Annual Report • May 24, 2018
Annual Report
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Part 2
Energy intended as the warmth of the people at Sabaf - a word with a dual meaning, almost an exhortation to tackle the daily challenges of the market. Because at Sabaf, "we burn for technology and safety".
| Business and Financial situation of the Group | 115 |
|---|---|
| Risk Factors | 117 |
| Research and development | 118 |
| Non-financial statement | 119 |
| Personnel | 119 |
| Environment | 119 |
| Corporate governance | 119 |
| Internal control system on financial reporting | 119 |
| Model 231 | 119 |
| Personal data protection | 119 |
| Derivative financial instruments | 119 |
| Atypical or unusual transactions | 119 |
| Secondary offices | 119 |
| Management and coordination | 119 |
| Intra-group transaction and related-party transactions | 120 |
| Significant events after year-end and business outlook | 120 |
| Business and financial situation of Sabaf S.p.A. | 121 |
| Reconciliation between parent company and consolidated shareholders' equity and net profit for the period |
123 |
| Use of the longer time limit for calling the shareholders' meeting | 123 |
| (€/000) | 2017 | % | 2016 | % | 2017-2016 CHANGE |
% CHANGE |
|---|---|---|---|---|---|---|
| Sales revenue | 150,223 | 100% | 130,978 | 100% | 19,245 | +14.7% |
| EBITDA | 30,955 | 20.6% | 25,365 | 19.4% | 5,590 | +22.0% |
| EBIT | 18,117 | 12.1% | 12,501 | 9.5% | 5,616 | +44.9% |
| Pre-tax profit | 17,804 | 11.9% | 12,417 | 9.5% | 5,387 | +43.4% |
| Profit attributable to the Group | 14,835 | 9.9% | 8,994 | 6.9% | 5,841 | +64.9% |
| Basic earnings per share (€) | 1.323 | - | 0.791 | - | 0.531 | +67.0% |
| Diluted earnings per share (€) | 1.323 | - | 0.791 | - | 0.531 | +67.0% |
In 2017, the Sabaf Group reported sales revenue of € 150.2 million, an increase of 14.7% versus the figure of € 131 million 2016; taking into consideration the same scope of consolidation, sales increased by 12.9%. In 2017, the increase in sales was accompanied by a more than proportional improvement in profitability: 2017 EBITDA amounted to € 31 million, equivalent to 20.6% of sales, compared to € 25.4 million (19.4% of sales) in 2016, EBIT reached € 18.1 million, equivalent to 12.1% of sales, compared to € 12.5 million (9.5%) in 2016. Net profit of 2017, equal to € 14.8 million (9.9% of sales), is 64.9% higher than the € 9 million of 2016.
An analysis of sales by product category shows the strong growth of special burners, the family where product innovation has been strongest in recent years. The trend in sales of light alloy valves, which have now almost completely replaced brass valves, was also very positive. All other product lines also recorded good growth rates, with the exception of thermostats.
The subdivision of sales revenues by product line is shown in the table below:
The geographical breakdown of revenues is shown below:
| (€/000) | 2017 | % | 2016 | % | % CHANGE |
|---|---|---|---|---|---|
| Brass valves | 5,991 | 4.0% | 9,007 | 6.9% | -33.5% |
| Light alloy valves | 39,351 | 26.2% | 32,393 | 24.7% | +21.5% |
| Thermostats | 7,376 | 4.9% | 7,699 | 5.9% | -4.2% |
| Standard burners | 41,070 | 27.3% | 37,338 | 28.5% | +10.0% |
| Special burners | 27,184 | 18.1% | 21,215 | 16.2% | +28.1% |
| Accessories and other revenues |
15,267 | 10.2% | 12,613 | 9.6% | +21.0% |
| TOTAL GAS PARTS | 136,239 | 90.7% | 120,265 91.8% | +13.3% | |
| Professional burners | 5,079 | 3.4% | 2,289 | 1.8% | +121.9% |
| Hinges | 8,905 | 5.9% | 8,424 | 6.4% | +5.7% |
| TOTAL | 150,223 | 100% | 130,978 100% | +14.7% |
| (€/000) | 2017 | % | 2016 | % | % CHANGE |
|---|---|---|---|---|---|
| Italy | 36,523 | 24.3% | 36,365 | 27.8% | +0.4% |
| Western Europe | 11,678 | 7.8% | 8,553 | 6.5% | +36.5% |
| Eastern Europe | 42,824 | 28.5% | 34,123 | 26.1% | +25.5% |
| Middle East and Africa | 13,009 | 8.6% | 11,698 | 8.9% | +11.2% |
| Asia and Oceania | 10,516 | 7.0% | 8,088 | 6.2% | +30.0% |
| South America | 22,938 | 15.3% | 20,847 | 15.9% | +10.0% |
| North America and Mexico |
12,735 | 8.5% | 11,304 | 8.6% | +12.7% |
| TOTAL | 150,223 | 100% | 130,978 | 100% | +14.7% |
1 2016 figures, shown for comparative purposes in this section, were recalculated pursuant to IFRS 3, in order to retrospectively take into account the effects resulting from the fair value measurement of A.R.C's assets and liabilities, at the acquisition date previously considered provisional.
In 2017, all markets recorded double-digit growth rates; Italy, where sales remained stable after years of decline due to the sharp reduction in the production of domestic appliances, is an exception. Very positive sales growth rates have been recorded in other European markets, where Sabaf is consolidating its leadership. The Middle East market showed a strong recovery compared to 2016; Asia, North and South America confirmed a positive underlying trend.
Average sales prices in 2017 were 0.8% lower compared to 2016.
The effective average purchase prices of the main raw materials (brass, aluminium alloys and steel) were on average higher than in 2016, with a negative impact of 0.9% of sales. Consumption (purchases plus change in inventories) as a percentage of sales was 38.2% in 2017, compared with 36.7% in 2016.
The impact of labour cost on sales decreased from 24.5% to 23.5%, by benefiting from greater automation of production and a lower impact of overhead costs.
Operating cash flow (net profit plus depreciation and amortisation) stood at € 27.7 million, equivalent to 18.5% of sales (€ 22 million and 16.8%, respectively in 2016).
The ratio of net financial expenses to sales remained unchanged at 0.5%.
The tax rate for 2017 was 16.2% (26.9% in 2016) and gained tax benefits of approximately € 2.3 million (mainly related to the patent box and investments made in Turkey), as described in detail in Note 31 to the consolidated financial statements.
Cash flows for the period are summarised in the table below:
| (€/000) | 2017 | 2016 |
|---|---|---|
| Opening liquidity | 12,143 | 3,991 |
| Operating cash flow | 22,779 | 25,931 |
| Cash flow from investments | (13,944) | (11,762) |
| Free cash flow | 8,835 | 14,169 |
| Cash flow from financing activities |
(6,516) | (2,894) |
| A.R.C. acquisition | - | (2,614) |
| Foreign exchange differences due to translation |
(2,929) | (509) |
| CASH FLOW FOR THE PERIOD |
(610) | 8,152 |
| Closing liquidity | 11,533 | 12,143 |
Net financial debt and liquidity shown in the tables above are defined in compliance with the net financial position detailed in Note 22 of the consolidated financial statements, as required by CONSOB memorandum of 28 July 2006.
At 31 December 2017, working capital stood at € 50.8 million compared with € 46.1 million at the end of the 2016: its impact on sales was 33.8% (35.2% in 2016).
Also to take advantage of the low level of interest rates, as from 2016, the Group reformulated the average duration of its loans, entering into unsecured loan agreements repayable in 5 years and reducing the short-term bank exposure.
In 2017, the Sabaf Group made net investments of € 13.9 million. The main investments in the financial year were aimed at automation of the assembly lines for light alloy valves and at the interconnection of production plants with management systems (Industry 4.0). The building in Campodarsego (PD) was acquired, where A.R.C., formerly rented, operates. In Brazil, the factory was expanded, against increased production volumes; while in Turkey all the die-casting machines were robotised. Other investments were made in the production of presses for new burners. Investments in maintenance and replacement, so that production equipment is kept constantly up to date and efficient, are systematic.
Free cash flow (operating cash flow less investments) amounted to € 8.8 million, compared with € 14.2 million in 2016, following a different trend in working capital (in particular, following the increase in sales, trade receivables increased at 31 December 2017).
During the financial year, the Group paid out dividends of € 5.4 million and purchased treasury shares for € 2.1 million; the net financial debt was € 25.5 million, versus € 23.5 million in 31 December 2016.
Shareholders' equity totalled € 115 million at 31 December 2017; the ratio between the net financial debt and the shareholders' equity was 0.22 versus 0.21 in 2016.
The Group's statement of financial position, reclassified based on financial criteria, is illustrated below:
| (€/000) | 31.12.2017 | 31.12.2016 |
|---|---|---|
| Non-current assets | 93,802 | 93,967 |
| Short-term assets 2 | 79,314 | 72,908 |
| Short-term liabilities 3 | (28,561) | (26,824) |
| Working capital 4 | 50,753 | 46,084 |
| Short-term financial assets | 67 | 0 |
| Provisions for risks and charges, Post-employment benefits, deferred taxes |
4,034 | (4,284) |
| NET INVESTED CAPITAL | 140,588 | 135,767 |
| Short-term net financial position | (5,830) | (2,804) |
| Medium/long-term net financial position |
(19,703) | (20,654) |
| NET FINANCIAL DEBT | (25,533) | (23,458) |
| SHAREHOLDERS' EQUITY | 115,055 | 112,309 |
| 2017 | 2016 | |
|---|---|---|
| ROCE (return on capital employed) |
12.9% | 9.2% |
| Dividends per share (€) | 0.55 5 | 0.48 |
| Net debt/EBITDA | 0.82 | 0.92 |
| Net debt/equity ratio | 22% | 21% |
| Market capitalisation (31/12)/ equity ratio |
2.00 | 1.07 |
| Change in sales | +14.7% | -5.1% |
Please refer to the introductory part of the Annual Report for a detailed examination of other key performance indicators.
The results of the risk identification and assessment process carried out in 2017 showed that the Sabaf Group is exposed to certain risk factors, which can be traced back to the macro-categories described below.
Risks deriving from the external context in which Sabaf operates, which could have a negative impact on the economic and financial sustainability of the business in the medium/long-term. The most significant risks in this category are related to general economic conditions, trend in demand and product competition, in addition to the risks related to Sabaf's presence in Turkey and, more generally, to instability of the emerging countries in which the Group operates.
Strategic risks that could negatively impact Sabaf's short to medium term performance, including, for example: the loss of business opportunities in the Chinese market, risks related to the growth through acquisitions strategy and the protection of product exclusivity.
Risks related to Sabaf's contractual liabilities and compliance with the laws and regulations applicable to the Group, including: Legislative Decree 231/2001, Law 262/2005, HSE regulations, regulations applicable to listed companies, tax regulations, labour regulations.
Risks of suffering losses due to inadequate or malfunctioning processes, human resources and information systems. This category includes financial risks (e.g. losses deriving from the volatility of the price of raw materials used by the Group in its production processes, from fluctuations in exchange rates or from the management of trade receivables), risks related to production processes (e.g. product liability),
organisational risks (e.g. loss of key staff and expertise and the difficulty of replacing them, resistance to change by the organisation), risks related to purchases (e.g. relations with suppliers and contractors) and Information Technology risks.
The main risks are described in detail below as well as the relevant risk management actions that are currently being implemented.
The Group's financial position, results and cash flows are affected by several factors related to the performance of the sector, including:
To cope with this situation, the Group aims to retain and reinforce, wherever possible, its leadership position through:
Turkey represents the main production hub of household appliances at the European level; over the years, local industry attracted heavy foreign investments and favoured the growth of important manufacturers. In this context, the Sabaf created a production plant in Turkey in 2012 that realises today the 10% of total Group production. The Turkish market represents more than 25% of the Group's total sales. The social and political tensions in Turkey over the last few years had no effect on the activities of the Sabaf Group, which continued normally. In consideration of the strategic importance of this Country, the management assessed the risks that could arise from the impossibility to operate in Turkey. We highlight that all the products made in Turkey today can be manufactured also in Italy, albeit at higher costs, to ensure in this way the continuity of supplies to customers.
More generally, the Group is exposed to risks related to (political, economic, tax, regulatory) instability in some emerging countries where it produces or sells. Any embargoes or major political or economic instability, or changes in the regulatory and/or local law systems, or new tariffs or taxes imposed could negatively affect a portion of Group sales and the related profitability.
Sabaf has taken the following measures to mitigate the above risk factors:
The Sabaf Group's business model focuses on the production of gas cooking components (valves and burners); therefore, there is the risk of not correctly assessing the threats and opportunities deriving from the competition of alternative products (alternative solutions to gas cooking, such as induction), with the consequence of not adequately making use of any market opportunities and/or suffering from negative impacts on margins and turnover.
In recent years, the Group has launched a number of projects aimed at analysing the opportunities and threats related to competition of alternative products, other than gas cooking, including:
With a production of over 20 million hobs per year, China is one of the world's most important markets. After many years of commercial presence only, in 2015 Sabaf started the on-site production of a special burner for the Chinese market.
However, there is a risk that Sabaf's investments in the opening of its Chinese headquarters and the start of production will not generate - at least in the short/medium term - an adequate economic return.
To support the development of the Group's Chinese subsidiary and to ensure the economic return on the investments made, Sabaf is carrying out the following actions:
The strategic plan developed by the Group's management includes, among other things, the possibility of growth through acquisitions, also in related sectors. This strategic choice involves specific risk profiles for Sabaf, due to:
The Group adopted solutions and instruments to mitigate the above risks, such as:
• definition of guidelines / requirements necessary for the identification of target companies;
Sabaf's business model based the protection of product exclusivity mainly on design capacity and the internal production of special machines used in manufacturing processes, thanks to its unique know-how that competitors would find difficult to replicate.
There is a risk that some Group products, although patented, will be copied by competitors. Exposure to this risk increased as a result of the opening up of trade in countries where it is difficult to enforce industrial patent rights.
Sabaf developed and maintained a structured model to manage innovation and protect intellectual property. Moreover, the Group periodically monitors the patent strategies adopted/to be adopted based on the assessments of cost/opportunity.
The Sabaf Group is exposed to a series of financial risks, due to:
For more information on financial risks, see Note 35 of the consolidated financial statements as regards disclosure for the purposes of IFRS 7.
The most important research and development projects conducted in 2017 were as follows:
In addition to the integrations between production plants and management systems (industry 4.0) mentioned above, studies were launched for the electronic labelling of packages and for the automation of internal logistics. The improvement in production processes continued throughout the Group, accompanied by the development and internal production of machinery, tools and presses.
Development costs to the tune of € 496,000 were capitalised, as all the conditions set by international accounting standards were met; in other cases, they were charged to the income statement.
Starting from 2017, the Sabaf Group publishes the consolidated non-financial statement required by Legislative Decree no. 54/2016 in a report separate from this Management Report. The consolidated non-financial statement provides all the information needed to ensure understanding of the Group's activities, performance, results and impact, with particular reference to environmental, social and personnel issues, respect for human rights and the fight against active and passive corruption, which are relevant considering the Group's activities and characteristics.
The consolidated non-financial statement is included in the same file in which the management report, the consolidated financial statements, the separate financial statements of the parent company Sabaf S.p.A. and the remuneration report are published. It should be noted that since 2005, the Sabaf Group has drawn up an Annual Report on
In 2017, the Sabaf Group suffered no on-the-job deaths or serious accidents that led to serious or very serious injuries to staff for which the Group was definitively held responsible, nor was it held responsible for occupational illnesses of employees or former employees, or causes of mobbing.
For all other information, please refer to the Non-Financial Statement.
its economic, social and environmental sustainability performance.
In 2017 there was no:
For all other information, please refer to the Non-Financial Statement.
For a complete description of the corporate governance system of the Sabaf Group, see the report on corporate governance and on the ownership structure, available in the Investor Relations section of the company website.
The internal control system on financial reporting is described in detail in the report on corporate governance and on ownership structure.
With reference to the "conditions for listing shares of parent companies set up and regulated by the law of states not belonging to the European Union" pursuant to articles 36 and 39 of the Market Regulations, the Company and its subsidiaries have administrative and accounting systems that can provide the public with the accounting situations prepared for drafting the consolidated report of the companies that fall within the scope of this regulation and can regularly supply management and the auditors of the Parent Company with the data necessary for drafting the consolidated financial statements. The Sabaf Group has also set up an effective information flow to the independent auditor and continuous information on the composition of the company officers of the subsidiaries, together with information on the offices held, and requires the systematic and centralised gathering and regular updates of the formal documents relating to the articles of association and granting of powers to company officers. The conditions exist as required by article 36, letters a), b) and c) of the Market Regulations issued by CONSOB. In the course of the financial year, no acquisitions were made of companies in countries not belonging to the European Union which, considered independently, would have a significant relevance for the purposes of the regulation in question.
The Organisation, Management and Control Model, adopted pursuant to Legislative Decree 231/2001, is described in the report on company governance and on the ownership structure, which should be reviewed for reference.
With reference to Legislative Decree 196 of 30 June 2003, in 2017 the Group continued its work to ensure compliance with current regulations. Compliance with the GDPR Regulation is in progress and will enter into force in May 2018.
For the comments on this item, please see Note 35 of the consolidated financial statements.
Sabaf Group companies did not execute any unusual or atypical transactions in 2017.
Neither Sabaf S.p.A. nor its subsidiaries have secondary operating offices.
Sabaf S.p.A. is not subject to management and coordination by other companies. Sabaf S.p.A. exercises management and coordination activities over its Italian subsidiaries, Faringosi Hinges s.r.l., Sabaf Immobiliare s.r.l. and A.R.C. s.r.l.
The relationships between the Group companies, including those with the parent company, are regulated under market conditions, as well as the relationships with related parties, defined in accordance with the accounting standard IAS 24. The details of the intra-group transactions and other related-party transactions are given in Note 36 of the consolidated financial statements and in Note 37 of the separate financial statements of Sabaf S.p.A.
The start of 2018 shows a moderate increase in sales compared to the same period of 2017. After a year characterised by a growth rate that is clearly higher than the average trend of recent years and despite the still challenging competitive scenario, the Group estimates that revenues for the entire financial year 2018 will increase ranging from 3% to 5% compared to 2017. The Group also believes that the adjustment of sales prices and further improvements in operating efficiency will enable it to balance the negative impacts associated with the weakening of the dollar and the rise in commodity prices, and therefore estimates operating profitability (EBITDA%) to be in line with 2017.
These forecasts assume a macroeconomic scenario not affected by unpredictable events. If the economic situation were to change significantly, actual figures might diverge from forecasts.
| (€/000) | 2017 | 2016 | CHANGE | % CHANGE |
|---|---|---|---|---|
| Sales revenue | 115,687 | 101,523 | 14,164 | +14.0% |
| EBITDA | 17,477 | 13,525 | 3,952 | +29.2% |
| EBIT | 8,050 | 4,070 | 3,980 | +97.8% |
| Pre-tax profit (EBT) | 9,072 | 3,593 | 5,479 | +152.5% |
| Net Profit | 8,001 | 2,460 | 5,541 | +225.2% |
The reclassification of the statement of financial position based on financial criteria is illustrated below:
| (€/000) | 31.12.2017 | 31.12.2016 |
|---|---|---|
| Non-current assets 6 | 89,361 | 89,258 |
| Non-current financial assets | 1,848 | 2,137 |
| Short-term assets 7 | 58,875 | 54,475 |
| Short-term liabilities 8 | (23,643) | (22,441) |
| Working capital 9 | 35,232 | 32,034 |
| Provisions for risks and charges, Post-employment benefits, deferred taxes |
(2,637) | (2,888) |
| NET INVESTED CAPITAL | 123,804 | 120,541 |
| Short-term net financial position | (15,239) | (11,496) |
| Medium/long-term net financial position | (16,478) | (17,521) |
| NET FINANCIAL POSITION | (31,717) | (29,017) |
| SHAREHOLDERS' EQUITY | 92,087 | 91,524 |
Cash flows for the period are summarised in the table below:
| (€/000) | 2017 | 2016 |
|---|---|---|
| Opening liquidity | 1,797 | 1,090 |
| Operating cash flow | 12,554 | 15,205 |
| Cash flow from investments | (9,319) | (12,591) |
| Free cash flow | 3,235 | 2,614 |
| Cash flow from financing activities | (2,335) | (1,907) |
| CASH FLOW FOR THE PERIOD | 900 | 707 |
| Closing liquidity | 2,697 | 1,797 |
6 Excluding Financial assets .
7 Sum of Inventories, Trade receivables, Tax receivables and Other current receivables
Net financial debt and the net short-term financial position shown in the tables above are defined in compliance with the net financial position detailed in Note 22 of the separate financial statements, as required by the CONSOB memorandum of 28 July 2006.
The 2017 financial year ended with an increase in sales of 14% compared with 2016. The product family of valves and thermostats was weaker, while sales of burners recorded a very positive trend. In particular, note the strong growth of special burners, the family where product innovation has been strongest in recent years. The increase in sales had a positive impact on gross operating profitability: EBITDA was € 17.5 million, or 15.1% of sales (€ 13.5 million in 2016, or 13.3%).
EBIT of 2017 was € 8.1 million, or 7% of sales (€ 4.1 million in 2016, or 4%).
The impact of the labour costs on sales decreased from 26% to 24.8%. Net finance expense as a percentage of sales was minimal, at 0.4% (substantially unchanged), given the low level of financial debt and the low interest rates.
In 2017, unlike in the previous year, the Company received dividends of € 1.5 million from the subsidiary Sabaf Immobiliare and recognised the tax benefit related to the Patent Box for the three-year period 2015 to 2017, totalling € 1.3 million, as described in detail in Note 33 to the separate financial statements. The actual tax burden related to 2017 was 11.8% (31.5% in 2016).
Net profit was € 8 million, or 6.9% of sales (€ 2.5 million in 2016, or 2.4%).
Operating cash flow (net profit plus depreciation and amortisation) decreased from €11.5 million to €16.8 million, with an impact on sales of 14.6% (compared to 11.3% in 2016).
In 2017, Sabaf S.p.A. invested over € 8 million in plant and equipment. The main investments in the financial year were aimed at the further automation of production of light alloy valves and interconnection of production plants with management systems (Industry 4.0). Other investments were made in the production of presses for new burners, while investments were made systematically to maintain a constantly updated and fully efficient machinery fleet.
At 31 December 2017, working capital stood at € 35 million compared with € 32 million in the previous year: its percentage impact on sales stood at 30.5% from 31.6% at the end of 2016.
Self-financing generated by operating cash flow was € 12.6 million, compared with € 15.2 million in 2016.
The net financial debt was € 31.7 million, compared with € 29 million in 31 December 2016.
At the end of the year, the shareholders' equity amounted to € 92.1 million, compared with € 91.5 million in 2016. The net financial debt/shareholders' equity ratio was 34%, 32% at the end of 2016.
Pursuant to the CONSOB memorandum of 28 July 2006, a reconciliation statement of the result of the 2017 financial year and Group shareholders' equity at 31 December 2017 with the same values of the parent company Sabaf S.p.A. is given below:
| 31.12.2017 | 31.12.2016 (*) | |||
|---|---|---|---|---|
| DESCRIPTION | Profit for the year | Shareholders' equity |
Profit for the year | Shareholders' equity |
| Profit and shareholders' equity of parent company Sabaf S.p.A. |
8,001 | 92,087 | 2,460 | 91,524 |
| Equity and consolidated company results | 7,971 | 67,929 | 6,175 | 66,276 |
| Elimination of the carrying value of consolidated equity investments |
682 | (48,596) | 521 | (49,900) |
| Goodwill | 0 | 6,215 | 0 | 6,215 |
| Put option on A.R.C. minorities | (241) | (1,763) | 0 | (1,522) |
| IFRS 3 effect on A.R.C. acquisition | 0 | 0 | (21) | 275 |
| Intercompany eliminations | (1,497) | (817) | (60) | (491) |
| Minority interests | (81) | (1,460) | (81) | (1,379) |
| PROFIT AND SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE GROUP |
14,835 | 113,595 | 8,994 | 110,998 |
Pursuant to the second paragraph of Article 2364 of the Italian Civil Code, in consideration of the need to consolidate the financial statements of Group companies and to prepare all supporting documentation, the directors intend to use the longer time limits granted to companies required to prepare the consolidated financial statements for calling the ordinary shareholders' meeting to approve the 2017 financial statements. The shareholders' meeting must also resolve on the election of the members of the administration and control bodies and must therefore be convened at least 40 days in advance pursuant to Article 125-bis of the TUF. The Shareholders' Meeting is convened on a single date for 8 May 2018.
As we thank our employees, the Board of Statutory Auditors, the Independent Auditor and the supervisory authorities for their invaluable cooperation, we would kindly ask the shareholders to approve the financial statements ended 31 December 2017 with the proposal to allocate the profit for the year of € 8,001,327 as follows:
Ospitaletto, 26 March 2018 The Board of Directors
We seek to establish an open communication channel with our stakeholders, clearly stating the rationale behind all corporate decisions and respecting their legitimate expectations.
| Group structure and corporate bodies | 127 |
|---|---|
| Consolidated statement of financial position | 128 |
| Consolidated income statement | 129 |
| Consolidated statement of comprehensive income | 130 |
| Statement of changes in consolidated shareholders' equity | 130 |
| Consolidated cash flow statement | 131 |
| Explanatory Notes | 132 |
| Comments on significant balance sheet items | 140 |
| Comments on key income statement items | 150 |
| Certification of the Consolidated Financial Statements | 159 |
| Parent company | ||||
|---|---|---|---|---|
| SABAF S.p.A. | ||||
| Subsidiaries and equity interest owned by the Group | ||||
| Faringosi Hinges s.r.l. | 100% | Sabaf Appliance Components (Kunshan) Co. Ltd. |
100% | |
| Sabaf Immobiliare s.r.l. | 100% | Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf Turkey) |
100% | |
| Sabaf do Brasil Ltda. | 100% | Sabaf Appliance Components Trading (Kunshan) Co. Ltd. in liquidazione |
100% | |
| Sabaf US Corp. | 100% | A.R.C. s.r.l. | 70% | |
| Associate companies and equity interest owned by the Group | ||||
| Handan ARC Burners Co. Ltd. | 35% | |||
| Board of Directors | ||||
| Chairman | Giuseppe Saleri | Director * | Renato Camodeca | |
| Vice Chairman | Cinzia Saleri | Director * | Giuseppe Cavalli | |
| Vice Chairman | Ettore Saleri | Director * | Fausto Gardoni | |
| Vice Chairman | Roberta Forzanini | Director * | Anna Pendoli | |
| Chief Executive Officer | Pietro Iotti | Director * | Nicla Picchi | |
| Director | Gianluca Beschi | Director | Alessandro Potestà | |
| Board of Statutory Auditors | Independent Auditor | |||
| Chairman | Antonio Passantino | Deloitte & Touche S.p.A. | ||
| Statutory Auditor | Luisa Anselmi |
Statutory Auditor Enrico Broli
| (€/000) | NOTES | 31.12.2017 | 31.12.2016 * |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 1 | 73,069 | 73,445 |
| Investment property | 2 | 5,697 | 6,270 |
| Intangible assets | 3 | 9,283 | 9,077 |
| Equity investments | 4 | 281 | 306 |
| Non-current financial assets | 10 | 180 | 0 |
| Non-current receivables | 5 | 196 | 262 |
| Deferred tax assets | 21 | 5,096 | 4,781 |
| TOTAL NON-CURRENT ASSETS | 93,802 | 94,141 | |
| Current assets | |||
| Inventories | 6 | 32,929 | 31,484 |
| Trade receivables | 7 | 42,263 | 36,842 |
| Tax receivables | 8 | 3,065 | 3,163 |
| Other current receivables | 9 | 1,057 | 1,419 |
| Current financial assets | 10 | 67 | 0 |
| Cash and cash equivalents | 11 | 11,533 | 12,143 |
| TOTAL CURRENT ASSETS | 90,914 | 85,051 | |
| Assets held for sale | 0 | 0 | |
| TOTAL ASSETS | 184,716 | 179,192 | |
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||
| Shareholders' equity | |||
| Share capital | 12 | 11,533 | 11,533 |
| Retained earnings, other reserves | 87,227 | 90,471 | |
| Profit for the year | 14,835 | 8,994 | |
| Total equity interest of the Parent Company | 113,595 | 110,998 | |
| Minority interests | 1,460 | 1,379 | |
| TOTAL SHAREHOLDERS' EQUITY | 115,055 | 112,377 | |
| Non-current liabilities | |||
| Loans | 14 | 17,760 | 18,892 |
| Other financial liabilities | 15 | 1,943 | 1,762 |
| Post-employment benefit and retirement reserves | 16 | 2,845 | 3,086 |
| Provisions for risks and charges | 17 | 385 | 434 |
| Deferred tax liabilities | 21 | 804 | 870 |
| TOTAL NON-CURRENT LIABILITIES | 23,737 | 25,044 | |
| Current liabilities | |||
| Loans | 14 | 17,288 | 14,612 |
| Other financial liabilities | 15 | 75 | 335 |
| Trade payables | 18 | 19,975 | 18,977 |
| Tax payables | 19 | 1,095 | 1,190 |
| Other payables | 20 | 7,491 | 6,657 |
| TOTAL CURRENT LIABILITIES | 45,924 | 41,771 |
Liabilities held for sale 0 0 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 184,716 179,192
| (€/000) | NOTE | 2017 | 2016 * |
|---|---|---|---|
| INCOME STATEMENT COMPONENTS | |||
| Operating revenue and income | |||
| Revenue | 23 | 150,223 | 130,978 |
| Other income | 24 | 3,361 | 2,819 |
| TOTAL OPERATING REVENUE AND INCOME | 153,584 | 133,797 | |
| Operating costs | |||
| Materials | 25 | (59,794) | (47,346) |
| Change in inventories | 2,380 | (754) | |
| Services | 26 | (30,227) | (27,983) |
| Payroll costs | 27 | (35,328) | (32,112) |
| Other operating costs | 28 | (1,134) | (1,078) |
| Costs for capitalised in-house work | 1,474 | 841 | |
| TOTAL OPERATING COSTS | (122,629) | (108,432) | |
| OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION, CAPITAL GAINS/LOSSES, AND WRITE DOWNS/WRITE-BACKS OF NON-CURRENT ASSETS |
30,955 | 25,365 | |
| Depreciations and amortisation | 1, 2, 3 | (12,826) | (12,882) |
| Capital gains on disposals of non-current assets | (12) | 18 | |
| EBIT | 18,117 | 12,501 | |
| Financial income | 214 | 101 | |
| Financial expenses | 29 | (804) | (620) |
| Exchange rate gains and losses | 30 | 274 | 435 |
| Profits and losses from equity investments | 3 | 0 | |
| PROFIT BEFORE TAXES | 17,804 | 12,417 | |
| Income tax | 31 | (2,888) | (3,342) |
| PROFIT FOR THE YEAR | 14,916 | 9,075 | |
| of which: minority interests | 81 | 81 | |
| PROFIT ATTRIBUTABLE TO THE GROUP | 14,835 | 8,994 | |
| EARNINGS PER SHARE (EPS) | 32 | ||
| Base | 1.323 euro | 0.791 euro | |
| Diluted | 1.323 euro | 0.791 euro |
* Figures recalculated pursuant to IFRS 3, in order to retrospectively take into account the effects resulting from the fair value measurement of A.R.C's assets and liabilities, at the acquisition date previously considered provisional.
| (€/000) | 2017 | 2016 3 |
|---|---|---|
| PROFIT FOR THE YEAR | 14,916 | 9,075 |
| Total profits/losses that will not be subsequently reclassified under profit (loss) for the year | ||
| Actuarial post-employment benefit reserve evaluation | 82 | (41) |
| Tax effect | (20) | 10 |
| 62 | (31) | |
| Total profits/losses that will be subsequently reclassified under profit (loss) for the year | ||
| Forex differences due to translation of financial statements in foreign currencies | (4,806) | (340) |
| TOTAL OTHER PROFITS/(LOSSES) NET OF TAXES FOR THE YEAR | (4,744) | (371) |
| TOTAL PROFIT | 10,172 | 8,704 |
| (€/000) | Share capital |
Share premium reserve |
Legal reserve |
Treasury shares |
Translation reserve |
Post-em ployment benefit discounting reserve |
Other reserves |
Profit for the year |
Total Group sharehol ders' equity |
Minority interests |
Total sha reholders' equity |
|---|---|---|---|---|---|---|---|---|---|---|---|
| BALANCE AT 31 DEC 2015 |
11,533 | 10,002 | 2,307 | (723) | (7,048) | (581) | 86,552 | 8,998 | 111,040 | 0 | 111,040 |
| Allocation of 2015 profit | |||||||||||
| • dividends paid out |
(5,467) | (5,467) | (5,467) | ||||||||
| • carried forward |
3,531 | (3,531) | 0 | 0 | |||||||
| ARC acqui sition and consolidation |
1,210 | 1,210 | |||||||||
| IFRS 3 effect on ARC acqui sition |
(15) | (15) | 83 | 68 | |||||||
| ARC put option |
(1,522) | (1,522) | (1,522) | ||||||||
| Purchase of treasury shares |
(1,676) | (1,676) | (1,676) | ||||||||
| Total profit at 31 Dec 2016 |
(340) | (31) | 9,009 | 8,638 | 86 | 8,724 | |||||
| BALANCE AT 31 DEC 2016 * |
11,533 | 10,002 | 2,307 | (2,399) | (7,388) | (612) | 88,561 | 8,994 | 110,998 | 1,379 | 112,377 |
| Allocation of 2016 profit | |||||||||||
| • dividends paid out |
(5,384) | (5,384) | (5,384) | ||||||||
| • carried forward |
3,610 | (3,610) | 0 | 0 | |||||||
| Purchase of treasury shares |
(2,110) | (2,110) | (2,110) | ||||||||
| Total profit at 31 Dec 2017 |
(4,806) | 62 | 14,835 | 10,091 | 81 | 10,172 | |||||
| BALANCE AT 31 DEC 2017 |
11,533 | 10,002 | 2,307 | (4,509) | (12,194) | (550) | 92,171 | 14,835 | 113,595 | 1,460 | 115,055 |
| 2017 | 2016 * | |
|---|---|---|
| Cash and cash equivalents at beginning of year | 12,143 | 3,991 |
| Profit for the year | 14,916 | 9,075 |
| Adjustments for: | ||
| • Depreciation and amortisation | 12,826 | 12,882 |
| • Realised gains | 12 | (18) |
| • Net financial income and expenses | 590 | 519 |
| • Income tax | 2,888 | 3,350 |
| Change in post-employment benefit reserve | (189) | (184) |
| Change in risk provisions | (49) | 39 |
| Change in trade receivables | (5,421) | 5,107 |
| Change in inventories | (1,445) | 416 |
| Change in trade payables | 998 | (1,286) |
| Change in net working capital | (5,868) | 4,237 |
| Change in other receivables and payables, deferred tax | 1,029 | 1,268 |
| Payment of taxes | (3,058) | (4,762) |
| Payment of financial expenses | (532) | (576) |
| Collection of financial income | 214 | 101 |
| CASH FLOW FROM OPERATIONS | 22,779 | 25,931 |
| Investments in non-current assets | ||
| • intangible | (860) | (477) |
| • tangible | (13,604) | (11,465) |
| • financial | 0 | 5 |
| Disposal of non-current assets | 520 | 175 |
| CASH FLOW ABSORBED BY INVESTMENTS | (13,944) | (11,762) |
| Repayment of loans | (16,526) | (33,141) |
| Raising of loans | 17,751 | 37,321 |
| Short-term financial assets | (247) | 69 |
| Purchase of treasury shares | (2,110) | (1,676) |
| Payment of dividends | (5,384) | (5,467) |
| CASH FLOW ABSORBED BY FINANCING ACTIVITIES | (6,516) | (2,894) |
| A.R.C. acquisition | 0 | (2,614) |
| Foreign exchange differences due to translation | (2,929) | (509) |
| NET FINANCIAL FLOWS FOR THE YEAR | (610) | 8,152 |
| Cash and cash equivalents at end of year (Note 11) | 11,533 | 12,143 |
| Current financial debt | 17,363 | 14,947 |
| Non-current financial debt | 19,703 | 20,654 |
| NET FINANCIAL DEBT (NOTE 22) | 25,533 | 23,458 |
* Figures recalculated pursuant to IFRS 3, in order to retrospectively take into account the effects resulting from the fair value measurement of A.R.C's assets and liabilities, at the acquisition date previously considered provisional.
The consolidated financial statements of the Sabaf Group for the financial year 2017 have been prepared in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Union. Reference to IFRS also includes all current International Accounting Standards (IAS). The financial statements have been prepared in euro, the current currency in the economies in which the Group mainly operates, rounding amounts to the nearest thousand, and are compared with consolidated financial statements for the previous year, prepared according to the same standards. The report consists of the statement of financial position, the income statement, the statement of changes in shareholders' equity, the cash flow statement, and these explanatory notes. The financial statements have been prepared on a historical cost basis except for some revaluations of property, plant and equipment undertaken in previous years, and are considered a going concern. The Group assessed that it is a going concern (as defined by paragraphs 25 and 26 of IAS 1), also due to the strong competitive position, high profitability and solidity of the financial structure.
The Group has adopted the following formats:
Use of these formats permits the most meaningful representation of the Group's operating results, financial position and cash flows.
The scope of consolidation at 31 December 2017 comprises the parent company Sabaf S.p.A. and the following companies controlled by Sabaf S.p.A.:
Sabaf U.S. is not consolidated since it is irrelevant for the purposes of the consolidation. Handan A.R.C. Ltd, Chinese company in which the Group holds a 35% share, was measured at cost in that at 31 December 2017 operations are still in the early stages, and therefore the company is considered irrelevant for consolidation purposes. The companies in which Sabaf S.p.A. simultaneously possesses the following three elements are considered subsidiaries: (a) power over the company; (b) exposure or rights to variable returns resulting from involvement therein; (c) ability to affect the size of these returns by exercising power. If these subsidiaries exercise a significant influence, they are consolidated as from the date in which control begins until the date in which control ends so as to provide a correct representation of the Group's operating results, financial position and cash flows.
The data used for consolidation have been taken from the income statements and statements of financial position prepared by the directors of the individual subsidiary companies. These figures have been appropriately amended and restated, when necessary, to align them with international accounting standards and with uniform group-wide classification criteria.
The criteria applied for consolidation are as follows:
Upon completion of the valuation of the assets and liabilities of A.R.C. at the acquisition date, pursuant to IFRS 3, previously considered provisional, the temporary figures of the tangible assets acquired recorded at the time in the consolidated financial statements at the date of first consolidation (30 June 2016) were increased by € 410,000, subsequent to a technical analysis carried out by experts on plants, machinery and equipment to identify their fair value. Furthermore, provisions for deferred tax liabilities were increased by € 114,000 in order to record the relevant tax effect. The Group has used the option provided by IFRS 3 in order to finalise the allocation within 12 months from the purchase date given that the technical analysis on plants, machinery and equipment was not previously complete and available.
Final goodwill of € 1,770,000 reflects the net change of € 296,000 described above, net of the allocation made to minority interests (€ 89,000), during the measurement period to the temporary values of tangible assets and deferred tax liabilities. At 31 December 2017, goodwill was tested for impairment, as described in detail in Note 3 below.
As required by IFRS 3, the comparative financial statements at 31 December 2016 have been restated to retrospectively take into account the effects resulting from the higher value of the assets acquired (€ 381,000) and the related tax effect (€ 106,000), as well as the reduction in goodwill (€ 207,000).
This entry resulted in a reduction in 2016 consolidated net income and consolidated shareholders' equity of € 21,000, of which € 15,000 owned by the Group.
| ORIGINAL VALUES ACQUIRED ASSETS/LIABILITIES |
MEASUREMENT AT FAIR VALUE |
FAIR VALUE ACQUIRED ASSETS/LIABILITIES |
|
|---|---|---|---|
| NON-CURRENT ASSETS | |||
| Property, plant and equipment and intangible assets | 303 | 410 | 713 |
| Financial fixed assets | 107 | 107 | |
| Non-current receivables and deferred tax assets | 145 | 145 | |
| CURRENT ASSETS | |||
| Inventories | 891 | 891 | |
| Trade receivables | 1,525 | 1,525 | |
| Other receivables | 234 | 234 | |
| Cash and cash equivalents | 2,186 | 2,186 | |
| TOTAL ASSETS | 5,391 | 410 | 5,801 |
| NON-CURRENT LIABILITIES Post-employment benefit reserve Deferred tax liabilities reserve |
(238) - |
(114) | (238) (114) |
| CURRENT LIABILITIES | |||
| Trade payables | (813) | (813) | |
| Sundry payables | (308) | (308) | |
| TOTAL LIABILITIES | (1,359) | (114) | (1,473) |
| FAIR VALUE OF NET ASSETS ACQUIRED | 4,032 | 296 | 4,328 |
| - % pertaining to Sabaf (70%) (a) | 2,823 | 207 | 3,030 |
| Total cost of acquisition (b) | 4,800 | 4,800 | |
| Goodwill deriving from acquisition (b-a) (Note 3) | 1,977 | (207) | 1,770 |
| Acquired cash and cash equivalents (c) | 2,186 | 2,186 | |
| Total cash outlay (b-c) | 2,614 | 2,614 |
Separate financial statements of each company belonging to the Group are prepared in the currency of the country in which that company operates (functional currency). For the purposes of the consolidated financial statements, the financial statements of each foreign entity are expressed in euro, which is the Group's functional currency and the reporting currency for the consolidated financial statements.
Balance sheet items in accounts expressed in currencies other than euro are converted by applying current end-of-year exchange rates. Income statement items are converted at average exchange rates for the year.
Foreign exchange differences arising from the comparison between opening shareholders' equity converted at current exchange rates and at historical exchange rates, together with the difference between the net result expressed at average and current exchange rates, are allocated to "Other Reserves" in shareholders' equity. The exchange rates used for conversion into euro of the financial statements of the foreign subsidiaries, prepared in local currency, are shown in the following table:
| DESCRIPTION OF CURRENCY |
EXCHANGE RATE IN EFFECT AT 31.12.17 |
AVERAGE EXCHANGE RATE 2017 |
EXCHANGE RATE IN EFFECT AT 31.12.16 |
AVERAGE EXCHANGE RATE 2016 |
|---|---|---|---|---|
| Brazilian real | 3.9729 | 3.6048 | 3.4305 | 3.8576 |
| Turkish lira | 4.5464 | 4.1207 | 3.7072 | 3.3435 |
| Chinese renminbi | 7.8044 | 7.6289 | 7.3202 | 7.3512 |
| 31.12.2017 | 31.12.2016 * | |||
|---|---|---|---|---|
| DESCRIPTION | Profit for the year | Shareholders' equity |
Profit for the year | Shareholders' equity |
| Profit and shareholders' equity of parent company Sabaf S.p.A. |
8,001 | 92,087 | 2,460 | 91,524 |
| Equity and consolidated company results | 7,971 | 67,929 | 6,175 | 66,276 |
| Elimination of consolidated equity investments' carrying value | 682 | (48,596) | 521 | (49,900) |
| Goodwill | 0 | 6,215 | 0 | 6,215 |
| Put option on A.R.C. minorities | (241) | (1,763) | 0 | (1,522) |
| IFRS 3 effect on A.R.C. acquisition | 0 | 0 | (21) | 275 |
| Intercompany eliminations | (1,497) | (817) | (60) | (491) |
| Minority interests | (81) | (1,460) | (81) | (1,379) |
| PROFIT AND SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE GROUP |
14,835 | 113,595 | 8,994 | 110,998 |
The Group's Operating segments in accordance with IFRS 8 - Operating Segment are identified in the business segments that generate revenue and costs, whose results are periodically reassessed by top management in order to assess performance and decisions regarding resource allocation. The Group operating segments are the following: • gas parts (household and professional)
• hinges.
The accounting standards and policies applied for the preparation of the consolidated financial statements at 31 December 2017, unchanged versus the previous year, are shown below:
These are recorded at purchase or manufacturing cost. The cost includes directly chargeable ancillary costs. These costs also include revaluations undertaken in the past based on monetary revaluation rules or pursuant to company mergers. Depreciation is calculated according to rates deemed appropriate to spread the carrying value of tangible assets over their useful working life. Estimated useful working life, in years, is as follows:
| Buildings | 33 |
|---|---|
| Light constructions | 10 |
| General plant | 10 |
| Specific plant and machinery | 6 – 10 |
| Equipment | 4 – 10 |
| Furniture | 8 |
| Electronic equipment | 5 |
| Vehicles and other transport means | 4 – 5 |
Ordinary maintenance costs are expensed in the year in which they are incurred; costs that increase the asset value or useful working life are capitalised and depreciated according to the residual possibility of utilisation of the assets to which they refer. Land is not depreciated.
Assets acquired via finance lease contracts are accounted for using the financial method and are reported with assets at their purchase value, less depreciation. Depreciation of such assets is reflected in the consolidated annual financial statements applying the same policy followed for Company-owned property, plant and equipment. Set against recognition of such assets, the amounts payable to the financial lessor are posted among short- and medium-/long-term payables. In addition, financial charges pertaining to the period are charged to the income statement.
Goodwill is the difference between the purchase price and fair value of investee companies' identifiable assets and liabilities on the date of acquisition.
As regards acquisitions completed prior to the date of IFRS adoption, the Sabaf Group has used the option provided by IFRS 1 to refrain from applying IFRS 3 – concerning business combinations – to acquisitions that took place prior to the transition date. Consequently, goodwill arising in relation to past acquisitions has not been recalculated and has been posted in accordance with Italian GAAPs, net of amortisation reported up to 31 December 2003 and any losses caused by a permanent value impairment.
After the transition date, goodwill – as an intangible asset with an indefinite useful life – is not amortised but subjected annually to impairment testing to check for value loss, or more frequently if there are signs that the asset may have suffered impairment (impairment test).
As established by IAS 38, other intangible assets acquired or internally produced are recognised as assets when it is probable that use of the asset will generate future economic benefits and when asset cost can be measured reliably. If it is considered that these future economic benefits will not be generated, the development costs are written down in the year in which this is ascertained.
Such assets are measured at purchase or production cost and - if the assets concerned have a finite useful life - are amortised on a straight-line basis over their estimated useful life.
The useful life of projects for which development costs are capitalised is estimated to be 10 years.
The SAP management system is amortised over five years.
At each end of reporting period, the Group reviews the carrying value of its tangible and intangible assets to determine whether there are signs of impairment of the value of these assets. If there is any such indication, the recoverable amount of said assets is estimated so as to determine the total of the write-down. If it is not possible to estimate recoverable value individually, the Group estimates the recoverable value of the cash generating unit (CGU) to which the asset belongs.
In particular, the recoverable value of the cash generating units (which generally coincide with the legal entity to which the capitalised assets refer) is verified by determining the value of use. The recoverable amount is the higher of the net selling price and value of use. In measuring the value of use, future cash flows net of taxes, estimated based on past experience, are discounted to their present value using a pre-tax rate that reflects fair market valuations of the present cost of money and specific asset risk. The main assumptions used for calculating the value of use concern the discount rate, growth rate, expected changes in selling prices and cost trends during the period used for the calculation. The growth rates adopted are based on future market expectations in the relevant sector. Changes in the sales prices are based on past experience and on the expected future changes in the market. The Group prepares operating cash flow forecasts based on the most recent budgets approved by the Board of Directors of the consolidated companies, draws up the forecasts for the coming years and determines the terminal value (current value of perpetual income), which expresses the medium and long term operating flows in the specific sector.
If the recoverable amount of an asset (or CGU) is estimated to be lower than its carrying value, the asset's carrying value is reduced to the lower recoverable amount, recognising impairment of value in the income statement.
When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or of the cash-generating unit) - with the exception of goodwill - is increased to the new value resulting from the estimate of its recoverable value, but not beyond the net carrying value that the asset would have had if it had not been written down for impairment of value. Reversal of impairment loss is recognised in the income statement.
As allowed by IAS 40, non-operating buildings and constructions are assessed at cost net of depreciation and losses due to cumulative impairment of value. The depreciation criterion applied is the asset's estimated useful life, which is considered to be 33 years.
If the recoverable amount of the investment property – determined based on the market value of the properties – is estimated to be lower than its carrying value, the asset's carrying value is reduced to the lower recoverable amount, recognising impairment of value in the income statement.
When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or CGU) is increased to the new value stemming from the estimate of its recoverable amount – but not beyond the net carrying value that the asset would have had if it had not been written down for impairment of value. Reversal of impairment loss is recognised in the income statement.
Equity investments not classified as held for sale are stated in the accounts at cost, reduced for impairment. The original value is written back in subsequent years if the reasons for write-down cease to exist.
Non-current receivables are stated at their presumed realisable value.
Inventories are measured at the lower of purchase or production cost – determined using the weighted average cost method – and the corresponding fair value represented by the replacement cost for purchased materials and by the presumed realisable value for finished and semi-processed products – calculated taking into account any manufacturing costs and direct selling costs yet to be incurred. Inventory cost includes accessory costs and the portion of direct and indirect manufacturing costs that can reasonably be assigned to inventory items. Inventories subject to obsolescence and low turnover are written down in relation to their possibility of use or realisation. Inventory write-downs are eliminated in subsequent years if the reasons for such write-downs cease to exist.
Receivables are recognised at their presumed realisable value. Their face value is adjusted to a lower realisable value via specific provisioning directly reducing the item based on in-depth analysis of individual positions. Trade receivables assigned without recourse, despite being transferred legally, continue to be stated with "Trade receivables" until they are collected, which is never prior to the due date. Trade receivables past due and non-recoverable assigned without recourse are recorded under "Other current receivables".
Financial assets held for trading are measured at fair value, allocating profit and loss effects to finance income or expense.
Provisions for risks and charges are provisioned to cover losses and debts, the existence of which is certain or probable, but whose amount or date of occurrence cannot be determined at the end of the year. Provisions are stated in the statement of financial position only when a legal or implicit obligation exists that determines the use of resources with an impact on profit and loss to meet that obligation and the amount can be reliably estimated. If the effect is significant, the provisions are calculated by updating future financial flows estimated at a rate including taxes such as to reflect current market valuations of the current value of the cash and specific risks associated with the liability.
The post-employment benefit reserve (TFR) is provisioned to cover the entire liability accruing vis-à-vis employees in compliance with current legislation and with national and supplementary company collective labour contracts. This liability is subject to revaluation via application of indices fixed by current regulations. Up to 31 December 2006, post-employment benefits were considered defined-benefit plans and accounted for in compliance with IAS 19, using the projected unit-credit method. The regulations of this fund were amended by Italian Law no. 296 of 27 December 2006 and subsequent Decrees and Regulations issued during the first months of 2007 In the light of these changes, and, in particular, for companies with at least 50 employees, post-employment benefits must now be considered a defined-benefit plan only for the portions accruing before 1 January 2007 (and not yet paid as at the end of the reporting period). Conversely, portions accruing after that date are treated as defined-contribution plans. Actuarial gains or losses are recorded immediately under "Other total profits/(losses)".
Payables are recognised at face value; the portion of interest included in their face value and not yet payable at period-end is deferred to future periods.
Loans are initially recognised at cost, net of related costs of acquisition. This value is subsequently adjusted to allow for any difference between initial cost and repayment value over the loan's duration using the effective interest rate method. Loans are classified among current liabilities unless the Group has the unconditional right to defer discharge of a liability by at least 12 months after the reference date.
Receivables and payables originally expressed in foreign currencies are converted into euro at the exchange rates in force on the date of the transactions originating them. Forex differences realised upon collection of receivables and payment of payables in foreign currency are posted in the income statement. Income and costs relating to foreign-currency transactions are converted at the rate in force on the transaction date.
At year-end, assets and liabilities expressed in foreign currencies, with the exception of non-current items, are posted at the spot exchange rate in force at the end of the reporting period and related foreign exchange gains and losses are posted in the income statement. If conversion generates a net gain, this value constitutes a nondistributable reserve until it is effectively realised.
The Group's business is exposed to financial risks relating to changes in exchange rates, commodity prices and interest rates. The company uses derivative instruments (mainly forward contracts on currencies and commodity options) to hedge risks stemming from changes in foreign currencies relating to irrevocable commitments or to planned future transactions. Derivatives are initially recognised at cost and are then adjusted to fair value on subsequent closing dates.
Changes in the fair value of derivatives designated and recognised as effective for hedging future cash flows relating to the Group's contractual commitments and planned transactions are recognised directly in shareholders' equity, while the ineffective portion is immediately posted in the income statement. If the contractual commitments or planned transactions materialise in the recognition of assets or liabilities, when such assets or liabilities are recognised, the gains or losses on the derivative that were directly recognised in equity are factored back into the initial valuation of the cost of acquisition or carrying value of the asset or liability. For cash flow hedges that do not lead to recognition of assets or liabilities, the amounts that were directly recognised in equity are included in the income statement in the same period when the contractual commitment or planned transaction hedged impacts profit and loss – for example, when a planned sale actually takes place.
For effective hedges of exposure to changes in fair value, the item hedged is adjusted for the changes in fair value attributable to the risk hedged and recognised in the income statement. Gains and losses stemming from the derivative's valuation are also posted in the income statement.
Changes in the fair value of derivatives not designated as hedging instruments are recognised in the income statement in the period when they occur.
Hedge accounting is discontinued when the hedging instrument expires, is sold or is exercised, or when it no longer qualifies as a hedge. At this time, the cumulative gains or losses of the hedging instrument recognised in equity are kept in the latter until the planned transaction actually takes place. If the transaction hedged is not expected to take place, cumulative gains or losses recognised directly in equity are transferred to the year's income statement.
Embedded derivatives included in other financial instruments or contracts are treated as separate derivatives when their risks and characteristics are not strictly related to those of their host contracts and the latter are not measured at fair value with posting of related gains and losses in the income statement.
Revenue is reported net of return sales, discounts, allowances and bonuses, as well as of the taxes directly associated with sale of goods and rendering of services.
Sales revenue is reported when the company has transferred the significant risks and benefits associated with ownership of the goods and the amount of revenue can be reliably measured.
Revenues of a financial nature are recorded on an accrual basis.
Finance income includes interest receivable on funds invested and income from financial instruments, when not offset as part of hedging transactions. Interest income is recorded in the income statement at the time of vesting, taking effective output into consideration.
Financial expenses include interest payable on financial debt calculated using the effective interest method and bank expenses.
Income taxes include all taxes calculated on the Group's taxable income. Income taxes are directly recognised in the income statement, with the exception of those concerning items directly debited or credited to shareholders' equity, in which case the tax effect is recognised directly in shareholders' equity. Other taxes not relating to income, such as property taxes, are included among operating expenses. Deferred taxes are provisioned in accordance with the global liability provisioning method. They are calculated on all temporary differences emerging between the taxable base of an asset and liability and its book value in the consolidated financial statements, with the exception of goodwill that is not tax-deductible and of differences stemming from investments in subsidiaries for which cancellation is not envisaged in the foreseeable future. Deferred tax assets on unused tax losses and tax credits carried forward are recognised to the extent that it is probable that future taxable income will be available against which they can be recovered. Current and deferred tax assets and liabilities are offset when income taxes are levied by the same tax authority and when there is a legal right to settle on a net basis. Deferred tax assets and liabilities are measured using the tax rates that are expected to be applicable, according to the respective regulations of the countries where the Group operates, in the years when temporary differences will be realised or settled.
Dividends are posted on an accrual basis when the right to receive them materialises, i.e. when shareholders approve dividend distribution.
Treasury shares are booked as a reduction of shareholders' equity. The carrying value of treasury shares and revenues from any subsequent sales are recognised in the form of changes in shareholders' equity.
Basic EPS is calculated by dividing the profit or loss attributable to the direct parent company's shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by dividing the profit or loss attributable to the direct parent company's shareholders by the weighted average number of shares outstanding, adjusted to take into account the effects of all potential ordinary shares with a dilutive effect.
Preparation of the financial statements and notes in accordance with IFRS requires management to make estimates and assumptions that affect the carrying values of assets and liabilities and the disclosures on contingent assets and liabilities as of the end of the reporting period. Actual results might differ from these estimates. Estimates are used to measure tangible and intangible assets subject to impairment testing, as described earlier, as well as to measure provisions for bad debts, for inventory obsolescence, depreciation and amortisation, asset write-downs, employee benefits, taxes, and other provisions. Specifically:
The procedure for determining impairment of value of tangible and intangible assets described in "Impairment of value" implies – in estimating the value of use – the use of the Business Plans of investees, which are based on a series of assumptions relating to future events and actions of the investees' management bodies, which may not necessarily come about. In estimating market value, however, assumptions are made on the expected trend in trading between third parties based on historical trends, which may not actually be repeated.
Receivables are adjusted by the related bad debt provision to take into account their recoverable value. To determine the size of the write-downs, management must make subjective assessments based on the documentation and information available regarding, among other things, the customer's solvency, as well as experience and historical payment trends.
Warehouse inventories subject to obsolescence and slow turnover are systematically valued, and written down if their recoverable value is less than their carrying value. Write-downs are calculated based on management assumptions and estimates, resulting from experience and historical results.
The current value of liabilities for employee benefits depends on a series of factors determined using actuarial techniques based on certain assumptions. Assumptions concern the discount rate, estimates of future salary increases, and mortality and resignation rates. Any change in the above-mentioned assumptions might have significant effects on liabilities for pension benefits.
The Group is subject to different bodies of tax legislation on income. Determining liabilities for Group taxes requires the use of management valuations in relation to transactions whose tax implications are not certain at the end of the reporting period. Furthermore, the valuation of deferred taxes is based on income expectations for future years; the valuation of expected income depends on factors that might change over time and have a significant effect on the valuation of deferred tax assets.
When estimating the risk of potential liabilities from disputes, the Directors rely on communications regarding the status of recovery procedures and disputes from the lawyers who represent the Group in litigation. These estimates are determined taking into account the gradual development of the disputes, considering existing exemptions.
Estimates and assumptions are regularly reviewed and the effects of each change immediately reflected in the income statement.
the occurrence of certain circumstances and on the estimate of taxable income for future years.
The application of these amendments did not have any effect on the Group's consolidated financial statements.
The principle applies from 1 January 2018. The amendments to IFRS 15, Clarifications to IFRS 15 - Revenue from Contracts with Customers, were approved by the European Union on 6 November 2017. On the basis of the analyses carried out, the directors expect that the application of IFRS 15 will have a minor impact on the amounts recorded as revenues and on the related disclosures in the Group's consolidated financial statements.
The new standard must be applied by financial statements from 1 January 2018 onwards.
On the basis of the analyses carried out, the directors expect that the application of IFRS 9 will have a minor impact on the amounts and on the related disclosures in the Group's consolidated financial statements.
• Standard IFRS 16 – Leases (published on 13 January 2016), which will replace standard IAS 17 – Leases, as well as interpretations 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. The new standard provides a new definition of lease and introduces a criterion based on the control (right of use) of an asset in order to distinguish the leasing contracts from the service contracts, identifying the discriminatory ones: the identification of the asset, the right of replacement of the same, the right to obtain substantially all of the economic benefits deriving from the use of the asset and the right to direct the use of the asset underlying the contract. The standard establishes a single model of recognition and measurement of the lease agreements for the lessee which requires the recognition of the asset to be leased (operating lease or otherwise) in assets offset by a financial debt, while also providing the opportunity not to recognise as leases the agreements whose subject matter are "low-value assets" and leases with a contract duration equal to or less than 12 months. By contrast, the Standard does not include significant changes for the lessors. The standard applies beginning on 1 January 2019 but early application is permitted, only for Companies that already applied IFRS 15 - Revenue from Contracts with Customers.
The directors not expect that the application of IFRS 16 can have a significant impact on the amounts and on the relevant disclosures in the Group's consolidated financial statements. However, it is not possible to provide a reasonable estimate of the effects until the Group has completed a detailed analysis of the related contracts.
On the reference date of these consolidated financial statements, the competent bodies of the European Union have not yet concluded the approval process necessary for the adoption of the amendments and principles described below.
the intended use of the property. This change must refer to a specific event that happened and must not be limited to a change of intention by the Management of an entity. These amendments are applicable from 1 January 2018. The directors do not expect a significant effect on the Group's consolidated financial statements through the adoption of these changes.
Amendment to IFRS 9 "Prepayment Features with Negative Compensation (published on 12 October 2017). This document specifies the instruments that envisage early repayment that could comply with the "SPPI" test even if the "reasonable additional compensation" to be paid in the event of early repayment is a "negative compensation" for the lender. The amendment applies from 1 January 2019, but early application is permitted. The directors do not expect a significant effect on the Group's consolidated financial statements through the adoption of these changes.
Amendment to IAS 28 "Long-term Interests in Associates and Joint Ventures" (published on 12 October 2017)". This document clarifies the need to apply IFRS 9, including the requirements of impairment, to other long-term interests in associate companies and joint ventures that are not accounted for under the equity method. The amendment applies from 1 January 2019, but early application is permitted. The directors do not expect a significant effect on the Group's consolidated financial statements through the adoption of these changes.
| PROPERTY | PLANT AND EQUIPMENT |
OTHER ASSETS | ASSETS UNDER CONSTRUCTION |
TOTAL | |
|---|---|---|---|---|---|
| COST | |||||
| AT 31 DECEMBER 2015 | 51,225 | 176,529 | 37,149 | 2,059 | 266,962 |
| Increases | 95 | 8,417 | 2,275 | 1,101 | 11,888 |
| Disposals | (1) | (3,075) | (312) | - | (3,388) |
| Change in the scope of consolidation | - | 1,745 | 584 | - | 2,329 |
| Reclassifications | 1 | 875 | 177 | (1,476) | (423) |
| Forex differences | (52) | 657 | 430 | 86 | 1,121 |
| AT 31 DECEMBER 2016 | 51,268 | 185,148 | 40,303 | 1,770 | 278,489 |
| Increases | 1,589 | 7,050 | 2,487 | 2,782 | 13,908 |
| Disposals | - | (1,002) | (538) | - | (1,540) |
| Reclassifications | 118 | 587 | 192 | (1,201) | (304) |
| Forex differences | (914) | (1,900) | (626) | (29) | (3,469) |
| AT 31 DECEMBER 2017 | 52,061 | 189,883 | 41,818 | 3,322 | 287,084 |
| ACCUMULATED DEPRECIATIONS | |||||
| AT 31 DECEMBER 2015 | 15,470 | 146,059 | 32,396 | - | 193,925 |
| Depreciations for the year | 1,442 | 7,961 | 2,328 | - | 11,731 |
| Eliminations for disposals | - | (3,066) | (231) | - | (3,297) |
| Change in scope of consolidation | - | 1,174 | 492 | - | 1,666 |
| Reclassifications | 5 | 40 | 21 | - | 66 |
| Forex differences | 59 | 588 | 306 | - | 953 |
| AT 31 DECEMBER 2016 | 16,976 | 152,756 | 35,312 | - | 205,044 |
| Depreciations for the year | 1,459 | 8,047 | 2,260 | - | 11,766 |
| Eliminations for disposals | - | (800) | (479) | - | (1,279) |
| Reclassifications | 5 | 41 | 30 | - | 76 |
| Forex differences | (156) | (1,002) | (434) | - | (1,592) |
| AT 31 DECEMBER 2017 | 18,284 | 159,042 | 36,689 | - | 214,015 |
| NET CARRYING VALUE | |||||
| AT 31 DECEMBER 2017 | 33,777 | 30,841 | 5,129 | 3,322 | 73,069 |
| AT 31 DECEMBER 2016 | 34,292 | 32,392 | 4,991 | 1,770 | 73,445 |
The breakdown of the net carrying value of Property was as follows:
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Land | 6,877 | 6,688 | 189 |
| Industrial buildings | 26,900 | 27,604 | (704) |
| TOTAL | 33,777 | 34,292 | (515) |
The net carrying value of industrial property includes an amount of € 2,125,000 (€ 2,211,000 at 31 December 2016) relating to industrial buildings held under finance leases.
The main investments in the financial year were aimed at automation of the assembly lines for light alloy valves and at the interconnection of production plants with management systems (Industry 4.0). The building in Campodarsego (PD) was acquired, where A.R.C., formerly rented, operates. In Brazil, the factory was expanded, against increased production volumes; while in Turkey all the die-casting machines were robotised. Other investments were made in the production of presses for new burners. Investments in maintenance and replacement, so that production equipment is kept constantly up to date and efficient, are systematic.
Decreases mainly relate to the disposal of machinery no longer in use. Assets under construction include machinery under construction and advance payments to suppliers of capital equipment.
At 31 December 2017, the Group found no endogenous or exogenous indicators of impairment of its property, plant and equipment. As a result, the value of property, plant and equipment was not submitted to impairment testing.
| COST | |
|---|---|
| AT 31 DECEMBER 2015 | 13,136 |
| Increases | - |
| Disposals | - |
| AT 31 DECEMBER 2016 | 13,136 |
| Increases | - |
| Disposals | (199) |
| AT 31 DECEMBER 2017 | 12,937 |
| ACCUMULATED DEPRECIATIONS | |
| AT 31 DECEMBER 2015 | 6,424 |
| Depreciations for the year | 442 |
| Eliminations for disposals | - |
| AT 31 DECEMBER 2016 | 6,866 |
| Depreciations for the year | 436 |
| Eliminations for disposals | (62) |
| AT 31 DECEMBER 2017 | 7,240 |
| NET CARRYING VALUE | |
| AT 31 DECEMBER 2017 | 5,697 |
| AT 31 DECEMBER 2016 | 6,270 |
This item includes non-operating buildings owned by the Group: these are mainly properties for residential use, held for rental or sale.
At 31 December 2017, the Group found no endogenous or exogenous indicators of impairment of its investment property. As a result, the value of investment property was not submitted to impairment testing.
| GOODWILL | PATENTS, SOFTWARE AND KNOW-HOW |
DEVELOPMENT COSTS |
OTHER INTANGIBLE ASSETS |
TOTAL | |
|---|---|---|---|---|---|
| COST | |||||
| AT 31 DECEMBER 2015 | 9,008 | 6,231 | 4,685 | 799 | 20,723 |
| Increases | - | 155 | 314 | 18 | 487 |
| Change in the scope of consolidation | 1,770 | 13 | - | 19 | 1,802 |
| Reclassifications | - | 62 | (44) | (30) | (12) |
| Decreases | - | - | - | (15) | (15) |
| Forex differences | - | 6 | - | - | 6 |
| AT 31 DECEMBER 2016 | 10,778 | 6,467 | 4,955 | 791 | 22,991 |
| Increases | - | 420 | 496 | 23 | 939 |
| Reclassifications | - | - | (79) | - | (79) |
| Decreases | - | (14) | - | (13) | (27) |
| Forex differences | - | (14) | - | (8) | (22) |
| AT 31 DECEMBER 2017 | 10,778 | 6,859 | 5,372 | 793 | 23,802 |
| AMORTISATION/WRITE-DOWNS | |||||||
|---|---|---|---|---|---|---|---|
| AT 31 DECEMBER 2015 | 4,563 | 5,732 | 2,347 | 556 | 13,198 | ||
| Amortisation for the year | - | 266 | 352 | 98 | 716 | ||
| Change in the scope of consolidation | - | 3 | - | 8 | 11 | ||
| Decreases | - | - | - | (15) | (15) | ||
| Forex differences | - | 4 | - | - | 4 | ||
| AT 31 DECEMBER 2016 | 4,563 | 6,005 | 2,699 | 647 | 13,914 | ||
| Amortisation for the year | - | 272 | 342 | 22 | 636 | ||
| Decreases | - | (14) | - | - | (14) | ||
| Forex differences | - | (9) | - | (8) | (17) | ||
| AT 31 DECEMBER 2017 | 4,563 | 6,254 | 3,041 | 661 | 14,519 |
| AT 31 DECEMBER 2017 | 6,215 | 605 | 2,331 | 132 | 9,283 |
|---|---|---|---|---|---|
| AT 31 DECEMBER 2016 | 6,215 | 462 | 2,256 | 144 | 9,077 |
Goodwill recognised at 31 December 2017 is allocated:
In 2017, the Hinges CGU achieved very positive and better results, in terms of sales and profitability, both compared to the previous year and compared to the budget. The 2018-2022 forward plan, drafted at the beginning of 2018, envisages a further increase in sales. Profitability is expected to decline in 2018, following the devaluation of the dollar (the currency in which more than 40% of sales are denominated) and the increase in the price of steel, before gradually recovering in subsequent years. At 31 December 2017, the Group tested the carrying value of its CGU Hinges for impairment, determining its recoverable value, considered to be equivalent to its usable value, by discounting expected future cash flow in the forward plan drafted by the management. Cash flows for the period from 2018 to 2022 were augmented by the so-called terminal value, which expresses the operating flows that the CGU is expected to generate from the sixth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 9.18% (7.76% in the impairment test conducted while preparing the consolidated financial statements at 31 December 2016) and a growth rate (g) of 1.50%, which is in line with historical data.
The recoverable value calculated on the basis of the above-mentioned assumptions and valuation techniques is € 12.680 million, compared with a carrying value of the assets allocated to the Hinges unit of € 7.427 million; consequently, the value recorded for goodwill at 31 December 2017 was deemed recoverable.
At 31 December 2017, the Group tested the carrying value of its Professional burners CGU for impairment, determining its recoverable value, considered to be equivalent to its usable value, by discounting expected future cash flow in the forward plan drafted at the beginning of 2018. Cash flows for the 2018-2022 period were augmented by the so-called terminal value, which expresses the operating flows that the CGU is expected to generate from the fourth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 6.90% (5.79% in the impairment test conducted while preparing the consolidated financial statements at 31 December 2016) and a growth rate (g) of 1.50%.
The recoverable value calculated on the basis of the above-mentioned assumptions and valuation techniques is € 11.345 million, compared with a carrying value of the assets allocated to the Professional burners unit of € 4.409 million (including minority interests); consequently, the value recorded for goodwill at 31 December 2017 was deemed recoverable.
Software investments include the implementation of a production scheduler and the application development of the Group management system (SAP).
if there are indications of value impairment. Recoverable value is determined through value of use, by discounting expected cash flows.
The Group verifies the ability to recover goodwill at least once a year or more frequently
The table below shows the changes in recoverable value depending on changes in the WACC discount rate and growth factor g:
| (€/000) | GROWTH RATE | ||||
|---|---|---|---|---|---|
| DISCOUNT RATE |
1.00% | 1.25% | 1.50% | 1.75% | 2.00% |
| 8.18% | 13,890 | 14,312 | 14,765 | 15,254 | 15,782 |
| 8.68% | 12,902 | 13,263 | 13,649 | 14,063 | 14,508 |
| 9.18% | 12,036 | 12,348 | 12,680 | 13,035 | 13,414 |
| 9.68% | 11,272 | 11,543 | 11,831 | 12,138 | 12,464 |
| 10.18% | 10,592 | 10,830 | 11,081 | 11,348 | 11,631 |
The table below shows the changes in recoverable value depending on changes in the WACC discount rate and growth factor g:
| (€/000) | GROWTH RATE | ||||
|---|---|---|---|---|---|
| DISCOUNT RATE |
1.00% | 1.25% | 1.50% | 1.75% | 2.00% |
| 5.90% | 12,794 | 13,396 | 14,066 | 14,816 | 15,663 |
| 6.40% | 11,549 | 12,033 | 12,566 | 13,156 | 13,814 |
| 6.90% | 10,516 | 10,917 | 11,345 | 11,820 | 12,343 |
| 7.40% | 9,646 | 9,975 | 10,333 | 10,721 | 11,146 |
| 7.90% | 8,903 | 9,180 | 9,479 | 9,802 | 10,153 |
The main investments in the year relate to the development of new products, including special burners and personalised burners for some customers (research and development activities carried out during the year are set out in the Report on Operations).
2 Figure recalculated pursuant to IFRS 3, in order to retrospectively take into account the effects resulting from the fair value measurement of A.R.C's assets and liabilities, at the acquisition date previously considered provisional.
| 31.12.2016 | DISPOSALS | 31.12.2017 | |
|---|---|---|---|
| Sabaf US | 139 | - | 139 |
| ARC Handan Burners Co. | 101 | - | 101 |
| Other equity investments | 66 | (25) | 40 |
| TOTAL | 306 | (25) | 281 |
The subsidiary Sabaf U.S. operates as a commercial base for North America. The carrying value of the investment is deemed recoverable taking into consideration expected developments on the North American market.
Handan ARC Burners Co. is a Chinese joint venture built at the end of 2015, in which A.R.C. s.r.l. holds 50% (therefore, the Group's share is 35%). The aim of Handan ARC Burners is to produce and market in China burners for professional cooking; production of the first pre-series began in 2017.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Tax receivables | 153 | 225 | (72) |
| Guarantee deposits | 43 | 37 | 6 |
| TOTAL | 196 | 262 | (66) |
Tax receivables relate to indirect taxes expected to be recovered after 31 December 2018.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Commodities | 11,459 | 9,740 | 1,719 |
| Semi-processed goods | 11,180 | 10,893 | 287 |
| Finished products | 13,448 | 13,308 | 140 |
| Obsoloscence provision | (3,158) | (2,457) | (701) |
| TOTAL | 32,929 | 31,484 | 1,445 |
The value of final inventories at 31 December 2017 increased compared to the end of the previous year to meet the higher volumes of activity. The obsolescence provision is mainly allocated for hedging the obsolescence risk, quantified on the basis of specific analyses carried out at the end of the year on slow-moving and non-moving products.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Total trade receivables | 43,002 | 37,576 | 5,426 |
| Bad debt provision | (739) | (734) | (5) |
| NET TOTAL | 42,263 | 36,842 | 5,421 |
Trade receivables at 31 December 2017 were higher than at the end of 2016 subsequent to higher sales. There were no significant changes in payment terms agreed with customers.
booked at the EUR/USD exchange rate in effect on 31 December 2017, i.e. 1.1993. The amount of trade receivables recognised in the financial statements includes approximately € 28.2 million of insured receivables (€ 22.4 million at 31 December 2016). The bad debt provision was adjusted to the better estimate of the credit risk at the end of the reporting period.
At 31 December 2017, trade receivables included balances totalling USD 6,826,000,
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Current receivables (not past due) | 38,282 | 32,616 | 5,666 |
| Outstanding up to 30 days | 2,802 | 3,296 | (494) |
| Outstanding from 30 to 60 days | 868 | 218 | 650 |
| Outstanding from 60 to 90 days | 594 | 136 | 458 |
| Outstanding for more than 90 days | 456 | 1,310 | (854) |
| TOTAL | 43,002 | 37,576 | 5,426 |
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| For income tax | 1,998 | 2,186 | (188) |
| For VAT and other sales taxes | 682 | 533 | 149 |
| Other tax credits | 385 | 444 | (59) |
| TOTAL | 3,065 | 3,163 | (98) |
The income tax receivables derives for € 1,153,000 from the full deductibility of IRAP from IRES relating to the expenses incurred for employees for the 2006-2011 period (Italian Legislative Decree 201/2011), for which an application for a refund was presented and, for the residual part, to the payments on account on 2017 income, for the part exceeding the tax to be paid.
Other tax receivables mainly refer to receivables in respect of indirect Brazilian and Turkish taxes.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Credits to be received from suppliers |
360 | 706 | (346) |
| Advances to suppliers |
155 | 168 | (13) |
| Other | 542 | 545 | (3) |
| TOTAL | 1,057 | 1,419 | (362) |
At 31 December 2017, credits to be received from suppliers included € 248,000 related to the relief due to the parent company as an energy-intensive business (socalled "energy-intensive bonuses") for the years 2016 and 2017. "Energy-intensive bonuses" due for the years 2014 and 2015 were regularly collected during 2017.
| 31.12.2017 | 31.12.2016 | |||
|---|---|---|---|---|
| current | non current | current | non current | |
| Escrow bank accounts |
60 | 180 | - | - |
| Derivative instruments on interest rates |
7 | - | - | - |
| TOTAL | 67 | 180 | 0 | 0 |
The item Derivative instruments on interest rates refers to the positive fair value of an IRS hedging rate risks of an unsecured loan pending, for a notional amount of approximately € 4 million and expiry until 31 December 2021. Financial income was recognised in the income statement with a balancing entry.
Cash and cash equivalents, which amounted to € 11,533,000 at 31 December 2017 (€ 12,143,000 at 31 December 2016) consisted of bank current account balances of approximately € 11 million and sight deposits of approximately € 0.5 million.
The parent company's share capital consists of 11,533,450 shares with a par value of € 1.00 each. The share capital paid in and subscribed did not change during the year.
During the financial year Sabaf S.p.A. acquired 148,630 treasury shares at an average unit price of € 14.20; there have been no sales.
At 31 December 2017, the parent company Sabaf S.p.A. held 381,769 treasury shares, equal to 3.31% of share capital (233,139 treasury shares at 31 December 2016), reported in the financial statements as an adjustment to shareholders' equity at a unit value of € 11.81 (the market value at year-end was € 19.91).
There were 11,151,681 outstanding shares at 31 December 2017 (11,300,311 at 31 December 2016).
| 31.12.2017 | 31.12.2016 | |||
|---|---|---|---|---|
| current | non current | current | non current | |
| Property leasing | 149 | 1,462 | 145 | 1,611 |
| Unsecured loans | 5,982 | 16,298 | 6,656 | 17,281 |
| Short-term bank loans |
9,477 | - | 7,802 | - |
| Advances on bank receipts or invoices |
1,678 | - | 2 | - |
| Interest payable | 2 | - | 7 | - |
| TOTAL | 17,288 | 17,760 | 14,612 | 18,892 |
To manage interest rate risk, unsecured loans are either fixed-rate or hedged by IRS. Two of the outstanding unsecured loans, amounting to € 9 million at 31 December 2017, have covenants, defined with reference to the consolidated financial statements at the end of the reporting period, as specified below:
All outstanding bank loans are denominated in euro, with the exception of a shortterm loan of USD 2 million and a short-term loan of 1.4 million Turkish lira. Note 35 provides information on financial risks, pursuant to IFRS 7.
| 31.12.2017 | 31.12.2016 | |||
|---|---|---|---|---|
| current | non current | current | non current | |
| Option on minorities |
- | 1,763 | - | 1,522 |
| Payables to A.R.C. shareholders |
60 | 180 | 60 | 240 |
| Currency derivatives |
- | - | 238 | - |
| Derivative instruments on interest rates |
15 | - | 37 | - |
| TOTAL | 75 | 1,943 | 335 | 1,762 |
In June 2016, as part of the acquisition of 70% of A.R.C. S.r.l., Sabaf signed with Loris Gasparini (current minority shareholder by 30% of A.R.C.) an agreement that aimed to regulate Gasparini's right to leave A.R.C. and the interest of Sabaf to acquire 100% of the shares after expiry of the term of five years from the signing of the purchase agreement of 24 June 2016, by signing specific option agreements. Therefore, the agreement envisaged specific option rights to purchase (by Sabaf) and sell (by Gasparini) exercisable as from 24 June 2021, the remaining shares of 30% of A.R.C., with strike prices contractually defined on the basis of final income parameters from A.R.C. at 31 December 2020.
Pursuant to the provisions of IAS 32, the assignment of an option to sell (put option) in the terms described above required the recording of a liability corresponding to the estimated redemption value, expected at the time of any exercise of the option: to this end, a financial liability of € 1.522 million was recognised in the consolidated financial statements at 31 December 2016. At 31 December 2017, the Group revalued the outlay estimate, based on the expected results of A.R.C. at 31 December 2020 in accordance with the business plan of the subsidiary prepared at the beginning of 2018. The recalculation of the fair value, in compliance with IAS 39, led to an increase of € 241,000 in the liability; financial expenses were recognised as a balancing entry (Note 29).
The payable to the A.R.C. shareholders of € 240,000 at 31 December 2017 is related to the part of the price still to be paid to the sellers, which was deposited on an escrow account and will be released in favour of the sellers at constant rates in 4 years, in accordance with contractual agreements and guarantees issued by the sellers.
Other financial liabilities also include the negative fair value of two IRSs hedging rate risks of unsecured loans pending, for residual notional amounts of approximately € 5.4 million and expiry until 31 December 2021. Financial expenses in the same amount were recognised in the income statement.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Post employment benefit reserve |
2,720 | 2,961 | (241) |
| Retirement reserve |
125 | 125 | - |
| TOTAL | 2,845 | 3,086 | (241) |
Following the revision of IAS 19 - Employee benefits, from 1 January 2013 all actuarial gains or losses are recorded immediately in the comprehensive income statement ("Other comprehensive income") under the item "Actuarial income and losses".
Post-employment benefits are calculated as follows:
| FINANCIAL ASSUMPTIONS |
31.12. 2017 | 31.12.2016 |
|---|---|---|
| Discount rate | 1.15% | 1.15% |
| Inflation | 1.80% | 1.75% |
| DEMOGRAPHIC THEORY | 31.12. 2017 | 31.12.2016 |
| Mortality rate | ISTAT 2016 M/F | ISTAT 2010 M/F |
| Disability rate | INPS 1998 M/F | INPS 1998 M/F |
| Staff turnover | 3% - 6% | 3% - 6% |
| Advance payouts | 5% - 7% per year | 5% - 7% per year |
| Retirement age | Pursuant to legislation in force on 31 december 2017 |
Pursuant to legislation in force on 31 december 2016 |
| 31.12.2016 | PROVISIONS | UTILISATION | RELEASE OF EXCESS PORTION |
EXCHANGE RATE DIFFERENCES |
31.12.2017 | |
|---|---|---|---|---|---|---|
| Reserve for agents' indemnities |
231 | 15 | (15) | (21) | - | 210 |
| Product guarantee fund | 60 | 11 | (11) | - | - | 60 |
| Reserve for legal risks | 143 | - | (7) | - | (21) | 115 |
| TOTAL | 434 | 26 | (33) | (21) | (21) | 385 |
The reserve for agents' indemnities covers amounts payable to agents if the Group terminates the agency relationship.
The product guarantee fund covers the risk of returns or charges by customers for products already sold. The fund was adjusted at the end of the year, on the basis of analyses conducted and past experience.
The reserve for legal risks, set aside for moderate disputes, was adjusted to reflect the outstanding disputes.
The provisions booked to the provisions for risks, which represent the estimate of future payments made based on historical experience, have not been discounted because the effect is considered negligible.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| TOTAL | 19,975 | 18,977 | 998 |
Average payment terms did not change versus the previous year. At 31 December 2017, there were no overdue payables of a significant amount and the Group did not receive any injunctions for overdue payables.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| For income tax | 240 | 361 | (121) |
| Withholding taxes | 656 | 788 | (132) |
| Other tax payables | 199 | 41 | 158 |
| TOTAL | 1,095 | 1,190 | (95) |
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| To employees | 4,552 | 3,965 | 587 |
| To social security institutions | 2,304 | 2,139 | 165 |
| To agents | 195 | 268 | (73) |
| Advances from customers | 94 | 181 | (87) |
| Other current payables | 346 | 104 | 242 |
| TOTAL | 7,491 | 6,657 | 834 |
At the beginning of 2018, payables due to employees and social security institutions were paid in accordance with the scheduled expiry dates.
| 31.12.2017 | 31.12.2016 | |
|---|---|---|
| Deferred tax assets | 5,096 | 4,781 |
| Deferred tax liabilities | (804) | (870) |
| NET POSITION | 4,293 | 3,911 |
The table below analyses the nature of the temporary differences that determine the recognition of deferred tax liabilities and assets and their movements during the year and the previous year.
| Depreciation and amortisa tion and leasing |
Provisions and value adjustments |
Fair value of derivative instruments |
Goodwill | Tax incentives |
Actuarial post employment benefit reserve evaluation |
Other temporary differences |
TOTAL | |
|---|---|---|---|---|---|---|---|---|
| AT 31 DECEMBER 2016 |
(83) | 1,062 | 67 | 1,771 | 595 | 210 | 289 | 3,911 |
| To the income statement | (37) | 105 | (64) | - | 159 | (2) | 423 | 584 |
| To shareholders' equity | - | - | - | - | - | (19) | - | (19) |
| Forex differences | - | (17) | - | - | (125) | - | (41) | (183) |
| AT 31 DECEMBER 2017 |
(120) | 1,150 | 3 | 1,771 | 629 | 189 | 671 | 4,293 |
Deferred tax assets relating to goodwill, equal to € 1,771,000, refer to the exemption of the value of the equity investment in Faringosi Hinges s.r.l. made in 2011 pursuant to Italian law Decree 98/2011. The future tax benefit can be made in ten annual portions starting in 2018.
Deferred tax assets relating to tax incentives are commensurate to investments made in Turkey, for which the Group benefited from reduced taxation recognised on income generated in Turkey.
As required by the CONSOB memorandum of 28 July 2006, we disclose that the Company's net financial position is as follows:
| 31.12.2017 | 31.12.2016 | CHANGE | ||
|---|---|---|---|---|
| A. | Cash (Note 11) | 14 | 12 | 2 |
| B. | Positive balances of unrestricted bank accounts (Note 11) |
11,009 | 8,376 | 2,633 |
| C. | Other cash equivalents | 510 | 3,755 | (3,245) |
| D. | LIQUIDITY (A+B+C) | 11,533 | 12,143 | (610) |
| E. | Current bank payables (Note 14) | 11,157 | 7,811 | 3,346 |
| F. | Current portion of non-current debt (Note 14) | 6,131 | 6,801 | (670) |
| G. | Other current financial payables (Note 15) | 75 | 335 | (260) |
| H. | CURRENT FINANCIAL DEBT (E+F+G) | 17,363 | 14,947 | 2,416 |
| I. | NET CURRENT FINANCIAL DEBT (H-D) | 5,830 | 2,804 | 3,026 |
| J. | Non-current bank payables (Note 14) | 16,298 | 17,281 | (983) |
| K. | Other non-current financial payables (Note 14) | 3,405 | 3,373 | 32 |
| L. | NON-CURRENT FINANCIAL DEBT (J+K) | 19,703 | 20,654 | (951) |
| M. | NET FINANCIAL DEBT (I+L) | 25,533 | 23,458 | 2,075 |
The consolidated cash flow statement shows changes in cash and cash equivalents (letter D of this schedule).
In 2017, sales revenues totalled € 150,223,000, up by € 19,245,000 (+14.7%) compared with 2016. Taking into consideration the same scope of consolidation, revenue increased by 12.9%.
| 2017 | % | 2016 | % | % CHANGE | |
|---|---|---|---|---|---|
| Brass valves | 5,991 | 4.0% | 9,007 | 6.9% | -33.5% |
| Light alloy valves | 39,351 | 26.2% | 32,393 | 24.7% | +21.5% |
| Thermostats | 7,376 | 4.9% | 7,699 | 5.9% | -4.2% |
| Standard burners | 41,070 | 27.3% | 37,338 | 28.5% | +10.0% |
| Special burners | 27,184 | 18.1% | 21,215 | 16.2% | +28.1% |
| Accessories | 15,267 | 10.2% | 12,613 | 9.6% | +21.0% |
| Household gas parts | 136,239 | 90.7% | 120,265 | 91.8% | +13.3% |
| Professional gas parts | 5,079 | 3.4% | 2,289 | 1.8% | +121.9% |
| Hinges | 8,905 | 5.9% | 8,424 | 6.4% | +5.7% |
| TOTAL | 150,223 | 100% | 130,978 | 100% | +14.7% |
| 2017 | % | 2016 | % | % CHANGE | |
|---|---|---|---|---|---|
| Italy | 36,523 | 24.3% | 36,365 | 27.8% | +0.4% |
| Western Europe | 11,678 | 7.8% | 8,553 | 6.5% | +36.5% |
| Eastern Europe | 42,824 | 28.5% | 34,123 | 26.1% | +25.5% |
| Middle East and Africa | 13,009 | 8.6% | 11,698 | 8.9% | +11.2% |
| Asia and Oceania | 10,516 | 7.0% | 8,088 | 6.2% | +30.0% |
| South America | 22,938 | 15.3% | 20,847 | 15.9% | +10.0% |
| North America and Mexico | 12,735 | 8.5% | 11,304 | 8.6% | +12.7% |
| TOTAL | 150,223 | 100% | 130,978 | 100% | +14.7% |
An analysis of sales by product category shows the strong growth of special burners, the family where product innovation has been strongest in recent years. The trend in sales of light alloy valves, which have now almost completely replaced brass valves, was also very positive. All other product lines also recorded good growth rates, with the exception of thermostats.
In 2017, all markets recorded double-digit growth rates; Italy, where sales remained stable after years of decline due to the sharp reduction in the production of domestic appliances, is an exception. Very positive sales growth rates have been recorded in other European markets, where Sabaf is consolidating its leadership. The Middle East market showed a strong recovery compared to 2016; Asia, North and South America confirmed a positive underlying trend.
Average sales prices in 2017 were on average 0.8% lower compared with 2016.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Sale of trimmings | 2,261 | 1,684 | 577 |
| Contingent income |
311 | 146 | 165 |
| Rental income | 89 | 85 | 4 |
| Use of provisions for risks and charges |
36 | 67 | (31) |
| Other income | 664 | 837 | (173) |
| TOTAL | 3,361 | 2,819 | 542 |
The increase in income from the sale of trimmings is directly related to higher production volumes and to the increase in the price of raw materials.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Commodities and outsourced components |
54,179 | 42,540 | 11,639 |
| Consumables | 5,615 | 4,806 | 809 |
| TOTAL | 59,794 | 47,346 | 12,448 |
In 2017, the effective purchase prices of the main raw materials (aluminium alloys, steel and brass) were on average higher than in 2016, with a negative impact of 0.9% of sales. Consumption (purchases plus change in inventories) as a percentage of sales was 38.2% in 2017, compared with 36.7% in 2016.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Outsourced processing | 9,779 | 8,435 | 1,344 |
| Natural gas and power | 4,485 | 4,622 | (137) |
| Maintenance | 4,474 | 4,071 | 403 |
| Transport | 2,221 | 1,848 | 373 |
| Advisory services | 2,106 | 1,639 | 467 |
| Directors' fees | 1,084 | 1,181 | (97) |
| Travel expenses and allowances | 715 | 693 | 22 |
| Commissions | 637 | 648 | (11) |
| Insurance | 537 | 675 | (138) |
| Canteen | 394 | 395 | (1) |
| Temporary agency workers | 199 | 125 | 74 |
| Other costs | 3,596 | 3,651 | (55) |
| TOTAL | 30,227 | 27,983 | 2,244 |
The higher costs for outsourced processing were related to the increase in production volumes in Italy. The reduction in energy costs is due to the recognition of the "energy-intensive bonuses" for 2016 and 2017 for a total of € 248,000, which was not recognised in the 2016 financial statements because the collectability was uncertain at the end of the reporting period. The increase in maintenance costs was due to activities in progress for the ongoing adaptation of plants, machinery and equipment at the premises of all the factories of the Group.
Other costs included expenses for the registration of patents, waste disposal, cleaning, leasing third-party assets and other minor charges.
Costs for advisory services related to technical (€ 568,000), sales (€ 343,000) and legal, administrative and general (€ 1,195,000) services.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Salaries and wages | 23,987 | 22,284 | 1,703 |
| Social Security costs | 7,585 | 7,088 | 497 |
| Temporary agency workers |
1,910 | 1,216 | 694 |
| Post-employment benefit reserve and other costs |
1,846 | 1,524 | 322 |
| TOTAL | 35,328 | 32,112 | 3,216 |
The average Group headcount in 2017 was 760 employees compared to 755 in 2016. The average number of temporary staff was 60 in 2017 (40 in 2016).
During the financial year, the Group made only negligible use of the solidarity contract and temporary lay-off scheme, whereas in 2016 these institutions, used in periods characterised by low production requirements, made it possible to save personnel costs of € 689,000.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Non-income taxes | 539 | 488 | 51 |
| Other operating expenses |
331 | 205 | 126 |
| Contingent liabilities | 145 | 69 | 76 |
| Losses and write-downs of trade receivables |
93 | 189 | (96) |
| Provisions for risks | 11 | 127 | (116) |
| Other provisions | 15 | - | 15 |
| TOTAL | 1,134 | 1,078 | 56 |
Non-income taxes chiefly relate to property tax. Provisions refer to the allocations to the reserves described in Note 17.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Interest paid to banks | 260 | 243 | 17 |
| Interest paid on finance lease contracts |
19 | 22 | (3) |
| IRS spreads payable | 10 | 37 | (27) |
| Banking expenses | 240 | 263 | (23) |
| Adjustment to the fair value of the ARC option (Note 15) |
241 | - | 241 |
| Other financial expense | 34 | 55 | (22) |
| TOTAL | 804 | 620 | 183 |
In 2017, the Group reported net foreign exchange gains of € 274,000, versus net gains of € 435,000 in 2016.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Current taxes | 3,836 | 3,454 | 382 |
| Deferred tax liabilities | (452) | 73 | (525) |
| Taxes related to previous financial years |
(496) | (176) | (320) |
| TOTAL | 2,888 | 3,351 | (463) |
The current income taxes include the IRES of € 2,448,000, the IRAP of € 545,000 and foreign income taxes of € 843,000 (€ 2,078,000, € 452,000 and € 924,000 respectively in 2016).
Reconciliation between the tax burden booked in the financial statements and the theoretical tax burden calculated according to the statutory tax rates currently in force in Italy is shown in the following table:
| 2017 | 2016 | |
|---|---|---|
| Theoretical income tax | 4,272 | 3,280 |
| Permanent tax differences | 172 | 202 |
| Taxes related to previous financial years | 91 | (138) |
| Tax effect from different foreign tax rates | 5 | (109) |
| Effect of non-recoverable tax losses | 172 | 162 |
| "Patent box" tax benefit | (1,151) | - |
| "Super ammortamento" tax benefit | (179) | - |
| Tax incentives for investments in Turkey | (950) | (408) |
| Other differences | 10 | (71) |
| Income taxes booked in the accounts, excluding IRAP and withholding taxes (current and deferred) |
2,442 | 2,918 |
| IRAP (current and deferred) | 446 | 433 |
| TOTAL | 2,888 | 3,351 |
Theoretical taxes were calculated applying the current corporate income tax (IRES) rate, i.e. 24% (27.50% in 2016), to the pre-tax result.
Following the prior agreement signed with the Revenue Agency, in 2017 the Group recognised the tax benefit relating to the Patent Box for the three-year period 2015 to 2017, for a total of € 1,324,000 (€ 1,151,000 for IRES and € 173,000 for IRAP), of which € 772,000 for 2015 and 2016 (Note 38) and € 552,000 for 2017.
In 2018, the Group also recognised € 950,000 in tax benefits deriving from investments made in Turkey, of which € 582,000 deriving from investments made in previous years for which access to the incentive was only established in 2017 (Note 38).
IRAP is not taken into account for the purpose of reconciliation because, as it is a tax with a different assessment basis from pre-tax profit, it would generate distorting effects.
No significant tax disputes were pending at 31 December 2017.ì
Basic and diluted EPS are calculated based on the following data:
| EARNINGS | 2017 | 2016 |
|---|---|---|
| (€/000) | (€/000) | |
| Profit for the year | 14,835 | 8,994 |
| NUMBER OF SHARES | 2017 | 2016 |
| Weighted average number of ordinary shares for determining basic earnings per share |
11,208,062 | 11,376,320 |
| Dilutive effect from potential ordinary shares | - | - |
| Weighted average number of ordinary shares for determining diluted earnings per share |
11,208,062 | 11,376,320 |
| EARNINGS PER SHARE (€) | 2017 | 2016 |
| Basic earnings per share | 1.323 | 0.791 |
| Diluted earnings per share | 1.323 | 0.791 |
Basic earnings per share are calculated on the average number of outstanding shares minus treasury shares, equal to 325,388 in 2017 (157,130 in 2016). Diluted earnings per share are calculated taking into account any shares approved but not yet subscribed, of which there were none in 2017 and 2016.
On 31 May 2017, shareholders were paid an ordinary dividend of € 0.48 per share (total dividends of € 5,384,000).
The Directors have recommended payment of a dividend of € 0.55 per share this year. This dividend is subject to approval of shareholders in the annual Shareholders' Meeting and was not included under liabilities in these financial statements.
The dividend proposed is scheduled for payment on 30 May 2018 (ex-date 28 May and record date 29 May).
Below is the information by business segment for 2017 and 2016.
| 2017 FY | 2016 FY | |||||
|---|---|---|---|---|---|---|
| Gas parts (household and professional) |
Hinges | TOTAL | Gas parts (household and professional) |
Hinges | TOTAL | |
| Sales | 141,280 | 8,943 | 150,223 | 122,636 | 8,342 | 130,978 |
| Ebit | 16,974 | 1,143 | 18,117 | 11,643 | 887 | 12,530 |
In accordance with IFRS 7, a breakdown of the financial instruments is shown below, among the categories set forth in IAS 39.
| FINANCIAL ASSETS | 31.12.2017 | 31.12.2016 |
|---|---|---|
| Amortised cost | ||
| • Cash and cash equivalents | 11,533 | 12,143 |
| • Escrow bank deposits | 240 | - |
| • Trade receivables and other receivables |
43,516 | 38,523 |
| Income statement fair value | ||
| • Derivative to hedge cash flows | 7 | - |
| FINANCIAL LIABILITIES | 31.12.2017 | 31.12.2016 |
| Amortised cost | ||
| • Loans | 35,048 | 33,504 |
| • Other financial liabilities | 240 | 300 |
| • Trade payables | 19,975 | 18,977 |
| Income statement fair value | ||
| • ARC put option | 1,763 | 1,522 |
The Group is exposed to financial risks related to its operations, mainly:
It is part of the Sabaf Group's policies to hedge exposure to changes in prices and in fluctuations in exchange and interest rates via derivative financial instruments. Hedging is done using forward contracts, options or combinations of these instruments. Generally speaking, the maximum duration covered by such hedging does not exceed 18 months. The Group does not enter into speculative transactions. When the derivatives used for hedging purposes meet the necessary requisites, hedge accounting rules are followed.
Trade receivables involve producers of domestic appliances, multinational groups and smaller manufacturers in a few or single markets. The Company assesses the creditworthiness of all its customers at the start of supply and systemically on at least an annual basis. After this assessment, each customer is assigned a credit limit.
A credit insurance policy is in place, which guarantees cover for approximately 65% of trade receivables.
Credit risk relating to customers operating in emerging economies is generally attenuated by the expectation of revenue through letters of credit.
The key currencies other than the euro to which the Group is exposed are the US dollar, the Brazilian real and the Turkish lira, in relation to sales made in dollars (chiefly on some Asian and American markets) and the production units in Brazil and Turkey. Sales in US dollars represented 14% of total revenue in 2017, while purchases in dollars represented 4% of total revenue. During the year, operations in dollars were partially hedged through forward sales contracts; no currency derivatives were pending at 31 December 2017.
With reference to financial assets and liabilities in US dollars at 31 December 2017, a hypothetical and immediate revaluation of 10% of the euro against the dollar would have led to a loss of € 475,000.
At 31 December 2017, gross financial debt of the Group was at a floating rate for approximately 35% and at a fixed rate for approximately 65%; to reach an optimum mix of floating and fixed rates in the structure of the loans, the Group also used derivative financial instruments. At 31 December 2017, three interest rate swap (IRS) contracts totalling € 9.4 million were in place, mirrored in mortgages with the same residual debt, through which the Group transformed the floating rate of the mortgages into fixed rate. Considering the IRS in place, at the end of 2017, the fixed-rate portion amounted to approximately 90% of the total financial debt. The derivative contracts were not designated as a cash flow hedge and were therefore recognised using the "fair value in the income statement" method.
At 31 December 2017, the sensitivity analysis concerned financial leases and the floating rate portion of the short-term financial debt. The Group is not exposed to interest rate risk as regards medium/long-term bank debt, since the floating rate of loans has been transformed into a fixed rate by means of the interest rate swap contracts in place.
With reference to financial assets and liabilities at variable rate at 31 December 2017 and 31 December 2016, a hypothetical increase (decrease) in the interest rate of 100 base points versus the interest rates in effect at the same date – all other variables being equal - would lead to the following effects:
| 31.12.2017 | 31.12.2016 | |
|---|---|---|
| FINANCIAL EXPENSES | FINANCIAL EXPENSES | |
| Increase of 100 base points |
31 | 20 |
| Decrease of 100 base points |
(31) | - |
A significant portion of the Group's purchase costs is represented by brass and aluminium alloys. Sale prices of products are generally renegotiated annually; as a result, the Group is unable to pass on to customers any changes in the prices of commodities during the year. The Group protects itself from the risk of changes in the price of brass and aluminium with supply contracts signed with suppliers for delivery up to twelve months in advance or, alternatively, with derivative financial instruments. In 2017 and 2016, the Group did not use financial derivatives on commodities.
To stabilise the rising costs of commodities, Sabaf preferred to execute transactions on the physical market, fixing prices with suppliers for immediate and deferred delivery.
The Group operates with a low debt ratio (net financial debt / shareholders' equity at 31 December 2017 of 22%, net financial debt / EBITDA of 0.82) and has unused short-term lines of credit. To minimise the risk of liquidity, the Administration and Finance Department:
Below is an analysis by expiration date of financial payables at 31 December 2017 and 31 December 2016:
| CARRYING VALUE |
CONTRACTUAL FINANCIAL FLOWS |
WITHIN 3 MONTHS |
FROM 3 MONTHS TO 1 YEAR |
FROM 1 TO 5 YEARS |
MORE THAN 5 YEARS |
|
|---|---|---|---|---|---|---|
| Short-term bank loans | 11,157 | 11,157 | 11,157 | 0 | - | - |
| Unsecured loans | 22,280 | 22,676 | 1,537 | 4,612 | 16,527 | - |
| Finance leases | 1,611 | 1,818 | 47 | 141 | 754 | 876 |
| Payables to ARC shareholders | 240 | 240 | - | 60 | 180 | - |
| ARC option | 1,763 | 1,763 | - | - | 1,763 | - |
| TOTAL FINANCIAL PAYABLES | 37,051 | 37,654 | 12,741 | 4,813 | 19,224 | 876 |
| Trade payables | 19,975 | 19,975 | 19,021 | 954 | - | - |
| TOTAL | 57,026 | 57,629 | 31,762 | 5,767 | 19,224 | 876 |
| AT 31 DECEMBER 2016 | |||||||
|---|---|---|---|---|---|---|---|
| CARRYING VALUE |
CONTRACTUAL FINANCIAL FLOWS |
WITHIN 3 MONTHS |
FROM 3 MONTHS TO 1 YEAR |
FROM 1 TO 5 YEARS |
MORE THAN 5 YEARS |
||
| Short-term bank loans | 7,811 | 7,811 | 5,811 | 2,000 | - | - | |
| Unsecured loans | 23,937 | 24,388 | 1,709 | 5,129 | 17,550 | - | |
| Finance leases | 1,756 | 2,007 | 47 | 141 | 754 | 1,065 | |
| Payables to ARC shareholders | 300 | 300 | - | 60 | 240 | - | |
| ARC option | 1,522 | 1,522 | - | - | 1,522 | - | |
| TOTAL FINANCIAL PAYABLES | 35,326 | 36,028 | 7,567 | 7,330 | 20,066 | 1,065 | |
| Trade payables | 18,977 | 18,977 | 18,340 | 637 | - | - | |
| TOTAL | 54,303 | 55,005 | 25,907 | 7,967 | 20,066 | 1,065 |
The various due dates are based on the period between the end of the reporting period and the contractual expiration date of the commitments, the values indicated in the table correspond to non-discounted cash flows. Cash flows include the shares of principal and interest; for floating rate liabilities, the shares of interest are determined based on the value of the reference parameter at the end of the reporting period increased by the spread set forth in each contract.
The revised IFRS 7 requires that financial instruments reported in the statement of financial position at fair value be classified based on a hierarchy that reflects the significance of the input used in determining the fair value. IFRS 7 makes a distinction between the following levels:
The following table shows the assets and liabilities valued at fair value at 31 December 2017, by hierarchical level of fair value assessment.
| LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL | |
|---|---|---|---|---|
| Other financial assets (derivatives on interest rates) |
- | 7 | - | 7 |
| Other financial liabilities (derivatives on interest rates) |
- | (15) | - | (15) |
| Other financial liabilities (ARC put option) |
- | - | (1,763) | (1,763) |
| TOTAL LIABILITIES | 0 | (8) | (1,763) | (1,771) |
Transactions between consolidated companies were eliminated from the consolidated financial statements and are not reported in these notes. The table below illustrates the impact of all transactions between the Group and other related parties on the balance sheet and income statement.
| TOTAL 2017 | GIUSEPPE SALERI S.A.P.A. |
NON CONSOLIDATED SUBSIDIARIES |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Trade receivables | 42,263 | - | 299 | - | 299 | 0.71% |
| Tax receivables | 3,065 | 1,158 | - | - | 1,158 | 37.78% |
| Trade payables | 19,976 | - | 2 | 2 | 0.01% | |
| TOTAL 2016 | GIUSEPPE SALERI S.A.P.A. |
NON CONSOLIDATED |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
| SUBSIDIARIES | ||||||
| Trade receivables | 36,842 | - | 221 | - | 221 | 0.60% |
| Tax receivables | 3,163 | 1,158 | - | - | 1,158 | 36.61% |
| TOTAL 2017 | GIUSEPPE SALERI S.A.P.A. |
NON CONSOLIDATED SUBSIDIARIES |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Other income | 3,361 | 10 | - | - | 10 | 0.30% |
| Services | (30,227) | - | (167) | (20) | (187) | 0.62% |
| NON | ||||||
| TOTALE 2016 | GIUSEPPE SALERI S.A.P.A. |
CONSOLIDATED SUBSIDIARIES |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
| Other income | 2,819 | 10 | - | - | 10 | 0.35% |
Transactions with the shareholder, Giuseppe Saleri S.a.p.A., comprise:
Transactions are regulated by specific contracts regulated at arm's length conditions. Transactions with non-consolidated subsidiaries were solely of a commercial nature.
Please see the 2017 Report on Remuneration for this information.
At 31 December 2017, there were no equity-based incentive plans for the Group's directors and employees.
Pursuant to CONSOB memorandum of 28 July 2006, the following section describes and comments on significant non-recurring events, the consequences of which are reflected in the economic, equity and financial results for the year:
| SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE GROUP |
PROFIT ATTRIBUTABLE TO THE GROUP |
NET FINANCIAL DEBT |
CASH FLOWS | |
|---|---|---|---|---|
| Financial statement values (A) | 113,595 | 14,835 | 25,533 | (610) |
| Recognition of "Patent box" tax benefit related to 2015 and 2016 |
(772) | (772) | - | - |
| Recognition of tax incentives for investments in Turkey carried out in previous financial years |
(592) | (592) | - | - |
| FINANCIAL STATEMENT NOTIONAL VALUE (A+B) |
112,231 | 13,471 | 25,533 | (610) |
As described in Note 31, in these consolidated financial statements, the Group recognised:
the tax benefit relating to the Patent Box for the three-year period 2015 to 2017;
the tax benefit on investments made in Turkey, against which a tax credit was recognised.
The tax benefits relating to previous years are considered non-recurring and are therefore shown in the table above.
Pursuant to CONSOB memorandum of 28 July 2006, the Group declares that no atypical and/or unusual transactions as defined by the CONSOB memorandum were executed during 2017.
The Sabaf Group has issued sureties to guarantee consumer and mortgage loans granted by banks to Group employees for a total of € 5,145,000 (€ 5,510,000 at 31 December 2016).
| COMPANY NAME | REGISTERED OFFICES | SHARE CAPITAL | SHAREHOLDERS | OWNERSHIP % |
|---|---|---|---|---|
| Faringosi Hinges s.r.l. | Ospitaletto (BS) | € 90,000 | Sabaf S.p.A. | 100% |
| Sabaf Immobiliare s.r.l. | Ospitaletto (BS) | € 25,000 | Sabaf S.p.A. | 100% |
| Sabaf do Brasil Ltda | Jundiaì (SP, Brazil) | BRL 24,000,000 | Sabaf S.p.A. | 100% |
| Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki |
Manisa (Turkey) | TRK 28,000,000 | Sabaf S.p.A. | 100% |
| Sabaf Appliance Components Trading Ltd. |
Kunshan (China) | € 200,000 | Sabaf S.p.A. | 100% |
| Sabaf Appliance Components Ltd. | Kunshan (China) | € 4,400,000 | Sabaf S.p.A. | 100% |
| A.R.C. s.r.l. | Campodarsego (PD) - Italy | € 45,000 | Sabaf S.p.A. | 70% |
| COMPANY NAME | REGISTERED OFFICES |
SHARE CAPITAL | SHAREHOLDERS | OWNERSHIP % | HOLDING % |
|---|---|---|---|---|---|
| Sabaf US Corp. | Plainfield (USA) | USD 100,000 | Sabaf S.p.A. | 100% | 100% |
| Handan ARC Burners Co., Ltd. | Handan (China) | RMB 7,000,000 | A.R.C. s.r.l. | 50% | 35% |
Via dei Carpini, 1 25035 Ospitaletto (Brescia)
Tel.: +39 030 6843001 Fax: +39 030 6848249 E-mail: [email protected] Website: www.sabaf.it
Tax information: R.E.A. Brescia: 347512 Tax Code 03244470179 VAT number: 01786910982
The following table, prepared pursuant to Article 149-duodecies of the CONSOB Issuers' Regulation, shows fees relating to 2017 for auditing and for services other than auditing provided by the Independent Auditor and its network.
| (€/000) | PARTY PROVIDING THE SERVICE | RECIPIENT | FEES PERTAINING TO THE 2017 FINANCIAL YEAR |
|---|---|---|---|
| Audit | Deloitte & Touche S.p.A. | Parent company | 57 |
| Deloitte & Touche S.p.A. | Italian subsidiaries | 30 | |
| Deloitte network | Sabaf do Brasil | 27 | |
| Deloitte network | Sabaf Turkey | 21 | |
| Certification services | Deloitte & Touche S.p.A. | Parent company | 2 (1) |
| Deloitte & Touche S.p.A. | Italian subsidiaries | 1 (1) | |
| Other services | Deloitte & Touche S.p.A. | Parent company | 14 (2) |
| Deloitte network | Sabaf do Brasil | 3 (3) | |
| TOTAL | 155 |
in accordance with Article 154 bis of Italian Legislative Decree 58/98
Pietro Iotti, the Chief Executive Officer, and Gianluca Beschi, the Financial Reporting Officer of Sabaf S.p.A., have taken into account the requirements of Article 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of 24 February 1998 and can certify:
of the administrative and accounting procedures for the formation of the consolidated financial statements during the 2017 financial year.
They also certify that:
Ospitaletto, 26 March 2018
Chief Executive Officer
Pietro Iotti
The Financial Reporting Officer Gianluca Beschi
A major company like ours sets out to serve as a point of reference for society as a whole: we are committed to establishing a responsible and sustainable relationship with the local communities in which we operate.
| Corporate bodies | 169 |
|---|---|
| Statement of financial position | 170 |
| Income statement | 171 |
| Comprehensive income statement | 172 |
| Statement of changes in shareholders' equity | 172 |
| Cash flow Statement | 173 |
| Explanatory notes | 174 |
| Comments on the main items of the statement of financial position |
180 |
| Comments on key income statement items | 192 |
| Certification of Separate financial statements | 202 |
| Director * | Renato Camodeca |
|---|---|
| Director * | Giuseppe Cavalli |
| Director * | Fausto Gardoni |
| Director * | Anna Pendoli |
| Director * | Nicla Picchi |
| Director | Alessandro Potestà |
Deloitte & Touche S.p.A.
| (IN €) | NOTES | 31.12.2017 | 31.12.2016 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets Property, plant and equipment |
1 | 31,610,510 | 31,092,204 |
| Investment property | 2 | 1,453,564 | 1,645,412 |
| Intangible assets | 3 | 3,370,260 | 3,095,000 |
| Equity investments | 4 | 49,451,811 | 50,098,459 |
| Non-current financial assets | 5 | 1,847,639 | 2,137,353 |
| - of which from related parties | 36 | 1,667,639 | 1,897,353 |
| Non-current receivables | 19,871 | 11,621 | |
| Deferred tax assets | 21 | 3,455,483 | 3,315,263 |
| TOTAL NON-CURRENT ASSETS | 91,209,138 | 91,395,312 | |
| Current assets | |||
| Inventories | 6 | 24,768,927 | 23,492,840 |
| Trade receivables | 7 | 31,154,012 | 27,465,436 |
| - of which from related parties | 36 | 1,208,883 | 1,191,581 |
| Tax receivables | 8 | 2,229,708 | 2,477,294 |
| - of which from related parties | 36 | 1,083,666 | 1,083,666 |
| Other current receivables | 9 | 721,529 | 1,039,324 |
| Current financial assets | 10 | 1,067,429 | 1,060,000 |
| - of which from related parties | 36 | 1,000,000 | 1,000,000 |
| Cash and cash equivalents | 11 | 2,696,664 | 1,796,980 |
| TOTAL CURRENT ASSETS | 62,638,269 | 57,331,874 | |
| Assets held for sale | 0 | 0 | |
| TOTAL ASSETS | 153,847,407 | 148,727,186 | |
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||
| Shareholders' equity | |||
| Share capital | 12 | 11,533,450 | 11,533,450 |
| Retained earnings, other reserves | 72,552,367 | 77,530,764 | |
| Profit for the year | 8,001,327 | 2,459,688 | |
| TOTAL SHAREHOLDERS' EQUITY | 92,087,144 | 91,523,902 | |
| Non-current liabilities | |||
| Loans | 14 | 16,297,969 | 17,281,379 |
| Other financial liabilities | 15 | 180,000 | 240,000 |
| Post-employment benefit and retirement reserves | 16 | 2,199,523 | 2,435,538 |
| Provisions for risks and charges | 17 | 369,482 | 322,979 |
| Deferred tax liabilities | 21 | 67,983 | 129,289 |
| TOTAL NON-CURRENT LIABILITIES | 19,114,957 | 20,409,185 | |
| Current liabilities | |||
| Loans | 14 | 18,927,558 | 14,054,604 |
| - of which from related parties | 36 | 2,100,000 | 0 |
| Other financial liabilities | 15 | 74,849 | 298,161 |
| Trade payables | 18 | 16,569,390 | 16,010,381 |
| - of which from related parties | 36 | 509,631 | 104,142 |
| Tax payables | 19 | 623,013 | 641,944 |
| Other payables | 20 | 6,450,496 | 5,789,009 |
| TOTAL CURRENT LIABILITIES | 42,645,306 | 36,794,099 | |
| Liabilities held for sale | 0 | 0 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 153,847,407 | 148,727,186 |
| (IN €) | NOTES | 2017 | 2016 |
|---|---|---|---|
| INCOME STATEMENT COMPONENTS | |||
| Operating revenue and income | |||
| Revenue | 23 | 115,687,029 | 101,523,407 |
| - of which from related parties | 36 | 10,238,606 | 6,680,209 |
| Other income | 24 | 2,647,542 | 2,278,649 |
| TOTAL OPERATING REVENUE AND INCOME | 118,334,571 | 103,802,056 | |
| Operating costs | |||
| Materials | 25 | (46,554,625) | (36,875,454) |
| Change in inventories | 1,276,087 | (1,182,000) | |
| Services | 26 | (27,603,637) | (26,031,824) |
| - of which by related parties | 36 | (3,966,399) | (4,151,074) |
| Payroll costs | 27 | (28,734,310) | (26,382,450) |
| Other operating costs | 28 | (715,296) | (647,178) |
| Costs for capitalised in-house work | 1,474,322 | 841,526 | |
| TOTAL OPERATING COSTS | (100,857,459) | (90,277,380) | |
| OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION, CAPITAL GAINS/LOSSES, WRITE-DOWNS/WRITE-BACKS OF NON-CURRENT ASSETS |
17,477,112 | 13,524,676 | |
| Depreciations and amortisation | 1,2,3 | (8,843,617) | (9,020,829) |
| Capital gains/(losses) on disposals of non-current assets | 97,873 | 87,113 | |
| Write-downs/write-backs of non-current assets | 29 | (681,628) | (521,021) |
| - of which by related parties | 36 | (681,628) | (521,021) |
| EBIT | 8,049,740 | 4,069,939 | |
| Financial income | 88,754 | 84,559 | |
| Financial expenses | 30 | (482,136) | (512,872) |
| Exchange rate gains and losses | 31 | (88,145) | (48,356) |
| Profits and losses from equity investments | 32 | 1,503,354 | 0 |
| PROFIT BEFORE TAXES | 9,071,567 | 3,593,270 | |
| Income tax | 33 | (1,070,240) | (1,133,582) |
| PROFIT FOR THE YEAR | 8,001,327 | 2,459,688 | |
| (IN €) | 2017 | 2016 |
|---|---|---|
| PROFIT FOR THE YEAR | 8,001,327 | 2,459,688 |
| Total profits/losses that will not be subsequently reclassified under profit (loss) for the year | ||
| • Actuarial post-employment benefit reserve evaluation | 73,372 | (35,894) |
| • Tax effect | (17,609) | 8,615 |
| Total other profits/(losses) net of taxes for the year | 55,763 | (27,279) |
| TOTAL PROFIT | 8,057,090 | 2,432,409 |
| (€/000) | Share Capital |
Share premium reserve |
Legal reserve |
Treasury shares |
Actuarial post-em ployment benefit reserve evaluation |
Other reserves |
Profit for the year |
Total shareholders' equity |
|---|---|---|---|---|---|---|---|---|
| BALANCE AT 31 DEC 2015 |
11,533 | 10,002 | 2,307 | (723) | (506) | 67,979 | 5,642 | 96,234 |
| Allocation of 2015 profit | ||||||||
| • dividends paid out |
(5,467) | (5,467) | ||||||
| • to reserve | 175 | (175) | ||||||
| Purchase of treasury shares |
(1,676) | (1,676) | ||||||
| Total profit at 31 Dec 2016 |
(27) | 2,460 | 2,433 | |||||
| BALANCE AT 31 DEC 2016 |
11,533 | 10,002 | 2,307 | (2,399) | (533) | 68,154 | 2,460 | 91,524 |
| 2017 dividend payment |
(2,924) | (2,460) | (5,384) | |||||
| Purchase of treasury shares |
(2,110) | (2,110) | ||||||
| Total profit at 31 Dec 2017 |
56 | 8,001 | 8,057 | |||||
| TOTAL PROFIT AT 31 DEC 2017 |
11,533 | 10,002 | 2,307 | (4,509) | (477) | 65,230 | 8,001 | 92,087 |
| Cash and cash equivalents at beginning of year 1,797 1,090 Profit for the year 8,001 2,460 Adjustments for: • Depreciation and amortisation 8,844 9,021 • Realised gains (98) (87) • Write-downs/write-backs of non-current assets 622 521 • Profits and losses from equity investments (1,503) • Net financial income and expenses 393 428 • Non-monetary foreign exchange differences 23 (60) • Income tax 1,070 1,133 Change in post-employment benefit reserve (263) (131) Change in risk provisions 47 (3) Change in trade receivables (3,689) 5,405 Change in inventories (1,276) 1,182 Change in trade payables 559 (2,192) Change in net working capital (4,406) 4,395 Change in other receivables and payables, deferred tax 830 367 Payment of taxes (847) (2450) Payment of financial expenses (456) (474) Collection of financial income 89 85 CASH FLOW FROM OPERATIONS 12,554 15,205 Investments in non-current assets • intangible (1,099) (735) • tangible (8,670) (7,298) • financial - (4,800) Disposal of non-current assets 449 242 CASH FLOW ABSORBED BY INVESTMENTS (9,319) (12,591) Repayment of loans (10,607) (19,077) Raising of loans 14,273 24,243 Change in financial assets (7) 69 Sale of treasury shares (2,110) (1,675) Payment of dividends (5,384) (5,467) Collection of dividends 1,500 - CASH FLOW ABSORBED BY FINANCING ACTIVITIES (2,335) (1,907) TOTAL FINANCIAL FLOWS 900 707 Cash and cash equivalents at end of year (Note 11) 2,697 1,797 Net current financial debt 15,239 11,496 Non-current financial debt 16,478 17,521 NET FINANCIAL DEBT (NOTE 22) 31,717 29,017 |
(€/000) | 2017 FY | 2016 FY | |
|---|---|---|---|---|
The separate financial statements of Sabaf S.p.A. for the financial year 2017 have been prepared in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Union. Reference to IFRS also includes all current International Accounting Standards (IAS).
The separate financial statements are drawn up in euro, which is the currency in the economy in which the Company operates. The income statement, the comprehensive income statement and the statement of financial position schedules are prepared in euro, while the cash flow statement, the statement of changes in shareholders' equity and the values reported in the explanatory notes are in thousands of euro.
The financial statements have been prepared on a historical cost basis except for some revaluations of property, plant and equipment undertaken in previous years, and are considered a going concern. The Company assessed that it is a going concern (as defined by paragraphs 25 and 26 of IAS 1), also due to the strong competitive position, high profitability and solidity of the financial structure.
Sabaf S.p.A., as the Parent Company, also prepared the consolidated financial statements of the Sabaf Group at 31 December 2017.
The Company has adopted the following formats:
Use of these formats permits the most meaningful representation of the Company's capital, business and financial status.
The accounting standards and policies applied for the preparation of the separate financial statements at 31 December 2017, unchanged versus the previous year, are shown below:
These are recorded at purchase or manufacturing cost. The cost includes directly chargeable ancillary costs. These costs also include revaluations undertaken in the past based on monetary revaluation rules or pursuant to company mergers.
Depreciation is calculated according to rates deemed appropriate to spread the carrying value of tangible assets over their useful working life. Estimated useful working life, in years, is as follows:
| Buildings | 33 |
|---|---|
| Light constructions | 10 |
| General plant | 10 |
| Specific plant and machinery | 6 - 10 |
| Equipment | 4 |
| Furniture | 8 |
| Electronic equipment | 5 |
| Vehicles and other transport means | 5 |
Ordinary maintenance costs are expensed in the year in which they are incurred; costs that increase the asset value or useful working life are capitalised and depreciated according to the residual possibility of utilisation of the assets to which they refer. Land is not depreciated.
Investment property is valued at cost, including revaluations undertaken in the past based on monetary revaluation rules or pursuant to company mergers.
The depreciation is calculated based on the estimated useful life, considered to be 33 years.
If the recoverable amount of the investment property – determined based on the market value of the properties – is estimated to be lower than its carrying value, the asset's carrying value is reduced to the lower recoverable amount, recognising impairment of value in the income statement.
When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or of the cash-generating unit) is increased to the new value stemming from the estimate of its recoverable value – but not beyond the net carrying value that the asset would have had if it had not been written down for impairment of value. Reversal of impairment loss is recognised in the income statement.
As established by IAS 38, intangible assets acquired or internally produced are recognised as assets when it is probable that use of the asset will generate future economic benefits and when asset cost can be measured reliably. If it is considered that these future economic benefits will not be generated, the development costs are written down in the year in which this is ascertained.
Such assets are measured at purchase or production cost and - if the assets concerned have a finite useful life - are amortised on a straight-line basis over their estimated useful life.
The useful life of projects for which development costs are capitalised is estimated to be 10 years.
The SAP management system is amortised over five years.
Equity investments not classified as held for sale are booked at cost, reduced for impairment.
Non-current receivables are stated at their presumed realisable value.
At each end of the reporting period, Sabaf S.p.A. reviews the carrying value of its property, plant and equipment, intangible assets and equity investments to determine whether there are signs of impairment of the value of these assets. If there is any such indication, the recoverable amount of said assets is estimated so as to determine the total of the write-down. If it is not possible to estimate the recoverable value individually, the Company estimates the recoverable value of the cash generating unit (CGU) to which the asset belongs. In particular, the recoverable value of the cash generating units (which generally coincide with the legal entity to which the capitalised assets refer) is verified by determining the value of use. The recoverable amount is the higher of the net selling price and value of use. In measuring the value of use, future cash flows net of taxes, estimated based on past experience, are discounted to their present value using a pre-tax rate that reflects fair market valuations of the present cost of money and specific asset risk. The main assumptions used for calculating the value of use concern the discount rate, growth rate, expected changes in selling prices and cost trends during the period used for the calculation. The growth rates adopted are based on future market expectations in the relevant sector. Changes in the sales prices are based on past experience and on the expected future changes in the market. The Company prepares operating cash flow forecasts based on the most recent budgets approved by the Boards of Directors of the investees, draws up fouryear forecasts and determines the terminal value (current value of perpetual income), which expresses the medium and long term operating flows in the specific sector.
Furthermore, the Company checks the recoverable value of its investees at least once a year when the separate financial statements are prepared.
If the recoverable amount of an asset (or CGU) is estimated to be lower than its carrying value, the asset's carrying value is reduced to the lower recoverable amount, recognising impairment of value in the income statement.
When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or of the cash-generating unit) is increased to the new value stemming from the estimate of its recoverable value – but not beyond the net carrying value that the asset would have had if it had not been written down for impairment of value. Reversal of impairment loss is recognised in the income statement.
Inventories are measured at the lower of purchase or production cost – determined using the weighted average cost method – and the corresponding fair value represented by the replacement cost for purchased materials and by the presumed realisable value for finished and semi-processed products – calculated taking into account any manufacturing costs and direct selling costs yet to be incurred. Inventory cost includes accessory costs and the portion of direct and indirect manufacturing costs that can reasonably be assigned to inventory items. Inventories subject to obsolescence and low turnover are written down in relation to their possibility of use or realisation. Inventory write-downs are eliminated in subsequent years if the reasons for such write-downs cease to exist.
Receivables are recognised at their presumed realisable value. Their face value is adjusted to a lower realisable value via specific provisioning directly reducing the item based on in-depth analysis of individual positions. Trade receivables assigned without recourse, despite being transferred legally, continue to be stated with "Trade receivables" until they are collected. Advance payments obtained with regard to the sale of trade receivables are recognised under current loans.
Financial assets held for trading are measured at fair value, allocating profit and loss effects to finance income or expense.
Provisions for risks and charges are provisioned to cover losses and debts, the existence of which is certain or probable, but whose amount or date of occurrence cannot be determined at the end of the year. Provisions are stated in the statement of financial position only when a legal or implicit obligation exists that determines the use of resources with an impact on profit and loss to meet that obligation and the amount can be reliably estimated. If the effect is significant, the provisions are calculated by updating future financial flows estimated at a rate including taxes such as to reflect current market valuations of the current value of the cash and specific risks associated with the liability.
The post-employment benefit reserve (TFR) is provisioned to cover the entire liability accruing vis-à-vis employees in compliance with current legislation and with national and supplementary company collective labour contracts. This liability is subject to revaluation via application of indices fixed by current regulations. Up to 31 December 2006, post-employment benefits were considered defined-benefit plans and accounted for in compliance with IAS 19, using the projected unit-credit method. The regulations of this fund were amended by Italian Law no. 296 of 27 December 2006 and subsequent Decrees and Regulations issued during the first months of 2007. In the light of these changes, and, in particular, for companies with at least 50 employees, post-employment benefits must now be considered a defined-benefit plan only for the portions accruing before 1 January 2007 (and not yet paid as at the end of the reporting period). Conversely, portions accruing after that date are treated as defined-contribution plans.
Actuarial gains or losses are recorded immediately under "Other total profits/(losses)".
Payables are recognised at face value; the portion of interest included in their face value and not yet payable at period-end is deferred to future periods.
Loans are initially recognised at cost, net of related costs of acquisition. This value is subsequently adjusted to allow for any difference between initial cost and repayment value over the loan's duration using the effective interest rate method.
Loans are classified among current liabilities unless the Company has the unconditional right to defer discharge of a liability by at least 12 months after the reference date.
Receivables and payables originally expressed in foreign currencies are converted into euro at the exchange rates in force on the date of the transactions originating them. Forex differences realised upon collection of receivables and payment of payables in foreign currency are posted in the income statement. Income and costs relating to foreign-currency transactions are converted at the rate in force on the transaction date.
At year-end, assets and liabilities expressed in foreign currencies are posted at the spot exchange rate in force at the end of the reporting period and related foreign exchange gains and losses are posted in the income statement. If conversion generates a net gain, this value constitutes a non-distributable reserve until it is effectively realised.
The Company's business is exposed to financial risks relating to changes in exchange rates, commodity prices and interest rates. The Company may decide to use derivative financial instruments to hedge these risks.
Derivatives are initially recognised at cost and are then adjusted to fair value on subsequent closing dates.
Changes in the fair value of derivatives designated and recognised as effective for hedging future cash flows relating to the Company's contractual commitments and planned transactions are recognised directly in shareholders' equity, while the ineffective portion is immediately posted in the income statement. If the contractual commitments or planned transactions materialise in the recognition of assets or liabilities, when such assets or liabilities are recognised, the gains or losses on the derivative that were directly recognised in equity are factored back into the initial valuation of the cost of acquisition or carrying value of the asset or liability. For cash flow hedges that do not lead to recognition of assets or liabilities, the amounts that were directly recognised in equity are included in the income statement in the same period when the contractual commitment or planned transaction hedged impacts profit and loss – for example, when a planned sale actually takes place.
For effective hedges of exposure to changes in fair value, the item hedged is adjusted for the changes in fair value attributable to the risk hedged and recognised in the income statement.
Gains and losses stemming from the derivative's valuation are also posted in the income statement.
Changes in the fair value of derivatives not designated as hedging instruments are recognised in the income statement in the period when they occur.
Hedge accounting is discontinued when the hedging instrument expires, is sold or is exercised, or when it no longer qualifies as a hedge. At this time, the cumulative gains or losses of the hedging instrument recognised in equity are kept in the latter until the planned transaction actually takes place.
If the transaction hedged is not expected to take place, cumulative gains or losses recognised directly in equity are transferred to the year's income statement.
Embedded derivatives included in other financial instruments or contracts are treated as separate derivatives when their risks and characteristics are not strictly related to those of their host contracts and the latter are not measured at fair value with posting of related gains and losses in the income statement.
Revenue is reported net of return sales, discounts, allowances and bonuses, as well as of the taxes directly associated with sale of goods and rendering of services. Sales revenue is reported when the company has transferred the significant risks and benefits associated with ownership of the goods and the amount of revenue can be reliably measured.
Revenues of a financial nature are recorded on an accrual basis.
Finance income includes interest receivable on funds invested and income from financial instruments, when not offset as part of hedging transactions. Interest income is recorded in the income statement at the time of vesting, taking effective output into consideration.
Financial expenses include interest payable on financial debt calculated using the effective interest method and bank expenses.
Income taxes include all taxes calculated on the Company's taxable income. Income taxes are directly recognised in the income statement, with the exception of those concerning items directly debited or credited to shareholders' equity, in which case the tax effect is recognised directly in shareholders' equity.
Other taxes not relating to income, such as property taxes, are included among operating expenses.
Deferred taxes are provisioned in accordance with the global liability provisioning method. They are calculated on all temporary differences that emerge from the taxable base of an asset or liability and its book value.
Current and deferred tax assets and liabilities are offset when income taxes are levied by the same tax authority and when there is a legal right to settle on a net basis. Deferred tax assets and liabilities are measured using the tax rates that are expected to be applicable in the years when temporary differences will be realised or settled.
Dividends are posted on an accrual basis when the right to receive them materialises, i.e. when shareholders approve dividend distribution.
Treasury shares are booked in a specific reserve as a reduction of shareholders' equity. The carrying value of treasury shares and revenues from any subsequent sales are recognised in the form of changes in shareholders' equity.
Preparation of the separate financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the carrying values of assets and liabilities and the disclosures on contingent assets and liabilities at the end of the reporting period. Actual results might differ from these estimates.
Estimates are used to measure tangible and intangible assets and investments subject to impairment testing, as described earlier, as well as to measure the ability to recover prepaid tax assets, provisions for bad debts, for inventory obsolescence, depreciation and amortisation, asset write-downs, employee benefits, taxes, other provisions and reserves.
Specifically:
The procedure for determining impairment of value of tangible and intangible assets described in "Impairment of value" implies – in estimating the value of use – the use of the Business Plans of investees, which are based on a series of assumptions relating to future events and actions of the investees' management bodies, which may not necessarily come about. In estimating market value, however, assumptions are made on the expected trend in trading between third parties based on historical trends, which may not actually be repeated.
Receivables are adjusted by the related bad debt provision to take into account their recoverable value.
To determine the size of the write-downs, management must make subjective assessments based on the documentation and information available regarding, among other things, the customer's solvency, as well as experience and historical payment trends.
Warehouse inventories subject to obsolescence and slow turnover are systematically valued, and written down if their recoverable value is less than their carrying value. Write-downs are calculated based on management assumptions and estimates, resulting from experience and historical results.
The current value of liabilities for employee benefits depends on a series of factors determined using actuarial techniques based on certain assumptions. Assumptions concern the discount rate, estimates of future salary increases, and mortality and resignation rates.
Any change in the above-mentioned assumptions might have an effect on liabilities for pension benefits.
Determining liabilities for Company taxes requires the use of management valuations in relation to transactions whose tax implications are not certain at the end of the reporting period. Furthermore, the valuation of deferred taxes is based on income expectations for future years; the valuation of expected income depends on factors that might change over time and have a significant effect on the valuation of deferred tax assets.
When estimating the risk of potential liabilities from disputes, the Directors rely on communications regarding the status of recovery procedures and disputes from the lawyers who represent the Company in litigation.
These estimates are determined taking into account the gradual development of the disputes, considering existing exemptions.
Estimates and assumptions are regularly reviewed and the effects of each change immediately reflected in the income statement.
• Amendment to IAS 7 "Disclosure Initiative" (published on 29 January 2016). The aim of the document is to provide some clarification to improve disclosure on financial liabilities.
In particular, the amendments require providing disclosures that enable the users of financial statements to understand changes in liabilities arising from financing activities.
• Amendment to IAS 12 "Recognition of Deferred Tax Assets for Unrealised Losses" (published on 19 January 2016). The aim of the document is to provide some clarification on the recognition of deferred tax assets on unrealised losses in the measurement of financial assets in the "Available for Sale" category upon the occurrence of certain circumstances and on the estimate of taxable income for future years.
The adoption of these amendments did not have any effect on the Company's separate financial statements.
IFRS and IFRIC accounting standards, amendments and interpretations approved by the European Union, not yet universally applicable and not adopted early by the Company at 31 December 2017
• Standard IFRS 15 – Revenue from Contracts with Customers (published on 28 May 2014 and supplemented with further clarifications published on 12 April 2016), which is scheduled to replace IAS 18 – Revenue and IAS 11 – Construction Contracts, as well as interpretations IFRIC 13 – Customer Loyalty Programmes, IFRIC 15 – Agreements for the Construction of Real Estate, IFRIC 18 – Transfers of Assets from Customers and SIC 31 – Revenues-Barter Transactions Involving Advertising Services.
The standard establishes a new revenue recognition model, which will apply to all contracts signed with customers except those falling within the application of other IAS/IFRS standards, such as leases, insurance contracts and financial instruments. The fundamental passages for the recognition of revenues according to the new model are:
The principle applies from 1 January 2018. The amendments to IFRS 15, Clarifications to IFRS 15 - Revenue from Contracts with Customers, were approved by the European Union on 6 November 2017.
On the basis of the analyses carried out, the directors expect that the application of IFRS 15 will have a minor impact on the amounts recorded as revenues and on the related disclosures in the Company's separate financial statements.
On the basis of the analyses carried out, the directors expect that the application of IFRS 9 will have a minor impact on the amounts and on the related disclosures in the Company's separate financial statements.
• Standard IFRS 16 – Leases (published on 13 January 2016), which will replace standard IAS 17 – Leases, as well as interpretations 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.
The new standard provides a new definition of lease and introduces a criterion based on the control (right of use) of an asset in order to distinguish the leasing contracts from the service contracts, identifying the discriminatory ones: the identification of the asset, the right of replacement of the same, the right to obtain substantially all of the economic benefits deriving from the use of the asset and the right to direct the use of the asset underlying the contract. The standard establishes a single model of recognition and measurement of the lease agreements for the lessee which requires the recognition of the asset to be leased (operating lease or otherwise) in assets offset by a financial debt, while also providing the opportunity not to recognise as leases the agreements whose subject matter are "low-value assets" and leases with a contract duration equal to or less than 12 months. By contrast, the Standard does not include significant changes for the lessors. The standard applies beginning on 1 January 2019 but early application is permitted, only for Companies that already applied IFRS 15 - Revenue from Contracts with Customers.
The directors expect that the application of IFRS 16 can have a significant impact on the amounts and on the relevant disclosures in the Company's separate statements. However, it is not possible to provide a reasonable estimate of the effects until the Company has completed a detailed analysis of the related contracts.
On the reference date of these separate financial statements, the competent bodies of the European Union have not yet concluded the approval process necessary for the adoption of the amendments and principles described below.
On 7 June 2017, IASB published the clarification document IFRIC 23 – Uncertainty over Income Tax Treatments. The document deals with uncertainties about the tax treatment of income taxes. The document requires that uncertainties in determining deferred tax assets and liabilities be reflected in the financial statements only when it is probable that the entity will pay or recover the amount in question. Moreover, the document does not contain any new disclosure requirement but emphasises that an entity will have to determine whether it will be necessary to disclose information on management considerations and on the uncertainty relating to tax accounting in accordance with IAS 1. The new interpretation applies from 1 January 2019, but early application is permitted.
Amendment to IFRS 9 "Prepayment Features with Negative Compensation (published on 12 October 2017). This document specifies the instruments that envisage early repayment that could comply with the "SPPI" test even if the "reasonable additional compensation" to be paid in the event of early repayment is a "negative compensation" for the lender. The amendment applies from 1 January 2019, but early application is permitted. The directors do not expect a significant effect on the Company's separate financial statements through the adoption of these changes.
| Property | Plant and equipment |
Other assets | Assets under construction |
Total | |
|---|---|---|---|---|---|
| COST | |||||
| AT 31 DECEMBER 2015 | 6,275 | 155,364 | 30,574 | 1,672 | 193,885 |
| Increases | 53 | 5,325 | 1,462 | 758 | 7,598 |
| Disposals | (1) | (2,982) | (236) | - | (3,219) |
| Reclassification | - | 684 | 19 | (1,003) | (300) |
| AT 31 DECEMBER 2016 | 6,327 | 158,391 | 31,819 | 1,427 | 197,964 |
| Increases | 56 | 5,347 | 1,770 | 1,785 | 8,958 |
| Disposals | - | (721) | (430) | (33) | (1,184) |
| Reclassification | 18 | 551 | 59 | (883) | (255) |
| AT 31 DECEMBER 2017 | 6,401 | 163,568 | 33,218 | 2,296 | 205,483 |
| AT 31 DECEMBER 2015 | 2,711 | 131,920 | 27,314 | - | 161,945 |
|---|---|---|---|---|---|
| Depreciations for the year | 176 | 6,200 | 1,702 | - | 8,078 |
| Eliminations for disposals | - | (2,973) | (178) | - | (3,151) |
| AT 31 DECEMBER 2016 | 2,887 | 135,147 | 28,838 | - | 166,872 |
| Depreciations for the year | 177 | 6,221 | 1,521 | - | 7,920 |
| Eliminations for disposals | - | (525) | (395) | - | (920) |
| AT 31 DECEMBER 2017 | 3,064 | 140,843 | 29,965 | - | 173,872 |
| AT 31 DECEMBER 2017 | 3,337 | 22,725 | 3,253 | 2,296 | 31,611 |
|---|---|---|---|---|---|
| AT 31 DECEMBER 2016 | 3,440 | 23,244 | 2,981 | 1,427 | 31,092 |
The breakdown of the net carrying value of Property was as follows:
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Land | 1,291 | 1,291 | - |
| Industrial buildings | 2,046 | 2,149 | (103) |
| TOTAL | 3,337 | 3,440 | (103) |
The main investments in the financial year were aimed at the further automation of production of light alloy valves and interconnection of production plants with management systems (Industry 4.0). Other investments were made in the production of presses for new burners. Investments in maintenance and replacement, so that production equipment is kept constantly up to date and efficient, are systematic. Decreases mainly relate to the disposal of machinery no longer in use.
Assets under construction include machinery under construction and advance payments to suppliers of capital equipment.
At 31 December 2017, the Company found no endogenous or exogenous indicators of impairment of its property, plant and equipment. As a result, the value of property, plant and equipment was not submitted to impairment testing.
| COST | |
|---|---|
| AT 31 DECEMBER 2015 | 6,675 |
| Increases | - |
| Disposals | - |
| AT 31 DECEMBER 2016 | 6,675 |
| Increases | - |
| Disposals | - |
| AT 31 DECEMBER 2017 | 6,675 |
| ACCUMULATED DEPRECIATIONS | |
| AT 31 DECEMBER 2015 | 4,838 |
| Depreciations for the year | 192 |
| AT 31 DECEMBER 2016 | 5,030 |
| Depreciations for the year | 191 |
| AT 31 DECEMBER 2017 | 5,221 |
| NET CARRYING VALUE | |
| AT 31 DECEMBER 2017 | 1,454 |
| AT 31 DECEMBER 2016 | 1,645 |
This item includes non-operating buildings owned by the Group. During the year this item did not undergo any changes except for depreciations for the year.
At 31 December 2017, the Company found no endogenous or exogenous indicators of impairment of its investment property. As a result, the value of investment property was not submitted to impairment testing.
| Patents, know-how and software |
Development costs | Other intangible assets | Total | |
|---|---|---|---|---|
| COST | ||||
| AT 31 DECEMBER 2015 | 6,113 | 4,676 | 1,807 | 12,596 |
| Increases | 108 | 313 | 53 | 474 |
| Reclassifications | 54 | (87) | 207 | 174 |
| Decreases | - | - | - | - |
| AT 31 DECEMBER 2016 | 6,275 | 4,902 | 2,067 | 13,244 |
| Increases | 243 | 441 | 161 | 845 |
| Reclassifications | 99 | 155 | 254 | |
| Decreases | (14) | (79) | (14) | (107) |
| AT 31 DECEMBER 2017 | 6,603 | 5,264 | 2,369 | 14,236 |
| AT 31 DECEMBER 2015 | 5,619 | 2,347 | 1,432 | 9,398 |
|---|---|---|---|---|
| Amortisation | 254 | 350 | 147 | 751 |
| Decreases | - | - | - | - |
| AT 31 DECEMBER 2016 | 5,873 | 2,697 | 1,579 | 10,149 |
| Amortisation | 242 | 341 | 148 | 731 |
| Decreases | (14) | - | - | (14) |
| AT 31 DECEMBER 2017 | 6,101 | 3,038 | 1,727 | 10,866 |
| AT 31 DECEMBER 2017 | 502 | 2,226 | 642 | 3,370 |
|---|---|---|---|---|
| AT 31 DECEMBER 2016 | 402 | 2,205 | 488 | 3,095 |
Intangible assets have a finite useful life and, as a result, are amortised throughout their life. The main investments in the year relate to the development of new products, mainly related to the expansion of the range of burners (research and development activities carried out during the financial year are set out in the Report on Operations). Software investments include the implementation of a production scheduler and the application development of the Group management system (SAP). Other intangible assets refer, in the main, to improvements to third-party leased assets.
At 31 December 2017, the Company found no endogenous or exogenous indicators of impairment of its intangible assets. As a result, the value of property, plant and equipment was not submitted to impairment testing.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| In subsidiaries | 49,417 | 50,039 | (622) |
| Other equity investments | 34 | 59 | (25) |
| TOTAL | 49,451 | 50,098 | (647) |
The change in equity investments in subsidiaries is broken down in the table below:
| SABAF IMMOBI LIARE |
FARINGOSI HINGES |
SABAF DO BRASIL |
SABAF U.S. | SABAF APPLIANCE COMPO NENTS (CHINA) |
SABAF A.C. TRADING (CHINA) |
SABAF TURKEY |
A.R.C. S.R.L. | TOTAL | |
|---|---|---|---|---|---|---|---|---|---|
| HISTORICAL COST | |||||||||
| AT 31 DECEMBER 2015 | 13,475 | 10,329 | 8,469 | 139 | 4,400 | 200 | 12,005 | 0 | 49,017 |
| Purchase of equity investments |
- | - | - | - | - | - | - | 4,800 | 4,800 |
| AT 31 DECEMBER 2016 | 13,475 | 10,329 | 8,469 | 139 | 4,400 | 200 | 12,005 | 4,800 | 53,817 |
| Purchase of equity investments |
- | - | - | - | - | - | - | - | 0 |
| AT 31 DECEMBER 2017 | 13,475 | 10,329 | 8,469 | 139 | 4,400 | 200 | 12,005 | 4,800 | 53,817 |
| PROVISION FOR WRITE-DOWNS | |||||||||
| AT 31 DECEMBER 2015 | 0 | 0 | 0 | 0 | 3,257 | 0 | 0 | 0 | 3,257 |
| Write-downs (Note 28) | - | - | - | - | 521 | - | - | - | 521 |
| AT 31 DECEMBER 2016 | 0 | 0 | 0 | 0 | 3,778 | 0 | 0 | 0 | 3,778 |
| Write-downs (Note 28) | - | - | - | - | 622 | - | - | - | 622 |
| AT 31 DECEMBER 2017 | 0 | 0 | 0 | 0 | 4,400 | 0 | 0 | 0 | 4,400 |
| NET CARRYING VALUE | |||||||||
| AT 31 DECEMBER 2017 | 13,475 | 10,329 | 8,469 | 139 | 0 | 200 | 12,005 | 4,800 | 49,417 |
| AT 31 DECEMBER 2016 | 13,475 | 10,329 | 8,469 | 139 | 622 | 200 | 12,005 | 4,800 | 50,039 |
PORTION OF SHAREHOLDERS' EQUITY (CALCULATED IN COMPLIANCE WITH IFRS)
| AT 31 DECEMBER 2017 | 30,061 | 6,248 | 10,409 | (79) | (60) | 251 | 16,449 | 3,200 | 66,479 |
|---|---|---|---|---|---|---|---|---|---|
| AT 31 DECEMBER 2016 | 30,027 | 5,546 | 10,628 | (25) | 683 | 266 | 14,805 | 3,025 | 64,955 |
| DIFFERENCE BETWEEN SHAREHOLDERS' EQUITY AND CARRYING VALUE | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| AT 31 DECEMBER 2017 | 16,586 | (4,081) | 1,940 | (218) | (60) | 51 | 4,444 | (1,600) | 17,062 |
| AT 31 DECEMBER 2016 | 16,552 | (4,783) | 2,159 | (164) | 61 | 66 | 2,800 | (1,775) | 14,916 |
In 2017, the Faringosi Hinges achieved very positive and better results, in terms of sales and profitability, both compared to the previous year and compared to the budget. The 2018-2022 forward plan, drafted at the beginning of 2018, envisages a further increase in sales. Profitability is expected to decline in 2018, following the devaluation of the dollar (the currency in which more than 40% of sales are denominated) and the increase in the price of steel, before gradually recovering in subsequent years. At 31 December 2017, Sabaf S.p.A. tested the carrying value of the equity investment for impairment, determining its recoverable value, considered to be equivalent to its usable value plus available liquidity, by discounting expected future cash flows in the forward plan drafted by the management. Cash flows for the period from 2018 to 2022 were augmented by the so-called terminal value, which expresses the operating flows that the investee is expected to generate from the sixth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 9.18% (7.76% in the impairment test conducted while drafting the separate financial statements at 31 December 2016) and a growth rate (g) of 1.50%, which is in line with historical data.
The recoverable value calculated on the basis of the above-mentioned assumptions and valuation techniques is € 12.279 million, compared with a carrying value of the equity investment of € 10.329 million; consequently, the value recorded for equity investment at 31 December 2017 was deemed recoverable.
The table below shows the changes in recoverable value depending on changes in the WACC discount rate and growth factor g:
| (€/000) | GROWTH RATE | |||||
|---|---|---|---|---|---|---|
| DISCOUNT RATE | 1.00% | 1.25% | 1.50% | 1.75% | 2.00% | |
| 8.18% | 13,466 | 13,888 | 14,341 | 14,830 | 15,358 | |
| 8.68% | 12,490 | 12,851 | 13,237 | 13,651 | 14,096 | |
| 9.18% | 11,635 | 11,847 | 12,279 | 12,634 | 13,013 | |
| 9.68% | 10,882 | 11,154 | 11,442 | 11,748 | 12,074 | |
| 10.18% | 10,213 | 10,451 | 10,703 | 10,969 | 11,252 |
In 2017, Sabaf do Brasil continued to obtain positive results, which improved compared with 2016. The decrease in shareholders' equity (converted into euros at the endof-year exchange rate) is entirely attributable to the devaluation of the Brazilian real.
The subsidiary Sabaf U.S. operates as a commercial support for North America. The difference between the carrying value and the shareholders' equity of the investee is attributable to the non-durable losses taking into consideration expected development on the North American market.
Sabaf Appliance Components (Kunshan) Co., Ltd. has been producing burners for the Chinese market since 2015. Furthermore, the company has performed the function as distributor on the Chinese market of Sabaf products manufactured in Italy and Turkey. Low production volumes have enabled the company to reach the break-even point in 2017. At 31 December 2017, the value of the equity investment decreased by € 622,000, zeroing the value of shareholders' equity at the end of the year, in that the loss was considered permanent.
Sabaf Appliance Components Trading (Kunshan) Co., Ltd., was founded during 2012 in order to perform the function as distributor. During 2015, this activity was centralised at Sabaf Appliance Components; however, the company went into liquidation; the process of liquidation will end in 2018.
Sabaf Turkey achieved extremely satisfactory results in 2017 as well. The conversion into euro of the shareholders' equity at the end of the financial year was affected by the strong devaluation of the Turkish lira at the end of 2017; however, the shareholders' equity remains higher than the carrying value of the equity investment.
In June 2016, the Company acquired the controlling share (70%) of A.R.C. s.r.l., leading company in the production of burners for professional cooking. The transaction allowed Sabaf to enter into a new sector, contiguous with the traditional sector of components for household gas cooking appliances, and to enhance the consolidated international presence of the Sabaf Group.
At 31 December 2017, the Company tested the carrying value of the equity investment for impairment, determining its recoverable value, considered to be equivalent to its usable value plus available liquidity, by discounting expected future cash flows in the forward plan drafted at the beginning of 2018. Cash flows for the period from 2018 to 2022 were augmented by the so-called terminal value, which expresses the operating flows that the investee is expected to generate from the fourth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 6.90% (5.79% in the impairment test carried out while drafting the separate financial statements at 31 December 2016) and a growth rate (g) of 1.50%, in line with last year.
The portion pertaining to Sabaf S.p.A. of the recoverable value calculated on the basis of the above-mentioned assumptions and valuation techniques is € 8.746 million (70% of total recoverable value, equal to € 12.495 million), compared with a carrying value of the equity investment of € 4.8 million; consequently, the carrying value recorded for equity investment at 31 December 2017 was deemed recoverable.
The table below shows the changes in recoverable value depending on changes in the WACC discount rate and growth factor g:
| (€/000) | GROWTH RATE | ||||
|---|---|---|---|---|---|
| DISCOUNT RATE | 1.00% | 1.25% | 1.50% | 1.75% | 2.00% |
| 5.90% | 13,929 | 14,531 | 15,201 | 15,951 | 16,798 |
| 6.40% | 12,692 | 13,176 | 13,709 | 14,299 | 14,957 |
| 6.90% | 11,667 | 12,063 | 12,495 | 12,970 | 13,493 |
| 7.40% | 10,804 | 11,133 | 11,490 | 11,879 | 12,303 |
| 7.90% | 10,067 | 10,345 | 10,643 | 10,967 | 11,317 |
As part of the acquisition of 70% of A.R.C. S.r.l., Sabaf S.p.A. signed with Loris Gasparini (current minority shareholder by 30% of A.R.C.) an agreement that aimed to regulate Gasparini's right to leave A.R.C. and the interest of Sabaf to acquire 100% of the shares after expiry of the term of five years from the signing of the purchase agreement of 24 June 2016, by signing specific option agreements. Therefore, the agreement envisaged specific option rights to purchase (by Sabaf) and sell (by Gasparini) exercisable as from 24 June 2021, the remaining shares of 30% of A.R.C., with strike prices contractually defined on the basis of final income parameters from A.R.C. at 31 December 2020.
The option for the purchase of the residual 30% of A.R.C. represents a derivative instrument; since the exercise price defined by contract was considered representative of the fair value of the portion that can be potentially acquired, no value was recorded in the separate financial statements ended 31 December 2017.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Financial receivables from subsidiaries | 1,668 | 1,897 | (229) |
| Escrow bank account | 180 | 240 | (60) |
| TOTAL | 1,848 | 2,137 | (289) |
At 31 December 2017 and at 31 December 2016, financial receivables from subsidiaries consist of an interest-bearing loan of USD 2 million, granted to the subsidiary Sabaf do Brasil with the aim of optimising the Group's exposure to foreign exchange rate risk and whose maturity, originally expected for 31 March 2017, was postponed to 14 March 2019.
As part of the acquisition of 70% of A.R.C., Sabaf S.p.A. deposited in an escrow account the total amount of € 300,000. This amount was deducted from the consideration agreed to guarantee the commitments assumed by the sellers and will be released in favour of the sellers at constant rates in 4 years (Note 15). At 31 December 2017, the portion due beyond 12 months amounted to € 180,000.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Commodities | 8,795 | 7,455 | 1,340 |
| Semi-processed goods | 9,115 | 9,310 | (195) |
| Finished products | 8,789 | 8,773 | 16 |
| Obsolescence provision | (1,930) | (2,045) | 115 |
| TOTAL | 24,769 | 23,493 | 1,276 |
The value of final inventories at 31 December 2017 increased compared to the end of the previous year to meet the higher volumes of activity. The obsolescence provision is mainly allocated for hedging the obsolescence risk, quantified on the basis of specific analyses carried out at the end of the year on slow-moving and non-moving products, and refers to raw materials for € 453,000, semi-finished products for € 536,000 and finished products for € 941,000.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Total trade receivables | 31,754 | 28,065 | 3,689 |
| Bad debt provision | (600) | (600) | 0 |
| NET TOTAL | 31,154 | 27,465 | 3,689 |
At 31 December 2017, trade receivables included balances totalling USD 3,656,000, booked at the EUR/USD exchange rate in effect on 31 December 2017, i.e. 1.1993. The amount of trade receivables recognised in the financial statements includes approximately € 22 million of insured receivables (€ 14 million at 31 December 2016).
The bad debt provision is considered adequate to cover the credit risk at the end of the reporting period, unchanged from the previous year.
Trade receivables at 31 December 2017 were higher than at the end of 2016 subsequent to higher sales. There were no significant changes in average payment terms agreed with customers.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Current receivables (not past due) | 28,591 | 24,378 | 4,213 |
| Outstanding up to 30 days | 1,524 | 2,242 | (718) |
| Outstanding from 31 to 60 days | 754 | 184 | 570 |
| Outstanding from 61 to 90 days | 519 | 64 | 455 |
| Outstanding for more than 90 days | 366 | 1,197 | (831) |
| TOTAL | 31,754 | 28,065 | 3,689 |
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| For income tax | 1,644 | 2,075 | (431) |
| For VAT and other sales taxes |
586 | 402 | 184 |
| TOTAL | 2,230 | 2,477 | (247) |
The income tax receivables derives for € 1,153,000 from the full deductibility of IRAP from IRES relating to the expenses incurred for employees for the 2006-2011 period (Italian Legislative Decree 201/2011), for which an application for a refund was presented and, for the residual part, to the payments on account on 2017 income, for the part exceeding the tax to be paid.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Credits to be received from suppliers |
351 | 678 | (327) |
| Advances to suppliers | 28 | 54 | (26) |
| Due from INAIL | 21 | 58 | (37) |
| Other | 322 | 249 | 73 |
| TOTAL | 722 | 1,039 | (317) |
At 31 December 2017, credits to be received from suppliers included € 248,000 related to the relief due to the Company as an energy-intensive business (so-called "energy-intensive bonuses") for the years 2016 and 2017. "Energy-intensive bonuses" due for the years 2014 and 2015 were regularly collected during 2017.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Financial receivables from subsidiaries |
1,000 | 1,000 | - |
| Escrow bank account (Note 5) |
60 | 60 | - |
| Interest rates derivatives |
7 | - | 7 |
| TOTAL | 1,067 | 1,060 | 7 |
At 31 December 2017 and at 31 December 2016, financial receivables from subsidiaries consist of an interest-bearing loan of € 1 million to Sabaf Appliance Components Co., Ltd. to support the Chinese subsidiary's working capital. The loan has a term of 12 months and was renewed in December 2017 for the same period. The receivable is considered recoverable in that the Chinese subsidiary is expected to generate sufficient cash flows to repay this loan in future years.
The item Cash and cash equivalents, equal to € 2,697,000 at 31 December 2017 (€ 1,797,000 at 31 December 2016) refers almost exclusively to bank current account balances.
At 31 December 2017, the Company's share capital consists of 11,533,450 shares with a par value of € 1.00 each. The share capital paid in and subscribed did not change during the year.
During the financial year, Sabaf S.p.A. acquired 148,630 treasury shares at an average unit price of € 14.20; there have been no sales.
At 31 December 2017, the Company held 381,769 treasury shares, equal to 3.31% of share capital (233,139 treasury shares at 31 December 2016), reported in the financial statements as an adjustment to shareholders' equity at a unit value of € 11.81 (the market value at year-end was € 19.91). There were 11,151,681 outstanding shares at 31 December 2017 (11,300,311 at 31 December 2016).
| 31.12.2017 | 31.12.2016 | |||
|---|---|---|---|---|
| current | non current | current | non current | |
| Unsecured loans | 5,982 | 16,298 | 6,656 | 17,281 |
| Short-term bank loans |
10,846 | - | 7,397 | - |
| Sabaf Turkey loan | 2,100 | - | - | - |
| Advances on bank receipts or invoices |
- | - | 2 | - |
| TOTAL | 18,928 | 16,298 | 14,055 | 17,281 |
During the financial year, the Company signed an unsecured loan totalling € 5 million repayable in five years in quarterly fixed instalments, at a fixed rate of 1.02%.
Two of the outstanding unsecured loans amounting to € 9 million at 31 December 2017 have covenants, defined with reference to the consolidated financial statements at the end of the reporting period, as specified below:
All outstanding bank loans are denominated in euro, with the exception of a short-term loan of USD 2 million.
As part of the Group's financial management, in 2017 a loan agreement was also signed with the Turkish subsidiary for a total amount of € 2,100,000, expiring on 21 September 2018.
Note 36 provides information on financial risks, pursuant to IFRS 7.
| 31.12.2017 | 31.12.2016 | |||
|---|---|---|---|---|
| current | non current | current | non current | |
| Payables to A.R.C. shareholders |
60 | 180 | 60 | 240 |
| Currency derivatives | - | - | 201 | - |
| Derivative instruments on interest rates |
15 | - | 37 | - |
| TOTAL | 75 | 180 | 298 | 240 |
The payable to the A.R.C. shareholders of € 240,000 at 31 December 2017 is related to the part of the price still to be paid to the sellers, which was deposited on an escrow account (Note 5) and will be released in favour of the sellers at constant rates in 4 years, in accordance with contractual agreements and guarantees issued by the sellers.
Other financial liabilities also include the negative fair value of two IRSs hedging rate risks of unsecured loans pending, for residual notional amounts of approximately € 5.4 million and expiry until 31 December 2021. Financial expenses in the same amount were recognised in the income statement.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| Post-employment bene fit reserve |
2,200 | 2,436 | (236) |
| TOTAL | 2,200 | 2,436 | (236) |
Following the revision of IAS 19 - Employee benefits, from 1 January 2013 all actuarial gains or losses are recorded immediately in the comprehensive income statement ("Other comprehensive income") under the item "Actuarial income and losses".
Post-employment benefits are calculated as follows:
| 31.12.2017 | 31.12.2016 | |
|---|---|---|
| Discount rate | 1.15% | 1.15% |
| Inflation | 1.80% | 1.75% |
| 31.12.2017 | 31.12.2016 | |
|---|---|---|
| Mortality rate | ISTAT 2016 M/F | ISTAT 2010 M/F |
| Disability rate | INPS 1998 M/F | INPS 1998 M/F |
| Staff turnover | 6% | 6% |
| Advance payouts | 5% per year | 5% per year |
| Retirement age | pursuant to legislation in force on 31 December 2017 |
pursuant to legislation in force on 31 December 2016 |
| 31.12.2016 | PROVISIONS | UTILISATION | RELEASE OF EXCESS | 31.12.2017 | |
|---|---|---|---|---|---|
| Reserve for agents' indemnities | 213 | 15 | (11) | (18) | 199 |
| Product guarantee fund | 60 | 11 | (11) | - | 60 |
| Provision for risks on equity investments |
- | 60 | - | - | 60 |
| Reserve for legal risks | 50 | - | - | - | 50 |
| TOTAL | 323 | 86 | (22) | (18) | 369 |
The reserve for agents' indemnities covers amounts payable to agents if the Company terminates the agency relationship.
The product guarantee fund covers the risk of returns or charges by customers for products already sold.
The provision for risks on equity investments was set-aside to cover future outlays to restore the shareholders' equity of the Chinese subsidiary Sabaf Appliance Components, which was negative at 31 December 2017.
The reserve for legal risks is allocated for disputes of a modest size.
The provisions booked to the provisions for risks, which represent the estimate of future payments made based on historical experience, have not been discounted because the effect is considered negligible.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| TOTAL | 16,569 | 16,010 | 559 |
Average payment terms did not change versus the previous year. The amount of trade payables in currencies other than the euro is not significant. At 31 December 2017, there were no overdue payables of a significant amount and the Company did not receive any injunctions for overdue payables.
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| To inland revenue for IRPEF tax deductions | 569 | 642 | (73) |
| Other tax payables | 54 | - | 54 |
| TOTAL | 623 | 642 | (19) |
| 31.12.2017 | 31.12.2016 | CHANGE | |
|---|---|---|---|
| To employees | 3,931 | 3,472 | 459 |
| To social security institutions | 2,063 | 1,937 | 126 |
| Advances from customers | 64 | 108 | (44) |
| To agents | 165 | 241 | (76) |
| Other current payables | 227 | 31 | 196 |
| TOTAL | 6,450 | 5,789 | 661 |
At the beginning of 2018, payables due to employees and social security institutions were paid in accordance with the scheduled expiry dates.
| 31.12.2017 | 31.12.2016 | |
|---|---|---|
| Deferred tax assets | 3,455 | 3,315 |
| Deferred tax liabilities | (68) | (129) |
| NET POSITION | 3,387 | 3,186 |
The table below analyses the nature of the temporary differences that determine the recognition of deferred tax liabilities and assets and their changes during the year and the previous year.
| Amortisation and leasing |
Provisions and value adjustments |
Fair value of derivative instruments |
Goodwill | Actuarial post employment benefit reserve evaluation |
Other tempora ry differences |
TOTAL | |
|---|---|---|---|---|---|---|---|
| AT 31 DECEMBER 2015 |
353 | 793 | (19) | 1,771 | 170 | 67 | 3,135 |
| To the income statement | 40 | (23) | 76 | - | - | (50) | 43 |
| To shareholders' equity | - | - | - | - | 8 | - | 8 |
| AT 31 DECEMBER 2016 |
393 | 770 | 57 | 1,771 | 178 | 17 | 3,186 |
| To the income statement | (46) | 149 | (55) | - | (2) | 172 | 218 |
| To shareholders' equity | - | - | - | - | (17) | - | (17) |
| AT 31 DECEMBER 2017 |
347 | 919 | 2 | 1,771 | 159 | 189 | 3,387 |
Deferred tax assets relating to goodwill refer to the exemption of the value of the investment in Faringosi Hinges s.r.l. made in 2011 pursuant to Italian law Decree 98/2011. The future tax benefit can be made in ten annual portions starting in 2018.
As required by the CONSOB memorandum of 28 July 2006, we disclose that the Company's net financial position is as follows:
| 31.12.2017 | 31.12.2016 | CHANGE | ||
|---|---|---|---|---|
| A. | Cash (Note 11) | 5 | 4 | 1 |
| B. | Positive balances of unrestricted bank accounts (Note 11) | 2,692 | 1,793 | 899 |
| C. | Other cash equivalents | - | - | - |
| D. | LIQUIDITY (A+B+C) | 2,697 | 1,797 | 900 |
| E. | CURRENT FINANCIAL RECEIVABLES | 1,067 | 1,060 | 7 |
| F. | Current bank payables (Note 14) | 12,946 | 7,399 | 5,547 |
| G. | Current portion of non-current debt (Note 14) | 5,982 | 6,656 | (674) |
| H. | Other current financial payables (Note 15) | 75 | 298 | (223) |
| I. | CURRENT FINANCIAL DEBT (F+G+H) | 19,003 | 14,353 | 4,650 |
| J. | NET CURRENT FINANCIAL POSITION (I-D-E) | 15,239 | 11,496 | 3,743 |
| K. | Non-current bank payables (Note 14) | 16,298 | 17,281 | (983) |
| L. | Other non-current financial payables | 180 | 240 | (60) |
| M. | NON-CURRENT FINANCIAL DEBT (K+L) | 16,478 | 17,521 | (1,043) |
| N. | NET FINANCIAL DEBT (J+M) | 31,717 | 29,017 | 2,700 |
The cash flow statement shows changes in cash and cash equivalents (letter D of this schedule).
In 2017, sales revenues totalled € 115,687,000, up by € 14,164,000 (+14%) compared with 2016.
| 2017 | % | 2016 | % | % CHANGE | |
|---|---|---|---|---|---|
| Italy | 29,587 | 25.6% | 31,431 | 30.9% | -5.9% |
| Western Europe | 8,920 | 7.7% | 6,868 | 6.8% | +29.9% |
| Eastern Europe and Turkey | 35,655 | 30.8% | 27,365 | 26.9% | +30.3% |
| Asia and Oceania (excluding Middle East) |
9,570 | 8.3% | 7,064 | 7.0% | +35.5% |
| Central and South America | 11,331 | 9.8% | 10,373 | 10.2% | +9.2% |
| Middle East and Africa | 12,703 | 11.0% | 11,254 | 11.1% | +12.9% |
| North America and Mexico | 7,921 | 6.8% | 7,168 | 7.1% | +10.5% |
| TOTAL | 115,687 | 100% | 101,523 | 100% | +14.0% |
| 2017 | % | 2016 | % | % CHANGE | |
|---|---|---|---|---|---|
| Brass valves | 5,992 | 5.2% | 9,002 | 8.9% | -33.4% |
| Light alloy valves | 39,219 | 33.9% | 32,406 | 31.9% | +21.0% |
| Thermostats | 7,365 | 6.4% | 7,690 | 7.6% | -4.2% |
| TOTAL VALVES AND THERMOSTATS |
52,576 | 45.4% | 49,098 | 48.4% | 7.1% |
| Standard burners | 25,127 | 21.7% | 21,483 | 21.2% | +17.0% |
| Special burners | 24,136 | 20.9% | 19,438 | 19.1% | +24.2% |
| TOTAL BURNERS | 49,263 | 42.6% | 40,921 | 40.3% | +20.4% |
| Accessories and other revenues |
13,848 | 11.9% | 11,504 | 11.3% | +20.4% |
| TOTAL | 115,687 | 100% | 101,523 | 100.0% | +14.0% |
An analysis of sales by product category shows the strong growth of special burners, the family where product innovation has been strongest in recent years. The trend in sales of light alloy valves, which have now almost completely replaced brass valves, was also very positive. All other product lines also recorded good growth rates, with the exception of thermostats.
In 2017, all markets recorded double-digit growth rates; Italy, where sales are slightly down due to the sharp reduction in the production of domestic appliances, is an exception. Very positive sales growth rates have been recorded in other European markets, where Sabaf is consolidating its leadership. The Middle East market showed a strong recovery compared to 2016; Asia, North and South America confirmed a positive underlying trend.
Average sales prices in 2017 were on average 0.7% lower compared with 2016.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Sale of trimmings | 1,457 | 958 | 499 |
| Services to subsidiaries |
378 | 154 | 224 |
| Contingent income | 97 | 136 | (39) |
| Rental income | 89 | 85 | 4 |
| Use of provisions for risks and charges |
39 | 88 | (49) |
| Services to parent company |
10 | 10 | - |
| Other income | 578 | 848 | (270) |
| TOTAL | 2,648 | 2,279 | 369 |
The increase in income from the sale of trimmings is directly related to higher produc-
Services to subsidiaries and to the parent company refer to administrative, commercial
Other income includes the charge to customers for sharing the development and indu-
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Outsourced processing |
8,681 | 7,587 | 1,094 |
| Property rental | 3,974 | 3,995 | (21) |
| Electricity and natural gas |
3,314 | 3,526 | (212) |
| Maintenance | 3,296 | 2,813 | 483 |
| Advisory services | 1,676 | 1,377 | 299 |
| Transport and export expenses |
1,408 | 1,134 | 274 |
| Directors' fees | 881 | 1,061 | (180) |
| Insurance | 444 | 562 | (118) |
| Commissions | 533 | 545 | (12) |
| Travel expenses and allowances |
550 | 478 | 72 |
| Waste disposal | 358 | 352 | 6 |
| Canteen | 296 | 282 | 14 |
| Temporary agency workers |
180 | 99 | 81 |
| Other costs | 2,013 | 2,221 | (208) |
| TOTAL | 27,604 | 26,032 | 1,572 |
strialisation of new products.
tion volumes and to the increase in the price of raw materials.
and technical services within the scope of the Group.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Commodities and outsourced components |
42,973 | 33,692 | 9,281 |
| Consumables | 3,582 | 3,183 | 399 |
| TOTAL | 46,555 | 36,875 | 9,680 |
In 2017, the effective purchase prices of the main raw materials (aluminium alloys, steel and brass) were on average higher than in 2016, with a negative impact of 0.8% of sales. Consumption (purchases plus change in inventories) as a percentage of sales was 41.3% in 2017, compared with 37.5% in 2016.
The higher costs for outsourced processing were related to the increase in production volumes in Italy. The reduction in energy costs is due to the recognition of "energyintensive bonuses" for 2016 and 2017 for a total of € 248,000, of which € 78,000 relating to the "2016 energy-intensive bonuses" which was not recognised in the 2016 financial statements because the collectability was uncertain at the end of the reporting period. The increase in maintenance costs was due to activities in progress for the ongoing adaptation of plants, machinery and equipment. Other costs included expenses for the registration of patents, waste disposal, cleaning, leasing third-party assets and other minor charges.
Costs for advisory services related to technical (€ 414,000), sales (€ 342,000) and legal, administrative and general (€ 920,000) services.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Salaries and wages | 19,540 | 18,322 | 1,218 |
| Social Security costs |
6,249 | 5,959 | 290 |
| Temporary agency workers |
1,477 | 845 | 632 |
| Post-employment benefit reserve and other costs |
1,468 | 1,256 | 212 |
| TOTAL | 28,734 | 26,382 | 2,352 |
Average of the Company headcount in 2017 totalled 514 employees (394 blue-collars, 110 white-collars and supervisors, 10 managers), compared with 543 in 2016 (424 bluecollars, 110 white-collars and supervisors, 9 managers). The average number of temporary staff, with supply contract, was 42 in 2017 (26 in 2016).
During the financial year, the Company made only negligible use of the solidarity contract and temporary lay-off scheme, whereas in 2016 these institutions, used in periods characterised by low production requirements, made it possible to save personnel costs of € 689,000.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Losses and write-downs of trade receivables |
49 | 171 | (122) |
| Non-income related taxes and duties |
238 | 181 | 57 |
| Contingent liabilities | 138 | 56 | 82 |
| Provisions for risks | 26 | 85 | (59) |
| Other operating expenses |
264 | 154 | 110 |
| TOTAL | 715 | 647 | 68 |
Non-income taxes mainly include IMU, TASI and the tax for the disposal of urban solid waste. Provisions for risks and other provisions relate to sums set aside for the risks described in Note 17.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Write-down of Sabaf Appliance Components |
(622) | (521) | (101) |
| Allocation to risk provisions on equity investments |
(60) | - | (60) |
| TOTAL | (682) | (521) | (161) |
The write-down of the equity investment in Sabaf Appliance Components and the allocation to the relevant provision are commented on in Note 4 and 17, to which reference is made.
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Interest paid to banks | 244 | 241 | 3 |
| Banking expenses | 209 | 229 | (20) |
| Other financial expense |
29 | 43 | (14) |
| TOTAL | 482 | 513 | (31) |
During the 2017 financial year, the Company reported net foreign exchange losses of € 88,000 (net loss of € 48,000 in 2016).
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Dividends received from Sabaf Immobiliare |
1,500 | - | 1,500 |
| Other profits from equity investments |
3 | - | 3 |
| TOTAL | 1,503 | - | 1,503 |
| 2017 | 2016 | CHANGE | |
|---|---|---|---|
| Current taxes | 1,791 | 1,314 | 477 |
| Deferred tax assets and liabilities |
(219) | (43) | (176) |
| Taxes related to previous financial years |
(502) | (137) | (365) |
| TOTAL | 1,070 | 1,134 | (64) |
Current taxes include IRES of € 1,436,000 and IRAP of € 355,000 (€ 1,034,000 and € 280,000 respectively in 2016).
Reconciliation between the tax burden booked in the financial statements and the theoretical tax burden calculated according to the statutory tax rates currently in force in Italy is shown in the following table:
| 2017 | 2016 | |
|---|---|---|
| Theoretical income tax | 2,177 | 988 |
| Permanent tax differences | (133) | 4 |
| Taxes related to previous financial years | 88 | (131) |
| "Patent box" tax effect | (1,151) | |
| "Superammortamento" tax benefit | (179) | - |
| Other differences | 9 | 7 |
| IRES (CURRENT AND DEFERRED) | 811 | 868 |
| IRAP (current and deferred) | 259 | 266 |
| TOTAL | 1,070 | 1,134 |
Theoretical taxes were calculated applying the current corporate income tax (IRES) rate, i.e. 24% (27.50% in 2016), to the pre-tax result. IRAP is not taken into account for the purpose of reconciliation because, as it is a tax with a different assessment basis from pre-tax profit, it would generate distorting effects.
Following the prior agreement signed with the Revenue Agency, in 2017 the Company recognised the tax benefit relating to the Patent Box for the three-year period 2015 to 2017, for a total of € 1,324,000 (€ 1,151,000 for IRES and € 173,000 for IRAP), of which € 772,000 for 2015 and 2016 (Note 38) and € 552,000 for 2017.
No significant tax disputes were pending at 31 December 2017.
On 31 May 2017, shareholders were paid an ordinary dividend of € 0.48 per share (total dividends of € 5,384,000).
The Directors have recommended payment of a dividend of € 0.55 per share this year. This dividend is subject to approval of shareholders in the annual Shareholders' Meeting and was not included under liabilities in these financial statements.
The dividend proposed is scheduled for payment on 30 May 2018 (ex-date 28 May and record date 29 May).
Within the Sabaf Group, the Company operates exclusively in the gas parts segment for household cooking. The information in the consolidated financial statements is divided between the various segments in which the Group operates.
In accordance with IFRS 7, a breakdown of the financial instruments is shown below, among the categories set forth in IAS 39.
| 31.12.2017 | 31.12.2016 | |
|---|---|---|
| FINANCIAL ASSETS | ||
| Income statement fair value | ||
| • Derivative cash flow hedges (on currency) |
7 | - |
| AMORTISED COST | ||
| • Cash and cash equivalents | 2,697 | 1,797 |
| • Trade receivables and other receivables |
31,876 | 28,505 |
| • Non-current loans | 1,668 | 1,897 |
| • Current loans | 1,000 | 1,000 |
| • Other financial assets | 240 | 300 |
Income statement fair value
| • Derivative cash flow hedges (on currency) |
- | 201 |
|---|---|---|
| • Derivative cash flow hedges (on interest rates) |
15 | 37 |
| • Loans | 35,226 | 31,336 |
|---|---|---|
| • Other financial liabilities | 240 | 300 |
| • Trade payables | 16,569 | 16,010 |
The Company is exposed to financial risks related to its operations, mainly:
It is part of Sabaf's policies to hedge exposure to changes in prices and in fluctuations in exchange and interest rates via derivative financial instruments. Hedging is done using forward contracts, options or combinations of these instruments. Generally speaking, the maximum duration covered by such hedging does not exceed 18 months. The Company does not enter into speculative transactions. When the derivatives used for hedging purposes meet the necessary requisites, hedge accounting rules are followed.
Trade receivables involve producers of domestic appliances, multinational groups and smaller manufacturers in a few or single markets. The Company assesses the creditworthiness of all its customers at the start of supply and systemically on at least an annual basis. After this assessment, each customer is assigned a credit limit.
A credit insurance policy is in place, which guarantees cover for approximately 70% of trade receivables.
Credit risk relating to customers operating in emerging economies is generally attenuated by the expectation of revenue through letters of credit.
The main exchange rate to which the Company is exposed is the euro/USD in relation to sales made in dollars (mainly in North America) and, to a lesser extent, to some purchases (mainly from Asian manufacturers). Sales in US dollars represented 12% of total revenue in 2017, while purchases in dollars represented 5% of total revenue. During the year, operations in dollars were partially hedged through forward sales contracts; no currency derivatives were pending at 31 December 2017.
With reference to financial assets and liabilities in US dollars at 31 December 2017, a hypothetical and immediate revaluation of 10% of the euro against the dollar would have led to a loss of € 210,000.
At 31 December 2017, gross financial debt of the Company was at a floating rate for approximately 35% and at a fixed rate for approximately 65%; to reach an optimum mix of floating and fixed rates in the structure of the loans, the Company also used derivative financial instruments. At 31 December 2017, three interest rate swap (IRS) contracts totalling € 9.4 million were in place, mirrored in mortgages with the same residual debt, through which the Company transformed the floating rate of the mortgages into fixed rate. Considering the IRS in place, at the end of 2017, the fixed-rate portion amounted to approximately 90% of the total financial debt. The derivative contracts were not designated as a cash flow hedge and were therefore recognised using the "fair value in the income statement" method.
At 31 December 2017, the sensitivity analysis concerned financial leases and the floating rate portion of the short-term financial debt. The Company is not exposed to interest rate risk with regard to medium/long-term bank debt, since the floating rate of loans has been transformed into a fixed rate through the interest rate swap contracts in place.
With reference to financial assets and liabilities at variable rate at 31 December 2017 and 31 December 2016, a hypothetical increase (decrease) in the interest rate of 100 base points versus the interest rates in effect at the same date – all other variables being equal - would lead to the following effects:
| 31.12.2017 | 31.12.2016 | |
|---|---|---|
| FINANCIAL EXPENSES |
FINANCIAL EXPENSES |
|
| Increase of 100 base points |
31 | 20 |
| Decrease of 100 base points |
(31) | - |
A significant portion of the purchase costs of the company is represented by brass and aluminium alloys. Sales prices of products are generally renegotiated annually; as a result, the Company is unable to immediately pass on to customers any changes in the prices of commodities during the year. The Company protects itself from the risk of changes in the price of brass and aluminium with supply contracts signed with suppliers for delivery up to twelve months in advance or, alternatively, with derivative financial instruments. In 2017 and 2016, the Company did not use financial derivatives on commodities. To stabilise the rising costs of commodities, Sabaf preferred to execute transactions on the physical market, fixing prices with suppliers for immediate and deferred delivery.
The Group operates with a low debt ratio (net financial debt / shareholders' equity at 31 December 2017 of 34%, net financial debt / EBITDA of 1.81) and has unused short-term lines of credit. To minimise the risk of liquidity, the Administration and Finance Department:
Below is an analysis by expiration date of financial payables at 31 December 2017 and 31 December 2016:
| AT 31 DECEMBER 2017 | |||||||
|---|---|---|---|---|---|---|---|
| Carrying value | Contractual financial flows |
Within 3 months |
From 3 months to 1 year |
From 1 to 5 years |
More than 5 years |
||
| Unsecured loans | 22,280 | 22,676 | 1,537 | 4,612 | 16,527 | - | |
| Short-term bank loans | 10,846 | 10,846 | 10,846 | - | - | - | |
| Short-term Sabaf Turkey loan | 2,100 | 2,118 | - | 2,118 | - | - | |
| Payables to ARC shareholders | 240 | 240 | - | 60 | 180 | - | |
| TOTAL FINANCIAL PAYABLES | 35,466 | 35,862 | 12,383 | 6,772 | 16,707 | 0 | |
| Trade payables | 16,569 | 16,569 | 15,615 | 954 | - | - | |
| TOTAL | 52,035 | 52,431 | 27,998 | 7,726 | 16,707 | 0 |
| AT 31 DECEMBER 2016 | |||||||
|---|---|---|---|---|---|---|---|
| Carrying value | Contractual financial flows |
Within 3 months |
From 3 months to 1 year |
From 1 to 5 years |
More than 5 years |
||
| Unsecured loans | 23,937 | 24,388 | 1,709 | 5,129 | 17,550 | - | |
| Short-term bank loans | 7,399 | 7,399 | 5,399 | 2,000 | - | - | |
| Payables to ARC shareholders | 300 | 300 | - | 60 | 240 | - | |
| TOTAL FINANCIAL PAYABLES | 31,636 | 32,087 | 7,108 | 7,189 | 17,790 | 0 | |
| Trade payables | 16,010 | 16,010 | 15,373 | 637 | - | - | |
| TOTAL | 47,646 | 48,097 | 22,481 | 7,826 | 17,790 | 0 |
The various due dates are based on the period between the end of the reporting period and the contractual expiration date of the commitments, the values indicated in the table correspond to non-discounted cash flows. Cash flows include the shares of principal and interest; for floating rate liabilities, the shares of interest are determined based on the value of the reference parameter at the end of the reporting period increased by the spread set forth in each contract.
The revised IFRS 7 requires that financial instruments reported in the statement of financial position at fair value be classified based on a hierarchy that reflects the significance of the input used in determining the fair value. IFRS 7 makes a distinction between the following levels:
The following table shows the assets and liabilities valued at fair value at 31 December 2017, by hierarchical level of fair value assessment.
| LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL | |
|---|---|---|---|---|
| Other financial assets (derivatives on interest rates) |
- | 7 | - | 7 |
| Other financial liabilities (derivatives on interest rates) |
- | (15) | - | (15) |
| Option on minorities A.R.C. | - | - | - | - |
| TOTAL ASSETS AND LIABILITIES AT FAIR VALUE |
0 | (8) | 0 | (8) |
The table below illustrates the impact of all transactions between Sabaf S.p.A. and other related parties on the balance sheet and income statement items and related parties, with the exception of the directors' fees, auditors and key management personnel which is stated in the Report on Remuneration.
| TOTAL 2017 | SUBSIDIARIES | GIUSEPPE SALERI SAPA |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Non-current financial assets | 1,848 | 1,668 | - | - | 1,668 | 90.26% |
| Trade receivables | 31,154 | 1,209 | - | - | 1,209 | 3.88% |
| Tax receivables | 2,230 | - | 1,084 | - | 1,084 | 48.60% |
| Current financial assets | 1,785 | 1,000 | - | - | 1,000 | 56.02% |
| Trade payables | 16,573 | 510 | - | 2 | 512 | 3.09% |
| Current financial payables | 2,100 | 2,100 | - | - | 2,100 | 100% |
| TOTAL 2016 | SUBSIDIARIES | GIUSEPPE SALERI SAPA |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Non-current financial assets | 2,137 | 1,897 | - | - | 1,897 | 88.77% |
| Trade receivables | 27,465 | 1,192 | - | - | 1,192 | 4.34% |
| Tax receivables | 2,477 | - | 1,084 | - | 1,084 | 43.76% |
| Current financial assets | 1,060 | 1,000 | - | - | 1,000 | 94.34% |
| Trade payables | 16,010 | 104 | - | 2 | 106 | 0.66% |
| TOTAL 2017 | SUBSIDIARIES | GIUSEPPE SALERI SAPA |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Revenue | 115,687 | 10,239 | - | - | 10,239 | 8.85% |
| Other income | 2,648 | 414 | 10 | - | 424 | 16% |
| Materials | 36,556 | 1,548 | - | - | 1,548 | 4.24% |
| Services | 27,602 | 3,966 | - | 20 | 3,987 | 14.44% |
| Capital gains on non-current assets | 98 | 97 | - | - | 97 | 99.58% |
| Write-downs of non-current assets | 682 | 682 | - | - | 682 | 100% |
| Financial income | 89 | 80 | - | - | 80 | 89.89% |
| Financial expenses | 482 | 2 | - | - | 2 | 0.46% |
| TOTAL 2016 | SUBSIDIARIES | GIUSEPPE SALERI SAPA |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Revenue | 101,523 | 6,680 | - | - | 6,680 | 6.58% |
| Other income | 2,279 | 399 | 10 | - | 409 | 17.95% |
| Materials | 36,895 | 916 | - | - | 916 | 2.48% |
| Services | 26,032 | 4,129 | - | 22 | 4,151 | 15.95% |
| Capital gains on non-current assets | 87 | 66 | - | - | 66 | 75.86% |
| Write-downs of non-current assets | 521 | 521 | - | - | 521 | 100% |
| Financial income | 85 | 82 | - | - | 82 | 96.47% |
Relations with subsidiaries mainly consist of:
Transactions with the shareholder, Giuseppe Saleri S.a.p.A., comprise:
Related-party transactions are regulated by specific contracts regulated at arm's length conditions.
Pursuant to CONSOB memorandum of 28 July 2006, the following section describes and comments on significant non-recurring events, the consequences of which are reflected in the economic, equity and financial results for the year:
| Sharehol ders' equity |
Net Profit | Net financial debt |
Cash flows |
|
|---|---|---|---|---|
| FINANCIAL STATEMENT VALUES (A) |
92,087 | 8,001 | 31,717 | 900 |
| Recognition of "Patent box" tax benefit related to 2015 and 2016 (B) |
(772) | (772) | - | - |
| FINANCIAL STATEMENT NOTIONAL VALUE (A+B) |
91,315 | 7,229 | 31,717 | 900 |
As described in Note 33, in these separate financial statements the Company recognised the tax benefit relating to the Patent Box for the three-year period 2015 to 2017; the share relating to previous years is considered non-recurring and is therefore shown in the table above.
Pursuant to CONSOB memorandum of 28 July 2006, the Company declares that no atypical and/or unusual transactions as defined by the CONSOB memorandum were executed during 2017.
Sabaf S.p.A. also issued sureties to guarantee mortgage loans granted by banks to employees for a total of € 5,145,000 (€ 5,510,000 at 31 December 2016).
Fees to directors, statutory auditors and executives with strategic responsibilities are described in the Report on Remuneration that will be presented to the shareholders' meeting called to approve these separate financial statements.
At 31 December 2017, there were no equity-based incentive plans for the Company's directors and employees.
| Company name | Registered offices | Share capital at 31 December 2017 |
Shareholders | Ownership % | Shareholders' equity at 31 December 2017 |
2017 profit (loss) |
|---|---|---|---|---|---|---|
| Faringosi Hinges s.r.l. | Ospitaletto (BS) | € 90,000 | Sabaf S.p.A. | 100% | € 6,248,113 | € 695,664 |
| Sabaf Immobiliare s.r.l. | Ospitaletto (BS) | € 25,000 | Sabaf S.p.A. | 100% | € 23,582,409 | € 1,673,079 |
| Sabaf do Brasil Ltda | Jundiaì (Brazil) | BRL 24,000,000 | Sabaf S.p.A. | 100% | BRL 41,353,284 | BRL 4,894,931 |
| Sabaf US Corp. | Plainfield (USA) | USD 100,000 | Sabaf S.p.A. | 100% | USD -79,482 | USD -53,095 |
| Sabaf Appliance Components (Kunshan) Co., Ltd. |
Kunshan (China) | € 4,400,000 | Sabaf S.p.A. | 100% | CNY 60,007 | CNY -5,275,687 |
| Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki |
Manisa (Turkey) | TRY 28,000,000 | Sabaf S.p.A. | 100% | TRY 72,264,252 | TRY 19,621,894 |
| Sabaf Appliance Components Trading (Kunshan) Co., Ltd. in liquidation |
Kunshan (China) | € 200,000 | Sabaf S.p.A. | 100% | CNY 1,955,552 | CNY 5,225 |
| A.R.C. s.r.l. | Campodarsego (PD) |
€ 45,000 | Sabaf S.p.A. | 70% | € 4,650,017 | € 328,544 |
| Description | Amount | Possibility of utilisation |
Available share | Amount subject to taxation for the company in the case of distribution |
||||
|---|---|---|---|---|---|---|---|---|
| CAPITAL RESERVE: | ||||||||
| Share premium reserve | 10,002 | A, B, C | 10,002 | 0 | ||||
| Revaluation reserve, Law 413/91 | 42 | A, B, C | 42 | 42 | ||||
| Revaluation reserve, Law 342/00 | 1,592 | A, B, C | 1,592 | 1,592 | ||||
| RETAINED EARNINGS: | ||||||||
| Legal reserve | 2,307 | B | 0 | 0 | ||||
| Other retained earnings | 58,876 | A, B, C | 58,876 | 0 | ||||
| VALUATION RESERVE: | ||||||||
| Post-employment benefit actuarial reserve | (477) | 0 | 0 | |||||
| TOTAL | 72,342 | 70,512 | 1,634 |
KEY A: for share capital increase B: to hedge losses
| Gross value | Cumulative depreciation | Net value | ||
|---|---|---|---|---|
| Law 72/1983 | 137 | (137) | 0 | |
| 1989 merger | 516 | (450) | 66 | |
| Investment property | Law 413/1991 | 47 | (42) | 5 |
| 1994 merger | 1,483 | (1,046) | 437 | |
| Law 342/2000 | 2,870 | (2,368) | 502 | |
| 5,053 | (4,043) | 1,010 | ||
| Law 576/75 | 205 | (205) | 0 | |
| Law 72/1983 | 2,224 | (2,224) | 0 | |
| Plants and machinery | 1989 merger | 6,140 | (6,140) | 0 |
| 1994 merger | 6,820 | (6,820) | 0 | |
| 15,389 | (15,389) | 0 | ||
| Industrial and commercial equipment | Law 72/1983 | 161 | (161) | 0 |
| Other assets | Law 72/1983 | 50 | (50) | 0 |
| TOTAL | 20,653 | (19,643) | 1,010 |
Sabaf S.p.A. is a company organised under the legal system of the Republic of Italy.
Contacts: Tel: +39 030 6843001 Fax: +39 030 6848249 E-mail: [email protected] Website: www.sabaf.it
Tax information:
R.E.A. Brescia: 347512 Tax Code: 03244470179 VAT Number: 0178691082
The following table, prepared pursuant to Article 149-duodecies of the CONSOB Issuers' Regulation, shows fees relating to 2017 for auditing services and for services other than auditing provided by the Independent Auditor. No services were provided by entities belonging to the network.
| (€/000) | Party providing the service | Fees pertaining to the 2017 financial year |
|---|---|---|
| Audit | Deloitte & Touche S.p.A. | 57 |
| Certification services | Deloitte & Touche S.p.A. | 2 (1) |
| Other services | Deloitte & Touche S.p.A. | 14 (2) |
| TOTAL | 73 |
(2) Auditing procedures agreement relating to interim management reports, auditing of statements and training activities
Pietro Iotti, the Chief Executive Officer, and Gianluca Beschi, the Financial Reporting Officer of Sabaf S.p.A., have taken into account the requirements of Article 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of 24 February 1998 and can certify:
of the administrative and accounting procedures for the formation of the separate financial statements during the 2017 financial year.
They also certify that:
Ospitaletto, 26 March 2018
Chief Executive Officer Pietro Iotti
The Financial Reporting Officer Gianluca Beschi
REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS' MEETING OF SABAF S.P.A.
in accordance with Art. 2429, 2nd paragraph of the Italian Civil Code
and Art. 153 of Italian Legislative Decree no. 58/1998
We hereby report to you on the supervisory activity performed during the 2017 financial year.
This report is prepared in accordance with Art. 2429, 2nd paragraph of the Italian Civil Code and Art. 153 of Italian Legislative Decree no. 58/1998, in light of the CONSOB recommendations, the Rules of Behaviour of the Board of Statutory Auditors of listed companies issued by CNDCEC and the indications contained in the Corporate Governance Code of Borsa Italiana, which applies to your Company. We note below the activity carried out.
1. Supervisory activity on compliance with the law and the bylaws and respect of the principles of correct administration
During the 2017 financial year, the Board of Statutory Auditors met on seven occasions and attended nine meetings of the Board of Directors, five meetings of the Control and Risk Committee, two meetings of the Company's Control Bodies (Board of Statutory Auditors, Control and Risk Committee, Supervisory Body, Financial Reporting Officer, Head of the Internal Audit Function, Independent Auditing Company) and a meeting of the Remuneration and Nomination Committee.
During the Board of Directors' meetings, the Board of Statutory Auditors obtained information on the general management performance, on its outlook, as well as on the most significant economic, financial and capital operations performed by the Company and by its subsidiaries.
In that regard, it is noted that, during 2017:
In conclusion, based upon the activity carried out, we have not identified any violations of the law and/or the bylaws or any manifestly imprudent or risky operations or operations in potential conflict of interest, in contrast with the resolutions passed by the shareholders' meeting or such as to compromise the integrity of the company's assets.
The Board of Statutory Auditors supervised the existence of an adequate organisational structure in relation to the company's dimensions.
In that regard, it is noted that the Company has for some time now adopted an Organisation Model compliant with the provisions of Italian Legislative Decree 231/2001, which is regularly updated.
During the financial year, the Board of Statutory Auditors maintained a constant information flow with the Supervisory Body.
The information acquired has not identified any critical issues with regard to the correct implementation of the organisation model that must be highlighted in this report.
With reference to the adequacy of the internal control system, the Board of Statutory Auditors expresses its positive assessment and acknowledges that there are no findings to be reported to the Shareholders' Meeting.
The sources of information on which the Board of Statutory Auditors was able to base its assessment are as follows:
The Board of Statutory Auditors monitored the adequacy of the administrative and accounting system and its reliability in providing a fair presentation of operational transactions by:
Based upon the gathered information, no findings have emerged.
The Chief Executive Officer and the Financial Reporting Officer have certified with a specific report attached to the 2017 financial statements:
A similar declaration has been made with reference to the consolidated financial statements.
The external audit was entrusted, by resolution of the shareholders' meeting dated 28 April 2009, to Deloitte & Touche S.p.A. for the period 2009/2017.
During the financial year, the Board of Statutory Auditors held periodic meetings with representatives of the Independent Auditing Company during which no significant data and information emerged that requires a mention in this report.
The procedures adopted in relation to the work plan submitted by the Independent Auditing Company have been examined. We have also received the technical information requested in relation to the accounting standards applied, as well as the accounts representation criteria of the most significant economic, capital and financial facts.
It is also noted that the Independent Auditing Company submitted to the Board of Statutory Auditors on 12 April 2018 the additional report required by Art. 11 of Regulation (EU) no. 537/2014, which illustrates the results of the external audit and provides the other information required by the Regulation, including the declaration of independence required by Art. 6, paragraph 2, letter a).
We note that the report does not reveal any significant shortcomings in the internal control system for financial reporting and in the Company's accounting system.
As required by Art. 19, first paragraph, letter (a) of Legislative Decree No. 39/2010, this report will be sent to the Board of Directors of the Company.
The Board of Statutory Auditors confirms that in the financial year just ended and up to today's date no critical profile has emerged in relation to the independence of the Independent Auditing Company.
It is also acknowledged that the appendix to the Consolidated and Separate Financial Statements indicates the fees for the year for services rendered by the Independent Auditing Company. As can be seen from the table, no services (other than the audit) prohibited pursuant to Art. 5, par. 1, of Regulation (EU) 537/2014 were rendered.
It is also acknowledged that, with the approval of the 2017 Financial Statements, the nine-year mandate of the Independent Auditing Company Deloitte & Touche S.p.a. expires.
As envisaged by Art. 16 of Regulation (EU) no. 537/2014, the Board of Statutory Auditors, in its role as Internal Control and Audit Committee, submitted to the Board of Directors a reasoned recommendation containing the name of two Independent Auditing Companies who are suitable to replace the one that expires, expressing preference for one of them.
This recommendation was developed following a detailed selection procedure that was carried out in compliance with the provisions contained in the Regulation itself. Finally, it is acknowledged that the supervisory activity described in this paragraph and in the paragraph above has allowed the Board of Statutory Auditors to fulfil its internal control and external audit committee function, pursuant to Art. 19 of Legislative Decree 39/2010, with respect to which it has no findings to report.
The Company prepared the 2017 financial statements in accordance with international accounting standards (IAS/IFRS).
The separate Financial Statements show a financial year profit of € 8,001,327 (€ 2,459,688 in 2016) and a shareholders' equity of € 92,087,144 (€ 91,523,902 in 2016).
Those financial statements were audited by the Company Deloitte & Touche Spa, which issued its report dated 12 April 2018 without findings or information requests. The financial statements, together with the management report, were made available to us within the time limits prescribed by the law and we have no particular comments to report.
The Company has also prepared the 2017 consolidated financial statements of the Sabaf Spa Group.
The consolidated financial statements show a profit for the year of € 14,916 thousand (€ 9,009 thousand in 2016 - before adjustments pursuant to IFRS 3) and a shareholders' equity of € 115,055 thousand (€ 112,309 thousand in 2016 - before adjustments pursuant to IFRS 3).
Those financial statements have also been subject to statutory audit by Deloitte & Touche Spa, which issued its report on 12 April 2018 without findings or information requests.
It is also acknowledged that the Independent Auditing Company expressed, in the reports mentioned above, a positive opinion with regard to consistency with the financial statements and compliance with the law with reference:
verifying their compliance with the law and the relevant accounting standards. In particular, the results of the impairment test carried out in accordance with IAS 36 on the individual CGUs that coincide with the two equity investments were evaluated ("Hinges" CGU for Faringosi Hinges S.r.l. and "Professional burners" CGU for A.R.C. S.r.l.).
In particular, it is noted that the test was carried out - for the purposes of the separate financial statements - to assess the impairment of the value of investments and - for the purposes of the consolidated financial statements - to assess the impairment of the related goodwill values.
In this regard, it is noted that the Independent Auditing Company, in its reports, accurately described the audit procedures carried out with reference to the impairment tests, as "key aspects of the audit" and to which, therefore, the Board of Statutory Auditors refers.
Finally, we acknowledge that no derogations have been made from the accounting standards adopted.
Your Company has accepted the Corporate Governance Code approved by the Corporate Governance Committee of listed companies.
In the annual Report on Corporate Governance and Ownership Structures, prepared in accordance with Art. 123 bis of Italian Legislative Decree 58/1998, the Board of Directors acknowledges the acceptance of the Corporate Governance Code and the methods of concrete implementation of the corporate governance rules adopted by the Company, in accordance with Art. 123 bis, 2nd paragraph, letter a).
During the financial year, the Board of Statutory Auditors supervised the methods of concrete application of the corporate governance rules adopted by the Company and, in that regard, it believes that they have been effectively and correctly applied. Insofar as we are aware, we inform you of the following:
The Board of Statutory Auditors supervised the adequacy of the instructions given by the Company to the subsidiaries, in accordance with Art. 114, 2nd Paragraph of Italian Legislative Decree 58/1998.
In that regard, it is noted that the Company, by way of the Managing Director, the Administration, Finance and Control Director and the other executives with strategic responsibilities, performs constant control over the operations of the subsidiaries, also due to the use, by the same, of a common accounting and management system (SAP), which is constantly accessible to management of the parent company.
Periodic meetings with the management and the company in charge of Internal Audit did not reveal any critical elements to be reported in this report.
Finally, we acknowledged that to date no communications have been received from the Control Bodies of the Subsidiaries and/or parent companies containing findings to be noted in this report.
In relation to the provisions of Art. 2391 bis of the Italian Civil Code, we acknowledge that the Board has adopted a procedure for the regulation of Related-Party Transactions, whose main objective is to define the guidelines and criteria for identifying Related-Party Transactions and setting out roles, responsibilities and operating methods so as to guarantee, for such transactions, adequate information transparency and the related procedural and substantial correctness.
That procedure was prepared in compliance with what was established by the Consob Regulation on Related Parties (no. 17221 dated 12 March 2010 as amended and supplemented).
The Board of Statutory Auditors supervised the effective application of the rules by the Company and it has no comments in that regard.
In accordance with Legislative Decree no. 254/2016, the Board of Directors of your Company prepared the "Consolidated non-financial statement".
We remind you that, in accordance with the provisions of the Decree, this Statement "to the extent necessary to ensure understanding of the company's activities, performance, results and impact, covers environmental, social and personnel issues, respect for human rights and the fight against active and passive corruption, which are relevant considering the Group's activities and characteristics".
We acknowledge that the Independent Auditing Company KPMG S.p.a., in charge pursuant to Art. 3, paragraph 10, of the Decree, today issued the certificate provided for therein, confirming that, on the basis of the work carried out, no elements have been brought to the attention of the auditor that would suggest that the Consolidated Non-Financial Statement has not been drawn up in all significant aspects in compliance with the requirements of articles 3 and 4 of the decree and the adopted reference standards (GRI – G4).
The Board of Statutory Auditors supervised compliance with the provisions of Legislative Decree 254/2016 and has no observations to make on this subject in this report.
During the supervisory activity carried out during the financial year, no omissions, censurable facts, irregularities or circumstances that require reporting to the Supervisory Authority or a mention herein were identified.
It is also acknowledged that the Board of Statutory Auditors has not received reports in accordance with Art. 2408 of the Italian Civil Code, nor has it become aware of cases and/or lawsuits to be noted in this report.
With regard to the above, the Board of Statutory Auditors expresses a favourable opinion on the approval of the separate financial statements and the proposal for the allocation of net income for the year made by the Board of Directors.
Ospitaletto, 13 April 2018
Chairman of the Board of Statutory Auditors Antonio Passantino
Statutory Auditor Enrico Broli
Statutory Auditor Luisa Anselmi
Enviroment
We are committed to raising awareness among our staff on environmental issues, contributing constructively to sustainability and environmental protection.
pursuant to Article 123-ter of the TUF and Article 84-quarter of the Issuers' Regulations
Section II - Remuneration of the members of the board of directors and the board of statutory auditors and other executives with strategic responsibilities in 2017 Section I - Remuneration Policy 220 215
Sabaf S.p.A.'s General Remuneration Policy (hereinafter also "remuneration policy"), approved by the Board of Directors on 22 December 2011 and updated on 20 March 2013, 4 August 2015 and 26 September 2017, defines the criteria and guidelines for the remuneration of members of the Board of Directors, Executives with strategic responsibilities and members of the Board of Statutory Auditors.
The remuneration policy was prepared:
No independent experts or advisors contributed to the preparation of the policy, nor were the remuneration policies of other companies used for reference purposes. The Board of Directors is responsible for properly implementing the remuneration policy.
The Remuneration and Nomination Committee currently in office comprises four non-executive members, the majority of them independent (Fausto Gardoni, Giuseppe Cavalli, Renato Camodeca and Alessandro Potestà), with the knowledge and experience in accounting, finance and remuneration policies that is deemed adequate by the Board of Directors.
Actually enacts what is decided upon by the Board.
The Company's intention is that the Remuneration Policy:
The definition of a fair and sustainable remuneration package takes into account three main tools:
Each remuneration component is analysed below.
The fixed component of the remuneration of the Directors is such that it is able to attract and motivate individuals with appropriate expertise for the roles entrusted to them within the Board, and is set with reference to the remuneration awarded for the same positions by other listed Italian industrial groups of a similar size.
The Shareholders' Meeting decides on the remuneration of the members of the Board of Directors, including a fixed amount and attendance fees.
With regard to the remuneration for Directors holding special offices, the Board of Directors, at the proposal of the Remuneration and Nomination Committee and subject to the opinion of the Board of Statutory Auditors, determines the additional fixed remuneration.
Directors who sit on committees formed within the Board (Internal Control and Risk Committee, Remuneration and Nomination Committee) are granted remuneration that includes a fixed salary and attendance fees intended to reward the commitment required of them.
Executives with strategic responsibilities are paid a fixed annual remuneration, determined so that it is sufficient in itself to guarantee an appropriate basic salary level, even in the event that the variable components are not paid owing to a failure to reach the targets.
The members of the Board of Statutory Auditors are paid a fixed remuneration, the amount of which is determined by the Shareholders' Meeting, at the time of their appointment.
| CORPORATE OFFICES | |||||
|---|---|---|---|---|---|
| COMPONENTS OF THE REMUNERATION |
EXECUTIVE DIRECTORS 1 |
NON-EXECUTIVE DIRECTORS |
MEMBERS OF COMMITTEES WITHIN THE BOD |
EXECUTIVES WITH STRATEGIC RESPONSIBILITIES |
STATUTORY AUDITORS |
| FIXED COMPONENTS | Fixed remuneration for the office of Director Fixed remuneration for Directors holding special positions |
Fixed remuneration for the office of Director Attendance fee |
Fixed remuneration for Directors members of committees within the BoD Attendance fee |
Collective National Contract for Industrial Managers |
Fixed remuneration |
The Board of Directors, at the suggestion of the Remuneration and Nomination Committee and in accordance with the budget, defines an MBO plan, for the benefit of:
This plan sets a common target (Group EBIT, which is considered to be the Group's main indicator of financial performance) and quantifiable and measurable individual targets economic-financial, technical-productive and/or socio-environmental in nature.
The targets of the Chief Executive Officer and of the Executives with strategic responsibilities are decided by the Board of Directors, at the suggestion of the Remuneration and Nomination Committee, in accordance with the budget.
The targets of the other beneficiaries of the incentive plans are defined by the Chief Executive Officer, in accordance with the budget.
Non-executive directors are not granted any variable remuneration.
At the suggestion of the Remuneration and Nomination Committee, and after obtaining the opinion of the Board of Statutory Auditors, the Board of Directors approves a long-term financial incentive, for the benefit of:
The long-term financial incentive is dependent on measurable and predetermined performance targets relating to the creation of value for shareholders over the long term and extends over three years coinciding with the mandate of the Board of Directors (2015-2017; 2018-2020; etc.).
The performance targets, set in accordance with the three-year business plan, are proposed by the Remuneration and Nomination Committee to the Board of Directors, as the body responsible for approving the long-term financial incentive.
| CORPORATE OFFICES | |||
|---|---|---|---|
| COMPONENTS OF THE REMUNERATION | EXECUTIVE DIRECTORS AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES |
OTHER PERSONS IDENTIFIED BY THE CEO |
|
| VARIABLE COMPONENTS | SHORT-TERM VARIABLE COMPONENT |
Annual MBO plan based on achieving a com mon target and individual targets |
Annual MBO plan based on achieving a common target and individual targets |
| LONG-TERM VARIABLE COMPONENT |
LTI dependent on measurable and predetermined performance targets relating to the creation of value for shareholders over a time horizon of three years |
N/A |
Any compensation plans based on the allocation of financial instruments with regard to directors and employees are resolved by the Shareholders' Meeting at the suggestion of the Board of Directors.
With the aim of attracting highly professional individuals, the Board may decide to give entry bonuses to newly hired executives.
There is an agreement for the Chief Executive Officer regulating ex ante the economic part concerning the early termination of the employment relationship.
There are no agreements for other Directors or other Executives with strategic responsibilities regulating ex ante the economic part concerning the early termination of the employment relationship. For the end of the relationship for reasons other than just cause or justified reasons provided by the employer, it is the Company's policy to pursue consensual agreements to end the employment relationship, in accordance with legal and contractual obligations.
•
The Company does not provide directors with benefits subsequent to the end of their mandate.
The Company has entered into Non-competition agreements with the Chief Executive Officer and with certain executives who report to him, the terms of which were approved by the Board of Directors, after obtaining the opinion of the Remuneration and Nomination Committee.
As from 2018, the Company established mechanisms for the ex-post adjustment of the variable remuneration component or claw back clauses to demand the return of all or part of the variable components of remuneration paid out (or to withhold deferred sums), which were determined on the basis of data subsequently found to be clearly incorrect.
Directors and other executives with strategic responsibilities may be paid remuneration – exclusively as a fixed amount – for offices held in subsidiaries. In addition to the approval of the subsidiaries' corporate bodies, this remuneration is subject to the favourable opinion of the Remuneration and Nomination Committee.
| CORPORATE OFFICES | |||||
|---|---|---|---|---|---|
| COMPONENTS OF THE REMUNERATION |
EXECUTIVE DIRECTORS | NON-EXECUTIVE DIRECTORS |
EXECUTIVES WITH STRATEGIC RESPONSIBILITIES |
STATUTORY | |
| Benefits | NON MONETARY BENEFITS |
Third-party liability insurance policy |
Third-party liability insurance policy |
Third-party liability insurance policy Life insurance policy, policy to cover medical expenses (FASI), policy for supplementary medical expenses Company cars |
Third-party liability insurance policy |
| and other components |
OFFICES IN SUBSIDIARIES |
Fixed remuneration for offices in subsidiaries |
N/A | Fixed remuneration for offices in subsidiaries |
N/A |
| INDEMNITY AGAINST THE EARLY TERMI NATION OF EMPLOYMENT |
Remuneration for Non-com petition agreement (only for Chief Executive Officer) |
N/A | Remuneration for Non-competition agreement |
N/A |
The Shareholders' Meeting is responsible for determining the annual gross remuneration (maximum amount) due to the Directors, including a fixed amount and attendance fees.
The members of the Board are covered by a third-party civil liability insurance policy for unlawful acts committed in the exercise of their respective duties, in violation of obligations established by law and the Articles of Association, with the sole exclusion of deliberate intent. The taking-out of this policy is approved by the Shareholders' Meeting.
Sabaf S.p.A. makes it a practice to appoint as Chairman and Vice Chairmen members of the Saleri family, principal shareholder of the Company through the company Giuseppe Saleri S.a.p.A.. No variable remuneration is paid to these directors, even if executive directors, but only remuneration in addition to those of directors for special offices held.
The remuneration of the Chief Executive Officer includes the following components:
If the Chief Executive Officer is also assigned an executive management role within the Sabaf Group, the Board decides on the assignment of the following additional remuneration instruments:
Fixed annual gross salary: the fixed remuneration is determined so that it is sufficient in itself to guarantee an appropriate basic salary level, even in the event that the variable components are not paid owing to a failure to reach the targets.
The amount of remuneration for Statutory Auditors is set by the Shareholders' Meeting, which establishes a fixed amount for the Chairman and the other Statutory Auditors.
The members of the Board are covered by a third-party civil liability insurance policy for unlawful acts committed in the exercise of their respective duties, in violation of obligations established by law and the Articles of Association, with the sole exclusion of deliberate intent. The taking-out of this policy is approved by the Shareholders' Meeting.
This section, by name of Directors and Statutory Auditors:
The remuneration paid to directors for 2017 consisted of the following components:
A fixed remuneration component for employment and a fixed remuneration for offices in subsidiaries are paid to executive directors appointed as executives.
With reference to variable components, which are intended only for executive directors (excluding the Chairman and Vice Chairmen), the following is pointed out:
There are no incentive plans based on financial instruments outstanding. On 3 August 2017, the Board of Directors, at the suggestion of the Remuneration and Nomination Committee, decided to grant the Chief Executive Officer and General Manager (Pietro Iotti) a gross all-inclusive indemnity for termination of employment relationship of € 700,000. This amount will be recognised in one of the following cases:
Moreover, the Company entered into a Non-competition agreement with the Chief Executive Officer valid for twelve months after termination of the employment relationship, which envisages the payment of an additional component of the annual salary of € 30,000, against the commitment of Pietro Iotti not to work for subjects that carry on/will carry on competing activities in Italy, Spain, Turkey, Brazil and China.
Finally, following the resignation of the Director Alberto Bartoli, in 2017 the conditions for the payment of the consideration related to the Non-competition Agreement of € 290,000 signed with the Company took shape. In 2017, a consideration of € 116,000 (40% of the total) was paid; the payment of the remaining amounts is deferred in two tranches that will be paid in 2018 (€ 58,000, equal to 20% of the total) and in 2019 (€ 116,000, equal to 40% of the total).
The remuneration paid to the Statutory Auditors for 2017 consists of a fixed remuneration determined by the Shareholders' Meeting of 5 May 2015.
The remuneration of other executives with strategic responsibilities (three persons) consists of a fixed remuneration for employment totalling € 384,624, and following variable remuneration:
Remuneration totalling € 96,500 was also disbursed by subsidiaries. There are no incentive plans based on financial instruments outstanding. For a breakdown of the remuneration paid in 2017, please refer to the tables below (Table 1 and Table 2), which contain remuneration paid to Directors and Statutory Auditors, and, at the aggregate level, to other executives with strategic responsibilities, taking into account any office held for a fraction of a year. Remuneration received from subsidiaries and/or affiliates, with the exception of that waived or paid back to the Company, is also indicated separately.
With particular reference to Table 1, the column:
For a breakdown of other items, see attachment 3A, statement 7-bis and 7-ter of Consob Regulation 11971 of 14 May 1999.
Table 2 contains information on monetary incentive plans for members of the administration body and other executives with strategic responsibilities; in particular, it shows:
Lastly, the column "Other bonuses" shows the bonuses for the year not explicitly included in specific ex ante defined plans.
Finally, pursuant to Article 84-quarter, paragraph four of the Consob Issuers' Regulations, Table 3 shows shareholdings in Sabaf S.p.A. held by directors and executives with strategic responsibilities, as well as their non-separated spouses and dependent children, directly or through subsidiaries, trust companies or third parties, as shown in the shareholder register, communications received and other information acquired from the same parties. This includes all persons who held office during the year, even for only part of the year. The number of shares held is shown by individual director and in aggregate form for executives with strategic responsibilities.
| Name and surname |
Office | Period of office |
Expiry of office | Fixed remuneration |
Remuneration for attendance at Committee meetings |
Variable remuneration (non equity) |
Other remuneration |
Total | Fair Value of equity remunera tion |
Indemnity for end of office or termination of employment relationship |
||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bonus and other incentives |
Profit sharing | |||||||||||
| BOARD OF DIRECTORS | ||||||||||||
| Giuseppe Saleri |
Chairman | 1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. (a) | 120,000 (a) | 0 | 0 | 0 | 0 | 0 | 120,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 8,000 | 0 | 0 | 0 | 0 | 0 | 8,000 | 0 | 0 | |||
| (III) TOTAL | 128,000 | 0 | 0 | 0 | 0 | 0 | 128,000 | 0 | 0 |
(a) Of which € 15,000 as Director and € 105,000 as Chairman
| Ettore Saleri |
Vice Chairman |
1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. (a) | 140,000 (a) | 0 | 0 | 0 | 0 | 0 | 140,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 8,000 | 0 | 0 | 0 | 0 | 0 | 8,000 | 0 | 0 | |||
| (III) TOTAL | 148,000 | 0 | 0 | 0 | 0 | 0 | 148,000 | 0 | 0 |
(a) Of which € 15,000 as Director and € 125,000 as Chairman
| Cinzia Saleri |
Vice Chairman |
1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. (a) | 140,000 (a) | 0 | 0 | 0 | 0 | 0 | 140,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 140,000 | 0 | 0 | 0 | 0 | 0 | 140,000 | 0 | 0 |
| Roberta Forzanini |
Vice Chairman |
1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. (a) | 140,000 (a) | 0 | 0 | 0 | 0 | 0 | 140,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 140,000 | 0 | 0 | 0 | 0 | 0 | 140,000 | 0 | 0 |
(a) Of which € 15,000 as Director and € 125,000 as Vice Chairman
| Name and surname |
Office | Period of office |
Expiry of office | Fixed remuneration |
Remuneration for attendance at Committee meetings |
Variable remuneration (non equity) |
Other remuneration |
Total | Fair Value of equity remu neration |
Indemnity for end of office or termination of employment relationship |
||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bonus and other incentives |
Profit sharing | |||||||||||
| Alberto Bartoli |
Chief Executive Officer |
1 Jan - 27 Apr 2017 |
Approval of 2017 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A (a) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 290,000 (a) | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 290,000 |
(a) Remuneration accrued upon termination of office (Non-competition Agreement), paid in three years: 2017, 2018, 2019
| Pietro Iotti |
Chief Executive Officer |
12 Set - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A.((a)(b) | 93,077 (a) | 0 | 83,333 (b) | 0 | 6,765 | 0 | 183,175 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 93,077 | 0 | 83,333 | 0 | 6,765 | 0 | 183,175 | 0 | 0 |
(b) Of which € 50,000 as entry bonus and € 33,000 paid on a pro rata basis
| Gianluca Beschi |
Director | 1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. (a)(b) | 259,315 (a) | 0 | 108,602 (b) | 0 | 12,929 | 0 | 380,846 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 43,000 | 0 | 0 | 0 | 0 | 0 | 43,000 | 0 | 0 | |||
| (III) TOTAL | 302,315 | 0 | 108,602 | 0 | 12,929 | 0 | 423,846 | 0 | 0 |
(a) Of which € 15,000 as director, € 100,000 as Chief Executive Officer ad interim, and € 144,315 as Administration, Finance and Control Director (b) Remuneration accrued in the year with reference to the 2017 MBO plan and Long-term Incentive Plan – for details, please refer to what is shown in Tab. 2
| Renato Camodeca |
Director | 1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. (a)(b) | 24,000 (a) | 27,000 (b) | 0 | 0 | 0 | 0 | 51,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 24,000 | 27,000 | 0 | 0 | 0 | 0 | 51,000 | 0 | 0 |
(a) Of which € 15,000 as director and € 9,000 in board meeting attendance fees
(b) Of which € 20,000 as a member of the Internal Control and Risk Committee and the Remuneration and Nomination Committee (i.e., € 10,000 each) and € 7,000 in Committee meeting attendance fees
| Name and surname |
Office | Period of office |
Expiry of office | Fixed remuneration |
Remuneration for attendance at Committee meetings |
Variable remuneration (non equity) |
Non monetary benefits |
Other remuneration |
Total | Fair Value of equity remu neration |
Indemnity for end of office or termination of employment relationship |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bonus and other incentives |
Profit sharing | |||||||||||
| Giuseppe Cavalli |
Director | 1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. (a)(b) | 23,000 (a) | 27,000 (b) | 0 | 0 | 0 | 0 | 50,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 23,000 | 27,000 | 0 | 0 | 0 | 0 | 50,000 | 0 | 0 |
(a) Of which € 15,000 as director and € 8,000 in board meeting attendance fees
(b) Of which € 20,000 as a member of the Internal Control and Risk Committee and the Remuneration and Nomination Committee (i.e., € 10,000 each) and € 7,000 in Committee meeting attendance fees
| Fausto Gardoni |
Director | 1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. (a)(b) | 24,000 (a) | 15,000 (b) | 0 | 0 | 0 | 0 | 39,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 24,000 | 15,000 | 0 | 0 | 0 | 0 | 39,000 | 0 | 0 |
(b) Of which € 10,000 as a member of the Remuneration and Nomination Committee and € 5,000 in Committee meeting attendance fees
| Nicla Picchi |
Director | 1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A (a)(b)(c) | 22,000 (a) | 14,000 (b) | 0 | 0 | 0 | 15,000 (c) | 51,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates (c) | 0 | 0 | 0 | 0 | 0 | 5,000 (c) | 5,000 | 0 | 0 | |||
| (III) TOTAL | 22,000 | 14,000 | 0 | 0 | 0 | 20,000 | 56,000 | 0 | 0 |
(a) Of which € 15,000 as director and € 7,000 in board meeting attendance fees
(b) Of which € 10,000 as a member of the Internal Control and Risk Committee and € 4,000 in Committee meeting attendance fees
(c) Of which € 15,000 as member of the Sabaf S.p.A. Supervisory Body and € 5,000 as member of the Supervisory Body of the subsidiary Faringosi Hinges S.r.l.
| Anna Pendoli |
Director | 1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. (a) | 23,000 (a) | 0 | 0 | 0 | 0 | 0 | 23,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 23,000 | 0 | 0 | 0 | 0 | 0 | 23,000 | 0 | 0 |
| Alessandro Potestà |
Director | 28 Apr - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. (a) | 21,000 (a) | 0 | 0 | 0 | 0 | 0 | 21,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 21,000 | 0 | 0 | 0 | 0 | 0 | 21,000 | 0 | 0 |
(a) Of which € 15,000 as director and € 6,000 in board meeting attendance fees
| Name and surname |
Office | Period of office |
Expiry of office | Fixed remuneration |
Remuneration for attendance at Committee meetings |
Variable remuneration (non equity) |
Non monetary benefits |
Other remuneration |
Total | Fair Value of equity remunera tion |
Indemnity for end of office or termination of employment relationship |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bonus and other incentives |
Profit sharing | |||||||||||
| BOARD OF STATUTORY AUDITORS | ||||||||||||
| Antonio Passantino |
Chairman | 1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 24,000 | 0 | 0 | 0 | 0 | 0 | 24,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
| (III) TOTAL | 0 | 0 | 0 | 0 | 0 | 24,000 | 0 | 0 | ||||
| Luisa Anselmi |
Chairman | 1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 16,000 | 0 | 0 | 0 | 0 | 0 | 16,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 16,000 | 0 | 0 | 0 | 0 | 0 | 16,000 | 0 | 0 | |||
| Enrico Broli |
Statutory Auditor |
1 Jan - 31 Dec 2017 |
Approval of 2017 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 16,000 | 0 | 0 | 0 | 0 | 0 | 16,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 0 | 0 | 0 | 0 | 16,000 | 0 | 0 |
| Name and surname |
Office | Period of office |
Expiry of office | Fixed remuneration |
Remuneration for attendance at Committee meetings |
Variable remuneration (non equity) |
Non monetary benefits |
Other remuneration |
Total | Fair Value of equity remunera tion |
Indemnity for end of office or termination of employment relationship |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bonus and other incentives |
Profit sharing | |||||||||||
| OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES |
| Other executives with strategic responsibilities (3) |
1 Jan - 31 Dec 2017 |
n/a | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. (a) | 384,624 | 0 | 148,619(a) | 0 | 39,024 | 0 | 572,267 | 0 | 0 | ||
| (II) Remuneration from subsidiaries and affiliates | 96,500 | 0 | 0 | 0 | 0 | 0 | 96,500 | 0 | 0 | ||
| (III) TOTAL | 481,124 | 0 | 148,619 | 0 | 39,024 | 0 | 668,767 | 0 | 0 |
(a) Remuneration accrued in the year with reference to the 2017 MBO plan and Long-term Incentive Plan – for details, please refer to what is shown in Tab. 2
| Name and surname |
Office | Plan | Payable / Paid | Deferred | Deferment period | No longer payable | Payable / Paid | Still deferred | Other bonuses |
|---|---|---|---|---|---|---|---|---|---|
| Bonus for the year | Bonus of previous years | ||||||||
| Pietro Iotti |
Chief Executive Officer |
||||||||
| Remuneration at Sabaf S.p.A. | 2017 MBO Plan (August 2017) |
33,000 | 0 | - | - | - | - | 0 | |
| TOTAL | 33,000 | 0 | - | 0 | 0 | 0 | 0 |
| Gianluca Beschi |
Executive Director |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| Remuneration at Sabaf S.p.A. | 2016 MBO Plan (March 2016) |
- | - | - | 0 | 0 | 0 | 0 | |
| Remuneration at Sabaf S.p.A. | 2017 MBO Plan (March 2017) |
0 | 36,128 | 75% March 18 25% December 18 |
- | - | - | 0 | |
| Remuneration at Sabaf S.p.A. | Three-year LTI 2015-2017 (August 2015) |
72,474 | 0 | - | - | - | - | 0 | |
| TOTAL | 72,474 | 36,128 | - | 0 | 0 | 0 | 0 |
| Other executives with strategic responsibilities (3) |
||||||||
|---|---|---|---|---|---|---|---|---|
| Remuneration at Sabaf S.p.A. | 2016 MBO Plan (March 2016) |
- | - | - | 0 | 33,050 | 0 | 0 |
| Remuneration at Sabaf S.p.A. | 2017 MBO Plan (March 2017) |
0 | 86,462 | 75% March 18 25% December 18 |
- | - | - | 0 |
| Remuneration at Sabaf S.p.A. | Three-year LTI 2015-2017 (August 2015) |
62,157 | 0 | - | - | - | - | |
| TOTAL | 62,157 | 86,462 | - | 0 | 33,050 | 0 | 0 |
| Surname and Name | Office | Type of Ownership | Investee Company | No. shares held as at 31 Dec 2016 |
No. shares acquired | No. shares sold | No. shares held as at 31 Dec 2017 |
|---|---|---|---|---|---|---|---|
| Giuseppe Saleri | Chairman | Indirect through the subsidiary Giuseppe Saleri S.a.p.A. |
Sabaf S.p.A. | 3,543,313 | - | 777,000 | 2,766,313 |
| Roberta Forzanini | Vice Chairman | Direct | Sabaf S.p.A. | 1,971 | - | 1,971 | 0 |
| Chief Executive Officer |
Direct | Sabaf S.p.A. | 7,500 | - | - | 7,500 (a) | |
| Alberto Bartoli (a) | (holding office until 27 April 2017) |
Indirect through spouse |
Sabaf S.p.A. | 1,000 | - | - | 1,000 (a) |
| Pietro Iotti | Chief Executive Officer (In office from 1 August 2017) |
Direct | Sabaf S.p.A. | 0 | 10,000 | - | 10,000 |
| Giuseppe Cavalli | Independent Director |
Indirect through spouse |
Sabaf S.p.A. | 5,000 | - | - | 5,000 |
| Anna Pendoli | Director | Direct | Sabaf S.p.A. | 450,000 | - | 337,500 | 112,500 |
| Executives with - strategic responsibilities (3) |
Direct | Sabaf S.p.A. | 4,300 | - | 4,300 | 0 |
|---|---|---|---|---|---|---|
| ----------------------------------------------------------- | -------- | -------------- | ------- | --- | ------- | --- |
(a) Data updated to 27 April 2017, date of termination of office
CONCEPT AND GRAPHIC DESIGN: ALL CREATIVE AGENCY - ALL COMUNICAZIONE.IT
PHOTO: STUDIO 22 - NICOLA TIRELLI
PRINT: GRAPHIC CENTER
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COPYRIGHT 2018 - SABAF S.P. A . - TUT TI I DIRIT TI RISERVATI
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