic (Suzhou) Co. Ltd | 9.276.379 | - | 9.276.379 | |||
| Carel Controls Iberica SL | 4.330.149 | (1.500.000) | 2.830.149 | |||
| Carel RUS Llc | 160.936 | 160.936 | ||||
| Carel Usa Llc | 3.661.874 | 3.661.874 | ||||
| Carel Nordic AB | 60.798 | 60.798 | ||||
| Carel Middle East | 1.060.614 | (760.614) | 300.000 | |||
| Alfaco Polska Sp.z.o.o. | 3.820.413 | - | 3.820.413 | |||
| Carel Japan Co. Ltd | 475.003 | (44.895) | 430.108 | |||
| Total | 123.788.882 | (5.224.651) | 118.564.231 | |||
| Associates: | ||||||
| Arion S.r.l | 140.000 | 140.000 | ||||
| Total | 140.000 | - | 140.000 | |||
| Other companies: | ||||||
| CONAI | 45 | - | 45 | |||
| Total | 45 | - | 45 | |||
| Total equity investments | 123.928.927 | (5.224.651) | 118.704.276 |
The following table provides a breakdown of the equity investments at the reporting date:
| 2017 | |||||||
|---|---|---|---|---|---|---|---|
| (in Euros) | Historical cost | Loss allowance | Carrying amount | ||||
| Subsidiaries: | |||||||
| Carel Deutschland GmbH | 138.049 | - | 138.049 | ||||
| Carel Adriatic D.o.o. | 4.322.076 | - | 4.322.076 | ||||
| C.R.C S.r.l. | 1.600.000 | - | 1.600.000 | ||||
| Carel France Sas | 91.469 | - | 91.469 | ||||
| Carel South America Ltda | 5.396.848 | (1.983.740) | 3.413.108 | ||||
| Carel U.K. Ltd | 1.624.603 | - | 1.624.603 | ||||
| Carel Asia Ltd | 935.402 | (935.402) | - | ||||
| Carel Electronic (Suzhou) Co. Ltd | 6.776.379 | - | 6.776.379 | ||||
| Carel Controls Iberica SL | 4.330.149 | (1.500.000) | 2.830.149 | ||||
| Carel RUS Llc | 160.936 | 160.936 | |||||
| Carel Usa Llc | 1.080.112 | 1.080.112 | |||||
| Carel Nordic AB | 60.798 | 60.798 | |||||
| Carel Middle East | 760.614 | (760.614) | - | ||||
| Alfaco Polska Sp.z.o.o. | 3.820.413 | - | 3.820.413 | ||||
| Total | 31.097.848 | (5.179.756) | 25.918.092 | ||||
| Associates: | |||||||
| Carel Japan Co. Ltd | 44.895 | (44.895) | - | ||||
| Arion S.r.l | 140.000 | 140.000 | |||||
| Total | 184.895 | (44.895) | 140.000 | ||||
| Other companies: | |||||||
| CONAI | 45 | - | 45 | ||||
| Total | 45 | - | 45 | ||||
| Total equity investments | 31.282.788 | (5.224.651) | 26.058.137 |
The following table provides the information about equity investments at 31 December 2018 in accordance with article 2427 of the Italian Civil Code:
| Registered office | Currency | Share capital currency |
Equity (Euros) | |
|---|---|---|---|---|
| Subsidiaries: | ||||
| Carel Deutschland GmbH | Frankfurt | EUR | 25.565 | 2.715.153 |
| Carel Adriatic D.o.o. | Labin | HRK | 54.600.000 | 10.614.981 |
| C.R.C S.r.l. | Bologna | EUR | 98.800 | 3.181.780 |
| Carel France Sas | St. Priest, Rhone | EUR | 100.000 | 2.310.065 |
| Carel Sud America Instrumentacao Eletronica Ltda | San Paolo | BRL | 31.149.059 | 5.752.928 |
| Carel U.K. Ltd | London | GBP | 350.000 | 2.151.042 |
| Carel Asia Ltd | Honk Kong | HKD | 15.900.000 | 1.054.546 |
| Carel Electronic (Suzhou) Co. Ltd | Suzhou-RC | CNY | 75.019.566 | 47.804.076 |
| Carel Controls Iberica SL | Barcelona | EUR | 3.005 | 2.776.428 |
| Carel RUS Llc | St. Petersburg | RUB | 6.600.000 | 608.863 |
| Carel Usa Llc | Wilmington Delaware-USA | USD | 3.000.000 | 14.154.323 |
| Carel Nordic AB | Höganäs | SEK | 550.000 | 577.823 |
| Carel Middle East | Dubai-UAE | Dirham | 4.333.877 | 292.754 |
| Alfaco Polska Sp.z.o.o. | Wrocław | PLN | 420.000 | 3.804.598 |
| Recuperator S.p.A. | Rescaldina | EUR | 500.000 | 6.583.903 |
| HygroMatik GmbH | Henstedt-Ulzburg | EUR | 639.115 | 779.146 |
| Carel Japan Co. Ltd | Tokyo | JPY | 60.000.000 | 240.805 |
| Total | ||||
| Associates: | ||||
| Arion S.r.l (*) | Brescia | EUR | 100.000 | 211.556 |
| Total | ||||
| Other companies: | ||||
| CONAI | EUR | |||
| Total | ||||
| Total equity investments |
(*) amounts at 31.12.2017
| Carrying amount Difference between pro-quota equity |
Owned portion Profit (loss) for the year |
||
|---|---|---|---|
| (Euros) | Indirect | Direct | (Euros) |
| 138.049 | 100,00% | 1.188.178 | |
| 7.370.289 | 100,00% | 2.424.914 | |
| 1.600.000 | 100,00% | 516.039 | |
| 91.469 | 100,00% | 527.568 | |
| 3.413.108 | 46,98% | 53,02% | 753.069 |
| 1.624.603 | 100,00% | 1.119.839 | |
| 826.096 | 100,00% | 330.553 | |
| 9.276.379 | 100,00% | 8.267.768 | |
| 2.830.149 | 100,00% | 769.126 | |
| 160.936 | 1,00% | 99,00% | 429.286 |
| 3.661.874 | 100,00% | 1.218.629 | |
| 60.798 | 100,00% | 150.609 | |
| 300.000 | 100,00% | (27.713) | |
| 3.820.413 | 100,00% | 813.142 | |
| 25.743.625 | 100,00% | (12.944) | |
| 57.216.335 | 100,00% | 140.031 | |
| 430.108 | 100,00% | (100.131) | |
| 118.564.231 | |||
| 140.000 | 40,00% | 12.380 | |
| 140.000 | |||
| 45 | |||
| 45 | |||
| 118.704.276 |
With reference to the difference between the company's share if the investee's equity and the carrying amount of the equity investment in Recuperator S.p.A. and Hygromatik Gmbh, with the support of an independent expert, the company checked the higher price paid allocated to assets and liabilities in the consolidated financial statements against the related equity in accordance with IFRS 3 and IAS 36. The directors tested goodwill for impairment, though it did not test amortisable assets for impairment as
no trigger events or circumstances indicated that impairment had taken place. Based on the analyses performed, there was no indication of impairment of the goodwill or the trademark at 31 December 2018 (for more information, reference should be made to note [2] Intangible assets of the consolidated financial statements) and therefore, the carrying amount of the above-mentioned equity investments remained the same.
These amounted to €2,580 thousand and can be analysed as follows:
| Change during the year | ||||
|---|---|---|---|---|
| (in Euros) | 31.12.2018 | New / increases | Repayments / decreases |
31.12.2017 |
| Subsidiaries | 2.418.294 | 2.418.294 | - | |
| Associates | 160.000 | - | - | 160.000 |
| Others | 1.993 | - | (78) | 2.071 |
| Total | 2.580.287 | 2.418.294 | (78) | 162.071 |
Amounts due from subsidiaries of €2,418 thousand refer to the amounts due after one year for an original interest-bearing loan of €3,608 thousand expiring on 30 November 2021 granted to the investee Hygromatik Gmbh.
Amounts due from associates of €160 thousand relate entirely to a non-interest-bearing long-term loan (expiring on 31 December 2022) granted to the associate Arion S.r.l..
Amounts due from others refer to term deposits for utilities and leases.
Deferred tax assets at 31 December 2018 were generated by the temporary differences between the carrying amounts of assets and liabilities and their tax bases calculated with reference to the tax rates expected to be enacted in the years in which the differences will reverse.
The company considered it appropriate to recognise the deferred tax assets deriving from the temporary differences indicated below in the separate financial statements, as it is reasonably certain that they will be achieved through taxable profits in the years in which the deductible temporary differences will reverse.
| 31.12.2018 | 31.12.2017 | ||||
|---|---|---|---|---|---|
| (in Euros) | Tax base | Deferred tax assets |
Tax base | Deferred tax assets |
|
| Allowance for inventory write-down | 1.003.441 | 240.826 | 1.329.312 | 319.035 | |
| Provision for product warranties | 224.427 | 62.615 | 236.888 | 66.092 | |
| Provision for complaints | 1.462.441 | 408.020 | 417.685 | 116.534 | |
| Provision for agents' termination indemnity and bonuses |
74.026 | 17.766 | 74.026 | 17.766 | |
| Unrealised exchange differences | - | - | 194.254 | 46.621 | |
| Deductible cash fees | 18.589 | 4.461 | - | - | |
| Amortisation of goodwill - transfer | 81.667 | 22.786 | 122.500 | 34.178 | |
| Substitute tax on goodwill(16%) | 81.667 | 13.067 | 122.500 | 19.601 | |
| Amortisation of goodwill - merger | 238.643 | 66.581 | 262.542 | 73.249 | |
| Substitute tax on goodwill(12%) | 238.643 | 28.637 | 262.563 | 31.514 | |
| Amortisation of goodwill - acquisition of business unit | 3.940 | 1.100 | 6.228 | 1.738 | |
| Discounting - Post-employment benefits and post term of office benefits for directors |
302.316 | 84.345 | 440.420 | 122.876 | |
| Difference between amortisation/depreciation and fiscally-driven amortisation/depreciation |
123.460 | 34.446 | 75.087 | 20.949 | |
| Fair value of derivatives | 153.205 | 36.769 | - | - | |
| Total | 4.006.465 | 1.021.419 | 3.544.005 | 870.153 |
Changes in deferred tax assets are presented in the table below:
| (in Euros) | 31.12.2018 | Recognised in profit or loss |
Recognised in other comprehen sive income |
31.12.2017 |
|---|---|---|---|---|
| Allowance for inventory write-down | 240.826 | (78.209) | - | 319.035 |
| Provision for product warranties | 62.615 | (3.477) | - | 66.092 |
| Provision for complaints | 408.020 | 291.486 | - | 116.534 |
| Provision for agents' termination indemnity and bonuses |
17.766 | - | - | 17.766 |
| Unrealised exchange differences | - | (46.621) | - | 46.621 |
| Deductible cash fees | 4.461 | 4.461 | - | - |
| Amortisation of goodwill - transfer | 22.786 | (11.392) | - | 34.178 |
| Substitute tax on goodwill (16%) | 13.067 | (6.534) | - | 19.601 |
| Amortisation of goodwill - merger | 66.581 | (6.667) | - | 73.248 |
| Substitute tax on goodwill (12%) | 28.637 | (2.877) | - | 31.514 |
| Amortisation of goodwill - acquisition of business unit | 1.100 | (638) | - | 1.738 |
| Discounting - Post-employment benefits and post term of office benefits for directors |
84.345 | (14.232) | (24.300) | 122.877 |
| Difference between amortisation/depreciation and fiscally-driven amortisation/depreciation |
34.446 | 13.497 | - | 20.949 |
| Fair value of derivatives | 36.769 | - | 36.769 | - |
| Total | 1.021.419 | 138.797 | 12.469 | 870.153 |
These amounted to €37,585 thousand (€41,163 thousand in 2017) and are as follows:
| (in Euros) | 31.12.2018 | Change 2018 | 31.12.2017 |
|---|---|---|---|
| Third parties | 24.361.794 | (872.169) | 25.233.963 |
| Parents | 327.808 | 327.808 | - |
| Subsidiaries | 13.668.116 | (2.005.897) | 15.674.013 |
| Associates | (9.750) | 9.750 | |
| Subsidiaries of parents | 16.677 | (951.282) | 967.959 |
| Related parties | - | (85.257) | 85.257 |
| Total trade receivables | 38.374.395 | (3.596.547) | 41.970.942 |
| Loss allowance | (788.979) | 18.932 | (807.911) |
| Total | 37.585.416 | (3.577.615) | 41.163.031 |
Trade receivables in foreign currency were recognised at the year-end exchange rate, adjusting the relative equivalent amount.
Trade receivables, gross of the loss allowance, refer to the following geographic segments:
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Western Europe | 23.251.083 | 26.301.718 |
| Other European countries, Middle East and Africa | 6.855.061 | 7.703.971 |
| North America | 2.343.042 | 2.724.848 |
| South America | 657.080 | 762.289 |
| Asia Pacific South | 1.966.920 | 1.404.723 |
| Asia Pacific North | 3.301.209 | 3.073.393 |
| Total | 38.374.395 | 41.970.942 |
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 credit 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.
Changes in the allowance are shown in the following table:
| Change during the year | |||||
|---|---|---|---|---|---|
| (in Euros) | 31.12.2018 | Accant. menti |
Utilizzi | Rilasci | 31.12.2016 |
| Loss allowance | 788.979 | - | (18.932) | 807.911 | |
| Total | 788.979 | - | (18.932) | 807.911 |
A breakdown of trade receivables due from group companies is as follows:
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Luigi Rossi Luciani S.a.p.A. | 198.426 | |
| Luigi Nalini S.a.p.A. | 129.382 | - |
| Parents | 327.808 | - |
| C.R.C. S.r.l. | 190.380 | 293.449 |
| Carel U.K. Ltd | 1.007.495 | 1.609.986 |
| Carel France s.a.s. | 1.098.895 | 1.531.499 |
| Carel Asia Ltd | 1.919.120 | 358.655 |
| Carel Sud America Instrumentacao Eletronica Ltda | 431.952 | 439.012 |
| Carel Usa Llc | 2.228.875 | 2.610.824 |
| Carel Australia Pty. Ltd | 872.832 | |
| Carel Deutschland GmbH | 271.491 | 1.020.783 |
| Carel Electronic (Suzhou) Co Ltd | 2.235.393 | 2.295.743 |
| Carel Controls Iberica S.L. | 1.033.698 | 1.108.927 |
| Carel ACR Systems India (Pvt) Ltd | 367.739 | 162.370 |
| Carel Controls South Africa (Pty) Ltd | 680.232 | |
| Carel Korea Ltd | 72.389 | 133.951 |
| Carel Nordic AB | 80 | 10 |
| Carel Japan Co. Ltd | 6.427 | - |
| Carel Mexicana S.De.RL | 114.167 | 114.024 |
| Carel Middle East DWC Llc | 32.500 | 7.018 |
| Alfaco Polska Sp.z.o.o | 2.091.368 | 1.684.276 |
| Carel (Thailand) CO Ltd | 50.756 | |
| Carel Adriatic D.o.o. | 566.147 | 699.666 |
| Subsidiaries | 13.668.116 | 15.674.013 |
| Carel Japan Co. Ltd | 9.750 | |
| Associates | - | 9.750 |
| RN Real Estate S.r.l | 3.050 | 3.050 |
| Eurotest Laboratori S.r.l. | 10.577 | 71.762 |
| Arianna S.p.A. | 3.050 | 893.147 |
| Subsidiaries of parents | 16.677 | 967.959 |
| Eurotec Limited | 85.257 | |
| Related parties | - | 85.257 |
These amounted to €22,170 thousand. They are comprised as follows, net of the allowance for inventory write downs for slow moving or obsolete inventories:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Raw materials and consumables | 12.695.009 | 3.552.117 | 9.142.892 |
| Allowance for inventory write-down | (584.475) | 246.850 | (831.325) |
| Total raw materials, consumable and supplies | 12.110.534 | 3.798.967 | 8.311.567 |
| Work in progress and semi-finished goods | 1.850.424 | 416.825 | 1.433.599 |
| Allowance for inventory write-down | (54.054) | 151.425 | (205.479) |
| Total work in progress and semi-finished goods | 1.796.370 | 568.250 | 1.228.120 |
| Finished goods | 8.627.304 | 722.499 | 7.904.805 |
| Allowance for inventory write-down | (364.912) | (72.404) | (292.508) |
| Total Finished goods | 8.262.392 | 650.095 | 7.612.297 |
| Payments on account | 450 | (94.091) | 94.541 |
| Inventories | 22.169.746 | 4.923.221 | 17.246.525 |
Inventories were not pledged or subject to property rights restrictions.
These amounted to €4,953 thousand and can be broken down as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| IRES tax asset | 4.281.933 | 3.943.866 | 338.067 |
| IRAP tax asset | 670.841 | 622.260 | 48.581 |
| Total | 4.952.774 | 4.566.126 | 386.648 |
In December 2018, the company signed an agreement with the tax office for the definition of a reduced tax regime for income derived from the direct use of intangible assets (patent box) covering 2015 and the following four years.
Current tax assets are as follows:
IRAP tax asset of €284 thousand following the filing of the supplementary tax returns for the 2015-2017 three-year period due to the patent box agreement entered into by the company and the tax office.
IRAP tax asset of €338 thousand resulting from the calculation of the taxes for 2018 due to advances paid that exceeded the actual tax liabilities.
These amounted to €2,390 thousand (€3,472 thousand at 31 December 2017) and can be broken down as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Other tax assets | 1.238.104 | (1.458.144) | 2.696.248 |
| Other assets | 1.152.391 | 376.582 | 775.809 |
| Total | 2.390.495 | (1.081.562) | 3.472.057 |
A breakdown of Other tax assets at year end is as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| VAT assets | 320.046 | (1.616.942) | 1.936.988 |
| Tax assets | 918.058 | 159.032 | 759.026 |
| Other tax assets | - | (234) | 234 |
| Total | 1.238.104 | (1.458.144) | 2.696.248 |
VAT assets relate to the VAT tax asset at the reporting date.
With reference to the VAT tax asset at 31 December 2017, in April 2018, the company offset €700 thousand against other taxes and contributions and in September 2018 it received the tax credit of €1,000 thousand it had claimed for reimbursement.
Tax assets refer to the tax credit for research and development of €863 thousand, the tax credit for dividends from subsidiaries of €17 thousand and the withholdings paid abroad on revenue from royalties. These tax assets can be recovered through the tax return.
A breakdown of other assets at year end is as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Advances to suppliers | 108.691 | 31.056 | 77.635 |
| Other assets | 3.940 | (65.322) | 69.262 |
| Prepaid insurance premiums | 230.754 | 191.620 | 39.134 |
| Prepayments related to more than one year | 74.660 | 40.019 | 34.641 |
| Other prepayments | 734.346 | 179.209 | 555.137 |
| Total | 1.152.391 | 376.582 | 775.809 |
Advances to suppliers refer to payments on account for services.
Prepayments and accrued income refer to income or charges collected/paid before or after the year to which they pertain. They are recognised regardless of the payment or collection date when the related income and charges are common to two or more years and can be allocated over time. Other prepayments also include €403 thousand pertaining to the subsequent year for software maintenance instalments.
These amounted to €7,484 thousand (€51,710 thousand in 2017) and are as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Loans to subsidiaries | 1.192.702 | 1.192.702 | - |
| Other securities | - | (47.062.788) | 47.062.788 |
| Cash pooling arrangement | 6.278.628 | 1.644.659 | 4.633.969 |
| Derivatives | 12.897 | (754) | 13.651 |
| Total | 7.484.227 | (44.226.181) | 51.710.408 |
Receivables from subsidiaries of €1,193 thousand refer to the amounts due whithin one year for an original interest-bearing loan of €3,608 thousand expiring on 30 November 2021 granted to the investee Hygromatik Gmbh.
During the year, the company received reimbursement of all the class 1 life insurance policies and, therefore, the balance of Other securities at 31 December 2018 was equal to zero. It should be noted that the insurance policies were agreed as a form of investment of its temporary excess liquidity. The policies' reimbursement value amounted to €47,496 thousand (€433 thousand of coupons that accrued in the year up to the date of reimbursement).
The Cash pooling arrangement includes the credit balance of the cash pooling account related to the cash pooling arrangements regarding the following group companies:
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Carel Adriatic Doo | 4.227.311 | 4.633.969 |
| Alfaco Polska Sp.z.o.o. | 2.051.317 | - |
| Total | 6.278.628 | 4.633.969 |
During the year, the company set up a cash pooling arrangement with the investee Alfaco Polska Sp.z.o.o. in Polish zloty.
Derivatives include derivatives with a positive fair value at the reporting date. The following table reclassifies derivatives by type of financial instrument.
| 2018 | 2017 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (in Euros) | Fair value ** |
Nominal amount ** |
Currency forwards purchases* |
Currency forwards sales* |
Fair value ** |
Nominal amount ** |
Currency purchases* |
Currency sales* |
|
| USD forwards | 9.447 | 1.480.871 | - | 1.690.000 | - | - | - | - | |
| YEN forwards | 3.450 | 137.424 | 17.693.630 | - | - | - | - | ||
| AUD forwards | - | - | - | - | 5.979 | 557.412 | - | 848.836 | |
| USD options | - | - | - | - | 7.094 | 2.699.309 | 3.000.000 | - | |
| YEN options | - | - | - | - | - | 327.103 | 35.000.000 | - | |
| AUD options | - | - | - | - | 578 | 384.615 | - | 600.000 | |
| RAND options | - | - | - | - | - | 194.444 | - | 3.500.000 | |
| Total | 12.897 | 13.651 |
* In foreign currency
** In Euros
Fair value is calculated as follows:
This caption comprises temporary liquidity in bank accounts and petty cash and amounted to €24,006.
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Bank deposits | 23.997.672 | 5.321.810 | 18.675.862 |
| Cash and cash equivalents | 8.552 | 3.113 | 5.439 |
| Total | 24.006.224 | 5.324.923 | 18.681.301 |
Cash and cash equivalents are not subject to any obligations or use restrictions by the company.
For more information about changes in such caption, reference should be made to the statement of cash flows.
Equity is comprised as follows and underwent the following changes:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Share capital | 10.000.000 | - | 10.000.000 |
| Share premium reserve | 867.350 | - | 867.350 |
| Revaluation reserves | 3.424.658 | - | 3.424.658 |
| Legal reserve | 2.000.000 | - | 2.000.000 |
| Hedging reserve | (92.802) | (125.560) | 32.758 |
| Other reserves | |||
| - Extraordinary reserve | 20.584.887 | (2.316.843) | 22.901.730 |
| - Transfer premium reserve | 6.105.327 | - | 6.105.327 |
| - Reserve for unrealised exchange rate gains (losses) | - | (69.051) | 69.051 |
| - IFRS FTA reserve | 2.145.495 | - | 2.145.495 |
| - Stock grant reserve | 77.257 | 77.257 | - |
| - Actuarial reserve | 25.394 | 62.797 | (37.403) |
| Retained earnings (lossess) | 476.149 | - | 476.149 |
| Profit (loss) for the year | 23.987.058 | (3.627.048) | 27.614.106 |
| Total | 69.600.773 | (5.998.448) | 75.599.221 |
The changes with respect to the previous year are detailed in the following tables.
| Change during the year | |||||||
|---|---|---|---|---|---|---|---|
| (in Euros) | 31.12.2018 | Total changes |
Allocation of prior year profit (loss) |
Reclassification | Dividends | Profit (loss) for the year |
Saldi al 31.12.2017 |
| Share capital | 10.000.000 | - | 10.000.000 | ||||
| Share premium reserve | 867.350 | - | 867.350 | ||||
| Revaluation reserves | 3.424.658 | - | 3.424.658 | ||||
| Legal reserve | 2.000.000 | - | 2.000.000 | ||||
| Hedging reserve | (92.802) | (125.560) | - | (125.560) | 32.758 | ||
| Other reserves | |||||||
| - Extraordinary reserve | 20.584.887 | (2.316.844) | 27.614.105 | 69.051 | (30.000.000) | 22.901.731 | |
| - Transfer premium reserve | 6.105.327 | - | 6.105.327 | ||||
| - Reserve for unrealised exchange rate gains (losses) |
- | (69.051) | - | (69.051) | 69.051 | ||
| - IFRS FTA reserve | 2.145.495 | - | 2.145.495 | ||||
| - Stock grant reserve | 77.257 | 77.257 | 77.257 | - | |||
| - Actuarial reserve | 25.394 | 62.797 | 62.797 | (37.403) | |||
| Retained earnings (losses) | 476.149 | - | - | 476.149 | |||
| Profit (loss) for the year | 23.987.058 | (3.627.047) | (27.614.105) | - | 23.987.058 | 27.614.105 | |
| Total | 69.600.773 | (5.998.448) | - | (30.000.000) | 24.001.552 | 75.599.221 |
Share capital: at the extraordinary meeting of 27 February 2018, in view of the proposed listing of the company's ordinary shares on the STAR segment of the stock market organised and managed by Borsa Italiana S.p.A., the shareholders resolved, inter alia, to split the existing ordinary shares into ten new shares for each existing share, in addition to the elimination of the shares' nominal amount.
On 31 December 2018, the fully paid-up and subscribed share capital consisted of 100,000,000 ordinary shares without a nominal amount for a total of €10,000,000.
The company's shares were not pledged as guarantees or liens.
The Revaluation reserve includes the revaluation, net of taxes, of property, plant and equipment acquired in 2009 following the transfer of the production business unit from the former parent, Carel S.p.A..
The hedging reserve includes the fair value gains or losses, net of the deferred tax effects on the effective portion of two interest rate hedging derivatives entered into to hedge the interest rate risk of floating-rate non-current loans entered into in 2016 and 2018. The changes are shown in the following table:
| (in Euros) | |
|---|---|
| 31 December 2017 | 32.758 |
| Change during the year | |
| Fair value increases | - |
| Fair value decreases | (165.210) |
| Release to profit or loss | - |
| Adjustment of assets/liabilities | - |
| Deferred tax effect | 39.650 |
| Total changes | (125.560) |
| 31 December 2018 | (92.802) |
The Reserve for unrealised exchange rate gains: at the meeting of 28 March 2018, in which the shareholders approved the financial statements for the year ended 31 December 2017, there were unrealised exchange rate losses, as a result, the conditions that required the constitution of an undistributable equity reserve pursuant to article 2426.8-bis of the Italian Civil Code no longer applied. Therefore, the company reclassified the entire reserve in place at 31 December 2017 to a distributable reserve.
The IFRS FTA reserve was set up upon the adoption of the International Financial Reporting Standards on 1 January 2015.
The Stock grant reserve includes the fair value of the incentive plan based on financial instruments for the free allocation of the company's ordinary shares approved by the shareholders on 7 September 2018.
For more information, reference should be made to the Share-based payment arrangements paragraph of note 32.
On 7 September 2018, the shareholders approved the repurchase of treasury shares, up to a maximum of 5,000,000 shares, equal to 5% of the company's share capital, used for the incentive plan. At the end of the year, the company had not repurchased any treasury shares.
The Actuarial reserve derives from the effects of the discounting of the post-employment benefits and postterm of office benefits for directors.
Retained earnings were created upon adoption of the IFRS and relate to 2015 and 2016. Equity captions are broken down by origin, possible use and distribution and their actual use in the past three years is set out below.
| Amount | Possible use | Available portion |
Distributable portion |
To cover losses |
Distribution of reserves |
|
|---|---|---|---|---|---|---|
| Share capital | 10.000.000 | |||||
| Equity-related reserves: | ||||||
| Share premium reserve | 867.350 | A, B, C | 867.350 | 867.350 | ||
| Revaluation reserves | 3.424.658 | A, B, C | 3.424.658 | 3.424.658 | ||
| Transfer premium reserve | 6.105.327 | A, B, C | 6.105.327 | 6.105.327 | ||
| Income-related reserves: | ||||||
| Legal reserve | 2.000.000 | B | 2.000.000 | |||
| Extraordinary reserve | 20.584.887 | A, B, C | 20.584.887 | 14.071.590 | 5.000.000 | |
| Reserve for unrealised exchange rate gains |
- | A, B | - | |||
| IFRS FTA reserve | 2.145.495 | B | 2.145.495 | |||
| Actuarial reserve | 25.394 | B | 25.394 | |||
| Hedging reserve | (92.802) | (92.802) | ||||
| Stock grant reserve | 77.257 | B | 77.257 | |||
| Retained earnings | 476.149 | B | 476.149 | |||
| Total (net of profit for 2018) | 45.613.715 | 35.613.715 | 24.468.925 | - | 5.000.000 | |
| Profit for 2018 | 23.987.058 | |||||
| Total equity | 69.600.773 |
Key: A: share capital increases B: to cover losses C: dividends
Pursuant to article 2426.5 of the Italian Civil Code, Start-up and capital costs and development expenditure pertaining to more than one year may be recognised as assets with the approval, where necessary, of the board of statutory auditors and they are amortised over five years. Until the amortisation is complete, dividends may only be distributed if there are sufficient available reserves to cover the amount of nonamortised costs.
At 31 December 2018, development expenditure not yet amortised amounted to €6,513,297.
The following table provides an indication of the tax regime for the share capital and reserves at 31 December
2018 in case of their repayment or distribution.
| (in Euros) | Total amount of reserves and non distributable earnings |
Share capital and reserves that make up the company's income |
Share capital and reserves that make up the shareholders' income |
Share capital and reserves that do not make up income for the company or shareholders |
Total |
|---|---|---|---|---|---|
| Share capital | 10.000.000 | 10.000.000 | |||
| Share premium reserve | 867.350 | 867.350 | |||
| Revaluation reserves | 3.424.658 | 3.424.658 | |||
| Legal reserve | 2.000.000 | 2.000.000 | |||
| Hedging reserve | (92.802) | (92.802) | |||
| Other reserves | - | ||||
| - Extraordinary reserve | 20.584.887 | 20.584.887 | |||
| - Transfer premium reserve | 6.105.327 | 6.105.327 | |||
| - IFRS FTA reserve | 2.145.495 | 2.145.495 | |||
| - Stock grant reserve | 77.257 | 77.257 | |||
| - Actuarial reserve | 25.394 | 25.394 | |||
| Retained earnings | 476.149 | 476.149 | |||
| Total | 4.631.493 | - | 20.584.887 | 20.397.335 | 45.613.715 |
Earnings per share were calculated by dividing the profit attributable to the shareholders by the weighted average number of outstanding ordinary shares. The company did not repurchase or issue ordinary shares during either year, nor were there potential ordinary shares that could be converted with dilutive effects. The amount at 31 December 2017 was recalculated on the basis of the above-mentioned share split as provided for by IAS 33.
The earnings per share are as follows:
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Number of shares | 100.000.000 | 100.000.000 |
| Profit for the year | 23.987.058 | 27.614.106 |
| Earnings per share | 0,2399 | 0,2761 |
The company's basic and diluted earnings per share are the same.
Non-current loans and borrowings can be broken down as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Bank loans and borrowings at amortised cost | 66.700.924 | 47.528.854 | 19.172.070 |
| Financial liabilities to others at amortised cost | 1.476.233 | (314.160) | 1.790.393 |
| Effective designated derivative hedges | 170.079 | 163.520 | 6.559 |
| Non-current financial liabilities | 68.347.236 | 47.378.214 | 20.969.022 |
Current loans and borrowings can be broken down as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Bank loans and borrowings at amortised cost | 43.268.246 | 17.243.988 | 26.024.258 |
| Financial liabilities to others at amortised cost | 414.410 | 89.165 | 325.245 |
| Derivatives held for trading at fair value through profit or loss |
11.922 | (66.466) | 78.388 |
| Cash pooling arrangement | 3.496.417 | 308.384 | 3.188.033 |
| Current financial liabilities | 47.190.995 | 17.575.071 | 29.615.924 |
A breakdown of bank loans and borrowings at amortised cost, net of the interest accrued at the end of the year and the residual amortised cost by due date is provided below:
| 31.12.2018 (in Euros) |
Currency | Original amount |
Maturity | Rate | Terms | Outstanding liabilities in Euros |
Within one year |
After one year |
|---|---|---|---|---|---|---|---|---|
| BNL (BNP Paribas) loan no. 280586 |
EUR | 10.000.000 | 02/2019 | Floating | 6m Euribor + 0.52% |
3.333.333 | 3.333.333 | - |
| BNL (BNP Paribas) loan no. 1788284 |
EUR | 10.000.000 | 06/2019 | Fixed | 0,30% | 10.000.000 | 10.000.000 | - |
| BNL (BNP Paribas) loan no. 6129125 |
EUR | 15.000.000 | 03/2020 | Fixed | 0,37% | 7.513.829 | 5.009.227 | 2.504.602 |
| Medio Credito Italiano (Intesa San Paolo) loan |
EUR | 15.000.000 | 06/2021 | Floating | 3m Euribor + 0.55% |
8.339.484 | 3.333.333 | 5.006.151 |
| Mediobanca – Banca di Credito Finanziario S.p.A. loan |
EUR | 30.000.000 | 11/2021 | Fixed | 0,88% | 29.971.652 | 12.000.000 | 17.971.652 |
| BNL (BNP Paribas) loan no. 6139218 |
EUR | 30.000.000 | 11/2022 | Fixed | 6m Euribor + 0.78% |
29.948.677 | 4.285.714 | 25.662.963 |
| Unicredit S.p.A. loan | EUR | 20.000.000 | 04/2023 | Fixed | 0,45% | 20.000.000 | 4.444.444 | 15.555.556 |
| BNL current account | PLN | 3.329.904 | On demand | Floating | 13,50% | 774.295 | 774.295 | - |
| Total | 109.881.270 | 43.180.346 | 66.700.924 |
During the year the company:
The loan agreements do not include covenants, apart from the loan entered into with Mediobanca in December for a total of €30,000 thousand. The loan requires that the following covenants be respected on a six-monthly basis at 31 December and 30 June of each year starting from 31 December 2018 and based on the figures recognised in the consolidated financial statements:
At 31 December 2018, such covenants have been respected.
With reference to Financial liabilities to others at amortised cost, their main are broken down by due date below:
| 31.12.2018 (in Euros) |
Currency | Original amount |
Maturity | Rate | Terms | Outstanding liabilities in Euros |
Current | Non current |
|---|---|---|---|---|---|---|---|---|
| Simest spa Prog. Middle East loans no. 5063 |
EUR | 1.000.025 | 06/2021 | Fixed | 0,4994% | 625.015 | 250.006 | 375.009 |
| Medio Credito Centrale- Horizon 2020 programme |
EUR | 1.340.866 | 06/2026 | Fixed | 0,80% | 1.265.628 | 164.404 | 1.101.224 |
| Total | 1.890.643 | 414.410 | 1.476.233 |
The loan granted by Simest S.p.A. (the Italian companies that supports overseas expansion) has been
granted as part of the programme for commercial expansion in the UAE.
In October 2014, the Ministry of Economic Development accepted the application presented by the company for funding a research and development project. This project regards technology as part of the Horizon 2020 EU framework programme.
The project has a duration of 36 months and a total cost of up to €2,980 thousand, of which €1,490 thousand as a subsidised loan (repayable in 16 six-monthly instalments, due on 30 June and 31 December of each year at a fixed rate of 0.8%).
Following the second progress report regarding the period from 1 September 2016 to 6 January 2018, for a total of €1,340 thousand, in October 2018, the bank used by the Ministry of Economic Development issued a second loan tranche of €100 thousand.
At the date of this report, the Ministry of Economic Development has checked the final report presented and the balance to be received is being calculated to not exceed the limit of the subsidised loan. The Effective designated derivative hedges included in non-current financial liabilities include the fair value of IRSs signed to hedge the interest rate risk of the loans. Specifically:
| (in Euros) | Instrument | Notional amount |
Floating interest rate | Fixed interest rate |
Maturity | Fair value |
|---|---|---|---|---|---|---|
| Medio Credito Italiano | Interest rate swap |
15.000.000 | "3m Euribor of > - 0.55% -0.55% of ≤ 3m Euribor" |
-0,10% | 30.06.2021 | 16.874 |
| BNL (BNP Paribas) | Interest rate swap |
30.000.000 | "6m Euribor of > - 0.78% -0.78% of ≤ 6m Euribor" |
-0,11% | 21.11.2022 | 153.205 |
| Total | 170.079 |
The Derivatives held for trading at fair value through profit or loss included in current financial liabilities are forwards and currency options agreed to hedge commercial transactions but which do not qualify for hedge accounting. The following table reclassifies the derivatives by type of financial instrument.
| 2018 | 2017 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (in Euros) | Fair value ** |
Nominal amount ** |
Currency purchases* |
Currency sales* |
Fair value ** |
Nominal amount ** |
Currency purchases* |
Currency sales* |
|
| USD forwards | - | - | - | - | 723 | 37.023 | 43.643 | - | |
| YEN forwards | - | - | - | - | 1.006 | 66.985 | 8.926.871 | - | |
| Zloty forwards | 11.922 | 2.112.809 | - | 9.180.724 | - | - | - | - | |
| AUD forwards | - | - | - | - | 2.375 | 182.959 | - | 286.032 | |
| Rand forwards | - | - | - | - | 74.284 | 689.983 | - | 11.465.003 | |
| Total | 11.922 | 78.388 |
* In foreign currency ** In Euros
Fair value is calculated as follows:
The cash pooling arrangement includes the debit balances of the cash pooling account related to the cash pooling arrangements regarding the following group companies:
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Carel U.K. Ltd | 244.526 | 612.758 |
| Carel France s.a.s. | 973.011 | 904.800 |
| Carel Deutschland GmbH | 1.713.887 | 1.445.907 |
| Carel Controls Iberica Sl | 564.993 | 224.568 |
| Total | 3.496.417 | 3.188.033 |
The following tables show changes in current and non-current and current financial liabilities, including cash and non-cash changes.
| (in Euros) | 31.12.2018 | Net cash flows | Change in fair value |
Reclassification | 31.12.2017 |
|---|---|---|---|---|---|
| Bank loans and borrowings at amortised cost |
66.700.924 | 59.204.748 | - | (11.675.894) | 19.172.070 |
| Financial liabilities to others at amortised cost |
1.476.233 | 87.228 | - | (401.388) | 1.790.393 |
| Effective designated derivative hedges | 170.079 | - | 163.520 | - | 6.559 |
| Non-current financial liabilities | 68.347.236 | 59.291.976 | 163.520 | (12.077.282) | 20.969.022 |
| (in Euros) | 31.12.2018 | Net cash flows | Change in fair value |
Reclassification | 31.12.2017 |
|---|---|---|---|---|---|
| Bank loans and borrowings at amortised cost |
43.268.246 | 5.568.094 | - | 11.675.894 | 26.024.258 |
| Financial liabilities to others at amortised cost |
414.410 | (312.223) | - | 401.388 | 325.245 |
| Derivatives held for trading at fair value through profit or loss |
11.922 | (78.388) | 11.922 | - | 78.388 |
| Cash pooling arrangement | 3.496.417 | 308.384 | - | - | 3.188.033 |
| Current financial liabilities | 47.190.995 | 5.485.867 | 11.922 | 12.077.282 | 29.615.924 |
Changes to the non-current and current provisions for risks can be broken down as follows:
| Change during the year | |||||||
|---|---|---|---|---|---|---|---|
| (in Euros) | 31.12.2018 | Actuarial benefits |
Accruals | Reversals | Utilisations | Reclassifications | 31.12.2017 |
| Provision for agents' termination benefits |
686.392 | 2.245 | 21.541 | (8.150) | 670.756 | ||
| Provision for legal and tax risks |
- | - | (128.537) | 128.537 | |||
| Provision for product warranties |
224.427 | - | - | (12.461) | 236.888 | ||
| Provision for complaints | 218.200 | - | - | (132.348) | (67.138) | 417.686 | |
| Total - non-current | 1.129.019 | 2.245 | 21.541 | (8.150) | (144.809) | (195.675) | 1.453.867 |
| Provision for legal and tax risks |
405.012 | 276.475 | 128.537 | - | |||
| Provision for complaints | 1.244.242 | 1.177.104 | 67.138 | - | |||
| Total - current | 1.649.254 | 1.453.579 | - | - | 195.675 | - | |
| Total provisions for risks | 2.778.273 | 2.245 | 1.475.120 | (8.150) | (144.809) | - | 1.453.867 |
In the following is detailed the changes in the non-current and current provisions for risks.
The Provision for agents' termination benefits, accrued for the potential risks of the termination of agency contracts, considers the estimated liabilities related to contacts in place at year end.
The provision for agents' termination benefits is calculated by an independent actuary using the closed group approach in accordance with IAS 37. The assessments were carried out by quantifying future payments through the projection of agency commissions accrued at the assessment date up to the estimated moment (uncertain) in which the contractual relationship is interrupted.
With regard to the demographic assumptions, the Mortality table RG48 published by the General Accounting Office was taken into consideration, the INPS tables split by age and gender for disabilities, while for the pensionable age, the requirements are set out by ENASARCO.
With regard to the possible departure of the agents following the interruption of their relationship with the
company or other causes, the estimated annual departure rate was used, based on company data of 2.50% for voluntary resignations and 2.00% for company reasons.
The financial assumptions, on the other hand, essentially relate to the discount rate, which at 31 December 2018, was in line with the Iboxx AA Corporate index equal to 1.13%, with the same duration as the closed group subject to assessment.
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:
However, pursuant to Legislative decree no. 119/2018, the company could proceed with a mutually-agreed assessment settlement procedure on the pending dispute that would allow for its settlement through the payment of assessed taxes reduced by 90%, without sanctions and interest. With regard to this opportunity and considering the liabilities in the case the dispute is lost, the company reclassified the provision from non-current to current and added an additional €131 thousand.
This resulted in reviewing the assessed taxes presented in the preliminary assessment report and the consequent cancellation of the findings for 2014 and 2016 and the redefinition of the disputed amounts for 2013 and 2015. In December 2018, the company signed a mutually-agreed assessment settlement procedure for 2013 and the consequent payment plan.
With regard to 2015, the company intends to agree to the new amount in 2019. Following this decision, the company reclassified the current provisions from non-current to current and added an additional €145 thousand.
The accruals to the provision for tax risks are recognised under Current taxes due to their nature.
The Provision for product warranties is related to the non-current portion of the liabilities, reasonably estimated based on the guarantees contractually granted to customers and past experience, connected to costs for spare parts and labour that the company may incur in future years for assistance to be provided for products, the sales revenue of which has already been recognised in profit or loss for the year or in previous years.
The Provision for complaints refers to the prudent accrual for costs incurred for commercial complaints from
customers relates to products sold.
The provision increased during the year due to the prudent estimate of the cost of reconditioning certain units which, for reasons related to the technical characteristics of the electrical network in which they are installed, have lost functionality. These amounts were estimated by the directors based on the available information and past experience.
The use during the year relates to specific customer complaints.
This caption consists of the company's liability for post-employment benefits and post-term of office benefits for directors. These benefits qualify as defined benefit plans pursuant to IAS 19 and the related liabilities are calculated by an independent actuary.
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Post-employment benefits | 4.486.581 | (149.652) | 4.636.233 |
| Post-term of office benefits for directors | 492.907 | 74.185 | 418.722 |
| Total | 4.979.488 | (75.467) | 5.054.955 |
Post-employment benefits at year end were as follows:
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Opening balance | 4.636.233 | 4.852.309 |
| Accruals | 1.032.337 | 1.142.352 |
| Transfers to pension funds | (1.016.354) | (1.102.305) |
| Interest cost | 62.680 | 61.766 |
| Employee benefits paid | (101.362) | (274.648) |
| Substitute tax | (15.983) | (40.047) |
| Actuarial losses | (110.970) | (3.194) |
| Closing balance | 4.486.581 | 4.636.233 |
Post employment benefits are calculated by an independent actuary in accordance with the projected unit credit method pursuant to IAS 19.
Law no. 296/06 changed the Italian post-employment benefits scheme and they are now classified as defined contribution plans regardless of whether the employee decides to have them transferred to INPS' (the Italian social security institution) treasury fund or an external pension plan. Benefits vested up until 31 December 2006 continue to be recognised as part of a defined benefit plan and are subject to actuarial valuation, excluding the future salary increase component.
As described in the Accounting policies, the actuarial gains or losses are recognised in a specific equity reserve with immediate recognition in other comprehensive income.
Measurement of the post-employment benefits (€4,636 thousand at 31 December 2017 and €4,487 thousand at 31 December 2018) was based on the following actuarial assumptions:
| (in Euros) | 31.12.2018 | 31.12.2017 | |
|---|---|---|---|
| Annual discount rate | 1,57% | 1,30% | |
| Annual rate of inflation | 1,50% | 1,50% | |
| Annual growth rate of post-employment benefits | 2,625% | 2,625% | |
| Mortality rate | Mortality table RG48 published by the General Accounting Office |
||
| Disability rate | INPS tables split by age and gender | ||
| Pensionable age | 100% upon attainment of the AGO requirements |
||
| Discount rate | 1,50% | 1,50% | |
| Turnover rate | 3,00% | 3,00% |
• the sensitivity analysis of the main measurement parameters:
| Turnover frequency | Rate of inflation | Discount rate | ||||
|---|---|---|---|---|---|---|
| (in Euros) | +1% | -1% | +0,25% | -0,25% | +0,25% | -0,25% |
| Employee benefits 31.12.2017 | 4.605.885 | 4.670.541 | 4.711.847 | 4.562.259 | 4.517.763 | 4.759.606 |
| Employee benefits 31.12.2018 | 4.451.667 | 4.530.910 | 5.078.822 | 3.985.726 | 4.275.839 | 4.714.358 |
• contribution for the subsequent year and average duration of the obligation:
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| future service costs (in Euros) | - | - |
| plan duration (in years) | 10,44 | 11,00 |
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Year 1 | 252.944 | 248.701 |
| Year 2 | 204.503 | 203.650 |
| Year 3 | 337.388 | 198.909 |
| Year 4 | 195.357 | 332.320 |
| Year 5 | 264.247 | 189.559 |
The post-term of office benefits for directors at year end was as follows:
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Opening balance | 418.722 | 354.383 |
| Accruals | 78.364 | 49.668 |
| Interest cost | 5.227 | 4.499 |
| Benefits paid to directors | (33.280) | (21.900) |
| Actuarial losses | 23.874 | 32.072 |
| Closing balance | 492.907 | 418.722 |
The post-term of office benefits for directors are calculated by an independent actuary in accordance with the projected unit credit method pursuant to IAS 19.
As described in the Accounting policies, the actuarial gains or losses are recognised in a specific equity reserve with immediate recognition in other comprehensive income.
Measurement of the directors' post-term of office benefits (€419 thousand at 31 December 2017 and €492 thousand at 31 December 2018) was based on the following actuarial assumptions:
| (in Euros) | 31.12.2018 | 31.12.2017 | |
|---|---|---|---|
| Annual discount rate | 1,57% | 1,30% | |
| Salary revaluation rate | 0,00% | 0,00% | |
| Mortality rate | Mortality table RG48 published by the General Accounting Office |
||
| Disability rate | INPS tables split by age and gender | ||
| Pensionable age | 100% upon attainment of the AGO requirements |
||
| Term of office revocation rate | 0,00% |
The following tables provide information about:
• the sensitivity analysis of the main measurement parameters:
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Discount rate + 0.25% | 486.232 | 412.732 |
| Discount rate - 0.25% | 499.949 | 424.964 |
• contribution for the subsequent year and average duration of the obligation:
| (in Euros) | 31.12.2018 |
|---|---|
| service cost 2018-2019 (in Euros) | 74.979 |
| plan duration (in years) | 16,80 |
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Year 1 | 3.436 | 2.544 |
| Year 2 | 294.277 | 3.324 |
| Year 3 | 218.149 | 279.992 |
| Year 4 | 358 | 196.798 |
| Year 5 | 459 | 248 |
Deferred tax liabilities at 31 December 2018 were generated by the temporary differences between the carrying amount of assets and liabilities and their tax base calculated with reference to the tax rates that are expected to be enacted in the years in which the differences will reverse.
The deferred tax liabilities recognised in the separate financial statements regard the following temporary differences:
| 2018 | 2017 | |||
|---|---|---|---|---|
| (in Euros) | Tax base | Deferred taxes |
Tax base | Deferred tax liabilities |
| Unrealised exchange differences | - | - | 160.828 | 38.599 |
| Fair value of derivatives | 31.097 | 7.463 | 43.102 | 10.344 |
| Change in amort/dep. calculated under IAS/OIC FTA | 445.303 | 124.240 | 1.218.708 | 340.019 |
| Change in amort/dep. calculated under IAS/OIC 2015 | 500.526 | 139.646 | 752.258 | 209.880 |
| Change in amort/dep. calculated under IAS/OIC 2016 | 470.958 | 131.397 | 505.414 | 141.011 |
| Discounting of agents' termination benefits | 153.395 | 42.797 | 155.640 | 43.424 |
| Total | 1.601.279 | 445.543 | 2.835.950 | 783.277 |
The changes in deferred tax liabilities were as follows:
| (in Euros) | 31.12.2018 | Recognised in profit or loss |
Recognised in other comprehensive income |
31.12.2017 |
|---|---|---|---|---|
| Unrealised exchange differences | - | (38.599) | - | 38.599 |
| Fair value of derivatives | 7.463 | - | (2.881) | 10.344 |
| Change in amort/dep. calculated under IAS/OIC FTA |
124.240 | (215.779) | - | 340.019 |
| Change in amort/dep. calculated under IAS/OIC 2015 |
139.646 | (70.234) | - | 209.880 |
| Change in amort/dep. calculated under IAS/OIC 2016 |
131.397 | (9.614) | - | 141.011 |
| Discounting of agents' termination benefits |
42.797 | (627) | - | 43.424 |
| Total | 445.543 | (334.853) | (2.881) | 783.277 |
These amounted to €34,878 thousand (€32,359 thousand in 2017) and are as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Payments on account to customers | 360.784 | (113.249) | 474.033 |
| Third parties | 23.418.958 | 1.529.387 | 21.889.571 |
| Subsidiaries | 11.029.839 | 1.206.187 | 9.823.652 |
| Associates | 24.532 | (60.101) | 84.633 |
| Subsidiaries of parents | 36.809 | (30.278) | 67.087 |
| Related parties | 6.582 | (13.537) | 20.119 |
| Total | 34.877.504 | 2.518.409 | 32.359.095 |
Payments on account received from customers relate to supply contracts that entail the future provision of goods.
Trade payables relate to transactions with suppliers to purchase raw materials, consumables, processing and services. These activities are part of the normal procurement management. The change recognised during the year is related to the normal commercial dynamics combined with business growth. Trade payables in foreign currency were recognised at the year-end exchange rate, adjusting the relative equivalent amount.
Trade payables refer to the following geographical segments:
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Western Europe | 23.346.449 | 22.279.433 |
| Other European countries, Middle East and Africa | 6.695.907 | 4.745.328 |
| North America | 343.611 | 155.121 |
| South America | 47.976 | 55.640 |
| Asia Pacific South | 311.841 | 84.478 |
| Asia Pacific North | 4.131.720 | 5.039.095 |
| Total | 34.877.504 | 32.359.095 |
A breakdown of trade payables due from group companies is as follows:
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| C.R.C. S.r.l. | 4.023 | 36.479 |
| Carel U.K. Ltd | 42.451 | 1.270 |
| Carel France Sas | 28.682 | 1.660 |
| Carel Asia Ltd | 75.836 | 17.671 |
| Carel Sud America Instrumentacao Eletronica Ltda | 42.906 | 55.640 |
| Carel Usa Llc | 216.083 | 120.512 |
| Carel Australia PTY Ltd | - | 11.569 |
| Carel Deutschland GmbH | 11.110 | 155.234 |
| Carel Electronic (Suzhou) Co Ltd | 3.912.901 | 4.611.049 |
| Carel Controls Iberica Sl | 6.252 | 1.179 |
| Carel ACR Systems India (Pvt) Ltd | 141.958 | 108.024 |
| Carel Controls South Africa (Pty) Ltd | 376 | 10.165 |
| Carel Rus Llc | 317.243 | 301.580 |
| Carel Korea Ltd | 14.788 | 3.919 |
| Carel Nordic AB | 340.818 | 236.783 |
| Carel Japan Co. Ltd | 165 | - |
| Carel Middle East DWC Llc | 139.726 | 13.656 |
| Alfaco Polska Sp.z.o.o | 2.692 | 12.620 |
| Carel (Thailand) CO Ltd | - | 2.105 |
| Carel Adriatic Doo | 5.731.829 | 4.122.537 |
| Subsidiaries | 11.029.839 | 9.823.652 |
| Carel Japan Co. Ltd | - | 10 |
| Arion S.r.l. | 24.532 | 84.623 |
| (in Euros) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Associates | 24.532 | 84.633 |
| RN Realt Estate S.r.l. | 833 | 12.499 |
| Eurotest Laboratori S.r.l. | 29.124 | 48.788 |
| Arianna S.p.A. | - | 761 |
| Nastrificio Victor S.p.A. | 6.852 | 5.039 |
| Subsidiaries of parents | 36.809 | 67.087 |
| Le Volpi Agriturismo | 4.697 | 17.794 |
| Panther S.r.l | 1.885 | 2.325 |
| Related parties | 6.582 | 20.119 |
These amounted to €289 thousand and can be broken down as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| IRES tax liabilities | - | (917.543) | 917.543 |
| IRAP tax liabilities | - | (257.114) | 257.114 |
| Tax liabilities pertaining to previous years | 288.649 | 288.649 | - |
| Total | 288.649 | (886.008) | 1.174.657 |
Tax liabilities pertaining to previous years relate to the payment plan, defined after the agreement of the mutually-agreed assessment settlement procedure for 2013 by the company and the Venice regional tax office following the preliminary assessment report issued in June 2018 upon conclusion of the audit into 2013, 2014, 2015 and 2016.
These amounted to €10,339 thousand and can be broken down as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Other tax liabilities | 1.304.647 | 143.975 | 1.160.672 |
| Social security contributions | 3.083.283 | 368.118 | 2.715.165 |
| Other liabilities | 5.933.418 | 774.037 | 5.159.381 |
| Accrued expenses and deferred income | 18.075 | (56.329) | 74.404 |
| Total | 10.339.423 | 1.229.801 | 9.109.622 |
Other tax liabilities can be broken down as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Withholdings to be paid | 1.302.453 | 157.590 | 1.144.863 |
| Substitute taxes to be paid | 2.194 | (7.789) | 9.983 |
| Post-employment benefits substitute tax | - | (5.826) | 5.826 |
| Total | 1.304.647 | 143.975 | 1.160.672 |
Social security contributions can be broken down as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| INPS | 1.962.889 | 258.319 | 1.704.570 |
| Social security contributions on deferred remuneration | 707.165 | 40.117 | 667.048 |
| ENASARCO | 12.984 | 1.572 | 11.412 |
| Others | 98.234 | 23.224 | 75.010 |
| Pension funds | 302.011 | 44.886 | 257.125 |
| Total | 3.083.283 | 368.118 | 2.715.165 |
Other liabilities can be broken down as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Wages and salaries | 5.828.972 | 691.820 | 5.137.152 |
| Directors | 28.100 | 10.349 | 17.751 |
| Contract workers/statutory auditors | 35.340 | 35.340 | - |
| Other sundry amounts | 41.006 | 36.528 | 4.478 |
| Total | 5.933.418 | 774.037 | 5.159.381 |
Wages and salaries include €4,694 thousand related to bonuses and unused holidays at 31 December 2018.
Accrued expenses and deferred income refer to adjustments of costs to allow for the recognition of interest and other financial expense and other operating costs on an accruals basis.
Deferred income of €8 thousand for interest income on the discounting of receivables expiring before 2019 acquired in October 2016 from the related party Ariana S.p.A..
A breakdown of the caption for 2018 is as follows:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Revenue for sales and services | 180.276.448 | 14.112.014 | 166.164.434 |
| Total | 180.276.448 | 14.112.014 | 166.164.434 |
Revenue from sales and services essentially relates to the sales of products to third parties and group companies and the charges for administration-commercial-financial coordination services provided to group companies. Specifically:
| (in Euros) | 31.12.2018 | Change during the year |
31.12.2017 |
|---|---|---|---|
| Revenue for sales and services to third parties | 95.824.473 | 5.647.708 | 90.176.765 |
| Revenue for sales and services to group companies | 84.451.975 | 8.464.306 | 75.987.669 |
| Total | 180.276.448 | 14.112.014 | 166.164.434 |
Reference should be made to the disclosures on relationships with related parties provided in note 32 for a breakdown of the composition and nature of the revenue from subsidiaries.
Revenue generated by goods and services to third parties amounted to €95,824 thousand compared to €90,177 thousand in 2017. A breakdown of revenue by market is as follows:
| (in Euros) | 2018 | 2017 |
|---|---|---|
| HVAC revenue | 61.507.643 | 56.144.092 |
| REF revenue | 32.616.253 | 31.009.676 |
| Non-core revenue | 1.700.577 | 3.022.997 |
| Total | 95.824.473 | 90.176.765 |
A breakdown of revenue for sales and services by geographic segment is as follows:
| (in Euros) | 2018 | % | 2017 | % |
|---|---|---|---|---|
| Western Europe | 117.056.651 | 70,45% | 105.125.935 | 63,27% |
| Other European countries, Middle East and Africa | 35.642.195 | 21,45% | 35.822.096 | 21,56% |
| North America | 9.686.889 | 5,83% | 9.610.193 | 5,78% |
| South America | 2.958.119 | 1,78% | 2.644.081 | 1,59% |
| Asia Pacific South | 4.839.453 | 2,91% | 3.858.274 | 2,32% |
| Asia Pacific North | 10.093.141 | 6,07% | 9.103.855 | 5,48% |
| Total | 180.276.448 | 108,49% | 166.164.434 | 100,00% |
For information on the performance of revenue, reference should be made to the consolidated financial
statements' directors' report.
A breakdown of the caption at year end is as follows:
| (in Euros) | 31.12.2018 | Variation | 31.12.2017 |
|---|---|---|---|
| Grants related to income | 868.475 | 94.648 | 773.827 |
| Licence fees | 1.600.733 | 291.748 | 1.308.985 |
| Sundry cost recoveries | 1.220.150 | 277.037 | 943.113 |
| Compensation | 44.230 | 31.484 | 12.746 |
| Company canteen cost recovery | 115.216 | 17.739 | 97.477 |
| Other revenue and income | 122.533 | 118.469 | 4.064 |
| Total | 3.971.337 | 831.125 | 3.140.212 |
Grants related to income include €862 thousand of the tax credit for research and development activities in 2018, in accordance with Law no. 190 of 23 December 2014 (the 2015 Stability law) and €6 thousand related to the grant for a research project funded by the European Union as part of the Horizon 2020 programme. Licence fees relate to royalties fully received by group companies.
Sundry cost recoveries mainly relate to the reimbursement of transport costs by third parties and group companies.
A breakdown of the caption at year end is as follows:
| (in Euros) | 31.12.2018 | Variation | 31.12.2017 |
|---|---|---|---|
| Purchases of raw materials, consumables and goods | (96.223.769) | (11.971.988) | (84.251.781) |
| Purchases of consumables | (1.708.788) | 67.272 | (1.776.060) |
| Change in raw materials and goods | 3.798.967 | 2.972.278 | 826.689 |
| Change in finished goods and semi-finished products | 1.218.345 | (455.768) | 1.674.113 |
| Total | (92.915.245) | (9.388.206) | (83.527.039) |
Costs of raw materials, consumables and goods include goods purchased for the company's normal production activities and can be broken down as follows:
| (in Euros) | 31.12.2018 | Variation | 31.12.2017 |
|---|---|---|---|
| Purchases of raw materials and semi-finished goods | (48.768.615) | (4.733.468) | (44.035.147) |
| Purchases of goods held for resale | (44.884.712) | (7.160.034) | (37.724.678) |
| Purchases of other materials | (2.869.459) | (75.168) | (2.794.291) |
| Total | (96.522.786) | (11.968.670) | (84.554.116) |
| Returns, markdowns, bonuses and discounts | 299.017 | (3.318) | 302.335 |
| Total purchases of raw materials, consumables and goods |
(96.223.769) | (11.971.988) | (84.251.781) |
The costs of raw materials, consumables, supplies and goods related to the group companies in 2018 amounted to €38,129 thousand.
The change in costs for raw materials, consumables, supplies and goods is directly correlated with sales performance.
The change in raw materials and goods refers to the acquisition of goods that will mostly be transformed rather than used, net of write-downs made to reflect obsolescence and the reduced usability of the products. The change in finished goods and semi-finished products can be broken down as follows:
| (in Euros) | 31.12.2018 | Variation | 31.12.2017 |
|---|---|---|---|
| Work in progress | (12.149) | (28.632) | 16.483 |
| Semi-finished goods | 580.399 | 834.455 | (254.056) |
| Finished goods | 650.095 | (1.261.591) | 1.911.686 |
| Total | 1.218.345 | (455.768) | 1.674.113 |
A breakdown of the caption at year end is as follows:
| (in Euros) | 31.12.2018 | Variation | 31.12.2017 |
|---|---|---|---|
| Services | (29.596.362) | (7.994.537) | (21.601.825) |
| Use of third party assets | (1.967.346) | (49.374) | (1.917.972) |
| Total service costs | (31.563.708) | (8.043.911) | (23.519.797) |
A breakdown of services at year end is as follows:
| (in Euros) | 31.12.2018 | Variation | 31.12.2017 |
|---|---|---|---|
| Transport | (3.935.106) | (587.247) | (3.347.859) |
| Consultancies | (7.463.325) | (5.508.970) | (1.954.355) |
| Business trips and travel | (1.066.953) | (72.160) | (994.793) |
| Maintenance and repairs | (2.362.541) | (355.062) | (2.007.479) |
| Marketing and advertising | (982.844) | 95.921 | (1.078.765) |
| Outsourcing | (4.056.119) | (208.573) | (3.847.546) |
| Agency commissions | (4.199.665) | (315.161) | (3.884.504) |
| Utilities | (722.741) | (47.100) | (675.641) |
| Fees to directors, statutory auditors and independent auditors |
(1.088.079) | (415.506) | (672.573) |
| Insurance | (602.213) | (255.344) | (346.869) |
| Telephone and connections | (254.472) | (20.905) | (233.567) |
| Certifications | (786.859) | (41.887) | (744.972) |
| Personnel expense and temporary staff | (1.239.733) | (129.150) | (1.110.583) |
| Other services | (835.712) | (133.393) | (702.319) |
| Services | (29.596.362) | (7.994.537) | (21.601.825) |
Services include the costs charged by group companies for a total of €4,435 thousand.
Lastly, during the year, the company incurred non-recurring service costs for a total of €5,403 thousand, specifically:
A breakdown of costs for the use of third party assets at year end is as follows:
| (in Euros) | 2018 | Variation | 2017 |
|---|---|---|---|
| Building lease payments | (1.149.885) | (7.836) | (1.142.049) |
| Lease payments and car hire | (478.103) | (39.050) | (439.053) |
| Royalties on patents and trademarks | (96.432) | 17.098 | (113.530) |
| Other payments for the use of third party assets | (242.926) | (19.586) | (223.340) |
| Use of third party assets | (1.967.346) | (49.374) | (1.917.972) |
It should be noted that building lease payments relate entirely to group companies.
This caption referred to expenditure for the year related to development projects capitalised under intangible assets and amortised over five years for projects completed by the reporting date or recognised as assets under development if not yet completed. The remainder relates to equipment and machinery constructed internally and recognised under property, plant and equipment.
A breakdown of the caption at year end is as follows:
| (in Euros) | 2018 | Variation | 2017 |
|---|---|---|---|
| Development expenditure | 2.076.313 | 505.170 | 1.571.143 |
| Plant and machinery constructed on a time and materials basis |
- | (2.499) | 2.499 |
| Industrial and commercial equipment constructed on a time and materials basis |
95.060 | 67.176 | 27.884 |
| Total | 2.171.373 | 569.847 | 1.601.526 |
A breakdown of personnel expense at year end is as follows:
| (in Euros) | 2018 | Variation | 2017 |
|---|---|---|---|
| Wages and salaries | (28.318.805) | (1.834.357) | (26.484.448) |
| Social security contributions | (8.016.741) | (1.130.877) | (6.885.864) |
| Defined benefit plans | (1.568.310) | (12.857) | (1.555.453) |
| Personnel expense | (37.903.856) | (2.978.091) | (34.925.765) |
Wages and salaries include the entire personnel expense for employees, including merit increases, category transfers, unused holidays and accruals based on laws and national labour agreements. €1,945 thousand related to temporary staff (€2,028 thousand in 2017).
Social security contributions refer to national insurance and supplementary contributions, net of taxation and accident insurance. The change is directly correlated with the changes in wages and salaries.
Defined benefit plans relate to the provision accrued pursuant to IAS 19.
The workforce at 31 December 2018 and changes therein during the year were as follows:
| 31.12.2017 | Hires | Departures | Promotions | 31.12.2018 | 2018 average |
2017 average |
|
|---|---|---|---|---|---|---|---|
| Managers | 18 | 1 | (2) | 1 | 18 | 18 | 18 |
| Junior managers |
51 | 2 | (4) | 4 | 53 | 53 | 49 |
| White collars |
338 | 52 | (29) | (5) | 356 | 346 | 330 |
| Blue collars | 205 | 28 | - | - | 233 | 219 | 205 |
| Total | 612 | 83 | (35) | - | 660 | 635 | 602 |
Lastly, during the year, the company paid its employees bonuses of €412 thousand related to the company's listing on STAR segment of the stock exchange managed by Borsa Italiana S.p.A. in June 2018.
A breakdown of the caption for the year is as follows:
| (in Euros) | 2018 | Variation | 2017 |
|---|---|---|---|
| Capital gains on disposal of assets | 4.656 | (490) | 5.146 |
| Prior year income | 284.122 | (259.778) | 543.900 |
| Other income | 288.778 | (260.268) | 549.046 |
| Capital losses on sale of assets | (7.199) | (200) | (6.999) |
| Prior year expense | (145.675) | (25.242) | (120.433) |
| Other taxes and duties | (91.327) | 11.742 | (103.069) |
| Accrual to the loss allowance | - | 210.481 | (210.481) |
| Accrual to the provisions for risks | (1.177.104) | (1.171.425) | (5.679) |
| Membership fees | (126.469) | (11.930) | (114.539) |
| Indemnities and compensation | (52.072) | (52.072) | - |
| Other costs | (9.990) | 16.483 | (26.473) |
| Other expense | (1.609.836) | (1.022.163) | (587.673) |
| Other expense, net | (1.321.058) | (1.282.431) | (38.627) |
Prior year income relates to the non-existent expense and the recognition of income pertaining to previous years, €136 thousand of which is subject to taxation and €148 thousand of which is not taxable.
Prior year expense relates to the non-existent income and the recognition of expense pertaining to previous years.
Provisions for risks relates to the prudent accrual for costs to be incurred for product complaints from customers. Reference should be made to the provision for complaints in note 14 hereto for more details.
A breakdown of the caption at year end is as follows:
| (in Euros) | 2018 | Variation | 2017 |
|---|---|---|---|
| Amortisation | (2.999.268) | 159.990 | (3.159.258) |
| Depreciation | (2.691.637) | (78.932) | (2.612.705) |
| Impairment losses | (92.887) | (92.887) | - |
| Amortisation, depreciation and impairment losses | (5.783.792) | (11.829) | (5.771.963) |
Reference should be made to that set out in the Accounting policies for information about amortisation, depreciation and impairment losses.
A breakdown of the caption at year end is as follows:
| 2018 | Variation | 2017 |
|---|---|---|
| 9.915.452 | (1.955.897) | 11.871.349 |
| 16.825 | 16.825 | - |
| 621.896 | (455.271) | 1.077.167 |
| 10.554.173 | (2.394.343) | 12.948.516 |
| (37.338) | (14.852) | (22.486) |
| (508.327) | 43.615 | (551.942) |
| (545.665) | 28.763 | (574.428) |
| 10.008.508 | (2.365.580) | 12.374.088 |
Income from investments in subsidiaries refers to dividends entirely resolved and received during the year amounting to €839 thousand from Carel U.K. Ltd, €500 thousand from Carel France sas, €3,081 thousand from Carel Electronic (Suzhou) Co Ltd, €495 thousand from Carel Rus LLC and €5,000 thousand from the newly acquired Recuperator S.p.A..
Other financial income can be broken down as follows:
| (in Euros) | 2018 | Variation | 2017 |
|---|---|---|---|
| Interest income from securities classified as current assets which are not equity investments |
433.436 | (441.016) | 874.452 |
| Interest income from cash pooling with subsidiaries | 127.664 | 51.509 | 76.155 |
| Interest income from cash pooling with associates | - | (5.087) | 5.087 |
| Bank interest income | 2.528 | 1.626 | 902 |
| Gains on derivatives | 1.690 | (10.533) | 12.223 |
| Other interest income | 56.578 | (51.770) | 108.348 |
| Total financial expense | 621.896 | (455.271) | 1.077.167 |
Interest and other financial expense related to subsidiaries refers to interest accrued on the cash pooling account overrun in place with group companies.
Interest and other financial expense due to others are as follows:
| (in Euros) | 2018 | Variation | 2017 |
|---|---|---|---|
| Interest and other financial expense on current bank loans and borrowings |
(2.241) | (1.907) | (334) |
| Interest and other financial expense on non-current bank loans and borrowings |
(259.215) | (61.416) | (197.799) |
| Losses on forwards | (23.412) | 48.412 | (71.824) |
| Losses on derivatives | - | 133.686 | (133.686) |
| Financial expense on discounting of liabilities | (67.907) | 3.134 | (71.041) |
| Bank charges and fees | (92.022) | (14.849) | (77.173) |
| Other interest expense | (63.530) | (63.445) | (85) |
| Total financial expense | (508.327) | 43.615 | (551.942) |
A breakdown of exchange rate gains and losses at year end is as follows:
| (in Euros) | 2018 | Variation | 2017 |
|---|---|---|---|
| Realised exchange rate gains | 1.129.171 | (55.536) | 1.184.707 |
| Unrealised exchange rate gains | 96.924 | (63.904) | 160.828 |
| Exchange rate gains | 1.226.095 | (119.440) | 1.345.535 |
| Realised exchange rate losses | (1.305.806) | (58.622) | (1.247.184) |
| Unrealised exchange rate losses | (69.568) | 124.686 | (194.254) |
| Exchange rate losses | (1.375.374) | 66.064 | (1.441.438) |
| Exchange rate gains / (losses) | (149.279) | (53.376) | (95.903) |
| Realised exchange rate gains / (losses) | (176.635) | (114.158) | (62.477) |
| Unrealised exchange rate gains / (losses) | 27.356 | 60.782 | (33.426) |
Exchange rate gains and losses are part of the company's normal performance.
Unrealised exchange rate gains and losses refer to the differences recognised in the adjustment of monetary captions mainly related to the performance of the US dollar, yen, Polish zloty and Australian dollar.
The unrealised component shows gains of €27 thousand, namely greater unrealised exchange rate gains than losses (in 2017, the unrealised component was a net loss of €33 thousand).
Therefore, as part of the allocation of the profit for 2018, the company shall accrue the net unrealised exchange rate gain in a specific undistributable reserve pursuant to article 2426.8-bis of the Italian Civil Code.
At 31 December 2018, the company did not impair any equity investments.
Note 3 provides more details about the effects of the measurement at equity of the investments.
A breakdown of income taxes is as follows:
| (in Euros) | 2018 | Variation | 2017 |
|---|---|---|---|
| Current taxes | (4.881.038) | 3.031.141 | (7.912.179) |
| Deferred tax assets | 138.797 | 103.395 | 35.402 |
| Deferred tax liabilities | 334.853 | (119.306) | 454.159 |
| Prior year taxes | 1.603.718 | 1.607.546 | (3.828) |
| Total | (2.803.670) | 4.622.776 | (7.426.446) |
With regard to deferred taxes, reference should be made to the Accounting policies and the information provided about deferred tax assets (note 5) and deferred tax liabilities (note 16).
A reconciliation of the theoretical and effective tax expense is provided below:
| (in Euros) | 2018 | 2017 |
|---|---|---|
| Profit before tax | 26.790.728 | 35.040.552 |
| Theoretical IRES | 6.429.775 | 8.409.732 |
| Lower taxes: | ||
| - other prior-year income | (36.715) | (35.734) |
| - personnel expense and supplementary pension funds | (14.902) | (14.548) |
| - dividends from equity investments and gains on the sale of investments | (2.260.723) | (2.706.667) |
| - maxi-amortisation and hyper-amortisation | (205.847) | (82.788) |
| - amortisation of goodwill | (19.934) | (19.934) |
| - patent box | (475.444) | - |
| - other | (430.060) | (469.732) |
| Higher taxes: | ||
| - undeductible amortisation | 272.629 | 396.173 |
| - accruals to provisions | 282.505 | 1.363 |
| - prior year expense | 2.002 | 1.089 |
| - impairment of equity investments | - | 86.547 |
| - write-down of inventory | 17.377 | 87.147 |
| - other undeductible costs | 88.609 | 86.456 |
| - other | 69.705 | 101.014 |
| - unused tax withholdings | 365.495 | 937.106 |
| Total income taxes (IRES) | 4.084.472 | 6.777.224 |
| IRAP | 796.566 | 1.134.955 |
| Prior year taxes | (1.603.718) | 3.828 |
| Deferred tax assets/liabilities | (473.650) | (489.561) |
| TOTAL INCOME TAXES | 2.803.670 | 7.426.446 |
Specifically, tax liabilities pertaining to previous years at 31 December 2018 are as follows:
| (in Euros) | 2018 |
|---|---|
| Lower IRES and IRAP for supplementary patent box relief for 2015-2017 | (2.128.268) |
| Higher IRES and IRAP for mutually-agreed assessment settlement procedure for 2013 | 268.075 |
| Adjustment of tax provision for disputes for 2011-2012 | 131.174 |
| Adjustment of tax provision for disputes for 2015 | 125.301 |
| Prior year taxes | (1.603.718) |
On 11 June 2018, Carel Industries S.p.A. was admitted to list its ordinary shares on the STAR segment of the stock exchange organised and managed by Borsa Italiana S.p.A.. The transaction entailed assigning 35,000,000 ordinary shares, which subsequently increased to 40,250,000 on 25 June 2018 following the exercise of the greenshoe option. Therefore, the placement with institutional investors involved 40.25% of the share capital and 25.20% of shares with voting rights.
A dispute is ongoing between the company and the Venice provincial tax office following the assessment notice regarding transfer pricing issued for 2011 and 2012. The findings regarded solely transactions between the Chinese company, Carel Electronic (Suzhou) Co Ltd and the company for the supply of raw materials, semi-finished products and finished goods. The higher assessed taxes amount to €423 thousand (IRES and IRAP) plus interest and fines. During the year, the tax office and the company engaged in negotiations to settle the dispute but were unable to come to an agreement. The date of the first hearing of the dispute is not yet known, however, due to the effect of the recent regulation covered by Legislative decree no. 119/2018, the company could proceed with a facilitated agreement of the pending dispute that will allow for its settlement through the payment of assessed taxes reduced by 90%, without sanctions and interest. The provision for tax risks related to the dispute has been adjusted accordingly in the financial statements as at and for the year ended 31 December 2018.
With regard to transfer pricing and the above transactions between the Chinese company, Carel Electronic (Suzhou) Co Ltd and the company, in June 2018, the Venice regional tax office issued a preliminary assessment report for 2013, 2014, 2015 and 2016. Following the discussions related to the preliminary assessment report, on 5 December 2018, the company and the tax office agreed on profitability parameters to determine the market price of the disputed transactions, agreeing on the use of the profitability indicator used for 2013. This resulted in reviewing the assessed taxes presented in the preliminary assessment report and the consequent cancellation of the findings for 2014 and 2016 and the redefinition of the disputed amounts for 2013 and 2015. The company signed a mutually-agreed assessment settlement procedure for
2013 and defined the payment plan for the €310 thousand owed, to be paid in quarterly instalments starting from December 2018.
With regard to 2015, the company intends to agree to the new amount of €171 thousand plus interest in 2019 and a suitable provision for tax risks has been accrued.
In December 2015, the company filed for the reduced tax regime for income derived from the use of intangible assets with the relevant regional tax office.
Following the investigation activities and the full examination of the findings and the documentation produced, in December 2018, the company signed an agreement for the definition of a reduced tax regime for income derived from the direct use of intangible assets (patent box) with reference to 2015 and the following four years.
As a result, the company filed the IRES and IRAP supplementary tax returns for the 2015-2017 three-year period, recognising a greater amount of €2,128 thousand as Tax assets.
The "2018-2022 share-based performance plan" resolved by the shareholders on 7 September 2018 is an "equity-settled" incentive plan, with the free allocation of shares to members of governing bodies and/or company 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 first vesting period refers to 2018-2020.
The number of shares allocated is subject to achieving specific performance objectives based on:
EBITDA Adj Net Working Capital-CAPEX EBITDA Adj with a relative weight of 40%
The performance objectives are independent of one another and will be calculated separately for each vesting period.
| Performance of the indicators (% of the performance objective for each vesting period) |
Shares assigned for each performance objective (% of base number of shares for each vesting period) |
|---|---|
| <80% | 0% |
| =80% | 80% |
| >80% and ≤120% | 80%-120% pro-quota |
| >120% (overperformance) | 120% |
The curves for the measurement of performance are the same for both the indicators, as described below:
A portion of the shares to be assigned will be subject to lock-up restrictions during the specific vesting periods depending on the type of beneficiary.
In accordance with IFRS 2 - Share-based payments - the fair value of the distributions 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 period between the vesting date and the maturity date with a balancing entry in equity. In 2018, the group recognised an expense of €77 thousand in profit or loss and the same amount was also recognised in equity. This amount represents the amount attributable to 2018 for the first cycle of the plan, the fair value of which amounts to €691 thousand.
On 7 September 2018, the shareholders approved the repurchase of treasury shares, up to a maximum of 5,000,000 shares, equal to 5% of the company's share capital, used for the incentive plan. At the end of the year, the company had not repurchased any treasury shares.
On 7 September 2018, the shareholders resolved, inter alia, to authorise the board of directors to repurchase and transfer treasury shares for the purposes of:
The repurchase of treasury shares can take place in one or more transactions of up to a maximum of 5,000,000 shares, equal to 5% of the company's share capital, within the limit of the distributable profits and the available reserves as shown in the most recent approved financial statements, over a period of 18 months from the date of the meeting. The repurchases will be carried out (i) at a price that does not depart, either upwards or downwards, by more than 20% from the reference price recorded by the shares during the stock market trading session on the day preceding each individual transaction and (ii) for a consideration that is no higher than the greater of the price of the latest independent transaction and of the highest current independent bid price available in the stock market in which the purchase is carried out.
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 company has not identified individual operating segments but is an operating segment as a whole.
The fees paid, net of expenses, to directors, statutory auditors and key management personnel during the year were as follows:
| (in Euros) | 2018 | 2017 |
|---|---|---|
| Directors | ||
| - Remuneration and fees (3) | 900.342 | 411.316 |
| - Other non-monetary benefits | 11.838 | 3.791 |
| - Other fees (1) | 50.000 | |
| - Fair value of share-based payments | 33.811 | - |
| Total fees paid to directors | 995.991 | 415.107 |
| Statutory auditors | ||
| - Fixed fees and fees for participation in committees | 72.629 | 22.934 |
| Total fees paid to statutory auditors | 72.629 | 22.934 |
| Key management personnel | ||
| - Remuneration and fees | 932.106 | 1.161.744 |
| - Other non-monetary benefits | 24.110 | 27.362 |
| - Other fees (1) | 138.000 | 13.000 |
| - Fair value of share-based payments | 34.207 | - |
| - Compensation in the event of dismissal or resignation (2) | 17.675 | 3.900 |
| Total fees paid to key management personel | 1.146.098 | 1.206.006 |
(1) the amount includes a one-off payment (2) for cash flows (3) the figure for 2017 refers solely to fees
The following table highlights the fees pertaining to the year for audit services and non-audit services provided by the independent auditors:
| (in Euros) | 2018 | 2017 |
|---|---|---|
| Audit | 151.480 | 98.197 |
| Attestation services | 416.602 | 1.500 |
| Other Services | 10.196 | 27.968 |
| Total | 578.278 | 127.665 |
Transparency obligations required by Law no. 124/2017 - (Annual market and competition law) 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 2018 is set out below.
Funding party: European Commission;
Amount received: €46,378;
Coordinator: UNINOVA – Instituto De Desenvolvimento De Novas Tecnologias (Portugal);
Cause: Grant Agreement 636692 – H2020-F0F-2014-2015/H2020-FoF-2014 under Horizon 2020 Research and Innovation Framework Programme.
Funding party: PROVINCE OF PADUA - labour sector - tax code 80006510285 - VAT no. 0070044028; Amount received: €9,600;
Cause: grants from Regional fund for the employment of disabled people pursuant to article 14 of Law no. 68/99;
During the year, the company:
Furthermore, during the year, the company benefited from the following subsidies/benefits:
At 31 December 2018, the company had
A breakdown of the indirect subsidiaries at 31 December 2018 is as follows:
| (in Euros) | Registered office | Parent | Currency | Share capital (foreign currency) |
Equity (Euros) |
Profit (loss) for the year (Euros) |
Indirect investment |
|
|---|---|---|---|---|---|---|---|---|
| Subsidiaries: | ||||||||
| Carel Australia Pty. Ltd | SYDNEY-AU | Carel Electronic (Suzhou) Co Ltd |
AUD | 100 | 2.834.257 | 412.640 | 100,00% | |
| Carel ACR Systems India (Pvt) Ltd |
MUMBAI-IN | Carel Electronic (Suzhou) Co Ltd |
INR | 1.665.340 | 752.147 | 203.308 | 99,99% | |
| Carel France s.a.s. | 0,01% | |||||||
| Carel Controls South Africa (Pty) Ltd |
JOHANNESBURG-ZA | Carel Electronic (Suzhou) Co Ltd |
ZAR | 4.000.000 | 1.092.565 | 36.106 | 100,00% | |
| Carel HVAC&R Korea Ltd | SEOUL-KR | Carel Electronic (Suzhou) Co Ltd |
KRW | 550.500.000 | 242.515 | (95.629) | 100,00% | |
| Carel South East Asia Pte. Ltd. |
SINGAPORE-SG | Carel Asia Ltd | SGD | 100.000 | 183.598 | 41.117 | 100,00% | |
| Carel Mexicana S.De.RL | Guerra, Tlalpan-MX | Carel Usa Llc | MXN | 12.441.149 | 887.829 | 216.190 | 100,00% | |
| Carel (Thailand) CO Ltd | Carel Electronic (Suzhou) Co Ltd |
THB | 79,994% | |||||
| BANGKOK-TH | Carel Australia Pty. Ltd |
10.000.000 | 1.777.793 | 370.901 | 0,006% |
In order to satisfy the disclosure requirement of article 2427.1.22-bis of the Italian Civil Code:
The table below provides assets, liabilities, revenue and costs related to transactions with related parties performed in 2018.
| Assets and liabilities | ||||||
|---|---|---|---|---|---|---|
| Loan assets | Trade receivables |
Financial liabilities |
Trade payables |
Sale of products |
||
| Parents | ||||||
| Luigi Rossi Luciani S.a.p.A. | 198.426 | |||||
| Luigi Nalini S.a.p.A. | 129.382 | |||||
| Total parents | - | 327.808 | - | - | - | |
| Subsidiaries | ||||||
| C.R.C S.r.l. | 190.380 | 4.023 | 1.456.436 | |||
| Recuperator S.p.A | ||||||
| Carel U.K. Ltd | 1.007.495 | 244.526 | 42.451 | 9.351.696 | ||
| Carel France s.a.s. | 1.098.895 | 973.011 | 28.682 | 11.137.961 | ||
| Carel Asia Ltd | 1.919.120 | 75.836 | 4.346.188 | |||
| Carel Sud America Instrumentacao Eletronica Ltda | 431.952 | 42.906 | 1.712.328 | |||
| Carel Usa Llc | 2.228.875 | 216.083 | 8.501.658 | |||
| Carel Australia Pty. Ltd | 238.651 | |||||
| Carel Deutschland GmbH | 271.491 | 1.713.887 | 11.110 | 20.911.319 | ||
| Carel Electronic (Suzhou) Co Ltd | 2.235.393 | 3.912.901 | 5.765.704 | |||
| Carel Controls Iberica S.L. | 1.033.698 | 564.993 | 6.252 | 8.305.649 | ||
| Carel ACR Systems India (Pvt) Ltd | 367.739 | 141.958 | 681.482 | |||
| Carel Controls South Africa (Pty) Ltd | 376 | 240.748 | ||||
| Carel Rus Llc | 317.243 | |||||
| Carel Korea Ltd | 72.389 | 14.788 | 639.322 | |||
| Carel Nordic AB | 80 | 340.818 | 8.040 | |||
| Carel Japan Co. Ltd | 6.427 | 165 | 138.316 | |||
| Carel Mexicana S.De.RL | 114.167 | 835.092 | ||||
| Carel Middle East DWC Llc | 32.500 | 139.726 | 5.034 | |||
| Alfaco Polska Sp.z.o.o. | 2.051.317 | 2.091.368 | 2.692 | 5.460.664 | ||
| Carel (Thailand) CO Ltd | 10.699 | |||||
| Carel Adriatic D.o.o. | 4.227.311 | 566.147 | 5.731.829 | 3.067.236 | ||
| HygroMatik GmbH | 3.610.996 | |||||
| Total subsidiaries | 9.889.624 | 13.668.116 | 3.496.417 | 11.029.839 | 82.814.223 | |
| Associates | ||||||
| Arion S.r.l. | 160.000 | 24.532 | 84 | |||
| Total associates | 160.000 | - | - | 24.532 | 84 | |
| Subsidiaries of parents | ||||||
| RN Real Estate S.r.l. | 3.050 | 833 | ||||
| Eurotest Laboratori S.r.l. | 10.577 | 29.124 | 25 | |||
| Arianna S.p.A. | 3.050 | (8.428) | ||||
| Nastrificio Victor S.p.A. | 6.852 | |||||
| Total subsidiaries of parents | - | 16.677 | - | 36.809 | (8.403) | |
| Related parties | ||||||
| Carel Real Estate Adriatic doo | ||||||
| Le Volpi Agriturismo | 4.697 | |||||
| Panther S.r.l. | 1.885 | |||||
| Eurotec Ltd | 27.999 | |||||
| Total related parties | - | - | - | 6.582 | 27.999 | |
| TOTAL | 10.049.624 | 14.012.601 | 3.496.417 | 11.097.762 | 82.833.903 |
| Revenue and costs | ||
|---|---|---|
| Purchases of Income Other goods and Services from equity purchases materials investments |
Other revenue |
Sale of services |
| 184.475 | ||
| 120.285 | ||
| - - - - |
304.760 | - |
| 10.345 14.187 |
328 | 97.200 |
| 5.000.000 | ||
| 475 82.680 839.337 |
149.498 | 31.402 |
| 170 2.898 25.000 500.000 |
136.852 | 37.181 |
| 80.267 52.880 |
4.448 | 987 |
| 324.849 | 287 | 46.909 |
| 201.254 378.332 1.035 |
248.767 | 350.084 |
| 271 13.292 |
||
| 27.702 | 338.301 | 59.210 |
| 15.340.204 396.643 117 3.081.114 |
1.291.636 | 569.878 |
| 73.503 5.628 |
11.570 | 36.020 |
| 188 316.924 |
1.981 | |
| 6.661 394 |
1.836 | |
| 1.107.272 495.000 |
||
| 1.684 14.023 |
49.522 | |
| 1.100.120 | 1.717 | 20 |
| 6.269 109 |
||
| 27 1.927 |
268 | |
| 2.488 498.841 3.400 |
115 | 32.659 |
| 13.116 | 1.057 | |
| 296 | ||
| 22.078.232 27.237 |
219.889 | 260.000 |
| 38.156.489 3.997.261 56.867 9.915.451 |
2.406.473 | 1.573.472 |
| 1.512.302 14.110 |
||
| - 1.512.302 14.110 - - |
- | |
| 1.130.774 | 20.357 | 5.000 |
| 251.958 26.900 |
3.689 | 34.600 |
| 6.861 75.000 |
4.908 | 5.000 |
| 42.180 | ||
| 49.041 251.958 1.232.674 - |
28.954 | 44.600 |
| 1.890 | ||
| 4.021 11.710 600 |
||
| 6.353 | ||
| 894 | ||
| 11.268 11.710 600 - |
1.890 | - |
| 39.729.100 4.275.039 1.290.141 9.915.451 |
2.742.077 | 1.618.072 |
Following the shareholders' resolution of 7 September 2018 which approved the repurchase of treasury shares, up to a maximum of 5,000,000 shares, equal to 5% of the company's share capital, used for the performance plan described in note 32, the company repurchased 34,835 treasury shares for a total of €338,294 thousand between the end of the year and the preparation of the financial statements. No other significant events have taken place since the reporting date.
Carel Industries S.p.A.'s separate financial statements as at and for the year ended 31 December 2018 show a profit of €23,987,058.
It should be noted that:
We invite you to approve the financial statements and to allocate the profit for the year as follows:
CEO
________________________________ Francesco Nalini
The directors' report contains a reliable analysis of the performance and results, 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
________________________________ ________________________________
Brugine, 7 March 2018
CEO Manager in charge of financial reporting
Francesco Nalini Giuseppe Viscovich
Annexes to the Separate Financial Statements as at and for the year ended
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'S REPORT ON THE CONSOLIDATED NON-FINANCIAL STATEMENT PURSUANT TO ARTICLE 3, PARAGRAPH 10 OF LEGISLATIVE DECREE No. 254 OF DECEMBER 30, 2016 AND ART. 5 OF CONSOB REGULATION N. 20267/2018
To the Board of Directors of Carel Industries S.p.A.
Pursuant to article 3, paragraph 10, of the Legislative Decree no. 254 of December 30, 2016 (hereinafter "Decree") and to article 5 of the CONSOB Regulation n. 20267/2018, we have carried out a limited assurance engagement on the Consolidated Non-Financial Statement of Carel Industries S.p.A. and its subsidiaries (hereinafter "Carel Group" or "Group") as of December 31, 2018 prepared on the basis of art. 4 of the Decree, and approved by the Board of Directors on March 7, 2019 (hereinafter "NFS").
The Directors are responsible for the preparation of the NFS in accordance with articles 3 and 4 of the Decree and the "Global Reporting Initiative Sustainability Reporting Standards" established in 2016 by GRI - Global Reporting Initiative ("GRI Standards"), which they have identified as reporting framework.
The Directors are also responsible, within the terms established by law, for such internal control as they determine is necessary to enable the preparation of NFS that is free from material misstatement, whether due to fraud or error.
The Directors are moreover responsible for defining the contents of the NFS, within the topics specified in article 3, paragraph 1, of the Decree, taking into account the activities and characteristics of the Group, and to the extent necessary in order to ensure the understanding of the Group's activities, its trends, performance and the related impacts.
Finally, the Directors are responsible for defining the business management model and the organisation of the Group's activities as well as, with reference to the topics detected and reported in the NFS, for the policies pursued by the Group and for identifying and managing the risks generated or undertaken by the Group.
The Board of Statutory Auditors is responsible for overseeing, within the terms established by law, the compliance with the provisions set out in the Decree.
We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Our auditing firm applies International Standard on Quality Control 1 (ISQC Italia 1) and, accordingly, maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
Ancona Bari Bergamo Bologna Brescia Cagliari Firenze Genova Milano Napoli Padova Palermo Parma Roma Torino Treviso Udine Verona Sede Legale: Via Tortona, 25 – 20144 Milano | Capitale Sociale: Euro 10.328.220.00 i.v.
Codice Fiscale/Registro delle Imprese Milano n. 03049560166 – R.E.A. Milano n. 172039 | Partita IVA IT 03049560166
Il nome Deloitte si riferisce a una o più delle seguenti entità: Deloitte Touche Tohmatsu Limited, una società inglese a responsabilità limitata ("DTTL"), le member firm aderenti al suo network e le entità a esse correlate. DTTL e ciascuna delle sue member firm sono entità giuridicamente separate e indipendenti tra loro. DTTL (denominata anche "Deloitte Global") non fornisce servizi ai clienti. Si invita a leggere l'informativa completa relativa alla descrizione della struttura legale di Deloitte Touche Tohmatsu Limited e delle sue member firm all'indirizzo www.deloitte.com/about.
© Deloitte & Touche S.p.A.
Our responsibility is to express our conclusion based on the procedures performed about the compliance of the NFS with the Decree and the GRI Standards. We conducted our work in accordance with the criteria established in the "International Standard on Assurance Engagements ISAE 3000 (Revised) – Assurance Engagements Other than Audits or Reviews of Historical Financial Information" (hereinafter "ISAE 3000 Revised"), issued by the International Auditing and Assurance Standards Board (IAASB) for limited assurance engagements. The standard requires that we plan and perform the engagement to obtain limited assurance whether the NFS is free from material misstatement. Therefore, the procedures performed in a limited assurance engagement are less than those performed in a reasonable assurance engagement in accordance with ISAE 3000 Revised, and, therefore, do not enable us to obtain assurance that we would become aware of all significant matters and events that might be identified in a reasonable assurance engagement.
The procedures performed on NFS are based on our professional judgement and included inquiries, primarily with company personnel responsible for the preparation of information included in the NFS, analysis of documents, recalculations and other procedures aimed to obtain evidence as appropriate.
Specifically we carried out the following procedures:
Moreover, with reference to these matters, we carried out a comparison with the information contained in the NFS and the verifications described in the subsequent point [5], letter a);
In particular, we carried out interviews and discussions with the management of Carel Industries S.p.A. and with the employees of Carel Adriatic d.o.o., Carel Eletronic (Suzhou) Co.,Ltd, Carel USA LLC, and we carried out limited documentary verifications, in order to gather information about the processes and procedures which support the collection, aggregation, elaboration and transmittal of non-financial data and information to the department responsible for the preparation of the NFS.
2
3
In addition, for material information, taking into consideration the Group's activities and characteristics:
Based on the work performed, nothing has come to our attention that causes us to believe that the NFS of the Carel Group as of December 31, 2018 is not prepared, in all material aspects, in accordance with article 3 and 4 of the Decree and the GRI Standards.
DELOITTE & TOUCHE S.p.A.
Signed by Cristiano Nacchi Partner
Padua, Italy March 22, 2019
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]
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.