Management Reports • May 20, 2019
Management Reports
Open in ViewerOpens in native device viewer
Operating in a world market means satisfying diverse customers by listening to their many needs and requirements. With a broad and growing product range, Sabaf competes and achieves remarkable results in every country.
| Business and Financial situation of the Group 109 |
|
|---|---|
| The acquisition of Okida Elektronik112 | |
| Risk Factors112 | |
| Research and development114 | |
| Consolidated disclosure of non-financial information114 | |
| Personnel114 | |
| Environment114 | |
| Corporate governance 114 |
|
| Internal control system on financial reporting114 | |
| Model 231114 | |
| Personal data protection 115 |
|
| Derivative financial instruments115 | |
| Atypical or unusual transactions 115 |
|
| Secondary offices115 | |
| Management and coordination115 | |
| Intra-group transaction and related-party transactions 115 |
|
| Significant events after year-end and business outlook 115 |
|
| Business and financial situation of Sabaf S.p.A 115 |
|
| Reconciliation between parent company and consolidated shareholders' equity and net profit for the period117 |
|
| Use of the longer time limit for calling the shareholders' meeting | 117 |
| (€/000) | 2018 | % | 2017 | % | 2018-2017 CHANGE |
CHANGE % |
|---|---|---|---|---|---|---|
| Sales revenue | 150,642 | 100% | 150,223 | 100% | 419 | +0.3% |
| EBITDA | 29,959 | 19.9% | 30,955 | 20.6% | (996) | -3.2% |
| EBIT | 16,409 | 10.9% | 18,117 | 12.1% | (1,708) | -9.4% |
| Pre-tax profit | 20,960 | 13.9% | 17,804 | 11.9% | 3,156 | +17.7% |
| Profit attributable to the Group | 15,614 | 10.4% | 14,835 | 9.9% | 779 | +5.3% |
| Basic earnings per share (€) | 1.413 | 1.323 | 0.090 | +6.8% | ||
| Diluted earnings per share (€) | 1.413 | 1.323 | 0.090 | +6.8% |
In 2018, the Sabaf Group reported a sales revenue of € 150.6 million, an increase of 0.3% versus the figure of € 150.2 million in 2017 (-2.4% taking into consideration the same scope of consolidation). Profitability continued to be excellent, albeit slightly down: 2018 EBITDA amounted to € 30 million, equivalent to 19.9% of turnover, compared to € 31 million (20.6% of turnover) in 2017, EBIT reached € 16.4 million, equivalent to 10.9% of turnover, compared to € 18.1 million (12.1%) in 2017. Net profit of 2018, equal to € 15.6 million (10.4% of sales), is 5.3% higher than the € 14.8 million of 2017.
The subdivision of sales revenues by product line is shown in the table below:
| (€/000) | 2018 | % | 2017 | % | CHANGE % |
|---|---|---|---|---|---|
| Brass valves | 4,327 | 2.9% | 5,991 | 4.0% | -27.8% |
| Light alloy valves | 37,615 | 25.0% | 39,351 | 26.2% | -4.4% |
| Thermostats | 6,521 | 4.3% | 7,376 | 4.9% | -11.6% |
| Standard burners | 39,368 | 26.1% | 41,070 | 27.3% | -4.1% |
| Special burners | 27,585 | 18.3% | 27,184 | 18.1% | +1.5% |
| Accessories and other revenues | 15,422 | 10.3% | 15,267 | 10.2% | +1.0% |
| Total household gas parts | 130,838 | 86.9% | 136,239 | 90.7% | -4.0% |
| Professional gas parts | 5,331 | 3.5% | 5,079 | 3.4% | +5.0% |
| Hinges | 10,436 | 6.9% | 8,905 | 5.9% | +17.2% |
| Electronic components | 4,037 | 2.7% | 0 | 0.0% | |
| Total | 150,642 | 100% | 150,223 | 100% | +0.3% |
Product innovation continues to support sales of special and professional burners, while more mature products (brass valves and thermostats) show a marked decline. Sales of hinges increased significantly, supported by the positive trend of the North American market and the launch of new supply contracts. Following the acquisition of Okida Elektronik, from September 2018 the Group is also active in the production and sale of electronic components.
(€/000) 2018 % 2017 % CHANGE % Italy 31,579 21.0% 36,523 24.3% -13.5% Western Europe 12,337 8.2% 11,678 7.8% +5.6% Eastern Europe 46,301 30.7% 42,824 28.5% +8.1% Middle East and Africa 12,303 8.2% 13,009 8.6% -5.4% Asia and Oceania 7,590 5.0% 10,516 7.0% -27.8% South America 25,461 16.9% 22,938 15.3% +11.0% North America and Mexico 15,071 10.0% 12,735 8.5% +18.3% Total 150,642 100% 150,223 100% +0.3%
The geographical breakdown of revenues is shown below:
The sales analysis by geographical area shows an uneven trend in the various markets in which the Group operates. The best results were achieved on the American continent: sales in North America were sustained by the good performance of consumption; in South America, strong growth rates were recorded in the Andean countries, which more than offset the effects of the crisis in Argentina and a still stagnant demand in Brazil. Satisfactory growth rates were recorded in European markets, thanks to the consolidation of relationships with major customers and the contribution made by the acquisition in Turkey of Okida; only in Italy sales are down due to the sharp reduction in the production of domestic appliances. North Africa and the Middle East have shown signs of weakness, while the Group's presence on Asian markets is not yet sufficiently consolidated.
Average sales prices in 2018 were 0.2% lower compared to 2017.
The effective average purchase prices of the main raw materials (aluminium alloys, steel and brass) were on average higher than in 2017, with a negative impact of 0.7% of sales. Consumption (purchases plus change in inventories) as a percentage of sales was 38.4% in 2018, compared with 38.2% in 2017.
The impact of labour cost on sales decreased from 23.5% to 23.1%, by benefiting from greater automation of production.
The ratio of net financial expenses to turnover remained low, equal to 0.6% of turnover. During the year, the Group recorded in the income statement positive exchange differences of € 5.4 million, due to fluctuations in exchange rates with the Turkish lira and the U.S. dollar.
The tax rate in 2018 was 24.6% (16.2% in 2017, when the Group recorded the "Patent Box" benefit for the three-year period 2015 to 2017). The main tax benefits enjoyed by the Group are shown in Note 31 to the consolidated financial statements.
The Group's statement of financial position, reclassified based on financial criteria, is illustrated below:
| (€/000) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Non-current assets | 119,527 | 93,802 |
| Short-term assets 1 | 92,111 | 79,314 |
| Short-term liabilities 2 | (32,381) | (28,561) |
| Working capital 3 | 59,730 | 50,753 |
| Short-term financial assets | - | 67 |
| Provisions for risks and charges, Post-employment benefits, deferred taxes |
(6,387) | (4,034) |
| Net invested capital | 172,870 | 140,588 |
| Short-term net financial position | (9,180) | (5,830) |
| Medium/long-term net financial position | (44,344) | (19,703) |
| Net financial debt | (53,524) | (25,533) |
| Shareholders' equity | 119,346 | 115,055 |
Sum of Inventories, Trade receivables, Tax receivables and Other current receivables
Sum of Trade payables, Tax payables and Other liabilities
Difference between short-term assets and short-term liabilities
110
Cash flows for the financial year are summarised in the table below:
| (€/000) | 2018 | 2017 |
|---|---|---|
| Opening liquidity | 11,533 | 12,143 |
| Operating cash flow | 25,814 | 22,779 |
| Cash flow from investments | (11,467) | (13,944) |
| Free cash flow | 14,347 | 8,835 |
| Cash flow from financing activities | 21,579 | (6,516) |
| Okida acquisition | (24,077) | - |
| Foreign exchange differences due to translation | (9,956) | (2,929) |
| Cash flow for the period | 1,893 | (610) |
| Closing liquidity | 13,426 | 11,533 |
Net financial debt and liquidity shown in the tables above are defined in compliance with the net financial position detailed in Note 22 of the consolidated financial statements, as required by CONSOB memorandum of 28 July 2006.
At 31 December 2018, working capital stood at € 59.7 million compared with € 50.8 million at the end of the 2017: its impact on pro-forma turnover (i.e. considered the contribution of Okida for the entire financial year 2018) was 38% (33.8% in 2017).
The Group's financial debt is mainly medium to long-term, the most widely used form of financing is unsecured loans repayable in 5 years.
In 2018, the Group invested € 24.1 million to acquire 100% of the Turkish company Okida Elektronik; the purposes of this transaction are closely examined in the next paragraph of this report.
The Sabaf Group also carried out organic investments of € 11.5 million: the main investments in the financial year were aimed at the further automation of production of light alloy valves and interconnection of production plants with management systems (Industry 4.0). Other investments were made in the production of presses for new burners. Investments in maintenance and replacement, so that production equipment is kept constantly up to date and efficient, are systematic.
During the financial year, the Group paid out dividends of € 6.1 million and purchased treasury shares for € 2.4 million; the net financial debt was € 53.5 million, versus € 25.5 million in 31 December 2017.
Shareholders' equity totalled € 119.3 million at 31 December 2018; the ratio between the net financial debt and the shareholders' equity was 0.45 versus 0.22 in 2017.
| 2018 | 2017 | |
|---|---|---|
| ROCE (return on capital employed) | 9.5% | 12.9% |
| Dividends per share (€) | 0.55 4 | 0.55 |
| Net debt/EBITDA | 1.79 | 0.82 |
| Net debt/equity ratio | 45% | 22% |
| Market capitalisation (31/12)/equity ratio | 1.44 | 2.00 |
| Change in turnover | +0.2% | +14.7% |
Please refer to the introductory part of the Annual Report for a detailed examination of other key performance indicators.
In September 2018, the Group acquired 100% of Okida Elektronik, a leader in Turkey in the design, manufacture and sale of electronic control boards, controls, timers, display units and power units for ovens, hoods, vacuum cleaners, refrigerators and freezers. The acquisition of Okida represents the first step towards the implementation of the 2018-2022 Business Plan, in line with the strategy of expanding the range of products in components for household appliances and the acquisition of e-skills.
Okida was consolidated as from 4 September 2018, contributing € 4 million to 2018 consolidated turnover. The company ended the entire 2018 financial year with sales of € 11.1 million.
The results of the risk identification and assessment process carried out in 2018 showed that the Sabaf Group is exposed to certain risk factors, which can be traced back to the macro-categories described below.
Risks deriving from the external context in which Sabaf operates, which could have a negative impact on the economic and financial sustainability of the business in the medium/long-term. The most significant risks in this category are related to general economic conditions, trend in demand and product competition, in addition to the risks related to Sabaf's presence in Turkey and, more generally, to instability in the emerging countries in which the Group operates.
Strategic risks that could negatively impact Sabaf's short to medium term performance, including, for example: the loss of business opportunities in the Chinese market, risks related to the growth through acquisitions and the protection of product exclusivity.
Risks related to Sabaf's contractual liabilities and compliance with the regulations applicable to the Group, including: Legislative Decree 231/2001, Law 262/2005, HSE regulations, regulations applicable to listed companies, tax regulations, labour regulations, international trade regulations and intellectual property regulations.
Risks of suffering losses due to inadequate or malfunctioning processes, human resources and information systems. This category includes financial risks (e.g. losses deriving from the volatility of the price of raw materials used by the Group in its production processes, from fluctuations in exchange rates or from the management of trade receivables), risks related to production processes (e.g. product liability), organisational risks (e.g. loss of key staff and expertise and the difficulty of replacing them, resistance to change by the organisation), risks related to purchases (e.g. relations with suppliers
and contractors) and Information Technology risks.
The main risks are described in detail below as well as the relevant risk management actions that are currently being implemented.
The Group's financial position, results and cash flows are affected by several factors related to the performance of the sector, including:
To cope with this situation, the Group aims to retain and reinforce its leadership position wherever possible through:
Turkey represents the main production hub of household appliances at the European level; over the years, local industry attracted heavy foreign investments and favoured the growth of important manufacturers. In this context, the Sabaf Group created a production plant in Turkey in 2012 that realises today 10% of total production. In 2018, the Group also acquired 100% of Okida Elektronik, a leader in Turkey in the design, manufacture and sale of electronic control boards for household appliances.
With the acquisition of Okida, Turkey represents approximately 15% of the Group's production and more than 25% of its total sales. The social and political tensions in Turkey over the last few years had no effect on the activities of the Sabaf Group, which continued normally. In consideration of the strategic importance of this Country, the management assessed the risks that could arise from any difficulties/impossibilities of operating in Turkey and envisaged actions to mitigate this risk.
More generally, the Group is exposed to risks related to (political, economic, tax, regulatory) instability in some emerging countries where it produces or sells. Any embargoes or major political or economic instability, or changes in the regulatory and/or local law systems, or new tariffs or taxes imposed could negatively affect a portion of Group turnover and the related profitability.
Sabaf has taken the following measures to mitigate the above risk factors:
The Sabaf Group's business model focuses on the production of gas cooking components (valves and burners); therefore, there is the risk of not correctly assessing the threats and opportunities deriving from the competition of alternative products (alternative solutions to gas cooking, such as induction), with the consequence of not adequately making use of any market opportunities and/or suffering from negative impacts on margins and turnover.
In recent years, the Group has launched a number of projects aimed at analysing the opportunities and threats related to competition of products other than gas cooking, including:
With a production of over 20 million hobs per year, China is one of the world's most important markets. After many years of commercial presence only, in 2015 Sabaf started the on-site production of a special burner for the Chinese market. However, there is a risk that Sabaf's investments in the opening of its Chinese headquarters and the start of production will not generate - at least in the short/medium term - an adequate economic return.
To support the development of the Group's Chinese subsidiary and ensure the economic return on the investments made, Sabaf is carrying out the following actions:
The strategic plan developed by the Group's management includes the possibility of growth through acquisitions, also in related sectors. This strategic choice involves specific risk profiles for Sabaf, due to:
The Group adopted solutions and instruments to mitigate the above risks, such as:
Sabaf's business model based the protection of product exclusivity mainly on design capacity and the internal production of special machines used in manufacturing processes, thanks to its unique know-how that competitors would find difficult to replicate.
There is a risk that some Group products, although patented, will be copied by competitors. Exposure to this risk increased as a result of the opening up of trade in countries where it is difficult to enforce industrial patent rights.
Sabaf developed and maintained a structured model to manage innovation and protect intellectual property. Moreover, the Group periodically monitors the patent strategies adopted/to be adopted based on the assessments of cost/opportunity.
The Sabaf Group is exposed to a series of financial risks, due to:
For more information on financial risks and the related management methods, see Note 35 of the consolidated financial statements as regards disclosure for the purposes of IFRS 7.
The most important research and development projects carried out in 2018 were as follows:
The improvement in production processes continued throughout the Group, accompanied by the development and internal production of machinery, tools and presses.
Development costs to the tune of € 340,000 were capitalised, as all the conditions set by international accounting standards were met; in other cases, they were charged to the income statement.
Starting from 2017, the Sabaf Group publishes the consolidated disclosure of non-financial information required by Legislative Decree no. 254/2016 in a report separate from this Management Report. The consolidated disclosure of non-financial information provides all the information needed to ensure understanding of the Group's activities, performance, results and impact, with particular reference to environmental, social and personnel aspects, respect for human rights and the fight against active and passive corruption, which are relevant considering the Group's activities and characteristics.
The consolidated disclosure of non-financial information is included in the same file in which the management report, the consolidated financial statements, the separate financial statements of the parent company Sabaf S.p.A. and the remuneration report are published.
It should be noted that since 2005, the Sabaf Group has drawn up an Annual Report on its economic, social and environmental sustainability performance.
In 2018, the Sabaf Group suffered no on-the-job deaths or serious accidents that led to serious or very serious injuries to staff for which the Group was definitively held responsible, nor was it held responsible for occupational illnesses of employees or former employees or causes of mobbing.
For all other information, please refer to the Consolidated disclosure of non-financial information.
In 2018 there was no:
For all other information, please refer to the Consolidated disclosure of non-financial information.
For a complete description of the corporate governance system of the Sabaf Group, see the report on corporate governance and on the ownership structure, available in the Investor Relations section of the company website.
The internal control system on financial reporting is described in detail in the report on corporate governance and on ownership structure.
With reference to the "conditions for listing shares of parent companies set up and regulated by the law of states not belonging to the European Union" pursuant to articles 36 and 39 of the Market Regulations, the Company and its subsidiaries have administrative and accounting systems that can provide the public with the accounting situations prepared for drafting the consolidated report of the companies that fall within the scope of this regulation and can regularly supply management and the auditors of the Parent Company with the data necessary for drafting the consolidated financial statements. The Sabaf Group has also set up an effective information flow to the independent auditor as well as continuous information on the composition of the corporate bodies of the subsidiaries, together with information on the offices held, and requires the systematic and centralised gathering as well as regular updates of the formal documents relating to the articles of association and granting of powers to corporate bodies. The conditions exist as required by article 36, letters a), b) and c) of the Market Regulations issued by CONSOB. During the year, the Group acquired Okida Elektronik, a company based in Turkey, and is fully integrating its financial reporting system.
The Organisation, Management and Control Model, adopted pursuant to Legislative Decree 231/2001, is described in the report on company governance and on the ownership structure, which should be reviewed for reference.
114
During 2018, Sabaf S.p.A. updated its personal data management and protection system, adopting an Organisational Model consistent with the provisions of European Regulation 2016/679 (General Data Protection Regulation - GDPR). Specific projects are being implemented for all Group companies for which the GDPR is applicable.
For the comments on this item, please see Note 35 of the consolidated financial statements.
Sabaf Group companies did not execute any unusual or atypical transactions in 2018.
Neither Sabaf S.p.A. nor its subsidiaries have secondary operating offices.
Sabaf S.p.A. is not subject to management and coordination by other companies. Sabaf S.p.A. exercises management and coordination activities over its Italian subsidiaries, Faringosi Hinges s.r.l., Sabaf Immobiliare s.r.l. and A.R.C. s.r.l.
The relationships between the Group companies, including those with the parent company, are regulated under market conditions, as well as the relationships with related parties, defined in accordance with the accounting standard IAS 24. The details of the intra-group transactions and other related-party transactions are given in Note 36 of the consolidated financial statements and in Note 37 of the separate financial statements of Sabaf S.p.A.
The start of 2019 shows signs of a slowdown in demand in some of the main markets in which the Group operates, including Turkey.
For 2019 the Group estimates that it will be able to achieve sales ranging from € 160 to € 165 million and a gross operating profit (EBITDA %) of more than 20%.
These forecasts assume a macroeconomic scenario not affected by unpredictable events. If the economic situation were to change significantly, actual figures might diverge from forecasts.
| (€/000) | 2018 | 2017 | CHANGE | % CHANGE |
|---|---|---|---|---|
| Sales revenue | 110,065 | 115,687 | (5,622) | -4.9% |
| EBITDA | 13,644 | 17,477 | (3,833) | -21.9% |
| EBIT | 5,543 | 8,050 | (2,507) | -31.1% |
| Pre-tax profit (EBT) | 9,227 | 9,072 | 155 | +1.7% |
| Net Profit | 8,040 | 8,001 | 39 | +0.5% |
The reclassification based on financial criteria is illustrated below:
| (€/000) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Non-current assets 5 | 96,495 | 89,361 |
| Non-current financial assets | 5,367 | 1,848 |
| Short-term assets 6 | 64,927 | 58,875 |
| Short-term liabilities 7 | (25,626) | (23,643) |
| Working capital 8 | 39,301 | 35,232 |
| Provisions for risks and charges, Post-employment benefits, deferred taxes |
(3,278) | (2,637) |
| Net invested capital | 138,885 | 123,804 |
| Short-term net financial position | (12,056) | (15,239) |
| Medium/long-term net financial position | (33,789) | (16,478) |
| Net financial position | (45,845) | (31,717) |
| Shareholders' equity | 92,040 | 92,087 |
5 Excluding Financial assets
6 Sum of Inventories, Trade receivables, Tax receivables and Other current receivables
Sum of Trade payables, Tax payables and Other liabilities
8 Difference between short-term assets and short-term liabilities
Cash flows for the financial year are summarised in the table below:
| (€/000) | 2018 | 2017 |
|---|---|---|
| Operating cash flow | 2,697 | 1,797 |
| Cash flow from investments | 8,796 | 12,554 |
| Free cash flow | (15,219) | (9,319) |
| Free cash flow | (6,423) | 3,235 |
| Cash flow from financing activities | 5,685 | (2,335) |
| Cash flow for the period | (738) | 900 |
| Closing liquidity | 1,959 | 2,697 |
Net financial debt and the net short-term financial position shown in the tables above are defined in compliance with the net financial position detailed in Note 22 of the separate financial statements, as required by the CONSOB memorandum of 28 July 2006.
The 2018 financial year ended with a decrease in turnover of 4.9% compared with 2017. The sales analysis by product category shows a marked decrease in more mature products (brass valves and thermostats), while more innovative product families (light alloy valves and special burners) show an improved performance. The decrease in sales had a negative impact on gross operating profitability: EBITDA was € 13.6 million, or 12.4% of turnover (€ 17.5 million in 2017, or 15.1%).
EBIT of 2018 was € 5.5 million, or 5% of turnover (€ 8.1 million in 2017, or 7%).
The impact of the labour costs on sales increased from 24.8% to 25.8%. Net finance expense as a percentage of turnover was minimal, at 0.8%, given the low level of financial debt and the low interest rates.
During 2018, the Company received dividends of € 3 million from the subsidiary Sabaf Immobiliare and € 1.3 million from the new investee Okida Elektronik.
The actual tax burden related to 2018 was 12.9% (11.8% in 2017). Net profit was € 8 million euro, or 7.3% of turnover (substantially unchanged from 2017, when it represented 6.9% of turnover).
In 2018, Sabaf S.p.A. invested over € 8 million in plant and equipment. The main investments in the financial year were aimed at increasing the production capacity of special burners, at the further automation of production of light alloy valves and interconnecting production plants with management systems (Industry 4.0). Other investments were made in the production of presses for new burners. Investments in maintenance and replacement, so that production equipment is kept constantly up to date and efficient, are systematic.
At 31 December 2018, working capital stood at € 39.3 million compared with € 35.2 million at the end of the previous year: its percentage impact on turnover stood at 35.7% from 30.5% at the end of 2017.
The net financial debt was € 45.8 million, compared with € 31.7 million on 31 December 2017.
At the end of the year, the shareholders' equity amounted to € 92 million, compared with € 92.1 million in 2017. The net financial debt/shareholders' equity ratio was 49.8%, 34% at the end of 2017.
Pursuant to the CONSOB memorandum of 28 July 2006, a reconciliation statement of the result of the 2018 financial year and Group shareholders' equity at 31 December 2018 with the same values of the parent company Sabaf S.p.A. is given below:
| 31.12.2018 | 31.12.2017 | |||
|---|---|---|---|---|
| Description | Profit for the year |
Shareholders' equity |
Profit for the year |
Shareholders' equity |
| Profit and shareholders' equity of parent company Sabaf S.p.A. | 8,040 | 92,039 | 8,001 | 92,087 |
| Equity and consolidated company results 9 | 15,324 | 113,123 | 7,971 | 74,144 |
| Elimination of the carrying value of consolidated equity investments | 640 | (83,622) | 682 | (48,596) |
| Put option on A.R.C. minorities | 55 | (1,818) | (241) | (1,763) |
| Intercompany eliminations | (8,005) | (427) | (1,497) | (817) |
| Other adjustments | (256) | 51 | 0 | 0 |
| Minority interests | (184) | (1,644) | (81) | (1,460) |
| Profit and shareholders' equity attributable to the Group | 15,614 | 117,702 | 14,835 | 113,595 |
Pursuant to the second paragraph of Article 2364 of the Italian Civil Code, in consideration of the need to consolidate the financial statements of Group companies and to prepare all supporting documentation, the directors intend to use the longer time limits granted to companies required to prepare the consolidated financial statements for calling the ordinary shareholders' meeting to approve the 2018 financial statements. The Shareholders' Meeting will be convened on a single date for 7 May 2019.
While thanking employees, the Board of Statutory Auditors, the independent auditors, and the Supervisory Authorities for their effective collaboration, we ask the shareholders to approve the financial statements for the year ended 31 December 2018, with the proposal to allocate the profit for the year of € 8,040,215 in the following manner:
Ospitaletto, 26 March 2019
The Board of Directors
9 Figures adjusted to allocate the consolidation difference to the equity of the acquired companies
We do not know the future, but we are preparing to face it by improving skills and increasing knowledge and experience daily. Knowledge allows us to continue production with an ever-increasing specialisation.
| Group structure and corporate bodies | 121 |
|---|---|
| Consolidated statement of financial position122 | |
| Consolidated income statement123 | |
| Consolidated statement of comprehensive income124 | |
| Statement of changes in consolidated shareholders' equity 124 |
|
| Consolidated cash flow statement125 | |
| Explanatory Notes 126 |
|
| Certification of the Consolidated Financial Statements | 155 |
| Independent auditor's report on the Consolidated Financial Statements at 31 December 2018156 |
| Faringosi Hinges s.r.l. | 100% |
|---|---|
| Sabaf do Brasil Ltda. | 100% |
| Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf Turkey) |
100% |
| Sabaf Appliance Components Trading (Kunshan) Co., Ltd. (in liquidation) |
100% |
| Sabaf Appliance Components (Kunshan) Co., Ltd. | 100% |
| Sabaf Immobiliare s.r.l. | 100% |
|---|---|
| A.R.C. s.r.l. | 70% |
| Okida Elektronik Sanayi ve Tickaret A.S | 100% |
| Non-consolidated companies | |
| Sabaf US Corp. Handan ARC Burners Co., Ltd. |
100% 35.5% |
| Director | Alessandro Potestà |
|---|---|
| Director* | Carlo Scarpa |
| Director* | Daniela Toscani |
| Stefania Triva | |
* independent directors
| (€/000) | NOTES | 31.12.2018 | 31.12.2017 | |
|---|---|---|---|---|
| ASSETS | ||||
| NON-CURRENT ASSETS | ||||
| Property, plant and equipment | 1 | 70,765 | 73,069 | |
| Investment property | 2 | 4,403 | 5,697 | |
| Intangible assets | 3 | 39,054 | 9,283 | |
| Equity investments | 4 | 380 | 281 | |
| Non-current financial assets | 10 | 120 | 180 | |
| Non-current receivables | 5 | 188 | 196 | |
| Deferred tax assets | 21 | 4,617 | 5,096 | |
| TOTAL NON-CURRENT ASSETS | 119,527 | 93,802 | ||
| CURRENT ASSETS | ||||
| Inventories | 6 | 39,179 | 32,929 | |
| Trade receivables | 7 | 46,932 | 42,263 | |
| Tax receivables | 8 | 4,466 | 3,065 | |
| Other current receivables | 9 | 1,534 | 1,057 | |
| Current financial assets | 10 | 3,511 | 67 | |
| Cash and cash equivalents | 11 | 13,426 | 11,533 | |
| TOTAL CURRENT ASSETS | 109,048 | 90,914 | ||
| ASSETS HELD FOR SALE | 0 | 0 | ||
| TOTAL ASSETS | 228,575 | 184,716 | ||
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||||
| SHAREHOLDERS' EQUITY | ||||
| Share capital | 12 | 11,533 | 11,533 | |
| Retained earnings, Other reserves | 90,555 | 87,227 | ||
| Profit for the year | 15,614 | 14,835 | ||
| Total equity interest of the Group | 117,702 | 113,595 | ||
| Minority interests | 1,644 | 1,460 | ||
| TOTAL SHAREHOLDERS' EQUITY | 119,346 | 115,055 | ||
| NON-CURRENT LIABILITIES | ||||
| Loans | 14 | 42,406 | 17,760 | |
| Other financial liabilities | 15 | 1,938 | 1,943 | |
| Post-employment benefit and retirement reserves |
16 | 2,632 | 2,845 | |
| Provisions for risks and charges | 17 | 725 | 385 | |
| Deferred tax liabilities | 21 | 3,030 | 804 | |
| Total non-current liabilities | 50,731 | 23,737 | ||
| CURRENT LIABILITIES | ||||
| Loans | 14 | 18,435 | 17,288 | |
| Other financial liabilities | 15 | 7,682 | 75 | |
| Trade payables | 18 | 21,215 | 19,975 | |
| Tax payables | 19 | 3,566 | 1,095 | |
| Other payables | 20 | 7,600 | 7,491 | |
| TOTAL CURRENT LIABILITIES | 58,498 | 45,924 | ||
| LIABILITIES HELD FOR SALE | 0 | 0 | ||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
228,575 | 184,716 |
122
| (€/000) | NOTES | 2018 | 2017 | |||
|---|---|---|---|---|---|---|
| INCOME STATEMENT COMPONENTS | ||||||
| OPERATING REVENUE AND INCOME | ||||||
| Revenue | 23 | 150,642 | 150,223 | |||
| Other income | 24 | 3,369 | 3,361 | |||
| Total operating revenue and income | 154,011 | 153,584 | ||||
| OPERATING COSTS | ||||||
| Materials | 25 | (62,447) | (59,794) | |||
| Change in inventories | 4,603 | 2,380 | ||||
| Services | 26 | (31,297) | (30,227) | |||
| Payroll costs | 27 | (34,840) | (35,328) | |||
| Other operating costs | 28 | (1,670) | (1,134) | |||
| Costs for capitalised in-house work | 1,599 | 1,474 | ||||
| TOTAL OPERATING COSTS | (124,052) | (122,629) |
| OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION, CAPITAL GAINS/ LOSSES, AND WRITE-DOWNS/WRITE-BACKS OF NON-CURRENT ASSETS |
29,959 | 30,955 | |
|---|---|---|---|
| Depreciations and amortisation | 1, 2, 3 | (12,728) | (12,826) |
| Capital gains on disposals of non-current assets | 28 | (12) | |
| Value adjustments of non-current assets | 2 | (850) | 0 |
| EBIT | 16,409 | 18,117 | |
|---|---|---|---|
| Financial income | 373 | 214 | |
| Financial expenses | 29 | (1,206) | (804) |
| Exchange rate gains and losses | 30 | 5,384 | 274 |
| Profits and losses from equity investments | 0 | 3 |
| PROFIT BEFORE TAXES | 20,960 | 17,804 | |
|---|---|---|---|
| Income tax | 31 | (5,162) | (2,888) |
| PROFIT FOR THE YEAR | 15,798 | 14,916 |
|---|---|---|
| of which: | ||
| Minority interests | 184 | 81 |
| PROFIT ATTRIBUTABLE TO THE GROUP | 15,614 | 14,835 |
| EARNINGS PER SHARE (EPS) | 32 | ||
|---|---|---|---|
| Base | 1.413 euro | 1.323 euro | |
| Diluted | 1.413 euro | 1.323 euro |
| (€/000) | 2018 | 2017 |
|---|---|---|
| PROFIT FOR THE YEAR | 15,798 | 14,916 |
| Total profits/losses that will not be subsequently reclassified under profit (loss) for the year |
||
| Actuarial post-employment benefit reserve evaluation | 32 | 82 |
| Tax effect | (8) | (20) |
| 24 | 62 | |
| Total profits/losses that will be subsequently reclassified under profit (loss) for the year |
||
| Forex differences due to translation of financial statements in foreign currencies |
(3,940) | (4,806) |
| TOTAL OTHER PROFITS/(LOSSES) NET OF TAXES FOR THE YEAR | (3,916) | (4,744) |
| TOTAL PROFIT | 11,882 | 10,172 |
| of which: | ||
| Minority interests | 184 | 81 |
| TOTAL PROFIT ATTRIBUTABLE TO THE GROUP | 11,698 | 10,091 |
| (€/000) | Share capital |
Share premium reserve |
Legal reserve |
Treasury shares |
Translation reserve |
Post-employment benefit discoun ting reserve |
Other reserves |
Profit for the year |
Total Group shareholders' equity |
Minority interests |
Total sharehol ders' equity |
|---|---|---|---|---|---|---|---|---|---|---|---|
| At 31 December 2016* | 11,533 | 10,002 | 2,307 | (2,399) | (7,388) | (612) | 88,561 | 8,994 | 110,998 | 1,379 | 112,377 |
| Allocation of 2016 profit | |||||||||||
| - dividends paid out | (5,384) | (5,384) | (5,384) | ||||||||
| - carried forward | 3,610 | (3,610) | 0 | 0 | |||||||
| Purchase of treasury shares | (2,110) | (2,110) | (2,110) | ||||||||
| Total profit at 31 December 2017 |
(4,806) | 62 | 14,835 | 10,091 | 81 | 10,172 | |||||
| At 31 December 2017 | 11,533 | 10,002 | 2,307 | (4,509) | (12,194) | (550) | 92,171 | 14,835 | 113,595 | 1,460 | 115,055 |
| Allocation of 2017 profit | |||||||||||
| - 2017 Dividends paid out | (6,071) | (6,071) | (6,071) | ||||||||
| - Carried forward | 8,764 | (8,764) | 0 | 0 | |||||||
| Purchase of treasury shares | (2,359) | (2,359) | (2,359) | ||||||||
| Stock grant plan | 321 | 321 | 321 | ||||||||
| Other changes | 518 | 518 | 518 | ||||||||
| Total profit at 31 December 2018 |
(3,940) | 24 | 15,614 | 11,698 | 184 | 11,882 | |||||
| At 31 December 2018 | 11,533 | 10,002 | 2,307 | (6,868) | (16,134) | (526) | 101,774 | 15,614 | 117,702 | 1,644 | 119,346 |
* figures recalculated pursuant to IFRS 3, in order to retrospectively take into account the effects resulting from the fair value measurement of A.R.C's assets and liabilities, at the acquisition date previously considered provisional.
| (€/000) | 2018 | 2017 |
|---|---|---|
| Cash and cash equivalents at beginning of year | 11,533 | 12,143 |
| Profit for the year | 15,798 | 14,916 |
| Adjustments for: | ||
| - Depreciation and amortisation | 12,728 | 12,826 |
| - Write-downs of non-current assets | 850 | - |
| - Realised gains/losses | (28) | 12 |
| - Valuation of the stock grant plan | 321 | - |
| - Net financial income and expenses | 833 | 590 |
| - Income tax | 5,162 | 2,888 |
| Change in post-employment benefit reserve | (241) | (189) |
| Change in risk provisions | 340 | (49) |
| Change in trade receivables | (3,003) | (5,421) |
| Change in inventories | (4,374) | (1,445) |
| Change in trade payables | 556 | 998 |
| Change in net working capital | (6,821) | (5,868) |
| Change in other receivables and payables, deferred tax | 2,537 | 1,029 |
| Payment of taxes | (4,860) | (3,058) |
| Payment of financial expenses | (1,178) | (532) |
| Collection of financial income | 373 | 214 |
| Cash flow from operations | 25,814 | 22,779 |
| Investments in non-current assets | ||
| - intangible | (589) | (860) |
| - tangible | (11,348) | (13,604) |
| - financial | (99) | 0 |
| Disposal of non-current assets | 569 | 520 |
| Cash flow absorbed by investments | (11,467) | (13,944) |
| Repayment of loans | (19,579) | (16,526) |
| Raising of loans | 52,972 | 17,751 |
| Short-term financial assets | (3,384) | (247) |
| Purchase of treasury shares | (2,359) | (2,110) |
| Payment of dividends | (6,071) | (5,384) |
| Cash flow absorbed by financing activities | 21,579 | (6,516) |
| Acquisition of Okida Elektronik | (24,077) | 0 |
| Foreign exchange differences due to translation | (9,956) | (2,929) |
| Net financial flows for the year | 1,893 | (610) |
| Cash and cash equivalents at end of year (Note 10) | 13,426 | 11,533 |
| Current financial debt | 22,606 | 17,363 |
| Non-current financial debt | 44,344 | 19,703 |
| Net financial debt (Note 22) | 53,524 | 25,533 |
The consolidated financial statements of the Sabaf Group for the financial year 2018 have been prepared in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Union. Reference to IFRS also includes all current International Accounting Standards (IAS). The financial statements have been prepared in euro, the current currency in the economies in which the Group mainly operates, rounding amounts to the nearest thousand, and are compared with consolidated financial statements for the previous year, prepared according to the same standards. They consist of the statement of financial position, the income statement, the statement of changes in shareholders' equity, the cash flow statement and these explanatory notes. The financial statements have been prepared on a historical cost basis except for some revaluations of property, plant and equipment undertaken in previous years, and are considered a going concern. The Group assessed that it is a going concern (as defined by paragraphs 25 and 26 of IAS 1), also due to the strong competitive position, high profitability and solidity of the financial structure.
The Group has adopted the following formats:
Use of these formats permits the most meaningful representation of the Group's operating results, financial position and cash flows.
The scope of consolidation at 31 December 2018 comprises the parent company Sabaf S.p.A. and the following companies controlled by Sabaf S.p.A.:
The only change in the scope of consolidation compared to 31 December 2017 is related to Okida Elektronik, of which the Group acquired control on 4 September 2018.
Sabaf U.S. is not consolidated since it is irrelevant for the purposes of the consolidation.
Handan A.R.C. Ltd, Chinese company in which the Group holds a 35.5% share, was measured at cost in that at 31 December 2018 operations are still in their embryonic stages, and therefore the company is considered irrelevant for consolidation purposes.
The companies in which Sabaf S.p.A. simultaneously possess the following three elements are considered subsidiaries: (a) power over the company; (b) exposure or rights to variable returns resulting from involvement therein; (c) ability to affect the size of these returns by exercising power. If these subsidiaries exercise a significant influence, they are consolidated as from the date in which control begins until the date in which control ends so as to provide a correct representation of the Group's operating results, financial position and cash flows.
The data used for consolidation have been taken from the income statements and statements of financial position prepared by the directors of the individual subsidiary companies. These figures have been appropriately amended and restated, when necessary, to align them with international accounting standards and with uniform group-wide classification criteria.
The criteria applied for consolidation are as follows:
Starting from these financial statements, Okida Elektronik, company active in the design and production of electronic components for household appliances, of which the Group acquired 100% control on 4 September 2018, was consolidated 1 . The Report on Operations describes the purpose of the transaction and the expected synergies.In these consolidated financial statements, the temporary evaluation of Okida in accordance with IFRS 3 revised, namely recognising the fair value of assets, liabilities and contingent liabilities at the acquisition date, was carried out. The final evaluation will be carried out within 12 months from the acquisition date. The effects of this operation are shown in the following table 2 :
| Original values at 04.09.2018 |
Purchase Price Allocation | Fair value of assets and liabilities acquired |
||
|---|---|---|---|---|
| ASSETS | ||||
| Property, plant, and equipment | 146 | 146 | ||
| Intangible assets | 409 | 8,638 | 9,047 | |
| - Customer Relationship | 6,805 | |||
| - Know How | 891 | |||
| - Brand | 942 | |||
| Inventories | 1,876 | 1,876 | ||
| Trade receivables | 1,666 | 1,666 | ||
| Other receivables | 236 | 236 | ||
| Cash and cash equivalents | 4,680 | 4,680 | ||
| Total assets | 9,013 | 17,651 | ||
| LIABILITIES | ||||
| Provisions for risks and charges | 0 | (269) | (269) | |
| Deferred tax liabilities | 0 | (1,753) | (1,753) | |
| Trade payables | (684) | (684) | ||
| Other payables | (814) | (814) | ||
| Total liabilities | (1,498) | (3,520) | ||
| Fair value of net assets acquired (a) | 7,515 | 14,131 | ||
| Total cost of acquisition (b) | 28,757 | |||
| Goodwill deriving from acquisition (b-a) | 14,626 | |||
| Acquired cash and cash equivalents (c) | 4,680 | |||
| Total cash outlay (b-c) | 24,077 |
The acquisition price was determined based on an Enterprise Value of 4x EBITDA 2017 plus 1.05x EBITDA 2018, adjusted for the net financial position at the date of the transaction and for the difference between working capital at the date of the transaction and average working capital. The parties agreed that the payment of part of the price will be postponed and in any case payable by the first quarter of 2019. At 31 December 2018, Other financial liabilities included a residual liability of € 7.622 million owed to former Okida shareholders, which represents the residual portion of the price payable to sellers (Note 15). The acquisition was entirely financed by bank loans with a duration of 72 months.
As shown in the table, the Purchase Price Allocation, carried out with the support of independent experts, led to the identification and measurement of the fair values of the following acquired intangible assets:
2Values originally expressed in Turkish lira and converted in this table at the Euro/Turkish lira exchange rate on the acquisition date (7.7188). In the consolidated balance sheet as at 31 December 2018, the values, including goodwill, are converted at the year-end exchange rate (6.0588)
1Financial data at 31 December 2018 and economic results for the period for which the Group held control (4 September - 31 September 2018) were consolidated
The related tax effect was recognised on the fair value of the intangible assets identified above (recognition of deferred taxes of € 1.753 million).
The Purchase Price Allocation also led to the recognition of provisions for risks and charges totalling € 0.269 million (Note 17).
In the period for which the Group held control (4 September 2018 - 31 December 2018), Okida achieved sales revenue of € 4.024 million and a net profit of € 0.371 million.
In order to assess the extent of the change in the scope of consolidation in the consolidated statement of financial position at 31 December 2018, the following table summarises the balance sheet balances at the same date of Okida Elektronik, including the effects of the Purchase Price Allocation described above.
| 31.12.2018 | |
|---|---|
| ASSETS | |
| Property, plant and equipment | 189 |
| Intangible assets | 29,901 |
| Inventories | 2,609 |
| Trade receivables | 3,399 |
| Tax receivables | 676 |
| Other receivables | 244 |
| Cash and cash equivalents | 1,214 |
| Total assets | 38,232 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |
| Shareholders' equity | 32,649 |
| Provisions for risks and charges | 273 |
| Deferred tax liabilities | 2,174 |
| Trade payables | 1,570 |
| Tax payables | 1,380 |
| Other payables | 186 |
| Total liabilities | 38,232 |
Separate financial statements of each company belonging to the Group are prepared in the currency of the country in which that company operates (functional currency). For the purposes of the consolidated financial statements, the financial statement of each foreign entity is expressed in euro, which is the Group's functional currency and the reporting currency for the consolidated financial statements.
Balance sheet items in accounts expressed in currencies other than euro are converted by applying current end-of-year exchange rates. Income statement items are converted at average exchange rates for the year.
Foreign exchange differences arising from the comparison between opening shareholders' equity converted at current exchange rates and at historical exchange rates, together with the difference between the net result expressed at average and current exchange rates, are allocated to "Other Reserves" in shareholders' equity.
The exchange rates used for conversion into euro of the financial statements of the foreign subsidiaries, prepared in local currency, are shown in the following table:
| Description of currency | EXCHANGE RATE IN EFFECT AT 31.12.18 |
AVERAGE EXCHANGE RATE 2018 |
EXCHANGE RATE IN EFFECT AT 31.12.17 |
AVERAGE EXCHANGE RATE 2017 |
|---|---|---|---|---|
| Brazilian real | 4.4440 | 4.3085 | 3.9729 | 3.6048 |
| Turkish lira | 6.0588 | 5.7145 | 4.5464 | 4.1207 |
| Chinese renminbi | 7.8751 | 7.8038 | 7.8044 | 7.6289 |
| 31.12.2018 | 31.12.2017 | ||||
|---|---|---|---|---|---|
| Description | Profit for the year | Shareholders' equity |
Profit for the year | Shareholders' equity |
|
| Profit and shareholders' equity of parent company Sabaf S.p.A. |
8,040 | 92,039 | 8,001 | 92,087 | |
| Equity and consolidated company results3 | 15,324 | 113,123 | 7,971 | 74,144 | |
| Elimination of consolidated equity investments' carrying value | 640 | (83,622) | 682 | (48,596) | |
| Put option on A.R.C. minorities | 55 | (1,818) | (241) | (1,763) | |
| Intercompany eliminations | (8,005) | (427) | (1,497) | (817) | |
| Other adjustments | (256) | 51 | 0 | 0 | |
| Minority interests | (184) | (1,644) | (81) | (1,460) | |
| Profit and shareholders' equity attributable to the Group | 15,614 | 117,702 | 14,835 | 113,595 |
3Figures adjusted to allocate the consolidation difference to the equity of the acquired companies
The Group's Operating segments in accordance with IFRS 8 - Operating Segment are identified in the business segments that generate revenue and costs, whose results are periodically reassessed by top management in order to assess performance and decisions regarding resource allocation. The Group operating segments are the following:
• gas parts (household and professional)
The accounting standards and policies applied for the preparation of the consolidated financial statements at 31 December 2018, unchanged versus the previous year, with the exception of the new accounting standards adopted as from 1 January 2018 (IFRS 9 and IFRS 15), are shown below:
These are recorded at purchase or manufacturing cost. The cost includes directly chargeable ancillary costs. These costs also include revaluations undertaken in the past based on monetary revaluation rules or pursuant to company mergers. Depreciation is calculated according to rates deemed appropriate to spread the carrying value of tangible assets over their useful working life. Estimated useful working life in years, unchanged compared to previous financial years, is as follows:
| Buildings | 33 |
|---|---|
| Light constructions | 10 |
| General plant | 10 |
| Specific plant and machinery | 6 – 10 |
| Equipment | 4 – 10 |
| Furniture | 8 |
| Electronic equipment | 5 |
| Vehicles and other transport means | 4 – 5 |
Ordinary maintenance costs are expensed in the year in which they are incurred; costs that increase the asset value or useful working life are capitalised and depreciated according to the residual possibility of utilisation of the assets to which they refer.
Land is not depreciated.
Assets acquired via finance lease contracts are accounted for using the financial method and are reported with assets at their purchase value, less depreciation. Depreciation of such assets is reflected in the consolidated annual financial statements applying the same policy followed for Company-owned property, plant and equipment. Set against recognition of such assets, the amounts payable to the financial lessor are posted among shortand medium-/long-term payables. In addition, financial charges pertaining to the period are charged to the income statement.
Goodwill is the difference between the purchase price and fair value of investee companies' identifiable assets and liabilities on the date of acquisition.
As regards acquisitions completed prior to the date of IFRS adoption, the Sabaf Group has used the option provided by IFRS 1 to refrain from applying IFRS 3 – concerning business combinations – to acquisitions that took place prior to the transition date. Consequently, goodwill arising in relation to past acquisitions has not been recalculated and has been posted in accordance with Italian GAAPs, net of amortisation reported up to 31 December 2003 and any losses caused by a permanent value impairment.
After the transition date, goodwill – as an intangible asset with an indefinite useful life – is not amortised but subjected annually to impairment testing to check for value loss, or more frequently if there are signs that the asset may have suffered impairment (impairment test).
As established by IAS 38, other intangible assets acquired or internally produced are recognised as assets when it is probable that use of the asset will generate future economic benefits and when asset cost can be measured reliably. If it is considered that these future economic benefits will not be generated, the development costs are written down in the year in which this is ascertained.
Such assets are measured at purchase or production cost and - if the assets concerned have a finite useful life - are amortised on a straight-line basis over their estimated useful life. Estimated useful working life, in years, is as follows:
| Customer relationship | 15 |
|---|---|
| Brand | 15 |
| Know-how | 7 |
| Development costs | 10 |
| Software | 3 - 5 |
At each end of reporting period, the Group reviews the carrying value of its tangible and intangible assets to determine whether there are signs of impairment losses of these assets. If there is any such indication, the recoverable amount of said assets is estimated so as to determine the total of the write-down. If it is not possible to estimate recoverable amount individually, the Group estimates the recoverable amount of the cash generating unit (CGU) to which the asset belongs.
In particular, the recoverable amount of the cash generating units (which generally coincide with the legal entity to which the capitalised assets refer) is verified by determining the value of use. The recoverable amount is the higher of the net selling price and value of use. In measuring the value of use, future cash flows net of taxes, estimated based on past experience, are discounted to their present value using a pre-tax rate that reflects fair market valuations of the present cost of money and specific asset risk. The main assumptions used for calculating the value of use concern the discount rate, growth rate, expected changes in selling prices and cost trends during the period used for the calculation. The growth rates adopted are based on future market expectations in the relevant sector. Changes in the sales prices are based on past experience and on the expected future changes in the market. The Group prepares operating cash flow forecasts based on the most recent budgets approved by the Board of Directors of the consolidated companies, draws up the forecasts for the coming years and determines the terminal value (current value of perpetual income), which expresses the medium and long term operating flows in the specific sector.
If the recoverable amount of an asset (or CGU) is estimated to be lower than its carrying value, the asset's carrying value is reduced to the lower recoverable amount, recognising impairment in the income statement.
When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or of the cash-generating unit) - with the exception of goodwill - is increased to the new value resulting from the estimate of its recoverable amount, but not beyond the net carrying value that the asset would have had if it had not been written down for impairment. Reversal of impairment loss is recognised in the income statement.
As allowed by IAS 40, non-operating buildings and constructions are assessed at cost net of depreciation and losses due to cumulative impairment. The depreciation criterion applied is the asset's estimated useful life, which is considered to be 33 years.
If the recoverable amount of the investment property – determined based on the market value of the properties – is estimated to be lower than its carrying value, the asset's carrying value is reduced to the lower recoverable amount, recognising impairment in the income statement.
When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or CGU) is increased to the new value stemming from the estimate of its recoverable amount – but not beyond the net carrying value that the asset would have had if it had not been written down for impairment. Reversal of impairment loss is recognised in the income statement.
Equity investments not classified as held for sale are stated in the accounts at cost, reduced for impairment. The original value is written back in subsequent years if the reasons for write-down cease to exist.
Non-current receivables are stated at their presumed realisable value.
Inventories are measured at the lower of purchase or production cost – determined using the weighted average cost method – and the corresponding fair value represented by the replacement cost for purchased materials and by the presumed realisable value for finished and semi-processed products
– calculated taking into account any manufacturing costs and direct selling costs yet to be incurred. Inventory cost includes accessory costs and the portion of direct and indirect manufacturing costs that can reasonably be assigned to inventory items. Inventories subject to obsolescence and low turnover are written down in relation to their possibility of use or realisation. Inventory write-downs are eliminated in subsequent years if the reasons for such write-downs cease to exist.
Upon initial recognition, financial assets are classified, as the case may be, on
the basis of subsequent measurement methods, i.e. at amortised cost, at fair value recognised in other comprehensive income (OCI) and at fair value recognised in the income statement.
The classification of financial assets at initial recognition depends on the characteristics of the contractual cash flows of the financial assets and on the business model that the Group uses to manage them.
Trade receivables that do not contain a significant financing component are valued at the transaction price determined in accordance with IFRS 15. See the "Revenue from Contracts with Customers" paragraph.
Other financial assets are recorded at fair value plus, in the case of a financial asset not at fair value recognised in the income statement, transaction costs. For a financial asset to be classified and measured at amortised cost or at fair value recognised in OCI, it must generate cash flows that depend solely on the principal and interest on the amount of principal to be repaid (known as 'solely payments of principal and interest (SPPI)'). This measurement is referred to as the SPPI test and is carried out at the instrument level.
The measurement of financial liabilities depends on their classification, as described below.
This category is the most important for the Group. The Group measures the financial assets at amortised cost if both of the following requirements are met:
Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in the income statement when the asset is derecognised, modified or revalued.
Financial assets at amortised cost of the Group include trade receivables.
This category includes all assets held for trading, assets designated at initial recognition as financial assets measured at fair value with changes recognised in the income statement, or financial assets that must be measured at fair value. Assets held for trading are all those assets acquired for sale or repurchase in the short term. Derivatives, separated or otherwise, are classified as financial instruments held for trading, unless they are designated as effective hedging instruments. Financial assets with cash flows that are not represented solely by principal and interest payments are classified and measured at fair value through profit or loss, regardless of the business model. Financial instruments at fair value with changes recognised in the income statement are recognised in the statement of financial position at fair value and net changes in fair value are recognised in the income statement. This category includes derivative instruments.
The Group does not hold financial assets at fair value through profit or loss with reclassification of cumulative gains and losses or financial assets at fair value through profit or loss without reversal of cumulative gains and losses upon derecognition.
A financial asset (or, if applicable, part of a financial asset or part of a group of similar financial assets) is firstly written off (e.g. removed from the statement of financial position of the Group) when:
• the rights to receive cash flows from the asset are extinguished, or
• the Group transferred to a third party the right to receive financial flows from the asset or has taken on the contractual obligation to pay them fully and without delay and (a) transferred substantially all the risks and benefits of the ownership of the financial asset or (b) did not substantially transfer or retain all the risks and benefits of the asset, but transferred their control. If the Group has transferred the rights to receive financial flows from an asset or has signed an agreement on the basis of which it retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the financial flows to one or more beneficiaries (pass-through), it considers whether or to what extent it has retained the risks and benefits concerning the ownership. If it has not substantially transferred or retained all the risks and benefits or has not lost control over it, the asset continued to be recognised in the financial statements of the Group to the extent of its residual involvement in the asset itself. In this case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured in such a way as to reflect the rights and obligations that pertain to the Group. When the residual involvement of the entity is a guarantee in the transferred asset, the involvement is measured based on the amount of the asset or the maximum amount of the consideration received that the entity could be obliged to pay, whichever lower.
Provisions for risks and charges are provisioned to cover losses and debts, the existence of which is certain or probable, but whose amount or date of occurrence cannot be determined at the end of the year. Provisions are stated in the statement of financial position only when a legal or implicit obligation exists that determines the use of resources with an impact on profit and loss to meet that obligation and the amount can be reliably estimated. If the effect is significant, the provisions are calculated by updating future financial flows estimated at a rate including taxes such as to reflect current market valuations of the current value of the cash and specific risks associated with the liability.
The post-employment benefit reserve (TFR) is provisioned to cover the entire liability accruing vis-à-vis employees in compliance with current legislation and with national and supplementary company collective labour contracts. This liability is subject to revaluation via application of indices fixed by current regulations. Up to 31 December 2006, post-employment benefits were considered defined-benefit plans and accounted for in compliance with IAS 19, using the projected unit-credit method. The regulations of this fund were amended by Italian Law no. 296 of 27 December 2006 and subsequent Decrees and Regulations issued during the first months of 2007. In the light of these changes, and, in particular, for companies with at least 50 employees, post-employment benefits must now be considered a defined-benefit plan only for the portions accruing before 1 January 2007 (and not yet paid as at the end of the reporting period). Conversely, portions accruing after that date are treated as defined-contribution plans. Actuarial gains or losses are recorded immediately under "Other total profits/(losses)".
All financial liabilities are initially recognised at fair value, in addition to directly attributable transaction costs in case of mortgages, loans and payables. The Company's financial liabilities include trade payables and other payables, mortgages and loans, including current account overdrafts and derivative financial instruments.
The measurement of financial liabilities depends on their classification, as described below.
Financial liabilities at fair value with changes recognised in the income statement include liabilities held for trading and financial liabilities initially recognised at fair value, with changes recognised in the income statement. Liabilities held for trading are those liabilities acquired in order to discharge or transfer them in the short term. This category also includes derivative financial instruments subscribed by the Company and not designated as hedging instruments in a hedging relationship pursuant to IFRS 9. Embedded derivatives, separated from the main contract, are classified as financial instruments held for trading, unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the income statement. Financial liabilities are designated at fair value with changes recognised in the income statement from the date of initial recognition, only if the criteria of IFRS 9 are met.
This is the most important category for the Company and includes interest-bearing payables and loans. After initial statement, loans are valued using the amortised cost approach, applying the effective interest rate method. Gains and losses are recognised in the income statement when the liability is discharged, as well as through the amortisation process. Amortised cost is calculated by recognising the discount or premium on the acquisition and the fees or costs that are an integral part of the effective interest rate. Amortisation at the effective interest rate is included in financial expenses in the income statement.
A financial liability is derecognised when the obligation underlying the liability is discharged, cancelled or fulfilled. If an existing financial liability is replaced by another from the same lender, at substantially different conditions, or if the conditions of an existing liability are substantially changed, this replacement or change is treated as a derecognition of the original liability accompanied by the recognition of a new liability, with any differences between the carrying values recognised in the income statement.
Receivables and payables originally expressed in foreign currencies are converted into euro at the exchange rates in force on the date of the transactions originating them. Forex differences realised upon collection of receivables and payment of payables in foreign currency are posted in the income statement. Income and costs relating to foreign-currency transactions are converted at the rate in force on the transaction date.
At year-end, assets and liabilities expressed in foreign currencies, with the ex-
ception of non-current items, are posted at the spot exchange rate in force at the end of the reporting period and related foreign exchange gains and losses are posted in the income statement. If conversion generates a net gain, this value constitutes a non-distributable reserve until it is effectively realised.
The Group's business is exposed to financial risks relating to changes in exchange rates, commodity prices and interest rates. The company uses derivative instruments (mainly forward contracts on currencies and commodity options) to hedge risks stemming from changes in foreign currencies relating to irrevocable commitments or to planned future transactions.
Derivatives are initially recognised at cost and are then adjusted to fair value on subsequent closing dates.
Changes in the fair value of derivatives designated and recognised as effective for hedging future cash flows relating to the Group's contractual commitments and planned transactions are recognised directly in shareholders' equity, while the ineffective portion is immediately posted in the income statement. If the contractual commitments or planned transactions materialise in the recognition of assets or liabilities, when such assets or liabilities are recognised, the gains or losses on the derivative that were directly recognised in equity are factored back into the initial valuation of the cost of acquisition or carrying value of the asset or liability. For cash flow hedges that do not lead to recognition of assets or liabilities, the amounts that were directly recognised in equity are included in the income statement in the same period when the contractual commitment or planned transaction hedged impacts profit and loss – for example, when a planned sale actually takes place.
For effective hedges of exposure to changes in fair value, the item hedged is adjusted for the changes in fair value attributable to the risk hedged and recognised in the income statement. Gains and losses stemming from the derivative's valuation are also posted in the income statement.
Changes in the fair value of derivatives not designated as hedging instruments are recognised in the income statement in the period when they occur.
Hedge accounting is discontinued when the hedging instrument expires, is sold or is exercised, or when it no longer qualifies as a hedge. At this time, the cumulative gains or losses of the hedging instrument recognised in equity are kept in the latter until the planned transaction actually takes place. If the transaction hedged is not expected to take place, cumulative gains or losses recognised directly in equity are transferred to the year's income statement.
Embedded derivatives included in other financial instruments or contracts are treated as separate derivatives when their risks and characteristics are not strictly related to those of their host contracts and the latter are not measured at fair value with posting of related gains and losses in the income statement.
The Group is engaged in the supply of components for household appliances (mainly gas components, such as valves and burners, hinges and electronic components).
Revenue from contracts with customers is recognised when control of the goods is transferred to the customer for an amount that reflects the consideration that the Group expects to receive in exchange for the goods. The control of the goods passes to the customer according to the terms of return defined with the customer. The usual extended payment terms range from 30 to 120 days from shipment; the Group believes that the price does not include significant financing components.
The guarantees provided for in the contracts with customers are of a general nature and not extended and are accounted for in accordance with IAS 37.
Finance income includes interest receivable on funds invested and income from financial instruments, when not offset as part of hedging transactions. Interest income is recorded in the income statement at the time of vesting, taking effective output into consideration.
Financial expenses include interest payable on financial debt calculated using the effective interest method and bank expenses. All the other financial expenses are recognised as costs for the year in which they are incurred.
Income taxes include all taxes calculated on the Group's taxable income. Income taxes are directly recognised in the income statement, with the exception of those concerning items directly debited or credited to shareholders' equity, in which case the tax effect is recognised directly in shareholders' equity. Other taxes not relating to income, such as property taxes, are included among operating expenses. Deferred taxes are provisioned in accordance with the global liability provisioning method. They are calculated on all temporary differences emerging between the taxable base of an asset and liability and its book value in the consolidated financial statements, with the exception of goodwill that is not tax-deductible and of differences stemming from investments in subsidiaries for which cancellation is not envisaged in the foreseeable future. Deferred tax assets on unused tax losses and tax credits carried forward are recognised to the extent that it is probable that future taxable income will be available against which they can be recovered. Current and deferred tax assets and liabilities are offset when income taxes are levied by the same tax authority and when there is a legal right to settle on a net basis. Deferred tax assets and liabilities are measured using the tax rates that are expected to be applicable, according to the respective regulations of the countries where the Group operates, in the years when temporary differences will be realised or settled.
Dividends are posted on an accrual basis when the right to receive them materialises, i.e. when shareholders approve dividend distribution.
Treasury shares are booked as a reduction of shareholders' equity. The carrying value of treasury shares and revenues from any subsequent sales are recognised in the form of changes in shareholders' equity.
Some Group employees receive part of the remuneration in the form of sharebased payments, therefore employees provide services in exchange for shares ("equity-settled transactions"). The cost of equity-settled transactions is determined by the fair value at the date on which the assignment is made using an appropriate measurement method, as explained in more detail in Note 37.
This cost, together with the corresponding increase in shareholders' equity, is recorded under personnel costs (Note 27) over the period in which the conditions relating to the achievement of objectives and/or the provision of the service are met. The cumulative costs recognised for such transactions at the end of each reporting period up to the vesting date are commensurate with the expiry of the vesting period and the best estimate of the number of equity instruments that will actually vest.
Service or performance conditions are not taken into account when defining the fair value of the plan at the assignment date. However, the probability of these conditions being met is taken into account when defining the best estimate of the number of equity instruments that will vest. Market conditions are reflected in the fair value at the assignment date. Any other condition related to the plan that does not involve a service obligation is not considered to be a vesting condition. Non-vesting conditions are reflected in the fair value of the plan and result in the immediate recognition of the cost of the plan, unless there are also service or performance conditions.
No cost is recognised for rights that do not vest in that the performance and/ or service conditions are not met. When the rights include a market condition or a non-vesting condition, these are treated as if they had vested regardless of whether the market conditions or other non-vesting conditions to which they are subject are met or not, it being understood that all other performance and/ or service conditions must be met.
If the conditions of the plan are changed, the minimum cost to be recognised is the fair value at the assignment date in the absence of the change in the plan itself, on the assumption that the original conditions of the plan are met. Moreover, a cost is recognised for each change that results in an increase in total fair value of the payment plan, or that is in any case favourable for employees; this cost is measured with reference to the date of change. When a plan is cancelled, any remaining element of the plan's fair value is immediately expensed to the income statement.
Basic EPS is calculated by dividing the profit or loss attributable to the direct parent company's shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by dividing the profit or loss attributable to the direct parent company's shareholders by the weighted average number of shares outstanding, adjusted to take into account the effects of all potential ordinary shares with a dilutive effect.
Preparation of the financial statements and notes in accordance with IFRS requires management to make estimates and assumptions that affect the carrying values of assets and liabilities and the disclosures on contingent assets and liabilities as of the end of the reporting period. Actual results might differ from these estimates. Estimates are used to measure tangible and intangible assets subject to impairment testing, as described earlier, as well as to measure provisions for bad debts, for inventory obsolescence, depreciation and amortisation, asset write-downs, employee benefits, taxes, and other provisions. Specifically:
The procedure for determining impairment of tangible and intangible assets described in "Impairment" implies – in estimating the value of use – the use of the Business Plans of investees, which are based on a series of assumptions relating to future events and actions of the investees' management bodies, which may not necessarily come about. In estimating market value, however, assumptions are made on the expected trend in trading between third parties based on historical trends, which may not actually be repeated.
Receivables are adjusted by the related bad debt provision to take into account their recoverable amount. To determine the size of the write-downs, management must make subjective assessments based on the documentation and information available regarding, among other things, the customer's solvency, as well as experience and historical payment trends.
Inventories subject to obsolescence and slow turnover are systematically valued, and written down if their recoverable amount is less than their carrying value. Write-downs are calculated based on management assumptions and estimates, resulting from experience and historical results.
The current value of liabilities for employee benefits depends on a series of factors determined using actuarial techniques based on certain assumptions. Assumptions concern the discount rate, estimates of future salary increases, and mortality and resignation rates. Any change in the above-mentioned assumptions might have significant effects on liabilities for pension benefits.
Estimating the fair value of share-based payments requires the determination of the most appropriate valuation model, which depends on the terms and conditions under which these instruments are granted. This also requires the identification of data to feed into the valuation model, including assumptions about the exercise period of the options, volatility and dividend yield. The Group uses a binomial model for the initial measurement of the fair value of share-based payments with employees.
The Group is subject to different bodies of tax legislation on income. Determining liabilities for Group taxes requires the use of management valuations in relation to transactions whose tax implications are not certain at the end of the reporting period. Furthermore, the valuation of deferred taxes is based on income expectations for future years; the valuation of expected income depends on factors that might change over time and have a significant effect on the valuation of deferred tax assets.
When estimating the risk of potential liabilities from disputes, the Directors rely on communications regarding the status of recovery procedures and disputes from the lawyers who represent the Group in litigation. These estimates are determined taking into account the gradual development of the disputes, considering existing exemptions.
Estimates and assumptions are regularly reviewed and the effects of each change immediately reflected in the income statement.
Accounting standards, amendments and interpretations applicable from 1 January 2018
Standard IFRS 9 – FINANCIAL INSTRUMENTS. In July 2014, the IAS issued its final IFRS 9 replacing IAS 39 and all previous versions of IFRS 9. The standard was approved by the European Union in November 2016 and is effective for financial years beginning on or after 1 January 2018. IFRS 9 brings together all aspects relating to the recognition of financial instruments: Classification and Measurement, Impairment and Hedge Accounting. The adoption of IFRS 9 did not have a significant impact on the Group's financial statements and did not entail the need to record adjustments to the consolidated statement of financial position at the date of initial application of the standard.
The Group did not have a significant impact on its financial statements as a result of the application of the classification and measurement requirements envisaged by IFRS 9. Loans, like trade receivables, are held for collection at the contractual due dates and are expected to generate cash flows represented solely by collections of principal and interest.
The Group has not recorded any adjustments to the consolidated statement of financial position at the date of initial application of the standard. In particular, with reference to trade receivables, the Group considered its policy of bad debt provision consistent with the Standard.
The Group does not use hedge accounting for hedging instruments.
Standard IFRS 15 – REVENUE FROM CONTRACTS WITH CUSTOMERS. In May 2014, the IAS issued IFRS 15, a new revenue recognition standard that replaces IAS 18 and IAS 11 and was supplemented with further clarifications and guidance in 2016. The standard is applicable to the preparation of the financial statements for the financial years starting from 1 January 2018 and introduced a new five-stage model that applies to contracts with customers. IFRS 15 requires the recognition of revenue for an amount that reflects the consideration to which the entity believes it is entitled in exchange for the
transfer of goods or services to the customer.
The application of the new standard and the relative interpretations has not had significant effects on the Group's consolidated financial statements, either from the point of view of classification or of determining quantities. In particular, the application of IFRS 15 had no impact on contracts with customers, in which the sale of Sabaf products is the only obligation ("at a point in time"), since revenues are recognised at the time when control of the activity is transferred to the customer, according to the terms of return defined with the customer. The guarantees provided for in the contracts are of a general nature and not extended and, consequently, the Group believes that they will continue to be accounted for in accordance with IAS 37. Finally, with regard to the income from participating in the production of presses and equipment, in line with previous years, the Group will continue to allocate these revenues over the useful life of the projects, which is generally 10 years.
provisions issued concern IFRS 1 First-Time Adoption of International Financial Reporting Standards - Deletion of short-term exemptions for first-time adopters, IAS 28 Investments in Associates and Joint Ventures – Measuring investees at fair value through profit or loss: an investment-by-investment choice or a consistent policy choice, IFRS 12 Disclosure of Interests in Other Entities – Clarification of the scope of the Standard. The provisions were approved by the European Union in February 2018 and are applicable in the preparation of the financial statements for financial years beginning on or after 1 January 2018, with reference to the amendments to IAS 28 and IFRS 1, as from 1 January 2017, with reference to the amendments to IFRS 12. The adoption of the provisions by the Group did not entail any changes in accounting policies or retrospective adjustments.
IFRIC 22 Interpretation "FOREIGN CURRENCY TRANSACTIONS AND ADVANCE CONSIDERATION". The interpretation was endorsed by the European Union in March 2018 and is applicable from 1 January 2018. The interpretation aims to provide guidelines for foreign currency transactions if advances or non-cash payments are recognised in the financial statements, prior to the recognition of the related asset, cost or revenue. This document provides guidance on how an entity should determine the date of a transaction, and consequently, the spot exchange rate to be used when foreign currency transactions occur in which the payment is made or received in advance. The adoption of the interpretation by the Group did not entail any changes in accounting policies or retrospective adjustments.
Amendment to IAS 40 "TRANSFERS OF INVESTMENT PROPERTY". These amendments clarify the transfers of a property to, or from, investment property. In particular, an entity must reclassify a property among, or from, investment property only when there is evidence that there was a change in the intended use of the property. This change must refer to a specific event that happened and must not be limited to a change of intention by the Management of an entity. The interpretation was endorsed by the European Union in March 2018 and is applicable from 1 January 2018 The adoption of the amendments by the Group did not entail any changes in accounting policies or retrospective adjustments.
Amendment to IFRS 2 "CLASSIFICATION AND MEASUREMENT OF SHARE-BASED PAYMENT TRANSACTIONS", which contains some clarification on the recording of the effects of vesting conditions in the presence of cash-settled share-based payments, on the classification of share-based payments with net settlement characteristics and on the recording of amendments under the terms and conditions of a share-based payment that change their classification from cash-settled to equity-settled. The interpretation was endorsed by the European Union in February 2018 and is applicable from 1 January 2018. The adoption of the amendments by the Group did not entail any changes in accounting policies or retrospective adjustments.
Standard IFRS 16 "LEASES" (published on 13 January 2016), which will replace standard IAS 17 – Leases, as well as interpretations IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases— Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The new standard provides a new definition of lease and introduces a criterion based on the control (right of use) of an asset in order to distinguish the leasing contracts from the service contracts, identifying the discriminatory ones: the identification of the asset, the right of replacement of the same, the right to obtain substantially all of the economic benefits deriving from the use of the asset and the right to direct the use of the asset underlying the contract. The standard establishes a single model of recognition and measurement of the lease agreements for the lessee which requires the recognition of the asset to be leased (operating lease or otherwise) in assets offset by a financial debt, while also providing the opportunity not to recognise as leases the agreements whose subject matter are "low-value assets" and leases with a contract duration equal to or less than 12 months. By contrast, the Standard does not include significant changes for the lessors. The standard applies beginning on 1 January 2019 but early application is permitted, only for Companies that already applied IFRS 15 - Revenue from Contracts with Customers.
On the basis of the analyses carried out, the directors expect that the application of IFRS 16 may have a minor impact on the amounts and on the related disclosures in the Group's consolidated financial statements. However, it is not possible to provide a reasonable estimate of the effects until the Group has completed a detailed analysis of the related contracts.
PENSATION". This document specifies the instruments that envisage early repayment that could comply with the "SPPI" test even if the "reasonable additional compensation" to be paid in the event of early repayment is a "negative compensation" for the lender. The interpretation was endorsed by the European Union in March 2018 and is applicable from 1 January 2019 (early application is also permitted). The directors do not expect a significant effect on the Group's consolidated financial statements through the adoption of these changes.
On the reference date of these consolidated financial statements the competent bodies of the European Union have not yet concluded the approval process necessary for the adoption of the amendments and principles described below.
On 7 June 2017, IASB published the clarification document IFRIC 23 – UN-CERTAINTY OVER INCOME TAX TREATMENTS. The document deals with uncertainties about the tax treatment of income taxes. The document requires that uncertainties in determining deferred tax assets and liabilities be reflected in the financial statements only when it is probable that the entity will pay or recover the amount in question. Moreover, the document does not contain any new disclosure requirement but emphasises that an entity will have to determine whether it will be necessary to disclose information on management considerations and on the uncertainty relating to tax accounting in accordance with IAS 1. The new interpretation applies from 1 January 2019, but early application is permitted.
Amendment to IAS 28 "LONG-TERM INTERESTS IN ASSOCIATES AND JOINT VENTURES" (published on 12 October 2017). This document clarifies the need to apply IFRS 9, including the requirements of impairment, to other long-term interests in associate companies and joint ventures that are not accounted for under the equity method. The amendment applies from 1 January 2019, but early application is permitted. The directors do not expect a significant effect on the Group's consolidated financial statements through the adoption of these changes.
Document "ANNUAL IMPROVEMENTS TO IFRSS 2015-2017 CYCLE", published on 12 December 2017 (including IFRS 3 Business Combinations and IFRS 11 Joint Arrangements – Remeasurement of previously held interest in a joint operation, IAS 12 Income Taxes – Income tax consequences of payments on financial instruments classified as equity, IAS 23 Borrowing costs Disclosure of Interests in Other Entities – Borrowing costs eligible for capitalisation) which implements changes to some standards as part of the annual process of improving them. The amendments apply from 1 January 2019 but early application is permitted. The directors do not expect a significant effect on the Group's consolidated financial statements through the adoption of these changes.
Amendment to IAS 19 "PLAN AMENDMENT, CURTAILMENT OR SETTLE-MENT". The amendments clarify how pension costs are determined when a change occurs in a defined benefit plan. The amendments will be effective for the preparation of the financial statements for financial years beginning on or after 1 January 2019, unless they are postponed subsequent to their approval by the European Union.
Standard IFRS 17 "INSURANCE CONTRACTS". A new accounting standard for the recognition of insurance contracts that will replace IFRS 4. The new standard will be effective for the preparation of the financial statements for financial years beginning on or after 1 January 2021, unless they are postponed subsequent to their approval by the European Union.
| PROPERTY | PLANT AND EQUIPMENT |
OTHER ASSETS | ASSETS UNDER CONSTRUCTION |
TOTAL | |
|---|---|---|---|---|---|
| COST | |||||
| At 31 December 2016 | 51,268 | 185,148 | 40,303 | 1,770 | 278,489 |
| Increases | 1,589 | 7,050 | 2,487 | 2,782 | 13,908 |
| Disposals | - | (1,002) | (538) | - | (1,540) |
| Reclassifications | 118 | 587 | 192 | (1,201) | (304) |
| Forex differences | (914) | (1,900) | (626) | (29) | (3,469) |
| At 31 December 2017 | 52,061 | 189,883 | 41,818 | 3,322 | 287,084 |
| Increases | 309 | 6,120 | 1,703 | 3,250 | 11,382 |
| Disposals | - | (1,644) | (125) | - | (1,769) |
| Change in the scope of consolidation | - | 189 | - | - | 189 |
| Reclassifications | 5 | 1,647 | 84 | (1,770) | (34) |
| Forex differences | (868) | (1,840) | (563) | (114) | (3,385) |
| At 31 December 2018 | 51,507 | 194,355 | 42,917 | 4,688 | 293,467 |
| ACCUMULATED DEPRECIATIONS | |||||
|---|---|---|---|---|---|
| At 31 December 2016 | 16,976 | 152,756 | 35,312 | - | 205,044 |
| Depreciations for the year | 1,459 | 8,047 | 2,260 | - | 11,766 |
| Eliminations for disposals | - | (800) | (479) | - | (1,279) |
| Reclassifications | 5 | 41 | 30 | - | 76 |
| Forex differences | (156) | (1,002) | (434) | - | (1,592) |
| At 31 December 2017 | 18,284 | 159,042 | 36,689 | - | 214,015 |
| Depreciations for the year | 1,466 | 7,781 | 2,125 | - | 11,372 |
| Eliminations for disposals | - | (1,178) | (92) | - | (1,270) |
| Reclassifications | 4 | 40 | 28 | - | 72 |
| Forex differences | (151) | (956) | (380) | - | (1,487) |
| At 31 December 2018 | 19,603 | 164,729 | 38,370 | - | 222,702 |
| NET CARRYING VALUE | |||||
|---|---|---|---|---|---|
| At 31 December 2018 | 31,904 | 29,626 | 4,547 | 4,688 | 70,765 |
| At 31 December 2017 | 33,777 | 30,841 | 5,129 | 3,322 | 73,069 |
The breakdown of the net carrying value of Property was as follows:
| 31.12.2018 | 31.12.2017 | Change | |
|---|---|---|---|
| Land | 6,699 | 6,877 | (178) |
| Industrial buildings | 25,205 | 26,900 | (1,695) |
| Total | 31,904 | 33,777 | (1,873) |
The net carrying value of industrial property includes an amount of € 2,040,000 (€ 2,125,000 at 31 December 2017) relating to industrial buildings held under finance leases.
The main investments in the financial year were aimed at increasing the production capacity of special burners, completing the automation of production of light alloy valves and interconnecting production plants with management systems (Industry 4.0). Other investments were made in the production of presses for new burners. Investments in maintenance and replacement, so that production equipment is kept constantly up to date and efficient, are systematic.
Decreases mainly relate to the disposal of machinery no longer in use. Assets under construction include machinery under construction and advance payments to suppliers of capital equipment.
At 31 December 2018, the Group found no endogenous or exogenous indicators of impairment of its property, plant and equipment. As a result, the value of property, plant and equipment was not submitted to impairment testing.
| COST | |||||
|---|---|---|---|---|---|
| At 31 December 2016 | 13,136 | ||||
| Increases | - | ||||
| Disposals | (199) | ||||
| At 31 December 2017 | 12,937 | ||||
| Increases | - | ||||
| Disposals | (19) | ||||
| At 31 December 2018 | 12,918 |
At 31 December 2016 6,866 Depreciations for the year 436 Eliminations for disposals (62) At 31 December 2017 7,240 Depreciations for the year 427 Write-downs for the year 850 Eliminations for disposals (2) At 31 December 2018 8,515
| Net carrying value | ||||
|---|---|---|---|---|
| At 31 December 2018 | 4,403 | |||
| At 31 December 2017 | 5,697 |
This item includes non-operating buildings owned by the Group: these are mainly properties for residential use, held for rental or sale.
At 31 December 2018, the Group recorded a write-down of € 850,000, corresponding to the residual carrying value of a property acquired in 2013 and for which a revocation action was initiated during the year by the bankruptcy of the selling company. At 31 December 2018, the Group found no other endogenous or exogenous indicators of impairment of its investment property. As a result, the value of investment property was not submitted to impairment testing.
Depreciations and write-downs
| GOODWILL | PATENTS AND SOFTWARE |
DEVELOPMENT COSTS |
OTHER INTANGIBLE ASSETS |
TOTAL | |
|---|---|---|---|---|---|
| Cost | |||||
| At 31 December 2016 | 10,778 | 6,467 | 4,955 | 791 | 22,991 |
| Increases | - | 420 | 496 | 23 | 939 |
| Reclassifications | - | - | (79) | - | (79) |
| Decreases | - | (14) | - | (13) | (27) |
| Forex differences | - | (14) | - | (8) | (22) |
| At 31 December 2017 | 10,778 | 6,859 | 5,372 | 793 | 23,802 |
| Increases | - | 227 | 340 | 22 | 589 |
| Reclassifications | - | - | - | - | - |
| Decreases | - | - | (59) | (19) | (78) |
| Change in the scope of consolidation | 18,632 | 84 | - | 11,458 | 30,174 |
| Forex differences | - | (18) | - | - | (18) |
| At 31 December 2018 | 29,410 | 7,152 | 5,653 | 12,254 | 54,469 |
| AMORTISATION/WRITE-DOWNS | |||||
| At 31 December 2016 | 4,563 | 6,005 | 2,699 | 647 | 13,914 |
| Amortisation for the year | - | 272 | 342 | 22 | 636 |
| Decreases | - | (14) | - | - | (14) |
| Forex differences | - | (9) | - | (8) | (17) |
| At 31 December 2017 | 4,563 | 6,254 | 3,041 | 661 | 14,519 |
| Amortisation for the year | - | 261 | 367 | 288 | 916 |
| Decreases | - | - | - | (12) | (12) |
| NET CARRYING VALUE | |||||
|---|---|---|---|---|---|
| At 31 December 2018 | 24,847 | 645 | 2,245 | 11,318 | 39,054 |
| At 31 December 2017 | 6,215 | 605 | 2,331 | 132 | 9,283 |
Forex differences - (8) - - (8) At 31 December 2018 4,563 6,507 3,408 937 15,415
Goodwill recognised at 31 December 2018 is allocated:
The Group verifies the ability to recover goodwill at least once a year or more frequently if there are indications of impairment. Recoverable amount is determined through value of use, by discounting expected cash flows.
In 2018, the Hinges CGU achieved very positive and better results - in terms of sales and profitability - both compared to the previous year and compared to the budget. The 2019-2023 forward plan envisages a further increase in sales and the maintenance of high levels of profitability. At 31 December 2018, the Group tested - with the support of independent experts - the carrying value of its CGU Hinges for impairment, determining its recoverable amount, considered to be equivalent to its usable value, by discounting expected future cash flow in the forward plan drafted by the management. Cash flows for the period from 2019 to 2023 were augmented by the so-called terminal value, which expresses the operating flows that the CGU is expected to generate from the sixth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 10.45% (9.18% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2017) and a growth rate (g) of 1.50%, unchanged from the 2017 impairment test.
The recoverable amount calculated on the basis of the above-mentioned assumptions and valuation techniques is € 12.645 million, compared with a carrying value of the assets allocated to the Hinges unit of € 7.379 million; consequently, the value recorded for goodwill at 31 December 2018 was deemed recoverable.
The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g:
| (€/000) | GROWTH RATE | |||||
|---|---|---|---|---|---|---|
| DISCOUNT RATE | 1.00% | 1.25% | 1.50% | 1.75% | 2.00% | |
| 9.45% | 13,689 | 14,022 | 14,376 | 14,754 | 15,156 | |
| 9.95% | 12,859 | 13,150 | 13,459 | 13,786 | 14,134 | |
| 10.45% | 12,118 | 12,374 | 12,645 | 12,931 | 13,233 | |
| 10.95% | 11,453 | 11,679 | 11,918 | 12,169 | 12,435 | |
| 11.45% | 10,852 | 11,054 | 11,265 | 11,488 | 11,722 |
At 31 December 2018, the Group tested - with the support of independent experts - the carrying value of its Professional burners CGU for impairment, determining its recoverable amount, considered to be equivalent to its usable value, by discounting expected future cash flow in the forward plan drafted at the beginning of 2019. Cash flows for the period from 2019 to 2023 were augmented by the so-called terminal value, which expresses the operating flows that the CGU is expected to generate from the sixth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 7.73% (6.90% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2017) and a growth rate (g) of 1.50%, unchanged from the 2017 impairment test.
The recoverable amount calculated on the basis of the above-mentioned assumptions and valuation techniques is € 10.482 million, compared with a carrying value of the assets allocated to the Professional burners unit of € 4.247 million (including minority interests); consequently, the value recorded for goodwill at 31 December 2018 was deemed recoverable.
The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g:
| (€/000) | GROWTH RATE | |||||
|---|---|---|---|---|---|---|
| DISCOUNT RATE | 1.00% | 1.25% | 1.50% | 1.75% | 2.00% | |
| 6.73% | 11,637 | 12,082 | 12,569 | 13,106 | 13,699 | |
| 7.23% | 10,666 | 11,034 | 11,434 | 11,871 | 12,349 | |
| 7.73% | 9,839 | 10,148 | 10,482 | 10,843 | 11,236 | |
| 8.23% | 9,128 | 9,390 | 9,671 | 9,974 | 10,302 | |
| 8.73% | 8,510 | 8,734 | 8,974 | 9,231 | 9,507 |
At 31 December 2018, the Group tested - with the support of independent experts - the carrying value of its Electronic components CGU for impairment, determining its recoverable amount, considered to be equivalent to its value of use, by discounting expected future cash flow estimated on the basis of the 2019 budget and projections for the following three years. Cash flows for the period from 2019 to 2022 were augmented by the so-called terminal value, which expresses the operating flows that the CGU is expected to generate from the fifth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 11.05% and a growth rate (g) of 2.50%, in line with the expected growth of the sector in the Turkish market.
The recoverable amount calculated on the basis of the above-mentioned assumptions and valuation techniques is € 38.452 million, compared with a carrying value of the assets allocated to the Electronic components unit of € 31.434 million; consequently, the value recorded for goodwill at 31 December 2018 was deemed recoverable.
The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g:
| (€/000) | GROWTH RATE | |||||
|---|---|---|---|---|---|---|
| DISCOUNT RATE | 1.50% | 2.00% | 2.50% | 3.00% | ||
| 10% | 38,985 | 41,094 | 43,484 | 46,215 | ||
| 10.5% | 36,856 | 38,716 | 40,811 | 43,185 | ||
| 11% | 34,949 | 40,811 | 38,452 | 40,531 | ||
| 11.5% | 33,233 | 43,185 | 36,352 | 38,188 |
Software investments include the application development of the Group management system (SAP) and the implementation of specific IT solutions to meet the requirements of the tax regulations of the countries in which the Group operates.
The main investments in the year relate to the development of new products, including special burners and personalised burners for some customers (research and development activities carried out during the year are set out in the Report on Operations).
The other intangible assets recorded in these consolidated financial statements mainly derive from the Purchase Price Allocation carried out following the acquisition of Okida Elektronik and described in the previous paragraph "Information related to IFRS 3".
The net carrying value of intangible assets is broken down as follows:
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Customer Relationship electronic components |
8,477 | - | 8,477 |
| Electronic components - Brand |
1,174 | - | 1,174 |
| Electronic components - Know-how |
1,081 | - | 1,081 |
| Other | 586 | 132 | 454 |
| Total | 11,318 | 132 | 11,186 |
At 31 December 2018, the recoverability of the amount of other intangible assets allocated to the Electronic Components CGU was verified as part of the impairment test of the related goodwill described in the previous paragraph.
| 31.12.2017 | CAPITAL INCREASES | DISPOSALS | 31.12.2018 | |
|---|---|---|---|---|
| Sabaf US | 139 | - | - | 139 |
| ARC Handan Burners Co. | 101 | 100 | - | 201 |
| Other equity investments | 40 | - | - | 40 |
| Total | 280 | 100 | 0 | 380 |
The subsidiary Sabaf U.S. operates as a commercial base for North America. The carrying value of the investment is deemed recoverable taking into consideration expected developments on the North American market.
Handan ARC Burners Co. is a Chinese joint venture with the aim to produce and market in China burners for professional cooking. During the year, the Group, through ARC s.r.l., which holds the equity investment in the joint venture, subscribed and paid up capital of € 100,000 and increased its stake from 50% to 51% (therefore, the Group's share is now 35.5%). Handan ARC Burners is still in the start-up phase.
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Tax receivables | 145 | 153 | (8) |
| Guarantee deposits | 43 | 43 | - |
| Total | 188 | 196 | (8) |
Tax receivables relate to indirect taxes expected to be recovered after 31 December 2018.
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Raw Materials | 14,680 | 11,459 | 3,221 |
| Semi-processed goods | 11,727 | 11,180 | 547 |
| Finished products | 15,576 | 13,448 | 2,128 |
| Provision for inventory write-downs | (2,804) | (3,158) | 354 |
| Total | 39,179 | 32,929 | 6,250 |
The value of final inventories at 31 December 2018 increased compared to the end of the previous year due to the change in the scope of consolidation and to the higher value of finished products held in consignment stock by some customers. The provision for write-downs is mainly allocated for hedging the obsolescence risk. At the end of the financial year, the appropriation is adjusted based on specific analyses carried out on slow-moving and non-moving products.
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Total trade receivables | 48,061 | 43,002 | 5,059 |
| Bad debt provision | (1,129) | (739) | (390) |
| Net total | 46,932 | 42,263 | 4,669 |
Trade receivables at 31 December 2018 were higher than at the end of 2017 following the change in the scope of consolidation. Moreover, some customer payments of approximately € 4 million, which were due by the end of the year, were received in the early months of 2019. With the exception of this circumstance, there were no significant changes in the payment terms agreed with customers. The amount of trade receivables recognised in the financial statements includes approximately € 26.1 million in insured receivables (€ 28.2 million at 31 December 2017).
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Current receivables (not past due) | 38,980 | 38,282 | 698 |
| Outstanding up to 30 days | 3,972 | 2,802 | 1,170 |
| Outstanding from 30 to 60 days | 1,019 | 868 | 151 |
| Outstanding from 60 to 90 days | 3,062 | 594 | 2,468 |
| Outstanding for more than 90 days | 1,028 | 456 | 572 |
| Total | 48,061 | 43,002 | 5,059 |
The bad deb provision was adjusted to the better estimate of the credit risk at the end of the reporting period. Changes during the year were as follows:
| 31.12.2017 | PROVISIONS | UTILISATION | EXCHANGE RATE DIFFERENCES |
31.12.2018 | |
|---|---|---|---|---|---|
| Bad debt provision | 739 | 415 | (23) | (3) | 1,129 |
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| For income tax | 3,435 | 1,998 | 1,437 |
| For VAT and other sales taxes | 851 | 682 | 169 |
| Other tax credits | 180 | 385 | (205) |
| Total | 4,466 | 3,065 | 1,401 |
The income tax receivables derives for € 1,153,000 from the full deductibility of IRAP from IRES relating to the expenses incurred for employees for the 2006-2011 period (Italian Legislative Decree 201/2011), for which an application for a refund was presented and, for the residual part, to the payments on account on 2018 income, for the part exceeding the tax to be paid.
Other tax credits mainly refer to receivables in respect of indirect Brazilian and Turkish taxes.
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Credits to be received from suppliers | 385 | 360 | 25 |
| Advances to suppliers | 411 | 155 | 256 |
| Other | 738 | 542 | 196 |
| Total | 1,534 | 1,057 | 477 |
Credits to be received from suppliers mainly refer to bonuses paid to the Group for the attainment of purchasing objectives. Other current receivables include accrued income and prepaid expenses.
| 31.12.2018 | 31.12.2017 | |||
|---|---|---|---|---|
| Current | Non-current | Current | Non-current | |
| Escrow bank accounts | 3,510 | 120 | 60 | 180 |
| Derivative instruments on interest rates | - | - | 7 | - |
| Currency derivatives | 1 | - | - | - |
| Total | 3,511 | 120 | 67 | 180 |
At 31 December 2018, the following were taken out:
a term deposit of € 3.45 million, due on 31 March 2019, for a bank guarantee issued in favour of the sellers of the Okida Elektronik equity investment for the portion of the price for which payment is deferred until March 2019.
a term deposit of € 0.18 million, due on 30 June 2021, for the portion of the price not yet paid to the sellers of the ARC equity investment (Note 15).
Cash and cash equivalents, which amounted to € 13,426,000 at 31 December 2018 (€ 11,533,000 at 31 December 2017) consisted of bank current account balances of approximately € 7.1 million and sight deposits of approximately € 6.3 million.
The parent company's share capital consists of 11,533,450 shares with a par value of € 1.00 each. The share capital paid in and subscribed did not change during the year. At 31 December 2018, the structure of the share capital is shown in the table below.
| NO. OF SHARES | % OF SHARE CAPITAL | RIGHTS AND OBLIGATIONS |
|
|---|---|---|---|
| Ordinary shares | 11,133,450 | 96.532% | -- |
| Ordinary shares with increased vote | 400,000 | 3.468% | Two voting rights per share |
| TOTAL | 11,533,450 | 100% |
With the exception of the right to increased vote, there are no rights, privileges or restrictions on the shares of the Parent Company. The availability of the Parent Company's reserves is indicated in the separate financial statements of Sabaf S.p.A.
During the financial year Sabaf S.p.A. acquired 132,737 treasury shares at an average unit price of € 17.77; there have been no sales.
At 31 December 2018, the parent company Sabaf S.p.A. held 514,506 treasury shares, equal to 4.46% of share capital (381,769 treasury shares at 31 December 2017), reported in the financial statements as an adjustment to shareholders' equity at a unit value of € 13.35 (the market value at year-end was € 14.88). There were 11,018,944 outstanding shares at 31 December 2018 (11,151,681 at 31 December 2017).
Items "Retained earnings, other reserves" of € 90,236,000 included, at 31 December 2018, the stock grant reserve of € 321,000, which included the measurement at 31 December 2018 of fair value of rights assigned to receive shares of the Parent Company. For details of the Stock Grant Plan, refer to Note 37.
| 31.12.2018 | 31.12.2017 | |||
|---|---|---|---|---|
| Current | Non-current | Current | Non-current | |
| Property leasing | 153 | 1,309 | 149 | 1,462 |
| Unsecured loans | 10,741 | 41,097 | 5,982 | 16,298 |
| Short-term bank loans | 5,247 | - | 9,477 | - |
| Advances on bank receipts or invoices | 1,942 | - | 1,678 | - |
| Interest payable | 44 | - | 2 | - |
| Derivative instruments on interest rates | 308 | - | - | - |
| Total | 18,435 | 42,406 | 17,288 | 17,760 |
During the year, the Group took out new unsecured loans for a total of € 37 million to finance the investments made, with particular reference to the acquisition of Okida. All loans are signed with an original maturity ranging from 5 to 6 years and are repayable in instalments.
Some of the outstanding unsecured loans have covenants, defined with reference to the consolidated financial statements at the end of the reporting period, as specified below:
15. OTHER FINANCIAL LIABILITIES
widely observed at 31 December 2018.
To manage interest rate risk, unsecured loans are either fixed-rate or hedged by IRS. These consolidated financial statements include the negative fair value of the IRSs hedging rate risks of unsecured loans pending, for residual notional amounts of approximately € 34.9 million and expiry until 31 December 2024. Financial expenses were recognised in the income statement with a balancing entry.
Note 35 provides information on financial risks, pursuant to IFRS 7.
| 31.12.2018 | 31.12.2017 | |||
|---|---|---|---|---|
| Current | Non-current | Current | Non-current | |
| Payables to former Okida shareholders | 7,622 | - | ||
| Option on A.R.C. minorities | - | 1,818 | - | 1,763 |
| Payables to A.R.C. shareholders | 60 | 120 | 60 | 180 |
| Derivative instruments on interest rates | - | - | 15 | - |
| Total | 7,682 | 1,938 | 75 | 1,943 |
As part of the acquisition of 100% of Okida Elektronik, the parties agreed that the payment of part of the price would be subject to adjustment (depending, inter alia, on Okida's 2018 EBITDA) and postponed compared to the effective date of the transaction (4 September 2018). The payables to Okida shareholders at 31 December 2018 in these consolidated financial statements represent the residual portion of the price to be paid to the sellers.
In June 2016, as part of the acquisition of 70% of A.R.C. S.r.l., Sabaf signed with Loris Gasparini (current minority shareholder by 30% of A.R.C.) an agreement that aimed to regulate Gasparini's right to leave A.R.C. and the interest of Sabaf to acquire 100% of the shares after expiry of the term of five years from the signing of the purchase agreement of 24 June 2016, by signing specific option agreements. Therefore, the agreement envisaged specific option rights to purchase (by Sabaf) and sell (by Gasparini) exercisable as from 24 June 2021, the remaining shares of 30% of A.R.C., with strike prices contractually defined on the basis of final income parameters from A.R.C. at 31 December 2020.
Pursuant to the provisions of IAS 32, the assignment of an option to sell (put option) in the terms described above required the recording of a liability corresponding to the estimated redemption value, expected at the time of any exercise of the option: to this end, a financial liability of € 1.763 million was recognised in the consolidated financial statements at 31 December 2017. At 31 December 2018, the Group revalued the outlay estimate, based on the expected results of A.R.C. at 31 December 2020 in accordance with the business plan of the subsidiary prepared at the beginning of 2019. Th recalculation of the fair value, in compliance with IAS 39, led to an increase of € 55,000 in the liability; financial expenses were recognised as a balancing entry (Note 29).
The payable to the A.R.C. shareholders of € 180,000 at 31 December 2018 is related to the part of the price still to be paid to the sellers, which was deposited on an non-interest-bearing escrow account and will be released in favour of the sellers at constant rates in 3 years, in accordance with contractual agreements and guarantees issued by the sellers.
| POST-EMPLOYMENT BENEFIT RESERVE |
RETIREMENT RESERVE | TOTAL | |
|---|---|---|---|
| At 31 December 2017 | 2,720 | 125 | 2,845 |
| Provisions | 154 | - | 154 |
| Financial expenses | 27 | - | 27 |
| Payments made | (226) | (125) | (351) |
| Tax effect | (32) | - | (32) |
| Forex differences | (11) | - | (11) |
| At 31 December 2018 | 2,632 | 0 | 2,632 |
Following the revision of IAS 19 - Employee benefits, from 1 January 2013 all actuarial gains or losses are recorded immediately in the comprehensive income statement ("Other comprehensive income") under the item "Actuarial income and losses".
Post-employment benefits are calculated as follows:
| FINANCIAL ASSUMPTIONS | ||||
|---|---|---|---|---|
| 31.12.2018 | 31.12.2017 | |||
| Discount rate | 1.30% | 1.15% | ||
| Inflation | 1.70% | 1.80% |
| DEMOGRAPHIC THEORY | ||||||
|---|---|---|---|---|---|---|
| 31.12.2018 | 31.12.2017 | |||||
| Mortality rate | ISTAT 2016 M/F | ISTAT 2016 M/F | ||||
| Disability rate | INPS 1998 M/F | INPS 1998 M/F | ||||
| Staff turnover | 3% - 6% | 3% - 6% | ||||
| Advance pay-outs | 5% - 7% per year | 5% - 7% per year | ||||
| Retirement age | pursuant to legislation in force on 31 December 2018 |
pursuant to legislation in force on 31 December 2017 |
| 31.12.2017 | Provisions | Utilisation | Change in the scope of consolidation |
Exchange rate differences |
31.12.2018 | |
|---|---|---|---|---|---|---|
| Reserve for agents' indemnities | 210 | 28 | (21) | - | - | 217 |
| Product guarantee fund | 60 | 57 | (57) | - | - | 60 |
| Reserve for legal risks | 115 | 70 | (3) | - | (7) | 175 |
| Other provisions for risks and charges | - | - | - | 273 | - | 273 |
| Total | 385 | 155 | (81) | 273 | (7) | 725 |
The reserve for agents' indemnities covers amounts payable to agents if the Group terminates the agency relationship.
The product guarantee fund covers the risk of returns or charges by customers for products already sold. The fund was adjusted at the end of the year, on the basis of analyses conducted and past experience.
The reserve for legal risks, set aside for moderate disputes, was adjusted to reflect the outstanding disputes.
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Total | 21,215 | 19,975 | 1,240 |
The increase in trade payables is related to the change in the scope of consolidation. Average payment terms did not change versus the previous year. At 31 December 2018, there were no overdue payables of a significant amount and the Group did not receive any injunctions for overdue payables.
Other provisions for risks and charges, recognised as part of the purchase price allocation following the acquisition of Okida Elektronik, reflect the fair value of the potential liabilities of the acquired entity (tax risks).
The provisions booked to the provisions for risks, which represent the estimate of future payments made based on historical experience, have not been discounted because the effect is considered negligible.
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| For income tax | 2,672 | 240 | 2,432 |
| Withholding taxes | 680 | 656 | 24 |
| Other tax payables | 214 | 199 | 15 |
| Total | 3,566 | 1,095 | 2,471 |
The income tax payables refer to the taxes for the year, for the portion exceeding the advances paid.
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| To employees | 4,383 | 4,552 | (169) |
| To social security institutions | 2,148 | 2,304 | (156) |
| To agents | 312 | 195 | 117 |
| Advances from customers | 250 | 94 | 156 |
| Other current payables | 507 | 346 | 161 |
| Total | 7,600 | 7,491 | 109 |
At the beginning of 2019, payables due to employees and social security institutions were paid in accordance with the scheduled expiry dates.
| 31.12.2018 | 31.12.2017 | |
|---|---|---|
| Deferred tax assets | 4,617 | 5,096 |
| Deferred tax liabilities | (3,030) | (804) |
| Net position | 1,587 | 4,293 |
The table below analyses the nature of the temporary differences that determine the recognition of deferred tax liabilities and assets and their changes during the year and the previous year.
| Non-current tangible and intangible assets |
Provisions and value adjustments |
Fair value of derivative instruments |
Good will |
Tax incentives |
Actuarial post-em ployment benefit reserve evaluation |
Other temporary differences |
Total | |
|---|---|---|---|---|---|---|---|---|
| At 31 December 2017 | (120) | 1,150 | 3 | 1,771 | 629 | 189 | 671 | 4,293 |
| To the income statement | 78 | 34 | 53 | - | (141) | - | (333) | (309) |
| To shareholders' equity | (1,753) | - | - | - | - | (7) | - | (1,760) |
| Forex differences | (421) | (20) | - | - | (149) | - | (47) | (637) |
| At 31 December 2018 | (2,216) | 1,164 | 56 | 1,771 | 339 | 182 | 291 | 1,587 |
As described in the paragraph "Information related to IFRS 3", these consolidated financial statements include deferred taxes on the fair value measurement of intangible assets recognised as a result of the Purchase Price Allocation of Okida Elektronik.
Deferred tax assets relating to goodwill, equal to € 1,771,000, refer to the exemption of the value of the equity investment in Faringosi Hinges s.r.l. made in 2011 pursuant to Italian law Decree 98/2011.
Deferred tax assets relating to tax incentives are commensurate to investments made in Turkey.
As required by the CONSOB memorandum of 28 July 2006, we disclose that the Group's net financial position is as follows:
| 31.12.2018 | 31.12.2017 | CHANGE | ||
|---|---|---|---|---|
| Cash (Note 11) A. |
19 | 14 | 5 | |
| B. (Note 11) |
Positive balances of unrestricted bank accounts | 7,067 | 11,009 | (3,942) |
| Other cash equivalents C. |
6,340 | 510 | 5,830 | |
| D. Liquidity (A+B+C) | 13,426 | 11,533 | 1,893 | |
| E. Current financial receivables | 3,511 | 0 | 3,511 | |
| Current bank payables (Note 14) F. |
7,233 | 11,157 | (3,924) | |
| G. | Current portion of non-current debt (Note 14) | 10,741 | 6,131 | 4,610 |
| H. | Other current financial payables (Note 15) | 8,143 | 75 | 8,068 |
| I. | Current financial debt (F+G+H) | 26,117 | 17,363 | 8,754 |
| J. | Net current financial debt (I-D-E) | 9,180 | 5,830 | 3,350 |
| K. | Non-current bank payables (Note 14) | 41,097 | 16,298 | 24,799 |
| L. | Other non-current financial payables (Note 14) | 3,247 | 3,405 | (158) |
| M. Non-current financial debt (K+L) | 44,344 | 19,703 | 24,641 | |
| Net financial debt (J+M) N. |
53,524 | 25,533 | 27,991 |
The consolidated cash flow statement, which shows the changes in cash and cash equivalents (letter D. of this statement), describes in detail the cash flows that led to the change in the net financial position.
144
In 2018, sales revenues totalled € 150,642,000, up by € 419,000 (+0.3%) compared with 2017. Taking into consideration the same scope of consolidation, revenue decreased by 2.4%.
| Revenue by geographical area | ||
|---|---|---|
| 2018 | % | 2017 | % | % CHANGE | |
|---|---|---|---|---|---|
| Italy | 31,579 | 21.0% | 36,523 | 24.3% | -13.5% |
| Western Europe | 12,337 | 8.2% | 11,678 | 7.8% | +5.6% |
| Eastern Europe | 46,301 | 30.7% | 42,824 | 28.5% | +8.1% |
| Middle East and Africa | 12,303 | 8.2% | 13,009 | 8.6% | -5.4% |
| Asia and Oceania | 7,590 | 5.0% | 10,516 | 7.0% | -27.8% |
| South America | 25,461 | 16.9% | 22,938 | 15.3% | +11.0% |
| North America and Mexico | 15,071 | 10.0% | 12,735 | 8.5% | +18.3% |
| Total | 150,642 | 100% | 150,223 | 100% | +0.3% |
The sales analysis by geographical area shows an uneven trend in the various markets in which the Group operates. The best results were achieved on the American continent: sales in North America were sustained by the good performance of consumption; in South America, strong growth rates were recorded in the Andean countries, which more than offset the effects of the crisis in Argentina and a still stagnant demand in Brazil. Satisfactory growth rates were recorded in European markets, thanks to the consolidation of relationships with major customers and the contribution made by the acquisition in Turkey of Okida; only in Italy sales are down due to the sharp reduction in the production of domestic appliances. North Africa and the Middle East have shown signs of weakness, while the Group's presence on Asian markets is not yet sufficiently consolidated.
| 2018 | % | 2017 | % | % CHANGE | |
|---|---|---|---|---|---|
| Brass valves | 4,327 | 2.9% | 5,991 | 4.0% | -27.8% |
| Light alloy valves | 37,615 | 25.0% | 39,351 | 26.2% | -4.4% |
| Thermostats | 6,521 | 4.3% | 7,376 | 4.9% | -11.6% |
| Standard burners | 39,368 | 26.1% | 41,070 | 27.3% | -4.1% |
| Special burners | 27,585 | 18.3% | 27,184 | 18.1% | +1.5% |
| Accessories | 15,422 | 10.3% | 15,267 | 10.2% | +1.0% |
| Household gas parts | 130,838 | 86.9% | 136,239 | 90.7% | -4.0% |
| Professional gas parts | 5,331 | 3.5% | 5,079 | 3.4% | +5.0% |
| Hinges | 10,436 | 6.9% | 8,905 | 5.9% | +17.2% |
| Electronic components | 4,037 | 2.7% | - | - | |
| Total | 150,642 | 100% | 150,223 | 100% | +0.3% |
Product innovation continues to support sales of special and professional burners, while more mature products (brass valves and thermostats) show a marked decline. Sales of hinges increased significantly, supported by the positive trend of the North American market and the launch of new supply contracts. Following the acquisition of Okida Elektronik, from September 2018 the Group is also active in the production and sale of electronic components.
Average sales prices in 2018 were on average 0.2% lower compared with 2017.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Sale of trimmings | 2,507 | 2,261 | 246 |
| Contingent income | 88 | 311 | (223) |
| Rental income | 88 | 89 | (1) |
| Use of provisions for risks and charges |
71 | 36 | 35 |
| Other income | 615 | 664 | (49) |
| Total | 3,369 | 3,361 | 8 |
24. OTHER INCOME
Total 34,840 35,328 (488) The increase in income from the sale of trimmings is related to the increase in the price of raw materials.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Commodities and outsourced components |
56,347 | 54,179 | 2,168 |
| Consumables | 6,100 | 5,615 | 485 |
| Total | 62,447 | 59,794 | 2,653 |
In 2018, the effective purchase prices of the main raw materials (aluminium alloys, steel and brass) were on average higher than in 2017, with a negative impact of 0.7% of sales. Consumption (purchases plus change in inventories) as a percentage of sales was 38.4% in 2018, compared with 38.2% in 2017.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Outsourced processing |
10,017 | 9,779 | 238 |
| Natural gas and power |
4,561 | 4,485 | 76 |
| Maintenance | 4,468 | 4,474 | (6) |
| Transport | 2,340 | 2,221 | 119 |
| Advisory services | 2,326 | 2,106 | 220 |
| Travel expenses and allowances |
780 | 715 | 65 |
| Commissions | 736 | 637 | 99 |
| Directors' fees | 685 | 1,084 | (399) |
| Insurance | 545 | 537 | 8 |
| Canteen | 393 | 394 | (1) |
| Other costs | 4,446 | 3,795 | 651 |
| Total | 31,297 | 30,227 | 1,070 |
The main outsourced processing carried out by the Group's Italian companies include aluminium die-casting, hot moulding of brass and steel blanking, as well as some mechanical processing and assembly.
Costs for advisory services related to technical (€ 770,000), sales (€ 440,000) and legal, administrative and general (€ 1,116,000) services. Other costs included expenses for the registration of patents, waste disposal, cleaning, leasing third-party assets and other minor charges.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Salaries and wages | 23,141 | 23,987 | (846) |
| Social Security costs | 7,429 | 7,585 | (156) |
| Temporary agency workers |
2,121 | 1,910 | 211 |
| Post-employment benefit reserve and other costs |
1,828 | 1,846 | (18) |
| Stock grant plan | 321 | - | 321 |
The average Group headcount in 2018 was 798 employees compared to 760 in 2017. The average number of temporary staff was 61 in 2018 (60 in 2017). In 2018, the Group made negligible use of the temporary unemployment fund. The item "Stock Grant Plan" included the measurement at 31 December 2018 of the fair value of rights to the assignment of shares of the Parent Company attributed to Group employees. For details of the Stock Grant Plan, refer to Note 37.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Non-income taxes | 506 | 539 | (33) |
| Other operating expenses |
371 | 331 | 40 |
| Contingent liabilities | 217 | 145 | 72 |
| Losses and write-downs of trade receivables |
421 | 93 | 328 |
| Provisions for risks | 127 | 11 | 116 |
| Other provisions | 28 | 15 | 13 |
| Total | 1,670 | 1,134 | 536 |
Non-income taxes chiefly relate to property tax.
Provisions refer to the allocations to the reserves described in Note 17.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Interest paid to banks | 829 | 270 | 559 |
| Interest paid on finance lease contracts |
17 | 19 | (2) |
| Banking expenses | 287 | 240 | 47 |
| Adjustment to the fair value of the ARC option (Note 15) |
55 | 241 | (186) |
| Other financial expense |
18 | 34 | (16) |
| Total | 1,206 | 804 | 402 |
The increase in financial expenses to banks reflects the higher average net debt for the year. Interest paid to banks includes IRS spreads payable that hedge interest rate risks (Note 35).
In 2018, the Group reported net foreign exchange gains of € 5,384,000, versus net gains of € 274,000 in 2017. The main portion of 2018 foreign exchange gains, recorded by Sabaf Turkey, is related to financial payables taken out in euros and reflects the revaluation of the Turkish lira against the euro from the date on which the financial payables were taken out to the end of the reporting period.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Current taxes | 5,039 | 3,836 | 1,203 |
| Deferred tax liabilities | 103 | (452) | 555 |
| Taxes related to previous financial years |
21 | (496) | 517 |
| Total | 5,163 | 2,888 | 2,275 |
The current income taxes include the IRES of € 2,049,000, the IRAP of € 549,000 and foreign income taxes of € 2,441,000 (€ 2,448,000, € 545,000 and € 843,000 respectively in 2017).
Reconciliation between the tax burden booked in the financial statements and the theoretical tax burden calculated according to the statutory tax rates currently in force in Italy is shown in the following table:
| 2018 | 2017 | |
|---|---|---|
| Theoretical income tax | 5,030 | 4,272 |
| Permanent tax differences | 937 | 172 |
| Taxes related to previous financial years | 18 | 91 |
| Tax effect from different foreign tax rates | (25) | 5 |
| Effect of non-recoverable tax losses | 154 | 172 |
| "Patent box" tax benefit | (323) | (1,151) |
| "Super ammortamento" tax benefit | (449) | (179) |
| Tax incentives for investments in Turkey | (710) | (950) |
| Other differences | 22 | 10 |
| Income taxes booked in the accounts, excluding IRAP and withholding taxes (current and deferred) |
4,654 | 2,442 |
| IRAP (current and deferred) | 509 | 446 |
| Total | 5,163 | 2,888 |
Theoretical taxes were calculated applying the current corporate income tax (IRES) rate, i.e. 24%, to the pre-tax result. IRAP is not taken into account for the purpose of reconciliation because, as it is a tax with a different assessment basis from pre-tax profit, it would generate distorting effects.
Permanent tax differences mainly relate to non-deductible provisions and value adjustments.
In these consolidated financial statements, the Group recognised:
the tax benefit related to the Patent Box for 2018 of € 375,000 (€ 323,000 for IRES and € 52,000 for IRAP). Following the prior agreement signed with the Revenue Agency, in 2017 the benefit for the three-year period from 2015 to 2017, for a total of € 1,324,000 was recognised;
the tax benefits relating to "Superammortamento" (Super amortisation) and "Iperammortamento" (Hyper amortisation), related to the investments made in Italy, amounting to € 449,000 (€ 179,000 in 2017);
the tax benefits deriving from the investments made in Italy amounting to € 710,000 (€ 950,000 in 2017).
No significant tax disputes were pending at 31 December 2018.
Basic and diluted EPS are calculated based on the following data:
| EARNINGS | 2018 | 2017 |
|---|---|---|
| (€/000) | (€/000) | |
| Profit for the year | 15,614 | 14,835 |
| Number of shares | 2018 | 2017 |
| Weighted average number of ordinary shares for determining basic earnings per share |
11,051,570 | 11,208,062 |
| Dilutive effect from potential ordinary shares | - | - |
| Weighted average number of ordinary shares for determining diluted earnings per share |
11,051,570 | 11,208,062 |
| Earnings per share (€) | 2018 | 2017 |
| Basic earnings per share | 1.413 | 1.323 |
| Diluted earnings per share | 1.413 | 1.323 |
Basic earnings per share are calculated on the average number of outstanding shares minus treasury shares, equal to 481,880 in 2018 (325,388 in 2017). Diluted earnings per share are calculated taking into account any shares approved but not yet subscribed, of which there were none in 2018 and 2017.
On 31 May 2018, shareholders were paid an ordinary dividend of € 0.55 per share (total dividends of € 6,071,000).
The Directors have recommended payment of an unchanged dividend of € 0.55 per share this year. This dividend is subject to approval of shareholders in the annual Shareholders' Meeting and was not included under liabilities in these financial statements.
The dividend proposed is scheduled for payment on 29 May 2019 (ex-date 27 May and record date 28 May).
Below is the information by business segment for 2018 and 2017.
| 2018 FY | ||||||
|---|---|---|---|---|---|---|
| Gas parts (household and professional) |
Hinges | Electronic components | Total | |||
| Sales | 136,211 | 10,407 | 4,024 | 150,642 | ||
| Ebit | 13,540 | 1,315 | 1,554 | 16,409 | ||
| 2017 FY | ||||||
| Gas parts (household and professional) |
Hinges | Electronic components | Total | |
|---|---|---|---|---|
| Sales | 141,280 | 8,943 | - | 150,223 |
| Ebit | 16,974 | 1,143 | - | 18,117 |
In accordance with IFRS 7, a breakdown of the financial instruments is shown below, among the categories set forth in IAS 39.
| 31.12.2018 | 31.12.2017 | |
|---|---|---|
| Financial assets | ||
| Amortised cost | ||
| Cash and cash equivalents | 13,426 | 11,533 |
| Escrow bank deposits | 3,630 | 240 |
| Trade receivables and other receivables | 48,654 | 43,516 |
| Income statement fair value | ||
| Derivative to hedge cash flows | 1 | 7 |
| Financial liabilities | ||
| Amortised cost | ||
| Loans | 60,533 | 35,048 |
| Other financial liabilities | 7,802 | 240 |
| Trade payables | 21,215 | 19,975 |
| Income statement fair value | ||
| ARC put option (Note 15) | 1,818 | 1,763 |
| Derivative to hedge cash flows | 308 | 15 |
The Group is exposed to financial risks related to its operations, mainly:
It is part of the Sabaf Group's policies to hedge exposure to changes in prices and in fluctuations in exchange and interest rates via derivative financial instruments. Hedging is done using forward contracts, options or combinations of these instruments. Generally speaking, the maximum duration covered by such hedging does not exceed 18 months. The Group does not enter into speculative transactions. When the derivatives used for hedging purposes meet the necessary requisites, hedge accounting rules are followed.
Trade receivables involve producers of domestic appliances, multinational groups and smaller manufacturers in a few or single markets. The Group assesses the creditworthiness of all its customers at the start of supply and systemically at least on an annual basis. After this assessment, each customer is assigned a credit limit.
A credit insurance policy is in place, which guarantees cover for approximately 55% of trade receivables.
Credit risk relating to customers operating in emerging economies is generally attenuated by the expectation of revenue through letters of credit.
The key currencies other than the euro to which the Group is exposed are the US dollar, the Brazilian real and the Turkish lira, in relation to sales made in dollars (chiefly on some Asian and American markets) and the production units in Brazil and Turkey. Sales in US dollars represented 16% of total turnover in 2017, while purchases in dollars represented 4% of total turnover. During the year, operations in dollars were partially hedged through forward sales contracts; at 31 December 2018, the Group had in place forward sales contracts for a total of USD 1 million, maturing on 31 December 2019.
With reference to financial assets and liabilities in US dollars at 31 December 2018, a hypothetical and immediate revaluation of 10% of the euro against the dollar would have led to a loss of € 634,000.
Owing to the current trend in interest rates, the Group favours fixed-rate indebtedness: medium to long-term loans originated at a variable rate are converted to a fixed rate by entering into interest rate swaps (IRS) when the loan is opened. At 31 December 2018, IRS totalling € 34.9 million were in place, mirrored in mortgages with the same residual debt, through which the Group transformed the floating rate of the mortgages into fixed rate. The derivative contracts were not designated as a cash flow hedge and were therefore recognised using the "income statement fair value" method.
Considering the IRS in place, at the end of 2018 almost all of the Group's financial debt was at a fixed rate. Therefore, at 31 December 2018 no sensitivity analysis was carried out in that the exposure to interest rate risk, linked to a hypothetical increase (decrease) in interest rates, is not significant.
A significant portion of the Group's purchase costs is represented by aluminium, steel and brass. Sale prices of products are generally renegotiated annually; as a result, the Group is unable to pass on to customers any changes in the prices of commodities during the year. The Group protects itself from the risk of changes in the price of aluminium, steel and brass with supply contracts signed with suppliers for delivery up to twelve months in advance or, alternatively, with derivative financial instruments. In 2018 and 2017, the Group did not use financial derivatives on commodities. To stabilise the rising costs of commodities, Sabaf preferred to execute transactions on the physical market, fixing prices with suppliers for immediate and deferred delivery.
The Group operates with a debt ratio considered physiological (net financial debt / shareholders' equity at 31 December 2018 of 45%, net financial debt / EBITDA of 1.79) and has unused short-term lines of credit. To minimise the risk of liquidity, the Administration and Finance Department:
| AT 31 DECEMBER 2018 | Carrying value | Contractual financial flows |
Within 3 months |
From 3 months to 1 year |
From 1 to 5 years |
More than 5 years |
|---|---|---|---|---|---|---|
| Short-term bank loans | 7,233 | 8,063 | 8,063 | 0 | - | - |
| Unsecured loans | 51,838 | 53,219 | 1,947 | 9,256 | 39,603 | 2,413 |
| Finance leases | 1,462 | 1,630 | 47 | 142 | 754 | 687 |
| Payables to ARC shareholders | 180 | 180 | - | 60 | 120 | - |
| Payables to former Okida shareholders | 7,622 | 7,622 | 7,622 | - | - | - |
| ARC option | 1,818 | 1,818 | - | - | 1,818 | - |
| Total financial payables | 70,153 | 72,532 | 17,679 | 9,458 | 42,295 | 3,100 |
| Trade payables | 21,215 | 21,215 | 20,412 | 803 | - | - |
| Total | 91,368 | 93,747 | 38,091 | 10,261 | 42,295 | 3,100 |
| AT 31 DECEMBER 2017 | Carrying value | Contractual financial flows |
Within 3 months |
From 3 months to 1 year |
From 1 to 5 years |
More than 5 years |
| Short-term bank loans | 11,157 | 11,157 | 11,157 | 0 | - | - |
| Unsecured loans | 22,280 | 22,676 | 1,537 | 4,612 | 16,527 | - |
| Finance leases | 1,611 | 1,818 | 47 | 141 | 754 | 876 |
| Payables to ARC shareholders | 240 | 240 | - | 60 | 180 | - |
| ARC option | 1,763 | 1,763 | - | - | 1,763 | - |
| Total financial payables | 37,051 | 37,654 | 12,741 | 4,813 | 19,224 | 876 |
| Trade payables | 19,975 | 19,975 | 19,021 | 954 | - | - |
| Total | 57,026 | 57,629 | 31,762 | 5,767 | 19,224 | 876 |
An analysis by expiration date of financial payables at 31 December 2018 and 31 December 2017 is shown below:
The various due dates are based on the period between the end of the reporting period and the contractual expiration date of the commitments, the values indicated in the table correspond to non-discounted cash flows. Cash flows include the shares of principal and interest; for floating rate liabilities, the shares of interest are determined based on the value of the reference parameter at the end of the reporting period and increased by the spread set forth in each contract.
The following table shows the financial assets and liabilities valued at fair value at 31 December 2018, by hierarchical level of fair value assessment.
| LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL | |
|---|---|---|---|---|
| Other financial assets (currency derivatives) | - | 1 | - | 1 |
| Total assets | - | 1 | - | 1 |
| Other financial liabilities (interest rate derivatives) | - | 308 | - | 308 |
| Other financial liabilities (ARC put option) | - | - | 1,818 | 1,818 |
| Total liabilities | - | 308 | 1,818 | 2,126 |
Transactions between consolidated companies were eliminated from the consolidated financial statements and are not reported in these notes. The table below illustrates the impact of all transactions between the Group and other related parties on the balance sheet and income statement.
| TOTAL 2018 | GIUSEPPE SALERI S.A.P.A. |
NON-CONSOLIDATED SUBSIDIARIES |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Trade receivables | 46,932 | 12 | 88 | - | 100 | 0.21% |
| Tax receivables | 4,466 | 1,158 | - | - | 1,158 | 25.93% |
| Trade payables | 21,215 | - | - | 5 | 5 | 0.02% |
| TOTAL 2017 | GIUSEPPE | NON-CONSOLIDATED | OTHER | TOTAL | IMPACT ON |
| SALERI S.A.P.A. | SUBSIDIARIES | RELATED PARTIES | RELATED PARTIES | THE TOTAL | ||
|---|---|---|---|---|---|---|
| Trade receivables | 42,263 | - | 299 | - | 299 | 0.71% |
| Tax receivables | 3,065 | 1,158 | - | - | 1,158 | 37.78% |
| Trade payables | 19,976 | - | - | 2 | 2 | 0.01% |
| TOTAL 2018 | GIUSEPPE SALERI S.A.P.A. |
NON-CONSOLIDATED SUBSIDIARIES |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Other income | 3,369 | 40 | - | - | 40 | 1.19% |
| Services | (31,297) | - | (263) | (22) | (285) | 0.91% |
TOTAL 2017 GIUSEPPE SALERI S.A.P.A. NON-CONSOLIDATED SUBSIDIARIES OTHER RELATED PARTIES TOTAL RELATED PARTIES IMPACT ON THE TOTAL Other income 3,361 10 - - 10 0.30% Services (30,227) - (167) (20) (187) 0.62%
Transactions with the shareholder, Giuseppe Saleri S.a.p.A., comprise:
• administration services provided by Sabaf S.p.A. to Giuseppe Saleri S.a.p.A.;
• transactions as part of the domestic tax consolidation scheme until 2016, which generated the receivables shown in the tables and for which liquidation by the tax authorities is pending.
Transactions are regulated by specific contracts regulated at arm's length conditions.
Transactions with non-consolidated subsidiaries were solely of a commercial nature.
Please see the 2018 Report on Remuneration for this information.
In order to adopt a medium and long-term incentive instrument for directors and employees of the Sabaf Group, on the proposal of the Remuneration and Nomination Committee, the Board of Directors of Sabaf S.p.A. prepared a specific free allocation plan of shares (the "Plan") with the characteristics described below.
The Plan was approved by the Shareholders' Meeting on 8 May 2018 and the related Regulations by the Board of Directors on 15 May 2018.
The Plan aims to promote and pursue the involvement of the beneficiaries whose activities are considered relevant for the implementation of the contents and the achievement of the objectives set out in the Business Plan, foster loyalty development and motivation of managers, by increasing their entrepreneurial approach as well as align the interests of management with those of the Company's shareholders more closely, with a view to encouraging the achievement of significant results in the economic and asset growth of the Company.
The Plan is intended for persons who hold or will hold key positions in the Company and/or its Subsidiaries, with reference to the implementation of the contents and the achievement of the objectives of the 2018-2020 Business Plan. The Beneficiaries are divided into two groups:
On 15 May 2018, the Board of Directors identified the Beneficiaries of Cluster 1 of the Plan to whom a total of 185,600 rights have been assigned.
The subject-matter of the Plan is the free allocation to the Beneficiaries of a maximum of 370,000 Rights, each of which entitles them to receive free of charge, under the terms and conditions provided for by the Regulations of the Plan, 1 Sabaf S.p.A. Share.
The free allocation of Sabaf S.p.A. shares is conditional, among other things, on the achievement, in whole or in part, with progressiveness, of the business objectives related to the ROI, EBITDA and TSR indicators.
The Plan expires on 31 December 2022 (or on a different subsequent date set by the Board of Directors).
Considering the allocation mechanism described above, it was necessary to measure at fair value the rights assigned to receive shares of the Parent Company. In line with the date of assignment of the rights and terms of the plan, the grant date was set at 15 May 2018.
The main assumptions made at the beginning of the vesting period are illustrated below:
| 2018 | 2019 | 2020 | 2018-2020 | |
|---|---|---|---|---|
| Share price at the start of the vesting period | 19.48 | 19.48 | 19.48 | 19.48 |
| Risk free rate | -0.2846% | -0.1641% | -0.0497% | -0.0497% |
| Expected volatility | 31% | 29% | 27% | 29% |
| Dividend yield | 2.30% | 2.30% | 2.30% | 2.30% |
| Strike Price | 19.48 | 19.48 | 19.48 | 19.48 |
| Total value on ROI | 6.83 | |||
| Rights on ROI | 33.40% | Fair Value | 2.28 |
| FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED IN EBITDA | |||||
|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | 2018-2020 | ||
| Share price at the start of the vesting period | 19.48 | 19.48 | 19.48 | 19.48 | |
| Risk free rate | -0.2846% | -0.1641% | -0.0497% | -0.0497% | |
| Expected volatility | 31% | 29% | 27% | 29% | |
| Dividend yield | 2.30% | 2.30% | 2.30% | 2.30% | |
| Strike Price | 19.48 | 19.48 | 19.48 | 19.48 | |
| Total value on EBITDA | 8.97 | ||||
| Rights on EBITDA | 33.30% | Fair Value 2.99 |
| FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED IN TSR | |||||
|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | |||
| Share price at the start of the vesting period | 19.48 | 19.48 | 19.48 | ||
| Risk free rate | -0.2846% | -0.1641% | -0.0497% | ||
| Expected volatility | 31% | 29% | 27% | ||
| Dividend yield | 0.00% | 0.00% | 0.00% | ||
| Strike Price | 22.61 | 25.32 | 28.34 | ||
| Total value on TSR | 6.00 | ||||
| Rights on TSR | 33.30% | Fair Value | 2.00 |
| Fair Value per share at initial date of the vesting period | 7.27 |
|---|---|
The accounting impacts of the Plan on these consolidated financial statements are illustrated in Note 13 and Note 27.
For the purposes of managing the Group's capital, it has been defined that this includes the issued share capital, the share premium reserve and all other capital reserves attributable to the shareholders of the Parent Company. The main objective of capital management is to maximise the value for shareholders. In order to maintain or correct its financial structure, the Group may intervene in dividends paid to shareholders, purchase its own shares, redeem capital to shareholders or issue new shares. The Group controls equity using a gearing ratio consisting of the ratio of net financial debt (as defined in Note 22) to shareholders' equity. The Group's policy is to keep this ratio below 1.
In order to achieve this objective, the management of the Group's capital aims, among other things, to ensure that the covenants, linked to loans, which define the capital structure requirements, are complied with. Violations of covenants would allow banks to demand immediate repayment of loans (Note 14). During the current financial year, there were no breaches of the covenants linked to interest-bearing loans.
In the years ended 31 December 2018 and 2017, no changes were made to the objectives, policies and procedures for capital management.
The effects of the acquisition of Okida Elektronik are described in detail in the paragraph - "Information related to IFRS 3". Pursuant to CONSOB memorandum of 28 July 2006, the following section describes and analyses on significant non-recurring events, the consequences of which are reflected in the economic, equity and financial results for the year:
| SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE GROUP |
PROFIT ATTRIBUTABLE TO THE GROUP |
NET FINANCIAL DEBT |
CASH FLOWS |
|
|---|---|---|---|---|
| Financial statement values (A) | 117,702 | 15,614 | 53,524 | 1,893 |
| Write-down of investment property (Note 2) |
(850) | (850) | - | - |
| Financial statement notional value (A+B) |
118,552 | 16,464 | 53,524 | 1,893 |
Pursuant to CONSOB memorandum of 28 July 2006, the Group declares that no atypical and/or unusual transactions as defined by the CONSOB memorandum were executed during 2018.
The Sabaf Group has issued sureties to guarantee consumer and mortgage loans granted by banks to Group employees for a total of € 4,734,000 (€ 5,145,000 at 31 December 2017).
| COMPANIES CONSOLIDATED USING THE FULL LINE-BY-LINE CONSOLIDATION METHOD | |||||
|---|---|---|---|---|---|
| COMPANY NAME | REGISTERED OFFICES |
SHARE CAPITAL | SHAREHOLDERS | OWNERSHIP % | |
| Faringosi Hinges s.r.l. | Ospitaletto (BS) | € 90,000 | Sabaf S.p.A. | 100% | |
| Sabaf Immobiliare s.r.l. | Ospitaletto (BS) | € 25,000 | Sabaf S.p.A. | 100% | |
| Sabaf do Brasil Ltda | Jundiaì (SP, Brazil) | BRL 24,000,000 | Sabaf S.p.A. | 100% | |
| Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki |
Manisa (Turkey) | TRY 28,000,000 | Sabaf S.p.A. | 100% | |
| Sabaf Appliance Components Trading Ltd. | Kunshan (China) | € 200,000 | Sabaf S.p.A. | 100% | |
| Sabaf Appliance Components Ltd. | Kunshan (China) | € 4,400,000 | Sabaf S.p.A. | 100% | |
| A.R.C. s.r.l. | Campodarsego (PD) - Italy |
€ 45,000 | Sabaf S.p.A. | 70% | |
| Sabaf S.p.A. | 30% | ||||
| Okida Elektronik Sanayi ve Tickaret A.S | Istanbul (Turkey) | TRY 5,000,000 | Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki |
70% |
| NON-CONSOLIDATED COMPANIES VALUED AT COST | |||||
|---|---|---|---|---|---|
| REGISTERED SHARE CAPITAL SHAREHOLDERS OWNERSHIP % HOLDING % COMPANY NAME OFFICES |
|||||
| Sabaf US Corp. | Plainfield (USA) | USD 100,000 | Sabaf S.p.A. | 100% | 100% |
| Handan ARC Burners Co., Ltd. | Handan (Cina) | RMB 3,000,000 | A.R.C. s.r.l. | 51% | 35.5% |
| Registered and administrative office | Via dei Carpini, 1 25035 - Ospitaletto (Brescia) |
|---|---|
| Contacts | Tel: +39 030 - 6843001 |
| Fax: +39 030 - 6848249 | |
| E-mail: [email protected] | |
| Website: www.sabaf.it | |
| Tax information | R.E.A. Brescia 347512 |
| Tax Code 03244470179 | |
| VAT number 01786910982 |
The following table, prepared pursuant to Article 149-duodecies of the CONSOB Issuers' Regulation, shows fees relating to 2018 for auditing and for services other than auditing provided by the Independent Auditor and its network.
| (€/000) | PARTY PROVIDING THE SERVICE |
RECIPIENT | FEES PERTAINING TO THE 2018 FINANCIAL YEAR |
|---|---|---|---|
| EY S.p.A. | Parent company | 20 | |
| Audit | EY S.p.A. | Italian subsidiaries | 10 |
| EY network | Foreing subsidiaries | 52 | |
| Other services | EY S.p.A. | Parent company | 16 4 |
| Total | 98 |
Pietro Iotti, the Chief Executive Officer, and Gianluca Beschi, the Financial Reporting Officer of Sabaf S.p.A., have taken into account the requirements of Article 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of 24 February 1998 and can certify:
of the administrative and accounting procedures for the formation of the consolidated financial statements during the 2018 financial year.
They also certify that:
Ospitaletto, 26 March 2019
Chief Executive Officer Pietro Iotti
The Financial Reporting Officer Gianluca Beschi
Moving from your comfort zone always offers a combination of fear and curiosity, but it is an effective drive towards innovation and progress. At Sabaf, we do not limit ourselves when we develop innovative ideas, products and skills.
| Corporate bodies165 | |
|---|---|
| Statement of financial position166 | |
| Income statement167 | |
| Comprehensive income statement168 | |
| Statement of changes in shareholders' equity 168 |
|
| Cash flow Statement169 | |
| Explanatory notes170 | |
| Certification of Separate financial statements 199 |
|
| Independent auditor's report on the Separate financial Statements at 31 December 2018 |
200 |
| Report of the Board of Statutory Auditors to the Shareholders' Meeting of SABAF S.p.A206 |
* Independent directors
| (in €) | NOTES | 31.12.2018 | 31.12.2017 |
|---|---|---|---|
| ASSETS | |||
| NON-CURRENT ASSETS | |||
| Property, plant and equipment | 1 | 30,497,881 | 31,610,510 |
| Investment property | 2 | 1,261,716 | 1,453,564 |
| Intangible assets | 3 | 3,094,293 | 3,370,260 |
| Equity investments | 4 | 58,150,073 | 49,451,811 |
| Non-current financial assets | 5 | 5,366,725 | 1,847,639 |
| - of which from related parties | 36 | 5,246,725 | 1,667,639 |
| Non-current receivables | 19,871 | 19,871 | |
| Deferred tax assets | 21 | 3,471,716 | 3,455,483 |
| TOTAL NON-CURRENT ASSETS | 101,862,275 | 91,209,138 | |
| CURRENT ASSETS | |||
| Inventories | 6 | 26,627,854 | 24,768,927 |
| Trade receivables | 7 | 35,157,543 | 31,154,012 |
| - of which from related parties | 36 | 6,080,706 | 1,208,883 |
| Tax receivables | 8 | 2,377,224 | 2,229,708 |
| - of which from related parties | 36 | 1,083,666 | 1,083,666 |
| Other current receivables | 9 | 764,471 | 721,529 |
| Current financial assets | 10 | 5,110,000 | 1,067,429 |
| - of which from related parties | 36 | 1,600,000 | 1,000,000 |
| Cash and cash equivalents | 11 | 1,958,805 | 2,696,664 |
| TOTAL CURRENT ASSETS | 71,995,897 | 62,638,269 | |
| ASSETS HELD FOR SALE | 0 | 0 | |
| TOTAL ASSETS | 173,858,172 | 153,847,407 | |
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||
| SHAREHOLDERS' EQUITY | |||
| Share capital | 12 | 11,533,450 | 11,533,450 |
| Retained earnings, other reserves | 72,464,975 | 72,552,367 | |
| Profit for the year | 8,040,214 | 8,001,327 | |
| TOTAL SHAREHOLDERS' EQUITY | 92,038,639 | 92,087,144 | |
| NON-CURRENT LIABILITIES | |||
| Loans | 14 | 33,669,253 | 16,297,969 |
| Other financial liabilities | 15 | 120,000 | 180,000 |
| Post-employment benefit and retirement reserves | 16 | 2,083,922 | 2,199,523 |
| Provisions for risks and charges | 17 | 1,088,183 | 369,482 |
| Deferred tax liabilities | 21 | 106,646 | 67,983 |
| Total non-current liabilities | 37,068,004 | 19,114,957 | |
| CURRENT LIABILITIES | |||
| Loans | 14 | 17,330,136 | 18,927,558 |
| - of which from related parties | 36 | 0 | 2,100,000 |
| Other financial liabilities | 15 | 1,795,310 | 74,849 |
| Trade payables | 18 | 18,944,590 | 16,569,390 |
| - of which from related parties | 36 | 3,858,114 | 509,631 |
| Tax payables | 19 | 589,828 | 623,013 |
| Other payables | 20 | 6,091,665 | 6,450,496 |
| TOTAL CURRENT LIABILITIES | 44,751,529 | 42,645,306 | |
| LIABILITIES HELD FOR SALE | 0 | 0 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
173,858,172 | 153,847,407 |
166
| (in €) | NOTES | 2018 | 2017 |
|---|---|---|---|
| INCOME STATEMENT COMPONENTS | |||
| OPERATING REVENUE AND INCOME | |||
| Revenue | 23 | 110,065,252 | 115,687,029 |
| - of which from related parties | 36 | 10,238,606 | |
| Other income | 24 | 2,985,254 | 2,647,542 |
| Total operating revenue and income | 113,050,506 | 118,334,571 | |
| OPERATING COSTS | |||
| Materials | 25 | (45,084,626) | (46,554,625) |
| Change in inventories | 1,858,927 | 1,276,087 | |
| Services | 26 | (27,540,143) | (27,603,637) |
| - of which by related parties | 36 | (3,991,378) | (3,966,399) |
| Payroll costs | 27 | (28,388,299) | (28,734,310) |
| Other operating costs | 28 | (1,852,013) | (715,296) |
| Costs for capitalised in-house work | 1,599,795 | 1,474,322 | |
| TOTAL OPERATING COSTS | (99,406,359) | (100,857,459) | |
| OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION, CAPITAL GAINS/LOSSES, WRITE-DOWNS/ WRITE-BACKS OF NON-CURRENT ASSETS |
13,644,147 | 17,477,112 | |
| Depreciations and amortisation | 1,2,3 | (8,596,924) | (8,843,617) |
| Capital gains/(losses) on disposals of non-current assets |
495,659 | 97,873 | |
| Write-downs/write-backs of non-current assets | 29 | 0 | (681,628) |
| - of which by related parties | 36 | 0 | (681,628) |
| EBIT | 5,542,882 | 8,049,740 | |
| Financial income | 122,845 | 88,754 | |
| Financial expenses | 30 | (918,213) | (482,136) |
| Exchange rate gains and losses | 31 | 157,102 | (88,145) |
| Profits and losses from equity investments | 32 | 4,322,070 | 1,503,354 |
| PROFIT BEFORE TAXES | 9,226,686 | 9,071,567 | |
| Income tax | 33 | (1,186,472) | (1,070,240) |
PROFIT FOR THE YEAR 8,040,214 8,001,327
| (in €) | 2018 | 2017 |
|---|---|---|
| PROFIT FOR THE YEAR | 8,040,214 | 8,001,327 |
| Total profits/losses that will not be subsequently reclassified under profit (loss) for the year |
||
| Actuarial post-employment benefit reserve evaluation | 26,538 | 73,372 |
| Tax effect | (6,369) | (17,609) |
| TOTAL OTHER PROFITS/(LOSSES) NET OF TAXES FOR THE YEAR | 20,169 | 55,763 |
| TOTAL PROFIT | 8,060,383 | 8,057,090 |
| (€/000) | Share Capital |
Share premium reserve |
Legal reserve |
Treasury shares |
Actuarial post-employment benefit reserve evaluation |
Other reserves |
Profit for the year |
Total shareholders' equity |
|---|---|---|---|---|---|---|---|---|
| Balance at 31 December 2016 | 11,533 | 10,002 | 2,307 | (2,399) | (533) | 68,154 | 2,460 | 91,524 |
| 2017 dividend payment | (2,924) | (2,460) | (5,384) | |||||
| Purchase of treasury shares | (2,110) | (2,110) | ||||||
| Total profit at 31 December 2017 |
56 | 8,001 | 8,057 | |||||
| Balance at 31 December 2017 | 11,533 | 10,002 | 2,307 | (4,509) | (477) | 65,230 | 8,001 | 92,087 |
|---|---|---|---|---|---|---|---|---|
| 2018 dividend payment | 1,930 | (8,001) | (6,071) | |||||
| Purchase of treasury shares | (2,359) | (2,359) | ||||||
| Stock grant plan (IFRS 2) | 322 | 322 | ||||||
| Total profit at 31 December 2018 |
20 | 8,040 | 8,060 | |||||
| Balance at 31 December 2018 | 11,533 | 10,002 | 2,307 | (6,868) | (457) | 67,482 | 8,040 | 92,039 |
| (€/000) | 2018 FY | 2017 FY |
|---|---|---|
| Cash and cash equivalents at beginning of year | 2,697 | 1,797 |
| Profit for the year | 8,040 | 8,001 |
| Adjustments for: | ||
| - Depreciation and amortisation | 8,597 | 8,844 |
| - Realised gains | (496) | (98) |
| - Write-downs of non-current assets | 0 | 622 |
| - Profits and losses from equity investments | (4,322) | (1,503) |
| - Valuation of the stock grant plan | 321 | 0 |
| - Net financial income and expenses | 795 | 393 |
| - Non-monetary foreign exchange differences | 79 | 230 |
| - Income tax | 1,186 | 1,070 |
| Change in post-employment benefit reserve | (139) | (263) |
| Change in risk provisions | 719 | 47 |
| Change in trade receivables | (4,003) | (3,689) |
| Change in inventories | ||
| (1,859) | (1,276) 559 |
|
| Change in trade payables | 2,375 (3,487) |
(4,406) |
| Change in net working capital | ||
| Change in other receivables and payables, deferred taxes |
(407) | 830 |
| Payment of taxes | (1,319) | (847) |
| Payment of financial expenses | (895) | (456) |
| Collection of financial income | 123 | 89 |
| Cash flow from operations | 8,796 | 12,554 |
| Investments in non-current assets | ||
| - intangible | (526) | (1,099) |
| - tangible | (7,836) | (8,670) |
| - financial | (8,698) | - |
| Disposal of non-current assets | 1,841 | 449 |
| Cash flow absorbed by investments | (15,219) | (9,319) |
| Repayment of loans | (14,166) | (10,607) |
| Raising of loans | 31,600 | 14,273 |
| Change in financial assets | (7,641) | (7) |
| Sale of treasury shares | (2,359) | (2,110) |
| Payment of dividends | (6,071) | (5,384) |
| Collection of dividends Cash flow absorbed by financing activities |
4,322 5,685 |
1,500 (2,335) |
| Total cash flows | (738) | 900 |
| Cash and cash equivalents at end of year (Note 11) | 1,959 | 2,697 |
| Net current financial debt | 12,056 | 15,239 |
| Non-current financial debt | 33,789 | 16,478 |
| Net financial debt (Note 22) | 45,845 | 31,717 |
The separate financial statements of Sabaf S.p.A. for the financial year 2018 have been prepared in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Union. Reference to IFRS also includes all current International Accounting Standards (IAS).
The separate financial statements are drawn up in euro, which is the currency in the economy in which the Company operates. The income statement, the comprehensive income statement and the statement of financial position schedules are prepared in euro, while the cash flow statement, the statement of changes in shareholders' equity and the values reported in the explanatory notes are in thousands of euro.
The financial statements have been prepared on a historical cost basis except for some revaluations of property, plant and equipment undertaken in previous years, and are considered a going concern. The Company assessed that it is a going concern (as defined by paragraphs 25 and 26 of IAS 1), also due to the strong competitive position, high profitability and solidity of the financial structure.
Sabaf S.p.A., as the Parent Company, also prepared the consolidated financial statements of the Sabaf Group at 31 December 2018.
The Company adopted the following formats:
Use of these formats permits the most meaningful representation of the Company's capital, business and financial status.
The accounting standards and policies applied for the preparation of the separate financial statements at 31 December 2018, unchanged versus the previous year, with the exception of the new accounting standards adopted as from 1 January 2018 (IFRS 9 and IFRS 15), are shown below:
These are recorded at purchase or manufacturing cost. The cost includes directly chargeable ancillary costs. These costs also include revaluations undertaken in the past based on monetary revaluation rules or pursuant to company mergers.
Depreciation is calculated according to rates deemed appropriate to spread the carrying value of tangible assets over their useful working life. Estimated useful working life in years, unchanged compared to previous financial years, is as follows:
| Buildings | 33 |
|---|---|
| Light constructions | 10 |
| General plant | 10 |
| Specific plant and machinery | 6 – 10 |
| Equipment | 4 |
| Furniture | 8 |
| Electronic equipment | 5 |
| Vehicles and other transport means | 5 |
Ordinary maintenance costs are expensed in the year in which they are incurred; costs that increase the asset value or useful working life are capitalised and depreciated according to the residual possibility of utilisation of the assets to which they refer.
Land is not depreciated.
Investment property is valued at cost, including revaluations undertaken in the past based on monetary revaluation rules or pursuant to company mergers. The depreciation is calculated based on the estimated useful life, considered to be 33 years.
If the recoverable amount of the investment property – determined based on the market value of the properties – is estimated to be lower than its carrying value, the asset's carrying value is reduced to the lower recoverable amount, recognising impairment in the income statement.
When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or cash generating unit) is increased to the new value stemming from the estimate of its recoverable amount – but not beyond the net carrying value that the asset would have had if it had not been written down for impairment. Reversal of impairment loss is recognised in the income statement.
As established by IAS 38, intangible assets acquired or internally produced are recognised as assets when it is probable that use of the asset will generate future economic benefits and when asset cost can be measured reliably.
If it is considered that these future economic benefits will not be generated, the development costs are written down in the year in which this is ascertained.
Such assets are measured at purchase or production cost and - if the assets concerned have a finite useful life - are amortised on a straight-line basis over their estimated useful life.
The useful life of projects for which development costs are capitalised is estimated to be 10 years.
The SAP management system is amortised over five years.
Equity investments not classified as held for sale are booked at cost, reduced for impairment.
At each end of the reporting period, Sabaf S.p.A. reviews the carrying value of its property, plant and equipment, intangible assets and equity investments to determine whether there are signs of impairment of these assets. If there is any such indication, the recoverable amount of said assets is estimated so as to determine the total of the write-down. If it is not possible to estimate the recoverable amount individually, the Company estimates the recoverable amount of the cash generating unit (CGU) to which the asset belongs. In particular, the recoverable amount of the cash generating units (which generally coincide with the legal entity to which the capitalised assets refer) is verified by determining the value of use. The recoverable amount is the higher of the net selling price and value of use. In measuring the value of use, future cash flows net of taxes, estimated based on past experience, are discounted to their present value using a pre-tax rate that reflects current market valuations of the present cost of money and specific asset risk. The main assumptions used for calculating the value of use concern the discount rate, growth rate, expected changes in selling prices and cost trends during the period used for the calculation. The growth rates adopted are based on future market expectations in the relevant sector. Changes in the sales prices are based on past experience and on the expected future changes in the market. The Company prepares operating cash flow forecasts based on the most recent budgets approved by the Boards of Directors of the investees, draws up fouryear forecasts and determines the terminal value (current value of perpetual income), which expresses the medium and long term operating flows in the specific sector.
Furthermore, the Company checks the recoverable amount of its investees at least once a year when the separate financial statements are prepared.
If the recoverable amount of an asset (or CGU) is estimated to be lower than its carrying value, the asset's carrying value is reduced to the lower recoverable amount, recognising impairment in the income statement.
When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or cash generating unit) is increased to the new value stemming from the estimate of its recoverable amount – but not beyond the net carrying value that the asset would have had if it had not been written down for impairment. Reversal of impairment loss is recognised in the income statement.
Inventories are measured at the lower of purchase or production cost – determined using the weighted average cost method – and the corresponding fair value represented by the replacement cost for purchased materials and by the presumed realisable value for finished and semi-processed products – calculated taking into account any manufacturing costs and direct selling costs yet to be incurred. Inventory cost includes accessory costs and the portion of direct and indirect manufacturing costs that can reasonably be assigned to inventory items. Inventories subject to obsolescence and low turnover are written down in relation to their possibility of use or realisation. Inventory write-downs are eliminated in subsequent years if the reasons for such write-downs cease to exist.
Upon initial recognition, financial assets are classified, as the case may be, on the basis of subsequent measurement methods, i.e. at amortised cost, at fair value recognised in other comprehensive income (OCI) and at fair value recognised in the income statement.
The classification of financial assets at initial recognition depends on the characteristics of the contractual cash flows of the financial assets and on the business model that the Company uses to manage them.
Trade receivables that do not contain a significant financing component are valued at the transaction price determined in accordance with IFRS 15. See the "Revenue from Contracts with Customers" paragraph.
Other financial assets are recorded at fair value plus, in the case of a financial asset not at fair value recognised in the income statement, transaction costs. For a financial asset to be classified and measured at amortised cost or at fair value recognised in OCI, it must generate cash flows that depend solely on the principal and interest on the amount of principal to be repaid (known as 'solely payments of principal and interest (SPPI)'). This measurement is referred to as the SPPI test and is carried out at the instrument level.
The measurement of financial liabilities depends on their classification, as described below.
This category is the most important for the Company. The Company measures the financial assets at amortised cost if both of the following requirements are met:
Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in the income statement when the asset is derecognised, modified or revalued.
Financial assets at amortised cost of the Group include trade receivables.
This category includes all assets held for trading, assets designated at initial recognition as financial assets measured at fair value with changes recognised in the income statement, or financial assets that must be measured at fair value. Assets held for trading are all those assets acquired for sale or repurchase in the short term. Derivatives, separated or otherwise, are classified as financial instruments held for trading, unless they are designated as effective hedging instruments. Financial assets with cash flows that are not represented solely by principal and interest payments are classified and measured at fair value through profit or loss, regardless of the business model. Financial instruments at fair value with changes recognised in the income statement are recognised in the statement of financial position at fair value and net changes in fair value are recognised in the income statement. This category includes derivative instruments.
The Company does not hold financial assets at fair value through profit or loss with reclassification of cumulative gains and losses or financial assets at fair value through profit or loss without reversal of cumulative gains and losses upon derecognition.
A financial asset (or, if applicable, part of a financial asset or part of a group of similar financial assets) is firstly written off (e.g. removed from the statement of financial position of the Company) when:
If the Company has transferred the rights to receive financial flows from an asset or has signed an agreement on the basis of which it retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the financial flows to one or more beneficiaries (pass-through), it considers whether or to what extent it has retained the risks and benefits concerning the ownership. If it has not substantially transferred or retained all the risks and benefits or has not lost control over it, the asset continued to be recognised in the financial statements of the Company to the extent of its residual involvement in the asset itself. In this case, the company also recognises an associated liability. The transferred asset and the associated liability are measured in such a way as to reflect the rights and obligations that pertain to the Company. When the residual involvement of the entity is a guarantee in the transferred asset, the involvement is measured based on the amount of the asset or the maximum amount of the consideration received that the entity could be obliged to pay, whichever lower.
Provisions for risks and charges are provisioned to cover losses and debts, the existence of which is certain or probable, but whose amount or date of occurrence cannot be determined at the end of the year. Provisions are stated in the statement of financial position only when a legal or implicit obligation exists that determines the use of resources with an impact on profit and loss to meet that obligation and the amount can be reliably estimated. If the effect is significant, the provisions are calculated by updating future financial flows estimated at a rate including taxes such as to reflect current market valuations of the current value of the cash and specific risks associated with the liability.
The post-employment benefit reserve (TFR) is provisioned to cover the entire liability accruing vis-à-vis employees in compliance with current legislation and with national and supplementary company collective labour contracts. This liability is subject to revaluation via application of indices fixed by current regulations. Up to 31 December 2006, post-employment benefits were considered defined-benefit plans and accounted for in compliance with IAS 19, using the projected unit-credit method. The regulations of this fund were amended by Italian Law no. 296 of 27 December 2006 and subsequent Decrees and Regulations issued during the first months of 2007. In the light of these changes, and, in particular, for companies with at least 50 employees, post-employment benefits must now be considered a defined-benefit plan only for the portions accruing before 1 January 2007 (and not yet paid as at the end of the reporting period). Conversely, portions accruing after that date are treated as defined-contribution plans.
Actuarial gains or losses are recorded immediately under "Other total profits/ (losses)".
All financial liabilities are initially recognised at fair value, in addition to directly attributable transaction costs in case of mortgages, loans and payables. The Company's financial liabilities include trade payables and other payables, mortgages and loans, including current account overdrafts and derivative financial instruments.
The measurement of financial liabilities depends on their classification, as described below.
Financial liabilities at fair value with changes recognised in the income statement include liabilities held for trading and financial liabilities initially recognised at fair value, with changes recognised in the income statement. Liabilities held for trading are those liabilities acquired in order to discharge or transfer them in the short term. This category also includes derivative financial instruments subscribed by the Company and not designated as hedging instruments in a hedging relationship pursuant to IFRS 9. Embedded derivatives, separated from the main contract, are classified as financial instruments held for trading, unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the income statement. Financial liabilities are designated at fair value with changes recognised in the income statement from the date of initial recognition, only if the criteria of IFRS 9 are met.
This is the most important category for the Company and includes interest-bearing payables and loans. After initial statement, loans are valued using the amortised cost approach, applying the effective interest rate method. Gains and losses are recognised in the income statement when the liability is discharged, as well as through the amortisation process. Amortised cost is calculated by recognising the discount or premium on the acquisition and the fees or costs that are an integral part of the effective interest rate. Amortisation at the effective interest rate is included in financial expenses in the income statement.
A financial liability is derecognised when the obligation underlying the liability is discharged, cancelled or fulfilled. If an existing financial liability is replaced by another from the same lender, at substantially different conditions, or if the conditions of an existing liability are substantially changed, this replacement or change is treated as a derecognition of the original liability accompanied by the recognition of a new liability, with any differences between the carrying values recognised in the income statement.
Receivables and payables originally expressed in foreign currencies are converted into euro at the exchange rates in force on the date of the transactions originating them. Forex differences realised upon collection of receivables and payment of payables in foreign currency are posted in the income statement. Income and costs relating to foreign-currency transactions are converted at the rate in force on the transaction date.
At year-end, assets and liabilities expressed in foreign currencies are posted at the spot exchange rate in force at the end of the reporting period and related foreign exchange gains and losses are posted in the income statement. If conversion generates a net gain, this value constitutes a non-distributable reserve until it is effectively realised.
The Company's business is exposed to financial risks relating to changes in exchange rates, commodity prices and interest rates. The Company may decide to use derivative financial instruments to hedge these risks.
Derivatives are initially recognised at cost and are then adjusted to fair value on subsequent closing dates.
Changes in the fair value of derivatives designated and recognised as effective for hedging future cash flows relating to the Company's contractual commitments and planned transactions are recognised directly in shareholders' equity, while the ineffective portion is immediately posted in the income statement. If the contractual commitments or planned transactions materialise in the recognition of assets or liabilities, when such assets or liabilities are recognised, the gains or losses on the derivative that were directly recognised in equity are factored back into the initial valuation of the cost of acquisition or carrying value of the asset or liability. For cash flow hedges that do not lead to recognition of assets or liabilities, the amounts that were directly recognised in equity are included in the income statement in the same period when the contractual commitment or planned transaction hedged impacts profit and loss – for example, when a planned sale actually takes place.
For effective hedges of exposure to changes in fair value, the item hedged is adjusted for the changes in fair value attributable to the risk hedged and recognised in the income statement. Gains and losses stemming from the derivative's valuation are also posted in the income statement.
Changes in the fair value of derivatives not designated as hedging instruments are recognised in the income statement in the period when they occur.
Hedge accounting is discontinued when the hedging instrument expires, is sold or is exercised, or when it no longer qualifies as a hedge. At this time, the cumulative gains or losses of the hedging instrument recognised in equity are kept in the latter until the planned transaction actually takes place. If the transaction hedged is not expected to take place, cumulative gains or losses recognised directly in equity are transferred to the year's income statement.
Embedded derivatives included in other financial instruments or contracts are treated as separate derivatives when their risks and characteristics are not strictly related to those of their host contracts and the latter are not measured at fair value with posting of related gains and losses in the income statement.
Revenue is reported net of return sales, discounts, allowances and bonuses, as well as of the taxes directly associated with sale of goods and rendering of services.
Sales revenue is reported when the company has transferred the significant risks and benefits associated with ownership of the goods and the amount of revenue can be reliably measured.
Revenues of a financial nature are recorded on an accrual basis.
Finance income includes interest receivable on funds invested and income from financial instruments, when not offset as part of hedging transactions. Interest income is recorded in the income statement at the time of vesting, taking effective output into consideration.
Financial expenses include interest payable on financial debt calculated using the effective interest method and bank expenses. All the other financial expenses are recognised as costs for the year in which they are incurred.
Income taxes include all taxes calculated on the Company's taxable income. Income taxes are directly recognised in the income statement, with the exception of those concerning items directly debited or credited to shareholders' equity, in which case the tax effect is recognised directly in shareholders' equity. Other taxes not relating to income, such as property taxes, are included among operating expenses. Deferred taxes are provisioned in accordance with the global liability provisioning method. They are calculated on all temporary differences that emerge from the taxable base of an asset or liability and its book value. Current and deferred tax assets and liabilities are offset when income taxes are levied by the same tax authority and when there is a legal right to settle on a net basis. Deferred tax assets and liabilities are measured using the tax rates that are expected to be applicable in the years when temporary differences will be realised or settled.
Dividends are posted on an accrual basis when the right to receive them materialises, i.e. when shareholders approve dividend distribution.
Treasury shares are booked in a specific reserve as a reduction of shareholders' equity. The carrying value of treasury shares and revenues from any subsequent sales are recognised in the form of changes in shareholders' equity.
Some of the Company employees receive part of the remuneration in the form of share-based payments, therefore employees provide services in exchange for shares ("equity-settled transactions"). The cost of equity-settled transactions is determined by the fair value at the date on which the assignment is made using an appropriate measurement method, as explained in more detail in Note 42.
This cost, together with the corresponding increase in shareholders' equity, is recorded under personnel costs (Note 27) over the period in which the conditions relating to the achievement of objectives and/or the provision of the service are met. The cumulative costs recognised for such transactions at the end of each reporting period up to the vesting date are commensurate with the expiry of the vesting period and the best estimate of the number of equity instruments that will actually vest.
Service or performance conditions are not taken into account when defining the fair value of the plan at the assignment date. However, the probability of these conditions being met is taken into account when defining the best estimate of the number of equity instruments that will vest. Market conditions are reflected in the fair value at the assignment date. Any other condition related to the plan that does not involve a service obligation is not considered to be a vesting condition. Non-vesting conditions are reflected in the fair value of the plan and result in the immediate recognition of the cost of the plan, unless there are also service or performance conditions.
No cost is recognised for rights that do not vest in that the performance and/ or service conditions are not met. When the rights include a market condition or a non-vesting condition, these are treated as if they had vested regardless of whether the market conditions or other non-vesting conditions to which they are subject are met or not, it being understood that all other performance and/ or service conditions must be met.
If the conditions of the plan are changed, the minimum cost to be recognised is the fair value at the assignment date in the absence of the change in the plan itself, on the assumption that the original conditions of the plan are met. Moreover, a cost is recognised for each change that results in an increase in total fair value of the payment plan, or that is in any case favourable for employees; this cost is measured with reference to the date of change. When a plan is cancelled, any remaining element of the plan's fair value is immediately expensed to the income statement.
Preparation of the separate financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the carrying values of assets and liabilities and the disclosures on contingent assets and liabilities at the end of the reporting period. Actual results might differ from these estimates. Estimates are used to measure tangible and intangible assets and investments subject to impairment testing, as described earlier, as well as to measure the ability to recover prepaid tax assets, provisions for bad debts, for inventory obsolescence, depreciation and amortisation, asset write-downs, employee benefits, taxes, other provisions and reserves. Specifically:
The procedure for determining impairment loses of tangible and intangible assets described in "Impairment" implies – in estimating the value of use – the use of the Business Plans of investees, which are based on a series of assumptions relating to future events and actions of the investees' management bodies, which may not necessarily come about. In estimating market value, however, assumptions are made on the expected trend in trading between third parties based on historical trends, which may not actually be repeated.
Receivables are adjusted by the related bad debt provision to take into account their recoverable amount. To determine the size of the write-downs, management must make subjective assessments based on the documentation and information available regarding, among other things, the customer's solvency, as well as experience and historical payment trends.
Inventories subject to obsolescence and slow turnover are systematically valued and written down if their recoverable amount is less than their carrying value. Write-downs are calculated based on management assumptions and estimates, resulting from experience and historical results.
The current value of liabilities for employee benefits depends on a series of factors determined using actuarial techniques based on certain assumptions. Assumptions concern the discount rate, estimates of future salary increases, and mortality and resignation rates. Any change in the above-mentioned assumptions might have an effect on liabilities for pension benefits.
Estimating the fair value of share-based payments requires the determination of the most appropriate valuation model, which depends on the terms and conditions under which these instruments are granted. This also requires the identification of data to feed into the valuation model, including assumptions about the exercise period of the options, volatility and dividend yield. The Company uses a binomial model for the initial measurement of the fair value of share-based payments with employees.
Determining liabilities for Company taxes requires the use of management valuations in relation to transactions whose tax implications are not certain at the end of the reporting period. Furthermore, the valuation of deferred taxes is based on income expectations for future years; the valuation of expected income depends on factors that might change over time and have a significant effect on the valuation of deferred tax assets.
When estimating the risk of potential liabilities from disputes, the Directors rely on communications regarding the status of recovery procedures and disputes from the lawyers who represent the Company in litigation. These estimates are determined taking into account the gradual development of the disputes, considering existing exemptions.
Estimates and assumptions are regularly reviewed and the effects of each change immediately reflected in the income statement.
Standard IFRS 9 – FINANCIAL INSTRUMENTS. In July 2014, the IAS issued its final IFRS 9 replacing IAS 39 and all previous versions of IFRS 9. The standard was approved by the European Union in November 2016 and is effective for financial years beginning on or after 1 January 2018. IFRS 9 brings together all aspects relating to the recognition of financial instruments: Classification and Measurement, Impairment and Hedge Accounting.
The adoption of IFRS 9 did not have a significant impact on the of the Company's financial statements and did not entail the need to record adjustments to the consolidated statement of financial position at the date of initial application of the standard.
The Company did not have a significant impact on its financial statements as a result of the application of the classification and measurement requirements envisaged by IFRS 9. Loans, like trade receivables, are held for collection at the contractual due dates and are expected to generate cash flows represented solely by collections of principal and interest.
The Company has not recorded any adjustments to the consolidated statement of financial position at the date of initial application of the standard. In particular, with reference to trade receivables, the Company considered its policy of bad debt provision consistent with the Standard.
The Company does not use hedge accounting for hedging instruments.
Standard IFRS 15 – REVENUE FROM CONTRACTS WITH CUSTOMERS.
In May 2014, the IAS issued IFRS 15, a new revenue recognition standard that replaces IAS 18 and IAS 11 and was supplemented with further clarifications and guidance in 2016. The standard is applicable to the preparation of the financial statements for the financial years starting from 1 January 2018 and introduced a new five-stage model that applies to contracts with customers. IFRS 15 requires the recognition of revenue for an amount that reflects the consideration to which the entity believes it is entitled in exchange for the transfer of goods or services to the customer.
The application of the new standard and the relative interpretations had no significant effects on the Company's separate financial statements, either from the point of view of classification or of determining quantities. In particular, the application of IFRS 15 had no impact on contracts with customers, in which the sale of Sabaf products is the only obligation ("at a point in time"), since revenues are recognised at the time when control of the activity is transferred to the customer, according to the terms of return defined with the customer. The guarantees provided for in the contracts are of a general nature and not extended and, consequently, the Company believes that they will continue to be accounted for in accordance with IAS 37. Finally, with regard to the income from participating in the production of presses and equipment, in line with previous years, the Company will continue to allocate these revenues over the useful life of the projects, which is generally 10 years.
The provisions issued concern IFRS 1 First-Time Adoption of International Financial Reporting Standards - Deletion of short-term exemptions for firsttime adopters, IAS 28 Investments in Associates and Joint Ventures – Measuring investees at fair value through profit or loss: an investment-by-investment choice or a consistent policy choice, IFRS 12 Disclosure of Interests in Other Entities – Clarification of the scope of the Standard. The provisions were approved by the European Union in February 2018 and are applicable in the preparation of the financial statements for financial years beginning on or after 1 January 2018, with reference to the amendments to IAS 28 and IFRS 1, as from 1 January 2017, with reference to the amendments to IFRS 12. The adoption of the provisions by the Company did not entail any changes in accounting policies or retrospective adjustments.
IFRIC 22 Interpretation "FOREIGN CURRENCY TRANSACTIONS AND ADVANCE CONSIDERATION". The interpretation was endorsed by the European Union in March 2018 and is applicable from 1 January 2018. The interpretation aims to provide guidelines for foreign currency transactions if advances or non-cash payments are recognised in the financial statements, prior to the recognition of the related asset, cost or revenue. This document provides guidance on how an entity should determine the date of a transaction, and consequently, the spot exchange rate to be used when foreign currency transactions occur in which the payment is made or received in advance. The adoption of the interpretation by the Company did not entail any changes in accounting policies or retrospective adjustments.
Amendment to IAS 40 "TRANSFERS OF INVESTMENT PROPERTY". These amendments clarify the transfers of a property to, or from, investment property. In particular, an entity must reclassify a property among, or from, investment property only when there is evidence that there was a change in the intended use of the property. This change must refer to a specific event that happened and must not be limited to a change of intention by the Management of an entity. The interpretation was endorsed by the European Union in March 2018 and is applicable from 1 January 2018 The adoption of the amendments by the Company did not entail any changes in accounting policies or retrospective adjustments.
Amendment to IFRS 2 "CLASSIFICATION AND MEASUREMENT OF SHARE-BASED PAYMENT TRANSACTIONS", which contains some clarification on the recording of the effects of vesting conditions in the presence of cash-settled share-based payments, on the classification of share-based payments with net settlement characteristics and on the recording of amendments under the terms and conditions of a share-based payment that change their classification from cash-settled to equity-settled. The interpretation was endorsed by the European Union in February 2018 and is applicable from 1 January 2018. The adoption of the amendments by the Company did not entail any changes in accounting policies or retrospective adjustments.
Standard IFRS 16 " LEASES" (published on 13 January 2016), which will replace standard IAS 17 – Leases, as well as interpretations IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases— Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The new standard provides a new definition of lease and introduces a criterion based on the control (right of use) of an asset in order to distinguish the leasing contracts from the service contracts, identifying the discriminatory ones: the identification of the asset, the right of replacement of the same, the right to obtain substantially all of the economic benefits deriving from the use of the asset and the right to direct the use of the asset underlying the contract. The standard establishes a single model of recognition and measurement of the lease agreements for the lessee which requires the recognition of the asset to be leased (operating lease or otherwise) in assets offset by a financial debt, while also providing the opportunity not to recognise as leases the agreements whose subject matter are "low-value assets" and leases with a contract duration equal to or less than 12 months. By contrast, the Standard does not include significant changes for the lessors. The standard applies beginning on 1 January 2019 but early application is permitted, only for Companies that already applied IFRS 15 - Revenue from Contracts with Customers.
The Company started an analysis to assess the impact of the application of IFRS 16 on the amounts and related disclosures in the separate financial statements. However, it is not possible to provide a reasonable estimate of the effects until the Company has completed a detailed analysis of the related contracts.
PENSATION. This document specifies the instruments that envisage early repayment that could comply with the "SPPI" test even if the "reasonable additional compensation" to be paid in the event of early repayment is a "negative compensation" for the lender. The interpretation was endorsed by the European Union in March 2018 and is applicable from 1 January 2019 (early application is also permitted). The directors do not expect a significant effect on the Company's separate financial statements through the adoption of these changes.
On the reference date of these separate financial statements the competent bodies of the European Union have not yet concluded the approval process necessary for the adoption of the amendments and principles described below.
On 7 June 2017, IASB published the clarification document IFRIC 23 – UN-CERTAINTY OVER INCOME TAX TREATMENTS. The document deals with uncertainties about the tax treatment of income taxes. The document requires that uncertainties in determining deferred tax assets and liabilities be reflected in the financial statements only when it is probable that the entity will pay or recover the amount in question. Moreover, the document does not contain any new disclosure requirement but emphasises that an entity will have to determine whether it will be necessary to disclose information on management considerations and on the uncertainty relating to tax accounting in accordance with IAS 1. The new interpretation applies from 1 January 2019, but early application is permitted.
Amendment to IAS 28 "LONG-TERM INTERESTS IN ASSOCIATES AND JOINT VENTURES" (published on 12 October 2017)". This document clarifies the need to apply IFRS 9, including the requirements of impairment, to other long-term interests in associate companies and joint ventures that are not accounted for under the equity method. The amendment applies from 1 January 2019, but early application is permitted. The directors do not expect a significant effect on the Company's separate financial statements through the adoption of these changes.
Document "ANNUAL IMPROVEMENTS TO IFRSS 2015-2017 CYCLE", published on 12 December 2017 (including IFRS 3 Business Combinations and IFRS 11 Joint Arrangements – Remeasurement of previously held interest in a joint operation, IAS 12 Income Taxes – Income tax consequences of payments on financial instruments classified as equity, IAS 23 Borrowing costs Disclosure of Interests in Other Entities – Borrowing costs eligible for capitalisation) which implements changes to some standards as part of the annual process of improving them. The amendments apply from 1 January 2019 but early application is permitted. The directors do not expect a significant effect on the Company's separate financial statements through the adoption of these changes.
Amendment to IAS 19 "PLAN AMENDMENT, CURTAILMENT OR SETTLE-MENT". The amendments clarify how pension costs are determined when a change occurs in a defined benefit plan. The amendments will be effective for the preparation of the financial statements for financial years beginning on or after 1 January 2019, unless they are postponed subsequent to their approval by the European Union.
Standard IFRS 17 "INSURANCE CONTRACTS". A new accounting standard for the recognition of insurance contracts that will replace IFRS 4. The new standard will be effective for the preparation of the financial statements for financial years beginning on or after 1 January 2021, unless they are postponed subsequent to their approval by the European Union.
176
| PROPERTY | PLANT AND EQUIPMENT |
OTHER ASSETS | ASSETS UNDER CONSTRUCTION |
TOTAL | ||||
|---|---|---|---|---|---|---|---|---|
| COST | ||||||||
| At 31 December 2016 | 6,327 | 158,391 | 31,819 | 1,427 | 197,964 | |||
| Increases | 56 | 5,347 | 1,770 | 1,785 | 8,958 | |||
| Disposals | - | (721) | (430) | (33) | (1,184) | |||
| Reclassification | 18 | 551 | 59 | (883) | (255) | |||
| At 31 December 2017 | 6,401 | 163,568 | 33,218 | 2,296 | 205,483 | |||
| Increases | 164 | 4,772 | 960 | 1,940 | 7,836 | |||
| Disposals | - | (3,436) | (129) | - | (3,565) | |||
| Reclassification | 5 | 1,552 | 19 | (1,589) | (13) | |||
| At 31 December 2018 | 6,570 | 166,456 | 34,068 | 2,647 | 209,741 |
| ACCUMULATED DEPRECIATION | |||||||
|---|---|---|---|---|---|---|---|
| At 31 December 2016 | 2,887 | 135,147 | 28,838 | - | 166,872 | ||
| Depreciations for the year | 177 | 6,221 | 1,522 | - | 7,920 | ||
| Eliminations for disposals | - | (525) | (395) | - | (920) | ||
| At 31 December 2017 | 3,064 | 140,843 | 29,965 | - | 173,872 | ||
| Depreciations for the year | 180 | 6,049 | 1,433 | - | 7,662 | ||
| Eliminations for disposals | - | (2,175) | (116) | - | (2,291) | ||
| At 31 December 2018 | 3,244 | 144,717 | 31,282 | - | 179,243 |
| NET CARRYING VALUE | |||||||
|---|---|---|---|---|---|---|---|
| At 31 December 2018 | 3,326 | 21,739 | 2,786 | 2,647 | 30,498 | ||
| At 31 December 2017 | 3,337 | 22,725 | 3,253 | 2,296 | 31,611 |
The breakdown of the net carrying value of Property was as follows:
| 31.12.2018 | 31.12.2017 | Change | |
|---|---|---|---|
| Land | 1,291 | 1,291 | - |
| Industrial buildings | 2,035 | 2,046 | (11) |
| Total | 3,326 | 3,337 | (11) |
The main investments in the financial year were aimed at increasing the production capacity of special burners, at the further automation of production of light alloy valves and interconnecting production plants with management systems (Industry 4.0). Other investments were made in the production of presses for new burners. Investments in maintenance and replacement, so that production equipment is kept constantly up to date and efficient, are systematic.
Decreases mainly relate to the disposal of machinery no longer in use or sold to subsidiaries.
Assets under construction include machinery under construction and advance payments to suppliers of capital equipment.
At 31 December 2018, the Company found no endogenous or exogenous indicators of impairment of its property, plant and equipment. As a result, the value of property, plant and equipment was not submitted to impairment testing.
| COST | |
|---|---|
| At 31 December 2016 | 6,675 |
| Increases | - |
| Disposals | - |
| At 31 December 2017 | 6,675 |
| Increases | - |
| Disposals | - |
| ACCUMULATED DEPRECIATIONS | |||||
|---|---|---|---|---|---|
| At 31 December 2016 | 5,030 | ||||
| Depreciations for the year | 191 | ||||
| At 31 December 2017 | 5,221 | ||||
| Depreciations for the year | 192 | ||||
| At 31 December 2018 | 5,413 |
| NET CARRYING VALUE | ||||
|---|---|---|---|---|
| At 31 December 2018 | 1,262 | |||
| At 31 December 2017 | 1,454 |
This item includes non-operating buildings owned by the Group. During the year, this item did not undergo any changes except for depreciations for the year.
At 31 December 2018, the Company found no endogenous or exogenous indicators of impairment of its investment property.
As a result, the value of investment property was not submitted to impairment testing.
| PATENTS, KNOW-HOW AND SOFTWARE |
DEVELOPMENT COSTS |
OTHER INTANGIBLE ASSETS |
TOTAL | |
|---|---|---|---|---|
| COST | ||||
| At 31 December 2016 | 6,275 | 4,902 | 2,067 | 13,244 |
| Increases | 243 | 441 | 161 | 845 |
| Reclassifications | 99 | - | 155 | 254 |
| Decreases | (14) | (79) | (14) | (107) |
| At 31 December 2017 | 6,603 | 5,264 | 2,369 | 14,236 |
| Increases | 153 | 284 | 89 | 526 |
| Reclassifications | - | - | - | - |
| Decreases | - | (59) | - | (59) |
| At 31 December 2018 | 6,756 | 5,489 | 2,458 | 14,703 |
| AMORTISATION AND WRITE-DOWNS |
| At 31 December 2016 | 5,873 | 2,697 | 1,579 | 10,149 | |||
|---|---|---|---|---|---|---|---|
| Amortisation | 242 | 341 | 148 | 731 | |||
| Decreases | (14) | - | - | (14) | |||
| At 31 December 2017 | 6,101 | 3,038 | 1,727 | 10,866 | |||
| Amortisation | 220 | 362 | 161 | 743 | |||
| Decreases | - | - | - | - | |||
| At 31 December 2018 | 6,321 | 3,400 | 1,888 | 11,609 |
| At 31 December 2018 | 435 | 2,089 | 570 | 3,094 |
|---|---|---|---|---|
| At 31 December 2017 | 502 | 2,226 | 642 | 3,370 |
Intangible assets have a finite useful life and, as a result, are amortised throughout their life. The main investments in the year relate to the development of new products, mainly related to the expansion of the range of burners (research and development activities carried out during the financial year are set out in the Report on Operations). Software investments include the implementation of a production scheduler and the application development of the management system (SAP). Other intangible assets refer, in the main, to improvements to third-party leased assets. At 31 December 2018, the Company found no endogenous or exogenous indicators of impairment of its intangible assets. As a result, the value of property, plant and equipment was not submitted to impairment testing.
178
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| In subsidiaries | 58,116 | 49,418 | 8,698 |
| Other equity investments | 34 | 34 | - |
| Total | 58,150 | 49,452 | 8,698 |
The change in equity investments in subsidiaries is broken down in the table below:
| SABAF IMMOBILIARE |
FARINGOSI HINGES |
SABAF DO BRASIL |
SABAF U.S. |
SABAF APPLIANCE COMPONENTS (CHINA) |
SABAF A.C. TRADING (CHINA) |
SABAF TURKEY |
A.R.C. S.R.L. |
OKIDA | TOTAL | |
|---|---|---|---|---|---|---|---|---|---|---|
| HISTORICAL COST | ||||||||||
| At 31 December 2016 | 13,475 | 10,329 | 8,469 | 139 | 4,400 | 200 | 12,005 | 4,800 | 0 | 53,817 |
| Purchase | - | - | - | - | - | - | - | - | - | - |
| At 31 December 2017 | 13,475 | 10,329 | 8,469 | 139 | 4,400 | 200 | 12,005 | 4,800 | 0 | 53,817 |
| Purchase | - | - | - | - | - | - | - | - | 8,698 | 8,698 |
| At 31 December 2018 | 13,475 | 10,329 | 8,469 | 139 | 4,400 | 200 | 12,005 | 4,800 | 8,698 | 62,515 |
| PROVISION FOR WRITE-DOWNS | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| At 31 December 2016 | 0 | 0 | 0 | 0 | 3,778 | 0 | 0 | 0 | 0 | 3,778 |
| Write-downs | - | - | - | - | 622 | - | - | - | - | 622 |
| At 31 December 2017 | 0 | 0 | 0 | 0 | 4,400 | 0 | 0 | 0 | 0 | 4,400 |
| Write-downs | - | - | - | - | - | - | - | - | - | - |
| At 31 December 2018 | 0 | 0 | 0 | 0 | 4,400 | 0 | 0 | 0 | 0 | 4,400 |
| At 31 December 2018 | 13,475 | 10,329 | 8,469 | 139 | - | 200 | 12,005 | 4,800 | 8,698 | 58,116 |
|---|---|---|---|---|---|---|---|---|---|---|
| At 31 December 2017 | 13,475 | 10,329 | 8,469 | 139 | - | 200 | 12,005 | 4,800 | 0 | 49,418 |
| PORTION OF SHAREHOLDERS' EQUITY (CALCULATED IN COMPLIANCE WITH IFRS) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| At 31 December 2018 | 27,674 7,248 10,870 (28) (697) 248 23,425 3,630 1,719 74,089 |
|||||||||
| At 31 December 2017 | 30,061 | 6,248 | 10,409 | (79) | (60) | 251 | 16,449 | 3,200 | 0 | 66,479 |
| DIFFERENCE BETWEEN SHAREHOLDERS' EQUITY AND CARRYING VALUE | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| At 31 December 2018 | 14,199 (3,081) 2,401 (167) (697) 48 11,420 (1,170) (6,979) 15,974 |
|||||||||
| At 31 December 2017 | 16,586 | (4,081) | 1,940 | (218) | (60) | 51 | 4,444 | (1,600) | 0 | 17,062 |
In 2018, the Faringosi Hinges achieved very positive and better results - in terms of sales and profitability - both compared to the previous year and compared to the budget. The 2019-2023 forward plan, drafted at the beginning of 2019, envisages a further increase in sales. At 31 December 2018, Sabaf S.p.A. tested - with the support of independent experts - the carrying value of the equity investment for impairment, determining its recoverable amount, considered to be equivalent to its value of use plus available liquidity, by discounting expected future cash flows in the forward plan drafted by the management. Cash flows for the period from 2019 to 2023 were augmented by the so-called terminal value, which expresses the operating flows that the investee is expected to generate from the sixth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 10.45% (9.18% in the impairment test carried out while preparing the separate financial statements at 31 December 2017) and a growth rate (g) of 1.50%, unchanged from 31 December 2017.
The recoverable amount calculated on the basis of the above-mentioned assumptions and valuation techniques is € 12.762 million, compared with a carrying value of the equity investment of € 10.329 million; consequently, the amount recorded for equity investment at 31 December 2018 was deemed recoverable.
The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g:
| (€/000) | GROWTH RATE | |||||||
|---|---|---|---|---|---|---|---|---|
| DISCOUNT RATE | 1.00% | 1.25% | 1.50% | 1.75% | 2.00% | |||
| 9.45% | 13,784 | 14,118 | 14,472 | 14,849 | 15,252 | |||
| 9.95% | 12,966 | 13,257 | 13,565 | 13,893 | 14,241 | |||
| 10.45% | 12,236 | 12,492 | 12,762 | 13,048 | 13,351 | |||
| 10.95% | 11,581 | 11,808 | 12,046 | 12,298 | 12,563 | |||
| 11.45% | 10,991 | 11,192 | 10,404 | 11,627 | 11,861 |
In 2018, Sabaf do Brasil continued to obtain positive results, which improved compared with 2017. Shareholders' equity (converted into euros at the end-of-year exchange rate) is higher than the carrying amount of the investment.
The subsidiary Sabaf U.S. operates as a commercial support for North America. The difference between the carrying value and the shareholders' equity of the investee is attributable to the non-durable losses taking into consideration expected development on the North American market.
Sabaf Appliance Components (Kunshan) Co., Ltd. has been producing burners for the Chinese market since 2015. Furthermore, the company has performed the function as distributor on the Chinese market of Sabaf products manufactured in Italy and Turkey. Low production volumes have enabled the company to reach the break-even point in 2018. At 31 December 2018, a provision for risks on equity investments of € 700,000 was recognised, corresponding to the negative equity value of the investee company. For further details, refer to Note 36.
Sabaf Appliance Components Trading (Kunshan) Co., Ltd., was founded during 2012 in order to perform the function as distributor. During 2015, this activity was centralised at Sabaf Appliance Components; however, the company went into liquidation; the process of liquidation should end in 2019.
Sabaf Turkey achieved extremely satisfactory results in 2018 as well. The shareholders' equity remains well above the carrying value of the equity investment.
In June 2016, the Company acquired the controlling share (70%) of A.R.C. s.r.l., leading company in the production of burners for professional cooking. The transaction allowed Sabaf to enter into a new sector, contiguous with the traditional sector of components for household gas cooking appliances, and to enhance the consolidated international presence of the Sabaf Group.
At 31 December 2018, the Company tested - with the support of independent experts - the carrying value of the equity investment for impairment, determining its recoverable amount, considered to be equivalent to its value of use plus available liquidity, by discounting expected future cash flows in the forward plan drafted at the beginning of 2019. Cash flows for the period from 2019 to 2023 were augmented by the so-called terminal value, which expresses the operating flows that the investee is expected to generate from the fourth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 7.73% (6.90% in the impairment test carried out while drafting the separate financial statements at 31 December 2017) and a growth rate (g) of 1.50%, in line with last year.
The portion pertaining to Sabaf S.p.A. of the recoverable amount calculated on the basis of the above-mentioned assumptions and valuation techniques is € 8.421 million (70% of total recoverable amount, equal to € 12.030 million), compared with a carrying value of the equity investment of € 4.8 million; consequently, the carrying value recorded for equity investment at 31 December 2018 was deemed recoverable.
The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g:
| (€/000) | GROWTH RATE | |||||||
|---|---|---|---|---|---|---|---|---|
| DISCOUNT RATE | 1.00% | 1.25% | 1.50% | 1.75% | 2.00% | |||
| 6.73% | 13,170 | 13,615 | 14,103 | 14,640 | 15,233 | |||
| 7.23% | 12,207 | 12,575 | 12,975 | 13,412 | 13,891 | |||
| 7.73% | 11,389 | 11,697 | 12,030 | 12,392 | 12,785 | |||
| 8.23% | 10,685 | 10,947 | 11,228 | 11,531 | 11,858 | |||
| 8.73% | 10,073 | 10,298 | 10,538 | 10,795 | 11,071 |
As part of the acquisition of 70% of A.R.C. S.r.l., Sabaf S.p.A. signed with Loris Gasparini (current minority shareholder by 30% of A.R.C.) an agreement that aimed to regulate Gasparini's right to leave A.R.C. and the interest of Sabaf to acquire 100% of the shares after expiry of the term of five years from the signing of the purchase agreement of 24 June 2016, by signing specific option agreements. Therefore, the agreement envisaged specific option rights to purchase (by Sabaf) and sell (by Gasparini) exercisable as from 24 June 2021, the remaining shares of 30% of A.R.C., with strike prices contractually defined on the basis of final income parameters from A.R.C. at 31 December 2020.
The option for the purchase of the residual 30% of A.R.C. represents a derivative instrument; since the exercise price defined by contract was considered representative of the fair value of the portion that can be potentially acquired, no value was recorded in the separate financial statements ended 31 December 2018.
In September 2018, the Company directly acquired 30% of Okida Elektronik (the remaining 70% was acquired through the subsidiary Sabaf Turkey). Okida is a leader in Turkey in the design and manufacture of electronic components for household appliances (mainly ovens and hoods); the transaction allowed Sabaf to enter into a new sector, contiguous with the traditional sector of components for household gas cooking appliances.
At 31 December 2018, the Company tested - with the support of independent experts - the carrying value of the equity investment, determining its recoverable amount, by discounting expected future cash flows estimated on the basis of the 2019 budget and projections for the following three years. Cash flows for the period from 2019 to 2022 were augmented by the so-called terminal value, which expresses the operating flows that the company is expected to generate from the fifth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 11.05% and a growth rate (g) of 2.50%, in line with the expected growth of the sector in the Turkish market.
The portion pertaining to Sabaf S.p.A. of the recoverable amount calculated on the basis of the above-mentioned assumptions and valuation techniques is € 11.900 million (30% of total equity value, equal to € 39.665 million), compared with a carrying value of the equity investment of € 8.698 million; consequently, the carrying value recorded for equity investment at 31 December 2018 was deemed recoverable.
The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g:
| (€/000) | GROWTH RATE | |||||||
|---|---|---|---|---|---|---|---|---|
| DISCOUNT RATE | 1.50% | 2.00% | 2.50% | 3.00% | ||||
| 10% | 40,200 | 42,307 | 44,697 | 47,430 | ||||
| 10.5% | 38,070 | 39,930 | 42,027 | 44,400 | ||||
| 11% | 36,163 | 37,817 | 39,665 | 41,747 | ||||
| 11.5% | 34,447 | 35,923 | 37,567 | 39,403 |
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Financial receivables from subsidiaries | 5,247 | 1,668 | 3,579 |
| Escrow bank account | 120 | 180 | (60) |
| Total | 5,367 | 1,848 | 3,519 |
At 31 December 2018, financial receivables from subsidiaries consist of:
• As part of the acquisition of 70% of A.R.C., in 2016, Sabaf S.p.A. paid to a non-interest-bearing fixed bank account the total amount of € 300,000. This amount, deducted from the consideration agreed to guarantee the commitments assumed by the sellers, is released in favour of the sellers at constant rates in 5 years (Note 15). At 31 December 2018, the portion due beyond 12 months amounted to € 120,000, whereas the portion due within 12 months amounted to € 60,000 (Note 10).
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Commodities | 9,358 | 8,795 | 563 |
| Semi-processed goods | 9,633 | 9,115 | 516 |
| Finished products | 9,231 | 8,789 | 442 |
| Provision for inventory write-downs | (1,594) | (1,930) | 336 |
| Total | 26,628 | 24,769 | 1,857 |
The provision for write-downs is allocated for hedging the obsolescence risk, quantified on the basis of specific analyses carried out at the end of the year on slow-moving and non-moving products, and refers to raw materials for
€ 435,000, semi-finished products for € 408,000 and finished products for € 751,000.
| Net total | 35,157 | 31,154 | 4,003 |
|---|---|---|---|
| Bad debt provision | (1,000) | (600) | (400) |
| Total trade receivables | 36,157 | 31,754 | 4,403 |
| 31.12.2018 | 31.12.2017 | CHANGE |
At 31 December 2018, trade receivables included balances totalling USD 3,526,000, booked at the EUR/USD exchange rate in effect on 31 December 2018, i.e. 1.1450. The amount of trade receivables recognised in the financial statements includes approximately € 18 million in insured receivables (€ 22 million at 31 December 2017).
Note that some customer payments of approximately € 3.5 million, which were due by the end of the year, were received at the beginning of 2019. With the exception of this circumstance, there were no significant changes in the payment terms agreed with customers.
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Current receivables (not past due) | 29,966 | 28,591 | 1,375 |
| Outstanding up to 30 days | 1,996 | 1,524 | 472 |
| Outstanding from 31 to 60 days | 494 | 754 | (260) |
| Outstanding from 61 to 90 days | 3,030 | 519 | 2,511 |
| Outstanding for more than 90 days | 671 | 366 | 305 |
| Total | 36,157 | 31,754 | 4,403 |
The bad deb provision was adjusted to the better estimate of the credit risk at the end of the reporting period. Changes during the year were as follows:
| 31.12.2017 | PROVISIONS | UTILISATION | 31.12.2018 | |
|---|---|---|---|---|
| Bad debt provision | 600 | 402 | (2) | 1,000 |
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| For income tax | 2,002 | 1,644 | 358 |
| For VAT | 375 | 586 | (211) |
| Total | 2,377 | 2,230 | 147 |
The income tax receivables derives for € 1,084,000 from the full deductibility of IRAP from IRES relating to the expenses incurred for employees for the 2006-2011 period (Italian Legislative Decree 201/2011), for which an application for a refund was presented and, for the residual part, to the payments on account on income, for the part exceeding the tax to be paid.
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Credits to be received from suppliers | 374 | 351 | 23 |
| Advances to suppliers | 112 | 28 | 84 |
| Due from INAIL | 10 | 21 | (11) |
| Other | 268 | 322 | (54) |
| Total | 764 | 722 | 42 |
At 31 December 2018, credits to be received from suppliers included € 171,000 related to the relief due to the Company as an energy-intensive business (known as "energy-intensive bonuses") for the year 2017. "Energy-intensive bonuses" due for the year 2016 were regularly collected during 2018.
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Financial receivables from subsidiaries | 1,600 | 1,000 | 600 |
| Escrow bank accounts | 3,510 | 60 | 3,450 |
| Interest rate derivatives | - | 7 | (7) |
| Total | 5,110 | 1,067 | 4,043 |
Financial receivables from subsidiaries consist of an interest-bearing loan with a duration of 12 months to Sabaf Appliance Components Co., Ltd. to support the Chinese subsidiary's working capital.
At 31 December 2018, a term deposit of € 3.45 million was taken out, due on 31 March 2019, for a bank guarantee issued in favour of the sellers of the Okida Elektronik equity investment for the portion of the price, for which payment is deferred until March 2019.
The item Cash and cash equivalents, equal to € 1,959,000 at 31 December 2018 (€ 2,697,000 at 31 December 2017) refers almost exclusively to bank current account balances.
The Company's share capital consists of 11,533,450 shares with a par value of € 1.00 each. The share capital paid in and subscribed did not change during the year. At 31 December 2018, the structure of the share capital is shown in the table below.
| NO. OF SHARES | % OF SHARE CAPITAL |
RIGHTS AND OBLIGATIONS |
|
|---|---|---|---|
| Ordinary shares | 11,133,450 | 96.532% | -- |
| Ordinary shares with increased vote | 400,000 | 3.468% | Two voting rights per share |
| TOTAL | 11,533,450 | 100% |
With the exception of the right to increased vote, there are no rights, privileges or restrictions on the Company. The availability of reserves is indicated in a table at the end of these Explanatory Notes.
During the financial year, Sabaf S.p.A. acquired 132,737 treasury shares at an average unit price of € 17.77; there have been no sales.
At 31 December 2018, the Company held 514,506 treasury shares, equal to 4.46% of share capital (381,769 treasury shares at 31 December 2017), reported in the financial statements as an adjustment to shareholders' equity at a unit value of € 13.348 (the market value at year-end was € 11.811). There were 11,018,944 outstanding shares at 31 December 2018 (11,151,681 at 31 December 2017).
Items "Retained earnings, other reserves" of € 72,465,000 included, at 31 December 2018, the stock grant reserve of € 321,000, which included the measurement at 31 December 2018 of fair value of rights assigned to receive Sabaf shares. For details of the Stock Grant Plan, refer to Note 42.
| 31.12.2018 | 31.12.2017 | |||
|---|---|---|---|---|
| Current | Non-current | Current | Non-current | |
| Unsecured loans | 9,911 | 33,669 | 5,982 | 16,298 |
| Short-term bank loans | 7,188 | - | 10,846 | - |
| Derivative instruments on interest rates | 231 | - | - | - |
| Sabaf Turkey loan | - | - | 2,100 | - |
| TOTAL | 17,330 | 33,669 | 18,928 | 16,298 |
During the year, the Company took out new unsecured loans for a total of € 28.7 million to finance the investments made, with particular reference to the acquisition of Okida. All loans are signed with an original maturity of ranging from 5 to 6 years and are repayable in instalments.
Some of the outstanding unsecured loans have covenants, defined with reference to the consolidated financial statements at the end of the reporting period, as specified below:
All bank loans are denominated in euro, with the exception of a short-term loan of USD 2 million.
To manage interest rate risk, unsecured loans are either fixed-rate or hedged by IRS. These separate financial statements include the negative fair value of the IRSs hedging rate risks of unsecured loans pending, for residual notional amounts of approximately € 26.6 million and expiry until 31 December 2024. Financial expenses were recognised in the income statement with a balancing entry.
Note 36 provides information on financial risks, pursuant to IFRS 7.
| 31.12.2018 | 31.12.2017 | |||
|---|---|---|---|---|
| Current | Non-current | Current | Non-current | |
| Payables to former Okida shareholders | 1,735 | - | ||
| Payables to A.R.C. shareholders | 60 | 120 | 60 | 180 |
| Derivative instruments on interest rates | - | - | 15 | - |
| TOTAL | 1,795 | 120 | 75 | 180 |
As part of the acquisition of Okida Elektronik, the parties agreed that the payment of part of the price would be subject to adjustment (depending, inter alia, on Okida's 2018 EBITDA) and postponed compared to the effective date of the transaction (4 September 2018). The payables to Okida shareholders at 31 December 2018 in these financial statements represents the residual portion of the price to be paid to the sellers by the Company.
The payable to the A.R.C. shareholders of € 180,000 at 31 December 2018 is related to the part of the price still to be paid to the sellers, which was deposited on an fixed account (Note 5) and will be released in favour of the sellers at constant rates in 3 years, in accordance with contractual agreements and guarantees issued by the sellers.
| AT 31 DECEMBER 2017 | 2,200 |
|---|---|
| Financial expenses | 24 |
| Payments made | (113) |
| Tax effect | (27) |
| AT 31 DECEMBER 2018 | 2,084 |
Post-employment benefits are calculated as follows:
| FINANCIAL ASSUMPTIONS | ||||
|---|---|---|---|---|
| 31.12.2018 31.12.2017 |
||||
| Discount rate | 1.30% | 1.15% | ||
| Inflation | 1.70% | 1.80% |
| DEMOGRAPHIC THEORY | ||||
|---|---|---|---|---|
| 31.12.2018 31.12.2017 |
||||
| Mortality rate | ISTAT 2016 M/F | ISTAT 2016 M/F | ||
| Disability rate | INPS 1998 M/F | INPS 1998 M/F | ||
| Staff turnover | 6% | 6% | ||
| Advance pay-outs | 5% per year | 5% per year | ||
| Retirement age | pursuant to legislation in force on 31 December 2018 |
pursuant to legislation in force on 31 December 2017 |
| 31.12.2017 | PROVISIONS | UTILISATION | 31.12.2018 | |
|---|---|---|---|---|
| Reserve for agents' indemnities | 199 | 28 | (19) | 208 |
| Product guarantee fund | 60 | 7 | (7) | 60 |
| Provision for risks on equity investments | 60 | 640 | - | 700 |
| Reserve for legal risks | 50 | 70 | - | 120 |
| Total | 369 | 745 | (26) | 1,088 |
The reserve for agents' indemnities covers amounts payable to agents if the Company terminates the agency relationship.
The product guarantee fund covers the risk of returns or charges by customers for products already sold.
The provision for risks on equity investments was set aside to cover future outlays to restore the shareholders' equity of the Chinese subsidiary Sabaf Appliance Components, which was negative at 31 December 2018.
The reserve for legal risks is allocated for disputes of a modest size.
The provisions booked to the provisions for risks, which represent the estimate of future payments made based on historical experience, have not been discounted because the effect is considered negligible.
Following the revision of IAS 19 - Employee benefits, from 1 January 2013 all actuarial gains or losses are recorded immediately in the comprehensive income statement ("Other comprehensive income") under the item "Actuarial income and losses".
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| Total | 18,945 | 16,569 | 2,374 |
Average payment terms did not change versus the previous year. The amount of trade payables in currencies other than the euro is not significant. At 31 December 2018, there were no overdue payables of a significant amount and the Company did not receive any injunctions for overdue payables.
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| To inland revenue for IRPEF tax deductions |
590 | 569 | 21 |
| Other tax payables |
- | 54 | (54) |
| Total | 590 | 623 | (33) |
Payables for IRPEF tax deductions, relating to employment and self-employment, were duly paid at maturity.
| 31.12.2018 | 31.12.2017 | CHANGE | |
|---|---|---|---|
| To employees | 3,649 | 3,931 | (282) |
| To social security institutions | 1,901 | 2,063 | (162) |
| Advances from customers | 91 | 64 | 27 |
| To agents | 235 | 165 | 70 |
| Other current payables | 216 | 227 | (11) |
| Total | 6,092 | 6,450 | (358) |
At the beginning of 2019, payables due to employees and social security institutions were paid in accordance with the scheduled expiry dates.
| 31.12.2018 | 31.12.2017 | |
|---|---|---|
| Deferred tax assets | 3,472 | 3,455 |
| Deferred tax liabilities | (107) | (68) |
| Net position | 3,365 | 3,387 |
The table below analyses the nature of the temporary differences that determine the recognition of deferred tax liabilities and assets and their changes during the year and the previous year.
| AMORTISATION AND LEASING |
PROVISIONS AND VALUE ADJUSTMENTS |
FAIR VALUE OF DERIVATIVE INSTRUMENTS |
GOODWILL | ACTUARIAL POST-EMPLOYMENT BENEFIT RESERVE EVALUATION |
OTHER TEMPORARY DIFFERENCES |
TOTAL | |
|---|---|---|---|---|---|---|---|
| At 31 December 2016 | 393 | 770 | 57 | 1,771 | 178 | 17 | 3,186 |
| To the income statement | (46) | 149 | (55) | - | (2) | 172 | 218 |
| To shareholders' equity | - | - | - | - | (17) | - | (17) |
| At 31 December 2017 | 347 | 919 | 2 | 1,771 | 159 | 189 | 3,387 |
| To the income statement | 69 | (45) | 53 | - | - | (93) | (16) |
| To shareholders' equity | - | - | - | - | (6) | - | (6) |
| At 31 December 2018 | 416 | 874 | 55 | 1,771 | 153 | 96 | 3,365 |
Deferred tax assets relating to goodwill refer to the exemption of the value of the investment in Faringosi Hinges s.r.l. made in 2011 pursuant to Italian law Decree 98/2011.
186
As required by the CONSOB memorandum of 28 July 2006, we disclose that the Company's net financial position is as follows:
| 31.12.2018 | 31.12.2017 | CHANGE | ||
|---|---|---|---|---|
| A. | Cash (Note 11) | 6 | 5 | 1 |
| B. | Positive balances of unrestricted bank accounts (Note 11) |
1,953 | 2,692 | (739) |
| C. | Other cash equivalents | - | - | - |
| D. Liquidity (A+B+C) | 1,959 | 2,697 | (738) | |
| E. | Current financial receivables | 5,110 | 1,067 | 4,043 |
| F. | Current bank payables (Note 14) | 7,419 | 12,946 | (5,527) |
| G. | Current portion of non-current debt (Note 14) | 9,911 | 5,982 | 3,929 |
| H. | Other current financial payables (Note 15) | 1,795 | 75 | 1,720 |
| I. | Current financial debt (F+G+H) | 19,125 | 19,003 | 122 |
| J. | Net current financial debt (I-D-E) | 12,056 | 15,239 | (3,183) |
| K. | Non-current bank payables (Note 14) | 33,669 | 16,298 | 17,371 |
| L. | Other non-current financial payables | 120 | 180 | (60) |
| M. | Non-current financial debt (K+L) | 33,789 | 16,478 | 17,311 |
| N. | Net financial debt (J+M) | 45,845 | 31,717 | 14,128 |
The cash flow statement, which shows the changes in cash and cash equivalents (letter D. of this statement), describes in detail the cash flows that led to the change in the net financial position.
In 2018, sales revenue totalled € 110,065,252, down 4.9% from €115,687,029 in 2017.
| 2018 | % | 2017 | % | % CHANGE | |
|---|---|---|---|---|---|
| Italy | 24,762 | 22.5% | 29,587 | 25.6% | -16.3% |
| Western Europe | 8,925 | 8.1% | 8,920 | 7.7% | +0.1% |
| Eastern Europe and Turkey | 36,807 | 33.4% | 35,655 | 30.8% | +3.2% |
| Asia and Oceania (excluding Middle East) | 4,893 | 4.4% | 9,570 | 8.3% | -48.9% |
| Central and South America | 11,912 | 10.8% | 11,331 | 9.8% | +5.1% |
| Middle East and Africa | 13,323 | 12.1% | 12,703 | 11.0% | +4.9% |
| North America and Mexico | 9,443 | 8.6% | 7,921 | 6.8% | +19.2% |
| Total | 110,065 | 100% | 115,687 | 100% | -4.9% |
The sales analysis by geographical area shows an uneven trend in the various markets in which the Company operates. The best results were achieved on the American continent: sales in North America were sustained by the good performance of consumption; in South America, strong growth rates were recorded in the Andean countries, which more than offset the effects of the crisis in Argentina and a still stagnant demand in Brazil. Satisfactory growth rates were recorded in European markets, thanks to the consolidation of relationships with major customers and the contribution made by the acquisition in Turkey of Okida; only in Italy sales are down due to the sharp reduction in the production of domestic appliances. North Africa and the Middle East have shown signs of weakness, while the of the Company's presence on Asian markets is not yet sufficiently consolidated.
| 2018 | % | 2017 | % | % CHANGE | |
|---|---|---|---|---|---|
| Brass valves | 4,342 | 3.9% | 5,992 | 5.2% | -27.5% |
| Light alloy valves | 37,603 | 34.2% | 39,219 | 33.9% | -4.1% |
| Thermostats | 6,521 | 5.9% | 7,365 | 6.4% | -11.5% |
| Total valves and thermostats | 48,466 | 44.0% | 52,576 | 45.5% | -7.8% |
| Standard burners | 21,820 | 19.8% | 25,127 | 21.7% | -13.2% |
| Special burners | 24,018 | 21.8% | 24,136 | 20.9% | -0.5% |
| Total burners | 45,838 | 41.6% | 49,263 | 42.6% | -7.0% |
| Accessories and other revenues | 15,761 | 14.3% | 13,848 | 11.9% | +13.8% |
| Total | 110,065 | 100% | 115,687 | 100% | -4.9% |
The sales analysis by product category shows a marked decrease in more mature products (brass valves and thermostats), while more innovative product families (light alloy valves and special burners) show an improved performance.
Average sales prices in 2018 were 0.3% lower compared to 2017.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Sale of trimmings | 1,424 | 1,457 | (33) |
| Services to subsidiaries |
629 | 378 | 251 |
| Contingent income | 55 | 97 | (42) |
| Rental income | 87 | 89 | (2) |
| Use of provisions for risks and charges |
26 | 39 | (13) |
| Services to parent company |
40 | 10 | 30 |
| Other income | 724 | 578 | 146 |
| Total | 2,985 | 2,648 | 337 |
Services to subsidiaries refer to administrative, commercial and technical services provided within the scope of the Group.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Commodities and out sourced components |
41,286 | 42,973 | (1,687) |
| Consumables | 3,799 | 3,582 | 217 |
| Total | 45,085 | 46,555 | (1,470) |
In 2018, the effective purchase prices of the main raw materials (aluminium alloys, steel and brass) were on average higher than in 2017, with a negative impact of 0.6% of sales. Consumption (purchases plus change in inventories) as a percentage of sales was 42.6% in 2018, compared with 41.3% in 2017.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Outsourced processing |
8,815 | 8,681 | 134 |
| Property rental | 4,009 | 3,974 | 35 |
| Electricity and natural gas |
3,271 | 3,314 | (43) |
| Maintenance | 3,081 | 3,296 | (215) |
| Advisory services | 1,977 | 1,676 | 301 |
| Transport and export expenses |
1,394 | 1,408 | (14) |
| Directors' fees | 475 | 881 | (406) |
| Insurance | 468 | 444 | 24 |
| Commissions | 631 | 533 | 98 |
| Travel expenses and allowances |
550 | 550 | 0 |
| Waste disposal | 378 | 358 | 20 |
| Canteen | 291 | 296 | (5) |
| Temporary agency workers |
196 | 180 | 16 |
| Other costs | 2,004 | 2,013 | (9) |
| Total | 27,540 | 27,604 | (64) |
All-in-all, costs for services did not change significantly compared to the previous year.
Costs for advisory services related to technical (€ 564,000), sales (€ 503,000) and legal, administrative and general (€ 810,000) services.
During the year, the Board of Directors was renewed and the fees due to the directors were recalculated, with a reduction in expenses of around € 400,000. Other costs included expenses for the registration of patents, waste disposal, cleaning, leasing third-party assets and other minor charges.
188
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Salaries and wages | 18,744 | 19,540 | (796) |
| Social Security costs | 6,099 | 6,249 | (150) |
| Temporary agency workers |
1,779 | 1,477 | 302 |
| Post-employment benefit reserve and other costs |
1,445 | 1,468 | (23) |
| Stock grant plan | 321 | - | 321 |
| Total | 28,388 | 28,734 | (346) |
Average of the Company headcount in 2018 totalled 503 employees (376 blue-collars, 117 white-collars and supervisors, 10 managers), compared with 514 in 2017 (394 blue-collars, 110 white-collars and supervisors, 10 managers). The average number of temporary staff, with supply contract, was 47 in 2018 (42 in 2017).
In 2018, the Company made negligible use of the temporary unemployment fund. The item "Stock Grant Plan" included the measurement at 31 December 2018 of the fair value of rights to the assignment of Sabaf shares attributed to employees. For details of the Stock Grant Plan, refer to Note 42.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Losses and write downs of trade receivables |
402 | 49 | 353 |
| Non-income related taxes and duties |
217 | 238 | (21) |
| Contingent liabilities | 192 | 138 | 54 |
| Provisions for risks | 77 | - | 77 |
| Other provisions | 668 | 26 | 642 |
| Other operating expenses |
296 | 264 | 32 |
| Total | 1,852 | 715 | 1,137 |
Non-income taxes mainly include IMU, TASI and the tax for the disposal of urban solid waste. Provisions for risks and other provisions relate to sums set aside for the risks described in Note 17.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Write-down Sabaf Appliance Components |
- | (622) | 622 |
| Allocation to risk provisions on equity investments |
- | (60) | 60 |
| Total | 0 | (682) | 682 |
In 2017, this item included the write-down of the equity investment in Sabaf Appliance Components, to bring it into line with the value of shareholders' equity at 31 December 2018. As detailed in Note 17, in these consolidated financial statements a provision of € 640,000 was made to the provision for risks on equity investments, recorded under Other operating costs, to cover future outlays expected to restore the shareholders' equity of the Chinese subsidiary, which at 31 December 2018 was negative.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Interest paid to banks | 641 | 244 | 397 |
| Banking expenses | 240 | 209 | 31 |
| Other financial expense |
37 | 29 | 8 |
| Total | 918 | 482 | 436 |
The increase in financial expenses to banks reflects the higher average net debt for the year. Interest paid to banks includes IRS spreads payable that hedge interest rate risks.
During the 2018 financial year, the Company reported net foreign exchange gains of € 157,000 (net losses of € 88,000 in 2017).
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Dividends received from Sabaf Immobiliare |
3,000 | 1,500 | 1,500 |
| Dividends received from Okida Elektronik |
1,322 | - | 1,322 |
| Other profits from equity investments |
- | 3 | (3) |
| Total | 4,322 | 1,503 | 2,819 |
This item includes dividends received from investee companies.
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Current taxes | 967 | 1,791 | (824) |
| Deferred tax assets and liabilities |
16 | (219) | 235 |
| Taxes related to pre vious financial years |
21 | (502) | 523 |
| Taxes on dividends received |
182 | - | 182 |
| Total | 1,186 | 1,070 | 116 |
Current taxes include IRES of € 672,000 and IRAP of € 295,000 (€ 1,436,000 and € 355,000 respectively in 2017).
| 2018 | 2017 | |
|---|---|---|
| Theoretical income tax | 2,214 | 2,177 |
| Taxes related to previous financial years | 18 | 88 |
| Tax effect of dividends from investee companies | (803) | (342) |
| "Patent box" tax effect | (323) | (1,151) |
| "Iper e Superammortamento" tax benefit | (449) | (179) |
| Permanent tax differences | 279 | 209 |
| Other differences | 4 | 9 |
| IRES (current and deferred) | 940 | 811 |
| IRAP (current and deferred) | 246 | 259 |
| Total | 1,186 | 1,070 |
Reconciliation between the tax burden booked in the financial statements and the theoretical tax burden calculated according to the statutory tax rates currently in force in Italy is shown in the following table:
Theoretical taxes were calculated applying the current corporate income tax (IRES) rate, i.e. 24%, to the pre-tax result. IRAP is not taken into account for the purpose of reconciliation because, as it is a tax with a different assessment basis from pre-tax profit, it would generate distorting effects.
In these separate financial statements, the Company recognised the tax benefit related to the Patent Box for 2018 of € 375,000 (€ 323,000 for IRES and € 52,000 for IRAP). Following the prior agreement signed with the Revenue Agency, in 2017 the benefit for the three-year period from 2015 to 2017, for a total of € 1,324,000 was recognised.
No significant tax disputes were pending at 31 December 2018.
35. SEGMENT REPORTING
On 31 May 2018, shareholders were paid an ordinary dividend of € 0.55 per share (total dividends of € 6,071,000).
The Directors have recommended payment of an unchanged dividend of € 0.55 per share this year. This dividend is subject to approval of shareholders in the annual Shareholders' Meeting and was not included under liabilities in these financial statements.
The dividend proposed is scheduled for payment on 29 May 2019 (ex-date 27 May and record date 28 May).
In accordance with IFRS 7, a breakdown of the financial instruments is shown below, among the categories set forth in IAS 39.
| 31.12.2018 | 31.12.2017 | |
|---|---|---|
| Financial assets | ||
| Income statement fair value | ||
| Derivative cash flow hedges (on currency) | - | 7 |
| Amortised cost | ||
| Cash and cash equivalents | 1,959 | 2,697 |
| Trade receivables and other receivables | 35,922 | 31,876 |
| Non-current loans | 5,246 | 1,668 |
| Current loans | 1,600 | 1,000 |
| Other financial assets | 3,630 | 240 |
| Financial liabilities | ||
| Income statement fair value | ||
| Derivative cash flow hedges (on interest rates) | 231 | 15 |
| Amortised cost | ||
| Loans | 50,999 | 35,226 |
| Other financial liabilities | 1,915 | 240 |
| Trade payables | 18,945 | 16,569 |
Within the Sabaf Group, the Company operates exclusively in the gas parts segment for household cooking. The information in the consolidated financial statements is divided between the various segments in which the Group operates.
The Company is exposed to financial risks related to its operations, mainly:
It is part of Sabaf's policies to hedge exposure to changes in prices and in fluctuations in exchange and interest rates via derivative financial instruments. Hedging is done using forward contracts, options or combinations of these instruments. Generally speaking, the maximum duration covered by such hedging does not exceed 18 months. The Company does not enter into speculative transactions. When the derivatives used for hedging purposes meet the necessary requisites, hedge accounting rules are followed.
Trade receivables involve producers of domestic appliances, multinational groups and smaller manufacturers in a few or single markets. The Company assesses the creditworthiness of all its customers at the start of supply and systemically at least on an annual basis. After this assessment, each customer is assigned a credit limit.
A credit insurance policy is in place, which guarantees cover for approximately 50% of trade receivables.
Credit risk relating to customers operating in emerging economies is generally attenuated by the expectation of revenue through letters of credit.
The main exchange rate to which the Company is exposed is the euro/USD in relation to sales made in dollars (mainly in North America) and, to a lesser extent, to some purchases (mainly from Asian manufacturers). Sales in US dollars represented 12% of total turnover in 2018, while purchases in dollars represented 5% of total turnover. During the year, operations in dollars were partially hedged through forward sales contracts; no currency derivatives were pending at 31 December 2018.
With reference to financial assets and liabilities in US dollars at 31 December 2018, a hypothetical and immediate revaluation of 10% of the euro against the dollar would have led to a loss of € 270,000.
Owing to the current trend in interest rates, the Company favours fixed-rate indebtedness: medium to long-term loans originated at a variable rate are converted to a fixed rate by entering into interest rate swaps (IRS) at the same time as the loan is opened. At 31 December 2018, IRS totalling € 26.6 million were in place, mirrored in mortgages with the same residual debt, through which the Company transformed the floating rate of the mortgages into fixed rate. Considering the IRS in place, at the end of 2018 almost all medium to long-term financial debt was at a fixed rate. The derivative contracts were not designated as a cash flow hedge and were therefore recognised using the "income statement fair value" method.
Considering the IRS in place, at the end of 2018 almost all of the Company's financial debt was at a fixed rate. Therefore, at 31 December 2018 no sensitivity analysis was carried out in that the exposure to interest rate risk, linked to a hypothetical increase (decrease) in interest rates, is not significant.
A significant portion of the Company's purchase costs is represented by aluminium, steel and brass. Sales prices of products are generally renegotiated annually; as a result, the Company is unable to immediately pass on to customers any changes in the prices of commodities during the year. The Company protects itself from the risk of changes in the price of aluminium, steel and brass with supply contracts signed with suppliers for delivery up to twelve months in advance or, alternatively, with derivative financial instruments. In 2018 and 2017, the Company did not use financial derivatives on commodities. To stabilise the rising costs of commodities, Sabaf preferred to execute transactions on the physical market, fixing prices with suppliers for immediate and deferred delivery.
The management of liquidity and financial debt is coordinated at Group level. The Group operates with a debt ratio considered physiological (net financial debt / shareholders' equity at 31 December 2018 of 45%, net financial debt / EBITDA of 1.79) and has unused short-term lines of credit. To minimise the risk of liquidity, the Administration and Finance Department:
| AT 31 DECEMBER 2018 | Carrying value |
Contractual financial flows |
Within 3 months |
From 3 months to 1 year |
From 1 to 5 years |
More than 5 years |
|---|---|---|---|---|---|---|
| Unsecured loans | 43,580 | 44,414 | 1,795 | 8,422 | 32,621 | 1,576 |
| Short-term bank loans | 7,419 | 7,419 | 7,419 | - | - | - |
| Payables to ARC shareholders | 180 | 180 | - | 60 | 120 | - |
| Payables to former Okida shareholders | 1,735 | 1,735 | 1,735 | - | - | - |
| Total financial payables | 52,914 | 53,748 | 10,949 | 8,482 | 32,741 | 1,576 |
| Trade payables | 18,954 | 18,954 | 18,437 | 517 | - | - |
| Total | 71,868 | 72,702 | 29,386 | 8,999 | 32,741 | 1,576 |
| AT 31 DECEMBER 2017 | Carrying value |
Contractual financial flows |
Within 3 months |
From 3 months to 1 year |
From 1 to 5 years |
More than 5 years |
|---|---|---|---|---|---|---|
| Unsecured loans | 22,280 | 22,676 | 1,537 | 4,612 | 16,527 | - |
| Short-term bank loans | 10,846 | 10,846 | 10,846 | - | - | - |
| Short-term Sabaf Turkey loan | 2,100 | 2,118 | - | 2,118 | - | - |
| Payables to ARC shareholders | 240 | 240 | - | 60 | 180 | - |
| Total financial payables | 35,466 | 35,880 | 12,383 | 6,790 | 16,707 | 0 |
| Trade payables | 16,569 | 16,569 | 15,615 | 954 | - | - |
| Total | 52,035 | 52,449 | 27,998 | 7,744 | 16,707 | 0 |
The various due dates are based on the period between the end of the reporting period and the contractual expiration date of the commitments, the values indicated in the table correspond to non-discounted cash flows. Cash flows include the shares of principal and interest; for floating rate liabilities, the shares of interest are determined based on the value of the reference parameter at the end of the reporting period and increased by the spread set forth in each contract.
The revised IFRS 7 requires that financial instruments reported in the statement of financial position at fair value be classified based on a hierarchy that reflects the significance of the input used in determining the fair value. IFRS 7 makes a distinction between the following levels:
The following table shows the assets and liabilities valued at fair value at 31 December 2018, by hierarchical level of fair value assessment.
| LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL | |
|---|---|---|---|---|
| Other financial liabilities (derivatives on interest rates) | - | (231) | - | (231) |
| Option on minorities A.R.C. | - | - | - | - |
| Total assets and liabilities at fair value | - | (231) | - | (231) |
The table below illustrates the impact of all transactions between Sabaf S.p.A. and other related parties on the balance sheet and income statement items and related parties, with the exception of the directors' fees, auditors and key management personnel which is stated in the Report on Remuneration.
| TOTAL 2018 | SUBSIDIARIES | GIUSEPPE SALERI SAPA |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Non-current financial assets |
5,367 | 5,247 | - | - | 5,247 | 97.76% |
| Trade receivables | 35,158 | 6,166 | 12 | - | 6,178 | 17.57% |
| Tax receivables | 2,377 | - | 1,084 | - | 1,084 | 45.60% |
| Current financial assets |
5,874 | 1,600 | - | - | 1,600 | 27.24% |
| Trade payables | 18,945 | 3,895 | - | 5 | 3,900 | 20.59% |
| TOTAL 2017 | SUBSIDIARIES | GIUSEPPE SALERI SAPA |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Non-current financial assets |
1,848 | 1,668 | - | - | 1,668 | 90.26% |
| Trade receivables | 31,154 | 1,209 | - | - | 1,209 | 3.88% |
| Tax receivables | 2,230 | - | 1,084 | - | 1,084 | 48.60% |
| Current financial assets |
1,788 | 1,000 | - | - | 1,000 | 55.93% |
| Trade payables | 16,573 | 510 | - | 2 | 512 | 3.09% |
| Current financial payables |
2,100 | 2,100 | - | - | 2,100 | 100% |
| TOTAL 2018 | SUBSIDIARIES | GIUSEPPE SALERI SAPA |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Revenue | 110,065 | 11,520 | - | - | 11,520 | 10.46% |
| Other income | 2,985 | 800 | 40 | - | 840 | 28.14% |
| Materials | 45,085 | 1,417 | - | - | 1,147 | 3.14% |
| Services | 27,540 | 3,991 | - | 22 | 4,013 | 14.57% |
| Capital gains on non-current assets |
496 | 467 | - | - | 467 | 94.15% |
| Other operating costs |
1,852 | 640 | - | - | 640 | 34.56% |
| Financial income | 123 | 119 | - | - | 119 | 96.75% |
| TOTAL 2017 | SUBSIDIARIES | GIUSEPPE SALERI SAPA |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Revenue | 115,687 | 10,239 | - | - | 10,239 | 8.85% |
| Other income | 2,648 | 414 | 10 | - | 424 | 16% |
| Materials | 46,555 | 1,548 | - | - | 1,548 | 3.33% |
| Services | 27,604 | 3,966 | - | 20 | 3,986 | 14.44% |
| Capital gains on non-current assets |
98 | 97 | - | - | 97 | 99.58% |
| Write-downs of non-current assets |
682 | 682 | - | - | 682 | 100% |
| Financial income | 89 | 80 | - | - | 80 | 89.89% |
| Financial expenses | 482 | 2 | - | - | 2 | 0.46% |
Relations with subsidiaries mainly consist of:
Transactions with the shareholder, Giuseppe Saleri S.a.p.A., comprise:
Related-party transactions are regulated by specific contracts regulated at arm's length conditions.
Pursuant to the CONSOB memorandum of 28 July 2006, note that no significant non-recurring events or transactions, as defined by the memorandum, took place in 2018.
Pursuant to CONSOB memorandum of 28 July 2006, the Company declares that no atypical and/or unusual transactions as defined by the CONSOB memorandum were executed during 2018.
Sabaf S.p.A. also issued sureties to guarantee mortgage loans granted by banks to employees for a total of € 4,734,000 (€ 5,145,000 at 31 December 2017).
Fees to directors, statutory auditors and executives with strategic responsibilities are described in the Report on Remuneration that will be presented to the shareholders' meeting called to approve these separate financial statements.
In order to adopt a medium and long-term incentive instrument for directors and employees of the Sabaf Group, on the proposal of the Remuneration and Nomination Committee, the Board of Directors prepared a specific free allocation plan of shares (the "Plan") with the characteristics described below. The Plan was approved by the Shareholders' Meeting on 8 May 2018 and the related Regulations by the Board of Directors on 15 May 2018.
The Plan aims to promote and pursue the involvement of the beneficiaries whose activities are considered relevant for the implementation of the contents and the achievement of the objectives set out in the Business Plan, foster loyalty development and motivation of managers, by increasing their entrepreneurial approach as well as align the interests of management with those of the Company's shareholders more closely, with a view to encouraging the achievement of significant results in the economic and asset growth of the Company.
The Plan is intended for persons who hold or will hold key positions in the Company and/or its Subsidiaries, with reference to the implementation of the contents and the achievement of the objectives of the 2018-2020 Business Plan. The Beneficiaries are divided into two groups:
1 of the Plan to whom a total of 185,600 rights have been assigned.
The subject-matter of the Plan is the free allocation to the Beneficiaries of a maximum of 370,000 Rights, each of which entitles them to receive free of charge, under the terms and conditions provided for by the Regulations of the Plan, 1 Sabaf S.p.A. Share.
The free allocation of Sabaf S.p.A. shares is conditional, among other things, on the achievement, in whole or in part, with progressiveness, of the business objectives related to the ROI, EBITDA and TSR indicators.
The Plan expires on 31 December 2022 (or on a different subsequent date set by the Board of Directors).
Considering the allocation mechanism described above, it was necessary to measure at fair value the rights assigned to receive shares of the company.
194
The main assumptions made at the beginning of the vesting period of the plan are illustrated below:
| FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING O OBJECTIVES MEASURED IN ROI | |||||||
|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | 2018-2020 | ||||
| Share price at the start of the vesting period | 19.48 | 19.48 | 19.48 | 19.48 | |||
| Risk free rate | -0.2846% | -0.1641% | -0.0497% | -0.0497% | |||
| Expected volatility | 31% | 29% | 27% | 29% | |||
| Dividend yield | 2.30% | 2.30% | 2.30% | 2.30% | |||
| Strike Price | 19.48 | 19.48 | 19.48 | 19.48 | |||
| 6.83 Total value on ROI |
|||||||
| Rights on ROI | 33.40% | Fair Value | 2.28 |
| FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED IN EBITDA | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | 2018-2020 | |||||
| Share price at the start of the vesting period | 19.48 | 19.48 | 19.48 | 19.48 | ||||
| Risk free rate | -0.2846% | -0.1641% | -0.0497% | -0.0497% | ||||
| Expected volatility | 31% | 29% | 27% | 29% | ||||
| Dividend yield | 2.30% | 2.30% | 2.30% | 2.30% | ||||
| Strike Price | 19.48 | 19.48 | 19.48 | 19.48 | ||||
| Total value on EBITDA | 8.97 | |||||||
| Rights on EBITDA | 33.30% | Fair Value | 2.99 |
| FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED IN TSR | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | ||||||
| Share price at the start of the vesting period | 19.48 | 19.48 | 19.48 | |||||
| Risk free rate | -0.2846% | -0.1641% | -0.0497% | |||||
| Expected volatility | 31% | 29% | 27% | |||||
| Dividend yield | 0.00% | 0.00% | 0.00% | |||||
| Strike Price | 22.61 | 25.32 | 28.34 | |||||
| Total value on TSR | 6.00 | |||||||
| Rights on TSR | 33.30% | Fair Value | 2.00 | |||||
| Fair Value per share at initial date of the vesting period | 7.27 |
In line with the date on which the beneficiaries became aware of the assignment of the rights and terms of the plan, the grant date was set at 15 May 2018, the accounting impacts of the plan for the first half of 2018 are illustrated in Note 13 and Note 27 of these Financial statements.
In compliance with the requirements of transparency and publicity envisaged pursuant to Italian Law no. 124 of 4 August 2017, article 1, paragraphs 125- 129, which imposed on companies the obligation to indicate in the explanatory notes "grants, contributions, and in any case economic advantages of any kind", the following are the details of the relative amounts, accounted for "on a cash basis".
| STATUTORY REFERENCES |
CONTRIBUTION VALUE |
DISBURSING SUBJECT |
|---|---|---|
| Patent Box | 1,307 | Italian State |
| Super ammortamento (Super amortisation) |
179 | Italian State |
| Energy-intensive contributions |
509 | Italian State |
| Total | 1,995 |
concerning the reduced taxation of income from intangible assets, the reference regulations of which are contained in the 2015 Stability Law (Italian Law 23/12/2014 no.190) Articles from 37 to 45.
it allows an over-estimation of 130% of the newly purchased or leased instrumental investments, the reference regulations of which are contained in Law no. 205 of 27 December 2017.
Accessible grants for companies that consume a lot of electricity, whose regulatory reference is the MISE Decree of 21 December 2017.
| IN SUBSIDIARIES 1 | |||||||
|---|---|---|---|---|---|---|---|
| COMPANY NAME | REGISTERED OFFICES |
SHARE CAPITAL AT 31 DECEMBER 2018 |
SHAREHOLDERS | OWNERSHIP % |
SHAREHOLDERS' EQUITY AT 31 DECEMBER 2018 |
2018 PROFIT (LOSS) |
|
| Faringosi Hinges s.r.l. | Ospitaletto (BS) | EUR 90,000 | Sabaf S.p.A. | 100% | EUR 7,248,309 | EUR 996,255 | |
| Sabaf Immobiliare s.r.l. | Ospitaletto (BS) | EUR 25,000 | Sabaf S.p.A. | 100% | EUR 21,341,974 | EUR 759,565 | |
| Sabaf do Brasil Ltda | Jundiaì (Brazil) | BRL 24,000,000 | Sabaf S.p.A. | 100% | BRL 48,305,068 | BRL 6,954,784 |
|
| Sabaf US Corp. | Plainfield (USA) | USD 100,000 | Sabaf S.p.A. | 100% | USD -28,342 | USD 51,140 | |
| Sabaf Appliance Components (Kunshan) Co., Ltd. |
Kunshan (China) |
EUR 4,400,000 | Sabaf S.p.A. | 100% | CNY -4,347,931 | CNY -4,407,939 |
|
| Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki |
Manisa (Turkey) | TRY 28,000,000 | Sabaf S.p.A. | 100% | TRY 139,948,685 | TRY 67,735,385 |
|
| Sabaf Appliance Components Trading (Kunshan) Co., Ltd. in liquidation |
Kunshan (China) |
EUR 200,000 | Sabaf S.p.A. | 100% | CNY 1,955,552 | ---- | |
| A.R.C. s.r.l. | Campodarsego (PD) |
EUR 45,000 | Sabaf S.p.A. | 70% | EUR 5,289,518 | EUR 655,460 | |
| Sabaf S.p.A. | 30% | ||||||
| Okida Elektronik Sanayi ve Tickaret A.S |
Istanbul (Turkey) |
TRY 5,000,000 | Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki |
70% | TRY 34,726,075 | TRY 27,193,127 |
None.
196
1Values taken from the separate financial statements of subsidiaries, prepared in accordance with locally applicable accounting standards
| DESCRIPTION | AMOUNT | POSSIBILITY OF UTILISATION |
AVAILABLE SHARE |
AMOUNT SUBJECT TO TAXATION FOR THE COMPANY IN THE CASE OF DISTRIBUTION |
|---|---|---|---|---|
| CAPITAL RESERVE: | ||||
| Share premium reserve | 10,002 | A, B, C | 10,002 | 0 |
| Revaluation reserve, Law 413/91 |
42 | A, B, C | 42 | 42 |
| Revaluation reserve, Law 342/00 |
1,592 | A, B, C | 1,592 | 1,592 |
| RETAINED EARNINGS: | ||||
| Legal reserve | 2,307 | B | 0 | 0 |
| Other retained earnings | 58,657 | A, B, C | 58,657 | 0 |
| VALUATION RESERVE: | ||||
| Post-employment benefit actuarial reserve |
(456) | 0 | 0 | |
| Reserve for stock grant plan | 321 | 0 | 0 | |
| TOTAL | 72,465 | 70,293 | 1,634 |
A. for share capital increase
B. to hedge losses
C. for distribution to shareholders
| GROSS VALUE | CUMULATIVE DEPRECIATION |
NET VALUE | ||
|---|---|---|---|---|
| Law 72/1983 | 137 | (137) | 0 | |
| 1989 merger | 516 | (467) | 49 | |
| Investment property | Law 413/1991 | 47 | (43) | 4 |
| 1994 merger | 1,483 | (1,091) | 392 | |
| Law 342/2000 | 2,870 | (2,454) | 416 | |
| 5,053 | (4,192) | 861 | ||
| Law 576/75 | 205 | (205) | 0 | |
| Plant and machinery | Law 72/1983 | 2,219 | (2,219) | 0 |
| 1989 merger | 6,140 | (6,140) | 0 | |
| 1994 merger | 6,820 | (6,820) | 0 | |
| 15,384 | (15,384) | 0 | ||
| Industrial and commercial equipment | Law 72/1983 | 161 | (161) | 0 |
| Other assets | Law 72/1983 | 50 | (50) | 0 |
TOTAL 20,648 (19,787) 861
Sabaf S.p.A. is a company organised under the legal system of the Republic of Italy.
The following table, prepared pursuant to Article 149-duodecies of the CONSOB Issuers' Regulation, shows fees relating to 2018 for auditing services and for services other than auditing provided by the Independent Auditor. No services were provided by entities belonging to the network.
| (€/000) | PARTY PROVIDING THE SERVICE |
FEES PERTAINING TO THE 2018 FINANCIAL YEAR |
|---|---|---|
| Audit | EY S.p.A. | 20 |
| Certification services | EY S.p.A. | --- |
| Other services | EY S.p.A. | 16 2 |
| Total | 36 |
Pietro Iotti, the Chief Executive Officer, and Gianluca Beschi, the Financial Reporting Officer of Sabaf S.p.A., have taken into account the requirements of Article 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of 24 February 1998 and can certify:
of the administrative and accounting procedures for the formation of the separate financial statements during the 2018 financial year.
They also certify that:
Ospitaletto, 26 March 2019
Chief Executive Officer
Pietro Iotti
The Financial Reporting Officer Gianluca Beschi
| Key Audit Matters | ||
|---|---|---|
| -- | ------------------- | -- |
204
205
in accordance with Art. 2429, paragraph 2 of the Italian Civil Code and Art. 153 of Italian Legislative Decree no. 58/1998
To the Shareholders' Meeting of the Company SABAF S.p.A.
The Board of Statutory Auditors of SABAF S.p.A. (hereinafter also "SABAF" or "Company"), pursuant to Art. 153 of Italian Legislative Decree no. 58 of 1998 (hereinafter also TUF) and Art. 2429, paragraph 2 of the Italian Civil Code, is called upon to report to the Shareholders' Meeting called to approve the Financial Statements on the supervisory activity carried out during the financial year in the performance of its duties, also in the capacity of "internal control and audit committee", on any omissions and reprehensible facts found and on the results of the financial year, as well as to formulate proposals regarding the Financial Statements, the approval thereof and matters falling within its competence.
Note, first of all, that the Board of Directors decided to make use of the longer term envisaged in Art. 2364 of the Italian Civil Code and Art. 8 of the Articles of Association for the call of the Shareholders' Meeting to approve the 2018 financial statements, owing to the existence of the relative conditions. The financial statements report is in any case made available to the public in full within the terms of Art. 154-ter of the TUF (within four months from the end of the financial year). The decision was taken by the Board, as explained in the Report on Operations, as SABAF is required to prepare the consolidated financial statements, in consideration of requirements related to the relevant obligations and fulfilments.
During the year ended 31 December 2018 and up to date, the Board of Statutory Auditors carried out its supervisory activities in compliance with Law provisions, Rules of Behaviour of the Board of Statutory Auditors of listed companies issued by the Italian Board of Certified Public Accountants and Bookkeepers, the CONSOB provisions on corporate controls, the Corporate Governance Code, as well as by the provisions contained in Art. 19 of Italian Legislative Decree 39/2010.
The financial statements of SABAF were prepared in accordance with the IAS/IFRS international accounting standards issued by the International Accounting Standards Board (IASB) and approved by the European Union, as well as in accordance with the provisions issued by CONSOB in implementation of Article 9, paragraph 3, of Italian Legislative Decree 38/2005.
The Company's Financial Statements were prepared in accordance with the law and accompanied by the documents required by the Italian Civil Code and the TUF. Moreover, in accordance with law provisions, the Company prepared the Consolidated financial statements and the Consolidated disclosure of non-financial information for the year 2018.
The Board of Statutory Auditors acquired the information necessary for the performance of the supervisory duties assigned to it by attending the meetings of the Board of Directors and the Board Committees, the hearings of the Company's and the Group's management, the information acquired from the competent company structures, as well as through the additional control activities carried out.
The Board of Statutory Auditors in office at the date of this Report was appointed by the Shareholders' Meeting of 8 May 2018 in the persons of Alessandra Tronconi (Chairman), Luisa Anselmi (Statutory Auditor), Mauro Giorgio Vivenzi (Statutory Auditor), as well as Paolo Guidetti and Stefano Massarotto (Alternate Auditors). The control body will remain in office for three financial years and will expire on the date of the Shareholders' Meeting called to approve the Financial Statements for the year 2020.
The appointment was made on the basis of two lists submitted by the Shareholders Giuseppe Saleri S.a.p.a and Quaestio Capital SGR S.p.A. respectively, in compliance with the applicable law, regulatory and statutory provisions. The Chairman of the Board of Statutory Auditors and one Alternate Auditor were drawn from the list that obtained the lowest number of votes.
The composition of the Board of Statutory Auditors complies with the gender distribution criterion set forth in Art. 148 of Italian Legislative Decree no. 58 of 1998.
At the time of its appointment and subsequently on 15 May 2018, the Board of Statutory Auditors checked the existence of the independence requirement as part of the broader process of self-assessment of the control body pursuant to Standard Q.1.1 of the Rules of Behaviour of listed companies; the check was carried out on the basis of the criteria envisaged by the aforesaid Standards and by the Corporate Governance Code applicable to independent directors.
The outcome of the check was communicated (pursuant to Art. 144-novies, paragraph 1-ter of CONSOB Regulation no. 11971 of 1999, Art. 8.C.1 of the Corporate Governance Code and Standard Q.1.1 of the Rules of Behaviour of listed companies) to the Board of Directors, which issued the relevant press release on 26 June 2018.
This assessment was carried out again on 12 March 2019 and consequently communicated to the Board of Directors, which disclosed it in the Report prepared pursuant to Art. 123 bis of the TUF.
In carrying out its duties, the Board of Statutory Auditors carried out the supervisory activities required by Art. 2403 of the Italian Civil Code, Art. 149 of Italian Legislative Decree No. 58 of 1998, Art. 19 of Italian Legislative Decree No. 39/2010, CONSOB recommendations on corporate controls and the activities of the Board of Statutory Auditors and referring to the indications contained in the Corporate Governance Code, as well as the Rules of Behaviour of the Board of Statutory Auditors of listed companies.
Therefore, as part of its functions, the Board of Statutory Auditors:
• obtained from the Directors adequate information on the business carried on and major economic and financial operations carried out by the Company and its subsidiaries pursuant to Art. 150, paragraph 1 of the TUF. In this regard, the Board of Statutory Auditors paid special attention to the fact that the transactions approved and implemented complied with the law and the Articles of Association and were not imprudent or risky, in contrast with the resolutions adopted by the Shareholders' Meeting, in potential conflict of interest or such as to compromise the integrity of the Company's assets;
As required by Application Principle 1.C.1, letter g) of the Corporate Governance Code, the Board of Directors expressed its assessment of the size and composition of the Board and its operation, as well as the size, composition and operation of the board committees. The assessment - carried out on the basis of the results of a self-assessment questionnaire - used the assessment criteria already adopted in the previous year, filled in by all the members of the Board of Directors.
The Board also acknowledges that it has issued a favourable opinion:
The Board of Statutory Auditors also gave its consent, pursuant to Art. 2426, paragraph 1, number 5, of the Italian Civil Code, to the recognition in the financial statements of development costs with a multi-year use of € 284,000.
Pursuant to Art. 19 of Italian Legislative Decree 39/2010 (Consolidated External Audit Act), the Board of Statutory Auditors is required to supervise:
The Board of Statutory Auditors carried out its activities in collaboration with the Control and Risk Committee in order to coordinate their responsibilities and avoid overlapping of activities.
The Board of Statutory Auditors supervised the existence of rules and procedures relating to the process of formation and dissemination of financial information. In this regard, it should be noted that the Report on Corporate Governance and Ownership Structure illustrates how the Group defined its Internal Control and Risk Management System in relation to the financial reporting process at the consolidated level. The Financial Reporting Officer is Gianluca Beschi.
The Financial Reporting Officer is supported by the Internal Audit Department to check the operation of the administrative and accounting procedures through control testing.
The Board of Statutory Auditors acknowledges that it has received adequate information on the monitoring of business processes with an administrative and accounting impact within the Internal Control System, carried out both during the year in relation to the regular management reports, and during the closing of the accounts for the preparation of the Financial Statements, in compliance with the monitoring and certification requirements to which SABAF S.p.A. is subject pursuant to Italian Law no. 262/2005. In particular, the Board of Statutory Auditors acknowledged the Risk Assessment for 2018, as well as the periodic update on testing activities pursuant to Italian Law no. 262/2005.
The adequacy of the administrative and accounting system was also assessed through the acquisition of information from the heads of the respective departments and the analysis of the results of the work carried out by the Independent Auditors. Note that during the 2018 financial year no updates were made to the administrative and accounting procedures prepared pursuant to Italian Law 262/2005 and adopted by SABAF.
No particular critical issues or elements hindering the issue of the certification by the Financial Reporting Officer and by the Chief Executive Officer concerning the adequacy of the administrative and accounting procedures for the preparation of the financial statements of SABAF S.p.A. and the Consolidated Financial Statements for the year 2018 emerged.
The Board of Statutory Auditors supervised compliance with the regulations related to the preparation and publication of the Half-Yearly Report and the Interim Management Reports, as well as the settings given to them and the correct application of the accounting standards, also using the information obtained from the Independent Auditors.
Furthermore, it is acknowledged that:
In particular, all the main phases of the audit activity were illustrated to the Board of Statutory Auditors, including the identification of the risk areas, with a description of the related audit procedures adopted; moreover, the main accounting principles applied by SABAF have been followed.
The Board also acknowledges that the Independent Auditors EY S.p.A. issued their opinions on the Consolidated Financial Statements and the Separate Financial Statements today (April 12, 2019) and also issued on the same date the Additional Report to the Internal Control and Audit Committee pursuant to Article 11 of Regulation (EU) 2014/537.
The reports on the Separate financial statements and the Consolidated financial statements do not give rise to any observations or requests for information.
It is also acknowledged that the Independent Auditors expressed, in the reports mentioned above, a positive opinion with regard to consistency with the financial statements and compliance with the law with reference:
In the audit work, a special attention was paid to the key aspects relating to the impairment test and Purchase Price Allocation. Moreover, the reports issued by the Independent Auditors do not reveal any significant shortcomings in the Company's internal control system for financial information and accounting system.
The Board of Statutory Auditors supervised the independence of the Independent Auditors EY S.p.A., verifying the type and extent of services other than auditing with reference to SABAF and its subsidiaries and obtaining explicit confirmation from the Independent Auditors that the independence requirement was met. The statement on independence has been included, pursuant to Art. 11, paragraph 2, letter a), of Regulation (EU) 2014/537, in the above-mentioned Additional Report.
The fees paid by the SABAF Group to the Independent Auditors and to the companies belonging to the network of the Independent Auditors themselves are as follows:
| ASSETS | AMOUNT EUR/000 |
|---|---|
| Audit | 82 |
| Certification services | - |
| Other services | 16 |
| Total | 98 |
In the light of the above, the Board of Statutory Auditors considers that the Independent Auditors EY S.p.A. meet the requirement of independence.
Note that in 2018 there were changes in the scope of the audit, in relation to the inclusion in the consolidation area of the company Okida Elektronik Sanayi Limited Sirket as a result of its acquisition in September by the Group. Okida was consolidated as from 4 September 2018, contributing to the Group's total turnover of approximately € 4 million.
The Board of Statutory Auditors assessed and supervised the adequacy of internal control and the effectiveness of the internal control and risk management systems. The Board of Statutory Auditors acknowledges that it has verified the most significant activities carried out by the overall internal control and risk management system by attending the meetings of the Control and Risk Committee (also with functions of Committee for related-party transactions) attended by:
The Board of Statutory Auditors also acknowledges that it attended the periodic meetings among the Company's control bodies attended by:
In particular, as part of these activities, the Board of Statutory Auditors acknowledges that it has received and examined:
• periodic updates on the development of the risk management process, the outcome of the monitoring and assessment activities carried out by Internal Audit and the objectives achieved.
The Board of Statutory Auditors then reviewed every six months the periodic reports on the activities carried out by the Supervisory Body and examined the activity plan and the budget allocated for 2018. Similarly, the Board of Statutory Auditors acknowledged the compliance with the provisions of Italian Legislative Decree no. 231/2001 and the activity plan for 2018, examining and agreeing with the amendments made during the year to the Organisation and Management Model pursuant to Italian Legislative Decree no. 231/2001.
Following the activities carried out during the 2018 financial year, as detailed above, the Board of Statutory Auditors shared the positive assessment expressed by the Control and Risk Committee with regard to the adequacy of the Internal Control and Risk Management System.
With reference to the internal control system, the Board of Statutory Auditors acknowledges that, after the 2018 reporting period, on 5 February 2019, Marcandalli, Head of the Internal Audit department and member of the Supervisory Body, resigned, effective as from 1 May 2019. A new department head is currently being selected.
During 2018, in line with the 2018-2022 Business Plan, SABAF carried out an important operation aimed at achieving growth through acquisitions of the Group: as described in the Report on Operations, in September 2018 the Group purchased 100% of Okida Elektronik Sanayi Limited Sirket (30% directly from Sabaf S.p.A., the remaining 70% indirectly purchased through the Turkish subsidiary Sabaf Beyaz Esya), for a total investment of € 24.1 million. This transaction is considered strategic in that it allows the Group to implement its strategy of expanding its range of products in components for domestic appliances and acquiring expertise in the electronics sector.
In terms of ordinary operations, SABAF's activities continued in line with previous years and consisted of industrial activities, strategic and management coordination of the Group, the search for the optimisation of the Group's financial flows, as well as the search and selection of equity investments with the aim of accelerating the Group's growth.
The Sabaf Group also carried out organic investments of € 11.5 million mainly aimed at increasing the production capacity of special burners, completing the automation of production of light alloy valves and interconnection of production plants with management systems (Industry 4.0).
Moreover, following the supervision and control activities carried out during the year, the Board of Statutory Auditors can certify that:
no reports were received by the Board of Statutory Auditors pursuant to Art. 2408 of the Italian Civil Code, nor has it received any complaints from third parties;
no transactions have been identified with third parties, intra-group and/ or related parties such as to highlight atypical and/or unusual profiles, in terms of content, nature, size and timing;
The Board of Statutory Auditors assessed the application of the corporate governance rules set out in the Corporate Governance Code that SABAF complies with and the relative level of compliance, also by analysing the Report on Corporate Governance and ownership structure and comparing its contents with what emerged during the general supervisory activity carried out during the year. Moreover, compliance with the obligation on the part of SABAF to inform the market in its report on corporate governance of its level of compliance with the Code itself was assessed, also in accordance with the provisions of Article 123 bis of the TUF. The Board of Statutory Auditors is of the opinion that the report on corporate governance was prepared in accordance with the provisions of Art. 123-bis of the TUF and the Corporate Governance Code and following the format made available by the Corporate Governance Committee of Borsa Italiana S.p.A.
With regard to the Separate financial statements for the year ended 31 December 2018, the Consolidated financial statements for the year ended 31 December 2018 and the related Report on operations, note the following:
• the Board of Statutory Auditors ascertained, through direct audits and information obtained from the Independent Auditors, compliance with law provisions regulating their formation, the layout of the Financial statements, the Consolidated financial statements and the Report on Operations, and the financial statement formats adopted, certifying the correct use of the accounting standards described in the explanatory notes and the Report on operations. In particular, the Board of Statutory Auditors analysed the results of the impairment test carried out, in accordance with IAS 36, on the individual CGUs that coincide with the equity investments in Faringosi Hinges s.r.l., A.R.C. s.r.l. and Okida Elektronik ("Hinges" CGU for Faringosi Hinges s.r.l.; "Professional burners" CGU for A.R.C. s.r.l.; "electronic components" CGU for Okida Elektronik).
In particular, note that the test was carried out:
for the purposes of the Separate financial statements of Sabaf S.p.A. (and, in relation to Okida Elektronik, of Sabaf Turkey), to assess the recoverability of the amount of investments and
for the purposes of the Consolidated Financial Statements, to make sure that the net capital invested in the CGUs (including goodwill and other intangible assets deriving from the Okida acquisition) was lower than its recoverable amount.
In this regard, note that the Independent Auditors, in their reports, accurately described the audit procedures carried out with reference to the impairment tests, as "key aspects of the audit" and to which, therefore, the Board of Statutory Auditors refers. Therefore, the Board of Statutory Auditors supports the procedures adopted and the results obtained, which show values in use that are significantly higher than the carrying values of the equity investments and assets;
In relation to the presentation of the Consolidated disclosure of non-financial information, the Board of Statutory Auditors, in compliance with Italian Legislative Decree no. 254 of 30 December 2016, supervised compliance with the provisions set out in the decree itself and in CONSOB resolution no. 20267 of 18 January 2018 for the preparation of the statements in question, also acquiring the certification issued by the appointed auditor EY S.p.A. on 12 April 2019. This activity did not reveal any facts that could be reported in this report.
The Board of Statutory Auditors supervised the adequacy of the instructions given by the Company to the subsidiaries, in accordance with Art. 114, paragraph 2 of Italian Legislative Decree 58/1998.
Periodic meetings with the management and the company in charge of Internal Audit did not reveal any critical elements to be reported in this report.
Finally, we acknowledged that to date no communications have been received from the Control Bodies of the Subsidiaries and/or parent companies containing findings to be noted in this report.
In relation to the provisions of Art. 2391 bis of the Italian Civil Code, the Board of Statutory Auditors acknowledges that the Board of Directors adopted a procedure for the regulation of Related-Party Transactions, whose main objective is to define the guidelines and criteria for identifying related-party transactions and setting out roles, responsibilities and operating methods so as to guarantee, for such transactions, adequate information transparency and the related procedural and substantial correctness.
That procedure was prepared in compliance with what was established by the CONSOB Regulation on Related Parties (no. 17221 dated 21 March 2010) and was amended during the year by the Board of Directors on 25 September 2018.
The Board of Statutory Auditors supervised the effective application of the rules by the Company and has no observations to make in this regard in this Report.
The Board of Statutory Auditors expresses its favourable opinion for the approval of the Separate financial statements as at 31 December 2018 and has no objections to make to the draft resolution presented by the Board of Directors as formulated in the Directors' Report on Operations.
Ospitaletto, 12 April 2019
The Board of Statutory Auditors
Alessandra Tronconi
Statutory Auditor Mauro Vivenzi
Sabaf experiences small and big transformations by learning from the past and looking to the future with an open and innovative vision, developing our qualities and improving performance. This creates growth and improvement possibilities.
pursuant to Article 123-ter of the TUF and Article 84-quater of the Issuers' Regulations
Section I - Remuneration policy.............................................................................. 215
Section II – Remuneration of the members of the board of directors and the board of statutory auditors and other executives with strategic responsibilities in 2018.............219
214
Sabaf S.p.A.'s General Remuneration Policy (hereinafter also "remuneration policy"), approved by the Board of Directors on 22 December 2011 and updated on 20 March 2013, 4 August 2015 and 26 September 2017, defines the criteria and guidelines for the remuneration of members of the Board of Directors, Executives with strategic responsibilities and members of the Board of Statutory Auditors.
The remuneration policy was prepared:
No independent experts or advisors contributed to the preparation of the policy, nor were the remuneration policies of other companies used for reference purposes.
The Board of Directors is responsible for properly implementing the remuneration policy.
The Remuneration and Nomination Committee currently in office comprises four non-executive members, the majority of them independent (Daniela Toscani, Stefania Triva and Alessandro Potestà), with the knowledge and experience in accounting, finance and remuneration policies that is deemed adequate by the Board of Directors.
Actually enacts what is decided upon by the Board.
The Company's intention is that the Remuneration Policy:
Attacts, motivates and increases the loyalty of PERSONS with appropriate professional expertise
Favours the creation of SUSTAINABLE VALUE for shareholders in the medium to long term
Brings the interests of the MANAGEMENT into line with those of the SHAREHOLDERS
Protects the principles of INTERNAL EQUITY and DIVERSITY
The definition of a fair and sustainable remuneration package takes into account three main tools:
Each remuneration component is analysed below.
The fixed component of the remuneration of the Directors is such that it is able to attract and motivate individuals with appropriate expertise for the roles entrusted to them within the Board and is set with reference to the remuneration awarded for the same positions by other listed Italian industrial groups of a similar size.
The Shareholders' Meeting decides on the remuneration of the members of the Board of Directors, including a fixed amount and attendance fees.
With regard to the remuneration for Directors holding special offices, the Board of Directors, at the proposal of the Remuneration and Nomination Committee and subject to the opinion of the Board of Statutory Auditors, determines the additional fixed remuneration.
Directors who sit on committees formed within the Board (Internal Control and Risk Committee, Remuneration and Nomination Committee) are granted remuneration that includes a fixed salary and attendance fees intended to reward the commitment required of them.
Executives with strategic responsibilities are paid a fixed annual remuneration, determined so that it is sufficient in itself to guarantee an appropriate basic salary level, even in the event that the variable components are not paid owing to a failure to reach the targets.
The members of the Board of Statutory Auditors are paid a fixed remuneration, the amount of which is determined by the Shareholders' Meeting, at the time of their appointment.
There is an agreement for the Chief Executive Officer regulating ex ante the economic part concerning the early termination of the employment relationship. There are no agreements for other Directors or other Executives with strategic responsibilities regulating ex ante the economic part concerning the early termination of the employment relationship. For the end of the relationship for reasons other than just cause or justified reasons provided by the employer, it is the Company's policy to pursue consensual agreements to end the employment relationship, in accordance with legal and contractual obligations.
The Company does not provide directors with benefits subsequent to the end of their mandate.
The Company has entered into non-competition agreements with the Chief Executive Officer and with certain executives who report to him, the terms of which were approved by the Board of Directors, after obtaining the opinion of the Remuneration and Nomination Committee.
| COMPONENTS | CORPORATE OFFICES | |||||
|---|---|---|---|---|---|---|
| OF THE REMUNERATION | Executive Directors |
Non-Executive Directors |
Members of committees within the BoD |
Executives with strategic responsibilities |
Auditors | |
| FIXED COMPONENTS | Fixed remuneration for the office of Director |
Fixed remuneration for the office of Director |
Fixed remuneration for Directors members of committees within the BoD |
Collective National Contract for Industrial |
Fixed remuneration | |
| Fixed remuneration for Directors holding special positions |
Attendance fee | Attendance fee | Managers | |||
| INDEMNITY AGAINST THE EARLY TERMINATION OF EMPLOYMENT |
Remuneration for non-competition agreement (only for Chief Executive Officer) |
N/A | N/A | Remuneration for non-competition agreement |
N/A |
The Board of Directors, at the suggestion of the Remuneration and Nomination Committee and in accordance with the budget, defines an MBO plan, for the benefit of:
• Executives with strategic responsibilities
TARGETS BENEFICIARIES
• other persons, identified by the Chief Executive Officer, among the managers who report directly to him or who report to the aforementioned managers.
This plan sets a common target (Group EBIT, which is considered to be the Group's main indicator of financial performance) and quantifiable and measurable individual targets economic-financial, technical-productive and/or socio-environmental in nature.
The targets of the Chief Executive Officer and of the Executives with strategic responsibilities are decided by the Board of Directors, at the suggestion of the Remuneration and Nomination Committee, in accordance with the budget.
The targets of the other beneficiaries of the incentive plans are defined by the Chief Executive Officer, in accordance with the budget.
ANNUAL MBO
Non-executive directors are not granted any variable remuneration.
In compliance with the Shareholders' Meeting resolution, at the suggestion of the Remuneration and Nomination Committee, and after obtaining the opinion of the Board of Statutory Auditors, the Board of Directors approves a longterm incentive plan based on financial instruments (stock grants).
The Beneficiaries, if not already identified in the Plan, are identified by the Board of Directors among the members of the Board of Directors and/or among the managers of the Company or its Subsidiary companies who hold or will hold key positions in the implementation of the Business Plan. In the case of the Chief Executive Officer and/or Executives with strategic responsibilities of the Company, the identification is made on the suggestion of the Remuneration and Nomination Committee.
The Board of Directors identifies the total number of rights to be assigned to each beneficiary (within the limits set by the Shareholders' Meeting). All or part of the shares are allocated by the Board of Directors at the end of the vesting period; for the Chief Executive Officer and Executives with strategic responsibilities, the allocation is made on the suggestion of the Remuneration and Nomination Committee.
The allocation of shares is related to predetermined (business and individual) performance targets measurable and linked to the creation of value for shareholders over the long term and extends over three years coinciding with the mandate of the Board of Directors (2018-2020).
| • EXECUTIVE DIRECTORS (excluding the Chairman) • EXECUTIVES WITH STRATEGIC RESPONSIBILITIES • OTHER MANAGERS PROPOSED BY THE CHIEF EXECUTIVE OFFICER |
• CHIEF EXECUTIVE OFFICER • CFO • OTHER MANAGERS IDENTIFIED BY THE BOD who hold or will hold key positions in the implementation of the Business Plan |
|---|---|
| • COMMON TARGET: GROUP EBIT • INDIVIDUAL TARGETS: ECONOMIC/FINANCIAL AND TECHNICAL AND PRODUCTIVE |
• COMMON BUSINESS TARGETS: EBIT, ROI, TSR • INDIVIDUAL PERFORMANCE TARGETS: IDENTIFIED BY THE BOD FOR EACH BENEFICIARY |
| COMPONENTS | CORPORATE OFFICES | ||
|---|---|---|---|
| OF THE REMUNERATION | Executive directors and Other executives with strategic responsibilities |
Other persons identified by the CEO/BoD |
|
| VARIABLE COMPONENTS |
SHORT-TERM VARIABLE COMPONENT |
Annual MBO plan based on achieving a common target and individual targets |
Annual MBO plan based on achieving a common target and individual targets |
| LONG-TERM VARIABLE COMPONENT |
Stock Grant Plan based on achieving business targets and individual performance targets |
Stock Grant Plan based on achieving business targets and individual performance targets |
BENEFICIARIES
TARGETS
Third-party civil liability insurance policy: the Company has taken out a third-party civil liability insurance policy in favour of directors, statutory auditors and executives for unlawful acts committed in the carrying-out of their respective duties, in violation of obligations established by law and the Articles of Association, with the sole exclusion of deliberate intent. The taking-out of this policy is approved by the Shareholders' Meeting.
Life insurance policy and cover for medical expenses: the Company also provides a life insurance policy and cover for medical expenses (FASI) for executives, as established by the Collective National Contract for Industrial Managers; moreover, it has taken out an additional policy to cover medical expenses not covered by FASI reimbursements.
Company cars: at the suggestion of the Remuneration and Nomination Committee, the Board of Directors also assigns company cars to executives.
Accommodation costs: at the suggestion of the Remuneration and Nomination Committee, the Board of Directors can provide for housing to be made available to executives, for the possibility to reimburse the rent of the house or for the temporary reimbursement of the costs of accommodation in a hotel.
With the aim of attracting highly professional individuals, the Board may decide to give entry bonuses to newly hired executives.
As from 2018, the Company established mechanisms for the ex-post adjustment of the variable remuneration component or claw back clauses to demand the return of all or part of the variable components of remuneration paid out (or to withhold deferred sums), which were determined on the basis of data subsequently found to be clearly incorrect.
Directors and other executives with strategic responsibilities may be paid remuneration – exclusively as a fixed amount – for offices held in subsidiaries. In addition to the approval of the subsidiaries' corporate bodies, this remuneration is subject to the favourable opinion of the Remuneration and Nomination Committee.
| COMPONENTS | CORPORATE OFFICES | ||||
|---|---|---|---|---|---|
| OF THE REMUNERATION | Executive Directors |
Non-Executive Directors |
Executives with strategic responsibilities |
Auditors | |
| BENEFITS AND OTHER COMPONENTS |
NON-MONETARY BENEFITS |
Third-party liability insurance policy |
Third-party liability insurance policy |
Third-party liability insurance policy Life insurance policy to cover medical expenses (FASI), supplementary medical expenses Company cars |
Third-party liability insurance policy |
| OFFICES IN SUBSIDIARIES |
Fixed remuneration for offices in subsidiaries |
N/A | Fixed remuneration for offices in subsidiaries |
N/A |
The Shareholders' Meeting is responsible for determining the annual gross remuneration (maximum amount) due to the Directors, including a fixed amount and attendance fees.
The members of the Board are covered by a third-party civil liability insurance policy for unlawful acts committed in the exercise of their respective duties, in violation of obligations established by law and the Articles of Association, with the sole exclusion of deliberate intent. The taking-out of this policy is approved by the Shareholders' Meeting.
No variable remuneration is paid to the Chairman and Vice Chairman of the Board of Directors, but only remuneration in addition to those of directors for special offices held.
The remuneration of the Chief Executive Officer includes the following components:
Fixed remuneration for the office of Director: the Chief Executive Officer is the recipient of the fixed remuneration for the office of Director (pursuant to Article 2389 paragraph I Italian Civil Code).
Third-party civil liability insurance policy: The Company has taken out a third-party civil liability insurance policy for unlawful acts committed in the carrying-out of their respective duties, in violation of obligations established by law and the Articles of Association, with the sole exclusion of deliberate intent. The taking-out of this policy is approved by the Shareholders' Meeting. Long-term variable component: the long-term incentive is dependent on the achievement of performance targets, proposed by the Remuneration and Nomination Committee to the Board of Directors, and extends over three years, coinciding with the mandate of the Board of Directors.
If the Chief Executive Officer is also assigned an executive management role within the Sabaf Group, the Board decides on the assignment of the following additional remuneration instruments:
• Fixed annual gross salary: the fixed remuneration is determined so that it is sufficient in itself to guarantee an appropriate basic salary level, even in the event that the variable components are not paid owing to a failure to reach the targets.
218
Fixed annual gross remuneration: employment relationships with Executives with strategic responsibilities are regulated by the Collective National Contract for Industrial Managers. In this regard, fixed remuneration is determined so that it is sufficient in itself to guarantee an appropriate basic salary level, even in the event that the variable components are not paid owing to a failure to reach the targets.
Short- and long-term variable components: Executives with strategic responsibilities are the recipients of short- and long-term incentive plans (ref. paragraph 3). At the time of approval of short- and long-term incentive plans, the Board of Directors is responsible for setting the maximum amounts of variable remuneration, the methods and timing for the payment of this remuneration.
Benefits: Executives with strategic responsibilities receive the benefits envisaged for the executives of the Company (Life insurance policy and cover for medical expenses; assignment of company car) and are covered by an occupational risk policy.
The amount of remuneration for Statutory Auditors is set by the Shareholders' Meeting, which establishes a fixed amount for the Chairman and the other Statutory Auditors.
The members of the Board are covered by a third-party civil liability insurance policy for unlawful acts committed in the exercise of their respective duties, in violation of obligations established by law and the Articles of Association, with the sole exclusion of deliberate intent. The taking-out of this policy is approved by the Shareholders' Meeting.
This section, by name of Directors and Statutory Auditors:
The remuneration paid to directors for 2018 consisted of the following components:
A fixed remuneration component for employment and a fixed remuneration for offices in subsidiaries are paid to executive directors appointed as executives.
With reference to variable components, which are intended only for executive directors (excluding the Chairman), the following is pointed out:
In implementation of the Policy in 2018, Sabaf introduced a stock grant plan aimed at the Group's executive directors and executives who hold or will hold key positions in the implementation of the Business Plan. Beneficiaries already identified in the Plan include the Chief Executive Officer and Director Gianluca Beschi. The assignment of shares is subject to the achievement of company targets (based on ROI, TSR and EBITDA) and individual targets over the three-year period 2018 to 2020, consistent with the objectives of the Business Plan. For further details, please refer to the information contained in the Information Document prepared pursuant to Article 114-bis of Italian Legislative Decree no. 58 of 24 February 1998, of Article 84-bis of Consob resolution no. 11971/99, submitted to the Shareholders' Meeting on 8 May 2018.
The remuneration paid to the Statutory Auditors for 2018 consists of a fixed remuneration determined by the Shareholders' Meeting of 8 May 2018, amounting to a total of €70,000.
The remuneration of other executives with strategic responsibilities (Technical Director and two Sales Managers) consists of a fixed remuneration for employment totalling €420,743 , and following variable remuneration:
With particular reference to Table 1, the column:
"Other remuneration" shows, for the portion attributable to 2018, any other remuneration resulting from other services provided.
With reference to the variable incentive plan (MBO) for 2018, remuneration totalling €51,635 accrued. Its payment is deferred and dependent upon the continuation of the employment relationship.
Remuneration totalling €94,500 was also disbursed by subsidiaries.
The three executives with strategic responsibilities are among the Beneficiaries of the stock grant plan, approved in 2018, in implementation of the Remuneration Policy. For further details, please refer to the information contained in the Information Document prepared pursuant to Article 114-bis of Italian Legislative Decree no. 58 of 24 February 1998, of Article 84-bis of Consob resolution no. 11971/99, submitted to the Shareholders' Meeting on 8 May 2018.
For a breakdown of other items, see attachment 3A, statement 7-bis and 7-ter of Consob Regulation 11971 of 14 May 1999.
Table 2 shows the information relating to the stock grant plan approved by the Shareholders' Meeting and aimed at the Group's executive directors and executives who hold or will hold key positions in the implementation of the Business Plan. Specifically, the column:
"Vesting period" means the period between the time when the right to participate in the incentive scheme is assigned and the time when the right accrues. Financial instruments vested during the financial year and not assigned are financial instruments for which the vesting period ended during the financial year and which were not assigned to the recipient for failure to meet the conditions under which the assignment of the instrument was conditional (for example, failure to meet performance targets).
220
The value at the vesting date is the value of the financial instruments accrued, even if not yet paid (for example, due to the presence of lock up clauses), at the end of the vesting period.
For a breakdown of other items, see attachment 3A, statement 7-bis and 7-ter of Consob Regulation 11971 of 14 May 1999.
Table 3 contains information on monetary incentive plans for members of the administration body and other executives with strategic responsibilities; in particular, it shows:
Lastly, the column "Other bonuses" shows the bonuses for the year not explicitly included in specific ex ante defined plans.
Finally, pursuant to Article 84-quater, paragraph four of the Consob Issuers' Regulations, Table 4 shows shareholdings in Sabaf S.p.A. held by directors and executives with strategic responsibilities, as well as their non-separated spouses and dependent children, directly or through subsidiaries, trust companies or third parties, as shown in the shareholder register, communications received and other information acquired from the same parties. This includes all persons who held office during the year, even for only part of the year. The number of shares held is shown by individual director and in aggregate form for executives with strategic responsibilities.
(FIGURES IN EURO)
| Name | Remuneration | Variable remuneration (non equity) |
Non | Fair Value | Indemnity for end of office or |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| and surname | Office | Period of office |
Expiry of office | Fixed remuneration |
for attendance at Committee meetings |
Bonus and other incentives |
Profit sharing | monetary benefits |
Other remuneration |
Total | of equity remuneration |
termination of employment relationship |
| Giuseppe Saleri |
Chairman | 1 Jan - 31 Dec 2018 |
Approval of 2020 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 160,000(a) | 0 | 0 | 0 | 0 | 0 | 160,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 8,000 | 0 | 0 | 0 | 0 | 0 | 8,000 | 0 | 0 | |||
| (III) Total | 168,000 | 0 | 0 | 0 | 0 | 0 | 168,000 | 0 | 0 |
(a) of which €20,000 as Director and €140,000 as Chairman
| Nicla Picchi |
Vice Chairman | 1 Jan - 31 Dec 2018 |
Approval of 2020 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 39,000(a) | 14,000(b) | 0 | 0 | 0 | 15,000 | 68,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 5,000 | 5,000 | 0 | 0 | |||
| (III) Total | 39,000 | 14,000 | 0 | 0 | 0 | 20,000(c) | 73,000 | 0 | 0 |
(a) of which €20,000 as director, €10,000 as Vice Chairman' and €9,000 as board meeting attendance fees
(b) of which €10,000 as a member of the Internal Control and Risk Committee and €4,000 in Committee meeting attendance fees
(c) of which €15,000 as member of the Sabaf S.p.A. Supervisory Body and €5,000 as member of the Supervisory Body of the subsidiary Faringosi Hinges s.r.l.
| Pietro Iotti |
Chief Executive Officer |
1 Jan - 31 Dec 2018 |
Approval of 2020 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 330,000(a) | 0 | 33,333 | 0 | 10,171 | 0 | 373,505 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 22,000 | 0 | 0 | 0 | 0 | 0 | 22,000 | 0 | 0 | |||
| (III) Total | 352,000 | 0 | 33,333 | 0 | 10,171 | 0 | 395,505 | 0 | 0 |
(a) of which €20,000 as director, €10,000 as Chief Executive Officer, and €300,000 as General Manager (including €30,000 relating to Remuneration for non-competition agreement)
| Gianluca Beschi |
Director | 1 Jan - 31 Dec 2018 |
Approval of 2020 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 161,265(a) | 0 | 32,949 | 0 | 5,466 | 0 | 199,681 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 41,000 | 0 | 0 | 0 | 0 | 0 | 41,000 | 0 | 0 | |||
| (III) Total | 202,265 | 0 | 32,949 | 0 | 5,466 | 0 | 240,681 | 0 | 0 |
(a) of which €20,000 as director and €141,265 as Administration, Finance and Control Director
| Renato Camodeca |
Director | 1 Jan - 31 Dec 2018 |
23 January 2019 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 30,000(a) | 28,000(b) | 0 | 0 | 0 | 0 | 58,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 30,000 | 28,000 | 0 | 0 | 0 | 0 | 58,000 | 0 | 0 |
(a) of which €20,000 as director and €10,000 as BoD meeting attendance fees
222
(b) of which €10,000 as a member of the Internal Control and Risk Committee, €10,000 as a member of the Remuneration and Nomination Committee and €8,000 as Committee meeting attendance fees
(FIGURES IN EURO)
| Name and surname |
Office | Period of office |
Expiry of office | Fixed remuneration |
Remuneration for attendance at Committee |
Bonus and other |
Variable remuneration (non equity) Profit sharing |
Non monetary benefits |
Other remuneration |
Total | Fair Value of equity remuneration |
Indemnity for end of office or termination of employment |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| meetings | incentives | relationship | ||||||||||
| Alessandro Potestà |
Director | 1 Jan - 31 Dec 2018 |
Approval of 2020 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 28,000(a) | 11,000(b) | 0 | 0 | 0 | 0 | 39,000 | 0 | 0 | |||
| (I) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 28,000 | 11,000 | 0 | 0 | 0 | 0 | 39,000 | 0 | 0 |
(a) of which €20,000 as director and €8,000 as BoD meeting attendance fees
(b) of which €10,000 as a member of the Remuneration and Nomination Committee and €1,000 as Committee meeting attendance fees
| Claudio Bulgarelli |
Director | 8 May - 31 Dec 2018 |
Approval of 2020 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 28,000(a) | 2,667(b) | 0 | 0 | 0 | 0 | 30,667 | 0 | 0 | ||||
| (I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 28,000 | 2,667 | 0 | 0 | 0 | 0 | 30,667 | 0 | 0 |
(a) of which €20,000 as director and €8,000 as BoD meeting attendance fees
(b) of which €1,667 as a member of the Remuneration and Nomination Committee and €1,000 as Committee meeting attendance fees
| Daniela Toscani |
Director | 8 May - 31 Dec 2018 |
Approval of 2020 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 27,000(a) | 11,000(b) | 0 | 0 | 0 | 0 | 38,000 | 0 | 0 | ||||
| (I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 27,000 | 11,000 | 0 | 0 | 0 | 0 | 38,000 | 0 | 0 |
(a) of which €20,000 as director and €7,000 as BoD meeting attendance fees
(b) of which €10,000 as a member of the Internal Control and Risk Committee and €1,000 in Committee meeting attendance fees
| Stefania Triva |
Director | 8 May - 31 Dec 2018 |
Approval of 2020 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 25,000(a) | 8,333(b) | 0 | 0 | 0 | 0 | 33,333 | 0 | 0 | |||
| 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
| (III) Total | (II) Remuneration from subsidiaries and affiliates | 25,000 | 8,333 | 0 | 0 | 0 | 0 | 33,333 | 0 | 0 |
(a) of which €20,000 as director and €5,000 as BoD meeting attendance fees
(FIGURES IN EURO)
| Name and surname |
Office | Period of office |
Expiry of office | Fixed remuneration |
Remuneration for attendance at Committee meetings |
Bonus and other incentives |
Variable remuneration (non equity) Profit sharing |
Non monetary benefits |
Other remuneration |
Total | Fair Value of equity remuneration |
Indemnity for end of office or termination of employment relationship |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cinzia Saleri |
Vice Chairman | 1 Jan - 8 May 2018 |
Approval of 2017 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| Roberta Forzanini |
Vice Chairman | 1 Jan - 8 May 2018 |
Approval of 2017 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| Ettore Saleri |
Vice Chairman | 1 Jan - 8 May 2018 |
Approval of 2017 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| Giuseppe Cavalli |
Director | 1 Jan - 8 May 2018 |
Approval of 2017 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 2,000(a) | 3,000(b) | 0 | 0 | 0 | 0 | 5,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 2,000 | 3,000 | 0 | 0 | 0 | 0 | 5,000 | 0 | 0 | |||
| (a) of which €2,000 as BoD meeting attendance fees (b) of which €3,000 as Committee meeting attendance fees |
||||||||||||
| Approval of Fausto 1 Jan - Director 2017 financial Gardoni 8 May 2018 statements |
||||||||||||
| (I) Remuneration at Sabaf S.p.A. | 2,000(a) | 4,000(b) | 0 | 0 | 0 | 0 | 6,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 2,000 | 4,000 | 0 | 0 | 0 | 0 | 6,000 | 0 | 0 | |||
| (a) of which €2,000 as BoD meeting attendance fees |
(b) of which €4,000 as Committee meeting attendance fees
| Anna Pendoli |
Director | 1 Jan - 8 May 2018 |
Approval of 2017 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 2,000(a) | 0 | 0 | 0 | 0 | 0 | 2,000 | 0 | 0 | |||
| 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
| (II) Remuneration from subsidiaries and affiliates (III) Total |
2,000 | 0 | 0 | 0 | 0 | 0 | 2,000 | 0 | 0 |
(a) of which €2,000 as BoD meeting attendance fees
224
(FIGURES IN EURO)
| Remuneration | Variable remuneration (non equity) |
Non | Fair Value | Indemnity for end of office or |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Name and surname |
Office | Period of office |
Expiry of office | Fixed remuneration |
for attendance at Committee meetings |
Bonus and other incentives |
Profit sharing | monetary benefits |
Other remuneration |
Total | of equity remuneration |
termination of employment relationship |
| Alessandra Tronconi |
Chairman | 8 May - 31 Dec 2018 |
Approval of 2020 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 30,000 | 0 | 0 | 0 | 0 | 0 | 30,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 30,000 | 0 | 0 | 0 | 0 | 0 | 30,000 | 0 | 0 | |||
| Luisa Anselmi |
Standing Auditor |
1 Jan - 31 Dec 2018 |
Approval of 2020 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 20,000 | 0 | 0 | 0 | 0 | 0 | 20,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 20,000 | 0 | 0 | 0 | 0 | 0 | 20,000 | 0 | 0 | |||
| Mauro Vivenzi |
Standing Auditor |
8 May - 31 Dec 2018 |
Approval of 2020 financial statements |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 20,000 | 0 | 0 | 0 | 0 | 0 | 20,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
| (III) Total | 0 | 0 | 0 | 0 | 0 | 20,000 | 0 | 0 | ||||
| Antonio Passantino Chairman |
1 Jan - 8 May 2018 |
Approval of 2017 financial statements |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| Approval of |
| Enrico Broli |
Standing Auditor |
1 Jan - 8 May 2018 |
2017 financial statements |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) Total | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Other executives with strategic responsibilities (3) |
1 Jan - 31 Dec 2018 |
n/a | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 420,743(a) | 0 | 95,980 | 0 | 15,781 | 0 | 532,504 | 0 | 0 | ||
| 94,500 | 0 | 0 | 0 | 0 | 0 | 94,500 | 0 | 0 | |||
| (III) Total | (II) Remuneration from subsidiaries and affiliates | 95,980 | 0 | 15,781 | 0 | 627,004 | 0 | 0 |
(a) remuneration including €44,613 related to Remuneration for non-competition agreement
| FINANCIAL INSTRUMENTS | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Name | Office | Plan | assigned in previous financial years not vested during the financial year |
assigned during financial year | vested during financial year and not assigned |
year and assigned | vested during financial | pertaining to the financial year |
|||||
| and surname | Number and type of financial instruments |
Vesting period |
Number and type of financial instruments |
Fair Value at the assignment date |
Vesting period |
Assignment date |
Market price on assignment |
Number and type of financial instruments |
Number and type of financial instruments |
Value at vesting date |
Fair value | ||
| Pietro Iotti |
Chief Executive Officer |
||||||||||||
| Remuneration at Sabaf S.p.A. |
2018 Stock Grant Plan (May 2018) |
- | - | 56,000 rights corresponding to 56,000 shares |
407,120 | 3 years | 15 May 2018 |
€ 19.48 / share |
- | - | - | 96,985 | |
| Gianluca Beschi |
Director | ||||||||||||
| Remuneration at Sabaf S.p.A. |
2018 Stock Grant Plan (May 2018) |
- | - | 33,600 rights corresponding to 33,600 shares |
244,272 | 3 years | 15 May 2018 |
€ 19.48 / share |
- | - | - | 58,191 | |
| Other executives with strategic responsibilities (3) |
|||||||||||||
| Remuneration at Sabaf S.p.A. |
2018 Stock Grant Plan (May 2018) |
- | - | 46,000 rights corresponding to 46,000 shares |
334,420 | 3 years | 15 May 2018 |
€ 19.48 / share |
- | - | - | 93,521 | |
| TOTAL | 985,812 | - | 248,697 |
226
(FIGURES IN EURO)
| Bonus for the year | Bonus of previous years | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Name and surname |
Office | Plan | Payable / Paid | Deferred | Deferment period | No longer payable |
Payable / Paid | Still deferred |
Other bonuses |
| Pietro Iotti |
Chief Executive Officer |
||||||||
| Remuneration at Sabaf S.p.A. |
2017 MBO Plan (March 2017) |
0 | 0 | 0 | 33,333 | 0 | 0 | ||
| Remuneration at Sabaf S.p.A. |
2018 MBO Plan (March 2018) |
0 | 73,000 | March 2019 | 0 | 0 | 0 | 0 | |
| Gianluca Beschi |
Executive Director |
||||||||
| Remuneration at Sabaf S.p.A. |
2017 MBO Plan (March 2017) |
0 | 0 | 0 | 32,949 | 0 | 0 | ||
| Remuneration at Sabaf S.p.A. |
2018 MBO Plan (March 2018) |
0 | 26,374 | March 2019 | 0 | 0 | 0 | 0 | |
| Other executives with strategic responsibilities (3) |
|||||||||
| Remuneration at Sabaf S.p.A. |
2017 MBO Plan (March 2017) |
0 | 0 | 0 | 95,980 | 0 | 0 | ||
| Remuneration at Sabaf S.p.A. |
2018 MBO Plan (March 2018) |
0 | 51,635 | March 2019 | 0 | 0 | 0 | 0 | |
| Total | 0 | 151,009 | 0 | 162,262 | 0 | 0 |
(FIGURES IN EURO)
| Name and surname |
Office | Type of Ownership | Investee Company | No. shares held at 31 Dec 2017 |
No. shares acquired | No. shares sold | No. shares held at 31 Dec 2018 |
|---|---|---|---|---|---|---|---|
| Saleri Giuseppe |
Chairman | Indirect through the subsidiary Giuseppe Saleri S.a.p.A. |
Sabaf S.p.A. | 2,766,313 | - | - | 2,766,313 |
| Iotti Pietro | Chief Executive Officer |
Direct | Sabaf S.p.A. | 10,000 | 1,000 | - | 11,000 |
| Toscani | Indirect through spouse | Sabaf S.p.A. | - | 2,419 | - | 2,419 | |
| Daniela | Director | Direct | Sabaf S.p.A. | - | 498 | - | 498 |
| Bulgarelli Claudio |
Director | Indirect through the company Fintel Srl |
Sabaf S.p.A. | 850,000 | - | - | 850,000 |
| Vivenzi Mauro Giorgio |
Auditor | Indirect through spouse | Sabaf S.p.A. | - | 600 | - | 600 |
CONCEPT AND GRAPHIC DESIGN: ALL CREATIVE AGENCY - ALLCREATIVE.AGENCY
PRINT: GRAPHIC CENTER
Printed on paper Fedrigoni Sirio and Fedrigoni Arcoset W/W
COPYRIGHT 2019 - SABAF S.P. A . - ALL RIGHTS RESERVED
sabaf.it
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.