Annual Report • Mar 21, 2018
Annual Report
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Disclaimer
The consolidated and draft statutory financial statements at 31 December 2017 have been translated into English solely for the convenience of the International reader. In the event of conflict or inconsistency between the terms used in the Italian Version of the report and the English version, the Italian version shall prevail, as the Italian version constitutes the
Italy's recovery has strengthened. Supported by the accommodative monetary policy stance of the European Central Bank (ECB) and buoyant external demand, Italy's real GDP growth is projected at 1.5 % in both 2017 and 2018. It is expected to slow to 1.2 % in 2019. Rising demand and favourable financing conditions have started to support investment again after the sharp fall it suffered during the global financial crisis.
According to the Commission's forecasts, the growth rates of the Eurozone and the EU 2017 have exceeded the expectations of the past year, and from a phase of economic recovery we will then move to an expansion phase in 2018/2019. It is estimated that the economy of the Euro Area and of the European Union as a whole grew by 2.4% in 2017, the best figure for ten years now. This good performance should be repeated in 2018 and 2019, with growth rates of 2.3% and 2.0% respectively, both in the Euro area and in the EU.
This improvement in prospects is a result of both stronger cyclical momentum in Europe, where labour markets continue to improve and economic sentiment is particularly high, and a stronger than expected pickup in global economic activity and trade.
The Financial year 2017 for Aeffe Group was characterized by double-digit growth in revenues and a more than proportional increase in profitability, results achieved thanks to the good performance of our brands, especially the owned ones and to an effective business model. The Group's medium/long-term strategic goals are on the development of highly distinctive collections with a focus on a calibrated strengthening of our presence in high-potential markets, especially in the Greater China and Asia Pacific areas.
Considering the Group's vitality and the positive feedbacks on the ongoing Fall/Winter 2018-2019 collections sales campaign, we feel confident about the further development and consolidation of our brands in 2018.
The Chairman of the Board of Directors
Massimo Ferretti
| CORPORATE BOARDS OF THE PARENT COMPANY | 4 |
|---|---|
| ORGANISATION CHART | 5 |
| BRANDS PORTFOLIO | 6 |
| HEADQUARTERS | 7 |
| SHOWROOMS | 8 |
| MAIN FLAGSHIPSTORE LOCATIONS UNDER DIRECT MANAGEMENT | 9 |
| MAIN ECONOMIC-FINANCIAL DATA | 10 |
| CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2017 | 11 |
| REPORT ON OPERATIONS | 12 |
| FINANCIAL STATEMENTS | 26 |
| REPORT OF THE AUDITING COMPANY | 32 |
| EXPLANATORY NOTES | 37 |
| ATTACHMENTS TO THE EXPLANATORY NOTES | 80 |
| CONSOLIDATED NON-FINANCIAL STATEMENT | 87 |
| REPORT OF THE AUDITING COMPANY TO THE DNF | 108 |
| DRAFT STATUTORY FINANCIAL STATEMENTS AT 31 DECEMBER 2017 | 111 |
| REPORT ON OPERATIONS | 112 |
| FINANCIAL STATEMENTS | 120 |
| REPORT OF THE BOARD OF STATUTORY AUDITORS | 125 |
| REPORT OF THE AUDITING COMPANY | 132 |
| EXPLANATORY NOTES | 136 |
| ATTACHMENTS TO THE EXPLANATORY NOTES | 172 |
Massimo Ferretti
Alberta Ferretti
Simone Badioli
Directors Marcello Tassinari – Managing Director Roberto Lugano Daniela Saitta Sabrina Borocci Alessandro Bonfiglioli
Angelo Miglietta
Fernando Ciotti Carla Trotti
Nevio Dalla Valle Daniela Elvira Bruno
Committee
Board of Compensation
Daniela Saitta
President
Members Roberto Lugano Sabrina Borocci
Board of Internal Control Committee
Members Daniela Saitta Alessandro Bonfiglioli
Board of Statutory
4
Via Delle Querce, 51 47842 - San Giovanni in Marignano (RN) Italy
Via San Gregorio, 28 20124 - Milan Italy
Via Erbosa I° tratto, 92 47030 - Gatteo (FC) Italy
Via Delle Querce, 51 47842 - San Giovanni in Marignano (RN) Italy
(FERRETTI – PHILOSOPHY – POLLINI – CEDRIC CHARLIER) Via Donizetti, 48 20122 - Milan Italy
(FERRETTI – PHILOSOPHY – MOSCHINO) 28-29 Conduit Street W1S 2YB - London UK
(FERRETTI – PHILOSOPHY – MOSCHINO) 43, Rue DU Faubourg Saint Honoré 75008 - Paris France
(GRUPPO) 30 West 56th Street 10019 - New York USA
(MOSCHINO) Via San Gregorio, 28 20124 - Milan Italy
(LOVE MOSCHINO) Via Settembrini, 1 20124 - Milan Italy
(CEDRIC CHARLIER) 28, Rue de Sevigne 75004 - Paris France
Milan Rome Capri Paris London Los Angeles Shanghai
Milan Venice Bolzano Varese
Florence Venice
Milan Rome Capri Paris London Los Angeles New York Seoul Pusan Daegu
| Full Year | Full Year | ||
|---|---|---|---|
| 2016 | 2017 | ||
| Total revenues | (Values in millions of EUR) | 287.5 | 316.5 |
| Gross operating margin (EBITDA) * | (Values in millions of EUR) | 25.2 | 36.6 |
| Net operating profit (EBIT) | (Values in millions of EUR) | 10.1 | 22.7 |
| Profit before taxes | (Values in millions of EUR) | 8.3 | 18.9 |
| Net profit for the Group | (Values in millions of EUR) | 3.6 | 11.5 |
| Basic earnings per share | (Values in units of EUR) | 0.036 | 0.113 |
| Cash Flow (net profit + depreciation) | (Values in millions of EUR) | 16.3 | 23.1 |
| Cash Flow/Total revenues | (Values in percentage) | 5.7 | 7.3 |
* EBITDA is represented by operating profit before provisions and depreciation. EBITDA thus defined is a measure used by management to monitor and evaluate the operational performance and is not identified as an accounting measure under both Italian Accounting Principles and IFRS and therefore should not be considered an alternative measure for evaluating the Group's results. Since EBITDA is not regulated by applicable accounting standards, the criteria used by the Group might not be consistent with that adopted by others and therefore may not be comparable.
| 31 December | 31 December | ||
|---|---|---|---|
| 2016 | 2017 | ||
| Net capital invested | (Values in millions of EUR) | 227.6 | 229.0 |
| Net financial indebtedness | (Values in millions of EUR) | 59.5 | 50.6 |
| Group net equity | (Values in millions of EUR) | 135.8 | 146.1 |
| Group net equity per share | (Values in units of EUR) | 1.3 | 1.4 |
| Current assets/ current liabilities | (Ratio) | 1.8 | 1.9 |
| Current assets less invent./ current liabilities (ACID test) | (Ratio) | 0.8 | 0.8 |
| Net financial indebtedness/ Net equity | (Ratio) | 0.4 | 0.3 |
| ROI: Net operating profit/ Net capital invested | (Values in percentage) | 4.4 | 9.9 |
Shareholders,
We find it necessary to focus on the main macroeconomic variables in the sphere of which our Group has found itself operating.
Economic growth is strong across the main advanced and emerging economies. It is not, however, being accompanied by a recovery in inflation which remains weak. The short-term outlook remains favourable; there is still the risk that a downward adjustment of the prices of financial assets could slow economic activity.
In the third quarter of 2017 economic activity continued to expand in the main advanced economies, while cyclical conditions remained favourable in the final months of the year. For the United States, the latest data point to strong growth. In the United Kingdom, private consumption shows signs of recovery and leading indicators suggest for the last quarter of 2017 a rate of growth in line with the average for the first three. For Japan, the latest cyclical data indicate an acceleration in economic activity in the fourth quarter of 2017. In the emerging countries the recovery under way since the first half of 2017 is continuing. For China, growth was stable in the final months of the year after having exceeded expectations in the previous quarters. GDP growth accelerated during the summer months in India and Brazil.
In the third quarter of 2017, world trade grew by 3.5 per cent, with stronger imports in the euro area and in Asian emerging economies (excluding China).
The risks to the world economy continue to stem from a possible increase in volatility on the financial markets, connected to a sudden intensification of geopolitical tensions.
In the euro area the economy continued to grow at a fast pace, driven primarily by foreign demand. Inflation remains modest, reflecting weakness in the core component. The ECB Governing Council's decision to recalibrate its monetary policy instruments was taken to preserve the very favourable financing conditions that are still needed for a sustained return of inflation rates towards levels that are below, but close to, 2 per cent.
Based on the December Eurosystem staff projections, euro-area GDP is expected to grow by 2.3 per cent in 2018 (from 2.4 per cent in 2017).
The new projections for the Italian economy for the three years 2018-20 estimate that GDP expanded by 1.5 per cent in 2017, by 1.4 per cent in the current year and by 1.2 per cent in 2019-20. Economic activity is expected to be mainly driven by domestic demand.
In each of the three years 2018-20 exports are forecast to expand by more than 3 per cent on average, reflecting both the assumptions regarding the favourable performance of international trade and the effects of the appreciation of the euro in recent quarters. The growth of imports, which was especially strong in 2017 before gradually slowing, is expected to mirror developments in productive investment and exports, the two components of demand with the highest imported goods content.
The forecasting scenario assumes that financial conditions continue to be accommodating, with a very gradual adjustment in short- and long-term interest rates, orderly conditions on the government securities markets, and relatively relaxed credit supply conditions. Overall, GDP performance is expected to continue to depend on the support provided by economic policies, albeit to a lesser extent than in the past.
The main risks associated with these projections stem from global conditions and from the performance of the financial markets. An intensification of geopolitical tensions or greater uncertainty surrounding the future
course of international economic policies could translate into higher volatility in the financial markets and in risk premiums, with adverse repercussions on the euro-area economy.
Among domestic risks, those connected with the weakness of the banking system and with the potential heightening of uncertainty on the part of households and firms over the strength of the recovery under way have abated compared with past quarters. This scenario, however, relies on the continuation of economic policies capable of fostering long-term economic growth by supporting investment and consumption choices, while also lending credibility to public debt reduction objectives by fully exploiting the upturn in the global economy.
The luxury market has bounced back from a stagnant 2016 caused by economic uncertainty and geopolitical crises and is now worth around €1,160 billion, with growth of 5% at constant exchange rates.
The recovery of the segment is partially down to a general increase in consumer confidence: this factor has driven local consumption among Europeans, Americans and Asians, as well as the purchases of Chinese travellers. Another crucial aspect is the return of tourists to Europe with numbers 11% up on last year. In addition to this, there is the constant growth in the online channel, a market now worth the same as the Japanese market.
Growing by 6% at current exchange rates, Europe continues to recover, reestablishing its reputation as the key region for luxury sales. In Japan we are seeing strong growth driven by the currency and the consequent increase in Chinese spending has led to 2% growth at current exchange rates. Chinese luxury customers are increasingly expert and have driven up sales in China by 15%. The rest of Asia (excluding continental China and Japan) has registered strong growth of 6% and the American market (North and South America) has also managed to close the year positively, growing by 2%. In other regions growth remains stable at 1% with the Middle East held back by economic uncertainty. There has been growth of 8% in the Retail channel and multi-brand stores have also performed strongly. However, the figures relating to department stores at global level have been disappointing. The evolving role of the store is reflected by the online channel, which has grown by 24% with the American market alone accounting for almost half of these types of sales (accessories, beauty and hard luxury are among the biggest-selling categories in this channel): this doesn't mean that stores have lost their role but rather that they need to find a way of reinventing themselves.
Bain forecasts strong positive growth which will continue at a constant annual growth rate of between 4% and 5% in the next three years.
The forecasts for 2018 confirm a solid +5%: consistent growth for leather, footwear and accessories (+7%) and for Hard Luxury (5%). Growth also in the area of clothing, perfumes and cosmetics (+4%). All markets are expected to grow with Asia leading the way (+10%), followed by Japan (+5%), Europe and North America (+4%), the latter returning to growth after two difficult years.
Aeffe Group operates worldwide in the fashion and luxury goods sector and is active in the design, production and distribution of a wide range of products that includes prêt-a-porter, footwear and leather goods. The Group develops, produces and distributes, with a constant focus on the qualities of uniqueness and exclusivity, its own collections both under its own-label brands, including "Alberta Ferretti", "Philosophy" "Moschino" and "Pollini", and under licensed brands, which include "Blugirl Folies", "Cedric Charlier" and "Jeremy Scott". The Group has also licensed to key partners the production and distribution of other accessories and products with which it supplements its product range (perfumes, junior and children's lines, watches, sunglasses and other).
The Group's business is divided, based on the various product lines and brands it sells, into two segments: (i) prêt-a-porter (which includes prêt-a-porter lines, lingerie and swimwear); and (ii) footwear and leather goods.
The Prêt-a-porter Division, which is composed of the companies Aeffe, Moschino and Velmar, is mainly involved in the design, production and distribution of luxury prêt-a-porter garments and lingerie, beachwear and loungewear.
In terms of the prêt-a-porter collections, the activity is carried out by Aeffe, both for the production of the Group's proprietary brands ("Alberta Ferretti", "Philosophy", "Moschino", "Boutique Moschino" and "Love Moschino") and brands licensed from other companies (such as "Blugirl Folies", "Cedric Charlier" and "Jeremy Scott"). Aeffe also handles the distribution of all Division products both through the retail channel (via subsidiaries) and through the wholesale channel.
Velmar manufactures and distributes lingerie and swimwear collections, and specifically men's/women's lingerie, underwear and beachwear, and loungewear. Collections are produced and distributed under the Group's proprietary brands, such as "Moschino", and under third-party licensed brands such as "Blugirl Folies".
The Prêt-a-porter Division also manages licensing agreements granted to other companies to manufacture Aeffe and Moschino branded product lines such as the Moschino brand licensing agreement relating to the Love line, "Moschino" branded perfumes and "Moschino" branded sunglasses.
Aeffe is the brainchild of designer Alberta Ferretti, who set up her own business in 1972. The history of the parent company has developed in parallel with that of its founder, whose personal involvement in fashion has been a key factor in Aeffe's development.
The growth of the parent company as an industrial and creative entity has been distinguished from the start by a multi-brand approach, with Aeffe producing and distributing the prêt-a-porter collections of leading fashion houses utilising the know-how acquired in the production of luxury prêt-a-porter lines.
This provides the context for the partnership between Aeffe and designer Franco Moschino, whose brand "Moschino Couture!" it has produced and distributed under an exclusive licence since 1983.
Between 1995 and 2013, Aeffe worked with designer Jean Paul Gaultier producing and distributing the women prêt-à-porter collections branded "Jean Paul Gaultier".
In 2001, Aeffe gained control of Pollini, an established manufacturer of footwear and leather goods. This allowed Aeffe to supplement the collections produced in-house with an accessories line.
In 2002, Aeffe took over Velmar, a firm that had collaborated with Aeffe for some time on the production and distribution of lingerie, beachwear and loungewear lines.
In 2007, Aeffe, obtained the Consob Nulla Osta to public the offering memorandum relating to the Public Offering and the listing on the MTA – Star Segment – of Aeffe S.p.A. ordinary shares, closes successfully the Offer of shares and starts to be traded on the MTA – Star Segment – by Borsa Italiana.
Moschino was founded in 1983 and grew during the 1990s to become an internationally renowned brand. Following the disappearance in 1994 of its founder, Franco Moschino, his family, staff and friends have kept the designer's legacy alive, respecting his creative identity and philosophy. Rossella Jardini, who has worked for Franco Moschino since 1981, succeeded him as artistic director and becoming in charge of brand image and styling.
The company provides design, marketing and agency services from the Milan showroom for Moschino collections in Italy and overseas.
The company also directly manages six single-brand Moschino stores, three in Milan, one in Rome, one in Capri and one on-line.
In 2013 Jeremy Scott was appointed as creative director of the "Moschino" brand.
Velmar was created in 1983 in San Giovanni in Marignano and is active in the production and distribution of lingerie, underwear, beachwear and loungewear.
In 1990, a partnership began between Velmar and designer Anna Molinari to manufacture lingerie and beachwear lines. That same year, talks began with Aeffe and Genny.
Between 1990 and 1995, Velmar worked with Genny and Fendi, producing all of the swimwear lines designed by the two fashion houses. Between 1990 and 2001, Velmar worked with Itierre and Prada on the design and production of the active and sportswear lines sold under the "Extee" and "Prada" menswear labels.
Between 1995 and 1998, Velmar produced and distributed under licence the beachwear line for Byblos menswear and womenswear.
In 1998, Velmar signed a licensing agreement with Blufin for the production and distribution of "Blugirl" lines.
In 2001, Aeffe acquired 75% of Velmar. Again, this represented a natural progression of the existing partnership between the two companies.
In 2006, Velmar obtained a licence for the production and distribution of the men's beachwear and underwear lines and women's lingerie lines under the "Moschino" brand.
In 2010, Aeffe acquires the remaining 25% of Velmar's share capital.
In 2012 Velmar signed a licensing agreement with Blufin for the design, production and international distribution of "teen" women prêt-à-porter line branded Blugirl Folies.
Aeffe USA is 100% owned by Aeffe S.p.A. and was incorporated in May 1987 under the laws of the State of New York.
The company operates in the wholesale segment of the North American market (United States and Canada) distributing items of clothing and accessories produced by the parent company, Pollini S.p.A. and Velmar S.p.A. and other third-party licensed manufacturers, with different collections, of the brands produced by the parent company. The company also acts as agent for some of these lines. The company operates out of its showroom located in midtown Manhattan.
Aeffe Retail operates in the retail segment of the Italian market and directly manages 12 stores, both singlebrand and multi-brand, located in major Italian cities such as Milan, Rome, Venice, Florence and Capri, manages also an on-line single-brand store.
Clan Cafè S.r.l., incorporated in 2007, is 62.9% owned by Aeffe Retail. Since 2011 it entered into a lease of a business with the company Jader S.r.l. for the management of a store located in Milan Via Pontaccio 19, which distributes clothing and accessories produced by Aeffe Group and by third parties.
Aeffe UK is 100% owned by Aeffe S.p.A. and manages the store in London's Sloane Street, which sells clothing and accessories under the Alberta Ferretti and Philosophy di Lorenzo Serafini labels.
Aeffe France is 99.9% owned by Aeffe S.p.A. and manages the store in Rue St. Honorè in Paris, selling apparel and accessories under the Alberta Ferretti. The company also acts as an agent for the French market for the brands Alberta Ferretti and Philosophy di Lorenzo Serafini.
Aeffe Japan, company based in Tokyo and 100% owned by Aeffe S.p.A., has sold, starting from the 1st of January 2014, the distributing and franchising activities for the collections branded "Alberta Ferretti" and "Philosophy di Lorenzo Serafini" to Woollen Co., Ltd..
In 2014 the company, as owner of a new brand, has decided to develop it in the Japanese market and to that end has licensed it to a third party for the marketing of products in the country.
Moschino Japan, company based in Tokyo and 100% owned by Moschino S.p.A., has sold starting from the 1st of January 2014, the distributing and franchising activities for the collections branded Moschino to Woollen Co., Ltd..
In 2014 the company, as owner of a new brand, has decided to develop it in the Japanese market and to that end has licensed it to a third party for the marketing of products in the country.
Moschino Korea is 100% owned by Moschino S.p.A. and is based in Seoul. The company exclusively operates in the retail segment through flagship stores under direct management which sell Moschino-branded collections.
Fashoff UK operates by the showroom in London, acting as agent for the collections Moschino, Alberta Ferretti and Philosophy di Lorenzo Serafini.
The company also directly manages a single-brand Moschino store in London.
Moschino France is based in the Paris showroom and acts as agent for all Moschino collections except childrenswear, eyewear, perfumes and watches.
The company also manages a single-brand Moschino store in Paris.
Moschino Gmbh, company that managed directly a single-brand Moschino store in Berlin, starting from the 1st of January 2016, is liquidation.
Bloody Mary, company based in New York and 100% owned by Moschino S.p.A., has signed, starting from 2014, a sublease contract for the management of a store placed at 401 West 14th Street New York.
Moschino USA, company founded in 2014 with base in New York and 100% owned by Moschino S.p.A., directly manage two single-brand Moschino stores, one in Los Angeles and one in New York.
The footwear and leather goods Division, which is composed of Pollini and its subsidiaries, mainly handles the design, production and distribution of footwear, small leather goods, bags and matching accessories made from exclusive materials.
The operating activity is mainly carried out by Pollini, which directly handles the design, production and distribution of own-label products, as well as the production and distribution of brands licensed by Group companies.
The footwear and leather goods division also manages licensing agreements granted to other companies to manufacture "Pollini"" products such as umbrellas, scarves and ties.
Pollini was established in 1953 in the shoemaking district of San Mauro Pascoli, following in the Italian tradition of handmade leather goods and shoes. Italy is a leading producer of footwear: due to expertise required to make these products, nearly all production sites are located in areas with a long-standing shoemaking tradition, such as San Mauro Pascoli, Vigevano and Strà (PD). The company's philosophy is focused on promoting Pollini in other countries as an amalgam of traditional quality and Italian style, offering a range of products that include shoes, bags and matching accessories.
Between 1957 and 1961, Pollini produced the footwear collections of the designer Bruno Magli.
In the 1960s and early 1970s, Pollini began making shoes under its own label, presenting "themed" collections (such as the "Daytona" sports footwear collection, inspired by the world of motorbike racing).
In the 1970s, Pollini rose to international fame: at that point, its collections were shown in Düsseldorf, Paris and New York, as well as in Milan and Bologna. Around the same time, the first stores opened in Milan, Verona, Varese and Venice.
In 1989, Pollini moved into its new office in Gatteo, in the Italian province of Forlì-Cesena. The new site measures 50,000 sq. m., just over a third of it indoor, with a production workshop and seven-storey building housing the showroom and offices. The new site brought the footwear and leather goods divisions and sales and administration offices under one roof.
In 2001, Aeffe and Pollini reached an agreement whereby Aeffe would acquire a controlling stake in Pollini. The acquisition was a natural progression of the increasingly concentrated partnership between the two companies, enabling the growth of the footwear and leather goods lines designed by Alberta Ferretti.
Always in 2008, Pollini entered into new license agreements with Drops S.r.l., for the manufacturing of umbrellas, as well as Larioseta S.p.A., for the manufacturing and distribution of neckwear, including women's shawls, women's and men's scarves and ties.
In 2011 Aeffe S.p.A. has acquired the remaining 28% shareholding of Pollini S.p.A., becoming the sole shareholder.
Pollini Retail is active in the retail segment of the Italian market and directly manages 20 stores, between boutiques and outlets, in major Italian cities such as Milan and Rome.
Pollini Suisse directly manages the single-brand Pollini store in Mendrisio, Switzerland.
Pollini Austria directly manages the single-brand Pollini store in Pandorf, Austria.
| (Values in units of EUR) | Full Year | % | Full Year | % | Change | % |
|---|---|---|---|---|---|---|
| 2017 | on revenues | 2016 | on revenues | |||
| REVENUES FROM SALES AND SERVICES | 312,604,739 | 100.0% | 280,690,885 | 100.0% | 31,913,854 | 11.4% |
| Other revenues and income | 3,857,091 | 1.2% | 6,816,595 | 2.4% | ( 2,959,504) | (43.4%) |
| TOTAL REVENUES | 316,461,830 | 101.2% | 287,507,480 | 102.4% | 28,954,350 | 10.1% |
| Changes in inventory | 10,243,168 | 3.3% | ( 913,774) | (0.3%) | 11,156,942 | (1,221.0%) |
| Costs of raw materials, cons. and goods for resale | ( 106,306,060) | (34.0%) | ( 89,794,049) | (32.0%) | ( 16,512,011) | 18.4% |
| Costs of services | ( 91,038,590) | (29.1%) | ( 81,289,495) | (29.0%) | ( 9,749,095) | 12.0% |
| Costs for use of third parties assets | ( 23,340,025) | (7.5%) | ( 22,847,255) | (8.1%) | ( 492,770) | 2.2% |
| Labour costs | ( 65,376,702) | (20.9%) | ( 63,490,261) | (22.6%) | ( 1,886,441) | 3.0% |
| Other operating expenses | ( 4,071,124) | (1.3%) | ( 3,978,106) | (1.4%) | ( 93,018) | 2.3% |
| Total Operating Costs | ( 279,889,333) | (89.5%) | ( 262,312,940) | (93.5%) | ( 17,576,393) | 6.7% |
| GROSS OPERATING MARGIN (EBITDA) | 36,572,497 | 11.7% | 25,194,540 | 9.0% | 11,377,957 | 45.2% |
| Amortisation of intangible fixed assets | ( 6,555,292) | (2.1%) | ( 6,805,687) | (2.4%) | 250,395 | (3.7%) |
| Depreciation of tangible fixed assets | ( 5,004,115) | (1.6%) | ( 5,149,208) | (1.8%) | 145,093 | (2.8%) |
| Revaluations/(write-downs) and provisions | ( 2,316,749) | (0.7%) | ( 3,153,669) | (1.1%) | 836,920 | (26.5%) |
| Total Amortisation, write-downs and provisions | ( 13,876,156) | (4.4%) | ( 15,108,564) | (5.4%) | 1,232,408 | (8.2%) |
| NET OPERATING PROFIT / LOSS (EBIT) | 22,696,341 | 7.3% | 10,085,976 | 3.6% | 12,610,365 | 125.0% |
| Financial income | 1,418,353 | 0.5% | 1,523,856 | 0.5% | ( 105,503) | (6.9%) |
| Financial expenses | ( 5,175,881) | (1.7%) | ( 3,278,335) | (1.2%) | ( 1,897,546) | 57.9% |
| Total Financial Income / (expenses) | ( 3,757,528) | (1.2%) | ( 1,754,479) | (0.6%) | ( 2,003,049) | 114.2% |
| PROFIT / LOSS BEFORE TAXES | 18,938,813 | 6.1% | 8,331,497 | 3.0% | 10,607,316 | 127.3% |
| Taxes | ( 7,436,754) | (2.4%) | ( 3,955,128) | (1.4%) | ( 3,481,626) | 88.0% |
| NET PROFIT / LOSS | 11,502,059 | 3.7% | 4,376,369 | 1.6% | 7,125,690 | 162.8% |
| (Profit) / loss attributable to minority shareholders | ( 11,716) | (0.0%) | ( 735,125) | (0.3%) | 723,409 | (98.4%) |
| NET PROFIT / LOSS FOR THE GROUP | 11,490,343 | 3.7% | 3,641,244 | 1.3% | 7,849,099 | 215.6% |
In 2017 consolidated revenues amount to EUR 312,605 thousand compared to EUR 280,691 thousand of the year 2016, showing an increase of 11.4% (+11.6% at constant exchange rates).
Revenues of the prêt-à-porter division amount to EUR 239,815 thousand with an increase of 11.1% at current exchange rates (+11.4% at constant exchange rates) compared to 2016. The revenues of the footwear and leather goods division increase by 12.8% to EUR 108,216 thousand.
| (Values in thousands of EUR) | Full Year | Full Year | Change | |||
|---|---|---|---|---|---|---|
| 2017 | % | 2016 | % | Δ | % | |
| Alberta Ferretti | 30,864 | 9.9% | 23,964 | 8.5% | 6,900 | 28.8% |
| Philosophy | 16,324 | 5.2% | 13,140 | 4.7% | 3,184 | 24.2% |
| Moschino | 220,739 | 70.6% | 197,647 | 70.4% | 23,092 | 11.7% |
| Pollini | 34,363 | 11.0% | 29,604 | 10.5% | 4,759 | 16.1% |
| Other | 10,315 | 3.3% | 16,336 | 5.9% | ( 6,021) | (36.9%) |
| Total | 312,605 | 100.0% | 280,691 | 100.0% | 31,914 | 11.4% |
In 2017, the Alberta Ferretti brand increases by 28.8% (+29.5% at constant exchange rates), contributing to 9.9% of consolidated sales, while Philosophy di Lorenzo Serafini brand increases by 24.2% (+24.8% at constant exchange rates), contributing to 5.2% of consolidated sales.
In the same period Moschino brand increases by 11.7% (+11.8% at constant exchange rates), contributing to 70.6% of consolidated sales.
Pollini brand records a growth of 16.1% (+16.2% at constant exchange rates), generating 11.0% of consolidated sales, while brands under license decreases by 36.9% (-36.6% at constant exchange rates), equal to 3.3% of consolidated sales.
| (Values in thousands of EUR) | Full Year | Full Year | Change | |||
|---|---|---|---|---|---|---|
| 2017 | % | 2016 | % | Δ | % | |
| Italy | 152,116 | 48.7% | 126,079 | 44.9% | 26,037 | 20.7% |
| Europe (Italy and Russia excluded) | 67,759 | 21.7% | 59,934 | 21.4% | 7,825 | 13.1% |
| Russia | 9,106 | 2.9% | 9,107 | 3.2% | ( 1) | (0.0%) |
| United States | 18,605 | 5.9% | 22,941 | 8.2% | ( 4,336) | (18.9%) |
| Rest of the World | 65,019 | 20.8% | 62,630 | 22.3% | 2,389 | 3.8% |
| Total | 312,605 | 100.0% | 280,691 | 100.0% | 31,914 | 11.4% |
In 2017, sales in Italy register a very positive trend posting a 20.7% increase to EUR 152,116 thousand, contributing to 48.7% of consolidated sales, thanks to organic growth both in wholesale and retail channel, which both benefited from local customers and high-end tourist flows.
Sales in Europe increase by 13.1% (+13.6% at constant exchange rates), contributing to 21.7% of consolidated sales, driven especially by the good performance in UK, Germany and France. Sales data were positive both for the directly operated stores channel and for the wholesale channel.
The Russian market, contributing to 2.9% of consolidated sales, reported a constant trend compared to last year, showing good signs of recovery in the last quarter of the year.
Sales in the United States post a decrease of 18.9% (-17.5% at constant exchange rates) contributing to 5.9% of consolidated sales. This change was mainly due to the slowdown in sales in the department stores.
In the Rest of the World, sales increase by 3.8% (+3.7% at constant exchange rates) to EUR 65,019 thousand, contributing to 20.8% of consolidated sales, especially driven by healthy trend in Greater China, which posted a 16.5% growth.
| (Values in thousands of EUR) | Full Year | Full Year | Change | |||
|---|---|---|---|---|---|---|
| 2017 | % | 2016 | % | Δ | % | |
| Wholesale | 219,173 | 70.1% | 201,271 | 71.7% | 17,902 | 8.9% |
| Retail | 83,310 | 26.7% | 70,334 | 25.1% | 12,976 | 18.4% |
| Royalties | 10,122 | 3.2% | 9,086 | 3.2% | 1,036 | 11.4% |
| Total | 312,605 | 100.0% | 280,691 | 100.0% | 31,914 | 11.4% |
The revenues generated by the Group during 2017 are analysed below:
70.1% from the Group's sales organisation, showrooms, agents and importers, franchise outlets, corners and shop-in-shops (wholesale channel), which contributes EUR 201,271 thousand in 2016 and EUR 219,173 thousand in 2017, up 8.9% (+9.0% at constant exchange rates);
26.7% from sales outlets managed directly by the Group (retail channel), which contributes EUR 70,334 thousand in 2016 and EUR 83,310 thousand in 2017, +18.4% (+18.9% at constant exchange rates);
3.2% from royalties deriving from licenses granted to third parties for the production and distribution of product lines sold under the Group's brand names. Royalties increase from EUR 9,086 thousand in 2016 to EUR 10,122 thousand in 2017, by 11.4%.
Labour costs change from EUR 63,490 thousand in 2016 to EUR 65,377 thousand in 2017, recording an increase of EUR 1,887 thousand, and an incidence on revenues which changes from 22.6% in 2016 to 20.9% in 2017.
| Total | 1,307 | 1,301 | 6 | 0.5% |
|---|---|---|---|---|
| Executive and senior managers | 23 | 23 | - | 0.0% |
| Office staff-supervisors | 1,051 | 1,049 | 2 | 0.2% |
| Workers | 233 | 229 | 4 | 1.7% |
| 2017 | 2016 | Δ | % | |
| Average number of employees by category | Full Year | Full Year | Change | |
The workforce increases from an average of 1,301 units in 2016 to 1,307 units in 2017.
In 2017 consolidated EBITDA is positive for EUR 36,572 thousand (with an incidence of 11.7% of consolidated sales), showing an increase of 45.2% compared to an EBITDA of EUR 25,195 thousand in 2016 (with an incidence of 9.0% of consolidated sales). This improvement was due to both sales growth and lower incidence of the operating costs, in turn closely linked to the Group's business model. In particular, thanks to full exploitation of economies of scale, an increase in sales corresponds to a more than proportional increase in margins.
The improvement in profitability was mainly driven by the prêt-à-porter division.
In particular, EBITDA of the prêt-à-porter division amounts to EUR 26,821 thousand (11.2% on sales), compared to an EBITDA of EUR 18,925 thousand in 2016 (8.8% on sales), with an increase of EUR 7,896 thousand.
In 2017 EBITDA of the footwear and leather goods division is EUR 9,751 thousand (9.0% on sales), compared to an EBITDA of EUR 6,270 thousand in 2016 (6.5% on sales), with a EUR 3,481 thousand increase.
Consolidated EBIT is equal to EUR 22,696 thousand (7.3% on sales), recording an improvement of EUR 12,610 thousand, compared to EUR 10,086 thousand of 2016 (3.6% on sales).
Thanks to improvement in operating profit, the Result before taxes posts a profit of EUR 18,939 thousand, showing a EUR 10,608 thousand growth compared to EUR 8,331 thousand in 2016.
Net result posts a profit of EUR 11,502 thousand in 2017 compared to EUR 4,376 thousand in 2016, with an increase in absolute value of EUR 7,126 thousand.
Consolidated net result for the Group increases from EUR 3,641 thousand in 2016 to EUR 11,490 thousand in 2017, with a growth of EUR 7,849 thousand.
| (Values in units of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Trade receivables | 42,064,915 | 40,711,059 | 1,353,856 | 3.3% |
| Stock and inventories | 97,817,891 | 89,389,833 | 8,428,058 | 9.4% |
| Trade payables | ( 68,618,776) | ( 61,880,670) | ( 6,738,106) | 10.9% |
| Operating net working capital | 71,264,030 | 68,220,222 | 3,043,808 | 4.5% |
| Other short term receivables | 26,914,468 | 25,082,908 | 1,831,560 | 7.3% |
| Tax receivables | 5,411,024 | 4,094,261 | 1,316,763 | 32.2% |
| Derivative assets | - | - | - | n.a. |
| Other short term liabilities | ( 17,642,193) | ( 16,958,605) | ( 683,588) | 4.0% |
| Tax payables | ( 3,611,468) | ( 7,376,339) | 3,764,871 | (51.0%) |
| Derivative liabilities | ( 997,532) | - | ( 997,532) | n.a. |
| Net working capital | 81,338,329 | 73,062,447 | 8,275,882 | 11.3% |
| Tangible fixed assets | 59,104,297 | 61,376,021 | ( 2,271,724) | (3.7%) |
| Intangible fixed assets | 109,678,612 | 115,131,885 | ( 5,453,273) | (4.7%) |
| Equity investments | 131,558 | 131,558 | - | n.a. |
| Other fixed assets | 3,564,214 | 3,961,836 | ( 397,622) | (10.0%) |
| Fixed assets | 172,478,681 | 180,601,300 | ( 8,122,619) | (4.5%) |
| Post employment benefits | ( 5,916,166) | ( 6,366,872) | 450,706 | (7.1%) |
| Provisions | ( 2,415,237) | ( 2,558,786) | 143,549 | (5.6%) |
| Assets available for sale | 436,885 | 436,885 | - | n.a. |
| Liabilities available for sale | - | - | - | n.a. |
| Long term not financial liabilities | ( 787,692) | ( 469,000) | ( 318,692) | 68.0% |
| Deferred tax assets | 14,335,779 | 13,856,302 | 479,477 | 3.5% |
| Deferred tax liabilities | ( 30,436,700) | ( 30,985,927) | 549,227 | (1.8%) |
| NET CAPITAL INVESTED | 229,033,879 | 227,576,349 | 1,457,530 | 0.6% |
| Share capital | 25,371,407 | 25,371,407 | - | n.a. |
| Other reserves | 116,229,168 | 115,641,684 | 587,484 | 0.5% |
| Profits / (Losses) carried-forward | ( 6,957,390) | ( 8,883,005) | 1,925,615 | (21.7%) |
| Profits / (Loss) for the period | 11,490,343 | 3,641,244 | 7,849,099 | 215.6% |
| Group interest in shareholders' equity | 146,133,528 | 135,771,330 | 10,362,198 | 7.6% |
| Minority interests in shareholders' equity | 32,306,940 | 32,298,194 | 8,746 | 0.0% |
| Total shareholders' equity | 178,440,468 | 168,069,524 | 10,370,944 | 6.2% |
| Short term financial receivables | ( 1,420,000) | ( 2,235,854) | 815,854 | (36.5%) |
| Cash | ( 22,808,913) | ( 14,521,334) | ( 8,287,579) | 57.1% |
| Long term financial liabilities | 22,079,795 | 23,840,201 | ( 1,760,406) | (7.4%) |
| Long term financial receivables | ( 2,591,605) | ( 3,390,633) | 799,028 | (23.6%) |
| Short term financial liabilities | 55,334,134 | 55,814,445 | ( 480,311) | (0.9%) |
| NET FINANCIAL POSITION | 50,593,411 | 59,506,825 | ( 8,913,414) | (15.0%) |
| SHAREHOLDERS' EQUITY AND NET FINANCIAL INDEBTEDNESS | 229,033,879 | 227,576,349 | 1,457,530 | 0.6% |
Net invested capital increases by 0.6% compared with 31 December 2016.
Net working capital amounts to EUR 81,338 thousand (26.3% on sales) compared with EUR 73,062 thousand at 31 December 2016 (26.0% on sales).
Changes in the main items included in the net working capital are described below:
At 31 December 2017, fixed assets decrease by EUR 8,123 thousand compared to 31 December 2016.
Changes in the main items are described below:
The net financial position of the Group amounts to EUR 50,593 thousand as of 31 December 2017 compared with EUR 59,507 thousand as of 31 December 2016. The decrease is mainly due to a better management of net working capital.
Main shareholders
The shareholders' equity increases by EUR 10,370 thousand from EUR 168,070 thousand as of 31 December 2016 to EUR 178,440 thousand as of 31 December 2017. The reasons of such increase are illustrated in the explanatory notes. The number of shares is 107,362,504.
%
The following institutions hold more than 3% of the Aeffe's shares:
| Fratelli Ferretti Holding S.r.l. | 37.387% |
|---|---|
| I.M. Fashion S.r.l. | 24.410% |
| Tullio Badioli | 6.000% |
| Other shareholders(*) | 32.203% |
(*) 5,5% of own shares held by Aeffe S.p.A.
Pursuant to the Consob Communication of 28 July 2006, the following table provides reconciliation between the net result and equity of Aeffe S.p.A. for the year ended 31 December 2017 and the comparable items on a consolidated basis (portion attributable to owners of Aeffe S.p.A.):
| (Values in thousand of EUR) | Shareholders' equity at 31 December 2017 |
Net profit /loss for the full year 2017 |
|---|---|---|
| Taken from the corporate financial statements of the parent company | 143,477 | 6,818 |
| Share of the consolidated subsidiaries's equity and profit /loss attributable to the Group, net of the carrying amount of equity interests |
( 7,195) | 6,055 |
| Effect of business combination reopening | 33,517 | ( 1,303) |
| Reversal of the intercompany inventory margin | ( 963) | - |
| Transition to parent company accounting policies | 2,397 | 108 |
| Other adjustments | 7,207 | ( 176) |
| Total consolidation adjustments | 34,963 | 4,684 |
| Group interest in shareholders' equity | 146,133 | 11,490 |
| Minority interest | 32,307 | 12 |
| Total shareholders' equity | 178,440 | 11,502 |
Considering the particular nature of the Group's products, research & development activities consist in the continual technical/stylistic renewal of models and the constant improvement of the materials employed in production. These costs were charged in full to the Income Statement.
Regarding the Group's objectives and policies on financial risks refer to the information reported in the Notes.
Aeffe S.p.A. has aligned its system of corporate governance with the recommendations of the Code of Self-Regulation for stock-market listed companies approved in March 2006 (and amended in July 2015) by the Committee for Corporate Governance and Borsa Italiana S.p.A.. Unless specified otherwise, the references in this paragraph relate to the 2015 Code.
The Code of Self-Regulation provides an organisational and functional reference model for the companies listed on the markets organised and managed by Borsa Italiana; it is non-binding and offers the flexibility necessary for its adoption by listed companies.
Alignment of the system of governance adopted by listed companies with the recommendations contained in the Code of Self-Regulation is, in fact, not currently a legal requirement: adoption of the standards and organisational models proposed therein is therefore voluntary, and left to the discretion of the listed companies for which it is intended. Nevertheless, certain recommendations contained in the Code of Self-Regulation are reflected in current legislation and/or regulations including, more precisely, the Italian Civil Code, Decree 58 dated 24 February 1998 as subsequently amended (the "Consolidated Finance Law"), Consob Regulation 11971 dated 14 May 1999, as amended (the "Issuers' Regulations"), the Regulations for Markets Organised and Managed by Borsa Italiana (the "Market Regulations") and the Market Instructions relating specifically to companies with shares admitted to trading in the STAR segment.
As required by the regulations, Aeffe prepares yearly the "Report on corporate governance and ownership structures", stating: (i) which recommendations contained in the Code of Self-Regulation have actually been adopted by the Issuer and how, and (ii) which recommendations have not been adopted, in whole or in part, together with adequate information on the reasons for such partial or non-application of them. This report, which also provides information on the ownership structure, is available from the governance section of the following website: www.aeffe.com.
As of 31 December 2017, the Parent Company holds 5,876,878 treasury shares, par value EUR 0.25 each, totalling 5.5% of its share capital. During the year, no transactions on treasury shares have been carried out by the Parent Company.
As of 31 December 2017 the Parent Company does not hold shares of any controlling company either directly or indirectly.
During the period, there were no transactions with related parties, including intragroup transactions, which qualified as unusual or atypical. Any related party transactions formed part of the normal business activities of companies in the Group. Such transactions are concluded at standard market terms for the nature of goods and/or services offered.
Information on transactions with related parties, including specific disclosures required by the Consob Communication of 28 July 2006, is provided in Note "Related party transactions".
Regarding the information relative to personnel and environment, please refer to the indicated in the consolidated non-financial statement.
No significant events occurred during the year have to be reported.
Subsequent to the balance sheet date, no significant events regarding the Group's activities have to be reported.
The Financial year 2017 was characterized by double-digit growth in revenues and a more than proportional increase in profitability, results achieved thanks to the good performance of our brands, especially the proprietary ones and an effective business model. The Group's medium/long-term strategic goals are on the development of highly distinctive collections with a focus on a calibrated strengthening of our presence in high-potential markets, especially in the Greater China and Asia Pacific areas. Considering the Group's vitality and the positive feedbacks on the ongoing Fall/Winter 2018-2019 collections sales campaign, we feel confident about the further development and consolidation of our brands in 2018.
The Group prepares the consolidated non financial Statement pursuant to Legislative Decree 254/2016 and Consob Resolution no. 20267 of 18 January 2018 in a separate document, published on the Internet site, in the Investor Relations, Financial Statements and Reports section.
| (Values in units of EUR) | Notes | 31 December | 31 December | Change |
|---|---|---|---|---|
| 2017 | 2016 | |||
| NON-CURRENT ASSETS | ||||
| Intangible fixed assets | ||||
| Key money | 26,852,574 | 28,923,062 | ( 2,070,488) | |
| Trademarks | 81,975,169 | 85,468,751 | ( 3,493,582) | |
| Other intangible fixed assets | 850,869 | 740,072 | 110,797 | |
| Total intangible fixed assets | (1) | 109,678,612 | 115,131,885 | ( 5,453,273) |
| Tangible fixed assets | ||||
| Lands | 17,118,773 | 17,118,773 | - | |
| Buildings | 22,167,805 | 22,658,662 | ( 490,857) | |
| Leasehold improvements | 12,597,761 | 14,465,641 | ( 1,867,880) | |
| Plant and machinary | 2,863,830 | 2,665,840 | 197,990 | |
| Equipment | 260,126 | 311,406 | ( 51,280) | |
| Other tangible fixed assets | 4,096,002 | 4,155,699 | ( 59,697) | |
| Total tangible fixed assets | (2) | 59,104,297 | 61,376,021 | ( 2,271,724) |
| Other fixed assets | ||||
| Equity investments | (3) | 131,558 | 131,558 | - |
| Long term financial receivables | (4) | 2,591,605 | 3,390,633 | ( 799,028) |
| Other fixed assets | (5) | 3,564,214 | 3,961,836 | ( 397,622) |
| Deferred tax assets | (6) | 14,335,779 | 13,856,302 | 479,477 |
| Total other fixed assets | 20,623,156 | 21,340,329 | ( 717,173) | |
| TOTAL NON-CURRENT ASSETS | 189,406,065 | 197,848,235 | ( 8,442,170) | |
| CURRENT ASSETS | ||||
| Stocks and inventories | (7) | 97,817,891 | 89,389,833 | 8,428,058 |
| Trade receivables | (8) | 42,064,915 | 40,711,059 | 1,353,856 |
| Tax receivables | (9) | 5,411,024 | 4,094,261 | 1,316,763 |
| Derivate assets | (10) | - | - | - |
| Cash | (11) | 22,808,913 | 14,521,334 | 8,287,579 |
| Short term financial receivables | (12) | 1,420,000 | 2,235,854 | ( 815,854) |
| Other receivables | (13) | 26,914,468 | 25,082,908 | 1,831,560 |
| TOTAL CURRENT ASSETS | 196,437,211 | 176,035,249 | 20,401,962 | |
| Assets available for sale | (14) | 436,885 | 436,885 | - |
| TOTAL ASSETS | 386,280,161 | 374,320,369 | 11,959,792 |
(*) Pursuant to Consob Resolution N. 15519 of 27th July 2006, the effects of related party transactions on the Consolidated Balance Sheet are presented in the specific Balance Sheet schedule provided in the attachment I, and are further described in Note "Transactions with related parties".
| (Values in units of EUR) | Notes | 31 December | 31 December | Change |
|---|---|---|---|---|
| 2017 | 2016 | |||
| SHAREHOLDERS' EQUITY | (15) | |||
| Group interest | ||||
| Share capital | 25,371,407 | 25,371,407 | - | |
| Other reserves | 116,229,168 | 115,641,684 | 587,484 | |
| Profits / (losses) carried-forward | ( 6,957,390) | ( 8,883,005) | 1,925,615 | |
| Net profit / (loss) for the Group | 11,490,343 | 3,641,244 | 7,849,099 | |
| Group interest in shareholders' equity | 146,133,528 | 135,771,330 | 10,362,198 | |
| Minority interest | ||||
| Minority interests in share capital and reserves | 32,295,224 | 31,563,069 | 732,155 | |
| Net profit / (loss) for the minority interests | 11,716 | 735,125 | ( 723,409) | |
| Minority interests in shareholders' equity | 32,306,940 | 32,298,194 | 8,746 | |
| TOTAL SHAREHOLDERS' EQUITY | 178,440,468 | 168,069,524 | 10,370,944 | |
| NON-CURRENT LIABILITIES | ||||
| Provisions | (16) | 2,415,237 | 2,558,786 | ( 143,549) |
| Deferred tax liabilities | (6) | 30,436,700 | 30,985,927 | ( 549,227) |
| Post employment benefits | (17) | 5,916,166 | 6,366,872 | ( 450,706) |
| Long term financial liabilities | (18) | 22,079,795 | 23,840,201 | ( 1,760,406) |
| Long term not financial liabilities | (19) | 787,692 | 469,000 | 318,692 |
| TOTAL NON-CURRENT LIABILITIES | 61,635,590 | 64,220,786 | ( 2,585,196) | |
| CURRENT LIABILITIES | ||||
| Trade payables | (20) | 68,618,776 | 61,880,670 | 6,738,106 |
| Tax payables | (21) | 3,611,468 | 7,376,339 | ( 3,764,871) |
| Derivate liabilities | (10) | 997,532 | - | 997,532 |
| Short term financial liabilities | (22) | 55,334,134 | 55,814,445 | ( 480,311) |
| Other liabilities | (23) | 17,642,193 | 16,958,605 | 683,588 |
| TOTAL CURRENT LIABILITIES | 146,204,103 | 142,030,059 | 4,174,044 | |
| Liabilities available for sale | - | - | - | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 386,280,161 | 374,320,369 | 11,959,792 |
(*) Pursuant to Consob Resolution N. 15519 of 27th July 2006, the effects of related party transactions on the Consolidated Balance Sheet are presented in the specific Balance Sheet schedule provided in the attachment II, and are further described in Note "Transactions with related parties ".
| (Values in units of EUR) | Notes | Full Year | Full Year |
|---|---|---|---|
| 2017 | 2016 | ||
| REVENUES FROM SALES AND SERVICES | (24) | 312,604,739 | 280,690,885 |
| Other revenues and income | (25) | 3,857,091 | 6,816,595 |
| TOTAL REVENUES | 316,461,830 | 287,507,480 | |
| Changes in inventory | 10,243,168 | ( 913,774) | |
| Costs of raw materials, cons. and goods for resale | (26) | ( 106,306,060) | ( 89,794,049) |
| Costs of services | (27) | ( 91,038,590) | ( 81,289,495) |
| Costs for use of third parties assets | (28) | ( 23,340,025) | ( 22,847,255) |
| Labour costs | (29) | ( 65,376,702) | ( 63,490,261) |
| Other operating expenses | (30) | ( 4,071,124) | ( 3,978,106) |
| Amortisation, write-downs and provisions | (31) | ( 13,876,156) | ( 15,108,564) |
| Financial Income / (expenses) | (32) | ( 3,757,528) | ( 1,754,479) |
| PROFIT / LOSS BEFORE TAXES | 18,938,813 | 8,331,497 | |
| Taxes | (33) | ( 7,436,754) | ( 3,955,128) |
| NET PROFIT / LOSS | 11,502,059 | 4,376,369 | |
| (Profit) / loss attributable to minority shareholders | ( 11,716) | ( 735,125) | |
| NET PROFIT / LOSS FOR THE GROUP | 11,490,343 | 3,641,244 | |
| Basic earnings per share | (34) | 0.113 | 0.036 |
| Dilutive earnings per share | (34) | 0.113 | 0.036 |
(*) Pursuant to Consob Resolution N. 15519 of 27th July 2006, the effects of related party transactions on the Consolidated Income Statement are presented in the specific Income Statement schedule provided in the attachment III and are further described in Note "Transactions with related parties".
| (Values in units of EUR) | Notes | Full Year | Full Year |
|---|---|---|---|
| 2017 | 2016 | ||
| Profit/(loss) for the period (A) | 11,502,059 | 4,376,369 | |
| Other comprehensive income that will not be reclassified subsequently to profit or | |||
| loss: | |||
| Remeasurement of defined benefit plans | ( 43,304) | ( 115,249) | |
| Income tax relating to components of Other comprehensive income that will not be | |||
| reclassified subsequently to profit or loss | - | - | |
| Total other comprehensive income that will not be reclassified subsequently to profit | |||
| or loss, net of tax (B1) | ( 43,304) | ( 115,249) | |
| Other comprehensive income that will be reclassified subsequently to profit or loss: Gains/(losses) on cash flow hedges |
|||
| Gains/(losses) on exchange differences on translating foreign operations | ( 1,087,811) | 135,260 | |
| Income tax relating to components of Other Comprehensive income / (loss) Total other comprehensive income that will be reclassified subsequently to profit or |
- | - | |
| loss, net of tax (B2) | ( 1,087,811) | 135,260 | |
| Totale Other comprehensive income, net of tax(B1)+(B2)=(B) | ( 1,131,115) | 20,011 | |
| Total Comprehensive income / (loss) (A) + (B) | 10,370,944 | 4,396,380 | |
| Total Comprehensive income / (loss) attributable to: | 10,370,944 | 4,396,380 | |
| Owners of the parent | 10,362,198 | 4,027,466 | |
| Non-controlling interests | 8,746 | 368,914 |
| (Values in thousands of EUR) | Notes | Full Year | Full Year |
|---|---|---|---|
| 2017 | 2016 | ||
| OPENING BALANCE | 14,521 | 9,993 | |
| Profit before taxes | 18,939 | 8,331 | |
| Amortisation / write-downs | 13,876 | 15,110 | |
| Accrual (+)/availment (-) of long term provisions and post employment benefits | ( 594) | 1,305 | |
| Paid income taxes | ( 12,230) | ( 3,583) | |
| Financial income (-) and financial charges (+) | 3,757 | 1,754 | |
| Change in operating assets and liabilities | ( 6,509) | ( 12,195) | |
| CASH FLOW (ABSORBED)/ GENERATED BY OPERATING ACTIVITY | (33) | 17,239 | 10,722 |
| Increase (-)/ decrease (+) in intangible fixed assets | ( 1,102) | 883 | |
| Increase (-)/ decrease (+) in tangible fixed assets | ( 2,732) | ( 3,265) | |
| Investments and write-downs (-)/ Disinvestments and revaluations (+) | - | 77 | |
| CASH FLOW (ABSORBED)/ GENERATED BY INVESTING ACTIVITY | (34) | ( 3,834) | ( 2,305) |
| Other variations in reserves and profits carried-forward of shareholders' equity | ( 1,131) | 20 | |
| Dividends paid | - | - | |
| Proceeds (+)/ repayments (-) of financial payments | ( 2,241) | ( 679) | |
| Increase (-)/ decrease (+) in long term financial receivables | 2,013 | ( 1,476) | |
| Financial income (+) and financial charges (-) | ( 3,758) | ( 1,754) | |
| CASH FLOW (ABSORBED)/GENERATED BY FINANCING ACTIVITY | (35) | ( 5,117) | ( 3,889) |
| CLOSING BALANCE | 22,809 | 14,521 |
(*) Pursuant to Consob Resolution N. 15519 of 27th July 2006, the effects of related party transactions on the Consolidated Cash Flow are presented in the specific Cash Flow schedule provided in the attachment IV and are further described in Note "Transactions with related parties ".
| (Values in thousands of EUR) | Share capital | Share premium reserve | Other reserves | Fair Value reserve | IAS reserve | Profits/(losses) carried forward |
Remeasurement of defined benefit plans reserve |
Net profit / loss for the Group | Translation reserve | shareholders' equity Group interest in |
shareholders' equity Minority interest in |
Total shareholders' equity |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| BALANCES AT 1 January 2016 | 25,371 | 71,240 | 26,516 | 7,901 | 11,459 | ( 9,486) | ( 1,017) | 1,522 | ( 1,762) | 131,744 | 17,884 | 149,628 |
| Allocation of 2015 profit/(loss) | - | - | 919 | - | - | 603 | - | ( 1,522) | - | - | - | - |
| Dividends paid | - | - | - | - | - | - | - | - | - | - | - | - |
| Treasury stock (buyback)/sale | - | - | - | - | - | - | - | - | - | - | - | - |
| Total comprehensive income/(loss) of 2016 | - | - | - | - | - | - | ( 113) | 3,641 | 500 | 4,028 | 369 | 4,397 |
| Other changes | - | - | - | - | - | - | - | - | - | 14,045 | 14,045 | |
| BALANCES AT 31 December 2016 | 25,371 | 71,240 | 27,435 | 7,901 | 11,459 | ( 8,883) | ( 1,130) | 3,641 | ( 1,262) | 135,772 | 32,298 | 168,070 |
| (Values in thousands of EUR) | Share capital | Share premium reserve | Other reserves | Fair Value reserve | IAS reserve | Profits/(losses) carried forward |
Remeasurement of defined benefit plans reserve |
Net profit / loss for the Group | Translation reserve | shareholders' equity Group interest in |
shareholders' equity Minority interest in |
Total shareholders' equity |
| BALANCES AT 1 January 2017 | 25,371 | 71,240 | 27,435 | 7,901 | 11,459 | ( 8,883) | ( 1,130) | 3,641 | ( 1,262) | 135,772 | 32,298 | 168,070 |
| Allocation of 2016 profit/(loss) | - | - | 1,715 | - | - | 1,926 | - | ( 3,641) | - | - | - | - |
| Dividends paid | - | - | - | - | - | - | - | - | - | - | - | |
| Treasury stock (buyback)/sale | - | - | - | - | - | - | - | - | - | - | - | - |
| Total comprehensive income/(loss) of 2017 | - | - | - | - | ( 43) | 11,490 | ( 1,086) | 10,361 | 9 | 10,370 | ||
| Other changes | - | - | - | - | - | - | - | - | - | - |
Independent auditors' report in accordance with at. 14 of Legislative Decree n. 39 of January 27, 2010 and art. 10 of Regulation (EU) n. 537/2014
Ria Grant Thornton S.p.A. San Donato, 197 40127 Bologna
T +39 051 6045911 F +39 051 6045999
To the shareholders of Aeffe S.p.A.
We have audited the consolidated financial statements of Aeffe Group (the Group), which comprise the statement of financial position as at December 31, 2017, the consolidated statement of income, the consolidated statement of comprehensive income, the consolidated statement of changes in shareholders' equity, the consolidated statement of cash flows for the year then ended and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at December 31, 2017 and of its consolidated financial performance and its consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and with the regulations issued for implementing art. 9 of Legislative Decree n.38 dated February 28, 2005.
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical and independence requirements applicable in Italy to audit of financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The consolidated financial statements include the followings fixed intangible assets with a finite useful life:
• BRANDS, including "Alberta Ferretti", ""Moschino" and "Pollini", equal to Euro 82 Million as of 31st December,2017, are recognized at cost and are amortized systematically on a straight-line basis during their estimated useful life of 40 years.
Società di revisione ed organizzazione contabile Sede Legale: Corso Vercelli n.40 - 20145 Milano - Iscrizione al registro delle imprese di Milano Codice Fiscale e P.IVA n.02342440399 - R.E.A. 1965420. Registro dei revisori legali n.157902 già iscritta all'Albo Speciale delle società di revisione tenuto dalla CONSOB al n. 49 Capitale Sociale: € 1.832.610,00 interamente versato Uffici: Ancona-Bari-Bologna-Firenze-Genova-Milano-Napoli- Padova-Palermo-Perugia-Pescara-Pordenone-Rimini-Roma-Torino-Trento-Verona.
www.ria-grantthornton.it
Grant Thornton refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Ria Grant Thornton spa is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another's acts or omissions.
• KEY MONEY, equal to Euro 26,9 Million at 31st December,2017 are amounts paid by the Group to take over contracts relating to directly-managed stores or, in the case of business combinations, the fair value of these assets at the time of acquisition. The directors deemed it fitting to estimate a useful life corresponding to the residual term of the contract, and generally plan a renewal for another 6 years, considering a final end value equal to the amounts due by way of indemnity for taking over the lease if provided for by the national regulations.
Notwithstanding the fact that International Accounting Standards (IAS 36) only require goodwill and other indefinite-lived intangible assets to be subject to impairment tests on a yearly basis, the management has also tested the net book value of BRANDS and KEY MONEY, in order to compare their realizable values with their book values, as discussed in the following paragraphs.
For the purpose of verifying the recoverability of the brands subject to impairment test, the management applied the actualization of royalties' method. The method consists in measuring the sum of the net present values of the estimated cash flows from royalties, which the market will attribute to the owner of an intangible asset for its exclusive license.
The Group disclosed information regarding brands in Note 1 of the consolidated financial statements, as well as in note on the accounting principles adopted.
The recoverable value of key money was calculated by the management using the higher between the current value and the value determinable by use.
In particular, followings calculations are performed:
The Group disclosed information regarding key money in Note 1 of the consolidated financial statements, as well as in note on the accounting principles adopted.
Impairment tests are subject to complex estimates that require discretional assumptions. For this reason, we considered the valuation of brands and key money a key audit matter in the context of our audit of the consolidated financial statements as a whole.
As part of our audit of the consolidated financial statement as of 31st December 2017, we performed the followings procedures in response to key audit matters, for each of the two type of fixed intangible assets with a finite useful life.
We reviewed and understood the process underlying the preparation of the Budget Plan of Aeffe Group, staring in the 2018.
We analyzed assumptions underlying the calculation of royalties and their correspondence with the consolidated financial statements.
The Directors are responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with the regulations issued for implementing art. 9 of Legislative Decree n.38 dated February 28, 2005 and, within the terms provided by the law, for such internal control as they determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The Board of Statutory Auditors is responsible, within the terms provided by the law, for overseeing the Group's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with International Standard on Auditing (ISA Italia), we have exercised professional judgment and maintain professional skepticism throughout the audit. We also:
• Identified and assessed the risks of material misstatement of the consolidated financial statements, whether due to fraud or error; designed and performed audit procedures responsive to those risks and obtained audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
We have communicated with those charged with governance, as properly identified in accordance with ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also have provided those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we have determined those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters.
We were initially engaged by the shareholders of Aeffe S.p.A. on April,16,2016 to perform the audits of the financial statements and the consolidated financial statements of each fiscal year starting from December 31, 2016 to December 31, 2024.
We declare that we did not provide prohibited non-audit service, referred to article 5, par.1, of EU Regulation 537/2014, and that we remained independent of the Company in conducting the audit.
We confirm that the opinion on the financial statements included in this report is consistent with the content of the additional report, prepared in accordance with the article 11 of the EU Regulation 537/2014, submitted to the Board of Statutory Auditors.
The Directors of Aeffe Group are responsible for the preparation of the Director's Report and of the Report on Corporate Governance and Ownership Structure Aeffe as at December 31, 2017, including their
consistency with the related consolidated financial statements and their compliance with the applicable laws and regulations.
We have performed the procedures required by auditing standard (SA Italia) no. 720B in order to express an opinion on the consistency of the Director's Report and of the information set out in the Report on Corporate Governance and Ownership Structure referred to in art. 123-bis, paragraph 4 of Legislative Decree n. 58/98, with the consolidated financial statements of Aeffe Group as at December 31, 2017 and on their compliance with the applicable laws and regulations, and in order to assess whether they contain material misstatements.
In our opinion, the Director's Report and the above mentioned specific information included in the Report on Corporate Governance and Ownership Structure are consistent with the consolidated financial statements of Aeffe Group as at December 31, 2017 and are compliant with the applicable laws and regulations.
With reference to the assessment pursuant to art.14, par.2, subpar. e), of Legislative Decree n.39, dated 27 January 2010, based on our knowledge and understanding of the entity and its environment obtained through our audit, we have nothing to report.
Management of Aeffe Group is responsible for the preparation of the non-financial statement pursuant to Legislative Decree n.254 of 30 December 2016. We have verified that management approved the nonfinancial statement.
Pursuant to article 3, paragraph 10, of Legislative Decree n.254 of 30 December 2016, the non-financial statement is the subject of a separate statement of compliance issued by another auditor.
Bologna, March 21, 2018
Ria Grant Thornton S.p.A.
Signed by Sandro Gherardini Partner
This report has been translated into the English language from the original, which was issued in Italian, solely for the convenience of international.
Aeffe Group operates worldwide in the luxury goods sector and is active in the design, production and distribution of products of high quality and stylistic uniqueness.
The Group develops, produces and distributes, with a constant focus on the qualities of uniqueness and exclusivity, its own collections both under its own-label brands, including "Alberta Ferretti", "Philosophy", "Moschino" and "Pollini", and licensed brands, which include "Blugirl Folies", "Cedric Charlier" and "Jeremy Scott".
The Group also has licensed to key partners the production and distribution of other accessories and products with which it supplements its product range (perfumes, junior and children's lines, watches sunglasses and other).
The Group's business is divided, based on the various product lines and brands it sells, into two segments: prêt-a-porter (which includes prêt-a-porter, lingerie and swimwear) and footwear and leather goods.
The Parent Company Aeffe, an Italian legal entity incorporated as a public limited company (società per azioni) based in San Giovanni in Marignano (RN), is currently listed in the – STAR Segment – of the MTA, the Italian Stock Exchange operated by Borsa Italiana.
Aeffe is controlled by the company Fratelli Ferretti Holding S.r.l., of which in the attachment V are reported the data of the latest approved statutory financial statements. The company Fratelli Ferretti Holding also draws up the consolidated financial statement in accordance with the international accounting standards.
These consolidated financial statements include the financial statements of the Parent Company Aeffe and its subsidiaries and the Group's equity interests in affiliated companies. They consist of the balance sheet, income statement, comprehensive income statement, statement of changes in equity, cash flow statement and these notes.
The financial statements are expressed in euro, since this is the currency in which most of the Group's transactions are conducted. Foreign operations are included in the consolidated financial statements according to the principles stated in the notes that follow.
Pursuant to art. 3 of Decree 38/2005 dated 28th February 2005, these financial statements have been prepared in accordance with International Accounting Standards (IAS/IFRS). The explanatory notes, also prepared in accordance with IAS/IFRS, have been supplemented by the additional information requested by CONSOB and by its instructions issued in accordance with art. 9 of Decree 38/2005 (resolutions 15519 and 15520 dated 27th July 2006 and communication DEM/6064293 dated 28th July 2006, pursuant to art. 114.5 of the Consolidated Finance Law), by art. 78 of the Issuers' Regulations, by the EC document issued in November 2003 and, where applicable, by the Italian Civil Code. Consistent with last year's annual report, some of the required information are presented in the Directors' Report (Report on operations).
Unless otherwise indicated in the measurement bases described below, these consolidated financial statements were prepared in accordance with the historic cost principle.
The measurement bases were applied uniformly by all Group companies.
The scope of consolidation at 31 December 2017 includes the financial statements of the Parent Company Aeffe and those of the Italian and foreign companies in which Aeffe holds control either directly or through its subsidiaries and associates or in which it exerts a dominant influence.
If necessary, adjustments were made to the financial statements of subsidiaries to bring their accounting polices into line with those adopted by the Group.
Companies are consolidated using the line-by-line method. The principles adopted for the application of this method are essentially as follows:
Subsidiaries are enterprises controlled by the company. Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are consolidated from the date on which the Group acquires control and until the date when such control ceases.
The acquisition of subsidiaries is accounted for using the historical method. Historical cost is determined by adding together the fair values of the assets contributed, the shares issued and the liabilities assumed on the acquisition date, plus the costs directly associated with the acquisition. Any surplus acquisition cost over the Group's percentage share of the fair value of the identifiable assets, liabilities and contingent liabilities of the associate is recognised as goodwill.
If the Group's percentage share of the fair value of the identifiable assets, liabilities and contingent liabilities of the associate exceeds historical cost, the difference is immediately recorded in the income statement.
Intercompany balances, transactions, revenue and costs are eliminated in the consolidated statements.
Furthermore, intercompany business combinations are recognised by maintaining the same book value of assets and liabilities as previously recorded in the consolidated financial statements.
An associate is an enterprise in which the Group has significant influence, but has neither sole or joint control, by taking part in decisions regarding the company's financial and operating strategy.
Trading results and the assets and liabilities of associates are accounted for in the consolidated financial statements based on the equity method, except where they are classified as held for sale.
According to this method, equity interests in associates are recorded in the balance sheet at cost, adjusted to take account of changes following the acquisition of their net assets, excluding any loss in value of individual investments. Losses of associates that exceed the Group's percentage interest in them (including long-term receivables that essentially form part of the Group's net investment in the associate) are not recognised unless the Group has an obligation to cover them. The surplus acquisition cost over the parent's percentage share of the present value of the identifiable assets, liabilities and contingent liabilities of the associate on the acquisition date is recognised as goodwill. Goodwill is included in the carrying amount of the investment and is subjected to impairment tests. The historical cost deficit compared with the Group's percentage share of the fair value of the identifiable assets, liabilities and contingent liabilities of associates on the acquisition date is credited to the income statement in the year of acquisition. With reference to operations between a Group company and an associate, unrealised gains and losses are eliminated in equal measure to the Group's percentage interest in the associate, except for cases where the unrealised losses constitute evidence of impairment of the asset transferred.
In accordance with Article 126 of Consob Regulation 11971 of 14 May 1999, as subsequently amended, a complete list of Group companies and significant investments at 31 December 2017 is provided in the following table.
| Company | Location | Currency | Share capital | Direct | Indirect |
|---|---|---|---|---|---|
| interest | interest | ||||
| Companies included in the scope of consolidation | |||||
| Italian companies | |||||
| Aeffe Retail S.p.A. | S.G. in Marignano (RN) Italy | EUR | 8,585,150 | 100% | |
| Clan Cafè S.r.l. | S.G. in Marignano (RN) Italy | EUR | 100,000 | 62,9% (iii) | |
| Moschino S.p.A. | S.G. in Marignano (RN) Italy | EUR | 66,817,108 | 70% | |
| Pollini S.p.A. | Gatteo (FC) Italy | EUR | 6,000,000 | 100% | |
| Pollini Retail S.r.l. | Gatteo (FC) Italy | EUR | 5,000,000 | 100% (i) | |
| Velmar S.p.A. | S.G. in Marignano (RN) Italy | EUR | 120,000 | 100% | |
| Foreign companies | |||||
| Aeffe France S.a.r.l. | Paris (FR) | EUR | 50,000 | 100% | |
| Aeffe UK Ltd. | London (GB) | GBP | 310,000 | 100% | |
| Aeffe USA Inc. | New York (USA) | USD | 600,000 | 100% | |
| Divè S.a. | Galazzano (RSM) | EUR | 260,000 | 75% | |
| Fashoff UK Ltd. | London (GB) | GBP | 1,550,000 | 70% (ii) | |
| Moschino Japan Inc. | Tokyo (J) | JPY | 120,000,000 | 70% (ii) | |
| Moschino Korea Ltd. | Seoul (ROK) | KRW | 6,192,940,000 | 70% (ii) | |
| Moschino France S.a.r.l. | Paris (FR) | EUR | 1,612,000 | 70% (ii) | |
| Moschino Retail G.m.b.h. | Berlin (D) | EUR | 395,500 | 70% (ii) | |
| Moschino USA Inc. | New York (USA) | USD | 10,000 | 70% (ii) | |
| Aeffe Japan Inc. | Tokyo (J) | JPY | 3,600,000 | 100% | |
| Bloody Mary Inc. | New York (USA) | USD | 100,000 | 70% (ii) | |
| Pollini Suisse S.a.g.l. | Chiasso (CH) | CHF | 20,000 | 100% (i) | |
| Pollini Austria G.m.b.h. | Vienna (A) | EUR | 35,000 | 100% (i) | |
The amounts in the financial statements of each Group enterprise are measured using the operating currency or the currency of the economic area in which the enterprise operates. These consolidated financial statements are presented in EUR, which is the operating and reporting currency of the parent company.
Foreign currency transactions are converted into the operating currency at the exchange rate in force on the transaction date. Cash assets and liabilities denominated in foreign currencies are converted at the exchange rate in force on the balance sheet date. Any exchange rate differences arising from the elimination of these transactions or from the conversion of cash assets and liabilities are posted to the income statement. Noncash assets and liabilities in foreign currencies that are measured at fair value are converted at the exchange rates in force on the date on which the fair value was determined.
The financial statements of companies outside the EUR zone are translated into EUR based on the following procedures:
The exchange rates used for the conversion into euro of the financial and equity statements of companies included in the scope of consolidation are listed in the following table:
| Currency | Actual | Average | Actual | Average |
|---|---|---|---|---|
| description | exchange rate 31 December 2017 |
exchange rate 2017 |
exchange rate 31 December 2016 |
exchange rate 2016 |
| United States Dollars | 1.1993 | 1.1293 | 1.0541 | 1.1069 |
| United Kingdom Pounds | 0.8872 | 0.8762 | 0.8562 | 0.8195 |
| Japanese Yen | 135.0100 | 126.6545 | 123.4000 | 120.1967 |
| South Korean Won | 1,279.6100 | 1,275.8300 | 1,269.3600 | 1,284.1811 |
| Swiss franc | 1.1702 | 1.1115 | 1.0739 | 1.0902 |
As part of the options available under IAS 1 for the presentation of its economic and financial position, the Group has elected to adopt a balance sheet format that distinguishes between current and non-current assets and liabilities, and an income statement that classifies costs by type of expenditure, since this is deemed to reflect more closely its business activities. Within the income statement, as intermediate results, they are exposed EBITDA and EBIT, considered representative indicators of company performance. The cash flow statement is presented using the "indirect" format.
With reference to Consob Resolution no. 15519 dated 27th July 2006 regarding the format of the financial statements, additional schedules have also been presented for the income statement, the balance sheet and the cash flow statement in order to identify any significant transactions with related parties. This has been done to avoid compromising the overall legibility of the main financial statements.
On July 24, 2014 the IASB issued the final version of IFRS 9 - Financial Instruments.
There follows the main aspects of the new international accounting principle:
• Classification and Measurement
Classification determines how financial assets and financial liabilities are accounted for in financial statements and, in particular, how they are measured on an ongoing basis. IFRS 9 introduces a logical approach for the classification of financial assets, which is driven by cash flow characteristics and the business model in which an asset is held. This single, principle-based approach replaces existing rule-based requirements that are generally considered to be overly complex and difficult to apply. The new model also results in a single impairment model being applied to all financial instruments, thereby removing a source of complexity associated with previous accounting requirements.
• Impairment
During the financial crisis, the delayed recognition of credit losses on loans (and other financial instruments) was identified as a weakness in existing accounting standards. As part of IFRS 9, the IASB has introduced a new, expected-loss impairment model that will require more timely recognition of expected credit losses. Specifically, the new Standard requires entities to account for expected credit losses from when financial instruments are first recognised and to recognise full lifetime expected losses on a more timely basis. The IASB has already announced its intention to create a transition resource group to support stakeholders in the transition to the new impairment requirements.
• Hedge accounting
IFRS 9 introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities, enabling entities to better reflect these activities in their financial statements. In addition, as a result of these changes, users of the financial statements will be provided with better information about risk management and the effect of hedge accounting on the financial statements.
• Own credit
IFRS 9 also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value. This change in accounting means that gains caused by the deterioration of an entity's own credit risk on such liabilities are no longer recognised in profit or loss. Early application of this improvement to financial reporting, prior to any other changes in the accounting for financial instruments, is permitted by IFRS 9.
The amendments will apply for annual periods beginning on or after January 1, 2018. Earlier application is permitted.
The group decided to adopt the hedge accounting instructions relating to the forward excange contracts envisaged by IFRS 9. These transactions were not designated as hedges for IAS 39 as they did not meet the efficacy ratio of 80-125%. The change in policy due to the adoption of the new IFRS 9 will be applied prospectively from 1 January 2018. The losses recognized in the Income Statement for the period ended 31/12/2017 for approximately EUR 998 thousand, will be reclassified to other components of shareholders' equity from 01/01/2018, in particular in the cash flow hedge reserve.
On September 11, 2015 the IASB published the document Effective Date of IFRS 15, in which it has been deferred by one year, from the January 1, 2017 to the January 1, 2018, the effective date of the IFRS 15 "Revenue from Contracts with Customers".
On January 13, 2016 the IASB published the new accounting Standard, IFRS 16 Leases that will replaces IAS 17 Leases, 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.
It sets out the principles for the recognition, measurement, presentation and disclosure of leases. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17 Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019. Earlier application is permitted for entities that apply IFRS 15. it is yet to be endorsed for application in the European Union.
The group decided not to opt for the early application of IFRS 16 therefore the effects of this principle will be reflected starting from 01/01/2019.
It was therefore decided to use a retrospective application, without restatement of the comparative information. The cumulative effect will be recognized as a reduction in the new opening of profits carriedforward. The incremental borrowing rate will be the one on the application date of the principle excluding the initial direct costs from the valuation of the right to use the asset.
At 31/12/2017, operating lease commitments amounted to around EUR 114 million. Assuming that these remain substantially in line with 31/12/2017 the effect that will be reflected at 01/01/2019 (opening balance sheet subject to transition) will concern:
Leasing liabilities with an estimated increase of approximately EUR 90 million (Financial liabilities);
Assets deriving from the right to use the asset with an estimated increase of approximately EUR 85 million (Fixed assets);
The application of the new principle will also lead to the cancellation of operating lease fees, recognized as costs for services, which will be reparameterized betwenn amortization of "Right of use Assets" and financial charges linked to the amortized cost valuation of the financial debt for leasing. This will therefore result in an increase in EBITDA, which is expected to be approximately EUR 15 million for 31/12/2017.
Since this is a first estimate, this calculation will be refined in the first application of the principle to 01/01/2019.
On 12 April 2016 the IASB published Clarifications to IFRS 15 'Revenue from Contracts with Customers". The amendments include additional reliefs to reduce cost and complexity for a company when it first applies the new Standard. The amendments are effective for periods beginning on or after 1 January 2018. Earlier application is permitted.
On 20 June 2016 the IASB published some amendments to IFRS 2 "Share-based Payment" clarifying the classification and measurement of share-based payment transactions and the accounting of some types of share-based paymentss. It also introduces an exception to IFRS 2 requesting to be treated entirely sharebased payment the awards for which the Tax legislation provides for a deduction and therefore a subsequent payment to the Treasury. The amendments are effective for periods beginning on or after 1 January 2018. Earlier application is permitted.
On 8 December 2016, the IASB published the 'Transfers of Investment Property (Amendments to IAS 40)' to clarify transfers of property to, or from, investment property, stating that the transfer occurred when, and only when, there is evidence of a change in use. The amendments are effective for periods beginning on or after 1 January 2018. Earlier application is permitted.
On 8 December 2016, the IASB published Annual Improvements to IFRSs 2014 – 2016 Cycle. The document introduces amendments to the following principles: (i) Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards: Deletion of short-term exemptions for first-time adopters The IASB proposes to delete the short-term exemptions in IFRS 7, IAS 19 and IFRS 10 because they have now served their intended purpose; (ii) amendments to IFRS 12 Disclosure of Interests in Other Entities: amendments to IAS 28 Investments in Associates and Joint Ventures related to the measurement at fair value of an investment in an associate or a joint venture. The application is effective for annual reporting periods beginning on or after 1 January 2018.
On 8 December 2016 the IASB published IFRIC Interpretation 22 "Foreign Currency Transactions and Advance
Consideration". The document clarify the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The application is effective for annual reporting periods beginning on or after 1 January 2018. Earlier application is permitted.
In December 2017, the IASB published Annual Improvements to IFRS Standards 2015-2017 Cycle, containing the following amendments to the IFRS:
IFRS 3 Business Combinations and IFRS 11 Joint Arrangements - The amendments to IFRS 3 clarify that when an entity obtains control of a business that is registered as a joint operation, it must re-measure the investments previously held in that activity.
The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is registered as a joint operation, it must not re-measure the investments previously held in that activity.
IAS 12 Income taxes - The amendments clarify that all income taxes related to dividends (E.S. distribution of profits) must be recognized in the income statement, regardless of how they arose.
IAS 23 Financial charges - The amendments clarify that if a specific loan remains after the asset is ready for use or intended for sale, this loan becomes an integral part for the calculation of the rate of capitalization of generic loans.
The Group will adopt these new standards, amendments and interpretations, based on the data of scheduled Application, and assess potential impacts, when these will be approved by the European Union.
The accounting policies and valuation criteria adopted for the preparation of the financial statements as of 31 December 2017 are presented below:
Intangible fixed assets are identifiable non-monetary assets, without physical substance, that are controlled by the company and able to generate future economic benefits for the Group. Intangible fixed assets are initially recorded at purchase cost (being their fair value in the case of business combinations), as represented by the acquisition price paid including any charges directly attributable to the preparatory or production phase, if the conditions are met for the capitalisation of costs incurred on the internal generation of assets. Following initial recognition, intangible fixed assets are carried at cost, net of accumulated amortisation and any impairment recorded in accordance with IAS 36 (Impairment of Assets). Subsequent expenditure on intangible fixed assets is capitalised only if it increases the future economic benefits embodied in the specific asset to which it relates. All other costs are charged to the income statement as incurred.
Of intangible fixed assets, a distinction can be made between: a) those with an "infinite" useful life, such as goodwill, which are not amortised but subjected to an annual impairment test (or whenever there is reason to believe that the asset may have been impaired) in accordance with IAS 36; b) those with a finite useful life or other intangible fixed assets, the valuation criteria for which are reported in the following paragraphs.
Goodwill arising from the acquisition of a subsidiary or joint venture represents the surplus acquisition cost over the Group's percentage share of the fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary or joint venture on the acquisition date. Goodwill is recognised as an asset and reviewed annually to make sure that there is no impairment. Impairment losses are recognised in the income statement and are not restated.
In case of the disposal of a subsidiary or joint venture, the amount of goodwill not yet amortised is included in the calculation of the capital gain or loss on disposal.
If the net fair value of the identifiable assets, liabilities and contingent liabilities of the shareholding exceeds the acquisition cost, the difference is immediately recorded in the income statement.
When the acquisition contract allows the adjustment of the acquisition price based on future events, the estimated adjustment must be included in the acquisition cost if the adjustment seems probable and the amount can be reliably estimated. Any future adjustments to the estimate are recorded as a goodwill adjustment.
At 31 December 2017, the company has not recorded values related to goodwill in the financial statements.
Intangible fixed assets also include key money, or amounts paid by the Group to take over contracts relating to directly managed stores or, in the case of business combinations, the fair value of these assets at the time of acquisition. These assets are treated, as intangible fixed assets with a definite useful life. Based on the experience of the renewals obtained from the lessors in past financial years, the directors deemed it fitting to estimate a useful life corresponding to the residual term of the contract, and generally plan a renewal for another 6 years, considering a final end value equal to the amounts due by way of indemnity for taking over the lease if provided for by the national regulations.
Brands are recognised at cost and are amortised systematically on a straight-line basis during their estimated useful life (40 years) from when the asset is available for use. By applying IFRS 3, all business combinations since 31 December 2001 have been restated, with an indication, based on an independent estimate, of the new value of intangible fixed assets that were not reported when the shareholdings were acquired.
The Group has seen fit to give brands a finite life of 40 years in view of the policies adopted by other market operators. Prudently, it has adopted an extremely long – although not infinite and thus unidentifiable – useful life for its own brands (reflecting the prolonged benefits derived from these). This decision is in line with intangible fixed assets typical of the fashion industry, based on previous experience of other international operators in the sector (market comparables).
This caption comprises the costs incurred to acquire software, which is amortised over a period not exceeding 3 years.
The principal amortisation rates applied are summarised below:
| Category | % |
|---|---|
| Royalties from patents and intellectua property | 33% |
| Brands | 2,5% |
Research costs are charged to the income statement as incurred.
At 31 December 2017, the company has not recorded intangible fixed assets with an "infinite" useful life in the financial statements.
Tangible fixed assets, stated net of accumulated depreciation, are recorded at purchase or production cost except for those assets which have been revalued in accordance with specific laws. Cost includes related charges and directly-attributable expenses.
Tangible fixed assets are depreciated systematically each year on a straight-line basis using economictechnical rates that reflect the residual useful lives of each asset. Tangible fixed assets are written down in the event of permanent impairment, regardless of the depreciation already accumulated.
Ordinary maintenance expenses are charged in full to the income statement. Improvement expenditure is allocated to the fixed assets concerned and depreciated over their residual useful lives.
Construction in progress and advances to suppliers are recorded at the cost incurred, including directlyrelated charges.
As an exception to the general principle, the carrying amount of land and buildings has been adjusted to reflect the value determined by reference to an independent appraisal. This was performed to identify the separate value of land that was previously included in the "land and buildings" caption and consequently depreciated. The depreciation rates are applied on a straight-line basis over the new estimated useful lives of the buildings: 50 years (2%).
The depreciation rates applied are summarised below:
| Category | % |
|---|---|
| Industrial buildings | 2% - 2,56% |
| Plant and machinery | 10% - 12,5% |
| Industrial and commercial equipment | 25% |
| Electronic machines | 20% |
| Motor vehicles | 20% |
| Cars | 25% |
Land is not depreciated.
Leasehold improvements, including the costs of fitting and modernising directly-managed shops and all other property used for business purposes but not owned by the Group, are depreciated over the shorter of the duration of the lease, including any renewal periods, or their useful lives.
Improvement expenditure is added to the carrying amount of the assets concerned if the future economic benefits for the Group are likely to exceed those determined originally. Such expenditure is depreciated over the residual useful lives of the assets concerned. All other maintenance costs are charged to the income statement as incurred.
Assets held under finance leases, which transfer to the Group substantially all the risks and benefits of ownership, are recognised as part of property, plant and equipment at their fair value or, if lower, at the present value of the minimum lease payments, and stated net of accumulated depreciation. The corresponding liability to the lessor is classified among financial payables in the balance sheet. These assets are depreciated using the rates set out above.
On disposal, or when no further economic benefits are expected from use of the asset, leased assets are eliminated from the balance sheet and any gains or losses (difference between disposal proceeds and carrying amount) are reflected in the income statement for the year.
Leases that do not transfer to the Group substantially all the risks and benefits of ownership are recognised as operating leases. Payments under operating leases are recognised as a cost on a straight-line basis over the duration of the related lease contracts.
Key money, brands and other intangible fixed assets are subjected to impairment testing each year, or more frequently if there is evidence of a possible loss of value.
Tangible fixed assets and other non-current assets are subjected to impairment testing whenever events or a change of circumstances suggest that their value may be impaired.
Impairment losses arise and are recognised when the carrying amount of an asset or a cash generating unit exceeds its recoverable value. The carrying amount of such assets is aligned with their recoverable value and the impairment loss is charged to the income statement.
The comparison between the value of the Group shareholders' equity per share and the share list value at year-end and during the period until the date these financial statements were drawn up shows a book value higher than the market value. The directors believe that this evidence is basically attributable to the particular situation of the financial markets happened in the aftermath of the actual difficult situation of the world markets. Therefore, the market value is not considered representative of the Group value.
Under IAS 36, intangible and tangible fixed assets must be subjected to impairment testing if there is evidence (events, change of circumstances) to suggest a possible loss of value. The purpose of this is to ensure that assets are not recorded in the balance sheet at an amount that exceeds their recoverable value. As already mentioned, this test is performed annually, or more frequently, in relation to assets with an indefinite useful life.
The recoverable value of these assets is the higher between their fair value, net of disposal costs, and their value in use. In order to determine value in use, the estimated future cash flows, including those deriving from the disposal of the asset at the end of its useful life, are discounted using a post-tax rate that reflects the current market assessment of the value of money and the risks associated with the Group's activities. If separate cash flows cannot be estimated for an individual asset, the separate cash generating unit to which the asset belongs is identified.
The value of financial assets recorded at amortised cost is reinstated when a subsequent increase in their recoverable value can, objectively, be attributed to an event that took place subsequent to recognition of the impairment loss.
The value of other non-financial assets is reinstated if the reasons for impairment no longer apply and the basis for determining their recoverable value has changed.
Write-backs are credited immediately to the income statement and the carrying amount of the asset concerned is adjusted to reflect its recoverable value. Recoverable value cannot exceed the carrying amount that would have been recognised, net of depreciation, had the value of the asset not been written down due to impairment in prior years.
The written down value of goodwill is never reinstated.
Equity investments in non-consolidated subsidiaries, associates and joint ventures are recognised according to the equity method. The surplus cost over shareholders' equity on the acquisition date is treated in the same way as described in the section on consolidation principles. Other equity investments are recognised using the cost method, which is reduced for impairment losses. The original value is restated in subsequent years if the reasons for the write-down no longer apply.
This item includes assets where the book value will be recovered mainly through sale rather than continuous use. For this to happen, the asset (or group) must be available for sale in its current condition, subject to standard conditions applicable to the sale of such assets (or groups), and the sale must be highly probable. An asset classified as held for sale is recognised at the lesser of its book value and fair value, excluding selling costs, as stipulated in IFRS 5.
Receivables are stated at their estimated realisable value, being their nominal value less the allowance for collection losses on doubtful accounts. They are review regularly in terms of ageing and seasonality in order to avoid adjustments for unexpected losses. Non-current receivables that include an element of embedded interest are discounted using a suitable market rate. This caption also includes the accrued income and prepaid expenses recorded to match income and costs relating to more than one year in the accounting periods to which they relate.
Inventories are recorded at purchase or production cost or, if lower, at their estimated net realisable value. Net realisable value is the estimated selling price under normal operating conditions, net of completion costs and all other selling-related expenses.
The cost of production of finished products includes the cost of raw materials, outsourced materials and processing, and all other direct and indirect manufacturing costs reasonably attributable to them, with the exclusion of financing costs.
Obsolete and slow-moving inventories are written down to reflect their likely use or realisability.
Cash and cash equivalents comprise cash balances, demand deposits and all highly liquid investments with an original maturity of three months or less. Securities included in cash and cash equivalents are measured at their fair value.
The provisions for risks and charges cover known or likely losses or charges, the timing and extent of which cannot be determined at period end. Provisions are recorded only when there is a legal or implicit obligation that, to be settled, requires the consumption of resources capable of generating economic benefits, and the amount concerned can be estimated reliably. If the effect is significant, provisions are calculated by discounting expected future cash flows using a pre-tax rate that reflects the current market assessment of the present value of money and the specific risks associated with the liability.
Employee severance indemnities are covered by IAS 19 ("Employee Benefits") since they are deemed to be a form of defined benefit plan. Group contributions to defined benefit plans are charged to the income statement on an accruals basis.
The Group's net liability for defined benefit plans is determined on an actuarial basis, using the projected unit credit method. All actuarial gains and losses determined as of 1 January 2005, the IFRS transition date, have been recognised.
Financial payables, excepting derivates, are recorded at their fair value, after transactions costs directly attributable.
Loans are initially measured at cost, which approximates their fair value, net of any transaction-related expenses. Subsequently, they are measured at amortised cost. Any difference between cost and the redemption value is recorded in the income statement over the duration of the loan, using the effective interest method.
Loans are classified as current liabilities unless the Group has an unconditional right to defer their settlement for at least twelve months subsequent to the accounting reference date.
Payables are stated at the nominal value. The financial element embedded in non-current payables is separated using a market rate of interest.
Treasury shares are presented as a deduction from capital for the part of their nominal value, and from a specific reserve for the part in excess to their nominal value.
Any public contributions are reported when there is a reasonable certainty that the company will meet all the conditions foreseen to receive the contributions and actually receives them. The Group has opted to present any contributions to the capital account in the financial statement as items in adjustment of the book value of the property to which they refer, and any contributions to overhead as a direct deduction from the relative cost.
Revenues are stated net of returns, discounts, allowances and rebates, as well as the taxes associated with the sale of goods and the provision of services. Revenues from sales are recognised when the seller has transferred the principal risks and benefits of ownership to the purchaser. The principal types of revenue realised by the Company are recognised on the following basis:
Costs and expenses are recognised on an accrual basis.
Design and production costs for sample collections incurred during the period are correlated to the turnover from sales of collection and are thus carried in the income statement in proportion to the revenue generated. The remaining portion to be carried in the income statement during the period in which the corresponding revenue is generated is posted to other current assets.
These include all items of a financial nature written to the income statement for the period, including interest payable on financial debts calculated using the effective interest method (mainly current account overdrafts and medium and long-term loans), foreign currency gains and losses, dividends received, and the portion of interest payable deriving from the accounting treatment of assets under finance leases (IAS 17).
Interest income and expenses are reported in the income statement for the period in which they are realised/incurred.
Dividends are recognised in the period when the Group's right to a dividend payment matures, subject to ratification.
The amount of interest payable on finance leases is booked to the income statement using the effective interest method.
Income taxes for the period include all taxes calculated on taxable income. Income taxes for the period are recorded in the income statement.
Taxes other than income taxes, such as property tax, are reported under operating expenses or, if the necessary conditions are fulfilled, are capitalized in the related real estate.
Current taxes on income taxable in the period represent the tax burden calculated using current rates of taxation in force on the balance sheet date.
Deferred taxes are recognised for all temporary differences existing on the balance sheet date between the book value of assets and liabilities and the corresponding values used to determine taxable income for tax purposes.
Payables for deferred taxes relate to:
- positive components of income for the current period but taxable in future periods;
- negative components of income deductible in excess compared to the amount recorded in the income statement as a result of the application of the International Accounting Standards.
Receivables for deferred taxes are recognised:
Credits for deferred tax assets and debits for deferred tax liabilities are calculated based on the rates of taxation applicable to tax calculation on income in periods in which temporary differences are reversed, based on the rate of taxation and tax regulations in force on the balance sheet date.
The impact on these taxes of any change in rates of taxation is posted to the income statement in the period in which the change occurs.
Basic earnings per share is calculated by dividing the profit or loss attributable to the Company's shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the profit or loss attributable to the Company's shareholders by the weighted average number of ordinary shares outstanding.
Hereafter we report the main estimates and assumptions used by the Management to draft the consolidated financial statement, whose variations, not foreseeable at the moment, could affect the economic and equity situation of the Group.
• Estimates used to evaluate value impairment of assets other than financial assets
For the purposes of ascertaining any impairment of value of assets other than current assets entered in the financial statement, the company applied the method described above in the paragraph entitled "Impairment of value of assets".
The Group carried out an analysis aimed at assessing the existence of impairment indicators relating to the recoverability of the intangible and tangible fixed assets attributable to the single directly managed stores ("DOS"). For these types of assets, the recoverable amount was defined as the higher amount between the fair value net of disposal costs and the value in use.
The evaluation focuses both on the value of the stores' assets (replacement cost and market goodwill that can be determined for each store), and on the economic value obtainable from each point of sale.
The method of the goodwill expresses the "fair value" based on current market values in the event of sale to third parties of the lease contract (surveys of the first half of 2017 of the Agency of the Territory of the Revenue Agency).
The value of the goodwill is calculated on the basis of the sale to third parties of the lease with respect to market conditions, valuing the sum of:
The estimates used to calculate the values as indicated above are illustrated below:
The financial method expresses the value in use of the individual points of sale. The evaluation derives from the analysis of the cash flows generated by the characteristic activity of the single points of sale.
These cash flows are calculated using a projection up to the Terminal Value starting from the income statements of the individual locations and are discounted at a discount rate (Weighted Average Cost of Capital - WACC) that considers corporate risk and corporate indebtedness.
The value thus found represents the actual capacity of the analyzed network of shops to generate financial flows.
Economic forecasts for each sales point for the financial year 2018 prepared by the Management of the Aeffe Group. For this year, turnover trends were considered, which, depending on the case, envisage a variation with respect to the 2017 final figures between 4.6% and + 47%;
Forecast for financial years 2019, 2020 and forward hypothesis for each local according to the following criteria:
The management assesses at least once a year the intangible assets with a finite useful life (near the closing of the financial statements), in a stringent manner with respect to the requirements of the IAS 36 international accounting standard and equating them to the assets with an indefinite useful life.
To calculate the recoverable value of the brands entered in the financial statement, we estimated the current value, discounting the hypothetical value of the royalties deriving from the transfer in use to others of these intangible assets, for a period equal to the residual useful life. To calculate the values, the management has used the Group budget starting from the year 2018. For the remaining periods the management has used an increase in turnover with a compound annual growth rate ("CAGR") variable from 1.4% to 4.2%. As royalty rates we used the averages for the sector (10%) and as discount rate we used the average cost of capital (WACC) which is 5.63%.
The expected turn-over of employees is 6% for Aeffe S.p.A., 10% for Aeffe Retail S.p.A, 8% for Moschino S.p.A. and Pollini Retail and 5% for Pollini S.p.A and Velmar S.p.A.
Estimates used in the actuarial calculations to determine the supplementary clientele severance indemnity fund:
Within a group, various segments are distinguishable providing a series of homogeneous products or services (business segment) or providing products and services in a specific geographical area (geographical segment). Specifically, in Aeffe Group, two areas of activity are identified:
In accordance with IFRS 8, segment information can be found in the section entitled "Comments on the income statement and segment information".
The financial risks to which the Group is exposed in the performance of its business are as follows:
Management of the financial needs and relative risks (mainly rate and exchange risks) is handled at the level of the central treasury and, except in a few cases (Pollini Group) it is managed by the individual companies that, however, are coordinated by the treasury on the basis of the guidelines established by the Managing Director of the Group and approved by the Chief Executive Officer.
The main goal of these guidelines consists of:
The Group manages the liquidity risk with a view to guarantee, at the consolidated level, the presence of a liability structure in balance with the asset composition of the financial statement, in order to maintain an elevated solid equity.
The credit lines, though negotiated at the Group level, are granted to the individual companies.
As of the date of this financial statement, the companies in the Group with the main short and medium/long-term loans from banks are the parent company, Pollini, Moschino and Velmar.
The Group operates internationally and is therefore exposed to the exchange risk. The exchange risk arises when assets and liabilities are reported in a currency other than that in which the company operates.
The mode of management of this risk consists of minimizing the risk connected with exchange rates by using for the main companies of the Group exposed to the exchange risk, the opening of loans in foreign currency and the subscription of forward foreign exchange contracts..
The interest rate risk to which the companies in the Group are exposed originates mainly from the medium and long-term financial payables in existence, that are almost all at variable rates and expose the Group to the risk of variation in cash flows as the interest rates vary.
The average cost of indebtedness tends to be parametrized with the status of the EURIBOR rate at 3/6 months, plus a spread that depends mainly on the type of financial instrument used. In general, the margins applied are in line with the best market standards. As of 31 December 2017 a hypothetical upward variation of 10% in the interest rate, all other variables being equal, would have produced a higher cost before taxes (and thus a corresponding reduction in the shareholders' equity) of about EUR 108 thousand annually (EUR 223 thousand as of 31 December 2016).
The cash flow risk on interest rates has never been managed in the past with recourse to derivative contracts - interest rate swaps - that would transform the variable rate into a fixed rate. As of 31 December 2017 there are no instruments that hedge interest-rate risk.
The Group makes its purchases and sales worldwide and is therefore exposed to the normal risk of variations in price, typical of the sector.
With reference to receivables in Italy, the Group deals only with known and reliable clients. It is a policy of the Group that clients requesting extended payment terms are subject to procedures of audit of the class of merit. Moreover, the balance of receivables is monitored during the year to ensure that the doubtful positions are not significant.
The credit quality of unexpired financial assets and those that have not undergone value impairment can be valued with reference to the internal credit management procedure.
Customer monitoring activity consists mainly of a preliminary stage, in which we gather data and information about new clients, and a subsequent activation stage in which a credit is recognized and the development of the credit position is supervised.
The preliminary stage consists of collecting the administrative and fiscal data necessary to make a complete and correct assessment of the risks connected with the new client. Activation of the client is subject to the completeness of the data and approval, after any further clarification by the Customer Office.
Every new customer has a credit line: its concession is linked to further information (years in business, payment terms, customer's reputation) all of which are essential to make an evaluation of the level of solvency. After gathering this information, the documentation on the potential customer is submitted for approval by the company organizations.
Management of overdue receivable is differentiated depending on the seniority of the client (overdue payment group).
For overdue payments up to 60 days, reminders are sent through the branch or directly by the Customer Office; clearly, if an overdue payment exceeds 15 days or the amount of the credit granted, all further supplied to the client are suspended. For overdue credits "exceeding 90 days", where necessary, legal steps are taken.
As regards foreign receivables, the Group proceeds as follows:
The unexpired receivables, amounting to a total of EUR 30,207 thousand as of 31 December 2017, represent 72% of the receivables entered in the financial statements. This percentage strongly increases compared to the 62% of the previous year.
This procedure serves to define the rules and operating mechanisms that guarantee a flow of payments sufficient to ensure the solvency of the client and guarantee the company an income from the relationship.
As of the reference date of the financial statement, the maximum credit risk exposure is equal to the value of each category of receivable indicated here below:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Trade receivables | 42,065 | 40,711 | 1,354 | 3.3% |
| Other current receivables | 26,914 | 25,083 | 1,831 | 7.3% |
| Other fixed assets | 3,564 | 3,962 | ( 398) | (10.0%) |
| Total | 72,543 | 69,756 | 2,787 | 4.0% |
See note 5 for the comment and breakdown of the item "other fixed assets" note 8 "trade receivables" and note 13 for "other current receivables".
The fair value of the above categories has not been indicated, as the book value is a reasonable approximation.
As of 31 December 2017, overdue but not written-down trade receivables amount to EUR 11,858 thousand (EUR 15,586 thousand in 2016). The breakdown by due date is as follows:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| By 30 days | 7,343 | 7,036 | 307 | 4.4% |
| 31 - 60 days | 2,918 | 3,662 | ( 744) | (20.3%) |
| 61 - 90 days | 697 | 913 | ( 216) | (23.7%) |
| Exceeding 90 days | 900 | 3,975 | ( 3,075) | (77.4%) |
| Total | 11,858 | 15,586 | ( 3,728) | (23.9%) |
No significant risk of default with respect to such overdue receivables.
The cash flow statement presented by the Group in accordance with IAS 7 has been prepared using the indirect method. The cash and cash equivalents included in the cash flow statement represent the amounts reported in the balance sheet at the accounting reference date. Cash equivalents comprise short term and highly liquid applications of funds that can be readily converted into cash; the risk of changes in their value is minimal. Accordingly, a financial investment is usually classified as a cash equivalent if it matures rapidly, i.e. within three months or less of the acquisition date.
Bank overdrafts are generally part of financing activities, except when they are repayable on demand and are an integral part of the management of a company's cash and cash equivalents, in which case they are classified as a reduction of its cash equivalents.
Foreign currency cash flows have been translated using the average exchange rate for the year. Income and expenses deriving from interest, dividends received and income taxes are included in the cash flows from operating activities.
Under IAS 7, the cash flow statement must identify separately the cash flow deriving from operating, investing and financing activities:
The table below illustrates the breakdown and the changes of this item:
| (Values in thousands of EUR) | Brands | Key money | Other | Total |
|---|---|---|---|---|
| Net book value as of 01.01.16 | 88,962 | 33,209 | 650 | 122,821 |
| Increases | - | 938 | 482 | 1,420 |
| - increases externally acquired | - | 938 | 482 | 1,420 |
| - increases from business aggregations | - | - | - | - |
| Disposals | - | ( 2,278) | - | ( 2,278) |
| Translation differences and other variations | - | - | ( 25) | ( 25) |
| Amortisation | ( 3,493) | ( 2,946) | ( 367) | ( 6,806) |
| Net book value as of 31.12.16 | 85,469 | 28,923 | 740 | 115,132 |
| Increases | - | 865 | 490 | 1,355 |
| - increases externally acquired | - | 865 | 490 | 1,355 |
| - increases from business aggregations | - | - | - | - |
| Disposals | - | ( 253) | - | ( 253) |
| Translation differences and other variations | - | - | - | - |
| Amortisation | ( 3,494) | ( 2,682) | ( 379) | ( 6,555) |
| Net book value as of 31.12.17 | 81,975 | 26,853 | 851 | 109,679 |
The intangible fixed assets highlight the following variations:
This item includes the Group's own-label brands ("Alberta Ferretti", "Philosophy", "Moschino", "Boutique Moschino", "Love Moschino", "Pollini", "Studio Pollini"). A breakdown of brands is given below:
| (Values in thousands of EUR) | Brand residual life | 31 December | 31 December |
|---|---|---|---|
| 2017 | 2016 | ||
| Alberta Ferretti | 25 | 3,149 | 3,275 |
| Moschino | 27 | 45,696 | 47,623 |
| Pollini | 23 | 33,130 | 34,571 |
| Total | 81,975 | 85,469 |
The decrease between the two periods refers exclusively to the amortisation of the period.
Key money refers to the amounts paid by the Group to take over leases relating to directly managed stores or, in the case of business combinations, the fair value of these assets at the time of acquisition.
The directors prudentially deemed correct to change the estimate of useful life of key money switching from an indefinite useful life to a finite useful life. Based on the experience of the renewals obtained from the lessors in past financial years, the directors deemed it fitting to estimate a useful life corresponding to the residual term of the contract, and generally plan a renewal for another 6 years, considering a final end value equal to the amounts due by way of indemnity for taking over the lease if provided for by the national regulations.
The item other mainly includes software licences.
The table below illustrates the breakdown and the changes of this item:
(Values in thousands of EUR)
| Lands | Buildings | improvements Leasehold |
machinery Plant and |
Industrial and commercial equipment |
Other tangible assets |
Total | |
|---|---|---|---|---|---|---|---|
| Net book value as of 01.01.16 | 16,958 | 23,135 | 15,979 | 2,584 | 358 | 4,247 | 63,261 |
| Increases | 161 | 86 | 1,796 | 791 | 95 | 1,055 | 3,984 |
| Disposals | - | - | ( 357) | ( 10) | ( 7) | ( 133) | ( 507) |
| Translation differences | |||||||
| and other variations | - | - | ( 277) | ( 3) | 2 | 65 | ( 213) |
| Depreciation | - | ( 562) | ( 2,676) | ( 696) | ( 137) | ( 1,078) | ( 5,149) |
| Net book value as of 31.12.16 | 17,119 | 22,659 | 14,465 | 2,666 | 311 | 4,156 | 61,376 |
| Increases | - | 72 | 1,046 | 871 | 78 | 1,160 | 3,227 |
| Disposals | - | - | ( 126) | ( 22) | ( 6) | ( 67) | ( 221) |
| Translation differences | |||||||
| and other variations | - | - | ( 199) | - | ( 9) | ( 66) | ( 274) |
| Depreciation | - | ( 563) | ( 2,589) | ( 651) | ( 114) | ( 1,087) | ( 5,004) |
| Net book value as of 31.12.17 | 17,119 | 22,168 | 12,597 | 2,864 | 260 | 4,096 | 59,104 |
Tangible fixed assets have changed as follows:
This item includes shareholdings measured at the cost.
Long term financial receivables decrease from EUR 3,391 thousand at December 31, 2016 to EUR 2,592 thousand at December 31, 2017. The variation is mainly determined by amount accrued during the year and reclassified in current receivables.
This item mainly includes a long-term receivable related to the income recognized by Woollen Co., Ltd. to Aeffe Group as a result of the reorganization of the Japanese Distribution Network and receivables for security deposits related to commercial leases.
The table below illustrates the breakdown of this item at 31 December 2017 and at 31 December 2016:
| (Values in thousands of EUR) | Receivables | Liabilities | |||
|---|---|---|---|---|---|
| 31 December 2017 |
31 December 2016 |
31 December 2017 |
31 December 2016 |
||
| Tangible fixed assets | 49 | 35 | ( 17) | ( 26) | |
| Intangible fixed assets | 3 | 3 | ( 144) | ( 144) | |
| Provisions | 2,926 | 2,425 | ( 2) | - | |
| Costs deductible in future periods | 6,224 | 5,958 | ( 35) | - | |
| Income taxable in future periods | 360 | 399 | ( 1,565) | ( 1,638) | |
| Tax losses carried forward | 3,684 | 4,174 | - | - | |
| Other | 5 | 5 | ( 84) | ( 156) | |
| Tax assets (liabilities) from transition to IAS | 1,085 | 857 | ( 28,590) | ( 29,022) | |
| Total | 14,336 | 13,856 | ( 30,437) | ( 30,986) |
Changes in temporary differences during the period are illustrated in the following table:
| (Values in thousands of EUR) | Opening balance |
Differences arising on translation |
Recorded in the income statement |
Other | Closing balance |
|---|---|---|---|---|---|
| Tangible fixed assets | 9 | ( 6) | 29 | - | 32 |
| Intangible fixed assets | ( 141) | - | - | - | ( 141) |
| Provisions | 2,425 | ( 40) | 608 | ( 69) | 2,924 |
| Costs deductible in future periods | 5,958 | ( 21) | 252 | - | 6,189 |
| Income taxable in future periods | ( 1,239) | - | 31 | 3 | ( 1,205) |
| Tax losses carried forward | 4,174 | ( 168) | 4 | ( 326) | 3,684 |
| Other | ( 151) | 16 | 62 | ( 6) | ( 79) |
| Tax assets (liabilities) from transition to IAS | ( 28,165) | - | 646 | 14 | ( 27,505) |
| Total | ( 17,130) | ( 219) | 1,632 | ( 384) | ( 16,101) |
The negative variation of EUR 384 thousand in the column "Other" refers mainly to the partial compensation of the tax payable for IRES of the period generated in Aeffe Spa as a consequence of the adhesion of the subsidiaries to the fiscal consolidation with the receivable for deferred tax generated in some of the Group's subsidiaries.
Deferred tax assets related to costs deductible in future periods mainly relate to the deferred taxation on provisions for doubtful investments and for future risks and charges.
Deferred tax assets have been determined estimating the future recoverability of such activities.
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Raw, ancillary and consumable materials | 14,563 | 15,887 | ( 1,324) | (8.3%) |
| Work in progress | 8,901 | 6,696 | 2,205 | 32.9% |
| Finished products and goods for resale | 74,328 | 66,787 | 7,541 | 11.3% |
| Advance payments | 26 | 20 | 6 | 30.0% |
| Total | 97,818 | 89,390 | 8,428 | 9.4% |
The entry stocks and inventories increases of EUR 8,428 thousand mainly due to the increase in turnover.
Inventories of raw materials and work in progress mainly relate to the production of the Spring/Summer 2018 collections, while finished products mainly concern the Autumn/Winter 2017 and the Spring/Summer 2018 collections and the Autumn/Winter 2018 sample collections.
Inventories are valued at the lower of cost and net realizable value and therefore, to account for any physical obsolescence and slow moving of the materials in stock, the following write-downs have been recorded:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Raw material write-down provision Finished goods write-down provision |
2,500 10,182 |
1,000 7,886 |
1,500 2,296 |
150.0% 29.1% |
| Total | 12,682 | 8,886 | 3,796 | 42.7% |
This item is illustrated in the following table:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Trade receivables (Allowance for doubtful account) |
45,796 ( 3,731) |
43,499 ( 2,788) |
2,297 ( 943) |
5.3% 33.8% |
| Total | 42,065 | 40,711 | 1,354 | 3.3% |
Trade receivables amount to EUR 45,796 thousand at 31 December 2017, up 5.3% since 31 December 2016.
Management considers that the fair value of amounts due from customers approximates their book value.
The allowance for doubtful accounts is determined by reference to a detailed analysis of the available information and, in general, is based on historical trends.
This item is illustrated in details in the following table:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| VAT | 2,972 | 1,917 | 1,055 | 55.0% |
| Corporate income tax (IRES) | 846 | 844 | 2 | 0.2% |
| Local business tax (IRAP) | 292 | 150 | 142 | 94.7% |
| Amounts due to tax authority for withheld taxes | 4 | 17 | ( 13) | (76.5%) |
| Other tax receivables | 1,297 | 1,166 | 131 | 11.2% |
| Total | 5,411 | 4,094 | 1,317 | 32.2% |
As of 31 December 2017, the Group's tax receivables amount to EUR 5,411 thousand. The variation of EUR 1,317 thousand compared with the value at 31 December 2016 is mainly due to the increase of VAT receivable.
During 2017, the company Pollini Spa has signed contracts with forward currency purchase obligation, identified as non-hedging, for an equivalent amount in USD equal to EUR 20,832 thousand. The evaluation of the contracts that have not yet expired on 31 December 2017 shows a negative effect of Euro 998 thousand, the notional underlying the contracts still outstanding at year end amounts to USD 24,000 thousand.
This item includes:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Bank and post office deposits | 22,057 | 13,489 | 8,568 | 63.5% |
| Cheques | 24 | 34 | ( 10) | (29.4%) |
| Cash in hand | 728 | 998 | ( 270) | (27.1%) |
| Total | 22,809 | 14,521 | 8,288 | 57.1% |
Bank and postal deposits represent the nominal value of the current account balances with credit institutions, including interest accrued on the balance sheet date. Cash in hand represents the nominal value of the cash held on the balance sheet date.
The increase in cash and cash equivalents, recorded at 31 December 2017 compared with the amount recorded at 31 December 2016, is EUR 8,288 thousand. About the reason of this variation see the Cash Flow Statement.
This item includes:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Financial receivables | 1,420 | 2,236 | ( 816) | (36.5%) |
| Total | 1,420 | 2,236 | ( 816) | (36.5%) |
The reduction relates mainly to the collection of a receivable by the company Aeffe Retail.
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Credits for prepaid costs | 20,549 | 18,506 | 2,043 | 11.0% |
| Advances for royalties and commissions | 235 | 774 | ( 539) | (69.6%) |
| Advances to suppliers | 186 | 79 | 107 | 135.4% |
| Accrued income and prepaid expenses | 2,748 | 2,646 | 102 | 3.9% |
| Other | 3,196 | 3,078 | 118 | 3.8% |
| Total | 26,914 | 25,083 | 1,831 | 7.3% |
Other short term receivables increase of EUR 1,831 thousand mainly for the increase in credits for prepaid costs.
Credits for prepaid costs relate to the costs incurred to design and make samples for the Spring/Summer 2018 and Autumn/Winter 2018 collections for which the corresponding revenues from sales have not been realised yet.
This item is not changed during the period.
| (Values in thousands of EUR) | 31 December | 31 December |
|---|---|---|
| 2017 | 2016 | |
| Other fixed assets | 437 | 437 |
| Total Assets | 437 | 437 |
Described below are main categories of shareholders' equity at 31 December 2017, while the corresponding variations are described in the prospect of shareholders' equity.
| (Values in thousands of EUR) | 31 December | 31 December | Change |
|---|---|---|---|
| 2017 | 2016 | ||
| Share capital | 25,371 | 25,371 | - |
| Share premium reserve | 71,240 | 71,240 | - |
| Other reserves | 29,150 | 27,435 | 1,715 |
| Fair value reserve | 7,901 | 7,901 | - |
| IAS reserve | 11,459 | 11,459 | - |
| Profits / (losses) carried-forward | ( 6,957) | ( 8,883) | 1,926 |
| Remeasurement of defined benefit plans reserve | ( 1,173) | ( 1,130) | ( 43) |
| Net profit / (loss) for the Group | 11,490 | 3,641 | 7,849 |
| Translation reserve | ( 2,348) | ( 1,262) | ( 1,086) |
| Minority interests | 32,307 | 32,298 | 9 |
| Total | 178,440 | 168,070 | 10,370 |
Share capital
Share capital as of 31 December 2017, totally subscribed and paid, (gross of treasury shares) totals EUR 26,841 thousand, and is represented by 107,362,504 shares, par value EUR 0.25 each. At 31 December 2017 the Parent Company holds 5,876,878 treasury shares, representing the 5.5% of its share capital.
There are no shares with restricted voting rights, without voting rights or with preferential rights. The number of outstanding shares is not changed during the period.
The share premium reserve amounts to EUR 71,240 thousand and it remains unchanged since 31 December 2016.
The changes in these reserves reflect the allocation of prior-year profit of the Parent Company.
The fair value reserve derives from the application of IAS 16 in order to measure the land and buildings owned by the Company at their fair value, as determined with reference to an independent appraisal.
The IAS reserve, formed on the first-time adoption of IFRS, reflects the differences in value that emerged on the transition from ITA GAAP to IFRS. The differences reflected in this equity reserve are stated net of tax effect, as required by IFRS 1. Each difference is allocated on a pro rata basis to minority interests.
The caption profits/(losses) carried forward records a positive variation as a consequence of the consolidated result at 31 December 2016.
The remeasurement of defined benefit plans reserve, formed as a result of the application, from 1st January 2013 (retrospectively), of the amendment to IAS 19, changes of EUR 43 thousand compared to the value at 31 December 2016.
The decrease of EUR 1,086 thousand related to such reserve is mainly due to the conversion of companies' financial statements in other currency than EUR.
The variation in minority interests is mainly due to the portion of profit/loss attributable to the minority shareholders.
Minority interests represent the shareholders' equity of consolidated companies owned by other shareholders and include the corresponding IAS reserve.
Provisions are illustrated in the following statement:
| (Values in thousands of EUR) | 31 December | Increases | Decreases | 31 December |
|---|---|---|---|---|
| 2016 | 2017 | |||
| Pensions and similar obligations Other |
732 1,827 |
23 205 |
( 295) ( 77) |
460 1,955 |
| Total | 2,559 | 228 | ( 372) | 2,415 |
The additional client expenses reserve is determined based on an estimate of the liability relating to the severance of agency contracts, taking account of statutory provisions and any other relevant factor, such as statistical data, average duration of agency contracts and their rate of turnover. The item is calculated based on the actual value of the outflow necessary to extinguish the obligation.
The other provisions mainly relate to provisions for future charges and risks linked to organizational changes.
Potential tax liabilities for which no reserves have been established, since it is not considered probable that they will give rise to a liability for the Group, are described in the paragraph "Potential liabilities".
The severance indemnities payable on a deferred basis to all employees of the Group are deemed to represent a defined benefits plan (IAS 19), since the employer's obligation does not cease on payment of the contributions due on the remuneration paid, but continue until termination of the employment relationship.
For plans of this type, the standard requires the amount accrued to be projected forward in order to determine the amount that will be paid on the termination of employment, based on an actuarial valuation that takes account of employee turnover, likely future pay increases and any other applicable factors. This methodology does not apply to those employees whose severance indemnities are paid into approved supplementary pension funds, which, in the circumstances, are deemed to represent defined contributions plans.
| 202 | ( 653) | 2017 5,916 |
|---|---|---|
| changes | 31 December | |
| Increases | Decreases / Other |
Changes in the provision are illustrated in the following statement:
Increases include the share of post employment benefits matured in the year and the related revaluation, while the entry decreases/other changes includes the decrease for the liquidation of the post employment benefits for EUR 638 thousand and the actuarial loss of EUR 15 thousand.
(Values in thousands of EUR) 31 December 31 December Change 2017 2016 Δ % Loans from financial institutions 22,008 23,768 ( 1,760) (7.4%) Amounts due to other creditors 72 72 - n.a.
The following table contains details of long-term borrowings:
| The entry "Loans from financial institutions" relates to the portion of bank loans due beyond 12 months. This |
|---|
| entry is mainly due to a ten-year mortgage loan to the Parent company Aeffe Spa for an amount of EUR 11.5 |
| million on a real estate based in Gatteo, headquarter of the subsidiary Pollini Spa. All other operations are |
| unsecured loans and bank finance not assisted by any form of security and they are not subject to special |
| clauses, except for the early repayment clauses normally envisaged in commercial practice. Furthermore, |
| there are no covenants to comply with specific financial terms or negative pledges. |
Total 22,080 23,840 ( 1,760) (7.4%)
The following table contains details of bank loans as of 31 December 2017, including the current portion and the long term portion:
| (Values in thousands of EUR) | Total amount | Current | Long term |
|---|---|---|---|
| portion | portion | ||
| Bank borrowings | 32,855 | 10,847 | 22,008 |
| Total | 32,855 | 10,847 | 22,008 |
The total due beyond five years amount to EUR 1,096 thousand.
The caption changed during the period from EUR 469 thousand in 2016 to EUR 788 thousand in 2017 mainly due to a debt to a commercial partner.
Tax payables are analysed in comparison with the related balances as of 31 December 2016:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Trade payables | 68,619 | 61,881 | 6,738 | 10.9% |
| Total | 68,619 | 61,881 | 6,738 | 10.9% |
Trade payables are due within 12 months and concern the debts for supplying goods and services.
The value at 31 December 2017 increase of 10.9% compared to the previous year as a result of the sales growth.
Tax payables are analysed in comparison with the related balances as of 31 December 2016 in the following table:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Local business tax (IRAP) | 382 | 271 | 111 | 41.0% |
| Corporate income tax (IRES) | 332 | 4,235 | ( 3,903) | (92.2%) |
| Amounts due to tax authority for withheld taxes | 2,397 | 2,556 | ( 159) | (6.2%) |
| VAT due to tax authority | 390 | 287 | 103 | 35.9% |
| Other | 110 | 27 | 83 | 307.4% |
| Total | 3,611 | 7,376 | ( 3,765) | (51.0%) |
At December 31, 2017, the Group's payables to tax institutions amounted to EUR 3,611 thousand. The change of EUR 3,765 thousand compared to 31 December 2016 is mainly due to the decrease of IRES payable.
A breakdown of this item is given below:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Due to banks | 55,334 | 55,814 | ( 480) | (0.9%) |
| Total | 55,334 | 55,814 | ( 480) | (0.9%) |
Current bank debts include advances granted by credit institutions, current loans and the current portion of long-term financing commitments. Advances mainly consist of withdrawals from short-term credit facilities to finance the working capital requirement. Current loans (due within 12 months) are loans granted by banks to the Parent Company and to other Group companies.
Other current liabilities are analysed on a comparative basis in the following table:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Due to total security organization | 4,221 | 3,993 | 228 | 5.7% |
| Due to employees | 5,810 | 5,501 | 309 | 5.6% |
| Trade debtors - credit balances | 1,608 | 1,921 | ( 313) | (16.3%) |
| Accrued expenses and deferred income | 2,221 | 2,052 | 169 | 8.2% |
| Other | 3,782 | 3,492 | 290 | 8.3% |
| Total | 17,642 | 16,959 | 683 | 4.0% |
The other short term liabilities amount to EUR 17,642 thousand at 31 December 2017 increasing of EUR 683 thousand compared with the previous year.
In order to apply the IFRS 8 the Group has considered to delineate as operative sectors the same used by IAS 14 Segment reporting: Prêt-à porter Division and footwear and leather goods Division. Such decision has been taken because they represent business activities from which the entity may earn revenues and incur expenses, whose operating result are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.
Prêt-à porter Division is mainly represented by the companies Aeffe, Moschino and Velmar, operating in the design, production and distribution of luxury prêt-à porter and lingerie, beachwear and loungewear collections. The distribution of the collections takes place both via the retail channel and via the wholesale channel. Aeffe also handles the distribution of all Division products, which takes place via the retail channel through subsidiaries and via the wholesale channel.
In terms of prêt-à porter collections, the activity is carried out by Aeffe, both for the production of the Group's own-label brands ("Alberta Ferretti", "Philosophy", "Moschino", "Boutique Moschino" and "Love Moschino") and brands licensed from other companies (such as "Blugirl Folies", "Cedric Charlier" and "Jeremy Scott"). Aeffe also handles the distribution of all Division products, which takes place via the retail channel through subsidiaries and via the wholesale channel.
Velmar manufactures and distributes lingerie and swimwear collections, and specifically men's/women's lingerie, underwear, beachwear and loungewear. Collections are produced and distributes under the Group's own-label brands such as "Moschino" and under third-party licensed brands such as "Blugirl Folies".
The Prêt-a-porter Division also manages licensing agreements granted to other companies to manufacture Aeffe and Moschino branded product lines such as the "Moschino" brand licensing agreement relating to the love line, "Moschino" branded perfumes and "Moschino" branded sunglasses.
The footwear and leather goods Division, which is composed of Pollini and its subsidiaries, mainly handles the design, production and distribution of footwear, small leather goods, bags and matching accessories made from exclusive materials. The operating activity is mainly carried out by Pollini, which directly handles the design, production and distribution of own-label products, as well as the production and distribution of brands licensed by Group companies.
The footwear and leather goods division also manages licensing agreements granted to other companies to manufacture "Pollini" products such as umbrellas, foulards and ties.
| (Values in thousands of EUR) | Prêt-à porter Division Footwear and leather | Elimination of | Total | |
|---|---|---|---|---|
| 2017 | goods Division | intercompany transactions |
||
| SECTOR REVENUES | 239,815 | 108,216 | ( 35,426) | 312,605 |
| Intercompany revenues | ( 7,785) | ( 27,641) | 35,426 | - |
| Revenues with third parties | 232,030 | 80,575 | - | 312,605 |
| Gross operating margin (EBITDA) | 26,821 | 9,751 | - | 36,572 |
| Amortisation | ( 8,746) | ( 2,813) | - | ( 11,559) |
| Other non monetary items: | ||||
| Write-downs | ( 2,055) | ( 262) | - | ( 2,317) |
| Net operating profit / loss (EBIT) | 16,020 | 6,676 | - | 22,696 |
| Financial income | 884 | 945 | ( 411) | 1,418 |
| Financial expenses | ( 1,714) | ( 3,872) | 411 | ( 5,175) |
| Profit / loss before taxes | 15,190 | 3,749 | - | 18,939 |
| Income taxes | ( 6,086) | ( 1,351) | - | ( 7,437) |
| Net profit / loss | 9,104 | 2,398 | - | 11,502 |
The following table indicates the main economic data for the full year 2017 and 2016 of the Prêt-à porter and Footwear and leather goods Divisions:
| (Values in thousands of EUR) | Prêt-à porter Division Footwear and leather | Elimination of | Total | |
|---|---|---|---|---|
| goods Division | intercompany | |||
| 2016 | transactions | |||
| SECTOR REVENUES | 215,855 | 95,962 | ( 31,126) | 280,691 |
| Intercompany revenues | ( 7,258) | ( 23,868) | 31,126 | - |
| Revenues with third parties | 208,597 | 72,094 | - | 280,691 |
| Gross operating margin (EBITDA) | 18,925 | 6,270 | - | 25,195 |
| Amortisation | ( 9,090) | ( 2,865) | - | ( 11,955) |
| Other non monetary items: | ||||
| Write-downs | ( 2,873) | ( 281) | - | ( 3,154) |
| Net operating profit / loss (EBIT) | 6,962 | 3,124 | - | 10,086 |
| Financial income | 529 | 1,425 | ( 431) | 1,523 |
| Financial expenses | ( 2,505) | ( 1,204) | 431 | ( 3,278) |
| Profit / loss before taxes | 4,986 | 3,345 | - | 8,331 |
| Income taxes | ( 2,626) | ( 1,329) | - | ( 3,955) |
| Net profit / loss | 2,360 | 2,016 | - | 4,376 |
The following tables indicate the main patrimonial and financial data at 31 December 2017 and 2016 of the Prêt-à porter and Footwear and leather goods Divisions:
| (Values in thousands of EUR) 31 December 2017 |
Prêt-à porter Division Footwear and leather | goods Division | Elimination of intercompany transactions |
Total |
|---|---|---|---|---|
| SECTOR ASSETS | 300,470 | 118,309 | ( 52,246) | 366,533 |
| of which non-current assets (*) | ||||
| Intangible fixed assets | 71,743 | 37,936 | - | 109,679 |
| Tangible fixed assets | 55,289 | 3,815 | - | 59,104 |
| Other non-current assets | 6,080 | 597 | ( 390) | 6,287 |
| OTHER ASSETS | 17,132 | 2,615 | - | 19,747 |
| CONSOLIDATED ASSETS | 317,602 | 120,924 | ( 52,246) | 386,280 |
(*) Non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets and rights arising under insurance contracts
| (Values in thousands of EUR) 31 December 2017 |
Prêt-à porter Division Footwear and leather | goods Division | Elimination of intercompany transactions |
Total |
|---|---|---|---|---|
| SECTOR LIABILITIES | 150,189 | 75,849 | ( 52,246) | 173,792 |
| OTHER LIABILITIES | 23,851 | 10,197 | - | 34,048 |
| CONSOLIDATED LIABILITIES | 174,040 | 86,046 | ( 52,246) | 207,840 |
| (Values in thousands of EUR) 31 December 2016 |
Prêt-à porter Division Footwear and leather goods Division |
Elimination of intercompany transactions |
Total | |
|---|---|---|---|---|
| SECTOR ASSETS | 296,856 | 117,117 | ( 57,604) | 356,369 |
| of which non-current assets (*) | ||||
| Intangible fixed assets | 74,990 | 40,142 | - | 115,132 |
| Tangible fixed assets | 58,308 | 3,068 | - | 61,376 |
| Other non-current assets | 11,260 | 666 | ( 4,442) | 7,484 |
| OTHER ASSETS | 15,322 | 2,629 | - | 17,951 |
| CONSOLIDATED ASSETS | 312,178 | 119,746 | ( 57,604) | 374,320 |
(*) Non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets and rights arising under insurance contracts
| (Values in thousands of EUR) 31 December 2016 |
Prêt-à porter Division Footwear and leather | goods Division | Elimination of intercompany transactions |
Total |
|---|---|---|---|---|
| SECTOR LIABILITIES | 148,916 | 76,577 | ( 57,604) | 167,889 |
| OTHER LIABILITIES | 27,609 | 10,753 | - | 38,362 |
| CONSOLIDATED LIABILITIES | 176,525 | 87,330 | ( 57,604) | 206,251 |
The following table indicates the revenues for the full year 2017 and 2016 divided by geographical area:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |||
|---|---|---|---|---|---|---|
| 2017 | % | 2016 | % | Δ | % | |
| Italy | 152,116 | 48.7% | 126,079 | 44.9% | 26,037 | 20.7% |
| Europe (Italy and Russia excluded) | 67,759 | 21.7% | 59,934 | 21.4% | 7,825 | 13.1% |
| Russia | 9,106 | 2.9% | 9,107 | 3.2% | ( 1) | (0.0%) |
| United States | 18,605 | 5.9% | 22,941 | 8.2% | ( 4,336) | (18.9%) |
| Rest of the World | 65,019 | 20.8% | 62,630 | 22.3% | 2,389 | 3.8% |
| Total | 312,605 | 100.0% | 280,691 | 100.0% | 31,914 | 11.4% |
In 2017 consolidated revenues amount to EUR 312,605 thousand compared to EUR 280,691 thousand of the year 2016, showing an increase of 11.4% (+11.6% at constant exchange rates).
Revenues of the prêt-à-porter division amount to EUR 239,815 thousand with an increase of 11.1% at current exchange rates (+11.4% at constant exchange rates) compared to 2016. The revenues of the footwear and leather goods division increase by 12.8% to EUR 108,216 thousand.
This item comprises:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Extraordinary income Other income |
45 3,812 |
867 5,950 |
( 822) ( 2,138) |
(94.8%) (35.9%) |
| Total | 3,857 | 6,817 | ( 2,960) | (43.4%) |
The caption extraordinary income, composed mainly by recovery of receivables from bankrupt customers, time expiry of receivables and payables that arose in prior years, decreases of EUR 822 thousand compared to the previous year.
The caption other income, that amounts to EUR 3,812 thousand in 2017, mainly includes exchange gains on commercial transaction, rental income sales of raw materials and packaging.
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Raw, ancillary and consumable materials | ||||
| and goods for resale | 106,306 | 89,794 | 16,512 | 18.4% |
| Total | 106,306 | 89,794 | 16,512 | 18.4% |
The entry purchase of raw materials increase of EUR 16,512 thousand.
This item mainly includes costs for the acquisition of raw materials such as fabrics, threads, skins and accessories, purchases of finished products for resale (products sold) and packaging.
This item comprises:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Subcontracted work | 30,046 | 25,369 | 4,677 | 18.4% |
| Consultancy fees | 16,623 | 14,896 | 1,727 | 11.6% |
| Advertising | 14,113 | 12,883 | 1,230 | 9.5% |
| Commission | 7,099 | 6,787 | 312 | 4.6% |
| Transport | 5,987 | 5,358 | 629 | 11.7% |
| Utilities | 1,985 | 1,967 | 18 | 0.9% |
| Directors' and auditors' fees | 3,399 | 2,958 | 441 | 14.9% |
| Insurance | 618 | 569 | 49 | 8.6% |
| Bank charges | 1,913 | 1,717 | 196 | 11.4% |
| Travelling expenses | 2,061 | 2,048 | 13 | 0.6% |
| Other services | 7,195 | 6,737 | 458 | 6.8% |
| Total | 91,039 | 81,289 | 9,750 | 12.0% |
Costs of services increase from EUR 81,289 thousand in the year 2016 to EUR 91,039 thousand in the year 2017, by 12.0%. The increase is mainly due to:
This item comprises:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Rental expenses | 21,202 | 20,028 | 1,174 | 5.9% |
| Royalties | 1,256 | 1,960 | ( 704) | (35.9%) |
| Hire charges and similar | 882 | 859 | 23 | 2.7% |
| Total | 23,340 | 22,847 | 493 | 2.2% |
The costs for use of third parties assets increases by EUR 493 thousand from EUR 22,847 thousand in 2016 to EUR 23,340 thousand in 2017.
Labour costs increase by EUR 1,887 thousand from EUR 63,490 thousand in 2016 to EUR 65,377 thousand in 2017, recording an incidence on revenues which changes from 22.6% in 2016 to 20.9% in 2017.
In 2017 the Group invested mainly in Research and Development, in commercial and communication/marketing department.
This item comprises:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Labour costs | 65,377 | 63,490 | 1,887 | 3.0% |
| Total | 65,377 | 63,490 | 1,887 | 3.0% |
In 2017 the average number of employees of the Group is:
| Average number of employees by category | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Workers | 233 | 229 | 4 | 1.7% |
| Office staff-supervisors | 1,051 | 1,049 | 2 | 0.2% |
| Executive and senior managers | 23 | 23 | - | 0.0% |
| Total | 1,307 | 1,301 | 6 | 0.5% |
This item includes:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Taxes | 816 | 773 | 43 | 5.6% |
| Gifts | 272 | 313 | ( 41) | (13.1%) |
| Contingent liabilities | 100 | 573 | ( 473) | (82.5%) |
| Write-down of current receivables | 506 | 180 | 326 | 181.1% |
| Foreign exchange losses | 1,550 | 1,583 | ( 33) | (2.1%) |
| Other operating expenses | 827 | 556 | 271 | 48.7% |
| Total | 4,071 | 3,978 | 93 | 2.3% |
The caption other operating expenses amounts to EUR 4,071 thousand is substantially in line with the value of the previous year.
This item includes:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Amortisation of intangible fixed assets | 6,555 | 6,806 | ( 251) | (3.7%) |
| Depreciation of tangible fixed assets | 5,004 | 5,149 | ( 145) | (2.8%) |
| Write-downs and provisions | 2,317 | 3,154 | ( 837) | (26.5%) |
| Total | 13,876 | 15,109 | ( 1,233) | (8.2%) |
The decrease of this caption from EUR 15,109 thousand in 2016 to EUR 13,876 thousand in 2017 is substantially generated by lower provisions for future risks and charges recorded in 2017 linked to organizational changes that will occur within the Group.
This item include:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Interest income | 152 | 173 | ( 21) | (12.1%) |
| Foreign exchange gains | 1,245 | 1,291 | ( 46) | (3.6%) |
| Financial discounts | 21 | 60 | ( 39) | (65.0%) |
| Financial income | 1,418 | 1,524 | ( 106) | (7.0%) |
| Bank interest expenses | 1,045 | 2,033 | ( 988) | (48.6%) |
| Other interest expenses | 288 | 241 | 47 | 19.5% |
| Foreign exchange losses | 3,025 | 473 | 2,552 | 539.5% |
| Other expenses | 818 | 531 | 287 | 54.0% |
| Financial expenses | 5,176 | 3,278 | 1,898 | 57.9% |
| Total | 3,758 | 1,754 | 2,004 | 114.3% |
The increase in financial income/expenses amounts to EUR 2,004 thousand. Such effect is substantially linked to higher foreign exchange losses partially counterbalanced by lower financial expenses as a result of the better banking conditions applied by banks.
During 2017, the company Pollini Spa has signed contracts with forward currency purchase obligation for an equivalent amount in USD equal to EUR 20,832 thousand. The contracts do not have the coverage characteristics and therefore it has been decided to measure them at fair value. The evaluation of the contracts that have not yet expired on 31 December 2017 shows a negative effect of Euro 998 thousand, the notional underlying the contracts still outstanding at year end amounts to USD 24,000 thousand.
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Current income taxes | 9,213 | 8,532 | 681 | 8.0% |
| Deferred income (expenses) taxes | ( 1,632) | ( 4,430) | 2,798 | (63.2%) |
| Taxes related to previous years | ( 144) | ( 147) | 3 | (2.0%) |
| Total taxes | 7,437 | 3,955 | 3,482 | 88.1% |
Details of deferred tax assets and liabilities and changes in this item are described in the paragraph on deferred tax assets and liabilities. The reconciliation between actual and theoretical taxation for 2017 and 2016 is illustrated in the following table:
| (Values in thousands of EUR) | Full Year | Full Year |
|---|---|---|
| 2017 | 2016 | |
| Profit / loss before taxes | 18,939 | 8,331 |
| Theoretical tax rate | 24.0% | 27.5% |
| Theoretical income taxes (IRES) | 4,545 | 2,291 |
| Fiscal effect | 1,891 | ( 828) |
| Effect of foreign tax rates | 1,667 | 1,239 |
| Total income taxes excluding IRAP (current and deferred) | 8,103 | 2,702 |
| IRAP (current and deferred) | ( 666) | 1,253 |
| Total income taxes (current and deferred) | 7,437 | 3,955 |
This reconciliation of the theoretical and effective tax rates does not take account of IRAP, given that it does not use profit before taxes to calculate the taxable amount. Accordingly, the inclusion of IRAP in the reconciliation would generate distorting effects between years.
The calculation of basic and dilutive earnings per share is based on the following elements:
| (Values in thousands of EUR) | Full Year | Full Year |
|---|---|---|
| From continuing and discontinued activities | 2017 | 2016 |
| Earnings for determining basic earnings per share | 11,490 | 3,641 |
| Dilutive effects | - | - |
| Earnings for determing dilutive earnings per share | 11,490 | 3,641 |
| (Values in thousands of EUR) | Full Year | Full Year |
|---|---|---|
| From continuing activities | 2017 | 2016 |
| Earnings for the period Earnings from discontinued operations |
11,490 - |
3,641 - |
| Earnings for determining basic earnings per share | 11,490 | 3,641 |
| Dilutive effects Earnings for determing dilutive earnings per share |
- 11,490 |
- 3,641 |
In both periods, September 2017 and September 2016, there is no evidence of dilution of consolidated net earnings.
| Full Year | Full Year | |
|---|---|---|
| 2017 | 2016 | |
| Average number of shares for determing earnings per share | 101,486 | 101,486 |
| Share options | - | - |
| Average number of shares for determing diluted earnings per | 101,486 | 101,486 |
Group net earnings attributable to holders of ordinary shares of parent company AEFFE S.p.A., amounts to EUR 11,490 thousand (December 2016: EUR 3,641 thousand).
The calculation of diluted earnings per share for the period January - December 2017, matches with the calculation of basic earnings per share, as there are no tools with potential dilutive effects.
The cash flow generated during 2017 is EUR 22,809 thousand.
| (Values in thousands of EUR) | Full Year | Full Year |
|---|---|---|
| 2017 | 2016 | |
| OPENING BALANCE (A) | 14,521 | 9,993 |
| Cash flow (absorbed)/ generated by operating activity (B) | 17,239 | 10,722 |
| Cash flow (absorbed)/ generated by investing activity (C) | ( 3,834) | ( 2,305) |
| Cash flow (absorbed)/ generated by financing activity (D) | ( 5,117) | ( 3,889) |
| Increase (decrease) in cash flow (E)=(B)+(C)+(D) | 8,288 | 4,528 |
| CLOSING BALANCE (F)=(A)+(E) | 22,809 | 14,521 |
The cash flow generated by operating activity during 2017 amounts to EUR 17,239 thousand.
The cash flow from operating activity is analysed below:
| (Values in thousands of EUR) | Full Year | Full Year |
|---|---|---|
| 2017 | 2016 | |
| Profit before taxes | 18,939 | 8,331 |
| Amortisation / write-downs | 13,876 | 15,110 |
| Accrual (+)/availment (-) of long term provisions and post employment benefits | ( 594) | 1,305 |
| Paid income taxes | ( 12,230) | ( 3,583) |
| Financial income (-) and financial charges (+) | 3,757 | 1,754 |
| Change in operating assets and liabilities | ( 6,509) | ( 12,195) |
| CASH FLOW (ABSORBED)/ GENERATED BY OPERATING ACTIVITY | 17,239 | 10,722 |
The cash flow absorbed by investing activity during 2017 amounts to EUR 3,834 thousand.
The factors comprising this use of funds are analysed below:
| (Values in thousands of EUR) | Full Year | Full Year |
|---|---|---|
| 2017 | 2016 | |
| Increase (-)/ decrease (+) in intangible fixed assets | ( 1,102) | 883 |
| Increase (-)/ decrease (+) in tangible fixed assets | ( 2,732) | ( 3,265) |
| Investments ans write-downs (-)/ Disinvestments and revaluations (+) | - | 77 |
| CASH FLOW (ABSORBED)/ GENERATED BY INVESTING ACTIVITY | ( 3,834) | ( 2,305) |
The cash flow absorbed by financing activity during 2017 amounts to EUR 5,117 thousand.
The factors comprising this use of funds are analysed below:
| (Values in thousands of EUR) | Full Year | Full Year |
|---|---|---|
| 2017 | 2016 | |
| Other variations in reserves and profits carried-forward of shareholders' equity | ( 1,131) | 20 |
| Dividends paid | - | - |
| Proceeds (+)/ repayments (-) of financial payments | ( 2,241) | ( 679) |
| Increase (-)/ decrease (+) in long term financial receivables | 2,013 | ( 1,476) |
| Financial income (+) and financial charges (-) | ( 3,758) | ( 1,754) |
| CASH FLOW (ABSORBED)/GENERATED BY FINANCING ACTIVITY | ( 5,117) | ( 3,889) |
Regarding the long term incentive plans reserved to executive directors of Aeffe S.p.A., please refer to the indicated in the Report on remuneration available from the governance section of the following website: www.aeffe.com.
As required by Consob communication DEM/6264293 dated 28th July 2006 and in compliance with the CESR's "Recommendations for the consistent implementation of the European Commission's Regulation on Prospectuses" dated 10th February 2005, the Group's net financial position as of 31 December 2017 is analysed below:
| (Values in thousands of EUR) | 31 December | 31 December |
|---|---|---|
| 2017 | 2016 | |
| A - Cash in hand | 752 | 1,032 |
| B - Other available funds | 22,057 | 13,489 |
| C - Securities held for trading | - | - |
| D - Cash and cash equivalents (A) + (B) + (C) | 22,809 | 14,521 |
| E - Short term financial receivables | 1,420 | 2,236 |
| F - Current bank loans | ( 44,487) | ( 47,205) |
| G - Current portion of long-term bank borrowings | ( 10,847) | ( 8,610) |
| H - Current portion of loans from other financial istitutions | - | - |
| I - Current financial indebtedness (F) + (G) + (H) | ( 55,334) | ( 55,815) |
| J - Net current financial indebtedness (I) + (E) + (D) | ( 31,105) | ( 39,058) |
| K - Non current bank loans | ( 22,008) | ( 23,768) |
| L - Issued obbligations | 2,592 | 3,391 |
| M - Other non current loans | ( 72) | ( 72) |
| N - Non current financial indebtedness (K) + (L) + (M) | ( 19,488) | ( 20,449) |
| O - Net financial indebtedness (J) + (N) | ( 50,593) | ( 59,507) |
The net financial position of the Group amounts to EUR 50,593 thousand as of 31 December 2017 compared with EUR 59,507 thousand as of 31 December 2016.
Reciprocal transactions and balances between Group companies included within the scope of consolidation are eliminated from the consolidated financial statements and as such will not be described here. Operations carried out with related parties mainly concern the exchange of goods, the performance of services and the provision of financial resources. All transactions arise in the ordinary course of business and are settled on market terms i.e. on the terms that are or would be applied between two independent parties.
The Group's business dealing with other related parties are summarised below:
| (Values in thousands of EUR) | Full Year | Full Year | Nature of the |
|---|---|---|---|
| 2017 | 2016 | transactions | |
| Shareholder Alberta Ferretti with Aeffe S.p.a. | |||
| Contract for the sale of artistic assets and design | 751 | 300 | Cost |
| Commercial | 205 | - | Payable |
| Commerciale Valconca with Aeffe S.p.a. | |||
| Commercial | 1,350 | 1,247 | Revenue |
| Property rental | 50 | 50 | Cost |
| Cost of services | 73 | 74 | Cost |
| Commercial | 735 | 763 | Receivable |
| Ferrim with Aeffe S.p.a. | |||
| Property rental | 1,789 | 1,779 | Cost |
| Aeffe USA with Ferrim USA | |||
| Property rental | 714 | 723 | Cost |
| Financial income | 123 | 126 | Financial income |
| Commercial | 304 | 468 | Receivable |
| Commercial | - | 253 | Payable |
| Non current financial | 1,752 | 2,131 | Receivable |
| Current financial | 1,000 | 1,000 | Receivable |
The following table indicates the data related on the incidence of related party transactions on the income statement, balance sheet, cash flow and indebtedness as of 31 December 2017 and 31 December 2016.
| (Values in thousands of EUR) | Balance | Value | % | Balance | Value | % |
|---|---|---|---|---|---|---|
| rel. party | rel. party | |||||
| Full Year | 2017 | Full Year | 2016 | |||
| Incidence of related party transactions on the income statement | ||||||
| Revenues from sales and services | 312,605 | 1,350 | 0.4% | 280,691 | 1,247 | 0.4% |
| Costs of services | 91,039 | 824 | 0.9% | 81,289 | 374 | 0.5% |
| Costs for use of third party assets | 23,340 | 2,553 | 10.9% | 22,847 | 2,552 | 11.2% |
| Financial Income / expenses | 3,758 | 123 | 3.3% | 1,754 | 126 | 7.2% |
| Incidence of related party transactions on the balance sheet | ||||||
| Non current financial receivables | 2,592 | 1,752 | 67.6% | 3,391 | 2,131 | 62.8% |
| Trade receivables | 42,065 | 1,039 | 2.5% | 40,711 | 1,231 | 3.0% |
| Current financial receivables | 1,420 | 1,000 | 70.4% | 2,236 | 1,000 | 44.7% |
| Trade payables | 68,619 | 205 | 0.3% | 61,881 | 253 | 0.4% |
| Incidence of related party transactions on the cash flow | ||||||
| Cash flow (absorbed) / generated by operating activities | 17,239 | ( 1,760) | n.a. | 10,722 | ( 1,788) | n.a. |
| Cash flow (absorbed) / generated by financing activities | ( 5,117) | 379 | n.a. | ( 3,889) | ( 100) | 2.6% |
| Incidence of related party transactions on the indebtedness | ||||||
| Net financial indebtedness | ( 50,593) | ( 1,381) | 2.7% | ( 59,507) | ( 1,888) | 3.2% |
Pursuant to Consob communication DEM/6064293 dated 28th July 2006, it is confirmed that in 2017 the Group did not enter into any atypical and/or unusual transactions, as defined in that communication.
No significant non-recurring events, occurred during the year, have to be reported.
As of 31 December 2017, the Group has given performance guarantees to third parties totaling EUR 9,774 thousand (EUR 6,944 thousand as of 31 December 2016).
The Group's fiscal disputes refer to the following companies:
Aeffe S.p.A.: the Rimini Provincial Tax Commission with ruling no. 101/2/06 filed on 16 December 2006 cancelled notices of assessment 81203T100562 (RG no. 43/05) and 81203T100570 (RG no. 69/05) issued by the Rimini Tax Authorities in November 2004. The issues raised related to the 1999 and 2000 tax years concern costs deemed not allowable and the write-down of the investment in Moschino. The Rimini tax office has appealed against the sentence handed down by the Rimini Provincial Tax Commissioners. The Company presented its counter analysis within the legally-prescribed time period. The Bologna Regional Tax Commission, as set during the hearing of 27 September 2010, has rejected the appeal, confirming the first level ruling.
On 12 January 2012, the State Legal Bar disputed the validity of the judgment of the Bologna regional tax commission, by bringing an appeal before the Court of Cassation. The company, presented its countersubmission within the time limit established by the law.
The positive outcome at the first two levels of judgment means that the further development of this dispute can be considered in a positive light.
The Rimini Provincial Tax Commission with ruling no. 37/02/08 of 28 January 2008, filed on 9 April 2008, cancelled notices of assessment no. 81203T300390/06 and no. 81203T300393/06 issued by the Rimini Tax Authorities in June 2006. The assessments concern tax years 2001 and 2002, and are connected with nonrecognition of utilisation of the tax loss achieved during tax period 2000. The Rimini Tax Office has appealed against the sentence handed down by the Rimini Provincial Tax Commissioners with notification sent to the company on 29 May 2009. The appeal presented its counter analysis to the Regional Tax Commission of Bologna within the legally-prescribed time period. The Bologna Regional Tax Commission ordered on 14 April 2011 the suspension of this judgment pending resolution of the dispute ruling related to the notice of assessment 81203T100570/20042 (tax year 2000). The judgment was summarized by Section 1 of the Regional Tax Commission of Bologna with the hearing on the merits on 26 May 2016, after postponed to 12 December 2016 and again postponed to 15 December 2016.
It was again placed the suspension of the trial pending a ruling of the Supreme Court.
On 1 October 2008 the Rimini Tax Office notified the company of inspection minutes in relation to direct taxes and IRAP for FY 2005. The audits also concerned VAT and were mainly focused on relations with group companies and costs for services. Specifically, the Tax Office raised issues on non-pertinent costs totaling EUR 130 thousand and non-pertinent advertising costs amounting to roughly EUR 580 thousand tied to the disbursement of contributions to subsidiary companies. On 30 August 2010, the Major Taxpayers Office of the Emilia Romagna Regional Tax Department notified assessments TGB03B500172/2010 (IRAP), TGB08B500181/2010 (theoretical IRES) and TGB09B500185/2010 (actual IRES), containing the matters indicated above. The company challenged these assessments before the Bologna Provincial Tax Commissioners ahead of the legal deadline, trusting that the valid defensive reasoning will be accepted. On 13 July 2011, with tax return n. 137 2011 00031537 15 the company has been ordered to pay the amount registered in the roll by the Tax Office, provisionally awaiting trial, equal to half of the taxes in dispute, besides interests, for a total amount of EUR 161 thousand. This tax dispute has been disputed in December 2012 before the Bologna Provincial Tax Commission, who, with sentence no. 40/13/13, filed on 14 March 2013, has accepted the request of the company, annulling the contested measures with reference to the matter relating to intra-group costs for advertising contributions and confirming the contested measures related to the reliefs for costs to be incurred and intra-group costs for lease payments. The Office, with act of appeal notified to the company on 28 October 2013, appealed against the sentence of the Bologna Provincial Tax Commission requesting the reform in relation to the matter relating to intra-group costs for advertising contributions. The Company, on 23 December 2013, filed a timely notice of cross-appeal counterclaims and contextual interlocutory appeal. On 13 September 2016, the Company has formulated a proposed conciliation agreement aimed at achieving a settlement agreement that, if reached would not involve any outlay for the Company.
On 30 May 2014, following a general tax audit for IRES, IRAP and VAT for the tax years 2009, 2010 and 2011, by the Emilia Romagna Regional Management, Large Taxpayers Office, was issued a formal notice of assessment, with which the Tax Office has formulated remarks with recoveries of total taxes (IRES and IRAP) of EUR 210 thousand for 2009, EUR 350 thousand for 2010 and EUR 299 thousand for 2011. The complaints mainly concern the recovery of costs for commissions and advertising contributions granted to certain foreign subsidiaries and the failure to account for interest income on loans to foreign subsidiaries.
The company, on 29 July 2014, submitted comments pursuant to Article 12, paragraph 7, of Law 212 of 2000.
On 3 December 2014 the Large Taxpayers Office of Emilia Romagna Regional Management has notified, for 2009, the assessment notices n. TGB0EC700238/2014 (IRES) and n. TGB03C700239/2014 (IRAP), with a total recovery of taxes of EUR 210 thousand.
Both assessment notices were challenged before the competent Provincial Tax Commission of Bologna.
On 25 September 2015 the Large Taxpayers Office of Emilia Romagna Regional Management has notified, for 2010, the assessment notices n. TGB0EC700149/2015 (IRES) and n. TGB03C700150/2015 (IRAP), with a total recovery of taxes of EUR 350 thousand.
Both assessment notices were challenged before the competent Provincial Tax Commission of Bologna.
On 6 June 2016, the Large Taxpayers Office of Emilia Romagna Regional Management has notified, for 2011, the assessment notices n. TGB0EC700080/2016 (IRES) and n. TGB0CC700083/2016 (IRAP), with total tax recoveries of Euro 299 thousand. Both assessment notices have been challenged before the competent Provincial Tax Commission of Bologna.
It is noted that regarding the deductibility of advertising contributions to foreign subsidiaries (which constitute the bulk of disputes) the company has already received feedback from the Provincial Tax Commission of Bologna that, with judgment 40/13/13 filed on 14 March 2013 on the litigation referred to in paragraph above, has already rejected this type of dispute.
No provisions have been recorded in relation to the above disputes, since the defensive arguments put forward by the companies and its professional advisors are fully sustainable.
The directors, in receipt of the opinion of their fiscal and legal consultants, do not deem it likely that any liabilities will derive from the above-mentioned.
The following table, prepared in accordance with art. 149-duodecies of the "Regolamento Emittenti" issued by Consob, reports the amount of fees charged in 2017 for the audit and audit related services provided by the Audit Firm.
| (Values in thousand of EUR) | Service provider | 2017 fees |
|---|---|---|
| Audit | RIA GRANT THORNTON | 118 |
| Audit | BDO ITALIA | 52 |
| Audit | WARD DIVECHA | 8 |
| Audit | ARI AUDIT | 4 |
| Audit non-financial statement (DNF) | BDO ITALIA | 10 |
| Stamp of approval of VAT declaration | BDO ITALIA | 2 |
Non-financial statement (DNF) BDO ITALIA 15
Total 208
| ATTACHMENT I | Consolidated Assets Balance Sheet with related parties. |
|---|---|
| ATTACHMENT II | Consolidated Liabilities Balance Sheet with related parties. |
| ATTACHMENT III | Consolidated Income Statement with related parties. |
| ATTACHMENT IV | Consolidated Cash Flow Statement with related parties. |
| ATTACHMENT V | Prospect of crucial data from the statutory financial statements of Fratelli Ferretti Holding at 31 December 2016. |
Pursuant to Consob Resolution n. 15519 of 27 July 2006
| (Values in units of EUR) | Notes | 31 December | of which | 31 December | of which |
|---|---|---|---|---|---|
| 2017 | Related parties | 2016 | Related parties | ||
| NON-CURRENT ASSETS | |||||
| Intangible fixed assets | |||||
| Key money | 26,852,574 | 28,923,062 | |||
| Trademarks | 81,975,169 | 85,468,751 | |||
| Other intangible fixed assets | 850,869 | 740,072 | |||
| Total intangible fixed assets | (1) | 109,678,612 | 115,131,885 | ||
| Tangible fixed assets | |||||
| Lands | 17,118,773 | 17,118,773 | |||
| Buildings | 22,167,805 | 22,658,662 | |||
| Leasehold improvements | 12,597,761 | 14,465,641 | |||
| Plant and machinary | 2,863,830 | 2,665,840 | |||
| Equipment | 260,126 | 311,406 | |||
| Other tangible fixed assets | 4,096,002 | 4,155,699 | |||
| Total tangible fixed assets | (2) | 59,104,297 | 61,376,021 | ||
| Other fixed assets | |||||
| Equity investments | (3) | 131,558 | 131,558 | ||
| Long term financial receivables | (4) | 2,591,605 | 1,751,605 | 3,390,633 | 2,130,633 |
| Other fixed assets | (5) | 3,564,214 | 3,961,836 | ||
| Deferred tax assets | (6) | 14,335,779 | 13,856,302 | ||
| Total other fixed assets | 20,623,156 | 21,340,329 | |||
| TOTAL NON-CURRENT ASSETS | 189,406,065 | 197,848,235 | |||
| CURRENT ASSETS | |||||
| Stocks and inventories | (7) | 97,817,891 | 89,389,833 | ||
| Trade receivables | (8) | 42,064,915 | 1,039,292 | 40,711,059 | 1,230,887 |
| Tax receivables | (9) | 5,411,024 | 4,094,261 | ||
| Derivative assets | (10) | - | - | ||
| Cash | (11) | 22,808,913 | 14,521,334 | ||
| Short term financial receivables | (12) | 1,420,000 | 1,000,000 | 2,235,854 | 1,000,000 |
| Other receivables | (13) | 26,914,468 | 25,082,908 | ||
| TOTAL CURRENT ASSETS | 196,437,211 | 176,035,249 | |||
| Assets available for sale | (14) | 436,885 | 436,885 | ||
| TOTAL ASSETS | 386,280,161 | 374,320,369 |
Pursuant to Consob Resolution N. 15519 of 27 July 2006
| (Values in units of EUR) | Notes | 31 December | of which | 31 December | of which |
|---|---|---|---|---|---|
| 2017 | Related parties | 2016 | Related parties | ||
| SHAREHOLDERS' EQUITY | (15) | ||||
| Group interest | |||||
| Share capital | 25,371,407 | 25,371,407 | |||
| Other reserves | 116,229,168 | 115,641,684 | |||
| Profits / (losses) carried-forward | ( 6,957,390) | ( 8,883,005) | |||
| Net profit / (loss) for the Group | 11,490,343 | 3,641,244 | |||
| Group interest in shareholders' equity | 146,133,528 | 135,771,330 | |||
| Minority interest | |||||
| Minority interests in share capital and reserves | 32,295,224 | 31,563,069 | |||
| Net profit / (loss) for the minority interests | 11,716 | 735,125 | |||
| Minority interests in shareholders' equity | 32,306,940 | 32,298,194 | |||
| TOTAL SHAREHOLDERS' EQUITY | 178,440,468 | 168,069,524 | |||
| NON-CURRENT LIABILITIES | |||||
| Provisions | (16) | 2,415,237 | 2,558,786 | ||
| Deferred tax liabilities | (6) | 30,436,700 | 30,985,927 | ||
| Post employment benefits | (17) | 5,916,166 | 6,366,872 | ||
| Long term financial liabilities | (18) | 22,079,795 | 23,840,201 | ||
| Long term not financial liabilities | (19) | 787,692 | 469,000 | ||
| TOTAL NON-CURRENT LIABILITIES | 61,635,590 | 64,220,786 | |||
| CURRENT LIABILITIES | |||||
| Trade payables | (20) | 68,618,776 | 204,906 | 61,880,670 | 252,981 |
| Tax payables | (10) | 3,611,468 | 7,376,339 | ||
| Derivative liabilities | (21) | 997,532 | - | ||
| Short term financial liabilities | (22) | 55,334,134 | 55,814,445 | ||
| Other liabilities | (23) | 17,642,193 | 16,958,605 | ||
| TOTAL CURRENT LIABILITIES | 146,204,103 | 142,030,059 | |||
| Liabilities available for sale | - | - | |||
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 386,280,161 | 374,320,369 |
Pursuant to Consob Resolution N. 15519 of 27 July 2006
| (Values in units of EUR) | Notes | Full Year | of which | Full Year | of which |
|---|---|---|---|---|---|
| 2017 | Related parties | 2016 | Related parties | ||
| REVENUES FROM SALES AND SERVICES | (24) | 312,604,739 | 1,349,985 | 280,690,885 | 1,246,673 |
| Other revenues and income | (25) | 3,857,091 | 6,816,595 | ||
| TOTAL REVENUES | 316,461,830 | 287,507,480 | |||
| Changes in inventory | 10,243,168 | ( 913,774) | |||
| Costs of raw materials, cons. and goods for resale | (26) | ( 106,306,060) | ( 89,794,049) | ||
| Costs of services | (27) | ( 91,038,590) | ( 823,840) | ( 81,289,495) | ( 373,703) |
| Costs for use of third parties assets | (28) | ( 23,340,025) | ( 2,552,334) | ( 22,847,255) | ( 2,552,042) |
| Labour costs | (29) | ( 65,376,702) | ( 63,490,261) | ||
| Other operating expenses | (30) | ( 4,071,124) | ( 3,978,106) | ||
| Amortisation, write-downs and provisions | (31) | ( 13,876,156) | ( 15,108,564) | ||
| Financial Income / (expenses) | (32) | ( 3,757,528) | 122,731 | ( 1,754,479) | 125,558 |
| PROFIT / LOSS BEFORE TAXES | 18,938,813 | 8,331,497 | |||
| Taxes | (33) | ( 7,436,754) | ( 3,955,128) | ||
| NET PROFIT / LOSS | 11,502,059 | 4,376,369 | |||
| (Profit) / loss attributable to minority shareholders | ( 11,716) | ( 735,125) | |||
| NET PROFIT / LOSS FOR THE GROUP | 11,490,343 | 3,641,244 |
Pursuant to Consob Resolution N. 15519 of 27 July 2006
| (Values in thousands of EUR) | Notes | Full Year | of which | Full Year | of which |
|---|---|---|---|---|---|
| 2017 | Related parties | 2016 | Related parties | ||
| OPENING BALANCE | 14,521 | 9,993 | |||
| Profit before taxes | 18,939 | ( 1,904) | 8,331 | ( 1,553) | |
| Amortisation / write-downs | 13,876 | 15,110 | |||
| Accrual (+)/availment (-) of long term provisions and post employment benefits | ( 594) | 1,305 | |||
| Paid income taxes | ( 12,230) | ( 3,583) | |||
| Financial income (-) and financial charges (+) | 3,757 | 1,754 | |||
| Change in operating assets and liabilities | ( 6,509) | 144 | ( 12,195) | ( 234) | |
| CASH FLOW (ABSORBED)/ GENERATED BY OPERATING ACTIVITY | (35) | 17,239 | 10,722 | ||
| Increase (-)/ decrease (+) in intangible fixed assets | ( 1,102) | 883 | |||
| Increase (-)/ decrease (+) in tangible fixed assets | ( 2,732) | - | ( 3,265) | - | |
| Investments and write-downs (-)/ Disinvestments and revaluations (+) | - | 77 | |||
| CASH FLOW (ABSORBED)/ GENERATED BY INVESTING ACTIVITY | (36) | ( 3,834) | ( 2,305) | ||
| Other variations in reserves and profits carried-forward of shareholders' equity | ( 1,131) | 20 | |||
| Dividends paid | - | - | |||
| Proceeds (+)/ repayments (-) of financial payments | ( 2,241) | ( 679) | |||
| Increase (-)/ decrease (+) in long term financial receivables | 2,013 | 379 | ( 1,476) | ( 100) | |
| Financial income (+) and financial charges (-) | ( 3,758) | ( 1,754) | |||
| CASH FLOW (ABSORBED)/GENERATED BY FINANCING ACTIVITY | (37) | ( 5,117) | ( 3,889) | ||
| CLOSING BALANCE | 22,809 | 14,521 |
| STATUTORY FINANCIAL | STATUTORY FINANCIAL | |
|---|---|---|
| (Values in units of EUR) | STATEMENTS 2016 | STATEMENTS 2015 |
| BALANCE SHEET | ||
| ASSETS | ||
| Intangible fixed assets | 127,574 | 162,405 |
| Tangible fixed assets | 2,248,163 | 1,547,778 |
| Equity investments | 63,397,878 | 60,695,372 |
| Non current assets | 65,773,616 | 62,405,555 |
| Trade receivables | 1,391,856 | 1,381,624 |
| Tax receivables | - | 341,690 |
| Cash | 21,753 | 83,161 |
| Other receivables | 3,308 | 87,280 |
| Current assets | 1,416,917 | 1,893,755 |
| Total assets | 67,190,533 | 64,299,310 |
| LIABILITIES | ||
| Share capital | 100,000 | 100,000 |
| Share premium reserve | 62,529,081 | 63,195,446 |
| Other reserves | 15,038 | 15,038 |
| Profits / (losses) carried-forward | - | - |
| Net profit / loss | ( 934,416) | ( 666,366) |
| Shareholders' equity | 61,709,703 | 62,644,118 |
| Provisions | 184,132 | 195,885 |
| Long term financial liabilities | - | - |
| Non-current liabilities | 184,132 | 195,885 |
| Trade payables | 5,296,697 | 1,459,307 |
| Current liabilities | 5,296,697 | 1,459,307 |
| Total shareholders' equity and liabilities | 67,190,532 | 64,299,310 |
| INCOME STATEMENT | ||
| Revenues from sales and services | ||
| Other revenues and income | 366,894 | 343,594 |
| Total revenues | 366,894 | 343,594 |
| Operating expenses | ( 305,149) | ( 393,855) |
| Costs for use of third parties assets | ( 215,672) | ( 489,341) |
| Amortisation and write-downs | ( 165,803) | ( 76,175) |
| Other operating expenses | ( 15,112) | ( 24,894) |
| Financial income / (expenses) | 47,040 | 213,695 |
| Financial assets adjustments | ( 717,550) | ( 290,916) |
Profit / (loss) before taxes ( 1,005,352) ( 717,892) Income taxes 70,936 51,526 Net profit / (loss) ( 934,416) ( 666,366)
The undersigned Massimo Ferretti as President of the Board of Directors, and Marcello Tassinari as manager responsible for preparing Aeffe S.p.A.'s financial reports, pursuant to the provisions of art. 154 bis, clauses 3 and 4, of Legislative Decree n. 58 of 1998, hereby attest:
of the administrative and accounting procedures applied in the preparation of the consolidated financial statements at 31 December 2017.
The undersigned moreover attest that the consolidated financial statements:
The report on operations includes a reliable operating and financial review of the Company and of the Group as well as a description of the main risks and uncertainties to which they are exposed.
8 March 2018
President of the board of directors Manager responsible for preparing Aeffe S.p.A. financial reports
Massimo Ferretti Marcello Tassinari
The Aeffe SpA Group (hereinafter also Aeffe) falls within the scope of Legislative Decree no. 254/2016 issued in implementation of Directive 2014/95 / EU of the European Parliament and of the Council of 22 October 2014 - which provides for the non-financial reporting obligation in the Management Report, referring to the financial year closed at December 31, 2017
Therefore, the present Declaration constitutes Aeffe's commitment to reporting on the social and environmental impacts of its action, respect for human rights and its policies in these fields and on the issue of diversity and the fight against corruption, in compliance with the provisions from the same D.lgs. 254/2016.
Aeffe, with the aim of complying with the reporting criteria of non-financial information as required by Legislative Decree no. 254/2016, adopted the GRI Standard as guidelines, a model issued in 2016 by the Global Reporting Initiative and which is the most widespread reference at international level for sustainability reporting.
Chapter 7 of the present Declaration summarizes a correlation table between the information reported by the Group and the GRI indicators, in its level of application to the Referenced method.
Aeffe, to define the significant issues reported in this Declaration, analyzed the content of Article 3 of Legislative Decree no. 254/2016, arriving at the following conclusions:
Following this preliminary analysis, the Aeffe Group launched a further process for the determination of other material issues, which took place through the completion of a questionnaire (so-called materiality questionnaire) and a benchmark activity.
The analysis of materiality saw the direct participation of the referents of the individual companies included in the scope of reference for the Declaration of a non-financial nature, to which a questionnaire was distributed containing a series of issues, for each of which each referent had the the task of giving a score of 1 to 5 based on their perception and sensitivity to the topic examined, in order to bring out the issues relevant to the Group and, indirectly, to its stakeholders.
The internal functions involved in the process of determining the material themes were:
The Group has identified and selected its stakeholders on the basis of awareness of its social role and strong territorial roots, subdividing them into the following categories: employees, shareholders, investors, distributors, suppliers, customers, schools and universities, public administration, community and territory , Non Governmental Organizations (NGOs), media and environment.
From the analysis described above, the following emerged:
With regard to the topics related to the economic aspect (financial performance, distribution of added value, market presence), reference is made to chapter 6 of this consolidated Declaration of a nonfinancial nature (Other material topics) and to the other sections of the Balance.
The following image shows the Group's corporate structure, including controlling equity investments at December 31, 2017.
Aeffe considers the following companies within the scope of this non-financial statement (hereinafter also referred to as DNF):
The companies: Aeffe France Sarl did not fall within the reporting scope; Aeffe UK Ltd; Aeffe Japan Inc; Clan cafè Srl; Divè SA; Pollini Suisse Sagl; Pollini Austria Gmbh; Pollini France Sarl; Moschino France Sarl; Moschino USA Inc; Bloody Mary Inc; Moschino Japan Ltd; Moschino Retail Gmbh; Fashoff UK Ltd.
These exclusions are motivated by the fact that the socio-economic and environmental impacts of these companies are not considered significant due to the low incidence, compared to the consolidated total, in terms of turnover and employees; this possibility is provided for by art. 4 of Legislative Decree n. 254/2016, according to which, in fact, the Consolidated Statement may lead to excluding those subsidiaries that, although included in the area of accounting consolidation, are not necessary in order to understand the Group's business, its performance, its results and the impact produced by the activity itself.
The following table shows, for each material theme, the reporting boundary to which the information provided refers.
"Group" means the group of companies included in the reporting perimeter of the consolidated nonfinancial statement listed above.
| THEME | REPORTING PERIMETER |
NOTES |
|---|---|---|
| Compliance with laws, regulations and even voluntary standards |
Group | |
| Non-discrimination and equal opportunities |
Group | |
| Human resources, training and development of professional skills |
Group | |
| Health & Safety | Aeffe S.p.A. and Pollini S.p.A. |
The limitation is justified by the fact that the other companies included in the reporting scope are of a commercial and non-productive nature. |
| Freedom of association and dialogue with the social partners |
Group | |
| Production and management of waste |
Aeffe S.p.A. and Pollini S.p.A. |
The limitation is justified by the fact that the other companies included in the reporting scope are of a commercial and non-productive nature. |
| Anti-corruption commitment | Group | |
| Protection of human rights | Group | |
| Responsible management of the supply chain and sustainable supply |
Aeffe S.p.A. and Pollini S.p.A. |
The limitation is justified by the fact that the other companies included in the reporting scope are of a commercial and non-productive nature. |
| Responsible management of the product |
Aeffe S.p.A. and Pollini S.p.A. |
The limitation is justified by the fact that the other companies included in the reporting scope are of a commercial and non-productive nature. |
| Financial performance | Group |
The contents of this Consolidated Declaration of a non-financial nature have undergone a process of validation and approval which has developed as follows:
-A small work group was identified for the General Management of the Aeffe SpA group, represented by the following functions:
This Declaration is published, together with the 2017 Annual Report of the Aeffe Group, in the Investor Relations - Financial Statements and Reports section of the http://www.aeffe.com website.
The parent company Aeffe S.p.A. has adopted a traditional model of administration and control structured on a Board of Directors and a Board of Statutory Auditors appointed by the Shareholders' Meeting; in addition, the reference framework for the definition of its governance system has been identified in the Self-Regulatory Code, promoted by Borsa Italiana S.p.A.
The Aeffe Group operates internationally in the fashion and luxury sector and is active in the creation, production and distribution of a wide range of products including prêt-à-porter and footwear and leather goods, whose distribution network is composed of both from the Retail channel and from the Wholesale channel.
The subsidiaries are grouped into three geographical areas: Europe, North America and the Far East, therefore, considering the entire distribution structure, the presence of the Aeffe Group extends to almost 80 countries worldwide.
MATERIAL THEMES RELATED RISKS IMPROVEMENT AIMS - Compliance with laws, regulations and even voluntary standards - Non-discrimination and equal opportunities. The Management of Aeffe identifies and assesses the related risks, identifying the appropriate prevention actions. Among the risks there are: - Risks deriving from noncompliance or violation of the reference legislation such as, for example, the payment of - Extend the internal auditing process adopted by the Parent Company to all the companies belonging to the reporting scope; - Evaluate the possibility of implementing adequate management systems of a voluntary nature (ISO Standards) for a more
The contents of the Consolidated Statement of a non-financial nature are shown below, in compliance with the provisions of Legislative Decree no. 254/2016, for the subject in question.
POLITICS AND MANAGEMENT MODEL
The Aeffe Group undertakes to guarantee equal treatment opportunities towards all its collaborators. All Group decisions are based on merit, skills and abilities.
The Group rejects any direct or indirect discrimination based on age, health status, gender, religion, race, political and cultural opinions, as well as personal or social conditions.
Aeffe undertakes to provide for all awareness-raising actions in order to spread the maximum possible knowledge on the issues and to help all the most exposed subjects.
The Organization, Management and Control Model, pursuant to Legislative Decree no. 231/2001 is part of the wider control system already in place and adopted in order to provide reasonable assurance regarding the achievement of corporate objectives in compliance with the laws and regulations.
To understand the Group's governance model (including the adoption of the 231 model for Italian companies and its operational role in terms of supervision and control), refer to the Report on Corporate Governance available on the website www.aeffe.com.
During 2017 there was no incident related to discrimination of any kind within the reporting scope.
The contents of the Consolidated Statement of a non-financial nature are shown below, in compliance with the provisions of Legislative Decree no. 254/2016, for the subject in question.
| MATERIAL | RELATED | IMPROVEMENT |
|---|---|---|
| THEMES | RISKS | AIMS |
| - Training and development of professional skills; - Health, safety, freedom of association and dialogue with the social partners. |
The Management of Aeffe identifies and assesses the related risks, identifying the appropriate prevention actions. Among the risks there are: - Increase in turnover and loss of competent and relevant staff in crucial processes; - Strengthening of |
- Continuation of the actions undertaken in the field of training, career development for opportunities for professional growth; - Study a corporate welfare plan that can support and improve workers' satisfaction and the internal climate. - Introduce and develop complete software on the entire company population for the management of HR processes in web / i-cloud mode. The HR Department would thus become a Virtual Workspace, accessible anywhere |
| occupational safety). |
|---|
| ----------------------- |
For Aeffe people are a real capital: to be preserved and enriched, people are continually stimulated and led to a path of personal and professional growth within which the potential and creativity of individuals are fully realized.
The Management of the Aeffe Group wants to guarantee its human capital a comfortable, but also safe workplace: the risks to which workers and interested parties can be identified and assessed, identifying the appropriate preventive actions.
The Group guarantees respect for the right of all personnel to form, organize or participate in trade unions of their own choosing and to contract collectively, without causing any negative consequences or causing retaliation.
The organizational system for the health and safety of Aeffe S.p.A. and by Pollini S.p.A. it is organized in compliance with the current national law (Legislative Decree 81/08 and subsequent amendments).
The company organization for workers' health and safety is managed internally by a dedicated office and covers the entire working population of both companies. Employees are represented by workers' safety representatives (RLS).
From the assessment of business risks, developed in application of Legislative Decree no. 81/08, there are no duties or professional activities that expose the workers of Aeffe S.p.A. and Pollini S.p.A. at a high risk of specific diseases, attributable to work.
* the data below refer only to Aeffe S.p.A. and Pollini S.p.A.
Injuries in 2017 were 17 (involving 5 men and 12 women), 6 more than in 2016. Of these, 8 occurred at the workplace and 9 on the journey home-work.
On the other hand, there were no cases of occupational diseases.
The days of absence (due to injury and illness) among the total per capita employees (average value) in 2017 were equal to 5.96.
| Number of days lost (employees) | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2017 | 2016 | |||||||
| Number of days | Men | Women | Total | Man | Women | Total | ||
| Absences (excluding permits, holidays) |
1.467 | 11.254 | 12.721 | 1.236 | 11.362 | 12.598 |
| Lost days (illness and accident) | 972 | 3.648 | 4.620 | 757 | 4.010 | 4.767 | |||
|---|---|---|---|---|---|---|---|---|---|
| Number of hours worked (employees) | |||||||||
| 2017 | 2016 | ||||||||
| Hours | Men | Women Total |
Men | Women | Total | ||||
| Planned/scheduled hours worked |
327.208 | 1.073.989 | 1.401.197 | 328.012 | 1.052.154 | 1.380.166 | |||
| Hours worked | 286.429 | 889.193 | 1.175.622 | 285.540 | 832.447 | 1.117.987 |
The external staff, during the period of collaboration with Aeffe S.p.A. and Pollini S.p.A., is required to comply with the regulations, internal procedures and the current regulations to which the companies are subject.
| Total number of employees, broken down by job contract and gender | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2017 | 2016 | |||||||
| Type of contract | Men | Women | Total | Men | Women | Total | ||
| Undetermined | 250 | 845 | 1.095 | 236 | 846 | 1.082 | ||
| Determined | 14 | 115 | 129 | 18 | 92 | 110 | ||
| Total | 264 | 960 | 1.224 | 254 | 938 | 1.192 | ||
| Total number of employees, broken down by job contract and gender | ||||||||
| 2017 | 2016 | |||||||
| Type of employment | Men | Women | Total | Men | Women | Total | ||
| Full-time | 252 | 814 | 1.066 | 243 | 799 | 1.042 | ||
| Part-time | 12 | 146 | 158 | 11 | 139 | 150 | ||
| Total | 264 | 960 | 1.224 | 254 | 938 | 1.192 |
| Staff recruiting rate and turnover | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Men | Women | Total | <30years | 30- 50years |
>50years | Italy | Extra-UE | ||
| Total empoyees | 264 | 960 | 1224 | 167 | 723 | 335 | 1137 | 87 | |
| New hires | 38 | 246 | 284 | 108 | 128 | 48 | 274 | 10 | |
| Total terminations | 28 | 224 | 252 | 87 | 114 | 51 | 242 | 10 | |
| Hire rate | 14% | 26% | 23% | 65% | 18% | 14% | 24% | 11% | |
| Turnover rate | 11% | 23% | 21% | 52% | 16% | 15% | 21% | 11% |
The attraction of new talents is considered by Gruppo Aeffe essential for the success of its Brands: the Group is increasingly oriented towards the future, favoring the recruitment of young and female resources, registering an increase in the total number of incoming staff equal to 23%.
The policies and procedures followed by the Group, for the management of labor relations, refer to what is indicated in the various National Collective Labor Contracts, to which the individual companies refer.
100% of the employees of the Italian companies of the Aeffe Group are covered by national collective agreements.
This indicator does not consider the employees of the foreign companies located in America (Aeffe USA Inc) and Korea (Moschino Korea Ltd) because the national legislation on the matter is different from that in force in the Italian State.
*the figures shown are net of the contribution of the companies Aeffe USA Inc and Moschino Korea Ltd, in which no formal training is done
Clusters referring to the categories required by the L.gs. Decree 254/2016 do not correspond to the clusters used for the presentation of balance sheet data, which instead refer to the categories of classification defined by the respective C.C.N.L.
| Number of hours of annual training given to employees, broken down by job category and gender | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2017 | 2016 | |||||||
| Categorie | Men | Women Total |
Men | Women | Total | |||
| Executive and senior managers |
0 | 0 | 0 | 0 | 8 | 8 | ||
| Supervisors | 33 | 42 | 75 | 11 | 11 | 22 | ||
| Office staff | 634 | 3.455 | 4.089 | 958 | 2.155 | 3.113 | ||
| Workers | 38 | 338 | 376 | 48 | 80 | 128 | ||
| Total | 705 | 3.835 | 4.540 | 1.017 | 2.254 | 3.271 |
The Aeffe Group considers the training necessary for the growth of its talents and for the development of the key competences of each individual employee: about 40% more training hours were provided compared to 2016.
| Average hours of annual training given to employees, broken down by job category and gender | |||||||
|---|---|---|---|---|---|---|---|
| 2017 | 2016 | ||||||
| Total number of training hours given to employees | 4.540 | 3.271 | |||||
| Total number of employees | 1.224 | 1.192 | |||||
| Average hours of training given to employees | 3,7 | 2,7 |
| Total number of training hours given to female employees | 3.835 | 2.254 |
|---|---|---|
| Total number of female employees | 960 | 938 |
| Average hours of training given to female employees | 4,0 | 2,4 |
| Total number of training hours given to male employees | 705 | 1.017 |
| Total number of male employees | 264 | 254 |
| Average hours of training given to male employees | 2,7 | 4,0 |
| Total number of training hours given to Executive and senior managers | - | 8 |
| Total number of Executive and senior managers | 23 | 24 |
| Average hours of training given to Executive and senior managers | - | 0,3 |
| Total number of training hours given to Supervisors | 75 | 22 |
| Total number of Supervisors | 59 | 64 |
| Average hours of training given to Supervisors | 1,3 | 0,3 |
| Total number of training hours given to Office staff | 4.089 | 3.113 |
| Total number of Office staff | 849 | 824 |
| Average hours of training given to Office staff | 4,8 | 3,8 |
| Total number of training hours given to Workers | 376 | 128 |
| Total number of Workers | 293 | 280 |
| Average hours of training given to Workers | 1,3 | 0,5 |
*The tables above with reference to training have been constructed by comparing the actual training carried out, using for the division of category and gender a percentage ratio with respect to the population of the workforce of the companies included in the reporting scope.
Clusters referring to the categories required by the L.gs. Decree 254/2016 do not correspond to the clusters used for the presentation of balance sheet data, which instead refer to the categories of classification defined by the respective C.C.N.L.
| Staff members | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2017 | 2016 | |||||||
| Categories | Men Women Total |
Men | Women | Total | ||||
| Executive and senior managers |
15 | 8 | 23 | 16 | 8 | 24 |
| Supervisors | 26 | 33 | 59 | 25 | 39 | 64 |
|---|---|---|---|---|---|---|
| Office staff | 172 | 739 | 911 | 166 | 720 | 886 |
| Workers | 51 | 180 | 231 | 47 | 171 | 218 |
| Total | 264 | 960 | 1.224 | 254 | 938 | 1.192 |
| Members of governing bodies, broken down by gender * | |||||||
|---|---|---|---|---|---|---|---|
| 2017 | 2016 | ||||||
| Governing bodies | Men | Women | Total | Men | Total | ||
| Board of Directors | 5 | 3 | 8 | 6 | 2 | 8 | |
| Total | 5 | 3 | 8 | 6 | 2 | 8 |
| Staff members, broken down by age groups | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2017 | 2016 | ||||||||
| Staff | <30years | 30-50 years | >50 years | Total | <30years | 30-50 years | >50 years | Total | |
| Executive and senior managers |
- | 7 | 16 | 23 | - | 5 | 19 | 24 | |
| Supervisors | 2 | 35 | 22 | 59 | 2 | 38 | 24 | 64 | |
| Office staff | 158 | 571 | 182 | 911 | 142 | 565 | 179 | 886 | |
| Workers | 11 | 101 | 119 | 231 | 7 | 92 | 119 | 218 | |
| Total | 171 | 714 | 339 | 1.224 | 151 | 700 | 341 | 1.192 |
| Members of governing bodies, broken down by age groups * | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2017 | 2016 | |||||||
| Governing bodies | <30years | 30-50 years |
>50 years |
Total | <30years | 30-50 years |
>50 years |
Total |
| Board of Directors | - | 2 | 6 | 8 | - | 2 | 6 | 8 |
| Total | - | 2 | 6 | 8 | - | 2 | 6 | 8 |
* The data relating to the members of the governing bodies refer to the Board of Directors of the Parent Company Aeffe S.p.A.
The contents of the Consolidated Statement of a non-financial nature are shown below, in compliance with the provisions of Legislative Decree no. 254/2016, for the subject in question.
| MATERIAL THEMES |
RELATED RISKS |
IMPROVEMENT AIMS |
||||||
|---|---|---|---|---|---|---|---|---|
| Production management of (hazardous and hazardous). |
and waste non |
The Management of Aeffe identifies and assesses the related risks, identifying the appropriate prevention actions. Among the risks there are: - Provide negative environmental impacts, especially resulting from incorrect management of hazardous waste; - Incurring fines and fines of a pecuniary nature; - Loss of reputation. |
Despite the issue of the production and management of waste material has become (with reference to the Aeffe SpA and Pollini S.p.A.), the Management does not set specific objectives for improvement, as it is regulated by specific national legislation. |
|||||
| POLITICS AND MANAGEMENT MODEL |
The Group Management is sensitive to the possible impacts that individual behavior can have on the natural context in which it operates, in order to contribute to delivering a more sustainable environment to future generations.
To do this, Aeffe undertakes to adopt solutions that minimize the negative impacts that its activities may have on the environment, in particular:
waste production through careful management of waste and waste produced;
the reduction of the quantities used, the reuse and use of raw materials from sustainable sources.
At the Aeffe S.p.A. plant and Pollini S.p.A. are produced waste classified as "special" that are treated and disposed of on the basis of the provisions of current laws. All waste, produced and stored at the company offices, are assigned to authorized and suitably selected waste disposal companies that provide for the treatment, according to the specific type, in compliance with current environmental legislation.
During the year, waste was produced for a total of about 125 tons, a decrease of 3.6% compared to the figure for 2016.
Most of the waste falls into the category of non-hazardous waste (124t) while "special" waste, produced only by Pollini SpA, has an incidence of 1% on the total product (1t).
* The data refer only to the companies Aeffe S.p.A. and Pollini S.p.A., as the other companies do not produce waste, if not similar to urban waste.
The following are the contents of the Consolidated Statement of a non-financial nature, in compliance with the provisions of Legislative Decree no. 254/2016, for the subject in question.
| MATERIAL | RELATED | IMPROVEMENT |
|---|---|---|
| THEMES | RISKS | AIMS |
| - Anti-corruption commitment; - Protection of human rights. |
The Management of Aeffe identifies and assesses the related risks, identifying the appropriate prevention actions. Among the risks there are: - Risks deriving from non compliance or violation of the reference legislation such as, for example, the payment of pecuniary sanctions and / or the summons in court cases; - Risks of causes related to the non-protection of human rights, with consequent loss of reputation; - Risk of falling sales and decreasing economic performance. |
- Maintenance and implementation of the control of respect for all human rights and constant supervision to avoid any possibility of corruption; - Include in each type of contract with third parties a clause concerning the commitment of the Aeffe Group to respect human rights and corruption. |
One of the key factors in Aeffe's reputation is the ability to carry out its business with integrity, transparency, legality, impartiality, prudence and in compliance with the law.
Aeffe is committed to combating, fighting and condemning corruption in all its forms, including extortion, bribery and trimming: under no circumstances can the pursuit of the interests or advantages of the Companies, at Group level, justify a unethical or non-honest or illicit conduct. For this reason the fight against corruption, active and passive, is considered an indispensable commitment.
Aeffe promotes respect for work and workers by committing to abolishing child labor, forced labor and ensuring all workers the same opportunities for employment and professional growth as well as fair economic treatment based on meritocracy criteria.
The Aeffe SpA companies and Pollini S.p.A. have adopted the organizational, management and control model pursuant to Legislative Decree no. 231/2001 (to which reference is made for appropriate details).
All other companies belonging to the reporting scope (both Italian and foreign) operate in compliance with the guidelines and the Code of Ethics of Aeffe SpA, also concerning anti-corruption and protection of human rights, for which all internal processes have been evaluated.
It is emphasized that, to all the new recruits, the Parent Company's Code of Ethics is delivered.
In the reporting year, no case of corruption was found within the reporting scope.
All the members of the Parent Company's Board of Directors, as well as all employees, are informed about the anti-corruption policy and protocols in use.
The following are the contents of the Consolidated Statement of a non-financial nature, in compliance with the provisions of Legislative Decree no. 254/2016, for the subject in question.
| MATERIAL | RELATED | IMPROVEMENT |
|---|---|---|
| THEMES | RISKS | AIMS |
| - Responsible management of the Supply Chain; - Responsible management of the product: Recyclability of products o and packaging Use of ecological raw o materials in the meaning of SMI; Attention to quality and o safety. Brand reputation o Customer satisfaction o - Financial performance. |
Evaluation of related risks: - Loss of image and reputation deriving from the entrusting of the process to suppliers not in line with the Code of Ethics of Aeffe S.p.A. and in compliance with current regulations; Contraction of economic results and failure to achieve the objectives. |
- The selection of suppliers will be increasingly inspired by meritocratic criteria on the basis of professionalism, solidity, code of ethics and compliance with all applicable regulations. - Continuous monitoring and supply chain audit also through periodic staff visits; - Constant updating of the framework contract that regulates the supply relationship according to the new International Regulations. |
POLITICS AND MANAGEMENT MODEL
The Aeffe Group undertakes to use raw materials that respect ecological standards, always aiming at the quality of the marketed product and its safety.
The commitment is also aimed at compliance with international requirements, extended also to its suppliers, adopting a precautionary approach to the challenges of our time, deepening the knowledge of environmental and social impacts throughout the life cycle of products.
The industrial process of the Aeffe Group is governed by the Operating Companies in the Divisional area, consequently the research, development, procurement, production and testing activities are coordinated by the Divisions which in this way optimize and monitor the relationship with each individual supplier.
One of the elements characterizing the procurement of raw materials is the strict quality control: the goods are always delivered by the supplier to the Group companies and are controlled by dedicated internal structures, before shipment to the external laboratories in charge of the various stages of the production process. Purchases are made on the basis of projections made taking into account the progress data of the sales campaign, which are updated weekly.
The selection capacity lies in the availability of the most suitable suppliers by type of raw material, with a constant monitoring of the individual performances in compliance with the terms of delivery and the quality of the materials.
The Aeffe Group places the quality of the product at the base of its corporate strategy and ensures its implementation through the satisfaction of the different expectations of the stakeholders, benefiting from the expertise and professionalism of its resources.
The safety, reliability and high performance of the products offered are fundamental, based on a continuous evolution and innovation of the product itself in order to guarantee its customers the highest quality and satisfaction.
The Group aims to promote corporate culture oriented towards quality and ethics, through a continuous dialogue with its stakeholders. This constant dialogue and the strong collaboration with suppliers and customers are fundamental in terms of shared development and satisfaction of market expectations.
The stylistic activity is developed through the creation of collections and the definition of key aspects related to the image of the brand and the choice of messages to be communicated to the public.
One of the main strengths of the Group is the independence of each maison in the definition of the creative and stylistic aspects: research and experimentation are in fact the essential part of every designer's mindset; within the Group, these activities are carried out continuously and allow constant renewal, with the goal of capturing and anticipating latent desires and new market trends.
The creative development of the product is done by the stylist and the style office, which, based on their intuitions and experiences, supported by the trend lines of the market detected by the internal structures of the Group proceed to the design of the collection.
All products, whether they are clothing or footwear, are provided with a label containing information on the composition of the textile materials used, the washing methods to be followed by the final consumer in order to preserve the integrity of the product and the information on "Made in".
* the data below refer only to Aeffe S.p.A. and Pollini S.p.A.
| Suppliers divided by geographical area | |||||
|---|---|---|---|---|---|
| 2017 | 2016 | ||||
| Type of suppliers | Number of suppliers | Volume € | Number of suppliers | Volume € | |
| Others | 5 | 483.597 | 5 | 565.258 | |
| America | 1 | 28.488 | 2 | 106.627 | |
| Far East | 38 | 22.709.541 | 53 | 24.253.425 | |
| India | 16 | 997.443 18 |
1.085.611 | ||
| Italy | 1.077 | 82.112.824 | 948 | 69.090.986 | |
| Rest of Europe | 79 | 9.815.522 | 81 | 5.961.658 | |
| Total Goods | 1.216 | 116.147.414 | 1.107 | 101.063.564 |
| Other | 5 | 549.510 | 4 | 453.600 |
|---|---|---|---|---|
| India | 8 | 828.662 | 7 | 839.637 |
| Italy | 155 | 13.643.549 | 160 | 13.195.806 |
| Rest of Europe | 20 | 3.205.721 | 15 | 2.629.286 |
| Total services | 188 | 18.227.442 | 186 | 17.118.329 |
| Total suppliers | 1.404 | 134.374.857 | 1.293 | 118.181.893 |
| Suppliers divided by category of products / services | ||||||
|---|---|---|---|---|---|---|
| 2017 | 2016 | |||||
| Type of suppliers | Number of suppliers | Volume € | Number of suppliers | Volume € | ||
| Accessories and embroidery |
284 | 26.227.541 | 281 | 26.718.531 | ||
| Purchase of RM | 579 | 26.134.738 | 494 | 24.586.535 | ||
| Packaging | 31 | 2.294.306 | 26 | 1.684.735 | ||
| Finished and semi finished products |
148 53.170.726 139 |
40.950.246 | ||||
| Purchase of goods | 1.042 | 107.827.312 | 940 | 93.940.047 | ||
| Other workings | 194 | 9.202.704 | 188 | 7.566.627 | ||
| Complete cycle | 17 | 12 | 3.792.867 | |||
| Package | 73 | 7.214.229 | 79 | 7.340.024 | ||
| Wash | 1 | 74.945 | 4 | 215.478 | ||
| Stain Removal | 23 | 1.475.927 | 19 | 1.049.428 | ||
| Prints and embroidery | 26 | 1.886.107 | 23 | 1.339.761 | ||
| Ironing | 3 | 259.273 | 6 | 805.924 | ||
| Cut | 25 | 1.683.525 | 22 | 2.131.737 | ||
| Purchase services | 362 | 26.547.543 | 353 | 24.241.846 | ||
| Total suppliers | 1404 | 134.374.855 | 1293 | 118.181.893 |
* The data below refer only to Aeffe S.p.A. and Pollini S.p.A.
- Materials
| Volume of materials used and percentages of recycled materials used in the production of goods 2017 | |||||
|---|---|---|---|---|---|
| Materials | Total volume (€) | Vol. of material from recycled sources (€) |
% recycled materials on total |
Vol. of materials from certified sources (OEKO TEX) (€) |
|
| AEFFE S.P.A | |||||
| Cotton | 3.152.423 | ||||
| Wool | 4.145.008 | ||||
| Synthetic fibers | 3.950.740 | ||||
| Artificial | 4.027.068 | N/A | N/A | N/A | |
| Silk | 2.610.608 | ||||
| Linen | 168.430 | ||||
| Cardboard | 672.804 | 208.334 | 31,0% | 93.854 | |
| Plastic | 627.112 | 278.269 | 44,4% | N/A | |
| POLLINI S.P.A. | |||||
| Leather | 4.513.891 | ||||
| Metal | 3.426.366 | ||||
| Natural leather | 1.088.354 | N/A | N/A | N/A | |
| Cardboard | 839.350 | ||||
| Plastic | 294.502 | ||||
| Total (€) | 29.516.656 | 486.603 | MEDIA: 37,7% | 93.854 |
- Health and safety of the product
In the two-year period under review, no incidents of non-compliance were found regarding the health and safety impacts of the products offered by the Aeffe Group.
The table below shows the Value Added Reclassified Income Statement for the entire Aeffe Group.
For other information, refer to the contents included in this budget file.
| Economic value generated and distributed | ||||
|---|---|---|---|---|
| 31.12.2017 | 31.12.2016 | |||
| Revenues | 312.604.739 | 280.690.885 | ||
| Other income | 2.627.363 | 5.748.703 | ||
| Financial income | 173.018 | 233.379 | ||
| Total economic value generated by the Group | 315.405.120 | 286.672.966 | ||
| Operating costs | - 211.641.664 | - 196.286.636 | ||
| Staff remuneration | - 65.376.702 | - 63.490.261 | ||
| Remuneration of lenders | - 2.150.618 | - 2.804.857 | ||
| Investor remuneration | - | - | ||
| Remuneration of the Public Administration* | - 8.252.515 | - 4.727.541 | ||
| External donations | - | - | ||
| Total economic value distributed by the Group | - 287.421.499 | - 267.309.295 | ||
| Credit write-down | - 505.576 | - 180.383 | ||
| Exchange differences not realized | - 2.099.831 | 301.644 | ||
| Value adjustments of tangible and intangible assets | - | - | ||
| Value adjustments to financial assets | - 2.316.749 | - 3.153.668 | ||
| Depreciation | - 11.559.407 | - 11.954.896 | ||
| Provisions | - | - | ||
| Reserves | - 11.502.059 | - 4.376.368 | ||
| Economic value retained by the Group | - 27.983.622 | - 19.363.671 |
| GRI Standard Title | GRI Disclosure Number |
GRI Disclosure Title | Page number |
|---|---|---|---|
| 102-1 | Name of the organization | p. 1 | |
| GRI 102: General Disclosures 2017 - Organizational profile |
102-2 | Activities, brands, products and services. |
pp. 6,13-17 |
| 102-3 | Place of the main offices | p. 7 |
| 102-4 | Countries of operation | pp. 7-9 e p.91 | |
|---|---|---|---|
| 102-5 | Ownership structure and legal form | p. 91 | |
| 102-6 | Markets served | p. 91 | |
| 102-7 | Size of the organization | p. 89 | |
| 102-8 | Information on employees and workers |
p. 94 | |
| 102-9 | Supply chain | p. 100 | |
| 102-10 | Significant changes in the organization and its supply chain |
In 2017, compared to 2016, there were no significant changes in the corporate structure. |
|
| 102-12 | Initiatives to the outside | In the 2017 financial year, the Group decided to allocate a large part of its donations to health benefits, especially for children (the port of small children), on cancer diseases (IEO Foundation) and university education (Fondazione RUI) , for an amount of about € 45K. In addition, a contribution of € 250K was granted to MET GALA, an annual fundraising charity dinner. |
|
| 102-13 | Participation in associations | Associated with Confindustria | |
| GRI 102: General Disclosures 2017 - Strategy |
102-14 | Statement of the company's top management |
p. 2 |
| GRI 102: General Disclosures 2017 - Ethics and integrity |
102-16 | Values, principles, standards and rules of behavior |
The Company pursues excellence in serving its customers with the aim of creating value for shareholders and all other stakeholders, maintaining and developing relationships inspired by the principles of integrity, transparency, legality, impartiality and prudence. These guidelines are included in the Code of Ethics, an integral part of the Organization, |
| Management and Control Model pursuant to Legislative Decree 231/01, available on the website www.aeffe.com. |
|||
| GRI 102: General Disclosures 2017 - Governance |
102-18 | Government structure | p. 4 |
| 102-40 | List of stakeholder groups | p. 88 | |
| GRI 102: General |
102-41 | Collective bargaining agreements | p. 95 |
| Disclosures 2017 - Stakeholder engagement |
102-42 | Identification process and selection of stakeholders |
p. 88 |
| 102-43 | Approach to stakeholder engagement |
p. 88 | |
| GRI 102: General Disclosures 2017 – |
102-45 | List of companies included in the consolidated financial statements |
p. 89 |
| Reporting process | 102-46 | Definition of the contents of the report and of the perimeter of each aspect. |
pp. 87-88 |
|---|---|---|---|
| 102-47 | List of material aspects | pp. 87-88 | |
| 102-48 | Changes with respect to the previous financial statements |
N.a. | |
| 102-49 | Significant changes in reporting activity |
N.a. | |
| 102-50 | Reporting period. | 01.01.2017 - 31.12.2017 | |
| 102-51 | Date of publication of the most recent report |
N.a. | |
| 102-52 | Reporting frequency | Annual | |
| 102-54 | Statement on the reporting option according to the GRI standards |
p. 87 | |
| 102-55 | GRI contents table | pp. 104-107 | |
| 102-56 | External attestation | p.32 | |
| GRI 103: Management approach 2017 |
103-1 | Indication of the consolidation perimeter for each material aspect |
p. 90 |
| GRI 201: Economic performances 2017 |
201-1 | Direct economic value generated and distributed |
p. 103-104 |
| pp. 101-103 | |||
| GRI 204: Purchase practices 2017 |
204-1 | Percentage of expenditure concentrated on local suppliers |
Partial indicator, definitions were not provided and it was preferred to provide the number of suppliers rather than the percentage. |
| GRI 205: Anti |
205-1 | Transactions valued for corruption risk |
pp. 98-99 |
| corruption 2017 | 205-3 | Corruption incidents detected and corrective activities implemented |
p. 99 |
| GRI 301: Materials |
301-1 | Materials used divided by weight and volume |
p. 101-102 |
| 2017 | 301-2 | Percentage of materials used coming from recycling |
pp. 101-102 |
| p. 97-98 | |||
| GRI 306: Discharges and waste 2017 |
306-2 | Waste produced by type and disposal method |
For this exercise, the classification of waste by disposal method was not provided. In future years, the Group undertakes to provide such detail as well. |
| GRI 401: Occupation 2017 |
401-1 | Staffing rate and turnover | p.94-95 |
| GRI 403: Health and | 403-1 | Workers represented in the company-worker formal health and |
p. 93-94 |
| safety at work 2017 | safety committees | ||
|---|---|---|---|
| 403-2 | Type and rate of accidents, occupational diseases, lost and absentee days of work and number of fatal accidents related to work |
p. 93-94 | |
| 403-3 | Workers with high incidence or high risk of accident or occupational disease |
p. 93-94 | |
| GRI 404: Training and education 2017 |
404-1 | Average annual training hours per employee |
p. 95-96 |
| GRI 405: Diversity and equal opportunities 2017 |
405-1 | Diversity of employees and governing bodies |
pp. 96-97 |
| GRI 406: Non discrimination 2017 |
406-1 | Episodes of discrimination and implemented corrective actions |
pp. 91-92, 99 |
| GRI 412-1: Evaluations of human rights 2017 |
412-1 | Activities assessed on respect for human rights |
No systematic risk analysis activities have been carried out with regard to human rights, as all activities are carried out in countries where the protection of human rights is guaranteed by local legislation. |
| GRI 416: Consumer Health and Safety 2017 |
416-2 | Cases of non-compliance regarding the health and safety impacts of products and services |
p. 103 |
| GRI 417: Marketing and labelling 2017 |
417-1 | Obligation to provide information on products and services and labeling |
p. 100-101 |
| GRI 419: Socio economic regulatory compliance 2017 |
419-1 | Failure to comply with social and economic laws and regulations |
No cases of non-compliance with laws and regulations in the social and economic field. |
*(in accordance al livello di applicazione alla modalità Referenced)
Shareholders,
We find it necessary to focus on the main macroeconomic variables in the sphere of which Aeffe S.p.A. has found itself operating.
Economic growth is strong across the main advanced and emerging economies. It is not, however, being accompanied by a recovery in inflation which remains weak. The short-term outlook remains favourable; there is still the risk that a downward adjustment of the prices of financial assets could slow economic activity.
In the third quarter of 2017 economic activity continued to expand in the main advanced economies, while cyclical conditions remained favourable in the final months of the year. For the United States, the latest data point to strong growth. In the United Kingdom, private consumption shows signs of recovery and leading indicators suggest for the last quarter of 2017 a rate of growth in line with the average for the first three. For Japan, the latest cyclical data indicate an acceleration in economic activity in the fourth quarter of 2017. In the emerging countries the recovery under way since the first half of 2017 is continuing. For China, growth was stable in the final months of the year after having exceeded expectations in the previous quarters. GDP growth accelerated during the summer months in India and Brazil.
In the third quarter of 2017, world trade grew by 3.5 per cent, with stronger imports in the euro area and in Asian emerging economies (excluding China).
The risks to the world economy continue to stem from a possible increase in volatility on the financial markets, connected to a sudden intensification of geopolitical tensions
In the euro area the economy continued to grow at a fast pace, driven primarily by foreign demand. Inflation remains modest, reflecting weakness in the core component. The ECB Governing Council's decision to recalibrate its monetary policy instruments was taken to preserve the very favourable financing conditions that are still needed for a sustained return of inflation rates towards levels that are below, but close to, 2 per cent.
Based on the December Eurosystem staff projections, euro-area GDP is expected to grow by 2.3 per cent in 2018 (from 2.4 per cent in 2017).
The new projections for the Italian economy for the three years 2018-20 estimate that GDP expanded by 1.5 per cent in 2017, by 1.4 per cent in the current year and by 1.2 per cent in 2019-20. Economic activity is expected to be mainly driven by domestic demand.
In each of the three years 2018-20 exports are forecast to expand by more than 3 per cent on average, reflecting both the assumptions regarding the favourable performance of international trade and the effects of the appreciation of the euro in recent quarters. The growth of imports, which was especially strong in 2017 before gradually slowing, is expected to mirror developments in productive investment and exports, the two components of demand with the highest imported goods content.
The forecasting scenario assumes that financial conditions continue to be accommodating, with a very gradual adjustment in short- and long-term interest rates, orderly conditions on the government securities markets, and relatively relaxed credit supply conditions. Overall, GDP performance is expected to continue to depend on the support provided by economic policies, albeit to a lesser extent than in the past.
The main risks associated with these projections stem from global conditions and from the performance of the financial markets. An intensification of geopolitical tensions or greater uncertainty surrounding the future course of international economic policies could translate into higher volatility in the financial markets and in risk premiums, with adverse repercussions on the euro-area economy.
Among domestic risks, those connected with the weakness of the banking system and with the potential heightening of uncertainty on the part of households and firms over the strength of the recovery under way have abated compared with past quarters. This scenario, however, relies on the continuation of economic policies capable of fostering long-term economic growth by supporting investment and consumption choices, while also lending credibility to public debt reduction objectives by fully exploiting the upturn in the global economy.
The recovery of the segment is partially down to a general increase in consumer confidence: this factor has driven local consumption among Europeans, Americans and Asians, as well as the purchases of Chinese travellers. Another crucial aspect is the return of tourists to Europe with numbers 11% up on last year. In addition to this, there is the constant growth in the online channel, a market now worth the same as the Japanese market.
Growing by 6% at current exchange rates, Europe continues to recover, reestablishing its reputation as the key region for luxury sales. In Japan we are seeing strong growth driven by the currency and the consequent increase in Chinese spending has led to 2% growth at current exchange rates. Chinese luxury customers are increasingly expert and have driven up sales in China by 15%. The rest of Asia (excluding continental China and Japan) has registered strong growth of 6% and the American market (North and South America) has also managed to close the year positively, growing by 2%. In other regions growth remains stable at 1% with the Middle East held back by economic uncertainty. There has been growth of 8% in the Retail channel and multi-brand stores have also performed strongly. However, the figures relating to department stores at global level have been disappointing. The evolving role of the store is reflected by the online channel, which has grown by 24% with the American market alone accounting for almost half of these types of sales (accessories, beauty and hard luxury are among the biggest-selling categories in this channel): this doesn't mean that stores have lost their role but rather that they need to find a way of reinventing themselves.
Bain forecasts strong positive growth which will continue at a constant annual growth rate of between 4% and 5% in the next three years.
The forecasts for 2018 confirm a solid +5%: consistent growth for leather, footwear and accessories (+7%) and for Hard Luxury (5%). Growth also in the area of clothing, perfumes and cosmetics (+4%). All markets are expected to grow with Asia leading the way (+10%), followed by Japan (+5%), Europe and North America (+4%), the latter returning to growth after two difficult years.
| Esercizio | % | Esercizio | % | Change | % | |
|---|---|---|---|---|---|---|
| 2017 | on revenues | 2016 | on revenues | 2017/16 | ||
| REVENUES FROM SALES AND SERVICES | 157,527,014 | 100.0% | 145,903,311 | 100.0% | 11,623,703 | 8.0% |
| Other revenues and income | 5,623,268 | 3.6% | 5,244,463 | 3.6% | 378,805 | 7.2% |
| TOTAL REVENUES | 163,150,282 | 103.6% | 151,147,774 | 103.6% | 12,002,508 | 7.9% |
| Changes in inventory | 4,934,794 | 3.1% | ( 2,421,624) | (1.7%) | 7,356,418 | (303.8%) |
| Costs of raw materials, cons. and goods for resale |
( 62,094,018) | (39.4%) | ( 52,763,256) | (36.2%) | ( 9,330,761) | 17.7% |
| Costs of services | ( 47,770,721) | (30.3%) | ( 42,807,543) | (29.3%) | ( 4,963,178) | 11.6% |
| Costs for use of third parties assets | ( 15,700,433) | (10.0%) | ( 16,350,282) | (11.2%) | 649,849 | (4.0%) |
| Labour costs | ( 27,363,982) | (17.4%) | ( 27,659,494) | (19.0%) | 295,513 | (1.1%) |
| Other operating expenses | ( 1,750,622) | (1.1%) | ( 1,680,642) | (1.2%) | ( 69,980) | 4.2% |
| Total Operating Costs | ( 149,744,982) | (95.1%) | ( 143,682,842) | (98.5%) | ( 6,062,139) | 4.2% |
| GROSS OPERATING MARGIN (EBITDA) | 13,405,300 | 8.5% | 7,464,931 | 5.1% | 5,940,369 | 79.6% |
| Amortisation of intangible fixed assets | ( 404,459) | (0.3%) | ( 410,416) | (0.3%) | 5,957 | (1.5%) |
| Depreciation of tangible fixed assets | ( 1,456,414) | (0.9%) | ( 1,492,381) | (1.0%) | 35,967 | (2.4%) |
| Revaluations (write-downs) | ( 800,000) | (0.5%) | ( 300,000) | (0.2%) | ( 500,000) | 166.7% |
| Total Amortisation and write-downs | ( 2,660,873) | (1.7%) | ( 2,202,797) | (1.5%) | ( 458,076) | 20.8% |
| NET OPERATING PROFIT / LOSS (EBIT) | 10,744,427 | 6.8% | 5,262,135 | 3.6% | 5,482,293 | 104.2% |
| Financial income | 638,768 | 0.4% | 395,773 | 0.3% | 242,995 | 61.4% |
| Financial expenses | ( 1,523,221) | (1.0%) | ( 2,188,671) | (1.5%) | 665,450 | (30.4%) |
| Total Financial Income / (expenses) | ( 884,453) | (0.6%) | ( 1,792,898) | (1.2%) | 908,445 | (50.7%) |
| PROFIT / LOSS BEFORE TAXES | 9,859,974 | 6.3% | 3,469,237 | 2.4% | 6,390,738 | 184.2% |
| Current income taxes | ( 3,388,387) | (2.2%) | ( 2,346,303) | (1.6%) | ( 1,042,084) | 44.4% |
| Deferred income / (expenses) taxes | 345,963 | 0.2% | 591,613 | 0.4% | ( 245,650) | (41.5%) |
| Total Income Taxes | ( 3,042,424) | (1.9%) | ( 1,754,690) | (1.2%) | ( 1,287,734) | 73.4% |
| NET PROFIT / LOSS | 6,817,550 | 4.3% | 1,714,547 | 1.2% | 5,103,003 | 297.6% |
In 2017 revenues amount to EUR 157,527 thousand compared to EUR 145,903 thousand of the year 2016, showing an increase of 8% (8.4% with constant exchange rates). Such increase has mainly interested the brand Moschino and the two owned brands Alberta Ferretti and Philosophy di Lorenzo Serafini.
46% of revenues are earned in Italy while 54% come from foreign markets.
Labour costs move from EUR 27,659 thousand in 2016 to EUR 27,363 thousand in 2017, decreasing by 1.1%.
EBITDA moves from 7,465 thousand in 2016 to 13,405 thousand in 2017.
In percentage terms MOL changes from 5.1% in 2016 to 8.5% in 2017.
Net operating profit moves from 5,262 thousand in 2016 to 10,744 thousand in 2017.
Result before taxes rises from EUR 3,469 thousand in 2016 to EUR 9,860 thousand in 2017, showing a growth of EUR 6,391 thousand.
This improvement was due to both revenues growth and lower incidence of the operating costs and financial expenses, in turn closely linked to the Group's business model. In particular, thanks to full exploitation of economies of scale, an increase in sales corresponds to a more than proportional increase in margins.
Net result increases from EUR 1,715 thousand in 2016 to EUR 6,818 thousand in 2017, improving for EUR 5,103 thousand.
| (Values in units of EUR) | 31 December | 31 December | Change | % |
|---|---|---|---|---|
| 2017 | 2016 | 2017/2016 | ||
| Trade receivables | 56,076,722 | 63,925,587 | ( 7,848,865) | (12.3%) |
| Stock and inventories | 33,423,398 | 28,351,623 | 5,071,775 | 17.9% |
| Trade payables | ( 73,760,637) | ( 71,790,444) | ( 1,970,193) | 2.7% |
| Operating net working capital | 15,739,483 | 20,486,766 | ( 4,747,283) | (23.2%) |
| Other short term receivables | 12,973,798 | 11,699,317 | 1,274,481 | 10.9% |
| Tax receivables | 3,571,420 | 2,425,764 | 1,145,656 | 47.2% |
| Other short term liabilities | ( 7,682,293) | ( 7,277,490) | ( 404,803) | 5.6% |
| Tax payables | ( 1,824,903) | ( 5,871,625) | 4,046,722 | (68.9%) |
| Net working capital | 22,777,505 | 21,462,732 | 1,314,772 | 6.1% |
| Tangible fixed assets | 42,230,144 | 42,870,488 | ( 640,344) | (1.5%) |
| Intangible fixed assets | 3,734,072 | 3,758,530 | ( 24,458) | (0.7%) |
| Equity investments | 139,858,853 | 139,408,853 | 450,000 | 0.3% |
| Other fixed assets | 2,356,080 | 6,889,259 | ( 4,533,179) | (65.8%) |
| Fixed assets | 188,179,149 | 192,927,130 | ( 4,747,981) | (2.5%) |
| Post employment benefits | ( 3,942,800) | ( 4,284,423) | 341,623 | (8.0%) |
| Provisions | ( 122,521) | ( 281,528) | 159,007 | (56.5%) |
| Long term not financial liabilities | ( 694,674) | ( 761,303) | 66,629 | (8.8%) |
| Deferred tax assets | 2,565,163 | 2,279,104 | 286,059 | 12.6% |
| Deferred tax liabilities | ( 7,483,304) | ( 7,325,777) | ( 157,527) | 2.2% |
| NET CAPITAL INVESTED | 201,278,517 | 204,015,935 | ( 2,737,418) | (1.3%) |
| Share capital | 25,371,407 | 25,371,407 | - | 0.0% |
| Other reserves | 108,939,800 | 107,251,531 | 1,688,269 | 1.6% |
| Profits/(Losses) carried-forward | 2,347,959 | 2,347,959 | - | 0.0% |
| Profits/(Loss) for the period | 6,817,550 | 1,714,547 | 5,103,003 | 297.6% |
| Shareholders' equity | 143,476,716 | 136,685,444 | 6,791,272 | 5.0% |
| ( 7,612,077) | ( 2,634,547) | ( 4,977,530) | 188.9% | |
| Cash Long term financial liabilities |
22,667,879 | 25,118,429 | ( 2,450,550) | (9.8%) |
| Short term financial liabilities | 42,745,999 | 44,846,608 | ( 2,100,609) | (4.7%) |
| NET FINANCIAL POSITION | 57,801,801 | 67,330,491 | ( 9,528,690) | (14.2%) |
| SHAREHOLDERS' EQUITY AND NET FINANCIAL INDEBTEDNESS | 201,278,517 | 204,015,935 | ( 2,737,418) | (1.3%) |
Net capital invested decreases by 1.3% since 31 December 2016.
Net working capital amounts to EUR 22,778 thousand at 31 December 2017 compared with EUR 21,463 thousand at 31 December 2016.
Changes in the main items included in the net working capital are described below:
the sum of other short term receivables and payables changes in all of EUR 1,679 thousand mainly due to higher deferral of sample and stylistic costs;
the sum of tax receivables and tax payables changes in all of EUR 5,192 thousand. This change is mainly due to the decrease of tax payable for IRES generated in the period by Aeffe S.p.A. and as a consequence of the fiscal consolidation, mostly because of the reduction of the IRES rate, which has been moved from 27.5% in 2016 to 24% in 2017. Such reduction has been partially counterbalanced by the higher V.A.T. Group receivable.
Fixed assets decrease by EUR 4,748 thousand since 31 December 2016. The changes in the main items are described below:
The Company's net financial position moves from EUR 67,330 thousand as of 31 December 2016 to EUR 57,802 thousand as of 31 December 2017. The decrease of net financial position is mainly attributable to the improvement in operating cash flow.
Total shareholders' equity increases by EUR 6,791 thousand. The reasons of this increase are widely illustrated in the Explanatory notes.
Considering the particular nature of our products, research & development activities consist in the continual technical/stylistic renewal of our models and the constant improvement of the materials employed in production.
These costs, totalling EUR 17,869 thousand, have been charged to the 2017 Income Statement.
Pursuant to point 6-bis of art. 2428.3 of the Italian Civil Code, it is confirmed that the Company does not use financial instruments.
Financing requirements and the related risks are managed by the central treasury.
The principal objective is to ensure that the composition of liabilities and assets remains balanced, so that a high degree of financial strength is maintained.
The average cost of borrowing is essentially linked to 3/6-month EURIBOR plus a spread that principally depends on the type of financial instrument used.
The exchange risk associated with commercial transactions not denominated in the functional currency is hedged by the opening of loans in foreign currency.
Regarding the Company's objectives and policies on financial risks refer to the information reported in the Notes.
Information about the share capital is provided in the Report on Corporate Governance prepared pursuant to arts. 124 bis of the Consolidated Finance Law and 89 bis of the Consob's Issuers' Regulations, and art. IA2.6 of the related Market Instructions. This report was approved by the Board of Directors on 8 March 2018 and is available in the Governance section of the Company's website: www.aeffe.com.
The following parties hold each more than 3% of the Company's shares as of 31 December 2017:
Main shareholders %
| Fratelli Ferretti Holding S.r.l. | 37.387% |
|---|---|
| I.M. Fashion S.r.l. | 24.410% |
| Tullio Badioli | 6.000% |
| Other shareholders(*) | 32.203% |
(*) 5.5% of own shares held by Aeffe S.p.A.
As of 31 December 2017, the Company holds 5,876,878 treasury shares, par value EUR 0.25 each, totalling 5.5% of its share capital. During the year no transactions on treasury shares have been carried out by the Company. As of 31 December 2017 the Company does not hold shares of any controlling company either directly or indirectly.
During the period, there were no transactions with related parties, including intragroup transactions, which qualified as unusual or atypical. Any related party transactions formed part of the normal business activities of companies in the Group. Such transactions are concluded at standard market terms for the nature of goods and/or services offered.
Information on transactions with related parties, including specific disclosures required by the Consob Communication of 28 July 2006, is provided in Notes 36 and 37 of the Financial Statements at 31 December 2017.
Regarding the information relative to personnel and environment, please refer to the indicated in the consolidated non-financial statement.
No significant events have to be reported for the period.
Subsequent to the balance sheet date, no significant events regarding the Company's activities have to be reported.
The Financial year 2017 was characterized by double-digit growth in revenues and a more than proportional increase in profitability, results achieved thanks to the good performance of our brands, especially the proprietary ones and an effective business model. The Company's medium/long-term strategic goals are on the development of highly distinctive collections with a focus on a calibrated strengthening of our presence in high-potential markets, especially in the Greater China and Asia Pacific areas. Considering the Company's vitality and the positive feedbacks on the ongoing Fall/Winter 2018-2019 collections sales campaign, we feel confident about the further development and consolidation of our brands in 2018.
Shareholders,
In presenting the financial statements as of 31 December 2017 for your approval, we propose to allocate the profit of the year of EUR 6,817,550 as follows:
08 March 2018 For the Board of Directors
Chairman Massimo Ferretti
| (Values in units of EUR) | Notes | 31 December | 31 December | Change |
|---|---|---|---|---|
| 2017 | 2016 | 2017/16 | ||
| NON-CURRENT ASSETS | ||||
| Intangible fixed assets | ||||
| Trademarks | 3,148,672 | 3,274,434 | ( 125,762) | |
| Other intangible fixed assets | 585,400 | 484,096 | 101,304 | |
| Total intangible fixed assets | (1) | 3,734,072 | 3,758,530 | ( 24,458) |
| Tangible fixed assets | ||||
| Lands | 16,944,871 | 16,944,871 | - | |
| Buildings | 21,871,389 | 22,370,366 | ( 498,977) | |
| Leasehold improvements | 1,206,481 | 1,288,435 | ( 81,954) | |
| Plant and machinary | 1,528,038 | 1,682,299 | ( 154,261) | |
| Equipment | 62,959 | 46,406 | 16,553 | |
| Other tangible fixed assets | 616,406 | 538,111 | 78,295 | |
| Total tangible fixed assets | (2) | 42,230,144 | 42,870,488 | ( 640,344) |
| Other fixed assets | ||||
| Equity investments | (3) | 139,858,853 | 139,408,853 | 450,000 |
| Other fixed assets | (4) | 2,356,080 | 6,889,259 | ( 4,533,179) |
| Deferred tax assets | (5) | 2,565,163 | 2,279,104 | 286,059 |
| Total other fixed assets | 144,780,096 | 148,577,216 | ( 3,797,120) | |
| TOTAL NON-CURRENT ASSETS | 190,744,312 | 195,206,234 | ( 4,461,922) | |
| CURRENT ASSETS | ||||
| Stocks and inventories | (6) | 33,423,398 | 28,351,623 | 5,071,775 |
| Trade receivables | (7) | 56,076,722 | 63,925,587 | ( 7,848,865) |
| Tax receivables | (8) | 3,571,420 | 2,425,764 | 1,145,656 |
| Cash | (9) | 7,612,077 | 2,634,547 | 4,977,530 |
| Other receivables | (10) | 12,973,798 | 11,699,317 | 1,274,481 |
| TOTAL CURRENT ASSETS | 113,657,415 | 109,036,839 | 4,620,576 | |
| TOTAL ASSETS | 304,401,727 | 304,243,073 | 158,654 |
(*) Pursuant to Consob Resolution no. 15519 dated 27 July 2006, the effects of transactions with related parties on the balance sheet of Aeffe S.p.A. are shown in Attachment IV and described in Notes 36 and 37.
| (Values in units of EUR) | Notes | 31 December | 31 December | Change |
|---|---|---|---|---|
| 2017 | 2016 | 2017/16 | ||
| SHAREHOLDERS' EQUITY | ||||
| Share capital | 25,371,407 | 25,371,407 | - | |
| Share premium reserve | 71,240,251 | 71,240,251 | - | |
| Other reserves | 26,558,081 | 24,929,262 | 1,628,819 | |
| Fair Value reserve | 7,742,006 | 7,742,006 | - | |
| IAS reserve | 1,085,602 | 1,085,602 | - | |
| Legal reserve | 2,994,800 | 2,909,073 | 85,727 | |
| Remeasurement of defined benefit plans reserve | ( 680,940) | ( 654,663) | ( 26,277) | |
| Profits / (Losses) carried-forward | 2,347,959 | 2,347,959 | - | |
| Net profit / loss | 6,817,550 | 1,714,547 | 5,103,003 | |
| TOTAL SHAREHOLDERS' EQUITY | (11) | 143,476,716 | 136,685,444 | 6,791,272 |
| NON-CURRENT LIABILITIES | ||||
| Provisions | (12) | 122,521 | 281,528 | ( 159,007) |
| Deferred tax liabilities | (5) | 7,483,304 | 7,325,777 | 157,527 |
| Post employment benefits | (13) | 3,942,800 | 4,284,423 | ( 341,623) |
| Long term financial liabilities | (14) | 22,667,879 | 25,118,429 | ( 2,450,550) |
| Long term not financial liabilities | (15) | 694,674 | 761,303 | ( 66,629) |
| TOTAL NON-CURRENT LIABILITIES | 34,911,178 | 37,771,461 | ( 2,860,283) | |
| CURRENT LIABILITIES | ||||
| Trade payables | (16) | 73,760,637 | 71,790,444 | 1,970,193 |
| Tax payables | (17) | 1,824,903 | 5,871,625 | ( 4,046,722) |
| Short term financial liabilities | (18) | 42,745,999 | 44,846,608 | ( 2,100,609) |
| Other liabilities | (19) | 7,682,293 | 7,277,490 | 404,803 |
| TOTAL CURRENT LIABILITIES | 126,013,832 | 129,786,168 | ( 3,772,335) | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 304,401,727 | 304,243,073 | 158,654 |
(*) Pursuant to Consob Resolution no. 15519 dated 27 July 2006, the effects of transactions with related parties on the balance sheet of Aeffe S.p.A. are shown in Attachment V and described in Note 36 and 37.
| (Values in units of EUR) | Notes | Full year | Full year |
|---|---|---|---|
| 2017 | 2016 | ||
| REVENUES FROM SALES AND SERVICES | (20) | 157,527,014 | 145,903,311 |
| Other revenues and income | (21) | 5,623,268 | 5,244,463 |
| TOTAL REVENUES | 163,150,282 | 151,147,774 | |
| Changes in inventory Costs of raw materials, cons. and goods for resale Costs of services Costs for use of third parties assets Labour costs Other operating expenses Amortisation and write-downs Financial Income / (expenses) |
(22) (23) (24) (25) (26) (27) (28) |
4,934,794 ( 62,094,018) ( 47,770,721) ( 15,700,433) ( 27,363,982) ( 1,750,622) ( 2,660,873) ( 884,453) |
( 2,421,624) ( 52,763,256) ( 42,807,543) ( 16,350,282) ( 27,659,494) ( 1,680,642) ( 2,202,797) ( 1,792,898) |
| PROFIT / LOSS BEFORE TAXES Income Taxes |
(29) | 9,859,974 ( 3,042,424) |
3,469,237 ( 1,754,690) |
| NET PROFIT / LOSS | 6,817,550 | 1,714,547 |
(*) Pursuant to Consob Resolution no. 15519 dated 27 July 2006, the effects of transactions with related parties on the income statement of Aeffe S.p.A. are shown in the income statement presented in Attachment VI and described in Notes 36 and 37.
| (Values in units of EUR) | Notes | Full Year | Full Year |
|---|---|---|---|
| 2017 | 2016 | ||
| Profit/(loss) for the period (A) | 6,817,550 | 1,714,547 | |
| Other comprehensive income that will not be reclassified subsequently to profit or | |||
| loss: | |||
| Remeasurement of defined benefit plans | ( 26,277) | ( 69,520) | |
| Income tax relating to components of Other comprehensive income that will not be | - | - | |
| reclassified subsequently to profit or loss | |||
| Total other comprehensive income that will not be reclassified subsequently to profit | ( 26,277) | ( 69,520) | |
| or loss, net of tax (B1) | |||
| Other comprehensive income that will be reclassified subsequently to profit or loss: | |||
| Gains/(losses) on cash flow hedges | - | - | |
| Gains/(losses) on exchange differences on translating foreign operations | - | - | |
| Income tax relating to components of Other Comprehensive income / (loss) Total other comprehensive income that will be reclassified subsequently to profit or |
- | - | |
| loss, net of tax (B2) | - | - | |
| Totale Other comprehensive income, net of tax(B1)+(B2)=(B) | ( 26,277) | ( 69,520) | |
| Total Comprehensive income / (loss) (A) + (B) | 6,791,273 | 1,645,027 |
| (Values in thousands of EUR) | Notes | Full Year | Full Year |
|---|---|---|---|
| 2017 | 2016 | ||
| OPENING BALANCE | 2,633 | 1,339 | |
| Profit before taxes | 9,860 | 3,469 | |
| Amortisation | 2,661 | 2,203 | |
| Accrual (+)/availment (-) of long term provisions and post employment benefits | ( 501) | ( 38) | |
| Paid income taxes | ( 7,435) | 2,162 | |
| Financial income (-) and financial charges (+) | 884 | 1,793 | |
| Change in operating assets and liabilities | 2,083 | 2,506 | |
| CASH FLOW (ABSORBED)/ GENERATED BY OPERATING ACTIVITY | (30) | 7,552 | 12,095 |
| Increase (-)/ decrease (+) in intangible fixed assets | ( 380) | ( 282) | |
| Increase (-)/ decrease (+) in tangible fixed assets | ( 816) | ( 1,072) | |
| Investments (-)/ Disinvestments (+) | ( 450) | ( 400) | |
| CASH FLOW (ABSORBED)/ GENERATED BY INVESTING ACTIVITY | (31) | ( 1,646) | ( 1,754) |
| Other variations in reserves and profits carried-forward of shareholders' equity | ( 26) | ( 70) | |
| Proceeds (+)/repayments (-) of financial payments | ( 4,551) | ( 8,451) | |
| Increase (-)/ decrease (+) in long term financial receivables | 4,533 | 1,267 | |
| Financial income (+) and financial charges (-) | ( 884) | ( 1,793) | |
| CASH FLOW (ABSORBED)/GENERATED BY FINANCING ACTIVITY | (32) | ( 929) | ( 9,047) |
| CLOSING BALANCE | 7,610 | 2,633 |
(*) Pursuant to Consob Resolution no. 15519 dated 27 July 2006, the effects of transactions with related parties on the cash flows of Aeffe S.p.A. are shown in the cash flow statement presented in Attachment VII and described in Notes 36 and 37.
| (Values in thousands of EUR) | Share capital | Share premium reserve | Other reserves | Fair Value reserve | IAS reserve | Legal reserve | Remeasurement of defined benefit plans reserve |
Profits / (Losses) carried forward |
Net profit / loss | Total shareholders' equity |
|---|---|---|---|---|---|---|---|---|---|---|
| BALANCES AT 1 January 2016 | 25,371 | 71,240 | 24,057 | 7,742 | 1,086 | 2,863 | ( 586) | 2,348 | 919 | 135,040 |
| Allocation of 2015 profit | 873 | 46 | ( 919) | - | ||||||
| Total comprehensive income/(loss) of | ( 70) | ( 70) | ||||||||
| 2016 Profit/(loss) of 2016 |
1,715 | 1,715 | ||||||||
| BALANCES AT 31 December 2016 | 25,371 | 71,240 | 24,930 | 7,742 | 1,086 | 2,909 | ( 656) | 2,348 | 1,715 | 136,685 |
| (Values in thousands of EUR) | Share capital | Share premium reserve | Other reserves | Fair Value reserve | IAS reserve | Legal reserve | Remeasurement of defined benefit plans reserve |
Profits / (Losses) carried forward |
Net profit / loss | Total shareholders' equity |
| BALANCES AT 1 January 2017 | 25,371 | 71,240 | 24,930 | 7,742 | 1,086 | 2,909 | ( 656) | 2,348 | 1,715 | 136,685 |
| Allocation of 2016 profit | 1,629 | 86 | ( 1,715) | - | ||||||
| Total comprehensive income/(loss) of 2017 |
( 26) | ( 26) | ||||||||
| Profit/(loss) of 2017 | 6,818 | 6,818 | ||||||||
| BALANCES AT 31 December 2017 | 25,371 | 71,240 | 26,558 | 7,742 | 1,086 | 2,995 | ( 681) | 2,348 | 6,818 | 143,477 |
issued pursuant to article 153 of Italian Legislative Decree 58/98 and art. 2429, paragraph 3 of the Italian Civil Code.
Shareholders,
Pursuant to art. 153 of Decree 58 dated 24th February 1988, and in compliance with current regulations, the Board of Statutory Auditors has prepared this report to the Shareholders' Meeting on the work performed and on any omissions and censurable facts that were identified.
This Control Body was appointed, with its current members, at the Shareholders' Meeting held on 12th April 2017.
During the year ended 31st December 2017, the Board of Statutory Auditors performed the supervisory activities required by law and, in particular, by art. 149 of Decree 58/1998, as well as by the rules of conduct issued by the Italian Accounting Profession and by the CO.N.SO.B recommendations on corporate governance and the verification work carried out by the Board of Statutory Auditors, as supplemented by the provisions of art. 8 of the Code of self-regulation issued by the Corporate Governance Commission.
* * *
The members of the Board of Statutory Auditors have complied with the limit on the number of appointments specified in art. 23.2 of the Company's articles of Association, art. 148 bis of Decree 58/98 and the Issuers' Regulation, as modified by CO.N.SO.B Decision 18671 dated 8th December 2013, and made the required disclosures during the year.
The Shareholders' Meeting held on 13th April 2016 appointed RIA Grant Thornton S.p.A. to perform the legal audit of the accounts pursuant to Decree 58/1998 "Consolidated Finance Law" and Decree 39/2010. Reference is made to the report issued by that auditing Firm.
This report was prepared in conformity with the current regulations applying to listed companies, in compliance with CO.N.SO.B Communication DEM/1025564 dated 6th April 2001, given that the shares of AEFFE S.p.A. are traded in the STAR segment of the market managed by Borsa Italiana.
The accounting policies adopted for the preparation of the 2017 financial statements reflect the established international standards (I.A.S./I.F.R.S.), pursuant to art. 2 of Decree 38/2005.
With regard to the performance of the supervisory activities required of the Board of Statutory Auditors, it confirms that, among other work, we:
* * *
obtained the information needed to perform our work regarding compliance with the law and the articles of Association, compliance with the principles of proper administration and the adequacy of the Company's organizational structure, by direct investigation, by gathering information from the managers of the functions concerned, by periodic exchanges of information both with the Firm appointed to perform the annual legal audit of the separate and consolidated financial statements, and with the Supervisory Body, and by attending the meetings of the Audit Committee;
checked the functioning and effectiveness of the systems of internal control, holding regular meetings with the internal audit Manager and focusing attention on the adequacy of the administrative and accounting system with regard, in particular, to the reliability with which it presents fairly the results of operations, and extending our checks to several internal procedures;
* * *
The specific information to be presented in this Report, pursuant to the CO.N.SO.B Communication DEM/1025564 dated 6th April 2001 and subsequent amendments, is provided below.
We refer to the Directors' Report for information about any transactions not related to the economic and financial context.
The Directors' Report highlights, pursuant to CO.N.SO.B Communication DEM/6064293, that the Company has not arranged any atypical and/or unusual transactions with third parties, group companies or related parties, and that there have not been any other significant economic or financial transactions.
The characteristics of the intercompany and related-party transactions carried out during 2017, the parties involved and the related economic effects are appropriately described in the section on "Intercompany transactions" contained in para. 40 of the Report on operations. Further information on intercompany transactions is contained in the 2017 Consolidated Financial Statements, to which this Board refers.
The incidence of related-party transactions is analyzed below in comparison with those carried out in the prior year.
| (Values in thousands of EUR) | Balance | Value | % | Balance | Value | % |
|---|---|---|---|---|---|---|
| rel. party | rel. party | |||||
| Full Year | 2017 | Full Year | 2016 | |||
| Incidence of related party transactions on the income statement | ||||||
| Revenues from sales and services | 312,605 | 1,350 | 0.4% | 280,691 | 1,247 | 0.4% |
| Costs of services | 91,039 | 824 | 0.9% | 81,289 | 374 | 0.5% |
| Costs for use of third party assets | 23,340 | 2,553 | 10.9% | 22,847 | 2,552 | 11.2% |
| Financial Income / expenses | 3,758 | 123 | 3.3% | 1,754 | 126 | 7.2% |
| Incidence of related party transactions on the balance sheet | ||||||
| Non current financial receivables | 2,592 | 1,752 | 67.6% | 3,391 | 2,131 | 62.8% |
| Trade receivables | 42,065 | 1,039 | 2.5% | 40,711 | 1,231 | 3.0% |
| Current financial receivables | 1,420 | 1,000 | 70.4% | 2,236 | 1,000 | 44.7% |
| Trade payables | 68,619 | 205 | 0.3% | 61,881 | 253 | 0.4% |
| Incidence of related party transactions on the cash flow | ||||||
| Cash flow (absorbed) / generated by operating activities | 17,239 | ( 1,760) | n.a. | 10,722 | ( 1,788) | n.a. |
| Cash flow (absorbed) / generated by financing activities | ( 5,117) | 379 | n.a. | ( 3,889) | ( 100) | 2.6% |
| Incidence of related party transactions on the indebtedness | ||||||
| Net financial indebtedness | ( 50,593) | ( 1,381) | 2.7% | ( 59,507) | ( 1,888) | 3.2% |
The routine intercompany and related-party transactions were mostly commercial transactions carried out on market terms, in compliance with the transfer pricing rules.
All parties involved were either affiliate companies or subsidiaries and their subsidiaries and/or affiliate companies.
In general, the related-party transactions examined by the Board of Statutory Auditors were deemed to be reasonable and in the interests of the Company.
Pursuant to art. 4, para. 6, of the CO.N.SO.B regulation approved by Decision 17221/2010, we confirm that the Board of Statutory Auditors has monitored the consistency of the procedure adopted by the Company with the principles indicated in the document entitled "Settlement of transactions with related parties", and its effective application.
The report issued by the auditing Firm on the 2017 financial statements does not contain any observations and/or qualifications or, indeed, any emphasis of matter.
During 2017, the Board of Statutory Auditors did not receive any complaints pursuant to art. 2408 of the Italian Civil Code.
The Board of Statutory Auditors has not received any statements from third parties.
Other than the appointment to perform the legal audit of the accounts of certain group companies, the Company did not engage RIA Grant Thornton S.p.A. to carry out any additional activities during 2017.
The Board of Statutory Auditors has monitored the independence of the auditing Firm, pursuant to art. 19, letter e), of Decree 39/2010 and otherwise, checking compliance with the related regulations and compatibility with the legal restrictions placed on the provision of non-audit services to the Company and its subsidiaries, identifying that no work was given during the year to parties belonging to the same network as that of the auditing Firm.
During 2017, the Board of Statutory Auditors did not release any opinions required by law.
In the performance of its functions and in order to obtain the information needed to carry out its supervisory duties, the Board of Statutory Auditors:
met regularly and prepared 8 reports on the work performed, 6 of which were prepared by the current members of this Control Body;
attended all 6 meetings of the Board of Directors, obtaining from the Directors a continuous flow of information about the activities performed and the principal economic, financial and equity transactions carried out by the Company and its Subsidiaries;
attended, in the person of the Chairman of the Board of Statutory Auditors or another authorized Serving Auditor, all the meetings of the Audit Committee and the Remuneration Committee;
attended the only Shareholders' Meeting, held on 12th April 2017;
maintained relations with the equivalent Boards of the Subsidiary companies, pursuant to art. 151 of Decree 58/1998, via both periodic consultations and a joint meeting with them;
attended, represented by one of the Serving Auditors as a permanent member, the meetings of the Supervisory Body established to monitor the Organizational Model envisaged by Law 231/2001, as discussed further below.
The Board of Statutory Auditors has obtained information about and monitored compliance with the law and the articles of Association, ensuring that the transactions decided and implemented by the Directors were in compliance with the law and the articles of Association, were founded on the principles of economic rationality and were not obviously imprudent or risky, in conflict with the interests of the Company, in contrast with the resolutions adopted at the Shareholders' Meeting, or likely to jeopardize the net assets of the Company, concluding that the governance tools and procedures adopted by the Company represent a valid approach to ensuring operational compliance with the principles of proper administration.
With regard to the adequacy of the organizational structure of the Company and the Group, the monitoring work performed by the Board of Statutory Auditors involved obtaining a knowledge of the organizational structure and gathering information from the various responsibility centers concerned, as well as meetings with the Managers of the various business functions; meetings with the internal audit Manager, and periodic meetings with the auditing Firm for a mutual exchange of information.
In this regard, with reference to the powers and mandates granted, the Board of Statutory Auditors has determined that:
the Chief Executive Officer exercises wide powers for the management of the Company.
In terms of supervising the adequacy and effectiveness of the system of internal control, pursuant to art. 19 of Decree 39/2010 and otherwise, as previously mentioned, the Board of Statutory Auditors held periodic meetings with the internal audit manager and the managers of other business functions and also attended, via the presence of Serving Auditors, the meetings of the Audit Committee and the Supervisory Body for the Organizational Model envisaged by Decree 231/2001.
The Board of Statutory Auditors considers the system of internal control adopted by the Company to be adequate, comprising a structured and organic set of rules and organizational procedures that encompass the entire Company. Their purpose is to prevent or limit the consequences of unexpected results and allow the strategic and operational objectives to be achieved by ensuring the consistency of the activities with the objectives, the efficiency and effectiveness of the activities, and the safeguarding of the Company's net assets, and ensure compliance with the applicable laws and regulations, as well as proper and transparent reporting, both internally and to the market.
The Board of Directors is responsible, with support from the Audit Committee for: i) establishing guidelines for the system of internal control; ii) examining periodically the principal business risks identified by the Chief Executive Officer, who is also responsible for implementing the guidelines for the system of internal control, and iii) assessing the adequacy, effectiveness and practical functioning of the system of internal control.
The system of internal control includes an internal audit function whose role is to assist the Board of Directors and the Audit Committee, as well as the management of the Company. The Board of Directors has given the internal audit manager the task of assessing the adequacy and effectiveness of the overall system of internal controls. The activities of this function principally include implementing an annual audit and compliance-testing plan, as well as monitoring the actual adoption of the recommendations made by performing follow-up work.
The Group also uses other tools to monitor its operational and compliance objectives. These include a structured and periodic system of planning, management control and reporting, as well as a structure for the governance of financial risks.
The Company has approved the organizational model envisaged by Decree 231/2001 ("Model 231"), the purpose of which is to impede the commission of significant offenses, as defined in that Decree, and, consequently, to mitigate, if not eliminate, the administrative responsibility of the Company for such offenses. Commencing from an analysis of business activities designed to identify those potentially at risk, the Model 231 adopted comprises a set of general principles, rules of conduct, control tools, organizational procedures, training and information-providing activities, and disciplinary systems intended to ensure, to the extent possible, that the commission of criminally-significant offenses is prevented.
The Board of Directors has appointed a Supervisory Body tasked with monitoring the proper functioning of the Model 231 and keeping it updated.
The Board of Statutory Auditors has received and analyzed the periodic reports prepared for the Board of Directors by the Audit Committee and the Supervisory Body and has no observations to make.
The Company has adopted the "Accounting control model" envisaged by Law 262/2005, with a view to defining guidelines for application throughout Group concerning the obligations, arising under art. 154 bis of Decree 58/1998, to prepare corporate accounting documents and give the related attestations.
The Board of Statutory Auditors has taken note of the attestations given by the Chairman of the Board of Directors and the Executive responsible for preparing the company's accounting documentation regarding the adequacy in relation to the characteristics of the business and the effective application of the administrative and accounting procedures for preparing the separate and consolidated financial statements.
The Board of Statutory Auditors has monitored the adequacy, without identifying any exceptions, of the instructions given by the Company to its subsidiaries pursuant to art. 114, para. 2, of Decree 58/98, so that they provide the information needed to satisfy the disclosure requirements envisaged by law.
The periodic meetings between the Board of Statutory Auditors and the Firm appointed to perform the legal audit of the accounts, pursuant to art. 150, para. 3, of Decree 58/1998, did not identify any matters that are considered necessary to highlight in this Report.
In terms of checking the way the corporate governance rules are actually implemented, as envisaged by the current Code of self-regulation issued by Borsa Italiana, the Board of Statutory Auditors performed this work with assistance from the manager of the Corporate Governance Office.
The Board of Directors in office from 12th April 2017 comprises 8 members, including 4 non-executive Directors, of whom 3 were qualified as independent by the Board with reference to the declarations made by them and as monitored by the Board of Directors in accordance with the Code of self-regulation.
When co-opting both Directors and Members of the Board of Statutory Auditors, the requirement to maintain the "gender balance" of Corporate Bodies has been respected.
The Board of Statutory Auditors has made the assessments required of it, identifying proper application of the criteria and procedures adopted by the Board of Directors to verify the independence status of the individual directors and compliance with the requirements for the composition of the Board taken as a whole.
In addition, the Board of Statutory Auditors has checked that the Serving Auditors meet the same independence requirements expected of the directors and has adopted the recommendations of the Code and relevant regulations, which require a declaration to be made and sent to the Board about any personal interest or interest on behalf of third parties in specific transactions presented to the Board of Directors. In this regard, it is confirmed that no situations arose in 2017 for which the members of the Board of Statutory Auditors had to make such declarations.
Reference is made to the Report on Corporate Governance and the Ownership Structure for further information about the corporate governance of the Company. The Board of Statutory Auditors has no observations to make to the Shareholders' Meeting in this regard.
As stated, the Company has adopted the Code of self-regulation issued by the Committee for the corporate governance of companies listed in the STAR segment.
No omissions, censurable facts or irregularities perpetrated by the Corporate Bodies were identified during the supervisory activities carried out by the Board of Statutory Auditors.
It is confirmed that the accounting policies adopted for the preparation of the separate and consolidated financial statements at 31st December 2017 reflect the IFRS (International Financial Reporting Standards) issued by the International Accounting Standards Board.
As described above, the supervision and control activities carried out by the Board of Statutory Auditors did not identify any significant matters worth mentioning in the Report to the Meeting, or reporting to the supervisory and control Bodies.
Based on all of the above, in conclusion to the supervisory activities performed during the year, the Board of Statutory Auditors has no observations to make pursuant to art. 153 of Decree 58/1998 concerning the matters for which it is responsible regarding the financial statements, the related Explanatory Notes and the adequacy of the information contained in the Report on operations, and concurs with the recommendation made by the Board of Directors to the Shareholders' Meeting concerning the allocation of the results for the year.
San Giovanni in Marignano, 21 March 2018 For the Board of Statutory Auditors
The President Angelo MIGLIETTA
"Free translation from the original in Italian".
Independent auditors' report in accordance with at. 14 of Legislative Decree n. 39 of January 27, 2010 and art. 10 of Regulation (EU) n. 537/2014
Ria Grant Thornton S.p.A. San Donato, 197 40127 Bologna
T +39 051 6045911 F +39 051 6045999
To the shareholders of Aeffe S.p.A.
We have audited the financial statements of Aeffe S.p.A. (the Company), which comprise the statement of financial position as at December 31, 2017, the statement of income, the statement of comprehensive income, the statement of changes in shareholders' equity, the statement of cash flows for the year then ended and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the financial statements give a true and fair view of the financial position of the Company as at December 31, 2017 and of its financial performance and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and with the regulations issued for implementing art. 9 of Legislative Decree n.38 dated February 28, 2005.
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical and independence requirements applicable in Italy to audit of financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The statutory financial statements include equity investments of Euro 139,9 Millions as of 31st December 2017.
As described in Explanatory notes, investments in subsidiary and associated companies are recorded at historical cost, and subsequently written down by any impairment recognized pursuant to IAS 36. Their original value is reinstated in subsequent years if the reasons for write-downs cease to apply.
Società di revisione ed organizzazione contabile Sede Legale: Corso Vercelli n.40 - 20145 Milano - Iscrizione al registro delle imprese di Milano Codice Fiscale e P.IVA n.02342440399 - R.E.A. 1965420. Registro dei revisori legali n.157902 già iscritta all'Albo Speciale delle società di revisione tenuto dalla CONSOB al n. 49 Capitale Sociale: € 1.832.610,00 interamente versato Uffici: Ancona-Bari-Bologna-Firenze-Genova-Milano-Napoli- Padova-Palermo-Perugia-Pescara-Pordenone-Rimini-Roma-Torino-Trento-Verona.
www.ria-grantthornton.it
Grant Thornton refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Ria Grant Thornton spa is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another's acts or omissions.
As for the previous periods, the Directors have performed an impairment test to estimate the recoverable amount of certain equity investments in subsidiaries that are deemed material, in order to verify the consistency of the book value. For the investments that have been tested, the recoverable amount has been determined using the Discounted Cash Flows' method.
The impairment test requires complex assumptions, with particular reference to the estimates of:
Relevant information regarding equity investments has been disclosed by the Company in Note 3 of the financial statements, as well as in note on the accounting principles adopted by the Company.
Due to the complexity of such estimates, we considered the valuation of the equity investments a key audit matter in the context of our audit of the statutory financial statements as a whole.
As part of our audit of the financial statement as of 31st December 2017, we performed the followings procedures in response to key audit matters.
The Directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with the regulations issued for implementing art. 9 of Legislative Decree n.38 dated February 28, 2005 and, within the terms provided by the law, for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Statutory Auditors is responsible, within the terms provided by the law, for overseeing the Company's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with International Standard on Auditng (ISA Italia), we have exercised professional judgment and maintain professional skepticism throughout the audit. We have also:
We have communicated with those charged with governance, as properly identified in accordance with ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also have provided those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we have determined those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters.
We were initially engaged by the shareholders of Aeffe S.p.A. on April,16,2016 to perform the audits of the financial statements and the consolidated financial statements of each fiscal year starting from December 31, 2016 to December 31, 2024.
We declare that we did not provide prohibited non-audit service, referred to article 5, par.1, of EU Regulation 537/2014, and that we remained independent of the Company in conducting the audit.
We confirm that the opinion on the financial statements included in this report is consistent with the content of the additional report, prepared in accordance with the article 11 of the EU Regulation 537/2014, submitted to the Board of Statutory Auditors.
The Directors of Aeffe S.p.A. are responsible for the preparation of the Director's Report and of the Report on Corporate Governance and Ownership Structure Aeffe S.p.A. as at December 31, 2017, including their consistency with the related financial statements and their compliance with the applicable laws and regulations.
We have performed the procedures required by auditing standard (SA Italia) no. 720B in order to express an opinion on the consistency of the Director's Report and of the information set out in the Report on Corporate Governance and Ownership Structure referred to in art. 123-bis, paragraph 4 of Legislative Decree n. 58/98, with the financial statements of Aeffe S.p.A. as at December 31, 2017 and on their compliance with the applicable laws and regulations, and in order to assess whether they contain material misstatements.
In our opinion, the Director's Report and the above mentioned specific information included in the Report on Corporate Governance and Ownership Structure are consistent with the financial statements of Aeffe S.p.A. as at December 31, 2017 and are compliant with the applicable laws and regulations.
With reference to the assessment pursuant to art.14, par.2, subpar. e), of Legislative Decree n.39, dated 27 January 2010, based on our knowledge and understanding of the entity and its environment obtained through our audit, we have nothing to report.
Bologna, March 21, 2018
Ria Grant Thornton S.p.A.
Signed by Sandro Gherardini Partner
This report has been translated into the English language from the original, which was issued in Italian, solely for the convenience of international.
Aeffe S.p.A. (the "Company") is an Italian legal entity and a Parent Company that holds, directly or indirectly, equity investments in the companies that lead the business sectors in which the Aeffe Group is active.
The Company is based in San Giovanni in Marignano (Rimini) and is currently listed in the – STAR Segment – of the MTA, the Italian Stock Exchange operated by Borsa Italiana.
The Company has the following branch offices and local units:
These financial statements have been prepared in EUR, which is the functional currency of the economy in which the Company operates.
The financial statements are accompanied by notes that explain the Company's economic and financial position as of and for the year ended 31 December 2017. This information is presented on a comparative basis, after adjusting the prior year's financial statements for consistency.
Unless stated otherwise, all amounts have been rounded to thousands of EUR.
The financial statements comprise the balance sheet, the income statement, comprehensive income statement the statement of changes in shareholders' equity, the cash flow statement and these explanatory notes.
Unless stated otherwise in the accounting policies described below, these financial statements have been prepared on an historical cost basis.
The financial statements have been audited by BDO Italia S.p.A..
The Company is controlled by the company Fratelli Ferretti Holding S.r.l., of which in the attachment VI are reported the data of the latest approved statutory financial statements. The company Fratelli Ferretti Holding also draws up the consolidated financial statement in accordance with the international accounting standards.
Pursuant to art. 3 of Decree 38/2005 dated 28 February 2005, these financial statements have been prepared in accordance with International Accounting Standards (IAS/IFRS). The explanatory notes, also prepared in accordance with IAS/IFRS, have been supplemented by the additional information requested by CO.N.SO.B and by its instructions issued in accordance with art. 9 of Decree 38/2005 (resolutions 15519 and 15520 dated 27 July 2006 and communication DEM/6064293 dated 28 July 2006, pursuant to art. 114.5 of the Consolidated Finance Law), by art. 78 of the Issuers' Regulations, by the EC document issued in November 2003 and, where applicable, by the Italian Civil Code. Consistent with last year's annual report, some of the required information is presented in the Directors' Report (Report on operations).
As part of the options available under IAS 1 for the presentation of its economic and financial position, the Company has elected to adopt a balance sheet format that distinguishes between current and non-current assets and liabilities, and an income statement that classifies costs by type of expenditure, since this is deemed to reflect more closely its business activities. Within the income statement, as intermediate results, they are exposed EBITDA and EBIT, considered representative indicators of company performance. The cash flow statement is presented using the "indirect" format.
With reference to Co.N.So.B Resolution no. 15519 dated 27th July 2006 regarding the format of the financial statements, additional schedules have also been presented for the income statement, the balance sheet and the cash flow statement in order to identify any significant transactions with related parties. This has been done to avoid compromising the overall legibility of the main financial statements.
On July 24, 2014 the IASB issued the final version of IFRS 9 - Financial Instruments.
There follows the main aspects of the new international accounting principle:
• Classification and Measurement
Classification determines how financial assets and financial liabilities are accounted for in financial statements and, in particular, how they are measured on an ongoing basis. IFRS 9 introduces a logical approach for the classification of financial assets, which is driven by cash flow characteristics and the business model in which an asset is held. This single, principle-based approach replaces existing rule-based requirements that are generally considered to be overly complex and difficult to apply. The new model also results in a single impairment model being applied to all financial instruments, thereby removing a source of complexity associated with previous accounting requirements.
• Impairment
During the financial crisis, the delayed recognition of credit losses on loans (and other financial instruments) was identified as a weakness in existing accounting standards. As part of IFRS 9, the IASB has introduced a new, expected-loss impairment model that will require more timely recognition of expected credit losses. Specifically, the new Standard requires entities to account for expected credit losses from when financial instruments are first recognised and to recognise full lifetime expected losses on a more timely basis. The IASB has already announced its intention to create a transition resource group to support stakeholders in the transition to the new impairment requirements.
• Hedge accounting
IFRS 9 introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities, enabling entities to better reflect these activities in their financial statements. In addition, as a result of these changes, users of the financial statements will be provided with better information about risk management and the effect of hedge accounting on the financial statements.
• Own credit
IFRS 9 also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value. This change in accounting means that gains caused by the deterioration of an entity's own credit risk on such liabilities are no longer recognised in profit or loss. Early application of this improvement to financial reporting, prior to any other changes in the accounting for financial instruments, is permitted by IFRS 9.
The amendments will apply for annual periods beginning on or after January 1, 2018. Earlier application is permitted.
On September 11, 2015 the IASB published the document Effective Date of IFRS 15, in which it has been deferred by one year, from the January 1, 2017 to the January 1, 2018, the effective date of the IFRS 15 "Revenue from Contracts with Customers".
On January 13, 2016 the IASB published the new accounting Standard, IFRS 16 Leases that will replaces IAS 17 Leases, 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.
It sets out the principles for the recognition, measurement, presentation and disclosure of leases. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17 Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019. Earlier application is permitted for entities that apply IFRS 15. it is yet to be endorsed for application in the European Union.
On 12 April 2016 the IASB published Clarifications to IFRS 15 'Revenue from Contracts with Customers". The amendments include additional reliefs to reduce cost and complexity for a company when it first applies the new Standard. The amendments are effective for periods beginning on or after 1 January 2018. Earlier application is permitted.
On 20 June 2016 the IASB published some amendments to IFRS 2 "Share-based Payment" clarifying the classification and measurement of share-based payment transactions and the accounting of some types of share-based paymentss. It also introduces an exception to IFRS 2 requesting to be treated entirely sharebased payment the awards for which the Tax legislation provides for a deduction and therefore a subsequent payment to the Treasury. The amendments are effective for periods beginning on or after 1 January 2018. Earlier application is permitted.
On 8 December 2016, the IASB published the 'Transfers of Investment Property (Amendments to IAS 40)' to clarify transfers of property to, or from, investment property, stating that the transfer occurred when, and only when, there is evidence of a change in use. The amendments are effective for periods beginning on or after 1 January 2018. Earlier application is permitted.
On 8 December 2016, the IASB published Annual Improvements to IFRSs 2014 – 2016 Cycle. The document introduces amendments to the following principles: (i) Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards: Deletion of short-term exemptions for first-time adopters The IASB proposes to delete the short-term exemptions in IFRS 7, IAS 19 and IFRS 10 because they have now served their intended purpose; (ii) amendments to IFRS 12 Disclosure of Interests in Other Entities: amendments to IAS 28 Investments in Associates and Joint Ventures related to the measurement at fair value of an investment in an associate or a joint venture. The application is effective for annual reporting periods beginning on or after 1 January 2018.
On 8 December 2016 the IASB published IFRIC Interpretation 22 "Foreign Currency Transactions and Advance
Consideration". The document clarify the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The application is effective for annual reporting periods beginning on or after 1 January 2018. Earlier application is permitted.
The company will adopt these new standards, amendments and interpretations, based on the data of scheduled Application, and assess potential impacts, when these will be approved by the European Union.
In December 2017, the IASB published Annual Improvements to IFRS Standards 2015-2017 Cycle, containing the following amendments to the IFRS:
IFRS 3 Business Combinations and IFRS 11 Joint Arrangements - The amendments to IFRS 3 clarify that when an entity obtains control of a business that is registered as a joint operation, it must re-measure the investments previously held in that activity.
The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is registered as a joint operation, it must not re-measure the investments previously held in that activity.
IAS 12 Income taxes - The amendments clarify that all income taxes related to dividends (E.S. distribution of profits) must be recognized in the income statement, regardless of how they arose.
IAS 23 Financial charges - The amendments clarify that if a specific loan remains after the asset is ready for use or intended for sale, this loan becomes an integral part for the calculation of the rate of capitalization of generic loans.
The accounting policies and valuation criteria adopted for the preparation of the financial statements as of 31 December 2017 are presented below:
Intangible fixed assets are identifiable non-monetary assets, without physical substance, that are controlled by the company and able to generate future economic benefits for the Company. Intangible fixed assets are initially recorded at purchase cost (being their fair value in the case of business combinations), as represented by the acquisition price paid including any charges directly attributable to the preparatory or production phase, if the conditions are met for the capitalisation of costs incurred on the internal generation of assets. Following initial recognition, intangible fixed assets are carried at cost, net of accumulated amortisation and any impairment recorded in accordance with IAS 36 (Impairment of Assets). Subsequent expenditure on intangible fixed assets is capitalised only if it increases the future economic benefits embodied in the specific asset to which it relates. All other costs are charged to the income statement as incurred.
Of intangible fixed assets, a distinction can be made between: a) those with an "infinite" useful life, such as goodwill, which are not amortised but subjected to an annual impairment test (or whenever there is reason to believe that the asset may have been impaired) in accordance with IAS 36; b) those with a finite useful life or other intangible fixed assets, the valuation criteria for which are reported in the following paragraphs.
Brands are recorded at cost and amortised systematically on a straight-line basis over their estimated useful life (40 years), commencing from the time the asset becomes available for use.
The Company has deemed it fair to attribute a finite life of 40 years to its brands, having regard for the prudent approach taken by other operators in the sector that consider the useful lives of their brands to be very long (given the extended utility of such assets), but not eternal or indefinite (duration not identifiable). This approach is consistent with the type of intangibles found in the fashion industry and with the longestablished practices of other firms in the sector (market comparables).
Regarding the brand Alberta Ferretti, the exclusivity of the business, their historical profitability and their future income allow to consider their value recoverable, even in presence of difficult market conditions.
In order to calculate the recoverable value of the brand registered in the balance sheet, we estimated the current value, discounting the hypothetical value of the royalties deriving from the transfer in use to others of this intangible asset, for a period equal to residual useful life. To calculate the value, the management has used the Group budget starting from the year 2018. For the remaining periods the management has used an increase in turnover with a compound annual growth rate ("CAGR") variable from 1.4% to 4.2%. As royalty rates we used the averages for the sector (10%) and as discount rate we used the average cost of capital (WACC) which is 5.63%.
This caption comprises the costs incurred to acquire software, which is amortised over a period not exceeding 3 years.
The principal amortisation rates applied are summarised below:
| Category | % |
|---|---|
| Royalties from patents and intellectual property | 33% |
| Brands | 2.5% |
Research costs are charged to the income statement as incurred.
At 31 December 2017 the Company has not recorded intangible fixed assets with an "infinite" useful life in the intangible fixed assets.
Tangible fixed assets, stated net of accumulated depreciation, are recorded at purchase or production cost except for those assets which have been revalued in accordance with specific laws. Cost includes related charges and directly-attributable expenses.
Tangible fixed assets are depreciated systematically each year on a straight-line basis using economictechnical rates that reflect the residual useful lives of each asset. Tangible fixed assets are written down in the event of permanent impairment, regardless of the depreciation already accumulated.
Ordinary maintenance expenses are charged in full to the income statement. Improvement expenditure is allocated to the fixed assets concerned and depreciated over their residual useful lives.
Construction in progress and advances to suppliers are recorded at the cost incurred, including directlyrelated charges.
As an exception to the general principle, the carrying amount of land and buildings has been adjusted to reflect the value determined by reference to an independent appraisal. This was performed to identify the separate value of land that was previously included in the "land and buildings" caption and consequently depreciated. The depreciation rates are applied on a straight-line basis over the new estimated useful lives of the buildings: 50 years (2%).
The depreciation rates applied are summarised below:
| Category | % |
|---|---|
| Industrial buildings | 2% |
| Plant and machinery | 12.5% |
| Industrial and commercial equipment | 25% |
| Electronic machines | 20% |
| Furniture and furnishings | 12% |
| Motor vehicles | 20% |
| Cars | 25% |
Land is not depreciated.
Leasehold improvements, including the costs of fitting and modernising directly-managed shops and all other property used for business purposes but not owned by the Company, are depreciated over the shorter of the duration of the lease, including any renewal periods, or their useful lives.
Improvement expenditure is added to the carrying amount of the assets concerned if the future economic benefits for the Company are likely to exceed those determined originally. Such expenditure is depreciated over the residual useful lives of the assets concerned. All other maintenance costs are charged to the income statement as incurred.
Assets held under finance leases, which transfer to the Company substantially all the risks and benefits of ownership, are recognised as part of property, plant and equipment at their fair value or, if lower, at the present value of the minimum lease payments, and stated net of accumulated depreciation. The corresponding liability to the lessor is classified among financial payables in the balance sheet. These assets are depreciated using the rates set out above.
On disposal, or when no further economic benefits are expected from use of the asset, leased assets are eliminated from the balance sheet and any gains or losses (difference between disposal proceeds and carrying amount) are reflected in the income statement for the year.
Leases that do not transfer to the Company substantially all the risks and benefits of ownership are recognised as operating leases. Payments under operating leases are recognised as a cost on a straight-line basis over the duration of the related lease contracts.
At 31 December 2017, the Company has not recorded intangible fixed assets with an "infinite" useful life in the intangible fixed assets.
Intangible fixed assets, equity investments, tangible fixed assets and other non-current assets are subjected to impairment testing whenever events or a change of circumstances suggest that their value may be impaired in order to determine if such activities may have been subject to a loss of value. If such evidence exists the activity's carrying amount is reduced to the related recoverable value.
Impairment losses arise and are recognised when the carrying amount of an asset or a cash generating unit exceeds its recoverable value. The carrying amount of such assets is aligned with their recoverable value and the impairment loss is charged to the income statement.
Under IAS 36, intangible and tangible fixed assets must be subjected to impairment testing if there is evidence (events, change of circumstances) to suggest a possible loss of value. The purpose of this is to ensure that assets are not recorded in the balance sheet at an amount that exceeds their recoverable value. As already mentioned, this test is performed annually, or more frequently, in relation to assets with an indefinite useful life.
The recoverable value of these assets is the higher between their fair value, net of disposal costs and their value in use. In order to determine value in use, the estimated future cash flows - including those deriving from the disposal of the asset at the end of its useful life - are discounted using a post-tax rate that reflects the current market assessment of the value of money and the risks associated with the Company's activities. If separate cash flows cannot be estimated for an individual asset, the separate cash generating unit to which the asset belongs is identified.
The value of financial assets recorded at amortised cost is reinstated when a subsequent increase in their recoverable value can, objectively, be attributed to an event that took place subsequent to recognition of the impairment loss.
The value of other non-financial assets is reinstated if the reasons for impairment no longer apply and the basis for determining their recoverable value has changed.
Write-backs are credited immediately to the income statement and the carrying amount of the asset concerned is adjusted to reflect its recoverable value. Recoverable value cannot exceed the carrying amount that would have been recognised, net of depreciation, had the value of the asset not been written down due to impairment in prior years.
The written down value of goodwill is never reinstated.
Investments in subsidiary, associated companies and joint venture are recorded as historical cost, as written down by any impairment recognised pursuant to IAS 36. Their original value is reinstated in subsequent years if the reasons for write-downs cease to apply.
It is signalled that it proceeded with the estimation of the recoverable amount of some equity investments in subsidiaries of particular importance in order to verify the consistency of the book value.
The recoverable value is defined as the higher value between the fair value of the asset, less costs for its sale, and the value in use. In order to calculate the recoverable value correctly, Aeffe Spa uses the value in use defined as the value of the future cash flows expected to originate from the asset.
For the calculation of the value in use, the Company refers to the following elements:
The method used is that of estimating the present value of cash flows in accordance with the principle established by IAS 36 to respect the consistency and homogeneity between the book value and the recoverable value.
The management uses the budget (2018) as the basis for calculation and prepares on the basis of the latter a further 4 forecast years (Economic Accounts and Balance Sheet). In relation to the plans, a schedule of posttax operating cash flows is then prepared which, on the basis of an estimated post-tax discounting rate (WACC of 5.63%), is subsequently discounted.
In order to assess the value in use of the investment with the discounted cash flow method, the management proceeded to estimate the value of the terminal flow using the perpetuity formula, taking account of the cash flow of the last year of the plan.
Finally, to estimate the recoverable value of the investment, the management proceeded to add to the present value of the cash flows relating to the explicit forecast period of the plan, the terminal value discounted net of the net financial position. It was basically carried out an estimation to estimate the equity value.
For the companies subjected to impairment test, Aeffe Retail S.p.A., Pollini S.p.A., Velmar S.p.A., Aeffe France S.a.r.l. and Aeffe USA Inc. no impairment losses have been emerged.
Receivables are stated at their estimated realisable value, being their nominal value less the allowance for collection losses on doubtful accounts. They are review regularly in terms of ageing and seasonality in order to avoid adjustments for unexpected losses. Non-current receivables that include an element of embedded interest are discounted using a suitable market rate. This caption also includes the accrued income and prepaid expenses recorded to match income and costs relating to more than one year in the accounting periods to which they relate.
Inventories are recorded at purchase or production cost or, if lower, at their market or estimated realisable value. Net realisable value is the estimated selling price under normal operating conditions, net of completion costs and all other selling-related expenses.
The cost of production of finished products includes the cost of raw materials, outsourced materials and processing, and all other direct and indirect manufacturing costs reasonably attributable to them, with the exclusion of financing costs.
Obsolete and slow-moving inventories are written down to reflect their likely use or realization.
Cash and cash equivalents comprise cash balances, demand deposits and all highly liquid investments with an original maturity of three months or less. Securities included in cash and cash equivalents are measured at their fair value.
The provisions for risks and charges cover known or likely losses or charges, the timing and extent of which cannot be determined at period end. Provisions are recorded only when there is a legal or implicit obligation that, to be settled, requires the consumption of resources capable of generating economic benefits, and the amount concerned can be estimated reliably. If the effect is significant, provisions are calculated by discounting expected future cash flows using a pre-tax rate that reflects the current market assessment of the present value of money and the specific risks associated with the liability.
Employee severance indemnities are covered by IAS 19 ("Employee Benefits") since they are deemed to be a form of defined benefit plan. Company contributions to defined benefit plans are charged to the income statement on an accruals basis.
The Company's net liability for defined benefit plans is determined on an actuarial basis, using the projected unit credit method. All actuarial gains and losses determined as of 1st January 2005, the IFRS transition date, have been recognised.
Financial payables, excepting derivates, are recorded at their fair value, after transactions costs directly attributable.
Loans are initially measured at cost, which approximates their fair value, net of any transaction-related expenses. Subsequently, they are measured at amortised cost. Any difference between cost and the redemption value is recorded in the income statement over the duration of the loan, using the effective interest method.
Loans are classified as current liabilities unless the Company has an unconditional right to defer their settlement for at least twelve months subsequent to the accounting reference date.
Payables are stated at the nominal value. The financial element embedded in non-current payables is separated using a market rate of interest.
Treasury shares are presented as a deduction from capital for the part of their nominal value, and from a specific reserve for the part in excess to their nominal value.
Any public contributions are reported when there is a reasonable certainty that the company will meet all the conditions foreseen to receive the contributions and actually receives them. The company has opted to present any contributions to the capital account in the financial statement as items in adjustment of the book value of the property to which they refer, and any contributions to overhead as a direct deduction from the relative cost.
Revenues are stated net of returns, discounts, allowances and rebates, as well as the taxes associated with the sale of goods and the provision of services. Revenues from sales are recognised when the seller has transferred the principal risks and benefits of ownership to the purchaser. The principal types of revenue realised by the Company are recognised on the following basis:
Costs and expenses are recorded on an accruals basis.
The costs incurred during the year for the creation and production of samples are matched with revenues from the sales of the related collections; accordingly, they are charged to the income statement in proportion to the revenues earned. The residual costs to be expensed when the related revenues are earned are classified as other current assets.
This comprises all the financial items recorded in the income statement for the year, including the interest accrued on financial payables using the effective interest method (mainly bank overdrafts, long-term loans), exchange gains and losses, dividend income, and the lease interest identified using finance lease accounting (IAS 17).
Interest income and expense is recorded in the income statement in the year in which it is earned/incurred.
Dividends are recognised in the year in which the Company's right to collect them is established (when they are declared).
The interest embedded in finance lease payments is charged to the income statement using the effective interest method.
Income taxes for the period include all taxes calculated on taxable income. Income taxes for the period are recorded in the income statement.
Taxes other than income taxes, such as property tax, are reported under operating expenses or, if the necessary conditions are fulfilled, are capitalized in the related real estate.
Current taxes on income taxable in the period represent the tax burden calculated using current rates of taxation in force on the balance sheet date.
Deferred taxes are recognised for all temporary differences existing on the balance sheet date between the book value of assets and liabilities and the corresponding values used to determine taxable income for tax purposes.
Payables for deferred taxes relate to:
statement as a result of the application of the International Accounting Standards.
Receivables for deferred taxes are recognised:
Credits for deferred tax assets and debits for deferred tax liabilities are calculated based on the rates of taxation applicable to tax calculation on income in periods in which temporary differences are reversed, based on the rate of taxation and tax regulations in force on the balance sheet date.
The impact on these taxes of any change in rates of taxation is posted to the income statement in the period in which the change occurs.
Basic earnings per share are calculated by dividing the profit or loss attributable to the Company's shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share are calculated by dividing the profit or loss attributable to the Company's shareholders by the weighted average number of ordinary shares outstanding.
Hereafter we report the main estimates and assumptions used by the Management to draft the financial statements, whose variations, not foreseeable at the moment, could affect the economic and equity situation of the Company.
• Estimates used to evaluate value impairment of assets other than financial assets
For the purposes of ascertaining any impairment of value of assets other than current assets entered in the financial statement, the Company applied the method described above in the paragraph entitled "Impairment of value of assets".
In particular, regarding the impairment tests related to equity investments, the main estimations used are the following:
Equity investment in Pollini S.p.A.: the evaluation emerges from the cash flow analysis of the entire Pollini Group. The cash flows have been gathered, for the year 2018, by the Group budget. It has been also estimated cash flow projections for the year 2019, 2020, 2021 and 2022 at a flat growth flat of 7%. The terminal value has been determined using the formula of perpetual annuity and assuming, prudentially, a growth rate G equal to 0. The cash flow useful to determine the terminal value has been gathered by the latest year of the cash flow projections, that is 2022. The rate used for the cash flow discounting back is the weighted average cost of capital (WACC), specifically calculated for the Pollini Group, equal to 5.63% (6.78% last year).
Equity investment in Aeffe Retail S.p.A., Velmar S.p.A. Aeffe France S.a.r.l., and Aeffe USA Inc.: the evaluation emerges from the cash flow analysis of each single company. The cash flows have been gathered, for the year 2018, by the Group budget. It has been also estimated cash flow projections for the year 2019, 2020, 2021 and 2022 at a growth rate basically stable compared to the one used in the budget 2018. The terminal value has been determined using the formula of perpetual annuity and assuming, prudentially, a growth rate G equal to 0. The cash flow useful to determine the terminal value has been gathered by the latest year of the cash flow projections, that is 2022. The rate used for the cash flow discounting back is the weighted average cost of capital (WACC) equal to 5.63% (6.78% last year).
− The inflation rate foreseen is 1.50%;
− The discount rate used is 1.11%;
The financial risks to which the Company is exposed in the performance of its business are as follows:
Management of the financial needs and relative risks (mainly rate and exchange risks) is handled at the level of the central treasury.
The main goal of these guidelines consists of:
The Company manages the liquidity risk with a view to guarantee the presence of a liability structure in balance with the asset composition of the financial statement, in order to maintain an elevated solid equity.
The Company operates internationally and is therefore exposed to the exchange risk. The exchange risk arises when assets and liabilities are reported in a currency other than that in which the Company operates.
The mode of management of this risk consists of minimizing the risk connected with exchange rates by using operating coverage. Alternatively, the Company, if exposed to the exchange risk, covers itself by loans in foreign currency.
The interest rate risk to which the Company is exposed originates mainly from the medium and long-term financial payables in existence, that are almost all at variable rates and expose the Company to the risk of variation in cash flows as the interest rates vary.
The average cost of indebtedness tends to be parametrized with the status of the EURIBOR rate at 3/6 months, plus a spread that depends mainly on the type of financial instrument used. In general, the margins applied are in line with the best market standards.
As of 31 December 2017 a hypothetical upward variation of 10% in the interest rate, all other variables being equal, would have produced a higher cost before taxes (and thus a corresponding reduction in the shareholders' equity) of about EUR 90 thousand annually (EUR 167 thousand as of 31 December 2016).
The cash flow risk on interest rates has never been managed in the past with recourse to derivative contracts - interest rate swaps - that would transform the variable rate into a fixed rate. As of 31 December 2017 there are no instruments that hedge interest-rate risk.
The Company makes its purchases and sales worldwide and is therefore exposed to the normal risk of variations in price, typical of the sector.
With reference to receivables in Italy, the Company deals only with known and reliable clients. It is a policy of the Company that clients requesting extended payment terms are subject to procedures of audit of the class of merit. Moreover, the balance of receivables is monitored during the year to ensure that the doubtful positions are not significant.
The credit quality of unexpired financial assets and those that have not undergone value impairment can be valued with reference to the internal credit management procedure.
Customer monitoring activity consists mainly of a preliminary stage, in which we gather data and information about new clients, and a subsequent activation stage in which a credit is recognized and the development of the credit position is supervised.
The preliminary stage consists of collecting the administrative and fiscal data necessary to make a complete and correct assessment of the risks connected with the new client. Activation of the client is subject to the completeness of the data and approval, after any further clarification by the Customer Office.
Every new customer has a credit line: its concession is linked to further information (years in business, payment terms, and customer's reputation) all of which are essential to make an evaluation of the level of solvency. After gathering this information, the documentation on the potential customer is submitted for approval by the company organizations.
Management of overdue receivable is differentiated depending on the seniority of the client (overdue payment group).
For overdue payments up to 60 days, reminders are sent through the branch or directly by the Customer Office; clearly, if an overdue payment exceeds 15 days or the amount of the credit granted, all further supplied to the client are suspended. For overdue credits "exceeding 90 days", where necessary, legal steps are taken.
As regards foreign receivables, the Company proceeds as follows:
This procedure serves to define the rules and operating mechanisms that guarantee a flow of payments sufficient to ensure the solvency of the client and guarantee the Company an income from the relationship.
As of the reference date of the financial statement, the maximum credit risk exposure was equal to the value of each category of receivable indicated here below:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Trade receivables Other current receivables |
56,077 12,974 |
63,925 11,699 |
( 7,848) 1,274 |
(12.3%) 10.9% |
| Total | 69,051 | 75,624 | ( 6,574) | (8.7%) |
See note 7 for the comment and breakdown of the item "trade receivables" and note 10 for "other current receivables".
The fair value of the above categories has not been indicated, as the book value is a reasonable approximation.
As of 31 December 2017, overdue but not written-down trade receivables amount to EUR 29,222 thousand (EUR 31,595 thousand in 2016). The breakdown by due date is as follows:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| By 30 days | 4,297 | 4,003 | 294 | 7.3% |
| 31 - 60 days | 3,527 | 1,495 | 2,032 | 135.9% |
| 61 - 90 days | 647 | 964 | ( 317) | (32.9%) |
| Exceeding 90 days | 20,751 | 25,133 | ( 4,382) | (17.4%) |
| Total | 29,222 | 31,595 | ( 2,373) | (7.5%) |
The decrease of overdue commercial receivables of EUR 2,373 thousand is the effect of a more and more careful financial management.
No risks of default with respect to such overdue receivables have to be highlighted.
The cash flow statement presented by the Company in accordance with IAS 7 has been prepared using the indirect method. The cash and cash equivalents included in the cash flow statement represent the amounts reported in the balance sheet at the accounting reference date. Cash equivalents comprise short term and highly liquid applications of funds that can be readily converted into cash; the risk of changes in their value is minimal. Accordingly, a financial investment is usually classified as a cash equivalent if it matures rapidly, i.e. within three months or less of the acquisition date.
Bank overdrafts are generally part of financing activities, except when they are repayable on demand and are an integral part of the management of a company's cash and cash equivalents, in which case they are classified as a reduction of its cash equivalents.
Foreign currency cash flows have been translated using the average exchange rate for the year. Income and expenses deriving from interest, dividends received and income taxes are included in the cash flows from operating activities.
Under IAS 7, the cash flow statement must identify separately the cash flow deriving from operating, investing and financing activities:
(i) cash flow from operating activities: the cash flow deriving from operating activities mainly relates to income-generating activities and is presented by the Company using the indirect method; on this basis, net profit is adjusted for the effects of items that did not give rise to payments or cash inflows during the year (non-monetary transactions);
(ii) cash flow from investing activities: investing activities are presented separately since, among other factors, they reflect the investment/disposals made in order to obtain future revenues and cash inflows;
(iii) cash flow from financing activities: financing activities comprise the cash flows that modify the size and composition of shareholders' equity and financial payables.
The composition of intangible fixed assets is analysed in the following table, together with the changes that took place during the year:
| (Values in thousands of EUR) | Brands | Other | Total |
|---|---|---|---|
| Net book value as of 01.01.16 | 3,400 | 486 | 3,886 |
| Increases externally acquired | 298 | 298 | |
| Disposals | ( 16) | ( 16) | |
| Amortisation | ( 126) | ( 284) | ( 410) |
| Net book value as of 01.01.17 | 3,274 | 484 | 3,758 |
| Increases externally acquired | 419 | 419 | |
| Disposals | ( 39) | ( 39) | |
| Amortisation | ( 126) | ( 279) | ( 405) |
| Net book value as of 31.12.17 | 3,149 | 585 | 3,734 |
This caption comprises the value of the brand names owned by the Company: "Alberta Ferretti" and "Philosophy".
The residual amortisation period for this caption is 25 years.
The caption "Other" relates to user licenses for software.
The composition of tangible fixed assets is analysed in the following table:
(Values in thousands of EUR)
| Lands | Buildings | improvements Leasehold |
machinery Plant and |
Industrial and commercial equipment |
Other tangible assets |
Total | |
|---|---|---|---|---|---|---|---|
| Net book value as of 01.01.16 | 16,945 | 22,846 | 1,386 | 1,551 | 26 | 537 | 43,291 |
| Increases | 86 | 222 | 560 | 36 | 193 | 1,097 | |
| Disposals Depreciation |
( 562) | ( 24) ( 295) |
( 429) | ( 16) | ( 1) ( 191) |
( 25) ( 1,493) |
|
| Net book value as of 01.01.17 | 16,945 | 22,370 | 1,289 | 1,682 | 46 | 538 | 42,870 |
| Increases | 65 | 199 | 249 | 45 | 264 | 822 | |
| Disposals | ( 6) | ( 6) | |||||
| Depreciation | ( 564) | ( 276) | ( 403) | ( 28) | ( 186) | ( 1,457) | |
| Net book value as of 31.12.17 | 16,945 | 21,871 | 1,206 | 1,528 | 63 | 616 | 42,229 |
Tangible fixed assets have changed as follows:
This caption comprises the investments held in subsidiary and associated companies. A complete list, together with the information requested by Co.N.So.B, is presented in Attachment I.
The investments increase of EUR 450 thousand due to increase of share capital, through waiver of financial receivables, towards the subsidiary Aeffe France S.a.r.l..
This caption principally includes amounts due by subsidiaries.
This caption is analysed below as of 31 December 2017 and 2016:
| (Values in thousands of EUR) | Receivables | Liabilities | ||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Tangible fixed assets | ( 17) | ( 17) | ||
| Intangible fixed assets | ( 130) | ( 130) | ||
| Provisions | 440 | 510 | ||
| Costs deducible in future periods | 1,105 | 988 | ||
| Income taxable in future periods | ( 132) | ( 39) | ||
| Tax losses carried forward | 158 | 158 | ||
| Other tax assets (liabilities) from transition to IAS | 863 | 623 | ( 7,204) | ( 7,140) |
| Total | 2,566 | 2,279 | ( 7,483) | ( 7,326) |
Changes in temporary differences during the year are shown in the following table:
| (Values in thousands of EUR) | Opening balance | Recorded in the | Other | Closing balance |
|---|---|---|---|---|
| income statement | ||||
| Tangible fixed assets | ( 17) | ( 17) | ||
| Intangible fixed assets | ( 130) | ( 130) | ||
| Provisions | 510 | ( 2) | ( 69) | 440 |
| Costs deducible in future periods | 988 | 117 | 1,105 | |
| Income taxable in future periods | ( 39) | ( 93) | ( 132) | |
| Tax losses carried forward | 158 | 158 | ||
| Other tax assets (liabilities) from transition to IAS | ( 6,517) | 167 | 8 | ( 6,342) |
| Total | ( 5,047) | 190 | ( 61) | ( 4,918) |
The variation of EUR 190 thousand in the income statement mainly refers to the deferred on provisions for inventory write-down and for unrealized foreign exchange losses.
Deferred tax assets have been determined estimating the future recoverability of such activities.
This caption comprises:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Raw, ancillary and consumable materials | 4,584 | 4,452 | 132 | 3.0% |
| Work in progress | 6,206 | 4,725 | 1,481 | 31.3% |
| Finished products and goods for resale | 22,611 | 19,157 | 3,454 | 18.0% |
| Advance payments | 22 | 17 | 5 | 29.4% |
| Total | 33,423 | 28,352 | 5,071 | 17.9% |
The increase by EUR 5,071 thousand in inventories is mainly related to the sales growth of the Spring/Summer 2018 collections.
Raw materials and work in progress products mainly concern the Spring/Summer 2018 collections.
Finished products mainly relate to the Autumn/Winter 2017 and to the Spring/Summer 2018 collections and to the Autumn/Winter 2018 samples collections.
Inventories are valued at the lower of cost and net realizable value and therefore, to account for any physical obsolescence and slow moving of the materials in stock, the following write-downs have been recorded:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Finished goods write-down provision | 3,300 | 2,300 | 1,000 | 43.5% |
| Total | 3,300 | 2,300 | 1,000 | 43.5% |
This caption is analysed in the following table:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Customers receivables | 12,671 | 12,420 | 251 | 2.0% |
| Subsidiaries receivables | 44,322 | 51,838 | ( 7,516) | (14.5%) |
| (Allowance for doubtful receivables) | ( 916) | ( 333) | ( 583) | 175.1% |
| Total | 56,077 | 63,925 | ( 7,848) | (12.3%) |
Trade receivables amount to EUR 56,077 thousand at 31 December 2017, showing an decrease by 12.3% compared to the value at 31 December 2016, mainly due to the decrease in receivables from subsidiaries as a result of a careful group financial management.
The allowance for doubtful receivables was determined by reference to a detailed analysis of the available information and, in general, is based on historical trends.
In particular the allowance existing at 31 December 2016 has been used for the amount of EUR 217 thousand to cover losses related to receivables arisen in previous years.
The adjustment of the receivables nominal value to the estimated realisable value has been obtained through the allocation of EUR 800 thousand to allowance for doubtful receivables.
This caption is analysed in the following table:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| VAT | 2,722 | 1,604 | 1,118 | 69.7% |
| Corporate income tax (IRES) | 799 | 799 | - | n.a. |
| Other tax receivables | 19 | 22 | ( 3) | (13.5%) |
| Total | 3,540 | 2,426 | 1,115 | 45.9% |
The variation of tax receivables is mainly due to the increase of VAT receivable.
This caption comprises:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Bank and post office deposits | 7,594 | 2,606 | 4,988 | 191.4% |
| Cheques | - | 4 | ( 4) | (100.0%) |
| Cash in hand | 18 | 25 | ( 7) | (28.0%) |
| Total | 7,612 | 2,635 | 4,977 | 188.8% |
Bank and postal deposits represent the nominal value of the current account balances with banks, including the interest accrued at period end.
Cash and cash equivalents represent the nominal value of the cash held at period end.
As of 31 December 2017, cash and cash equivalents are EUR 4,977 thousand higher than at the end of the previous year. The reasons for this are analysed in the cash flow statement.
This caption comprises:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Credits for prepaid costs (costs of producing collections) | 10,454 | 8,856 | 1,598 | 18.0% |
| Advances for royalties and commissions | 226 | 808 | ( 582) | (72.0%) |
| Advances to suppliers | 333 | 414 | ( 81) | (19.6%) |
| Accrued income and prepaid expenses | 597 | 513 | 84 | 16.4% |
| Other | 1,364 | 1,108 | 255 | 23.1% |
| Total | 12,974 | 11,699 | 1,274 | 10.9% |
Credits for prepaid costs are related to the costs incurred to design and make samples for the Spring/Summer 2018 and Autumn/Winter 2018 collections, for which the corresponding revenues from sales have not been realised yet.
Accrued income and prepaid expenses refer mainly to owed rent, insurance premium, maintenance and subscriptions fees.
The main elements comprising shareholders' equity as of 31 December 2017 are described below.
| Total | 143,477 | 136,685 | 6,792 |
|---|---|---|---|
| Net profit / (loss) | 6,818 | 1,715 | 5,103 |
| Profits/(Losses) carried-forward | 2,348 | 2,348 | - |
| Reamisurement of defined benefit plans reserve | ( 681) | ( 655) | ( 26) |
| IAS reserve | 1,086 | 1,086 | - |
| Fair value reserve | 7,742 | 7,742 | - |
| Other reserves | 26,558 | 24,929 | 1,629 |
| Share premium reserve | 71,240 | 71,240 | - |
| Legal reserve | 2,995 | 2,909 | 86 |
| Share capital | 25,371 | 25,371 | - |
| 2017 | 2016 | Δ | |
| (Values in thousands of EUR) | 31 December | 31 December | Change |
Share capital as of 31 December 2017 (gross of treasury shares) is represented by 107,362,504 issued and fully-paid ordinary shares, par value EUR 0.25 each, totalling EUR 26,841 thousand. As of 31 December 2017 the Company holds 5,876,878 treasury shares, representing the 5.5% of its share capital.
There are no shares with restricted voting rights, without voting rights or with preferential rights. The number of outstanding shares (non-considering treasury shares) is not changed during the period.
The legal reserve amounts to EUR 2,995 thousand at 31 December 2017. The increase of 86 thousand is determined by the 5% allocation of the net profit.
Share premium reserve
The share premium reserve amounts to EUR 71,240 thousand and it remains unchanged since 31 December 2016.
The caption records a positive variation as a consequence of the previous year's profit allocation for EUR 1,629 thousand.
We specify that reserves haven't changed for income or expenses recognized directly in equity.
The fair value reserve derives from the application of IAS 16 in order to measure the land and buildings owned by the Company at their fair value, as determined with reference to an independent appraisal.
The IAS reserve, formed on the first-time adoption of IFRS, reflects the differences in value that emerged on the transition from ITA GAAP to IFRS. The differences reflected in this equity reserve are stated net of tax effect, as required by IFRS 1.
The remeasurement of defined benefit plans reserve, formed as a result of the application, from 1st January 2014 (retrospectively), of the amendment to IAS 19, decreases of EUR 26 thousand compared to the value at 31 December 2016.
The Profits/(losses) carried-forward at 31 December 2017, amounting to EUR 2,348 thousand, is not changed compared to 31 December 2016.
This caption highlights a net profit of EUR 6,818 thousand.
The following schedule provides information on the way each equity reserve can be used and/or distributed, together with how they have been used in the past three years.
| (Values in thousands of EUR) | Amount | Possible | Amount | Uses in prior years |
|---|---|---|---|---|
| uses | distributable |
To cover losses For capital increases For distribution to shareholders
| Share capital | 25,371 | |||||
|---|---|---|---|---|---|---|
| Legal reserve | 2,995 | B | ||||
| Share premium reserve: | ||||||
| - including | 69,075 | A,B,C | 69,075 | |||
| - including | 2,165 | B | ||||
| Other reserves: | ||||||
| - inc. extraordinary reserve | 26,154 | A,B,C | 26,154 | |||
| IAS reserve (art.6 D.Lgs. 38/2005) | 1,086 | B | ||||
| Fair Value reserve (art. 6 D.Lgs. 38/2005) | 7,742 | B | ||||
| Remeasurement of defined benefit plans reserve | ( 681) | B | ||||
| Merger reserve | 404 | B | ||||
| Profit/(losses) carried-forward | 2,348 | A,B,C | 2,348 | |||
| Total | 136,659 | 97,577 | - | - | - |
Pursuant to art. 109.4.b) of the Consolidated Income Tax Law approved by Decree 917 dated 22 December 1986, as modified by Decree 344 dated 12 December 2003, restricted reserves as of 31 December 2017 amount to EUR 1,302 thousand.
In the absence of freely-distributable reserves or profits, these reserves would be taxable upon distribution.
The changes in the various provisions are analysed below:
| (Values in thousands of EUR) | 31 December | Increases | Decreases | 31 December |
|---|---|---|---|---|
| 2016 | 2017 | |||
| Pensions and similar obligations | 282 | 21 | ( 180) | 123 |
| Total | 282 | 21 | ( 180) | 123 |
The agents' termination indemnities reflect an estimate of the costs to be incurred on the termination of agency contracts, considering legal requirements and all other useful information, such as historical experience, the average duration of agency contracts and their rate of turnover. The amount stated represents the present value of the payments required to settle the obligation.
The section on "Contingent liabilities" describes the tax contingencies that are not covered by provisions since the Company is unlikely to incur charges in relation to them.
The severance indemnities payable on a deferred basis to all employees of the Company are deemed to represent a defined benefits plan (IAS 19), since the employer's obligation does not cease on payment of the contributions due on the remuneration paid, but continue until termination of the employment relationship.
For plans of this type, the standard requires the amount accrued to be projected forward in order to determine the amount that will be paid on the termination of employment, based on an actuarial valuation that takes account of employee turnover, likely future pay increases and any other applicable factors. This methodology does not apply to those employees whose severance indemnities are paid into approved supplementary pension funds which, in the circumstances, are deemed to represent defined contributions plans.
The main changes are described below:
| (Values in thousands of EUR) | 31 December | Increases | Decreases / Other changes |
31 December |
|---|---|---|---|---|
| 2016 | 2017 | |||
| Post employment benefits | 4,284 | 85 | ( 427) | 3,943 |
| Total | 4,284 | 85 | ( 427) | 3,943 |
Increases include the share of post employment benefits matured in the year and the related revaluation, while the entry decreases/other changes includes the decrease for the liquidation of the post employment benefits and the actuarial variation.
Non-current financial payables are analysed in the following table:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Loans from financial institutions Amounts due to other creditors |
20,548 2,120 |
22,712 2,407 |
( 2,164) ( 287) |
(9.5%) (11.9%) |
| Total | 22,668 | 25,119 | ( 2,451) | (9.8%) |
The increase in this entry is mainly due to the disbursement of a ten-year mortgage loan for an amount of EUR 11.5 million on a real estate based in Gatteo, headquarter of the subsidiary Pollini Spa.
All other amounts due to banks relate to the portion of bank loans due beyond 12 months and comprise solely unsecured loans and bank finance. Such loans are not assisted by any form of security and they are not subject to special clauses, except for the early repayment clauses normally envisaged in commercial practice.
Furthermore, there are no covenants to comply with specific financial terms or negative pledges.
The amount due to other creditors refer mainly to bearing loans obtained from the American subsidiary Aeffe Usa Inc. during 2016. The reduction of EUR 287 thousand is related to the exchange rate adjustment of these loans.
The following table details the bank loans outstanding as of 31 December 2017, including both the current and the non-current portion:
| (Values in thousands of EUR) | Total amount | Current portion | Non-current portion |
|---|---|---|---|
| Bank borrowings | 29,964 | 9,416 | 20,548 |
| Total | 29,964 | 9,416 | 20,548 |
The total due beyond five years amount to EUR 1,096 thousand.
Non-current not financial liabilities refers mainly to tax payable generated in Aeffe Spa, as a consequence of the adhesion of the subsidiaries to the fiscal consolidation, related to the fiscal losses.
This caption is analysed below on a comparative basis:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Payables with subsidiaries | 39,590 | 41,784 | ( 2,194) | (5.3%) |
| Payables with third parties | 34,171 | 30,006 | 4,165 | 13.9% |
| Total | 73,761 | 71,790 | 1,971 | 2.7% |
Trade payables are due within 12 months and concern the debts for supplying goods and services.
The variation of this caption is mainly due to the sales growth in 2017, partly offset by the reduction in payables to subsidiaries as a result of careful group financial management.
Tax payables are analysed on a comparative basis in the following table:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Local business tax (IRAP) | 137 | 208 | ( 71) | (34.1%) |
| Corporate income tax (IRES) | 326 | 4,229 | ( 3,903) | (92.3%) |
| Amounts due to tax authority for withheld taxes | 1,362 | 1,435 | ( 73) | (5.1%) |
| Total | 1,825 | 5,872 | ( 4,047) | (68.9%) |
The decrease of Tax payables is mostly due to the reduction of payable for IRES and IRAP generated in the period by Aeffe S.p.A. and the fiscal Group consolidated as a result of the reduction in the IRES rate, which change from 27.5% in 2016 to 24% in 2017.
This caption is analysed in the following table:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Due to banks | 42,746 | 44,847 | ( 2,101) | (4.7%) |
| Total | 42,746 | 44,847 | ( 2,101) | (4.7%) |
Bank overdrafts include advances from banks, short-term loans and the current portion of long-term loans. Advances mainly comprise the drawdown against short-term lines of credit arranged to finance working capital.
These captions are analysed in the following table:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Current bank loans Current portion of long-term bank borrowings |
33,330 9,416 |
37,124 7,723 |
( 3,794) 1,693 |
(10.2%) 21.9% |
| Total | 42,746 | 44,847 | ( 2,101) | (4.7%) |
The decrease of loans is mostly due to the improvement of the operating cash flow.
Other current liabilities are analysed on a comparative basis in the following table:
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Due to total security organization | 1,979 | 1,994 | ( 15) | (0.8%) |
| Due to employees | 2,445 | 2,503 | ( 58) | (2.3%) |
| Trade debtors - credit balances | 2,238 | 2,078 | 160 | 7.7% |
| Other | 1,020 | 701 | 319 | 45.5% |
| Total | 7,682 | 7,276 | 406 | 5.6% |
The amounts due to social security institutions, recorded at nominal value, relate to the social security charges on the wages and salaries of the Company's employees.
In 2017 revenues amount to EUR 157,527 thousand compared to EUR 145,903 thousand of the year 2016, showing an increase of 8% (8.4% at constant exchange rates). Such increase has mainly interested the brand Moschino and the two owned brands Alberta Ferretti and Philosophy di Lorenzo Serafini.
46% of revenues are earned in Italy while 54% come from foreign markets.
Revenues are analysed by geographical area below:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |||
|---|---|---|---|---|---|---|
| 2017 | % | 2016 | % | Δ | % | |
| Italy | 72,816 | 46.2% | 59,504 | 40.8% | 13,312 | 22.4% |
| Europe (Italy and Russia excluded) | 29,211 | 18.5% | 29,439 | 20.2% | ( 228) | (0.8%) |
| United States | 8,701 | 5.5% | 10,563 | 7.2% | ( 1,862) | (17.6%) |
| Russia | 4,958 | 3.1% | 5,496 | 3.8% | ( 538) | (9.8%) |
| Rest of the world | 41,841 | 26.6% | 40,901 | 28.0% | 940 | 2.3% |
| Total | 157,527 | 100.0% | 145,903 | 100.0% | 11,624 | 8.0% |
This caption comprises:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Rental income Other income |
3,509 2,114 |
3,523 1,721 |
( 14) 393 |
(0.4%) 22.8% |
| Total | 5,623 | 5,244 | 379 | 7.2% |
The caption other income, which amounts to EUR 2,114 thousand in 2017, mainly refers to exchange gains on commercial transaction, provision of services and sales of raw materials and packaging.
This caption comprises:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Raw, ancillary and consumable materials and goods for resale | 62,094 | 52,763 | 9,331 | 17.7% |
| Total | 62,094 | 52,763 | 9,331 | 17.7% |
This caption mainly reflects the purchase of raw materials, such as fabrics, yarns, hides and accessories, finished products acquired for resale and packaging.
The increase in this caption is mainly due to the sales growth in 2017.
This caption comprises:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Subcontracted work | 20,541 | 17,128 | 3,413 | 19.9% |
| Consultancy fees | 7,694 | 7,206 | 488 | 6.8% |
| Advertising | 4,512 | 3,857 | 655 | 17.0% |
| Commission | 6,587 | 6,858 | ( 271) | (4.0%) |
| Transport | 1,745 | 1,871 | ( 126) | (6.7%) |
| Utilities | 561 | 545 | 16 | 3.0% |
| Directors' and auditors' fees | 2,254 | 1,823 | 431 | 23.6% |
| Insurance | 193 | 154 | 39 | 25.3% |
| Bank charges | 304 | 310 | ( 6) | (1.9%) |
| Travelling expenses | 1,006 | 965 | 41 | 4.2% |
| Sundry industrial services | 916 | 754 | 162 | 21.5% |
| Other services | 1,457 | 1,337 | 120 | 9.0% |
| Total | 47,771 | 42,808 | 4,963 | 11.6% |
Costs of services increase from EUR 42,808 thousand in the year 2016 to EUR 47,771 thousand in the year 2017, by 11.6%. The increase is mainly due to:
This caption comprises:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Rental expenses | 2,642 | 2,557 | 85 | 3.3% |
| Royalties | 12,574 | 13,332 | ( 758) | (5.7%) |
| Hire charges and similar | 484 | 461 | 23 | 5.0% |
| Total | 15,700 | 16,350 | ( 650) | (4.0%) |
The entry cost of use of third parties assets decrease of EUR 650 thousand from EUR 16,350 thousand in 2016 to EUR 15,700 thousand in 2017. This change is mainly attributable to the reduction in costs for royalties as a result of the increase in turnover of the owned brands Alberta Ferretti and Philosophy di Lorenzo Serafini.
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Labour costs | 27,364 | 27,659 | ( 295) | (1.1%) |
| Total | 27,364 | 27,659 | ( 295) | (1.1%) |
Labour costs move from EUR 27,659 thousand in 2016 to EUR 27,364 thousand in 2017 with a decrease of EUR 295 thousand.
The applicable national payroll agreement is the textile and clothing sector contract of July 2017.
The average number of employees as of 31 December 2017 is analysed below:
| (Average number of employees by category) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Workers | 136 | 134 | 2 | 1.5% |
| Office staff - supervisors | 389 | 383 | 6 | 1.6% |
| Executive and senior managers | 13 | 12 | 1 | 8.3% |
| Total | 538 | 529 | 9 | 1.7% |
This caption comprises:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Taxes | 322 | 276 | 46 | 16.7% |
| Gifts | 217 | 276 | ( 59) | (21.4%) |
| Other operating expenses | 1,211 | 1,129 | 82 | 7.3% |
| Total | 1,750 | 1,681 | 69 | 4.1% |
The caption other operating expenses decreases from EUR 1,681 thousand in 2016 to EUR 1,750 thousand in 2017.
This caption comprises:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Amortisation of intangible fixed assets | 405 | 411 | ( 6) | (1.5%) |
| Depreciation of tangible fixed assets | 1,456 | 1,492 | ( 36) | (2.4%) |
| Write-downs | 800 | 300 | 500 | 166.7% |
| Total | 2,661 | 2,203 | 458 | 20.8% |
The caption "Financial income" comprises:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Interest income | 341 | 347 | ( 6) | (1.7%) |
| Financial discounts | 11 | 49 | ( 38) | (77.6%) |
| Foreign exchange gains | 287 | - | 287 | n.a. |
| Total | 639 | 396 | 243 | 61.4% |
The caption "Financial expenses" comprises:
| (Values in thousands of EUR) | Full Year | Full Year | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Interest expenses | 1,069 | 1,820 | ( 751) | (41.3%) |
| Foreign exchange losses | - | 191 | ( 191) | (100.0%) |
| Other expenses | 454 | 178 | 276 | 155.1% |
| Totale | 1,523 | 2,189 | ( 666) | (30.4%) |
The decrease in financial expenses is substantially linked to lower interest expenses as a result of the better banking conditions applied by banks and to the reduction of the banking indebtedness occurred during 2017.
This caption comprises:
| (Valori in migliaia di Euro) | Esercizio | Esercizio | Variazioni | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Current income taxes | 3,388 | 2,346 | 1,042 | 44.4% |
| Deferred income (expenses) taxes | ( 346) | ( 591) | 245 | (41.5%) |
| Totale imposte sul reddito | 3,042 | 1,755 | 1,287 | 73.3% |
The changes in deferred income (expenses) taxes are analysed in the note on deferred tax assets and liabilities.
The effective tax rates for 2016 and 2017 are reconciled with the theoretical rate in the following table:
| (Values in thousands of EUR) | Full Year | Full Year |
|---|---|---|
| 2017 | 2016 | |
| Profit before taxes | 9,860 | 3,469 |
| Theoretical tax rate | 24.0% | 27.5% |
| Theoretical income taxes (IRES) | 2,366 | 954 |
| Fiscal effect | 29 | 291 |
| Total income taxes excluding IRAP (current and deferred) | 2,395 | 1,245 |
| IRAP (current and deferred) | 647 | 509 |
| Total income taxes (current and deferred) | 3,042 | 1,754 |
This reconciliation of the theoretical and effective tax rates does not take account of IRAP, given that it does not use profit before taxes to calculate the taxable amount. Accordingly, the inclusion of IRAP in the reconciliation would generate distorting effects between years.
The cash flow generated in 2017 amounts to EUR 4,978 thousand.
| (Values in thousands of EUR) | Full year | Full year |
|---|---|---|
| 2017 | 2016 | |
| OPENING BALANCE (A) | 2,633 | 1,339 |
| Cash flow (absorbed)/generated by operating activity (B) | 7,552 | 12,095 |
| Cash flow (absorbed)/generated by investing activity (C) | ( 1,646) | ( 1,754) |
| Cash flow (absorbed)/generated by financing activity (D) | ( 929) | ( 9,047) |
| Increase (decrease) in cash flow (E)=(B)+(C)+(D) | 4,978 | 1,294 |
| CLOSING BALANCE (F)=(A)+(E) | 7,610 | 2,633 |
The cash flow generated by operating activity during 2017 amounts to EUR 7,552 thousand.
The cash flow from operating activities is analysed below:
| (Values in thousands of EUR) | Full Year | Full Year |
|---|---|---|
| 2017 | 2016 | |
| Profit before taxes | 9,860 | 3,469 |
| Amortisation | 2,661 | 2,203 |
| Accrual (+)/availment (-) of long term provisions and post employment benefits | ( 501) | ( 38) |
| Paid income taxes | ( 7,435) | 2,162 |
| Financial income (-) and financial charges (+) | 884 | 1,793 |
| Change in operating assets and liabilities | 2,083 | 2,506 |
| CASH FLOW (ABSORBED)/ GENERATED BY OPERATING ACTIVITY | 7,552 | 12,095 |
The cash flow absorbed by investing activity during 2017 amounts to EUR 1,646 thousand.
The factors comprising this use of funds are analysed below:
| CASH FLOW (ABSORBED)/ GENERATED BY INVESTING ACTIVITY | ( 1,646) | ( 1,754) |
|---|---|---|
| Investments (-)/ Disinvestments (+) | ( 450) | ( 400) |
| Increase (-)/ decrease (+) in tangible fixed assets | ( 816) | ( 1,072) |
| Increase (-)/ decrease (+) in intangible fixed assets | ( 380) | ( 282) |
| 2017 | 2016 | |
| (Values in thousands of EUR) | Full Year | Full Year |
The cash flow absorbed by financing activity during 2017 amounts to EUR 929 thousand.
The factors comprising this use of funds are analysed below:
| (Values in thousands of EUR) | Full Year | Full Year |
|---|---|---|
| 2017 | 2016 | |
| Other variations in reserves and profits carried-forward of shareholders' equity | ( 26) | ( 70) |
| Proceeds (+)/repayments (-) of financial payments | ( 4,551) | ( 8,451) |
| Increase (-)/ decrease (+) in long term financial receivables | 4,533 | 1,267 |
| Financial income (+) and financial charges (-) | ( 884) | ( 1,793) |
| CASH FLOW (ABSORBED)/GENERATED BY FINANCING ACTIVITY | ( 929) | ( 9,047) |
Regarding the long term incentive plans reserved to executive directors of Aeffe S.p.A., please refer to the indicated in the Report on remuneration available from the governance section of the following website: www.aeffe.com.
As required by Co.N.So.B communication DEM/6264293 dated 28th July 2006 and in compliance with the CESR's "Recommendations for the consistent implementation of the European Commission's Regulation on Prospectuses" dated 10 February 2005, the Company's net financial position as of 31 December 2017 is analysed below:
| (Values in thousands of EUR) | 31 December | 31 December | Change |
|---|---|---|---|
| 2017 | 2016 | ||
| A - Cash in hand | 18 | 29 | ( 11) |
| B - Other available funds | 7,594 | 2,606 | 4,988 |
| C - Securities held for trading | |||
| D - Cash and cash equivalents (A) + (B) + (C) | 7,612 | 2,635 | 4,977 |
| E - Short term financial receivables | |||
| F - Current bank loans | ( 33,330) | ( 37,123) | 3,793 |
| G - Current portion of long-term bank borrowings | ( 9,416) | ( 7,723) | ( 1,693) |
| H - Current portion of loans from other financial istitutions | |||
| I - Current financial indebtedness (F) + (G) + (H) | ( 42,746) | ( 44,846) | 2,100 |
| J - Net current financial indebtedness (I) + (E) + (D) | ( 35,134) | ( 42,211) | 7,077 |
| K - Non current bank loans | ( 22,668) | ( 25,119) | 2,451 |
| L - Issued obbligations | |||
| M - Other non current loans | |||
| N - Non current financial indebtedness (K) + (L) + (M) | ( 22,668) | ( 25,119) | 2,451 |
| O - Net financial indebtedness (J) + (N) | ( 57,802) | ( 67,330) | 9,528 |
Short-term financial liabilities include advances from banks that mainly comprise the drawdown against short-term lines of credit arranged to finance working capital.
| (Values in thousands of EUR) | 31 December | 31 December |
|---|---|---|
| 2017 | 2016 | |
| Earnings for the period Medium number of shares for the period |
6,818 101,486 |
1,715 101,486 |
| Basic earnings per share | 0.0672 | 0.0169 |
Aeffe S.p.A. also operates via its own direct or indirect subsidiaries. Operations carried out with them mainly concern the exchange of goods, the performance of services and the provision of financial resources. All transactions arise in the ordinary course of business and are settled on market terms i.e. on the terms that are or would be applied between two independent parties.
The effect of these transactions on the individual captions reported in the 2017 and 2016 financial statements, as shown in the supplementary income statement and balance sheet prepared for this purpose, is summarised in the following tables:
| (Values in thousands of EUR) | Revenues | Other | Costs of raw | Costs of | Costs for use of | Other | Financial |
|---|---|---|---|---|---|---|---|
| from sales and | revenues | materials, | services | third parties | operating | income | |
| services | and | cons. and | assets | costs | (expenses) | ||
| income | goods for | ||||||
| Year 2017 | |||||||
| Moschino Group | 15,464 | 668 | 246 | 3,504 | 12,020 | 6 | ( 69) |
| Pollini Group | 693 | 2,621 | 20,422 | 36 | 5 | 308 | |
| Aeffe Retail Group | 14,505 103 |
830 341 |
123 472 |
177 75 |
|||
| Velmar S.p.A. | 5,542 | 3 | 886 | 3 | ( 48) | ||
| Aeffe Usa Inc. Aeffe UK L.t.d. |
1,007 | 11 | 55 | 250 | |||
| Aeffe France S.a.r.l. | 844 | 6 | 84 | 738 | 22 | ||
| Total Group companies | 38,157 | 4,479 | 21,403 | 5,664 | 12,025 | 9 | 214 |
| Total income statement | 157,527 | 5,623 | 62,094 | 47,771 | 15,700 | ( 1,751) | ( 884) |
| Incidence % on income statement | 24.2% | 79.7% | 34.5% | 11.9% | 76.6% | (0.5%) | (24.2%) |
| (Values in thousands of EUR) | Revenues | Other | Costs of raw | Costs of | Costs for use of | Other | Financial |
| from sales and | revenues | materials, | services | third parties | operating | income | |
| services | and | cons. and | assets | costs | (expenses) | ||
| income | goods for | ||||||
| Year 2016 | |||||||
| Moschino Group | 15,843 | 574 | 272 | 3,488 | 12,219 | 1 | ( 75) |
| Pollini Group | 388 | 2,590 | 17,628 | 28 | 307 | ||
| Aeffe Retail Group | 9,839 | 885 | 105 | 147 | |||
| Velmar S.p.A. | 131 | 244 | 121 | 43 | |||
| Aeffe Usa Inc. | 6,701 | 12 | 440 | ( 28) | |||
| Aeffe UK L.t.d. | 996 | 15 | 65 | 251 | 1 | ||
| Aeffe France S.a.r.l. | 636 | 4 | 95 | 761 | 34 | ||
| Total Group companies | 34,534 | 4,322 | 18,286 | 5,158 | 12,219 | 1 | 238 |
| Total income statement | 145,903 | 5,244 | 52,763 | 42,808 | 16,350 | ( 1,681) | ( 1,793) |
| Incidence % on income statement | 23.7% | 82.4% | 34.7% | 12.0% | 74.7% | (0.1%) | (13.3%) |
| (Values in thousands of EUR) | Other fixed assets | Trade receivables | Trade payables | Non-current financial |
|---|---|---|---|---|
| Year 2017 | liabilities | |||
| Moschino Group | 3,201 | 28,451 | ||
| Pollini Group | 27,202 | 7,775 | ||
| Aeffe Retail Group | 4,868 | 218 | ||
| Velmar S.p.A. | 935 | 1,121 | ||
| Aeffe Usa Inc. | 1,336 | 2,085 | ||
| Aeffe UK L.t.d. | 4,896 | 250 | ||
| Aeffe France S.a.r.l. | 1,861 | 2,898 | 439 | |
| Aeffe Japan Inc. | 30 | 322 | ||
| Total Group companies | 1,891 | 44,322 | 39,590 | 2,085 |
| Total balance sheet | 2,356 | 56,077 | 73,761 | 22,668 |
| Incidence % on balance sheet | 80.3% | 79.0% | 53.7% | 9.2% |
| (Values in thousands of EUR) | Other fixed assets | Trade receivables | Trade payables | |
| Year 2016 | ||||
| Moschino Group | 10,646 | 30,442 | ||
| Pollini Group | 4,000 | 26,977 | 8,435 | |
| Aeffe Retail Group | 5,899 | 37 | ||
| Velmar S.p.A. | 507 | 784 | ||
| Aeffe Usa Inc. | 783 | 1,356 | 2,371 | |
| Aeffe UK L.t.d. | 4,009 | 250 | ||
| Aeffe France S.a.r.l. | 2,079 | 2,499 | 480 | |
| Aeffe Japan Inc. | 518 | |||
| Total Group companies | 6,079 | 51,838 | 41,784 | 2,371 |
| Total balance sheet | 6,889 | 63,926 | 71,790 | 25,118 |
| Incidence % on balance sheet | 88.2% | 81.1% | 58.2% | 9.4% |
Transactions between the Company and related parties mainly concern the exchange of goods, the performance of services and the provision of financial resources. All transactions arise in the ordinary course of business and are settled on market terms i.e. on the terms that are or would be applied between two independent parties.
The following schedule summarises the Company's transactions with other related parties:
| (Values in thousands of EUR) | 31 December | 31 December | |
|---|---|---|---|
| 2017 | 2016 | transactions | |
| Shareholder Alberta Ferretti with Aeffe S.p.A. | |||
| Contract for the sale of artistic assets and design | 751 | 300 | Cost |
| Commercial | 205 | Payable | |
| Ferrim with Aeffe S.p.A. | |||
| Property rental | 1,789 | 1,779 | Cost |
| Commerciale Valconca with Aeffe S.p.A. | |||
| Revenues | 1,350 | 1,247 | Revenue |
| Cost of services | 73 | 74 | Cost |
| Property rental | 50 | 50 | Cost |
| Commercial | 735 | 763 | Receivable |
The following table indicates the data related on the incidence of related party transactions on the income statement, balance sheet and cash flow as of 31 December 2017 and 31 December 2016:
| (Values in thousands of EUR) | Balance | Value rel. | % | Balance | Value rel. | % |
|---|---|---|---|---|---|---|
| party | party | |||||
| 2017 | 2017 | 2016 | 2016 | |||
| Incidence of related party transactions on the income statement | ||||||
| Revenues from sales and services | 157,527 | 1,350 | 0.9% | 145,903 | 1,247 | 0.9% |
| Costs of services | 47,771 | 874 | 1.8% | 42,808 | 424 | 1.0% |
| Costs for use of third party assets | 15,700 | 1,789 | 11.4% | 16,350 | 1,779 | 10.9% |
| Incidence of related party transactions on the balance sheet | ||||||
| Lands | 16,945 | 0.0% | 16,945 | 0.0% | ||
| Other current receivables | 12,974 | 0.0% | 11,699 | 0.0% | ||
| Trade receivables | 56,077 | 735 | 1.3% | 63,926 | 763 | 1.2% |
| Trade payables | 73,761 | 205 | 0.3% | 71,790 | 0.0% | |
| Incidence of related party transactions on the cash flow | ||||||
| Cash flow (absorbed) / generated by operating activity | 7,552 | ( 1,080) | n.a. | 12,095 | ( 826) | n.a. |
| Cash flow (absorbed) / generated by investing activity | ( 1,646) | 0.0% | ( 1,754) | 0.0% | ||
| Incidence of related party transactions on the indebtedness | ||||||
| Net financial indebtedness | ( 57,802) | ( 1,080) | 1.9% | ( 67,330) | ( 826) | 1.2% |
Pursuant to Co.N.So.B Communication DEM/6064293 dated 28 July 2006, it is confirmed that the Company did not enter into any atypical and/or unusual transactions (as defined in such Communication) during 2017.
No significant non-recurring events, occurred the year, have to be reported.
| (Values in thousands of EUR) | 31 December | 31 December | Change | |
|---|---|---|---|---|
| 2017 | 2016 | Δ | % | |
| Guarantees given | ||||
| - on behalf of third parties | 7,679 | 5,261 | 2,418 | 46.0% |
| Total | 7,679 | 5,261 | 2,418 | 46.0% |
Aeffe S.p.A.: the Rimini Provincial Tax Commission with ruling no. 101/2/06 filed on 16 December 2006 cancelled notices of assessment 81203T100562 (RG no. 43/05) and 81203T100570 (RG no. 69/05) issued by the Rimini Tax Authorities in November 2004. The issues raised related to the 1999 and 2000 tax years concern costs deemed not allowable and the write-down of the investment in Moschino. The Rimini tax office has appealed against the sentence handed down by the Rimini Provincial Tax Commissioners. The Company presented its counter analysis within the legally-prescribed time period. The Bologna Regional Tax Commission, as set during the hearing of 27 September 2010, has rejected the appeal, confirming the first level ruling.
On 12 January 2012, the State Legal Bar disputed the validity of the judgment of the Bologna regional tax commission, by bringing an appeal before the Court of Cassation. The company, presented its countersubmission within the time limit established by the law.
The positive outcome at the first two levels of judgment means that the further development of this dispute can be considered in a positive light.
The Rimini Provincial Tax Commission with ruling no. 37/02/08 of 28 January 2008, filed on 9 April 2008, cancelled notices of assessment no. 81203T300390/06 and no. 81203T300393/06 issued by the Rimini Tax Authorities in June 2006. The assessments concern tax years 2001 and 2002, and are connected with nonrecognition of utilisation of the tax loss achieved during tax period 2000. The Rimini Tax Office has appealed against the sentence handed down by the Rimini Provincial Tax Commissioners with notification sent to the company on 29 May 2009. The appeal presented its counter analysis to the Regional Tax Commission of Bologna within the legally-prescribed time period. The Bologna Regional Tax Commission ordered on 14 April 2011 the suspension of this judgment pending resolution of the dispute ruling related to the notice of assessment 81203T100570/20042 (tax year 2000). The judgment was summarized by Section 1 of the Regional Tax Commission of Bologna with the hearing on the merits on 26 May 2016, after postponed to 1 December 2016 and again postponed to 15 December 2016.
It was again placed the suspension of the trial pending a ruling of the Supreme Court.
On 1 October 2008 the Rimini Tax Office notified the company of inspection minutes in relation to direct taxes and IRAP for FY 2005. The audits also concerned VAT and were mainly focused on relations with group companies and costs for services. Specifically, the Tax Office raised issues on non-pertinent costs totaling EUR 130 thousand and non-pertinent advertising costs amounting to roughly EUR 580 thousand tied to the disbursement of contributions to subsidiary companies. On 30 August 2010, the Major Taxpayers Office of the Emilia Romagna Regional Tax Department notified assessments TGB03B500172/2010 (IRAP), TGB08B500181/2010 (theoretical IRES) and TGB09B500185/2010 (actual IRES), containing the matters indicated above. The company challenged these assessments before the Bologna Provincial Tax Commissioners ahead of the legal deadline, trusting that the valid defensive reasoning will be accepted. On 13 July 2011, with tax return n. 137 2011 00031537 15 the company has been ordered to pay the amount registered in the roll by the Tax Office, provisionally awaiting trial, equal to half of the taxes in dispute, besides interests, for a total amount of EUR 161 thousand. This tax dispute has been disputed in December 2012 before the Bologna Provincial Tax Commission, who, with sentence no. 40/13/13, filed on 14 March 2013, has accepted the request of the company, annulling the contested measures with reference to the matter relating to intra-group costs for advertising contributions and confirming the contested measures related to the reliefs for costs to be incurred and intra-group costs for lease payments. The Office, with act of appeal notified to the company on 28 October 2013, appealed against the sentence of the Bologna Provincial Tax Commission requesting the reform in relation to the matter relating to intra-group costs for advertising contributions. The Company, on 23 December 2013, filed a timely notice of cross-appeal counterclaims and contextual interlocutory appeal. On 13 September 2016, the Company has formulated a proposed conciliation agreement aimed at achieving a settlement agreement that, if reached would not involve any outlay for the Company.
On 30 May 2014, following a general tax audit for IRES, IRAP and VAT for the tax years 2009, 2010 and 2011, by the Emilia Romagna Regional Management, Large Taxpayers Office, was issued a formal notice of assessment, with which the Tax Office has formulated remarks with recoveries of total taxes (IRES and IRAP) of EUR 210 thousand for 2009, EUR 350 thousand for 2010 and EUR 299 thousand for 2011. The complaints mainly concern the recovery of costs for commissions and advertising contributions granted to certain foreign subsidiaries and the failure to account for interest income on loans to foreign subsidiaries.
The company, on 29 July 2014, submitted comments pursuant to Article 12, paragraph 7, of Law 212 of 2000.
On 3 December 2014 the Large Taxpayers Office of Emilia Romagna Regional Management has notified, for 2009, the assessment notices n. TGB0EC700238/2014 (IRES) and n. TGB03C700239/2014 (IRAP), with a total recovery of taxes of EUR 210 thousand.
Both assessment notices were challenged before the competent Provincial Tax Commission of Bologna.
On 25 September 2015 the Large Taxpayers Office of Emilia Romagna Regional Management has notified, for 2010, the assessment notices n. TGB0EC700149/2015 (IRES) and n. TGB03C700150/2015 (IRAP), with a total recovery of taxes of EUR 350 thousand.
Both assessment notices were challenged before the competent Provincial Tax Commission of Bologna.
On 6 June 2016, the Large Taxpayers Office of Emilia Romagna Regional Management has notified, for 2011, the assessment notices n. TGB0EC700080/2016 (IRES) and n. TGB0CC700083/2016 (IRAP), with total tax recoveries of Euro 299 thousand. Both assessment notices have been challenged before the competent Provincial Tax Commission of Bologna.
It is noted that regarding the deductibility of advertising contributions to foreign subsidiaries (which constitute the bulk of disputes) the company has already received feedback from the Provincial Tax Commission of Bologna that, with judgment 40/13/13 filed on 14 March 2013 on the litigation referred to in paragraph above, has already rejected this type of dispute.
No provisions have been recorded in relation to the above disputes, since the defensive arguments put forward by the companies and its professional advisors are fully sustainable.
The directors, in receipt of the opinion of their fiscal and legal consultants, do not deem it likely that any liabilities will derive from the above-mentioned.
The following schedule, prepared pursuant to art. 149-duodecies of Co.N.So.B's Issuers' Regulation, shows the fees incurred in 2017 for auditing services and non-auditing services provided by the appointed firm for auditors. No services were provided by members of the auditing firm's network.
| (Values in thousands of EUR) | Service provider | 2017 fees |
|---|---|---|
| Audit | RIA GRANT THORNTON S.p.A. | 78 |
| Audit non-financial statement (DNF) | BDO Italia S.p.A | 10 |
| Non-financial statement (DNF) | BDO Italia S.p.A | 15 |
Total 103
requested by Co.N.So.B Communication no. DEM/6064293 dated 28 July 2006
| Company | Registere | Currency | Share Capital (EUR) | Net profit for the | Net equity (EUR) | Direct | Number of | Book value |
|---|---|---|---|---|---|---|---|---|
| d office | period (EUR) | interest | shares | |||||
| (Values in units of EUR) | ||||||||
| In subsidiaries companies: | ||||||||
| Italian companies | ||||||||
| Aeffe Retail S.p.A. | S.G. in Marignano (RN) Italy | |||||||
| At 31/12/16 | 8,585,150 | ( 271,393) | 8,840,952 | 100% | 8,585,150 | 26,593,345 | ||
| At 31/12/17 | 8,585,150 | 1,937,332 | 10,778,284 | 100% | 8,585,150 | 26,593,345 | ||
| Moschino S.p.A. | S.G. in Marignano (RN) Italy | |||||||
| At 31/12/16 | 66,817,108 | 699,024 | 71,372,739 | 70% | 14,000,000 | 46,857,175 | ||
| At 31/12/17 | 66,817,108 | ( 178,435) | 71,194,304 | 70% | 14,000,000 | 46,857,175 | ||
| Pollini S.p.A. | Gatteo (FC) Italy | |||||||
| At 31/12/16 | 6,000,000 | 4,853,842 | 25,838,027 | 100% | 6,000,000 | 41,945,452 | ||
| At 31/12/17 | 6,000,000 | 5,163,389 | 31,001,416 | 100% | 6,000,000 | 41,945,452 | ||
| Velmar S.p.A. | S.G. in Marignano (RN) Italy | |||||||
| At 31/12/16 | 120,000 | 131,844 | 456,393 | 100% | 60,000 | 8,290,057 | ||
| At 31/12/17 | 120,000 | 2,139,325 | 2,595,718 | 100% | 60,000 | 8,290,057 | ||
| Foreign companies | ||||||||
| Aeffe France S.a.r.l. | Paris (FR) | |||||||
| At 31/12/16 | 50,000 | ( 266,676) | ( 211,421) | 100% | n.d. * | 4,568,720 | ||
| At 31/12/17 | 50,000 | ( 174,840) | 63,739 | 100% | n.d. * | 5,018,720 | ||
| Aeffe UK L.t.d. | London (GB) | |||||||
| At 31/12/16 | GBP | 310,000 | ( 801,623) | ( 1,620,776) | 100% | n.d. * | ||
| 362,065 | ( 936,257) | ( 1,892,988) | 100% | n.d. * | 478,400 | |||
| At 31/12/17 | GBP | 310,000 | ( 916,753) | ( 2,537,526) | 100% | n.d. * | ||
| 349,414 | ( 1,033,310) | ( 2,860,151) | 100% | n.d. * | 478,400 | |||
| Aeffe USA Inc. | New York (USA) | |||||||
| At 31/12/16 | USD | 600,000 | ( 105,101) | 11,927,042 | 100% | n.d. * | ||
| 569,206 | ( 99,707) | 11,314,906 | 100% | n.d. * | 10,664,812 | |||
| At 31/12/17 | USD | 600,000 | ( 263,879) | 11,663,163 | 100% | n.d. * | ||
| 500,292 | ( 220,028) | 9,724,975 | 100% | n.d. * | 10,664,812 | |||
| Aeffe Japan Inc. | Tokyo (Japan) | |||||||
| At 31/12/16 | JPY | 3,600,000 | ( 9,638,376) | ( 278,628,577) | 100% | n.d. * | - | |
| 29,173 | ( 78,107) | ( 2,257,930) | 100% | n.d. * | - | |||
| At 31/12/17 | JPY | 3,600,000 | ( 2,613,232) | ( 281,241,809) | 100% | n.d. * | - | |
| 26,665 | ( 19,356) | ( 2,083,118) | 100% | n.d. * | - | |||
| Total interests in subsidiaries: | 139,847,961 |
* quota
requested by Co.N.So.B Communication no. DEM/6064293 dated 28 July 2006
| Company | Registere | Currency | Share Capital (EUR) | Net profit for the Net equity (EUR) |
Direct | Number of | Book value |
|---|---|---|---|---|---|---|---|
| d office | period (EUR) | interest | shares |
(Values in units of EUR)
| Conai | |||
|---|---|---|---|
| At 31/12/16 | 109 | ||
| At 31/12/17 | 109 | ||
| Caaf Emilia Romagna | |||
| At 31/12/16 | 0.688% | 5,000 | 2,600 |
| At 31/12/17 | 0.688% | 5,000 | 2,600 |
| Assoform | |||
| At 31/12/16 | 1.670% | n.d. * | 1,667 |
| At 31/12/17 | 1.670% | n.d. * | 1,667 |
| Consorzio Assoenergia Rimini | |||
| At 31/12/16 | 2.100% | n.d. * | 516 |
| At 31/12/17 | 2.100% | n.d. * | 516 |
| Effegidi | |||
| At 31/12/16 | 6,000 | ||
| At 31/12/17 | 6,000 | ||
| Total interests in other companies: | 10,892 | ||
| * quota | |||
| Total interests: | 139,858,853 |
| (Values in thousands of EUR) | Notes | 31 December | of which | 31 December | of which |
|---|---|---|---|---|---|
| related | related | ||||
| parties | parties | ||||
| 2017 | 2016 | ||||
| NON-CURRENT ASSETS | |||||
| Intangible fixed assets | |||||
| Trademarks | 3,149 | 3,274 | |||
| Other intangible fixed assets | 585 | 484 | |||
| Total intangible fixed assets | (1) | 3,734 | 3,759 | ||
| Tangible fixed assets | |||||
| Lands | 16,945 | 16,945 | |||
| Buildings | 21,871 | 22,370 | |||
| Leasehold improvements | 1,206 | 1,288 | |||
| Plant and machinary | 1,528 | 1,682 | |||
| Equipment | 63 | 46 | |||
| Other tangible fixed assets | 616 | 538 | |||
| Total tangible fixed assets | (2) | 42,230 | 42,870 | ||
| Other fixed assets | |||||
| Equity investments | (3) | 139,859 | 139,848 | 139,409 | 139,398 |
| Other fixed assets | (4) | 2,356 | 1,891 | 6,889 | 6,079 |
| Deferred tax assets | (5) | 2,565 | 2,279 | ||
| Total other fixed assets | 144,780 | 148,577 | |||
| TOTAL NON-CURRENT ASSETS | 190,744 | 195,206 | |||
| CURRENT ASSETS | |||||
| Stocks and inventories | (6) | 33,423 | 28,352 | ||
| Trade receivables | (7) | 56,077 | 45,057 | 63,926 | 52,601 |
| Tax receivables | (8) | 3,571 | 2,426 | ||
| Cash | (9) | 7,612 | 2,635 | ||
| Other receivables | (10) | 12,974 | 11,699 | ||
| TOTAL CURRENT ASSETS | 113,657 | 109,037 | |||
| TOTAL ASSETS | 304,402 | 304,243 |
| Notes | 31 December | of which | 31 December | of which |
|---|---|---|---|---|
| related | ||||
| parties | ||||
| 71,240 | 71,240 | |||
| 26,558 | 24,929 | |||
| 7,742 | 7,742 | |||
| 1,086 | 1,086 | |||
| 2,995 | 2,909 | |||
| ( 681) | ( 655) | |||
| 2,348 | 2,348 | |||
| 6,818 | 1,715 | |||
| (11) | 143,477 | 136,685 | ||
| 2,371 | ||||
| (15) | 695 | 761 | ||
| 34,911 | 37,771 | |||
| 41,784 | ||||
| (19) | 7,682 | 7,277 | ||
| 126,014 | 129,786 | |||
| 304,402 | 304,243 | |||
| (12) (5) (13) (14) (16) (17) (18) |
2017 25,371 123 7,483 3,943 22,668 73,761 1,825 42,746 |
related parties 2,085 39,795 |
2016 25,371 282 7,326 4,284 25,118 71,790 5,872 44,847 |
| (Values in thousands of EUR) | Notes | Full year | of which | Full year | of which |
|---|---|---|---|---|---|
| 2017 | related parties |
2016 | related parties |
||
| REVENUES FROM SALES AND SERVICES | (20) | 157,527 | 39,507 | 145,903 | 35,781 |
| Other revenues and income | (21) | 5,623 | 4,479 | 5,244 | 4,322 |
| TOTAL REVENUES | 163,150 | 151,148 | |||
| Changes in inventory | 4,935 | ( 2,422) | |||
| Costs of raw materials, cons. and goods for resale | (22) | ( 62,094) | ( 21,403) | ( 52,763) | ( 18,286) |
| Costs of services | (23) | ( 47,771) | ( 6,538) | ( 42,808) | ( 5,582) |
| Costs for use of third parties assets | (24) | ( 15,700) | ( 13,814) | ( 16,350) | ( 13,998) |
| Labour costs | (25) | ( 27,364) | ( 27,659) | ||
| Other operating expenses | (26) | ( 1,751) | ( 9) | ( 1,681) | ( 1) |
| Amortisation and write-downs | (27) | ( 2,661) | ( 2,203) | ||
| Financial income/(expenses) | (28) | ( 884) | 214 | ( 1,793) | 238 |
| PROFIT / LOSS BEFORE TAXES | 9,860 | 3,469 | |||
| Income taxes | (29) | ( 3,042) | ( 1,755) | ||
| NET PROFIT / LOSS | 6,818 | 1,715 |
| (Values in thousands of EUR) | Notes | Full Year | of which | Full Year | of which |
|---|---|---|---|---|---|
| related | related | ||||
| 2017 | parties | 2016 | parties | ||
| OPENING BALANCE | 2,633 | 1,339 | |||
| Profit before taxes | 9,860 | 3,469 | |||
| Amortisation | 2,661 | 2,203 | |||
| Accrual (+)/availment (-) of long term provisions and post employment benefits |
( 501) | ( 38) | |||
| Paid income taxes | ( 7,435) | 2,162 | |||
| Financial income (-) and financial charges (+) | 884 | 1,793 | |||
| Change in operating assets and liabilities | 2,083 | ( 5,555) | 2,506 | ( 1,879) | |
| CASH FLOW (ABSORBED)/ GENERATED BY OPERATING ACTIVITY | (30) | 7,552 | 12,095 | ||
| Increase (-)/ decrease (+) in intangible fixed assets | ( 380) | ( 282) | |||
| Increase (-)/ decrease (+) in tangible fixed assets | ( 816) | ( 1,072) | ( 130) | ||
| Investments (-)/ Disinvestments (+) | ( 450) | ( 450) | ( 400) | ( 400) | |
| CASH FLOW (ABSORBED)/ GENERATED BY INVESTING ACTIVITY | (31) | ( 1,646) | ( 1,754) | ||
| Other variations in reserves and profits carried-forward of shareholders' equity |
( 26) | ( 70) | |||
| Proceeds (+)/repayment (-) of financial payments | ( 4,551) | ( 2,085) | ( 8,451) | ( 2,371) | |
| Increase (-)/ decrease (+) in long term financial receivables | 4,533 | 4,188 | 1,267 | 851 | |
| Financial income (+) and financial charges (-) | ( 884) | ( 1,793) | |||
| CASH FLOW (ABSORBED)/GENERATED BY FINANCING ACTIVITY | (32) | ( 929) | ( 9,047) | ||
| CLOSING BALANCE | 7,610 | 2,633 |
| STATUTORY FINANCIAL | STATUTORY FINANCIAL | |
|---|---|---|
| (Values in units of EUR) | STATEMENTS 2016 | STATEMENTS 2015 |
| BALANCE SHEET | ||
| ASSETS | ||
| Intangible fixed assets | 127,574 | 162,405 |
| Tangible fixed assets | 2,248,163 | 1,547,778 |
| Equity investments | 63,397,878 | 60,695,372 |
| Non current assets | 65,773,615 | 62,405,555 |
| Trade receivables | 1,391,856 | 1,381,624 |
| Tax receivables | 341,690 | |
| Cash | 21,753 | 83,161 |
| Other receivables | 3,308 | 87,280 |
| Current assets | 1,416,917 | 1,893,755 |
| Total assets | 67,190,532 | 64,299,310 |
| LIABILITIES | ||
| Share capital | 100,000 | 100,000 |
| Share premium reserve | 62,529,081 | 63,195,446 |
| Other reserves | 15,038 | 15,038 |
| Approximations | ||
| Net profit/(loss) | ( 934,416) | ( 666,366) |
| Shareholders' equity | 61,709,703 | 62,644,118 |
| Provisions | 184,132 | 195,885 |
| Long term financial liabilities | ||
| Non-current liabilities | 184,132 | 195,885 |
| Trade payables | 5,296,697 | 1,459,307 |
| Current liabilities | 5,296,697 | 1,459,307 |
| Total shareholders' equity and liabilities | 67,190,532 | 64,299,310 |
| INCOME STATEMENT | ||
| Revenues from sales and services | ||
| Other revenues and income | 366,894 | 343,594 |
| Total revenues | 366,894 | 343,594 |
| Operating costs | ( 305,149) | ( 393,855) |
| Costs for use of third parties assets | ( 215,672) | ( 489,341) |
| Amortisation and write-downs | ( 165,803) | ( 76,175) |
| Other operating expenses | ( 15,112) | ( 24,894) |
| Financial income (expenses) | 47,040 | 213,695 |
| Profit (loss) from affiliates | ||
| Financial assets adjustments | ( 717,550) | ( 290,916) |
| Extraordinary profit/(loss) | ||
| Profit before taxes | ( 1,005,352) | ( 717,892) |
| Income taxes | 70,936 | 51,526 |
| Net profit/(loss) | ( 934,416) | ( 666,366) |
The undersigned Massimo Ferretti as President of the Board of Directors, and Marcello Tassinari as manager responsible for preparing Aeffe S.p.A.'s financial reports, pursuant to the provisions of art. 154 bis, clauses 3 and 4, of Legislative Decree n. 58 of 1998, hereby attest:
of the administrative and accounting procedures applied in the preparation of the statutory financial statements at 31 December 2017.
The undersigned moreover attest that the statutory financial statements:
The report on operations includes a reliable operating and financial review of the Company as well as a description of the main risks and uncertainties to which they are exposed.
8 March 2018
President of the board of directors Manager responsible for preparing Aeffe S.p.A. financial reports
Massimo Ferretti Marcello Tassinari
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