Assets 1950 - 2020 Seventy Years of Sabaf. A lifetime for a man, only a few years for a company set up at international level, already with a wealth of experience gained in the field, but still young and full of energy and new ideas.
In this book, we want to take stock of the path we have followed up until today through a graphic summary of the key assets that the Sabaf Group has built one step at a time and that depict the foundation for long-term sustainable growth. Seven themes referring to Sabaf’s seven decades are expressed through conceptual and minimal images and
infographics, inspired by the great masters of the Bauhaus and the Esprit Nouveau. They are presented on the cover as abstracts and are developed in detail in the separators inside the book. Only two colours are used throughout the book as it is an effective minimalism for clearly and immediately revealing the data presented.
9,915,000
Index
10 12 18
INTRODUCTION TO THE ANNUAL REPORT Key Performance Indicators in summary (KPI) Products and markets
26
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION Methodological note Letter from the Chief Executive Officer to stakeholders Business model, strategic approach and sustainable creation of value
27 28 30 30
Strategic approach and creation of value
30
Sustainable value creation
30
Values, vision and mission
33
Business model
41
Materiality analysis
44
Corporate Governance, Risk Management and Compliance
44
Corporate Governance
57
Risk Management
58
Compliance
64
Sabaf and employees
64
Personnel management policy
66
The people of the Sabaf Group
69
Recruitment policy
74
Personnel training
74
Internal Communication
75
Diversity and equal opportunities
76
Remuneration, incentive and enhancement systems
79
Occupational health and safety and working environment
81
Industrial relations
82
Disciplinary measures and disputes
83
Sabaf and environment
83
Health and safety, environmental and energy policy
64
83
Risks
Risks
83
Dialogue with environmental associations and institutions
84
Process innovation and environmental sustainability
84
Environmental impact
88
Environmental investments
88
Disputes
89
Sabaf, the management of product quality and customer relations
89 89 90 90 90
Risks
Quality management policy Customer Health and Safety Customer satisfaction Customer complaint handling
90
Disputes
91
Sabaf and supply chain management
91
Supply chain management policy
92
Purchase analysis
92
Disputes
93
Sabaf, Public Administration and Community
94
Sabaf and shareholders
98
Sabaf and lenders
98
Sabaf and competitors
100
GRI Content Index
105
Indipendent auditors’ report on the consolidated Disclosure of non-financial information
110
REPORT ON OPERATIONS
122
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
172
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
230
REPORT ON REMUNERATION
91
Risks
SABAF . 2019 ANNUAL REPORT
Introduction to the Annual Report 12
Key Performance Indicators in summary (KPI)
18
Products and markets
10
INTRODUCTION TO THE ANNUAL REPORT
The publication of the Annual Report of the Sabaf Group, now in its fifteenth edition, confirms the Group’s commitment, undertaken since 2005, to an integrated reporting of its economic, social and environmental performance. One of the first international-level companies to embrace the trend of integrated reporting, Sabaf intends to continue on the path it has undertaken, inspired by the recommendations contained in the international Framework on sustainability reporting of the International Integrated Reporting Council (IIRC), aware that integrated, complete and transparent reporting can benefit both the companies themselves, through better understanding of the articulation of strategy and greater internal cohesion, and the community of investors, who will more clearly grasp the linkage between strategy, governance and corporate performance. The Annual Report provides an overview of the Group’s business model and the process of creating corporate value. The business model and the main results achieved (summary Performance Indicators) are in fact presented from the standpoint of the capital employed (financial; social and relational; human; intellectual, infrastructural, and natural) to create value over time, thereby generating results for the business, with positive impacts on the community and on stakeholders as a whole. “Non-financial indicators” include the results achieved in managing and enhancing intangible capital, the main driver that allows monitoring the ability of the company’s strategy to create value in a perspective of medium/longterm sustainability.
Sabaf also adopts a virtuous approach with regard to compliance with the new regulatory obligations on non-financial reporting. On 30 December 2016, Legislative Decree 254 came into force, which, in implementation of Directive 2014/95/EU on non-financial and diversity information, requires relevant public interest entities (PIEs) to communicate non-financial and diversity information starting with the 2017 financial statements. As a public-interest entity, Sabaf prepared for the third year the consolidated Disclosure of non-financial information presenting the chief policies practiced by the company, the management models, the risks, the activities performed by the Group during 2019, and the related performance indicators as pertains to the issues expressly referred to by Legislative Decree no. 254/2016 (environmental, social, personnel-related, respect for human rights, struggle against corruption) and to the extent needed to ensure understanding of the company’s activity, its trend, its results, and the impacts it produces. The Group’s commitment was also confirmed by the “Oscar di Bilancio” it garnered over the years (2004, 2013, 2017 and 2018) in the historic competition promoted and organized by Federazione Relazioni Pubbliche Italiana (FERPI), that for more than fifty years has honoured the companies most virtuous in financial reporting activities and in overseeing relations with stakeholders.
11
SABAF . 2019 ANNUAL REPORT
Key Performance Indicators in summary (KPI) ECONOMIC CAPITAL
2019
2018
2017
SALES REVENUES
€/000
155,923
150,642
150,223
EBITDA
€/000
27,033
29,959
30,955
EBIT
€/000
11,896
16,409
18,117
PRE-TAX PROFIT
€/000
9,776
20,960
17,804
NET PROFIT
€/000
9,915
15,614
14,835
WORKING CAPITAL
€/000
49,693
59,7301
50,753
INVESTED CAPITAL
€/000
176,233
172,870
140,588
SHAREHOLDERS’ EQUITY
€/000
121,105
119,346
115,055
NET FINANCIAL DEBT
€/000
55,128
53,524
25,533
%
6.8
9.5
12.9
€/000
6,060
6,071
5,386
ROCE (RETURN ON CAPITAL EMPLOYED) DIVIDENDS PAID OUT
NET PROFIT
2019
€/000
9,915
2018 20,000
15,614
Figures restated compared to those published in the 2018 Annual Report.
1
12
€/000
2017 20,000
€/000
14,835
20,000
INTRODUCTION TO THE ANNUAL REPORT
HUMAN CAPITAL
AVERAGE AGE OF PERSONNEL
LEVEL OF EDUCATION
LEAVING TURNOVER
(sum of employees age/total employees at 31.12)
(number of graduates/total employees at 31.12)
(employees no longer in office/ total employees at 31.12)
YEARS
%
2019
39.8
59.1
10.2
7.1
15.3
2018
39.7
59.6
11.1
9.1
22.3
2017 2017
39.0
57.3
13.3
10.4
19.8
%
HOURS OF TRAINING PER EMPLOYEE (hours of training/total employees at 31.12)
%
HOURS
INVESTMENTS IN TRAINING/TURNOVER
HOURS OF STRIKE FOR INTERNAL CAUSES
%
No.
No.
2019
0.25
0
1,035
63.5
36.5
2018
0.33
0
760
66.6
33.4
0.28
0
756
65.6
34.4
RECORDABLE INJURY RATE
INJURY LOST DAY RATE
2017 2017
(number of injuries x 1,000,000/ total hours worked)
TOTAL EMPLOYEES %
%
JOBS CREATED (LOST)
(days of absence x 1,000/total hours worked) No.
2019
9.91
0.17
15
2018
23.49
0.17
4
2017 2017
14.68
0.13
2 13
SABAF . 2019 ANNUAL REPORT
RELATIONAL CAPITAL
AVERAGE TURNOVER BY CUSTOMER
VALUE OF GOODS AND SERVICES OUTSOURCED €/000
(total turnover/number of customers) €/000
8,190
388
9,560
353
9,267
366 0
5,000
0
10,000
PERCENTAGE OF TURNOVER FROM NEW CUSTOMERS %
1.47 0.97
46 0
5
10
0
100
(turnover from certified suppliers/purchases) %
66
74 72
65
71
65 0
50
100
0
No.
2
3
1
4 5
100
6
2 0
50
LAWSUITS FILED AGAINST GROUP COMPANIES
NUMBER OF ANALYSTS WHO FOLLOW THE SECURITY CONTINUOUSLY
10
0
Key 14
50
TURNOVER FROM CERTIFIED SUPPLIERS
PERCENTAGE OF TOP 20 CUSTOMERS
No.
47 45
0.76
%
1,000
PERCENTAGE OF TOP 10 CUSTOMERS
(turnover from new customers/turnover) %
500
5
2019
10
2018
2017
INTRODUCTION TO THE ANNUAL REPORT
PRODUCTIVE CAPITAL
TOTAL NET INVESTMENTS
€/000 150,000 120,000
12,000
90,000
9,000
60,000
6,000
30,000
3,000
0
0
93,802
12,014
REAL INVESTMENT/TURNOVER
%
10
11,467
7.5
9.1
0
0.9
3
0.9
1.1
QUANTITIES SOLD OF LIGHT ALLOY VALVES ON TOTAL VALVES AND THERMOSTATS
QUANTITIES SOLD OF HIGH ENERGY EFFICIENCY BURNERS ON TOTAL BURNERS
100
50
8
80
40
6
60
30
4
4
20
2
2
10
0
91.7
90.1
87.8
0
23.1
Key
2
1
13,944
0
7.4
2
%
119,527
15,000
%
138,506
2
€/000
IT BUDGET (investments + current expenditure)/ TURNOVER3
%
FIXED ASSETS
21.9
2019
19.7
2018
2017
Figures restated compared to those published in the 2018 Annual Report. The indicator does not consider data relating to the C.M.I. Group, over which Sabaf acquired control on 31 July 2019.
15
SABAF . 2019 ANNUAL REPORT
ENVIRONMENTAL CAPITAL ALUMINIUM ALLOYS
MATERIALS USED (t)
BRASS
STEEL
1,000
10,000
20,000
500
5,000
10,000
0
481
789
540
0
6,476
7,831
WASTE4 (t)
NON - HAZARDOUS WASTE 10,000
250
5,000
5,000
189
0
1,631
m3x1,000
NATURAL GAS CONSUMPTION
2,434
0
2,095
6,164
2019
28,576
3,918
30,225
4,059
30,841 0
10,000
t
CO2 EMISSIONS
50,000
0.05
20,078
0.05
2017
MWh
100,000
t/€
0.05
0
10,000
20,000
0
0.05
Key
16
6,201
2018
TOT. WASTE/ECONOMIC VALUE GENERATED BY THE GROUP
17,772 18,520
4
6,008
ELECTRICITY CONSUMED
3,740
5,000
7,631
10,000
Key
0
7,861
500
0
186
21,881
HAZARDOUS WASTE
SIMILAR TO URBAN
225
0
8,070
The indicator does not include data relating to C.M.I. Polska.
0.1
2019
2018
2017
INTRODUCTION TO THE ANNUAL REPORT
INTELLECTUAL CAPITAL
2019
2018
2017
460
340
337
%
1.0
1.3
1.4
%
2.2
2.5
2.5
INVESTMENTS IN INTANGIBLE ASSETS/TURNOVER
%
0.7
0.4
0.6
VALUES OF WASTE/TURNOVER
%
0.47
0.60
0.74
%
0.14
0.09
0.09
No.
6,184
1,244
1,245
CAPITALISED INVESTMENTS IN RESEARCH AND DEVELOPMENT
HOURS DEDICATED TO THE DEVELOPMENT OF NEW PRODUCTS/HOURS WORKED HOURS DEDICATED TO PROCESS ENGINEERING/HOURS WORKED
(hours dedicated to orders for the construction of new machines for new products or to increase production capacity/total hours worked)
(production waste/turnover)
IMPACT OF QUALITY COSTS/TURNOVER
(charges and returns from customers/ turnover)
NUMBER OF SAMPLES FOR CUSTOMERS
€/000
17
SABAF . 2019 ANNUAL REPORT
Products and markets Historically, the Sabaf Group is one of the world’s leading manufacturers of components for household gas cooking appliances, with a market share of about 40% in Europe and over 10% worldwide. In recent years, through a policy of acquisitions, the Group expanded its product range and is now active in the following segments of the household appliance market:
Gas parts Hinges Electronic components The reference market is represented by manufacturers of household appliances. The range also includes products for the professional sector.
The 2018-2022 Business Plan On 13 February 2018, the BoD of Sabaf S.p.A. approved the 2018-2022 Business Plan. The underlying objective of the Plan is to undertake a renewed path of growth, both organic and through acquisitions: an acquisition policy that can also increase the product range in sectors adjacent to the current ones, taking full advantage of the potential of the Sabaf Group. As a whole, the Business Plan defines a revenue target ranging from € 250 to € 300 million, accompanied by a gross profitability (EBITDA%) of more than 20% and supported by an investment plan of up to € 230 million.
With regard to the organic component, the Plan set an annual growth target for revenue ranging from 4% to 6%, with the aim of achieving a turnover target of € 180-200 million in 2022. The Group also assesses growth opportunities through acquisitions, which, based on the objectives of the Business Plan, could generate additional revenues ranging from € 70 to € 100 million at the end of the five-year period.
GROWTH
SALES
ORGANIC
€ 200 - 230 mln by 2020
CAGR between 4% and 6% (€ 180 - 200 mln sales by 2022)
BY ACQUISITIONS
€ 250 - 300 mln by 2022
(€ 70 – 100 mln sales by 2022)
between
65% and 100%
(2022 COMPARED TO 2017) 0
of sales
200
>20%
100
ESTIMATED SALES GROWTH
300
EBITDA MARGIN
2017 2020 2022
18
INTRODUCTION TO THE ANNUAL REPORT
The product range Hinges
Gas parts
They allow movement and balancing when opening and closing the oven door, washing machine door or dishwasher door.
Valves: they regulate the flow of gas to the covered (of the oven or grill) or uncovered burners. Burners: by mixing the gas with air and burning the gases used, they produce one or more flame rings.
Electronic components
Accessories: include spark plugs, microswitches, injectors and other components to complete the range.
Electronic control boards, timers and display and power units for ovens, refrigerators, freezers, hoods and other products.
SALES BY PRODUCT FAMILY
â‚Ź/000
Valves and thermostats
2019
39,989 63,858
Burners
12,924
Accessories Professional gas parts
5,434 23,774
Hinges
9,944
Electronic components
48,463
Valves and thermostats
2018
66,953
Burners
15,422
Accessories Professional gas parts
5,331 10,436
Hinges Electronic components
4,037
Valves and thermostats
2017
52,718
Burners
68,254
Accessories Professional gas parts
15,267 5,079 8,905
Hinges
49,099
Valves and thermostats
2016
Burners
58,553
Accessories Professional gas parts Hinges
12,613 2,289 8,424 57,069
Valves and thermostats
2015
Burners Accessories Hinges
59,411 13,577 7,946
19
SABAF . 2019 ANNUAL REPORT
The industrial footprint SABAF S.P.A.
FARINGOSI HINGES S.R.L.
Valves and thermostats Standard burners Special burners
Oven hinges Hinges for whashing machines REVENUE € 11.3 MILLION
REVENUE € 94.9 MILLION
ARC S.R.L.
SABAF TURKEY
REVENUE € 5.4 MILLION
REVENUE € 22.8 MILLION
22 EMPLOYEES
126 EMPLOYEES
Professional burners
Standard burners
50 EMPLOYEES
506 EMPLOYEES
NEW
OKIDA ELEKTRONIK
CMI POLAND
Electronics for household appliances
Hinges for dishwashers REVENUE € 5 MILLION5 47 EMPLOYEES
REVENUE € 9.9 MILLION 99 EMPLOYEES
NEW
CMI ITALY
Oven hinges Hinges for dishwashers REVENUE € 11.8 MILLION5 133 EMPLOYEES
SABAF DO BRASIL LTDA Standard burners Special burners
REVENUE € 11.6 MILLION 88 EMPLOYEES
ARC HANDAN JV Professional burners
SABAF APPLIANCE COMPONENTS (KUNSHAN) CO. LTD Wok burners
REVENUE € 1.1 MILLION 8 EMPLOYEES
155.9
1,079
2019 GROUP TURNOVER
EMPLOYEES OF THE GROUP AT 31.12.2019 6
million
5 6
20
Since August 2019. Including temporary workes and trainees.
persons
INTRODUCTION TO THE ANNUAL REPORT
COUNTRIES AND CUSTOMERS7 CUSTOMERS
COUNTRIES
55
56
60
402
400
600
50 40
400
30 20
200
10 0
2019
2018
0
2019
2018
In line with the followed commercial policies, most of the active commercial relations are characterised by relations consolidated over the long term. There are 32 customers with annual sales of more than € 1 million (as in 2018). The distribution by class of turnover is as follows:
€
2019
2018
> 5,000,000
7
7
from 1,000,001 to 5,000,000
25
25
from 500,001 to 1,000,000
16
20
from 100,001 to 500,000
75
64
279
2848
402
400
< 100,000
TOTAL
Data processed considering customers with sales above € 1,000. In the last 5 years, the Sabaf Group’s share of sales in international markets (excluding Italy and Western Europe, areas where Sabaf has a consolidated presence) increased from 62.6% in 2014 to 72.1% in 2019. Figures restated compared to those published in the 2018 Annual Report.
7
8
21
SABAF . 2019 ANNUAL REPORT
Sabaf’s international development: challenges and opportunities ANALYSIS OF THE SCENARIO
PERFORMANCE DATA9
ITALY In the last ten years, the production of household appliances in Italy has been strongly reduced: some players left the sector and others relocated part of their activities to Turkey and Eastern Europe. There are still manufacturers focused mainly on the up-market or on special products, strongly dedicated to exports, which continue to show excellent results. 31,161 | 20.0%
2019
The importance of the Italian market for Sabaf is consequently lower than in the past. The majority (estimated at approximately 80%) of Sabaf’s sales in Italy are destined for household appliances exported by our customers.
31,579 | 21.0%
36,523 | 24.3%
36,365 | 27.8%
41,244 | 29.9%
2018
2017
2016
2015
WESTERN EUROPE The same trend that characterised Italy was also seen in the other Western European countries: in Western
Europe, up-market products remain high, where Sabaf is significantly increasing its share.
12,277 | 7.9%
12,337 | 8.2%
11,678 | 7.8%
8,553 | 6.5%
7,438 | 5.4%
2019
2018
2017
2016
2015
EASTERN EUROPE AND TURKEY Turkey is now the state where the largest number of household appliances are produced. In this context, the opening of a production plant in Turkey and the acquisition of Okida Elektronik (September 2018) are key elements in support of the growth strategy. Sabaf estimates that about 75% of sales in Turkey are exported by our customers (mainly in Europe); however, the Turkish domestic market is of increasing importance: the average age of the population, the number of new house-
9
22
55,059 | 35.3%
46,301 | 30.7%
2019
2018
Sales by geographical area (€/000) and percentage incidence on Group sales.
holds and the increase in income are converging indicators of a growing demand for durable goods. Contingent factors such as the currency crisis of 2018 can lead to temporary reversals of this trend in 2019. The Group’s strategy is to further develop its activities in Turkey in the coming years. The Group is also active in other Eastern European markets, where it has recently concluded new commercial agreements.
42,824 | 28.5%
2017
34,123 | 26.1%
35,125 | 25.5%
2016
2015
INTRODUCTION TO THE ANNUAL REPORT
ANALYSIS OF THE SCENARIO
PERFORMANCE DATA 9
NORTH AMERICA AND MEXICO Sabaf’s presence in North America is relatively recent, but sales and market share have been growing steadily in recent years. Future plans also include the develop17,727 | 11.4%
2019
ment of products co-designed with major customers and a more direct coverage on the market, also through a production site.
15,071 | 10.0%
12,735 | 8.5%
11,304 | 8.6%
2018
2017
2016
9,603 | 7.0%
2015
SOUTH AMERICA For future development, Sabaf can count on a consolidated production presence (a factory in Brazil has been operating since 2001). The Sabaf Group believes that the development potential of this area is still extremely interesting, considering the significant size of the market and the demographic growth trends.
The product range for the local market was recently expanded, with the production of special burners in Brazil, also to meet the specific nature of demand. Other markets of great interest to the Group are those in the Andean area.
23,451 | 15.0%
25,461 | 16.9%
22,938 | 15.3%
20,847 | 15.9%
20,815 | 15.1%
2019
2018
2017
2016
2015
MIDDLE EAST AND AFRICA Sabaf has a long-standing presence and reputation in the Middle East and Africa. The social, political and economic difficulties of the area inevitably condition the performance on these markets. 7,050 | 4.5%
12,303 | 8.2%
2019
2018
The Group also considers the Middle East and Africa among the most promising markets in the medium term, also in view of demographic trends and the growing rate of urbanisation.
13,009 | 8.6%
2017
11,698 | 8.9%
2016
16,759 | 12.1%
2015
ASIA AND OCEANIA China, with its production of more than 30 million hobs per year, is the most important market in the world. The Group, aware that it offers high quality products that are increasingly competitive compared to those supplied by local competitors, aims to establish long-term partnerships with the main Chinese hob manufacturers.
Another market with great potential is the Indian market, for which Sabaf developed a range of dedicated burners. During 2020, the construction of a production plant in India will begin. Although sales in China and India still represent a small share of Sabaf’s total business, these areas are a strategic priority for the Group.
9,198 | 5.9%
7,590 | 5.0%
10,516 | 7.0%
8,088 | 6.2%
7,019 | 5.0%
2019
2018
2017
2016
2015 23
2nd asset
SABAF . 2019 ANNUAL REPORT
Consolidated Disclosure of non-financial information (prepared pursuant to Article 4 of Legislative Decree 254/2016)
27
Methodological note
28
Letter from the Chief Executive Officer to stakeholders
30
Business model, strategic approach and sustainable creation of value
44
Corporate Governance, Risk Management and Compliance
64
Sabaf and employees
83
Sabaf and environment
89
Sabaf, the management of product quality and customer relations
91
Sabaf and supply chain management
93
Sabaf, Public Administration and Community
94
Sabaf and shareholders
98
Sabaf and lenders
98
Sabaf and competitors
100
GRI Content Index
105
Indipendent auditors’ report on the consolidated Disclosure of non-financial information
26
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Methodological note PREPARATION CRITERIA
The consolidated Disclosure of non-financial information of the Sabaf Group (hereinafter also referred to as the “Disclosure”), prepared in accordance with Art. 4 of Legislative Decree 254/2016 as amended (hereinafter also referred to as the “Decree”), contains information (policies practised, risks and related management methods, management models and performance indicators) on environmental, social, personnel, human rights and anti-corruption issues, to the extent necessary to ensure understanding of the activities carried out by the Group, its performance, results and impact. Each section also describes the main risks, generated or suffered, related to the above issues and deriving from the Group’s activities. The Sabaf Group identified the new GRI Sustainability Reporting Standards (hereinafter also referred to as “GRI Standards”) published by the Global Reporting Initiative (GRI) as the “reference standard” for fulfilling the obligations of Legislative Decree 254/2016, as the most widely recognised and internationally disseminated Guidelines. From 2019, Sabaf will report on occupational health and safety using the GRI 403 indicator: Occupational Health and Safety 2018. This Disclosure is prepared according to the “in accordance - core” reporting option. The process of defining the contents and determining the relevant aspects, also in relation to the areas envisaged by the Decree, was based on the principles envisaged by GRI Standards (materiality, stakeholder inclusiveness, sustainability context, completeness, comparability, accuracy, timeliness, clarity, reliability and balance). To help readers find the information in the document, the GRI Content Index is at the bottom of the Disclosure.
REPORTING PROCESS
On 17 December 2019, the Board of Directors of Sabaf S.p.A. approved a procedure for the reporting process of non-financial information. The procedure defines the phases, activities, timing, roles and responsibilities for the management of the reporting process and for the definition, collection and validation of data and other contents of the Disclosure. The procedure, which has been applied for the preparation of this Disclosure, envisages the involvement of the parent company’s management (“group data owners”) and the representatives of all subsidiaries (“subsidiary data owners”), who are responsible for the relevant areas and the related data and information covered by the Group’s non-financial reporting. In particular, the data and information included in this Disclosure derive from the company information system used for the management and accounting of the Group and from a non-financial reporting system (data collection package) specifically implemented to meet the requirements of Legislative Decree 254/2016 and GRI Standards. In order to ensure the reliability of the information contained in the Disclosure, directly measurable quantities have been included, limiting the use of estimates as much as possible. Calculations are based on the best information available or on sample surveys. The estimated quantities are clearly indicated as such. The economic and financial data and information are derived from the Consolidated Financial Statements at 31 December 2019.
This Disclosure was approved by the Board of Directors on 24 March 2020 and will be prepared annually. In accordance with one of the options envisaged by Art. 5 of Legislative Decree 254/2016, it constitutes a separate report from the Report on operations. Moreover, this Disclosure is subject to limited review according to ISAE 3000 Revised by the independent auditors EY S.p.A., appointed to audit the Group’s accounts.
REPORTING BOUNDARY
The reporting boundary of qualitative and quantitative data and information contained in the consolidated non-financial Disclosure of the Sabaf Group refers to the performance of the Sabaf Group (hereinafter also referred to as “Group” or “Sabaf”) for the year ended 31 December 2019 with reference to companies consolidated on a line-by-line basis. The data relating to the C.M.I. Group is consolidated from the date Sabaf acquired control (31 July 2019). Any exceptions are clearly indicated in the text at specific indicators.
27
SABAF . 2019 ANNUAL REPORT
Letter from the Chief Executive Officer to stakeholders Dear shareholders and stakeholders,
leading manufacturer of hinges for household appliances.
the approval of these 2019 financial statements comes at a
This is a very important step from a strategic point of view as it
time of such particular uncertainty around the world, due to the
further increases the Group’s product differentiation, whose de-
spread of the coronavirus, that it makes it difficult to forecast
velopment is based on three fundamental sectors: the tradition-
and project anyone’s strategies in the immediate future.
al burners and valves for gas cooking, electronics and hinges. A
The financial strength of Sabaf and its diversification into dif-
strategy that allows Sabaf to offer itself on the economic scene
ferent areas, both market and product, allow us to be reason-
as a global supplier to manufacturers of household appliances,
ably confident about the outlook for the future and to say that
combining mechanical and electronic know-how, and as a ful-
a structured group like ours is likely to be able to cope even with
ly-fledged creator and developer of innovative solutions in the
periods of emergency and collective difficulties.
flourishing world of smart appliances.
2019 closed with significant results, allowing us to reach almost 156 million revenues (155.9), up 3.5% on the same period in 2018.
Today, the Sabaf Group’s production and product development
We are pursuing with determination the implementation of our
force is made up of a dozen or so factories for a total of over
2018-2022 business plan, whose objective is both organic and
1,000 people, about half of which continue to work at Ospitalet-
through acquisitions, by means of an acquisition policy capable
to, which remains the Group’s vital centre and driving force.
of increasing the product range in sectors adjacent and synergistic with traditional ones. Despite some slowdowns in organic growth during 2019, this
The other factories, which allow for the increasingly global presence of Sabaf in strategic areas, are:
trend reversed positively at the beginning of this year. Moreover, we expect a significant increase in our portions of supply in the
• for Sabaf Turkey, Sabaf Brazil and Sabaf China domestic burners;
two-year period from 2020 to 2021 to some large customers
• for A.R.C. professional burners in Veneto;
with whom several projects Sabaf has worked on in recent years
• for Okida electronics in Turkey;
are being implemented.
• for the hinges of Faringosi Hinges in Bareggio (Milan) and the
These projects, which are structural in nature, have strength-
three plants of the C.M.I. Group, two in the province of Bologna
ened the relationship of mutual trust with the main global play-
(one of which, C.G.D., for the production of blanking presses)
ers in the household appliance sector and could be a sign of
and one in Poland.
further important developments in various areas of the world, starting with North America.
Our strength rests on the complete reliability and safety of prod-
On this basis, if we exclude the negative impacts caused by the
ucts whose development is constantly in tune with the needs of
current pandemic, we also estimate very good results for 2020.
an increasingly fragmented demand, specific in its details and
In the field of growth through acquisitions, after the acquisition
requiring rapid response times and satisfaction.
in the second half of 2018 of the Turkish company Okida Elektronik, last year Sabaf “brought back to Italy” the C.M.I. of Bo-
However, the environment around us changes, so living organ-
logna, which in 2017 had been acquired by the Chinese group
isms must also change, otherwise they are doomed to disappear.
Guandong Xingye Investment. With the acquisition of C.M.I., Sabaf has become the world’s
28
In order to further expand our penetration in an increasingly global market, we are considering possible alliances to better and
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
more closely serve China where the market for household appli-
We started as, and we continue to be, an engineering company,
ances is more than double that of the European one and whose
but we want to be open to the transformations imposed by the
needs must be addressed without hesitation and without self-ref-
market and history. We are equipped to change and govern the
erential prejudices, but only in compliance with demand and with
changes in a perspective of continuous development in which we
the guarantee of our quality standards.
want and can be protagonists, not passive spectators.
Other production outposts will have to be built according to the needs of other markets, such as North America, South America
Pietro Iotti
and India. We also work to produce increasingly innovative technological solutions. With Okida, we are able to offer electronic control systems that allow appliances to communicate with each other, with innovative solutions of the highest range. We are experiencing a period of profound economic and social change that Sabaf intends to interpret in a perspective of change shared with employees and all our stakeholders. Quality and innovation are dogmas that we intend to pursue with determination, combined with an increasing presence in global markets. This is possible thanks to the technical expertise, business relationships and trust we have been able to build with our customers and all our stakeholders.
29
SABAF . 2019 ANNUAL REPORT
Business model, strategic approach and sustainable creation of value Strategic approach and creation of value SUSTAINABLE VALUE CREATION For the Sabaf Group, respect for business ethics and socially responsible behaviour are the fundamental elements of its business model. Accordingly, the Group developed a strategy and a governance model that can guarantee sustainable growth over time. The Sabaf Group is aware that sustainable growth depends on the degree
of harmony and the sharing of values with its stakeholders: compliance with common values increases mutual trust, encourages the development of common knowledge, and therefore contributes to the containment of transaction costs and control costs; in essence, it benefits the Group and all its stakeholders.
VALUES, VISION AND MISSION Sabaf takes the Person as its original value and therefore as the fundamental criterion of every choice: this results in an entrepreneurial vision that ensures dignity and freedom to the Person within shared rules of behaviour. The centricity of the Person represents a universal value, i.e. a hyper-standard applicable without differences in time and space. In compliance with this universal value, the Sabaf Group operates by promoting cultural diversity through the criterion of equity in space and time. Such a moral commitment implies an a priori renunciation of
all choices that do not respect the physical, cultural and moral integrity of the Person, even if such decisions can be efficient, economically convenient and legally acceptable. Respecting the value of the Person means that, first of all, the dimension of the category of Being in relation to Doing and Having is the overriding consideration, and therefore implies the protection and enhancement of the “essential” manifestations expressing the fullness of the Person.
The Charter of Values of Sabaf The Charter of Values is the governance tool through which the Sabaf Group clearly explains the Company’s values, standards of behaviour and commitments in relations with its stakeholders – shareholders, employees, customers, suppliers, lenders, the Public Administration, the community and the environment. The spirit of the Charter is to reconcile the principles of economic management with ethics based on the centricity of Man, as an essential condition for the sustainable growth of business in the long term. Sustainable growth, intended as the ability to combine at the same time: • economic sustainability, i.e. operate in such a way that company choices increase the value of the company not only in the short term but above all are able to guarantee business continuity in the long term through the application of an advanced model of corporate governance; • social sustainability, i.e. promote ethical behaviour in business and reconcile the legitimate expectations of the various stakeholders in accordance with common shared values; • environmental sustainability, i.e. produce by minimising the direct and indirect environmental impacts of its production activities to preserve the natural environment for the benefit of future generations in compliance with current laws on the subject. The Charter aims to give a vision of ethics, focusing mainly on positive and just actions to be taken and not only on incorrect behaviour to be avoided. This vision is the basis for a positive use of freedom by decision-makers, where ethical references guide decisions in a manner consistent with the Group’s culture of social responsibility. The Sabaf Group aims to develop a process based on people being given a sense of responsibility within shared rules of behaviour with which to voluntarily comply. According to this approach, it is still imperative to comply absolutely with the law and regulations in force in Italy and in the other countries where the Group operates, as well as with all the internal regulations of the Group and the values declared in the Charter. The Charter of Values also represents a reference document as part of the Organisation, Management and Control Model pursuant to Legislative Decree 231/2001 and, as such, sets out a series of general rules of behaviour Group employees are required to comply with.
30
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Table summarising the Policies of the Sabaf Group with reference to the contents of Legislative Decree 254/2016 as amended1 TOPIC ENVISAGED BY LEGISLATIVE DECREE 254/2016
REFERENCE POLICIES
ENVIRONMENT
Basic principles • Raise staff awareness and train the personnel to promote environmental awareness • Minimise direct and indirect environmental impacts • Adopt a precautionary approach to environmental impacts • Encourage the development and diffusion of environmentally friendly technologies and products • Define environmental objectives and improvement programmes • Search for the right balance between economic objectives and environmental sustainability
• Charter of Values • Manual of the Integrated Management System of Health and Safety, Environment and Energy in compliance with ISO 14001, ISO 50001 and OHSAS 18001 standards
HUMAN RIGHTS
Basic principles • Adopt socially responsible behaviour • Promote respect for the fundamental human rights of workers in all countries where the Group operates • Avoid all forms of discrimination and favouritism in respect of employment and occupation • Enhance and respect diversity
• Charter of Values • Manual of the Social Responsibility Management System in compliance with SA8000 Standard
PERSONNEL
Basic principles • Encourage continuous learning, professional growth and knowledge sharing • Provide clear and transparent information on the tasks to be carried out and the position held • Encourage teamwork and the dissemination of creativity in order to allow the full expression of individual skills • Adopt criteria of merit and competence in employment relationships • Encourage the involvement and satisfaction of all the personnel
• Charter of Values • Manual of the Social Responsibility Management System in compliance with SA8000 Standard
PERSONNEL / HEALTH AND SAFETY
Basic principles • Reach working standards that guarantee health and maximum safety, also through the modernisation and continuous improvement of workplaces • Minimise any form of exposure to risks at work • Disseminate the culture of risk prevention through systematic and effective training • Promote the protection not only of oneself, but also of colleagues and third parties • Encourage the diffusion of products with security systems
• Charter of Values • Manual of the Integrated Management System of Health and Safety, Environment and Energy in compliance with ISO 14001, ISO 50001 and OHSAS 18001 standards
ANTI-CORRUPTION
Basic principles • Raise awareness among all those who work for Sabaf so that they behave correctly and transparently in the performance of their activities • Comply with local anti-corruption regulations
• Group Anti-Corruption Policy • Organisation, management and control Model pursuant to Legislative Decree 231/2001
SOCIAL / SUPPLY CHAIN
Basic principles • Ensure absolute impartiality in the choice of suppliers • Establish long-term relationships based on fairness in negotiations, integrity and contractual fairness 1 10
• Charter of Values
The Group intends to gradually extend its reference policies to the most recently acquired companies (Okida and C.M.I.). For 2019, the Group’s policies are applied in Okida and C.M.I. only to the extent that they are explained in the individual sections of this Disclosure.
31
SABAF . 2019 ANNUAL REPORT
The Charter of Values and the Anti-Corruption Policy are applied and disseminated in all Group companies.
In any case, the ISO 14001, OSHAS 18001, ISO 50001 and SA8000 standards are sources of reference and inspiration for the entire Group.
Sabaf S.p.A. adopts a Social Responsibility Management System certified and compliant with the SA8000 Standard and an integrated management system of Health and Safety, Environment and Energy certified and compliant with ISO 14001, ISO 50001 and OHSAS 18001 standards. Faringosi Hinges s.r.l. adopts a Health and Safety management system certified and compliant with OHSAS 18001 standard.
The Organisation, Management and Control Model pursuant to Legislative Decree 231/2001 is adopted by Sabaf S.p.A. and Faringosi Hinges s.r.l. and, limited to the part concerning Health and Safety at Work, by C.G.D. s.r.l..
Vision Combine business decisions and results with ethical values by going beyond family capitalism and opting for a managerial rationale oriented not only towards the creation of value but also towards the respect of values.
Mission Consolidate the technological and market leadership in the design, production and distribution of the entire range of components for household gas cooking appliances through constant attention to innovation, safety and the enhancement of internal expertise. Associate the growth of company services with social and environmental sustainability, promoting an open dialogue with the legitimate expectations of stakeholders.
32
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
BUSINESS MODEL Strategic pillars of Sabaf’s Business Model In line with its shared values and mission, Sabaf believes that there is a successful industrial and cultural model to be consolidated both through organic growth and growth through acquisitions. The distinctive features of the Sabaf model are set below.
Innovation Innovation represents one of the essential elements of Sabaf’s industrial model and one of its main strategic levers. Thanks to continuous innovation, the Group has managed to achieve excellent results, identifying technological and production solutions that are among the most advanced and effective currently available and establishing a virtuous circle of continuous improvement of processes and products, until acquiring technological competence with characteristics that are difficult to match for competitors. The know-how acquired over the years in the development and internal production of machinery, tools and presses, which is integrated synergistically with the know-how in the development and production of our products, represents the main critical success factor of the Group. With the acquisition of Okida, Sabaf has also acquired a strong electronic know-how that, together with the traditional and strong mechanical skills, can further expand the business spaces for the Group. The investments in innovation allowed the Group to become a world leader in a highly specialised sector. The production sites in Italy and abroad are designed to guarantee products according to the highest levels of technology available today and represent a cutting-edge model both for environmental protection and safety of the employees.
Eco-efficiency Sabaf’s product innovation strategy gives priority to the search for improved environmental performance. Attention to environmental issues is reflected both in innovative production processes that have a lower energy impact in the manufacture of products, and for what concerns gas parts, in the design of eco-efficient products during their daily use. Innovation efforts in this area are directed towards the development of burners that reduce fuel consumption (natural gas or other gases) and emissions (carbon dioxide and carbon monoxide, in particular) in users.
Safety Safety has always been one of the essential elements of Sabaf’s business project. Safety for Sabaf is not just a matter of complying with existing standards but a management philosophy oriented towards the continuous improvement of its performance, in order to guarantee the end user an increasingly safe product. In addition to investing in research and development of new products, the Group has chosen to play an active role in disseminating a safety culture: Sabaf has long been promoting the introduction of regulations worldwide - in the various institutional venues - that make it compulsory to adopt products with thermoelectric safety devices. Sabaf also promoted the ban on the use of zamak (zinc and aluminium alloy) for the production of gas valves for cooking, in consideration of the intrinsic danger. To date, the use of zamak is still permitted in Brazil, Mexico and other South American countries, limiting business opportunities in the valves segment for Sabaf.
Success on international markets and partnerpartnerships with multinational groups Sabaf pursues its growth through its success in international markets by trying to replicate its industrial model in emerging countries with due consideration of local culture. In line with its reference values and mission, the Group operates in emerging countries in full respect of human rights and the environment and in compliance with the United Nations Code of Conduct for Transnational Corporations. This choice is driven by the awareness that only by operating in a socially responsible way it is possible to ensure long-term development of industrial experience in emerging markets. The Group also intends to further strengthen its collaboration with customers and its position as main supplier of a complete range of products in the cooking components market, also thanks to its ability to adapt production processes to specific customer needs and provide an increasingly wide range of products.
Widening the range of components and development through acquisitions The continuous expansion of the range aims to increase customer loyalty through the widest satisfaction of market requirements. The possibility of offering a complete range of components is an additional distinguishing feature for Sabaf compared to its competitors. In order to sustain a dynamic growth path, the Group intends to extend its product range to other components for household appliances. This expansion is pursued both through internal research and through growth through acquisitions, assessing opportunities for partnerships and acquisitions of other companies. Examples of this are the acquisition of A.R.C. s.r.l. in 2016 and 100% of Okida in 2018, through which Sabaf entered the professional burners and electronic components for household appliance sectors. Finally, in 2019, Sabaf acquired control of the C.M.I. Group, an important manufacturer of hinges for ovens and dishwashers, significantly strengthening its position also in this product range where it was already present through Faringosi Hinges.
Enhancement of intangible assets and of its intellectual capital Sabaf carefully monitors and increases the value of its intangible assets: the high technical and professional competence of the people who work there, the image synonymous with quality and reliability, the reputation of a company attentive to social and environmental issues and the requirements of its stakeholders. The promotion of the idea of work and relations with stakeholders as a passion for a project based on common values in which everyone can recognise themselves symmetrically represents not only a moral commitment, but the real guarantee of enhancement of intangible assets. In this perspective, the sharing of values represents the link between the promotion of a corporate culture oriented towards social responsibility and the enhancement of its intellectual capital.
33
· Hours dedicated to the development of new products 1.0% · Hours dedicated to process · engineering 2.2%
34
BUSINESS APPROACH
INTERNATIONALISATION
DISTINCTIVE FEATURES
· Brass 481 t · Aluminium alloys 6,476 t · Steel 21,881 t · Electricity consumed 28,576 MWh
INNOVATION, ENHANCEMENT OF INTERNAL RESOURCES AND CONTINUOUS LEARNING
INTERNAL AND VERTICALISED PRODUCTION OF
PRODUCTS
Human capital Relational capital
· Production sites 10 · Real investment on turnover 7.4% · Value of property, plant and equipment 79,861,000 €
Productive capital
· Turnover from the top 10 customers 47% · No. customers (with sales over · € 1,000) 402
Environmental capital
· Employees 1,035 · Advanced education: employees with a degree or diploma 59.1% · Training hours by employee 15.3 · Investments in training on turnover 0.25%
Intellectual capital
Business model
· Net financial debt 55,128,000 € · Shareholders’ Equity 121,105,000 € · Invested capital 176,233,000 € · Market capitalisation at 31 December/ Shareholders’ Equity 1.28
Economic capital
SABAF . 2019 ANNUAL REPORT
GAS PARTS
ELECTRONIC COMPONENTS
Economic capital
HINGES
Human capital
MACHINERY, TOOLS AND PRESSES BASED ON SPECIFIC KNOW-HOW
Relational capital
COMPONENTS AND PRODUCTS
· No. of new employees 109 · Leaving turnover 9.08% · Strike hours on hours worked 0.10% · Recordable injury rate 9.91 · Injury lost day rate 0.17
· Average turnover by customer 388,000 € · Lawsuits filed against Group • companies 6 · No. of samples for customers 6,184
Productive capital
SUSTAINABILITY
· Sales revenue +3.5% · EBITDA as a percentage of sales 17.3%
· Burners sold • No. of parts 32,136,519 · High efficiency burners 23.1% · Valves and thermostats sold • No. of parts 15,651,916 · Light alloy valves and thermostats sold 91.7%
Environmental capital
QUALITY, INTERNAL AND EXTERNAL SAFETY, ECO-COMPATIBILITY
· Natural gas consumed 3,740,000 m3 · Water used 91,925 m3 · Total waste/Economic value generated by the Group 0.05 t/€ · CO2 emissions 17,772 t
Intellectual capital
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
· No. of patents 96 · Capitalised investments in research and development 460,000 €
35
SABAF . 2019 ANNUAL REPORT
GENERATED AND DISTRIBUTED ECONOMIC VALUE The analysis of the determination and distribution of economic value among stakeholders, prepared in accordance with the indications of the GRI is shown below. The table was prepared distinguishing between three levels of economic value. The generated one, the distributed one and the one retained by the
2019
2018
CHANGE
ECONOMIC VALUE GENERATED BY THE GROUP
160,095
160,054
41
Revenue
155,923
150,642
5,281
3,556
3,298
258
Financial income
638
373
265
Value adjustments
1,859
1,600
259
Bad debt provision
(509)
(421)
(88)
Exchange rate differences
(1,379)
5,384
(6,763)
Income/expenses from the sale of property, plant and equipment and intangible assets
46
28
18
Value adjustments to property, plant and equipment and intangible assets
0
(850)
850
(39)
0
(39)
140,762
137,515
3,247
Remuneration of suppliers
96,626
90,219
6,407
Remuneration of employees
37,103
34,840
2,263
Remuneration of lenders
1,339
1,206
133
Remuneration of shareholders
6,060
6,071
(11)
Remuneration of the Public Administration2
(408)
5,163
(5,571)
42
16
26
ECONOMIC VALUE RETAINED BY THE GROUP
19,333
22,539
(3,206)
Depreciations and amortisation
15,183
12,728
2,455
91
155
(64)
Use of provisions
(64)
(71)
7
Reserves
4,123
9,727
(5,604)
(thousands of Euro)
Other income
Profits/losses from equity investments ECONOMIC VALUE DISTRIBUTED BY THE GROUP
External perks
Provisions
2
36
Group. The economic value represents the overall wealth created by Sabaf, which is then distributed among the various stakeholders: suppliers (operating costs), employees, lenders, shareholders, Public Administration and community (external perks).
Includes deferred taxes.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
GOVERNANCE OF SOCIAL RESPONSIBILITY AND STAKEHOLDER ENGAGEMENT Social responsibility in business processes
To transform the values and principles of sustainable development into intervention choices and management activities, Sabaf applies a structured methodology, the key factors of which are as follows:
1
2
3 An internal control system
Sharing values, mission and sustainability strategy.
Training and
communication.
capable of monitoring risks
(including social, environmental and reputational risks) and
verifying the implementation of commitments to stakeholders.
4
5
Key Performance
A clear and complete
indicators (KPIs), which can monitor economic, social and environmental performance.
6
reporting system,
able to effectively inform
the different categories of stakeholders.
A stakeholder engagement
system, to compare with the
expectations of all stakeholders and to receive useful feedback for continuous improvement.
The precautionary approach The awareness of the social and environmental aspects that accompany the Group’s activities, together with the consideration of the importance of a cooperative approach with stakeholders and the Group’s good reputation, has led Sabaf to adopt a precautionary approach in managing the economic, social and environmental variables that it has to manage on a daily basis. To this end, the
Group analysed specifically the main risks of the different operating dimensions. Detailed information on the internal control system and on the risk management system is provided in the next paragraph “Corporate Governance, Risk Management and Compliance”.
37
SABAF . 2019 ANNUAL REPORT
Stakeholder Engagement Sabaf is committed to constantly strengthening the social value of its business activities through careful management of relations with stakeholders. The Group intends to establish an open and transparent
dialogue, encouraging opportunities for discussion in order to identify lawful expectations, increase trust in the Company, manage risks and identify new opportunities.
CUSTOMERS
COMMUNITY
EMPLOYEES
PUBLIC ADMINISTRATION
SHAREHOLDERS
COMPETITORS
ENVIRONMENT
LENDERS
INITIATIVES UNDERTAKEN
STAKEHOLDER ENGAGEMENT
Employee satisfaction survey and climate analysis Meetings with employees Meetings with trade unions
Customer Satisfaction Survey
Questionnaire Regular meetings
Questionnaire dedicated to financial analysts and investment fund managers Meetings with ethical fund managers
Competitors
Lenders
Community and Public Administration
communication tool for presenting the significant economic, social and environmental performance achieved during the year. The initiatives for involving each stakeholder that are carried out periodically are described below (generally every two or three years). The relevant issues arising from these activities are reported in the following paragraphs.
Shareholders
Suppliers
Customers
Employees
STAKEHOLDER
The identification of stakeholders is an essential starting point for defining social and environmental reporting processes. The “stakeholder map” provides a summary representation of Sabaf’s main stakeholders, identified on the basis of their business characteristics, the characteristic aspects of the market and the intensity of their relations with the latter. The Annual Report is the preferred
SUPPLIERS
Multi-stakeholder meetings Dialogue with universities
Regular dialogue
In 2019, in addition to the stakeholder engagement activities that take place on an ongoing basis, a customer satisfaction survey was carried out in Sabaf S.p.A. 38
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Sabaf complies with the Code of Conduct of APPLiA Europe Sabaf complied with the Code of Conduct of APPLiA Europe, an association of manufacturers of household appliances representing companies in the household appliances industry.
The Code of Conduct confirms the commitment of the European household appliance industry to ethical and fair behaviour. The Code aims to promote fair and sustainable standards in working conditions and environmental protection to support fair competition in global markets.
respect for environmental standards. The signatory companies also undertake to raise awareness among their suppliers of the principles of the Code of Conduct and encourage them to pursue them. They also require that the same principles be proposed to the whole supply chain through the latter.
The producers complying with the Code commit themselves voluntarily to implement decent working conditions, which include compliance with common standards regarding minimum age, working hours, hygiene and safety conditions, respect for freedom of association and collective bargaining, as well as
The Annual Report of Sabaf is also the tool through which the Group reports year by year on the practical implementation of the principles of the Code and the progress achieved, as specifically required of the companies complying with it.
39
SABAF . 2019 ANNUAL REPORT
Sabaf complies with the Global Compact In 2004, Sabaf complied formally with the Global Compact, the United Nations initiative for companies that commit to upholding and promoting the ten universally accepted principles of human rights, labour rights, environmental protection and anti-corruption. With the publication of the 2019 Annual Report, we renew our commitment to making the Global Compact and its principles an integral part of our strategy, culture and
day-to-day operations, and we also commit to explicitly declare our commitment to all employees, partners, customers and the general public. The consolidated Disclosure of non-financial information sets out in detail the actions taken by the Sabaf Group in support of the ten principles.
THE 10 PRINCIPLES OF THE GLOBAL COMPACT Human rights 1
Principle I Businesses should support and respect the protection of internationally proclaimed human rights; and Principle II make sure that they are not - even if indirectly - complicit in human rights abuses.
2
Labour 3
Principle III Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining. Principle IV The elimination of all forms of forced and compulsory labour.
5
4
Principle V The effective abolition of child labour. Principle VI The elimination of discrimination in respect of employment and occupation.
6
Environment 7
Principle VII Businesses should support a precautionary approach to environmental challenges and Principle VIII undertake initiatives to promote greater environmental responsibility; and
9
8
Principle IX encourage the development and diffusion of environmentally friendly technologies.
Fight against corruption Principle X Businesses should work against corruption in all its forms, including extortion and bribery.
40
10
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
MATERIALITY ANALYSIS The GRI Standards require that the contents of the consolidated Disclosure of non-financial information be defined on the basis of a materiality analysis. In compliance with the requests of GRI Standards, Sabaf has started since 2014 a process of identifying the (relevant) material aspects to be reported, i.e. those aspects: • of significant economic, environmental or social impact for Sabaf’s business; • that could substantially affect the assessments and decisions of stakeholders. From this perspective, materiality takes into consideration not only the point of view of the organisation but also that of stakeholders. In order to update the materiality analysis of the Group in view of the preparation of this Disclosure, a workshop was organised involving the first lines of Sabaf S.p.A. and during which: • the list of potential material aspects for the Group was shared; • the Group’s stakeholders were updated; • the relevance of the various potentially material aspects for the Group was defined.
The stakeholders involved were asked to express an evaluation (on a scale from 0 to 5) on the relevant aspects identified and inherent to their responsibilities, both from an internal perspective and from the perspective of the stakeholders concerned. It is noted that in defining material aspects, the following topics are considered preconditions for operating and are therefore considered very important for both Sabaf and its stakeholders: • creation and distribution of sustainable value over time (Economic Performance GRI 201; scope of the Decree: transversal); • transparent and effective governance system to support business (Governance structure GRI 102-18; scope of the Decree: transversal); • constant attention to compliance with the law in the performance of its activities3 (Anti-corruption GRI 205 and Environmental Compliance GRI 307; scope of the Decree: transversal).
VERY SIGNIFICANT
6 14 5 3 12
1
2 7
4
8
11
10 13
SIGNIFICANT
SIGNIFICANCE FOR STAKEHOLDERS
Materiality matrix4
9
SIGNIFICANT
VERY SIGNIFICANT
SIGNIFICANCE FOR SABAF 1. USE OF RAW MATERIALS AND MATERIALS 2. EMISSIONS INTO THE ATMOSPHERE, WASTE AND MANAGEMENT OF ENVIRONMENTAL IMPACTS 3. PROTECTION OF HUMAN AND WORKERS’ RIGHTS 4. REMUNERATION AND INCENTIVE POLICY 5. DEVELOPMENT OF RESOURCES AND SKILLS 6. HEALTH AND SAFETY OF PERSONNEL AND CONTRACTORS 7. DIVERSITY AND EQUAL OPPORTUNITIES 8. MANAGEMENT OF RELATIONS WITH SUPPLIERS, SUPPLIER ASSESSMENT AND CONTRACTUAL CONDITIONS
9. INDUSTRIAL RELATIONS 10. COMPLIANCE WITH THE COMPETITIVE SYSTEM 11. CUSTOMER SATISFACTION AND CUSTOMER SUPPORT 12. RESEARCH AND INNOVATION OF PRODUCTS AND PROCESSES ALSO WITH 12. REFERENCE TO SAFETY AND ENVIRONMENTAL PERFORMANCE 13. PARTNERSHIP WITH MULTINATIONAL GROUPS 14. PRODUCTION QUALITY AND ECO-EFFICIENCY
This includes the fight against corruption, which is an essential aspect of managing the Group’s business and therefore included in the preconditions. It is discussed in this document in the section “Corporate Governance, Risk Management and Compliance”. 4 Only the topics considered relevant by the organisation and subject matter of reporting are represented. 3
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SABAF . 2019 ANNUAL REPORT
Material aspects
RIGHTS
HUMAN
ENVIRONMENT
SCOPE OF LEGISLATIVE DECREE 254/16
ID
MATERIAL ASPECT
IMPORTANCE OF THE ASPECT FOR SABAF
LINK TO GRI STANDARDS
INTERNAL IMPACTS
1
Use of raw materials and materials
Use of materials for production, considering the maintenance of quality standards and assessing their environmental and social impact.
Materials GRI 301
Sabaf
2
Emissions into the atmosphere, waste and management of environmental impacts
Definition of monitoring and reduction activities of emissions of polluting substances into the atmosphere and of waste generated by the production processes of Sabaf.
Energy GRI 302 Emissions GRI 305 Effluents and Waste GRI 306
Sabaf
Suppliers
Protection of Human and Workers' Rights
Protection of human rights as provided for in the “Universal Declaration of Human Rights” and the principles laid down in the conventions of the International Labour Organisation.
Non-discrimination GRI 406 Supplier Social Assessment GRI 414
Sabaf
Suppliers
Remuneration and incentive policy
Definition of fixed and variable components of remuneration for employees. Incentive system based on the achievement of pre-established targets in order to pursue company targets.
Market Presence GRI 202 Training and Education GRI 404
Sabaf
Trade union org.
Development of resources and skills
Boost the Group’s expansion, through organic growth, maintaining the excellence of its economic results and preserving its financial solidity. Increase skills through training activities with the aim of guaranteeing the continuous professional growth of employees.
Employment GRI 401 Training and Education GRI 404
Sabaf
6
Health and safety of personnel and contractors
Management, in compliance with the regulations on occupational health and safety, of topics related to the health and safety of workers: training, prevention, monitoring, improvement objectives.
Occupational Health and Safety GRI 403
Sabaf
7
Diversity and equal opportunities
Commitment to ensuring equal opportunities for women and protected categories.
Diversity and Equal Opportunity GRI 405
Sabaf
8
Management of relations with suppliers, supplier assessment and contractual conditions
Sabaf’s commitment to defining a relation with the supply chain based on the principles of fairness in negotiations, integrity and contractual fairness. Sharing corporate values with suppliers. Sabaf defines minimum criteria for the creation of a lasting relationship with suppliers, based on the principles of social responsibility.
Supplier Social Assessment GRI 414
Sabaf
Suppliers
9
Industrial relations
Relations between Sabaf and the internal trade union representatives, based on the principles of transparency and mutual correctness.
Labour Management Relations GRI 402
Sabaf
Trade union org.
3
5
SOCIAL
PERSONNEL-RELATED
4
42
EXTERNAL IMPACTS*
Suppliers
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
TRANSVERSAL
SCOPE OF LEGISLATIVE DECREE 254/16
**
ID
MATERIAL ASPECT
IMPORTANCE OF THE ASPECT FOR SABAF
LINK TO GRI STANDARDS
INTERNAL IMPACTS
10
Compliance with the competitive system
Compliance with regulations and behaviour that ensure Sabaf conducts its business in a balanced and regular competitive environment.
Anti-competitive Behaviour GRI 206
Sabaf
11
Customer satisfaction and customer support
Ability to respond effectively to customer expectations, at all stages of the relationship (from design to after-sales service).
Customer Health and Safety GRI 416
Sabaf
12
Research and innovation of products and processes also with reference to safety and environmental performance
Identification of new technological and production solutions (also with a special attention to safety and environmental performance) that allow the Group to strengthen its leadership in the industrial sector to which it belongs.
Customer Health and Safety GRI 416
Sabaf
13
Partnership with multinational groups
Sabaf’s opening to strategic collaborations with the main players in the sector.
**
Sabaf
14
Production quality and eco-efficiency
Search for better product or process performance and solutions in terms of environmental impact. Designing new eco-efficient products.
Please refer to aspects 2 and 12
Sabaf
EXTERNAL IMPACTS*
Customers
Reporting is not extended to the external boundary. With regard to these aspects (not directly related to a Material Topic envisaged by the GRI Standards Guidelines), Sabaf indicates in the document the adopted management approach.
**
43
SABAF . 2019 ANNUAL REPORT
Corporate Governance, Risk Management and Compliance Corporate Governance OVERVIEW
The corporate governance model of Sabaf has always been based on a strict separation between the shareholding structure and management of the Company and of the Group. Sabaf is committed to maintaining a system of governance aligned with the recommendations and best practice and in particular with the Corporate Governance Code of Listed Companies.
On 31 January 2020, the new Corporate Governance Code, which is addressed to all listed companies and is applicable starting from 2021, was published. The substantial changes introduced by the Code concern: • sustainability: the Board of Directors is responsible for integrating sustainability objectives into the business plan, the internal control and risk management system and remuneration policies; • engagement: the chairman of the board is responsible for submitting to the board for approval, in agreement with the CEO, a policy for managing dialogue with all shareholders, ensuring that the board is adequately informed about the development and significant content of the dialogue with all shareholders;
The purpose of this section of the file is to highlight the choices made by Sabaf and the peculiarities of its governance system, revised in the light of the new features introduced by the Corporate Governance Code. Where possible, a comparison with other listed companies is also provided, using the information collected by Assonime in its document Notes and Studies “Corporate Governance in Italy: self-discipline, remuneration and compliance-or-explain”, published in January 2020 and concerning the Corporate Governance reports for the 2018 financial year of 220 listed Italian companies, available at 15 July 2019, 94% of which (i.e. 206 companies) has formally chosen to
44
• proportionality: some recommendations are addressed only to large companies (capitalisation over € 1 billion for three consecutive calendar years), specific simplifications are envisaged by concentrated ownership companies; • simplification: the Code is based on principles that define the objectives of good corporate governance, recommendations subject to the “comply or explain” rule and a neutral approach of best practices with respect to governance models has been developed to make the Code directly usable for all types of corporate model. Sabaf welcomes the new Code, fully endorses its new features and is committed to evaluating in advance any changes to its governance model that may be appropriate for the full application of the Code from the date of its entry into force.
comply with the Corporate Governance Code. The benchmark used below takes into account, where available, a panel of “non-financial” companies only. Finally, a further comparison is provided on the composition and operation of the Board of Directors, using the data provided by the 2019 Italia Board Index Observatory, published by Spencer Stuart, which analyses the characteristics and operation of the Boards of Directors of the top 100 listed Italian (industrial and financial) companies in order of capitalisation as of February 2019, as well as providing a comparison with the main European and non-European countries.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
SABAF S.p.A. 100%
100%
Sabaf do Brasil Ltda
Faringosi Hinges s.r.l.
(Brazil)
(Italy)
ARC s.r.l.
70%
100%
(Italy)
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki
(Turkey)
70% 51% 30%
Handan ARC Burners Co., Ltd (China)
C.M.I s.r.l
(Turkey)
100%
Sabaf US Corp. (USA)
100%
Sabaf Appliance Components Ltd (China)
68.5%
(Italy)
100% 97.5%
Okida Elektronik Sanayi ve Ticaret Anonim Şirketi
C.G.D s.r.l (Italy)
2.5%
C.M.I Polska Sp Zoo (Poland)
Manufacturing company Trading company
Sabaf Group companies are active in the following business segments. GAS PARTS ELECTRONIC COMPONENTS • Sabaf S.p.A., valves and burners; • Okida, electronic control boards, timers, display and • Sabaf do Brasil, burners; power units for ovens, hoods, vacuum cleaners, re• Sabaf Turkey, burners; frigerators and freezers. • Sabaf Appliance Components, burners; • ARC s.r.l. and ARC Handan, professional burners.
HINGES FOR HOUSEHOLD APPLIANCES • Faringosi Hinges; • C.M.I. Group (acquired in 2019).
45
SABAF . 2019 ANNUAL REPORT
THE GOVERNANCE STRUCTURE Sabaf adopted a traditional model of management and control, characterised by the presence of: • Shareholders’ Meetings (ordinary and extraordinary) called to pass resolutions pursuant to the laws in force and the Company’s Articles of Association; • Board of Statutory Auditors, in charge of supervising: (i) compliance with the law and Articles of Incorporation and adherence to principles of proper management in the performance of corporate activities; (ii) the adequacy of the Company’s organisational structure, internal control and risk management system and administrative/accounting system; (iii) the procedures for effective implementation of the corporate governance rules envisaged in the Corporate Governance Code; (iv) risk management; (v) the external audit of the accounts and the independence of the auditing firm; • Board of Directors, in charge of company administration and management of Company operations.
This model is supplemented, in accordance with the provisions of the Corporate Governance Code the Company complied with, by: a) the Committees set up by the Board of Directors within its members, each one with proposal and advisory functions on specific matters and without decision-making powers, such as: • Control and Risk Committee that also takes on the functions of the Related-Party Committee; • Remuneration and Nomination Committee that takes on the functions envisaged by the Remuneration Committee and integrates them with those relating to the appointment and composition of the control bodies indicated by the Code; b) the Internal Audit department in charge of checking the operation and adequacy of the internal control and risk management system. Finally, the Group’s administration and control model is completed by the presence of the Supervisory Body, set up following the adoption of the organisation, management and control model pursuant to Legislative Decree 231/2001, adopted by Sabaf since 2006.
The Governance Structure
BOARD OF STATUTORY AUDITORS
SHAREHOLDERS’ MEETING
SUPERVISORY BODY
BOARD OF DIRECTORS
REMUNERATION AND NOMINATION COMMITTEE
COMMITTEE FOR
INTERNAL AUDIT
CONTROL AND RISKS
DEPARTMENT
(ALSO RELATED-PARTY COMMITTEE)
OUTSOURCING
CHIEF EXECUTIVE OFFICER Director in charge of the Internal Control System
KEY Organisational carry-overs
46
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
BOARD OF DIRECTORS
EXECUTIVE DIRECTORS
The Board of Directors currently in office is composed of 9 members5 including: (i) 3 executive directors, (ii) 2 non-executive directors and (iii) 4 non-executive and independent directors.
OFFICE
MEMBERS
Chairman
Giuseppe Saleri
Chief Executive Officer
Pietro Iotti
Executive Director
Gianluca Beschi
5
SABAF
2019 ASSONIME AVERAGE
45%
45%
22%
29%
33%
26%
Nicla Picchi
Lead Independent Director
Director
Daniela Toscani
Director
Stefania Triva
Director
Carlo Scarpa
Director
Alessandro Potestà
Director
Claudio Bulgarelli
Executive Directors
INDEPENDENT DIRECTORS PURSUANT TO TUF AND/OR CODE
NON-EXECUTIVE DIRECTORS
Vice Chairman
Composition of the Board of Directors
Non-Executive Directors Independent Directors pursuant to TUF and/or Code
The Curriculum Vitae of the individual members are available on the Company’s website.
47
SABAF . 2019 ANNUAL REPORT
Composition of the Board of Directors
Giuseppe Saleri Founder of Sabaf, of which he acquired full ownership in 1993.
Promoter of listing on the stock exchange in 1998.
Degree in Law, Partner of Studio Picchi & Associati
where she works as a lawyer. In Sabaf since 2006, she is also Chairman of SB 231 of Sabaf S.p.A. and of the
subsidiary Faringosi-Hinges. She has been chairman of
in several industrial companies. In Sabaf since 2017, he holds the position of Chief Executive Officer.
Daniela Toscani
EXE DIR CUT I E C TO VE R
Mechanical Engineer, holds positions of increasing responsibility
I
Pietro Iotti
NT E ND OR E T EP EC D N DIR
F EXECUTIVE CHIE FFICER O
the Control and Risk Committee since 2015.
R
VIC
Nicla Picchi
E IND EPE CHA ND EN IRM TD IR AN EC TO
AN M IR A CH
Degree in business finance, she has gained many professional experiences in the field of finance and held positions of
increasing responsibility in many financial and industrial companies; she joined the BoD of Sabaf in 2018.
Gianluca Beschi Certified public accountant, at Sabaf since 1997
as Investor Relations Manager and Head of Management Control.
He has been holding the position of Director of Administration, Finance and Control since 2012.
48
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Claudio Bulgarelli Degree in Mechanical Engineering, entrepreneur, chairman of Fintel srl, joined the BoD of Sabaf in 2018.
N ON E DIR XEC EC UT TO IV R E
NT NDE PE TOR C DE IN DIRE
Carlo Scarpa He is a university professor of economics, joined the BoD of Sabaf in 2019.
INDE P E N DE DI R E C TO NT R
Stefania Triva Entrepreneur, since 2014 she has been holding the position of Chairman and CEO of Copan Italia S.p.A., she joined the BoD of Sabaf in 2018.
VE UTI EC EX OR N- ECT NO DIR
Alessandro Potestà Degree in Economics and Commerce, he held management positions in investments and Corporate Development. Today, he is Senior Portfolio Manager at Quaestio Capital Management SGR S.p.A.
49
SABAF . 2019 ANNUAL REPORT
Policy on the composition of Corporate Bodies On 26 March 2018, the Board of Directors of Sabaf S.p.A. adopted a Policy on the composition of the Corporate Bodies. This Policy sets out the Company’s guidelines on the characteristics considered functional to ensuring an optimal composition of the Corporate Bodies (Board of Directors and Board of Statutory Auditors), with the aim of guiding the names put forward by the Shareholders when renewing the Corporate Bodies, so that the benefits that can derive from a balanced composition of the Board and Board of Statutory Auditors inspired by criteria of diversity are taken into consideration.
Average age of directors
The Policy sets out the following characteristics for the composition of each of the two bodies: • Independence • Training and professional experience • Gender • Age and seniority in office • Numbers The Policy on the composition of the Corporate Bodies is published on the Company’s website and described in the Report on corporate governance and ownership structure, in compliance with the provisions of art. 123-bis, (2), (d-bis) of the Consolidated Law on Finance.
Number of meetings (2017-2019)
Overall average age:
44%
9
2017
Sabaf 61 years old vs Assonime 56.6 years old
10.3
2018
33%
Average attendance at the meetings (2017-2019)6 92%
2017
50-55
56-60
OVER 60
SABAF
50
Assonime panel including financial companies.
95%
92%
2018
90%
2019
78% of the members of the Board in office are between 50 and 60 years old; the average age is higher than the average of the Assonime sample (61 vs 56.6 years old). In 2019, the Board of Sabaf met on 9 occasions (slightly below the Assonime average), with an average attendance rate of 90%.
11
10.5
9
2019
22%
6
10.2
93%
ASSONIME AVERAGE
In general, the attendance of the Sabaf directors at the Board meetings in the last three years is greater than that of the Assonime panel. The meetings were attended by the Board of Statutory Auditors and occasionally - the managers of Sabaf, who were invited to attend and report on specific issues on the agenda.
96%
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Average size of the BoD
Average number of meetings of the BoD
12
15
10
0
USA
UK
SWEDEN
NORWEY
FINLAND
DENMARK
HOLLAND
SPAIN
FRANCE
ITALY
2
SABAF
USA
4 UK
SWEDEN
NORWEY
6 FINLAND
DENMARK
HOLLAND
SPAIN
GERMANY
FRANCE
ITALY
5
SABAF
10
9.5 Average
8 GERMANY
10.85 Average
0
Average age of non-executive directors
% of women in the BoD
50% 70
40% 33% Average
0
USA
UK
SWEDEN
NORWAY
FINLAND
DENMARK
HOLLAND
ITALY
SABAF
USA
10%
SPAIN
30% 20%
UK
SWEDEN
NORWAY
FINLAND
DENMARK
HOLLAND
10
ITALY
20
SABAF
30
FRANCE
40
GERMANY
50
GERMANY
59 Average
FRANCE
60
0
% of indipendent directors in the BoD
100% 80%
69% Average
0
SABAF
SOUTH EUROPE
NORTH EUROPE
ANGLO-SAXON COUNTRIES
USA
UK
SWEDEN
NORWAY
FINLAND
DENMARK
HOLLAND
SPAIN
FRANCE
ITALY
20%
SABAF
40%
GERMANY
60%
The comparison was carried out using the data provided by the 2019 Italia Board Index Observatory, published by Spencer Stuart, which analyses the characteristics and operation of the Boards of Directors of the top 100 listed Italian (industrial and financial) companies in order of capitalisation as of February 2019, as well as providing a comparison with the main European and non-European countries. During the financial year, the Board of Directors carried out its assessment of the size, membership (including professional competences, managerial skills and seniority) and operation of the Board of Directors and its Committees, opting for the self-assessment of individual directors, coordinated by the Lead Independent Director. The results of the assessment were generally positive and were discussed at the Board of Directors’ meeting of 17 December 2019.
Source: Spencer Stuart - Italia Board Index 2019
51
SABAF . 2019 ANNUAL REPORT
BOARD OF STATUTORY AUDITORS The Board of Statutory Auditors, appointed by the Shareholders’ Meeting on 8 May 2018 for the period 2018 to 2020, is composed of 3 members7 with an average age of 53 years old (lower than the Assonime average, 55.8 years old). All members of the Board of Statutory Auditors are between 50 and 60 years old. The Chairman of the Board of Statutory Auditors is the expression of the minority list.
OFFICE
MEMBERS
Chairman
Alessandra Tronconi
Average age of statutory auditors Overall average age: Sabaf 53 years old vs Assonime 55.8 years old
Statutory Auditor
Mauro Vivenzi
Statutory Auditor
Luisa Anselmi
100% 0%
0%
40-50
50-60
OVER 60
Number of meetings (2017-2019) 10.1
7
2017
11
2018 9
2019
11.7
Average attendance at the meetings (2017-2019)8 96% 100%
2017
96% 97%
2018
97% 100%
2019 SABAF
7 8
52
ASSONIME AVERAGE
The Curriculum Vitae of each statutory auditor is available on the Company’s website. Assonime panel including financial companies.
The Board of Statutory Auditors of Sabaf met on average 9 times in the last three years (9 meetings in 2019), a number of times slightly lower than the average number of meetings of the Assonime sample (10.9 meetings on average). The average attendance of members at meetings was 99% in the period 2017 to 2019 (100% in 2019), in line or higher than that of other listed companies of the research. In general, the commitment of the Board of Statutory Auditors of Sabaf is achieved not only by carrying out checks and attending the periodic meetings required by law, but also by involving all members in the meetings of the Board of Directors, of the Control and Risk Committee and of the Remuneration and Nomination Committee, in the half-yearly collective meetings with the Control Bodies and individual meetings with the independent auditors.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
CONTROL AND RISK COMMITTEE The Control and Risk Committee currently in office, set up within the Board, is composed of 3 members, in line with the vast majority of cases in the Assonime sample (3 members, 71% in cases). In line with the choice made by about 65% of the Assonime panel, the CRC of Sabaf is made up exclusively of independent directors. The Committee was also assigned the functions pertaining to the Related-Party Committee.
OFFICE
MEMBERS
Nicla Picchi
Chairman
Member
Daniela Toscani
Member
Carlo Scarpa
Number of meetings (2017-2019) 6.6
5
2017
In 2019, the Committee met on 7 occasions, in line with the average of the Assonime panel of 7.1 meetings. In 2019, the Committee, among other things: • evaluated, together with the Financial Reporting Officer and the auditors, the correct application of the accounting standards; • analysed the results of the risk assessment carried out at the end of 2019 and the consequent 2020 Audit Plan Proposal; • analysed the results of the Internal Audit operations carried out during the year; • examined the proposed acquisition of the company C.M.I. s.r.l.
6.6 7
2018
7 7.1
2019
SABAF
ASSONIME AVERAGE
REMUNERATION AND NOMINATION COMMITTEE The Remuneration and Nomination Committee, set up within the Board, comprises three non-executive members, the majority of them independent (in line with the choice made by 40% of the Assonime panel), with the knowledge and experience in accounting, finance and remuneration policies that is deemed adequate by the Board of Directors.
OFFICE
MEMBERS
Chairman
Daniela Toscani
Member
Stefania Triva
Member
Alessandro Potestà
Number of meetings (2017-2019) 9 4.1
10
2017 4.1
7
2018 4.5
2019 9
In the last three years, the Committee met a number of times higher than the Assonime average. In particular, during the last financial year, the Committee met six times. In 2019, the Committee, among other things: • examined the results of the 2018 short-term incentive plan and made proposals for the 2019 MBO plan; • formulated proposals for the allocation of Cluster II rights under the Long-Term Incentive Plan (LTI); • developed proposals regarding the Governance of the C.M.I. Group, acquired in July 2019 from Sabaf, and in particular in relation to the composition of the Board of Directors, the definition of their fees and the remuneration of the C.M.I. General Manager.
Assonime panel including financial companies.
6
SABAF
ASSONIME AVERAGE 53
SABAF . 2019 ANNUAL REPORT
GOVERNANCE OF SUSTAINABILITY Sabaf has always believed that social and environmental aspects are an integral part of the Group’s strategy and, as such, are the responsibility of the Board of Directors. With reference to the governance of these topics, at the meeting of the Board of Directors on 3 August 2017, which, among other things, granted powers to executive directors following the appointment of the new Chief Executive Officer, it was confirmed that the criteria for implementing Corporate Social Responsibility (“CSR”) are the responsibility of the Board itself. In order to show the commitment with regard to sustainability aspects, Sabaf has been jointly publishing its economic, social and environmental sustainability performance in its Annual Report since 2005. Since 2009, Sabaf S.p.A. has also adopted a Social Responsibility System certified according to the international standard SA8000.
Within the SA8000 Certified System, Sabaf S.p.A., in addition to having identified a Head of Social Responsibility Management System, created a Social Performance Team (SPT) made up of Representatives of the Social Responsibility Department and some Workers’ Representatives for Social Responsibility, to whom the following tasks are also assigned: • encourage a constant dialogue between the Workers and the Company Management; • identify and assess the risks related to the aspects of Ethics and Social Responsibility; • monitor the activities carried out in the workplace and check the implementation and effectiveness of the Social Responsibility System. All Sabaf employees, as part of their responsibilities and competences, are required to implement CSR every day in the performance of their activities.
Corporate Social Responsibility
DEVELOPMENT INTANGIBLE ASSETS Environmental Sustainability
Economic Sustainability
Social Sustainability
INTERDEPENDENCE
54
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
INTERNAL AUDIT AND SUPERVISORY BODY Internal Audit On 8 May 2018, the Board of Directors renewed the engagement of an independent external company that provides Internal Audit services, Protiviti s.r.l., to carry out the functions of the Internal Audit Department for the three-year period from 2018 to 2020. It then identified Emma Marcandalli, the company’s Managing Director, as Head of that department. This decision has been made because the professional resources to establish such a function are not available internally and also taking into account the greater skills and efficiency that a specialist outside firm can offer with regard to internal control given the size of Sabaf. Following the resignation of Emma Marcandalli from her position as member of the Supervisory Body and Head of Internal Audit, on 25 June 2019, the Board of Directors, upon the proposal of the Director in charge of the Internal Control and Risk Management System, subject to the favourable opinion
of the Control and Risk Committee, as well as after hearing the Board of Statutory Auditors, entrusted the Group Internal Audit Department for the period from 1 July 2019 to 31 December 2021 to PricewaterhouseCoopers Advisory S.p.A. (PwC) identifying Giuseppe Garzillo, Partner of the company, as the Head of the department. The Head of the Internal Audit department is responsible for verifying that the Internal Control and Risk Management System is working properly and is not responsible for any operational areas and remains in office for the entire term of the Board of Directors which appointed him/her. The Head of the Internal Audit department reports to the Board of Directors, which approves the Internal Audit Plan, as well as the appointment, and also defines the termination of the engagement.
Supervisory Body The Supervisory Body (in office for the three-year period 2018 to 2020) comprises Nicla Picchi, independent director and Vice Chairman of the Company (Chairman) and Giuseppe Garzillo, Head of the Internal Audit Department, appointed on 25 June 2019 following the resignation of Emma Marcandalli.
OFFICE
MEMBERS
Chairman
Nicla Picchi
Member
Giuseppe Garzillo
Also Head of Internal Audit Department. Representative of the Company that manages Internal Audit activities on an outsourcing basis.
Also a member of the Board of Directors, as independent director (Vice Chairman)
During 2019, the Supervisory Body of Sabaf met 2 times, asking the Company’s management to attend the meetings in order to carry out in-depth analysis on specific aspects.
55
SABAF . 2019 ANNUAL REPORT
INFORMATION FLOWS The administration and control model of Sabaf operates through a network of periodic and systematic information flows between the various Corporate Bodies. Each body, according to the timing and methods defined by the Articles
of Association, the Governance Model and other internal documents, reports to the functionally superior body on the activities carried out in the reference period and those planned for the following period, any observations noted and suggested actions.
Information flows within the governance structure
Every 6 months, through a Report
BOARD OF STATUTORY AUDITORS
Information on Committee meetings (at the first available meeting of the BoD) Information on activities carried out (at least once a year)
BOARD OF DIRECTORS
SUPERVISORY BODY
REMUNERATION
AND NOMINATION COMMITTEE
At each meeting of CRC
At each meeting of the SB
Information on Committee meetings (at the first available meeting of the BoD) Report on activities carried out (at least every 6 months)
CHIEF EXECUTIVE OFFICER
INTERNAL AUDIT DEPARTMENT OUTSOURCING
At each meeting of CRC
SHAREHOLDERS’ MEETING
Every 3 months, on the occasion of the BoD
At each meeting of the CRC and of the control bodies
CONTROL AND RISK
COMMITTEE
Continuously
Director in charge of the Internal Control System
At each meeting of CRC
KEY Organisational carry-overs Information flows
56
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Risk Management In the course of its business, Sabaf defines its strategic and operational objectives and identifies, assesses and manages risks that could prevent the achievement of these objectives. The risk management process includes all the material aspects identified by the Group as part of the materiality analysis carried out in accordance with the provisions of the GRI Standards.
Organisational Structure Analyses Risk Catalogue
Operational Guideline: “Process of periodic identification and assessment of Sabaf Group risks”
RISK MAP
Business Analysis
Risk Assessment Scale
RISK MANAGEMENT FRAMEWORK
In recent years, Sabaf has gradually moved closer to the concepts of risk assessment and risk management, developing a structured process of periodic identification, assessment and management of risks, defined and formalised in a Guideline of the Corporate Governance Manual.
The Guidelines define the roles and responsibilities of the risk assessment and risk management processes, indicating the subjects to be involved, the frequency of the process and the assessment scales. The most recent risk assessment activity, coordinated by the Internal Audit department and aimed at updating the risk assessment, was carried out in November 2019. The identification of risks was carried out according to a structured approach that involved the following steps: • conducting specific interviews with the Company’s front lines and the Chief Executive Officer - risk owners/process owners; • sharing of risk assessment documents drawn up after meetings with risk owners/process owners; • identification of the universe of risks considered relevant for the Company;
• identification of top risks; • prior examination of the risk assessment by the Control and Risk Committee; • approval the Board of Directors. All risks were investigated in terms of initial impact and probability, inherent risk and, taking into account existing mitigation measures, residual risk. The result of this analysis was represented within specific “heat maps” representing the risks in terms of “residual risk” and “current level of control”.
11
22
33
4 4
< € 0.2 mln
€ 0.2 - € 0.5 mln
€ 0.5 - € 1.2 mln
> € 1.2 mln
Limited damage to health / safety / environment
Moderate damage to health / safety / environment
Serious damage to health / safety / environment
Very serious damage to health / safety / environment
Reputational damage
Negligible impacts on stakeholder confidence
Moderate impacts on stakeholder confidence
Significant impacts on stakeholder confidence
Damaged stakeholder confidence
Operational damage
No impact on business processes
Low impacts on efficiency / continuity
Significant impacts on efficiency / continuity
Critical impacts on efficiency / continuity
Frequency of occurrence
Once every 3 years or more
Once every 2 years
Once a year
Several times a year
Quality indicators
Unlikely / Remote
Not very likely
Likely
Very likely
RISK MANAGEMENT LEVEL
Optimal
Adequate (with room for improvement)
To be strengthened
Nonexistent / lacking
ASSESSMENT SCALES
PROBABILITY
IMPACT
Economic-financial losses HSE
57
SABAF . 2019 ANNUAL REPORT
Compliance INTEGRATED COMPLIANCE Internal control system
CO RR D AN AU D
Corporate Governance Manual Operating guidelines Model 231
FR
Accounting Control Model
T EN ETY NM AF RO ND S VI EN TH A AL
Charter of Values
HE
UP TIO N
QUALITY
Internal Audit Department and Director in charge
Organisational Model Data Protection Quality Management System
System for the management of Social Responsibility
Training and business information
IN
Y AC IV PR
Body of procedures
TE PR LLE OP CT ER UA TY L
Integrated Management System of Health and Safety, Environment and Energy
Integrated audit activities
INFORMATION SECURITY
The risk management activity carried out by Sabaf also takes into account compliance requirements in order to achieve the company’s objectives. The internal control system is based on the following elements: • organisation of the internal control and risk management system; • procedures and mechanisms for the concrete implementation of the control principles; • continuous verification and monitoring processes carried out at various levels of the organisation, both within the company processes and through independent structures.
In particular, Sabaf prepares an integrated and risk-based Audit Plan, broken down according to specific control objectives (operational risks, compliance risks with Law 262/2005, Legislative Decree 231/2001, GDPR, security of company information systems, etc.). The execution of the interventions is assigned, in outsourcing, to a single structure, the Internal Audit, in turn responsible for reporting the results of the activities carried out to the competent control bodies.
ALL THIS TRANSLATES INTO AN INTEGRATED COMPLIANCE CULTURE AND TOOLS
58
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Integrated compliance and the Corporate Governance Manual OPERATING GUIDELINES
SELF-ASSESSMENT OF THE BoD
REGULATED SUBJECTS
Following compliance with the Corporate Governance Code for listed companies and in order to internalise the good governance practices sponsored in this document in its processes, Sabaf adopted a Corporate Governance Manual10 that regulates principles, rules and operating procedures. This Manual, adopted by Board resolution of 19 December 2006, has been updated several times over the years in order to reflect new laws and regulations in Corporate Governance, as well as best practices adopted by the Company over time. The Manual includes some operating guidelines, also approved by the Board of Directors and updated from September 2018, prepared for the purpose of the correct carrying-out of the activities pertaining to Sabaf’s management and control bodies.
MANAGEMENT, COORDINATION AND CONTROL OF GROUP SUBSIDIARIES MEANS OF COMPLIANCE WITH DISCLOSURE OBLIGATIONS TO STATUTORY AUDITORS PURSUANT TO ART. 150 OF THE TUF ASSESSMENT OF THE GROUP’S INTERNAL CONTROL SYSTEM
PROCESS OF PERIODIC IDENTIFICATION AND ASSESSMENT OF GROUP RISKS
MANAGEMENT OF SIGNIFICANT OPERATIONS IN WHICH DIRECTORS HAVE AN INTEREST
ASSIGNMENT OF PROFESSIONAL MANDATES TO THE INDEPENDENT AUDITORS
Integrated compliance and Legislative Decree 231/2001 In 2006, Sabaf S.p.A. adopted the Organisation, Management and Control Model, as suggested by Legislative Decree 231/200111, aimed at preventing the commission of specific types of offences by employees and/or collaborators in the interest or for the benefit of the Company. In the following years, the Company, under the supervision of the Supervisory Body, promptly responded to the need to adapt the Model and the control structure to the regulatory changes that had occurred from time to time.
The Company entrusts the Supervisory Body with the task of assessing the adequacy of the Model itself, i.e. its real capacity to prevent offences as well as to supervise the operation and correct observance of the adopted protocols. In 2008, the subsidiary Faringosi Hinges s.r.l. also adopted Model 231 and appointed the SB, ensuring, in line with the parent company, its proper updating and effective operation. In 2019, C.G.D. s.r.l. adopted its own Model 231, limited to the management of issues related to health and safety at work.
Activities carried out in 2019 During the period, the Body: • verified the effectiveness of the Model, both through checks carried out by Internal Audit and through conversations with personnel involved in sensitive activities; • carried out specific investigation activities regarding the occupational health and safety management processes, held periodic consultation meetings with Company management in order to analyse certain environmental and occupational health and safety matters, as well as issues subject toaudits during the years; • carried out informational and training exercises aimed at employees with respect to several protocols governed by the Model, as well as training sessions on Italian Legislative Decree no. 231/2001.
SUPERVISORY BODY
10
The latest version of the document in accordance with the provisions of the Corporate Governance Code, approved by the Board of Directors on 25 September 2018, is available on the Company website, at www.sabaf.it under the Investors - Corporate Governance section.
11
The latest version of the document, approved by the Board of Directors on 25 September 2018, is available on the Company website, at www.sabaf.it under the Investors - Corporate Governance section.
59
SABAF . 2019 ANNUAL REPORT
Integrated compliance and Anti-corruption The Sabaf Group, aware of the negative effects of corrupt practices in business management, is committed to preventing and combating the occurrence of offences in the carrying-out of its activities.
Sabaf is committed to preventing unlawful behaviour
The Anti-Corruption Poli-
by disseminating the con-
cy identifies some general
tents of its Charter of Va-
principles
lues (i.e. distributed to all
(prohibited obligations and
Group employees as well
of
behaviour
behaviour), applicable to all
Risk analysis and asses-
as to commercial agents
As further confirmation of
Recipients. Based on acti-
sment in case of violation of
who operate on behalf of
its commitment to fight
vities carried out by Sabaf
anti-corruption regulations
the Group worldwide) and
against unlawful behaviour,
and inspired by internatio-
is included in the annual
of the Organisation, Mana-
during 2018, Sabaf adopted
nal best practices, rules of
Risk Assessment process.
gement and Control Mo-
a Group Anti-Corruption
behaviour have been de-
del pursuant to Legislative
Policy. The provisions and
veloped in the following
Decree 231/2001 (adopted
guidelines set out in the
main areas assessed as
by Sabaf S.p.A. and Farin-
Policy are intended to pro-
potentially exposed to ri-
gosi-Hinges s.r.l.).
mote the highest ethical
sks of corruption: • trade relations with intermediaries and agents; • trade relations with customers, suppliers and other third parties; • relations with trade unions and political organisations; • human resource management; • management of gifts and presents, entertainment expenses, donations and sponsorships; • accounting and financial procedures and controls.
standards in all business relationships in line with national and international best practices. The Anti-Corruption Policy applies globally to Sabaf, to the Group’s subsidiaries and to all of their employees.
There were no cases of corruption in 2019.
60
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Integrated Compliance and Law 262/2005 The Group defined its own Accounting Control Model, approved for the first time by the Board of Directors on 12 February 2008, subsequently revised and updated.
Sabaf considers the Internal Control and Risk Management System for financial information an integral part of its risk management system. In this regard, Sabaf has integrated the activities relating to the management of the internal control system on financial reporting into its Audit and Compliance process since 2008.
se
as
i ve
ap
pl
ic
a
ls.
ADMINISTRATIVE AND ACCOUNTING PROCEDURES
AUDIT ACTIVITY
n t ro
CONTROL ENVIRONMENT
co
dic
a cy a n d e f fe c t
of
P e ri o
e
equ
n
Risk Assessment related to economic, equity and financial reporting.
m
o nt
d fa
tio
ss
ELEMENTS CHARACTERISING THE ACCOUNTING CONTROL MODEL
Internal certifications of completeness and correctness of information.
During 2019, a number of updates were made to the Accounting Control Model with a special attention to administrative and accounting procedures.
61
3rd asset
SABAF . 2019 ANNUAL REPORT
Sabaf and employees Risks The management of relations with the employees of the Sabaf Group cannot disregard the identification, assessment and management of potential risks. The relevant risk categories in this area are set out below. Strategic risks, which could affect the achievement of the Group’s development objectives, such as the lack of adequate skills, the loss of key resources or the difficulty of replacing them. Legal and compliance risks, related to contractual liabilities, compliance with the regulations applicable to the Group and the commitments set out in the Charter of Values, such as the correct application of labour contracts in force in the various countries in which the Group operates, health and safety regulations, compliance with the criteria of fairness and impartiality in the management of human resources. Operational risks, which may lead to malfunctions in the carrying-out of current activities, such as high turnover or conflicting industrial relations. In order to deal with these potential risks, the Group adopted certified systems for managing social responsibility (compliant with SA8000 Stand-
ard) for the parent company Sabaf S.p.A. and managing occupational health and safety (compliant with OHSAS 18001 standard) for Sabaf S.p.A. and Faringosi Hinges s.r.l., extending their principles and policies to all Group companies, in order to ensure increasingly coordinated and uniform management of aspects relating to relations with employees. In this perspective, at the end of 2018, the Group’s workforce included the position of Global Group HR Director and in 2019 the Group HSE Manager. Sabaf also implements structured policies in the following areas: • selection and recruitment of personnel; • training; • internal communication; • remuneration and incentive systems; • company welfare; • industrial relations. The combination of these systems and policies enables the Group to fully manage these risks. The following paragraphs outline, for each of these aspects, the characteristics of the “Sabaf model” and the performance achieved.
Personnel management policy THE SOCIAL RESPONSIBILITY AND HEALTH AND SAFETY MANAGEMENT SYSTEM The commitment of the Sabaf Group to social responsibility and the protection of workers’ health and safety are strategic elements for Sabaf and the achievement of labour standards that guarantee respect for human rights, health and maximum safety is a constant challenge. The Group is committed to pursuing the following objectives, which are also set out in the Charter of Values: • promote respect for the fundamental human rights of workers in all countries where the Group operates, as identified in the principles established in the SA8000 Standard, in the Global Compact and in the Code of Conduct of APPLiA Europe (European association of home appliances), relating to child labour, forced and compulsory labour, occupational health and safety, freedom of association and right to collective bargaining, discrimination, disciplinary procedures, working hours and remuneration criteria; • carry out their activities by creating a group of motivated people who can operate in a work environment that encourages and rewards fairness and respect for others; • produce profits without ever losing sight of the respect for the rights of its workers;
64
• identify and analyse potential hazards and risks in business processes, in order to make workplaces safer and more comfortable; • avoid any form of discrimination and favouritism during the recruitment phase of personnel, whose selection must be made on the basis of the applicants’ profiles meeting the company’s requirements; • value and respect diversity, avoiding any form of discrimination in career advancement on the grounds of gender, sexual orientation, age, nationality, state of health, political opinions, race and religious beliefs at all stages of the employment relationship; • adopt criteria of merit and competence in employment relationships, based also on the achievement of collective and personal objectives; • avoid all forms of harassment of workers; • enhance the contribution of human capital in decision-making processes, encouraging continuous learning, professional growth and knowledge sharing; • provide clear and transparent information on the tasks to be carried out and the position held, the performance of the Group and market developments; • establish a responsible and constructive dialogue with trade unions, fostering a climate of mutual trust in compliance with the principles of fairness and transparency, respecting their roles.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
For this reason, Sabaf S.p.A. adopted and maintains a Social Responsibility Management System that, by integrating with the other management systems operating in the company (health, safety, environment and energy and quality), constitutes an effective means for constant risk reduction. This objective is achieved through the following instruments: • maintaining full compliance with applicable laws, directives, local regulations and other signed requirements (SA8000, Global Compact, Code of Conduct of APPLiA Europe);
• the full implementation of the Charter of Values; • the prior assessment of human rights, health and safety aspects; • the development of a process based on people being given a sense of responsibility within shared rules of behaviour.
Sabaf S.p.A. and the SA8000 Standard Sabaf S.p.A. has been using a Social Responsibility Management System certified and compliant with the SA8000 Standard since March 2009.
To customers, by committing themselves within the household appliance industry to support ethical and fair behaviour, also through compliance with the Code of Conduct of APPLiA Europe.
In order that the main stakeholders can actively participate in the implementation of the Social Responsibility System, particular attention was paid to their involvement in the methods described below.
To the institutions, through the commitment to carry out its activities in order to overcome mere compliance with the law.
To Sabaf S.p.A. workers, through specific training sessions. Understanding the importance of adopting a Social Responsibility System is also facilitated by sharing information material on company electronic noticeboards, on the HR PORTAL workers’ portal, on the network and on the company website. To the trade unions, through awareness and the convinced involvement of trade union workers’ representatives is fundamental for the full implementation of the System. To suppliers, sub-suppliers and sub-contractors, through the signing of a commitment to comply with the requirements of the Standard, an integral part of contracts. Audits are also carried out on suppliers.
During 2019, no episodes of discrimination were observed at Group level. Through the process envisaged by the SA8000 Standard, with regard to Sabaf S.p.A., no transactions/activities with a high risk of recourse to child labour and forced or compulsory labour or with a high risk of violation of the right of workers to exercise their freedom of association and collective bargaining were identified.
To the community, by complying with the Global Compact, the United Nations initiative for companies that commit to upholding and promoting the ten principles: human rights, labour, environmental protection and anti-corruption. To be eligible for SA8000 compliance, Sabaf S.p.A. must comply with local, national and other applicable laws, prevailing industry standards, other requirements it complies with, and the principles of many international instruments, including the Universal Declaration of Human Rights, ILO Conventions and United Nations Conventions.
With regard to this last aspect of risks related to suppliers, the SA8000 process involves carrying out a risk analysis and providing a questionnaire for suppliers that include the issue of freedom of association and collective bargaining (for further information, refer to the paragraph “Sabaf S.p.A., the SA8000 Standard and suppliers). With regards to the other Group companies, there are no structured assessment tools.
65
SABAF . 2019 ANNUAL REPORT
The people of the Sabaf Group The Sabaf Group had 1,035 employees at 31 December 2019 compared to 760 at the end of 2018. The increase in the number of employees compared to the previous year was 275, of which 170 following the ac-
quisition of the C.M.I. Group and 96 following the inclusion of Okida in the reporting boundary of all the KPIs shown in the Disclosure.
31.12.2019
31.12.2018
31.12.2017
(no.) Sabaf S.p.A. (Ospitaletto, Brescia - Italy)
318
170
488
329
174
503
337
177
514
Faringosi Hinges s.r.l. (Bareggio, Milan - Italy)
23
21
44
22
21
43
22
21
43
A.R.C. s.r.l. (Campodarsego, Padua - Italy)
16
5
21
15
4
19
14
4
18
C.M.I. s.r.l. (Loc. Crespellano – Valsamoggia, Bologna – Italy)
33
52
85
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
C.G.D. s.r.l. (Loc. Crespellano – Valsamoggia, Bologna – Italy)
34
4
38
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
C.M.I. Polska SP ZOO (Myszkow, Poland)
18
29
47
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Sabaf do Brasil (Jundiaì, San Paolo - Brazil)
69
13
82
70
17
87
61
16
77
Sabaf Turkey (Manisa – Turkey)
84
42
126
64
36
100
56
40
96
Okida12 (Esenyurt/Istanbul – Turkey)
56
40
96
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Sabaf Appliance Components (Kunshan) Co., Ltd. (Kunshan, Jiangsu Province – China)
6
2
8
6
2
8
6
2
8
657
378
1,035
506
254
760
496
260
756
GROUP TOTAL
As regards the types of contract adopted, there are 990 employees with permanent contracts (95.7%) and 45 with fixed-term contracts (4.3%).
31.12.2019 GROUP
31.12.2018
(no.)
Permanent
621
369
990
487
247
734
473
249
722
Fixed term
36
9
45
19
7
26
23
11
34
GROUP TOTAL
657
378
1,035
506
254
760
496
260
756
31.12.2019 SABAF S.p.A.
31.12.2018
31.12.2017
(no.)
Permanent
312
167
479
326
171
497
335
177
512
Fixed term
6
3
9
3
3
6
2
0
2
31.12.2019 FARINGOSI HINGES s.r.l.
31.12.2018
31.12.2017
(no.)
Permanent
23
21
44
22
21
43
22
21
43
Fixed term
0
0
0
0
0
0
0
0
0
12
66
31.12.2017
In September 2018, Okida joined the Sabaf Group. The company was included in the reporting boundary as from 2019.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
31.12.2019 A.R.C. s.r.l.
31.12.2018
31.12.2017
(no.)
Permanent
16
5
21
15
4
19
14
4
18
Fixed term
0
0
0
0
0
0
0
0
0
31.12.2019 C.M.I. s.r.l.
31.12.2018
31.12.2017
(no.)
Permanent
30
51
81
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fixed term
3
1
4
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
31.12.2019 C.G.D. s.r.l.
31.12.2018
31.12.2017
(no.)
Permanent
33
4
37
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fixed term
1
0
1
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
31.12.2019 C.M.I. POLSKA SP ZOO
31.12.2018
31.12.2017
(no.)
Permanent
17
29
46
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fixed term
1
0
1
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
31.12.2019 SABAF DO BRASIL
31.12.2018
31.12.2017
(no.)
Permanent
65
13
78
70
17
87
58
16
74
Fixed term
4
0
4
0
0
0
3
0
3
31.12.2019 SABAF TURKEY
31.12.2018
31.12.2017
(no.)
Permanent
65
37
102
51
32
83
41
29
70
Fixed term
19
5
24
13
4
17
15
11
26
31.12.2019 OKIDA
31.12.2018
31.12.2017
(no.)
Permanent
56
40
96
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fixed term
0
0
0
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
31.12.2019 SABAF CHINA
31.12.2018
31.12.2017
(no.)
Permanent
4
2
6
3
2
5
3
2
5
Fixed term
2
0
2
3
0
3
3
0
3
67
SABAF . 2019 ANNUAL REPORT
Personnel with temporary work contract or similar and trainees 31.12.2019
31.12.2018
31.12.2017
42
57
47
2
3
1
31.12.2019
31.12.2018
31.12.2017
< 30 years old
17.2%
13.9%
16.0%
31 – 40 years old
35.1%
39.9%
40.5%
41 – 50 years old
31.8%
31.8%
30.7%
over 50 years old
15.9%
14.4%
12.8%
100.0%
100.0%
100.0%
(no.) Temporary workers Trainees
Breakdown of personnel by age
TOTAL
The low average age of Group employees (39.8 years old) confirms the strategy of hiring young workers, giving priority to training and internal growth rather than acquiring skills from outside, also in consideration of the specific nature of Sabaf’s industrial model.
The minimum age for Group personnel is 19 years old for Italy, 20 years old for Poland, 18 years old for Turkey, 16 years old for Brazil and 30 years old for China.
Breakdown of personnel by length of service 31.12.2019
31.12.2018
31.12.2017
< 5 years
37.2%
26.7%
24.5%
6 – 10 years
12.3%
12.9%
18.9%
11 – 20 years
36.6%
46.7%
45.1%
over 20 years
13.9%
13.7%
11.5%
100.0%
100.0%
100.0%
TOTAL
Sabaf is aware of the fundamental importance of having a stable and qualified workforce that is a key factor in maintaining its competitive advantage.
68
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Recruitment policy In order to attract the best resources, the recruitment policy aims to ensure equal opportunities for all candidates, avoiding any kind of discrimination. The selection procedure requires, inter alia: • the selection process to be carried out in at least two stages with two different representatives; • that at least two applicants be assessed for each position.
The assessment of the applicants is based on their skills, training, previous experience, expectations and potential, tailoring them to the specific needs of the company. All new employees of the Group are given the Charter of Values. Sabaf S.p.A. also delivers a copy of the SA8000:2014 Standard, for which the company is certified.
Breakdown by qualification 31.12.2019
31.12.2018
31.12.2017
Degree
14.9%
14.1%
12.3%
High school leaving diploma
44.2%
45.5%
45.0%
Middle school leaving certificate
39.7%
40.1%
41.5%
1.2%
0.3%
1.2%
100.0%
100.0%
100.0%
Elementary school leaving certificate TOTAL
Change in personnel in the three-year period by age group and gender 2019
2018
2017
2019
2018
2017
NO. OF EMPLOYEE TURNOVER
NO. OF EMPLOYEE HIRES < 30 years old
18
11
15
< 30 years old
9
7
9
31-40 years old
9
8
13
31-40 years old
9
13
17
41-50 years old
6
0
2
41-50 years old
8
2
1
> 50 years old
0
1
1
> 50 years old
1
4
2
TOTAL WOMEN
33
20
31
27
26
29
TOTAL WOMEN NO. OF EMPLOYEE TURNOVER
NO. OF EMPLOYEE HIRES < 30 years old
46
24
37
< 30 years old
32
34
25
31-40 years old
25
41
24
31-40 years old
19
17
24
41-50 years old
3
4
7
41-50 years old
10
6
12
> 50 years old
2
1
2
> 50 years old
6
3
9
TOTAL MEN
76
70
70
TOTAL MEN
67
60
70
TOTAL
109
90
101
TOTAL
94
86
99
69
SABAF . 2019 ANNUAL REPORT
Hire rate by geographical area, age group and gender
GROUP 2019
2018
2017
< 30 years old
4.76%
4.33%
5.77%
31-40 years old
2.38%
3.15%
5.00%
41-50 years old
1.59%
0.00%
0.77%
> 50 years old
0.00%
0.39%
0.38%
TOTAL WOMEN
8.73%
7.87%
11.92%
< 30 years old
7.00%
4.74%
7.46%
31-40 years old
3.81%
8.10%
4.84%
41-50 years old
0.46%
0.79%
1.41%
> 50 years old
0.30%
0.20%
0.40%
TOTAL MEN
11.57%
13.83%
14.11%
TOTAL
10.53%
11.84%
13.36%
HIRE RATE
HIRE RATE
ITALY (SABAF S.p.A., FARINGOSI, A.R.C.) 2019
2018
2017
HIRE RATE
2019
2018
2017
HIRE RATE
< 30 years old
2.04%
1.01%
0.00%
< 30 years old
0.00%
n.a.
n.a.
31-40 years old
0.00%
1.01%
0.00%
31-40 years old
0.00%
n.a.
n.a.
41-50 years old
0.51%
0.00%
0.00%
41-50 years old
0.00%
n.a.
n.a.
> 50 years old
0.00%
0.50%
0.50%
> 50 years old
0.00%
n.a.
n.a.
TOTAL WOMEN
2.55%
2.51%
0.50%
TOTAL WOMEN
0.00%
n.a.
n.a.
HIRE RATE
70
ITALY (C.M.I. and C.G.D.)
HIRE RATE
< 30 years old
0.84%
1.09%
0.27%
< 30 years old
0.00%
n.a.
n.a.
31-40 years old
0.84%
0.55%
1.61%
31-40 years old
2.99%
n.a.
n.a.
41-50 years old
0.00%
0.27%
0.54%
41-50 years old
0.00%
n.a.
n.a.
> 50 years old
0.56%
0.27%
0.54%
> 50 years old
0.00%
n.a.
n.a.
TOTAL MEN
2.24%
2.19%
2.95%
TOTAL MEN
2.99%
n.a.
n.a.
TOTAL
2.34%
2.30%
2.09%
TOTAL
2.99%
n.a.
n.a.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
POLAND (C.M.I. POLSKA) 2019
2018
BRAZIL (SABAF DO BRASIL)
2017
HIRE RATE
2019
2018
2017
HIRE RATE
< 30 years old
0.00%
n.a.
n.a.
< 30 years old
0.00%
5.88%
25.00%
31-40 years old
10.34%
n.a.
n.a.
31-40 years old
7.69%
5.88%
0.00%
41-50 years old
6.90%
n.a.
n.a.
41-50 years old
0.00%
0.00%
0.00%
> 50 years old
0.00%
n.a.
n.a.
> 50 years old
0.00%
0.00%
0.00%
TOTAL WOMEN
17.24%
n.a.
n.a.
TOTAL WOMEN
7.69%
11.76%
25.00%
HIRE RATE
HIRE RATE
< 30 years old
11.11%
n.a.
n.a.
< 30 years old
8.70%
2.86%
26.23%
31-40 years old
0.00%
n.a.
n.a.
31-40 years old
7.25%
38.57%
11.48%
41-50 years old
0.00%
n.a.
n.a.
41-50 years old
1.45%
1.43%
3.28%
> 50 years old
0.00%
n.a.
n.a.
> 50 years old
0.00%
0.00%
0.00%
TOTAL MEN
11.11%
n.a.
n.a.
TOTAL MEN
17.40%
42.86%
40.98%
14.89%
n.a.
n.a.
TOTAL
15.85%
36.78%
37.66%
TOTAL
TURKEY (SABAF TURKEY and OKIDA) 2019
2018
CHINA (SABAF CHINA)
2017
HIRE RATE
2019
2018
2017
HIRE RATE
< 30 years old
17.07%
22.22%
27.50%
< 30 years old
0.00%
0.00%
0,00%
31-40 years old
6.10%
13.89%
32.50%
31-40 years old
0.00%
0.00%
0.00%
41-50 years old
3.66%
0.00%
5.00%
41-50 years old
0.00%
0.00%
0.00%
> 50 years old
0.00%
0.00%
0.00%
> 50 years old
0.00%
0.00%
0.00%
26.83%
36.11%
65.00%
TOTAL WOMEN
0.00%
0.00%
0.00%
TOTAL WOMEN HIRE RATE
HIRE RATE
< 30 years old
25.00%
28.13%
35.71%
< 30 years old
0.00%
0.00%
0.00%
31-40 years old
10.71%
18.75%
19.64%
31-40 years old
0.00%
0.00%
0.00%
41-50 years old
1.43%
3.13%
5.36%
41-50 years old
0.00%
0.00%
0.00%
> 50 years old
0.00%
0.00%
0.00%
> 50 years old
0.00%
0.00%
0.00%
TOTAL MEN
37.14%
50.00%
60.71%
TOTAL MEN
0.00%
0.00%
0.00%
TOTAL
33.33%
45.00%
62.50%
TOTAL
0.00%
0.00%
0.00%
71
SABAF . 2019 ANNUAL REPORT
Turnover rate by geographical area, age group and gender
GROUP 2019
2018
2017
< 30 years old
2.38%
2.76%
3.46%
31-40 years old
2.38%
5.12%
6.54%
41-50 years old
2.12%
0.79%
0.38%
> 50 years old
0.26%
0.39%
0.00%
TOTAL WOMEN
7.14%
9.06%
10.38%
< 30 years old
4.87%
6.32%
5.04%
31-40 years old
2.89%
3.36%
4.84%
41-50 years old
1.52%
1.19%
2.42%
> 50 years old
0.91%
0.20%
1.01%
TOTAL MEN
10.19%
11.07%
13.31%
TOTAL
9.08%
10.39%
12.30%
TURNOVER RATE
TURNOVER RATE
ITALY (SABAF S.p.A., FARINGOSI, A.R.C.) 2019
2018
2017
TURNOVER RATE
2019
2018
2017
TURNOVER RATE
< 30 years old
0.51%
0.00%
0.00%
< 30 years old
0.00%
n.a.
n.a.
31-40 years old
1.53%
1.52%
0.99%
31-40 years old
0.00%
n.a.
n.a.
41-50 years old
1.53%
0.51%
0.00%
41-50 years old
0.00%
n.a.
n.a.
> 50 years old
0.51%
0.51%
0.00%
> 50 years old
0.00%
n.a.
n.a.
TOTAL WOMEN
4.08%
2.53%
0.99%
TOTAL WOMEN
0.00%
n.a.
n.a.
< 30 years old
0.56%
0.54%
0.54%
< 30 years old
1.49%
n.a.
n.a.
31-40 years old
1.40%
1.63%
2.68%
31-40 years old
0.00%
n.a.
n.a.
41-50 years old
1.96%
1.09%
1.61%
41-50 years old
0.00%
n.a.
n.a.
> 50 years old
0.84%
0.27%
1.07%
> 50 years old
1.49%
n.a.
n.a.
TOTAL MEN
4.76%
3.54%
5.90%
TOTAL MEN
2.98%
n.a.
n.a.
TOTAL
4.52%
3.19%
4.18%
TOTAL
1.63%
n.a.
n.a.
TURNOVER RATE
72
ITALY (C.M.I. and C.G.D.)
TURNOVER RATE
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
POLAND (C.M.I. POLSKA) 2019
2018
BRAZIL (SABAF DO BRASIL)
2017
2019
2018
2017
TURNOVER RATE
TURNOVER RATE < 30 years old
3.45%
n.a.
n.a.
< 30 years old
7.60%
0.00%
18.75%
31-40 years old
3.45%
n.a.
n.a.
31-40 years old
15.38%
5.88%
12.50%
41-50 years old
0.00%
n.a.
n.a.
41-50 years old
15.38%
0.00%
0.00%
> 50 years old
0.00%
n.a.
n.a.
> 50 years old
0.00%
0.00%
0.00%
TOTAL WOMEN
6.90%
n.a.
n.a.
TOTAL WOMEN
38.46%
5.88%
31.25%
TASSO DI TURNOVER
TURNOVER RATE < 30 years old
5.56%
n.a.
n.a.
< 30 years old
7.25%
17.14%
9.84%
31-40 years old
0.00%
n.a.
n.a.
31-40 years old
7.25%
7.14%
6.56%
41-50 years old
0.00%
n.a.
n.a.
41-50 years old
4.35%
2.86%
3.28%
> 50 years old
0.00%
n.a.
n.a.
> 50 years old
0.00%
0.00%
1.64%
TOTAL MEN
5.56%
n.a.
n.a.
TOTAL MEN
18.85%
27.14%
21.32%
66.38%
n.a.
n.a.
TOTAL
21.95%
22.99%
23.38%
TOTAL
TURKEY (SABAF TURKEY and OKIDA) 2019
2018
CHINA (SABAF CHINA)
2017
2019
2018
2017
TURNOVER RATE
TURNOVER RATE < 30 years old
7.32%
19.44%
15.00%
< 30 years old
0.00%
0.00%
0.00%
31-40 years old
3.66%
25.00%
32.50%
31-40 years old
0.00%
0.00%
0.00%
41-50 years old
3.66%
2.78%
2.50%
41-50 years old
0.00%
0.00%
0.00%
> 50 years old
0.00%
0.00%
0.00%
> 50 years old
0.00%
0.00%
0.00%
TOTAL WOMEN
14.64%
47.22%
50.00%
TOTAL WOMEN
0.00%
0.00%
0.00%
TURNOVER RATE
TURNOVER RATE < 30 years old
16.43%
28.13%
30.36%
< 30 years old
0.00%
0.00%
0.00%
31-40 years old
6.43%
9.38%
17.86%
31-40 years old
0.00%
0.00%
0.00%
41-50 years old
0.00%
0.00%
5.36%
41-50 years old
0.00%
0.00%
16.67%
> 50 years old
1.43%
0.00%
0.00%
> 50 years old
0.00%
0.00%
0.00%
TOTAL MEN
24.29%
37.50%
53.58%
TOTAL MEN
0.00%
0.00%
16.67%
TOTAL
20.72%
41.00%
52.09%
TOTAL
0.00%
0.00%
12.50%
In 2019, turnover was further reduced compared to 2018 and remained at satisfactory levels. In Turkey, the Group is experiencing the greatest difficulties in personnel retention, partly because Sabaf Turkey operates in an area, Manisa,
which is experiencing strong industrial development and where new employment opportunities are constantly being offered. The policies on personnel implemented have nevertheless led to a higher level of loyalty development in Turkey.
73
SABAF . 2019 ANNUAL REPORT
Personnel training Within the Sabaf Group, the professional growth of employees is supported by continuous training. The Group Human Resources Department, having consulted the relevant heads and gathered the training requirements, prepares an annual training plan on the basis of which the specific courses to be carried out are planned. 2019
2018
2017
(hours) Training for new employees, apprentices, training contracts
2,340
1,302
3,642
4,363
1,299
5,662
5,173
1,538
6,711
Technical training and information systems
2,316
117
2,433
2,121
704
2,824
776
95
871
Quality, safety, environment, energy and social responsibility
3,079
878
3,957
3,649
1,040
4,689
2,905
540
3,445
Administration and organisation
683
545
1,228
724
554
1,278
1,246
389
1,635
Foreign languages
1,234
540
1,774
1,339
420
1,759
328
152
480
Other (e.g. lean philosophy/production/office)
2,036
767
2,803
256
496
752
1,522
364
1,886
TOTAL HOURS OF TRAINING RECEIVED
11,688
4,149
15,837
12,452
4,513
16,963
11,950
3,078
15,028
979
284
1,263
7,239
1,915
9,154
4,501
1,282
5,783
12,667
4,433
17,100
19,691
6,428
26,119
16,451
4,360
20,811
Hours of training provided by internal trainers13 TOTAL
Average hours of training per capita received by category 2019
2018
2017
(hours) Blue collars
18.2
10.0
15.1
23.7
15.2
20.8
20.5
8.8
16.5
White collars and Middle Managers
16.9
15.2
16.3
29.8
24.4
27.9
36.1
22.2
31.1
Managers
11.6
3.5
10.8
16.2
51.5
18.5
28.7
50.0
30.1
TOTAL
17.8
11.0
15.3
24.8
17.5
22.3
23.9
11.9
19.8
In 2019, the total cost incurred for training activities of Group personnel was approximately € 390,000 (approximately € 497,000 in 2018). In addition, there are training costs for temporary personnel, which in 2019 were around € 28,000 (around € 134,000 in 2018).
Internal Communication With the aim of developing a dialogue and continuous involvement between the company and its collaborators, Sabaf organises meetings and sharing sessions in which the results of projects to improve quality, efficiency and productivity are presented. The HR representatives provide assistance to all Group employees on matters relating to the employment relationship.
13
74
Including training given to employees with temporary work contract.
The focus on internal communication uses advanced tools that can reach all employees, such as a dedicated portal and electronic bulletin boards. Systematic meetings in the various departments promote communication and involvement of personnel.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Diversity and equal opportunities Sabaf is constantly committed to ensuring equal opportunities for women employees, who currently represent 36.5% of the workforce (33.4% in 2018).
The Group, in accordance with the organisational and production requirements, is attentive to the family requirements of its employees. To date, most of the demands for reduced working time made by workers have been met. 31.12.2019
(no.)
31.12.2018
31.12.2017
TYPE OF CONTRACT Full-time
651
327
978
504
208
712
495
217
712
Part-time
6
51
57
2
46
48
1
43
44
657
378
1,035
506
254
760
496
260
756
TOTAL
Percentage distribution of employment by gender 31.12.2019
31.12.2018
31.12.2017
Number
657
378
1,035
506
254
760
496
260
756
%
63.5
36.5
100.0
66.6
33.4
100.0
65.6
34.4
100.0
Breakdown by category, age group and gender 31.12.2019
31.12.2018
31.12.2017
(%)
MANAGERS
WHITE COLLARS AND MIDDLE MANAGERS
BLUE COLLARS
TOTAL
< 30 years old
0
0
0
0
0
0
0
0
0
from 30 to 50 years old
1
0
1
1
0
1
1
0
1
over 50 years old
1
0
1
1
0
1
1
0
1
TOTAL
2
0
2
2
0
2
2
0
2
< 30 years old
1
2
3
2
2
4
1
2
3
from 30 to 50 years old
10
5
15
10
5
15
10
5
15
over 50 years old
2
1
3
2
1
3
2
1
3
TOTAL
13
8
21
14
8
22
13
8
21
< 30 years old
10
3
13
8
2
10
10
3
13
from 30 to 50 years old
31
22
53
35
21
56
34
21
55
over 50 years old
7
4
11
8
2
10
7
2
9
TOTAL
48
29
77
51
25
76
51
27
77
< 30 years old
10
5
15
10
4
14
12
4
16
from 30 to 50 years old
42
27
69
46
26
72
44
27
71
over 50 years old
11
5
16
11
3
14
10
3
13
TOTAL
63
37
100
67
33
100
66
34
100
The managers of all Group offices come from a geographical area close to the registered offices in which they operate, except for the production manager of Sabaf China, who has been living in China for many years.
75
SABAF . 2019 ANNUAL REPORT
Remuneration, incentive and enhancement systems All Group companies apply local national contracts, supplemented with any best deals. The employees of Sabaf S.p.A. are classified according to the provisions of the National Collective Labour Contract for the metal and engineering industry, supplemented by second-level negotiations, which include: • • • • •
contractual minimum, company welfare from National Collective Labour Agreement, productivity or personal bonuses per level, production bonus per level, fixed performance bonus (part of which includes part of the previous variable bonus) for all levels, • variable performance bonus that is the same for all levels.
During 2019, Sabaf S.p.A. launched a new corporate welfare platform (Edenred), which has been very well received by employees. Based on the use and conversion data of bonuses, Sabaf is among the 4 companies identified as best practice, out of a portfolio of 1,100 customer companies using the Edenred platform. In addition to economic incentives, the incentive system includes company agreements for access to goods or services on favourable terms for all employees, regardless of the type of contract. The Group believes that a fundamental element of the incentive system is represented by the training opportunities provided to employees, including the possibility to participate in numerous activities organised at the premises or off-premises.
Further information is provided in the notes to the consolidated financial statements.
LONG-TERM INCENTIVE
MANAGEMENT BY OBJECTIVES (MBO)
A long-term incentive plan (stock grant plan) was introduced in 2018, which envisages the free allocation of shares to parties (directors and employees) who hold or will hold key positions for Sabaf S.p.A. and its subsidiaries. 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 2018-2022 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 and of the Group.
A Group-wide incentive system linked to collective and individual objectives (MBOs) is in place, involving the Chief Executive Officer, executives with strategic responsibilities and managers. In 2019, this incentive system involved 42 employees of the Group (39 men and 3 women). Further details on the MBO mechanisms are described in the Remuneration Report.
76
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
The “Premio Produciamo Qualità (PPQ)” (literally, “We produce quality prize”) With the aim of rewarding the contribution of personnel to the achievement of company objectives, in 2016 Sabaf S.p.A. introduced an incentive system related to quality objectives (reduction of waste and rework), production efficiency and precision in carrying out projects. In 2019, improvement targets in these areas were set for 116 people involved in relevant business processes.
WHITE COLLARS
40
2
42
BLUE COLLARS
67
7
74
TOTAL
107
9
116
The initiative was very well received by the employees: in addition to being a tool for steering towards challenging objectives (458 objectives were assigned, achieved or exceeded in 52% of cases), the PPQ stimulated teamwork and favoured the sharing of short- and medium-long term development plans at all company levels.
Variable Performance Bonus (VPB) The supplementary company contract of Sabaf S.p.A. envisages a variable performance bonus for all employees, also based on quality and productivity indicators. Also in 2019, the VPB could be enjoyed in the form of company welfare.
Personnel Participation Bonus (PPB) In 2018, Sabaf S.p.A. introduced a Personnel Participation Bonus (PPB) for all its employees who, through effective participation, help to achieve the company’s objectives. This bonus was paid also in 2019 in the form of company welfare.
The forms of social security in force for all Group employees are those envisaged by the regulations in force in the various countries in which the Group operates.
77
SABAF . 2019 ANNUAL REPORT
Ratio of minimum monthly salary under collective labour agreements to minimum salary paid by Group companies14
2019 15
MINIMUM SALARY UNDER COLLECTIVE LABOUR AGREEMENT
MINIMUM SALARY PAID
MINIMUM % INCREASE
Values in euro Sabaf S.p.A.
1,617
1,617
1,630
2,044
1%
26%
Faringosi Hinges s.r.l.
1,617
A.R.C. s.r.l.
1,617
1,617
1,664
1,617
1,644
1,798
3%
11%
1,617
2%
0%
C.G.D. s.r.l.
1,498
1,795
1,533
2,063
2%
15%
C.M.I. Polska
389
389
465
465
20%
20%
Sabaf Turkey
288
288
329
329
14%
14%
Okida
288
288
288
288
0%
0%
Brazil
320
320
362
362
13%
13%
China
380
380
1,292
1,155
240%
204%
2018
MINIMUM SALARY UNDER COLLECTIVE LABOUR AGREEMENT
MINIMUM SALARY PAID
MINIMUM % INCREASE
Values in euro Sabaf S.p.A.
1,605
1,605
1,664
1,884
4%
17%
Faringosi Hinges s.r.l.
1,605
1,605
1,785
1,785
11%
11%
A.R.C. s.r.l.
1,605
1,605
1,644
1,705
2%
6%
Turkey
254
254
290
290
14%
14%
Brazil
313
313
353
353
13%
13%
China
259
259
348
1,145
34%
341%
2017
MINIMUM SALARY UNDER COLLECTIVE LABOUR AGREEMENT
MINIMUM SALARY PAID
MINIMUM % INCREASE
Values in euro Sabaf S.p.A.
1,590
1,590
1,814
2,172
14%
37%
Faringosi Hinges s.r.l.
1,590
1,590
1,771
1,771
11%
11%
A.R.C. s.r.l.
1,434
1,434
1,462
1,434
2%
0%
Turkey
308
308
352
352
14%
14%
Brazil
358
358
414
414
15%
15%
China
265
265
356
1,145
34%
332%16
The Group has procedures in place to systematically check the correct hiring and regular contribution of suppliers and contract workers.
Ratio of average salary of female personnel to average salary of male personnel
2019
2018
2017
White-collars, middle managers and managers
83%
71%
67%
Blue collars
82%
77%
74%
Values converted into euro at the annual average exchange rate. Data not available for C.M.I. s.r.l.. 16 Data modified compared to 2017 Annual Report due to a publication error. 14 15
78
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Occupational health and safety and working environment RISKS The Health & Safety risks to which Sabaf and contractors’ personnel are exposed are related to the processes at the various sites where the business is carried out. In general, the main risks to workers’ health and safety are: • risks with high associated damage (falls from a height, work in confined spaces); • the risks resulting from the presence of aluminium casting departments (burn, exposure to high temperatures). The Group is also exposed to the risk of failure to adopt measures to bring its procedures and operations into line with current health and safety regulations.
RISK MANAGEMENT The Sabaf Group formally defines the responsibilities, criteria and operating procedures for identifying and planning prevention measures to eliminate and/or mitigate risks, as part of a system that allows the level of safety and hygiene to be optimised and constantly improved through preventive actions. During 2019, the function of Group HSE Manager was established with the aim of coordinating the management of Health, Safety and Environment of all companies based on a common policy. The occupational health and safety management systems of Group companies are structured according to a risk-based approach. Prevention and reduction of risk levels are based on the following factors: • Effective training: all training courses are planned and managed by internal personnel and/or external trainers, with a propensity to teach and with strong experience in the reference sector (first aid, fire-fighting, work at height, etc.). Job-specific training courses have been designed with a focus on the simulation of real cases and actual experiences, in order to make training meetings more effective. The approach to training aims to overcome the compulsory approach to encourage the active participation of all employees.
• Cutting-edge plants: continuous investment in increasingly modern and technologically advanced machinery reduced the levels of risk related to ergonomics and manual handling of loads and improved the systems to protect against physical risks. • Organisation: the strong involvement and constant training of department heads and their awareness of obligations and responsibilities led to a clear improvement in all aspects of Health and Safety. In the Group companies based in Italy (Sabaf S.p.A., Faringosi Hinges s.r.l., A.R.C. s.r.l., C.M.I. s.r.l., C.G.D. s.r.l.), the risk assessment is carried out by the Employer through the collaboration of the Occupational Health and Safety Officer and the Company Physician, with the participation of all responsible parties (managers and representatives). The involvement of workers is envisaged, both through periodic meetings with safety representatives through the obligation to report possible additional risks. Equivalent systems, applied in accordance with applicable laws, are in place at the foreign offices. In Sabaf S.p.A., the management system for the health and safety of workers has been certified according to OHSAS 18001 since 2017; in Faringosi Hinges s.r.l. since 2012. The management systems of the other Group companies are not certified. Moreover, the increasing coordination at central level directs all companies towards a shared approach and methodology. For example, the support management system used at Sabaf S.p.A. has been gradually extended to certain subsidiaries (Faringosi Hinges, ARC, Sabaf do Brasil, Sabaf Turkey). For the recently acquired companies (Okida and the C.M.I. Group), the Group is starting the management and coordination of the related safety management systems.
79
SABAF . 2019 ANNUAL REPORT
2019
2018
2017
Hours worked
1,513,620
1,234,369
1,225,868
Near misses
39
37
76
Recordable injuries18 (absence < 6 months) - excluding fatalities
15
29
18
of which injuries while travelling to/from work19
0
2
3
High-consequence work-related injuries (absence > 6 months) - excluding fatalities
1
0
0
of which injuries while travelling to/from work
0
0
0
Deaths as a result of injuries
0
0
0
of which injuries while travelling to/from work
0
0
0
260
210
159
Total injuries - including fatalities
16
29
18
of which injuries while travelling to/from work
0
2
3
Recordable injury rate
9.91
23.49
14.68
High-consequence injury rate
0.66
0.00
0.00
Fatality rate as a result of injuries
0.00
0.00
0.00
Total injury rate
10.57
23.49
14.68
0.17
0.17
0.13
NUMBER AND DURATION OF INJURIES - GROUP17
Days lost due to injury
INJURY RATE - Number of injuries x 1,000,000/hours worked
INJURY LOST DAY RATE - Days’ absence x 1,000/hours worked Rate based on recordable and high-consequence injuries
During 2019, there was a serious injury at Sabaf Turkey where an employee lost his sight in one eye as a result of contact with a molten metal splash. After this event, prevention and protection measures were further strengthened to prevent the occurrence of similar accidents at any of the Group’s plants. Lastly, with regard to outside workers, in 2019, there was only one injury at Group level that did not have high-consequences, with an injury rate of 11.64.
17 18
19
80
In general, the injury rate improved compared to 2018. No cases of occupational disease were reported at Group level in 2019. In compliance with the laws in force, Group companies prepared and implemented health supervisory plans for employees, with health inspections aimed at the specific risks of the work activities carried out.
Please note that the 2018 and 2017 data was calculated according to the requirements of the 2016 version of the GRI Standard on Health and Safety. Recordable injury includes any occupational injury, including fatal injury, that occurs to a person during or as a result of work, resulting in absence from work for less than 6 months, alternative activities or medical treatment. Only if transport has been organised by the organisation and the transfers have taken place within working hours.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Sabaf, a health-promoting workplace At the beginning of 2016, Sabaf S.p.A. joined the WHP (Workplace Health Promotion) programme, committing itself to implementing good practices in the field of workplace health promotion. The company is committed not only to implementing all measures to prevent accidents and occupational diseases but also to offering its workers opportunities to improve their health, reducing general risk factors and in particular those most involved in the genesis of chronic diseases.
• • • •
improving work organisation and the working environment; encouraging personnel to participate in healthy activities; promoting healthy choices; encouraging personal growth.
Workplace health promotion is the result of the combined efforts of employers, workers and the company. The following factors contribute to this promotion:
The WHP Programme envisages the development of activities (good practices) in 6 thematic areas: food, fight against smoking, fitness training, safe and sustainable mobility, fight against addictions, wellbeing/work-life balance.
The central idea is simple: Sabaf aims to build, through a participatory process, a context that encourages the adoption of positive behaviour and choices for health.
Use of dangerous substances Only materials that fully comply with the requirements of Directive 2002/95/EC (RoHS Directive) which tends to limit the use of hazardous substances such as lead, mercury, cadmium and hexavalent chromium are used for production.
Industrial relations Sabaf complies with the labour laws of the various countries and the conventions of International Labour Organisation (ILO) on Workers’ Rights (freedom of association and collective bargaining, consultation, right to strike, etc.), systematically promoting dialogue between the parties and seeking an adequate level of agreement and sharing of company strategies by the personnel. In case of organisational changes, with regard to the minimum notice period, the Group complies with the provisions of the law and the reference contracts of the various countries. In January 2018, the second level company agreement of Sabaf S.p.A. was renewed, valid until June 2021. The key points of this agreement are set below: • the sharing between the company and trade unions and Unitary Union Representative Body of priorities on which to channel resources and energy in the coming years (producing quality, creating and maintaining efficiency, becoming more flexible); • sharing objectives also through the responsible involvement of personnel;
20
• maintaining fair and transparent industrial relations while respecting individual roles; • the establishment of working groups with the aim of improving the involvement of personnel at all levels; • the continuation of the payment of a variable part of remuneration, the payment of which is related to measurable and verifiable quality and efficiency indicators; data on which dissemination and transparency will be maintained; • the possibility of converting all or part of the variable performance bonus (VPB) into welfare. The internal trade union representatives present in Sabaf S.p.A. are FIOM, FIM and UILM and in Faringosi Hinges s.r.l. FIM. During the year, regular meetings between Management and the Unitary Union Representative Body took place. In Group companies, 125 employees, or 14.5% of the total, were registered at December 2019 (120 employees, or 15.8%, were registered in 2018)20. Hours of participation in trade union activities during 2019 amounted to 0.36% of the hours worked.
The data does not include the C.M.I. Group, over which Sabaf acquired control on 31 July 2019.
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SABAF . 2019 ANNUAL REPORT
Participation in trade union activities 2019
BENCHMARK 2 1
MEETING 2,373
No. of hours Percentage over hours worked
0.16
No. of hours per capita
2.3
LEAVE FOR TRADE UNION DUTIES No. of hours
1,579
Percentage over hours worked
0.10 1.5
No. of hours per capita STRIKE No. of hours
1,459
Percentage over hours worked
0.10 1.4
No. of hours per capita TOTAL No. of hours
5,410
Percentage over hours worked
0.36 5.2
No. of hours per capita
In 2019, a total of 12 hours of strike were called out in Sabaf S.p.A. in connection with national and provincial problems.
Since May 2019, Sabaf S.p.A. has had limited use of the solidarity contract in the face of a marked drop in production levels.
Disciplinary measures and disputes The Group makes use of all the instruments provided for in the contract for compliance with the company rules and social life. At 31 December 2019, 8 disputes were pending (all with former employees), 1 of which was started in 2019.
21
82
3.3
FEDERMECCANICA, L’industria metalmeccanica in cifre (June 2019) – Ore pro–capite di assenza dal lavoro (2017), http://www.federmeccanica.it
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Sabaf and environment Risks Environmental issues are also managed through a risk-based approach, in line with the UNI EN ISO 14001:2015 standard. Risks of external context (environmental sustainability), concerning the protection of the environment and the territory, through the reduction of environmental impacts and the containment of the use of natural and energy resources. These impacts are considered from the product design stage, through the different stages of its implementation and from a perspective that considers the whole life cycle of the product.
Strategic risks, including collaboration with strategic service providers with potential environmental risk (waste collection, cleaning services, maintenances). Legal and compliance risks, related to compliance with law requirements (authorisations and compliance obligations) and requests of local institutions. The following paragraph describes how these risks are managed.
Health and safety, environmental and energy policy PROGRAMME AND OBJECTIVES The Group is committed to the following objectives: • the prevention of pollution and rationalisation of the use of energy through the continuous improvement of its processes and products; • the efficiency in the use of natural and energy resources during production, with a special reference to water and energy consumption; • the reduction of the quantity of waste produced and the improvement of its quality in terms of hazardousness and recoverability. Sabaf S.p.A. adopted and maintains an Integrated Management System of Health and Safety, Environment and Energy (EHS&En) that, by integrating with the other Management Systems operating within the company, is an effective means of pursuing a constant reduction in risks, environmental impacts and energy consumption through the following instruments: • the prior assessment of EHS&En aspects in all company processes, with particular focus on design, production processes and purchases; • maintaining full compliance with current law requirements, proactively using them as elements of continuous process monitoring; • a training and information system involving all employees and collaborators.
Since 2003, the Environmental Management System of the Ospitaletto production site (which covers approximately 50% of the Group’s total production) has been certified in compliance with ISO 14001. In 2015, the Energy Management System implemented at the premises of Ospitaletto was certified in compliance with the ISO 50001 standard. In 2008, Sabaf S.p.A. obtained the Integrated Environmental Authorisation (IPPC) from the Lombardy Region pursuant to Legislative Decree no. 59 of 18 February 2005. With regard to the recently acquired companies (Okida and C.M.I. Group), environmental issues are currently managed autonomously by the representatives of the individual companies, in compliance with the local regulations in force.
Dialogue with environmental associations and institutions The Group has long promoted the dissemination of information about the lower environmental impact of using gas in cooking instead of electricity: in fact, the use of combustible gas for heat production allows higher efficiency than those obtainable with electric cooking appliances. Moreover,
cooking is increasingly characterised, all over the world, by the demand for high power and many cooking points to prepare meals quickly. Electrically powered hobs cause peak energy consumption to increase, typically around meal times, further increasing the demand for electricity. 83
SABAF . 2019 ANNUAL REPORT
Process innovation and environmental sustainability METAL WASHING
HIGH EFFICIENCY BURNERS
In the production process of valves, it is essential to wash metals in several stages. Since 2013, Sabaf S.p.A. has been using a washing system based on a modified alcohol, a solvent that is redistillable (and therefore recyclable) due to its properties. The environmental impact and operating costs of this solvent have been substantially eliminated, as well as the emissions and production of special waste. This efficient and sustainable technology has also been used since 2016 at the Sabaf do Brasil site and since 2018 at the Sabaf Turkey site.
For many years, the Sabaf Group has been at the forefront in offering burners that are characterised by yields higher than standard burners. In the range of standard single ring flame sizes, since the beginning of 2000 Sabaf has introduced four series of burners (Series III, AE, AEO and HE) to the market, all of which guarantee high energy efficiency, with an efficiency of up to 68%. The DCC series of special burners was introduced in the range of special burners: they are characterised by an energy efficiency of over 60%, the highest available on the market today for multiple flame ring burners. Moreover, DCC burners with a brass flame-spreader ring and efficiency of more than 65% were produced specifically for the Chinese market, the top of what is currently available on that market. High efficiency burners represent more than 23% of the total burners produced.
LIGHT ALLOY VALVES The production of aluminium alloy valves has several advantages compared to the production of brass valves: elimination of the hot moulding phase of brass, lower lead content in the product, lower weight and consequent reduction in consumption for packaging and transport. In 2019, the process of replacing brass valves with light alloy valves continued, representing almost 92% of the valves produced.  
Environmental impact MATERIALS USED AND RECYCLABILITY OF PRODUCTS Sabaf products can be easily recycled because they are made almost entirely of brass, aluminium alloys, copper and steel. MATERIALS USED
COMMODITIES
PACKAGING MATERIALS
2019 CONSUMPTION (t)
2017 CONSUMPTION (t)
Brass
481
789
540
Aluminium alloys
6,476
7,831
8,070
Zamak
11
33
91
Steel
21,881
7,861
7,631
Cast Iron
142
137
39
Enamel
193
189
189
Brass
1
-
-
Cardboard
397
454
482
Plastic
136
140
143
Wood
479
503
521
80% of brass and about 50% of aluminium alloys used are produced by scrap recycling; the remaining 50% of aluminium alloys and about 90% of steel are produced from ore. 70% of the cardboard and about 100% of the plastic comes from recycling. The strong increase in steel consumption is due to the inclusion in the scope of consolidation of C.M.I., which produces hinges for ovens and dishwashers made almost entirely of steel. The lower consumption of brass is linked to the gradual replacement of brass valves with aluminium alloy valves. Sabaf products fully comply with the requirements of Directive 2002/95/ EC (RoHS Directive) which tends to limit the use of hazardous substances such as lead in the production of electrical and electronic equipment.
84
2018 CONSUMPTION (t)
Moreover, Sabaf products fully comply with the requirements of Directive 2000/53/EC (End of Life Vehicles), i.e. the heavy metal content (lead, mercury, cadmium, hexavalent chromium) is below the limits imposed by the Directive. With regard to the REACH Regulation (Regulation no. 1907/2006 of 18/12/2006), Sabaf is a downstream user of substances and preparations. The products supplied by Sabaf are classified as articles that do not give rise to the intentional emission of substances during normal use, therefore there is no registration of the substances contained in them. Sabaf involved the suppliers to ensure that they fully comply with REACH Regulation and to obtain confirmation that they meet their obligations to pre-register and register the substances or preparations they use.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
ENERGY SOURCES22 ELECTRICITY from non-renewable sources
2019 CONSUMPTION (MWh)
2018 CONSUMPTION (MWh)
2017 CONSUMPTION (MWh)
Total
28,526
30,225
30,841
ELECTRICITY from renewable sources
2019 CONSUMPTION (MWh)
2018 CONSUMPTION (MWh)
2017 CONSUMPTION (MWh)
Total
50
-
-
NATURAL GAS
2019 CONSUMPTION (m 3 X 1,000)
2018 CONSUMPTION (m 3 X 1,000)
2017 CONSUMPTION (m 3 X 1,000)
Total
3,740
3,918
4,059
DIESEL OIL
2019 CONSUMPTION (l X 1,000)
2018 CONSUMPTION (l X 1,000)
2017 CONSUMPTION (l X 1,000)
Total
51
21
5.5
PETROL
2019 CONSUMPTION (l X 1,000)
2018 CONSUMPTION (l X 1,000)
2017 CONSUMPTION (l X 1,000)
Total
10
-
-
LPG
2019 CONSUMPTION (l X 1,000)
2018 CONSUMPTION (l X 1,000)
2017 CONSUMPTION (l X 1,000)
Total
0.09
-
-
TOTAL CONSUMPTION
2019 CONSUMPTION (GJ)
2018 CONSUMPTION (GJ)
2017 CONSUMPTION (GJ)
Total
238,887
249,866
272,329
The main sources used are: • electricity, for all the equipment with electric power supply present, whether functional or not to the production process, which covers about 40% of the total energy requirement; • natural gas, related to the operation of both production plants (foundry furnaces, washing burners, enamel kilns) and service plants (heating), which covers about 60% of total energy requirements.
Sabaf S.p.A., Sabaf do Brasil and Sabaf Turkey use natural gas as an energy source for the casting of aluminium and for the firing of enamelled lids. The production of other Group companies does not use methane as an energy source. The progressive reduction in energy consumption reflects the constant interventions aimed at improving the energy efficiency of the plants (research and repair of leak detection and repair and optimisation of process management of compressed air production; installation of a new technology for the company’s wastewater management process). Moreover, the trend in consumption is naturally correlated to production levels.
INDICATOR: ENERGY INTENSITY ENERGY INTENSITY KWh on turnover
2019 CONSUMPTION
2018 CONSUMPTION
2017 CONSUMPTION
0.426
0.460
0.489
During 2019, Sabaf S.p.A. and Faringosi Hinges s.r.l. carried out an energy audit, aimed at obtaining an in-depth knowledge of the energy consumption profile of their activities and identifying and quantifying energy saving opportunities..
22
The factors used to calculate 2017 consumption were published by the Department for Business, Energy & Industrial Strategy (BEIS) in 2015. The updated factors published by the Department for Environment, Food and Rural Affairs (DEFRA) in 2018 were used for 2018 consumption. The updated factors published by the Department for Environment, Food and Rural Affairs (DEFRA) in 2019 were used for 2019 consumption. Following the completion of the data collection system, the consumption of diesel oil for 2018 also includes the consumption of the company fleet owned by the Group and the consumption of diesel oil relating to Sabaf S.p.A. In 2017, only the consumption of diesel oil of ARC s.r.l. was considered.
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SABAF . 2019 ANNUAL REPORT
WATER WATER CONSUMPTION ( m3)
2019
2018
2017
- from municipal water supply
56,409
110,655
81,472
of which freshwater
56,409
110,665
81,472
of which other water
0
0
0
- from well
35,516
29,185
31,329
of which freshwater
35,516
29,185
31,329
of which other water
0
0
0
91,925
139,840
112,801
TOTAL
All the water used in the production processes by Group companies is destined for disposal or internal recycling for reuse in company processes: as a consequence, there is no industrial waste water. The water used in the die-casting and enamelling processes at the factory of Ospitaletto, at the end of the production processes, is treated in concentration plants that have significantly reduced the quantities of water required and waste produced. During 2019, a concentration plant was also started up at the Brazilian production site, which allowed a reduction in consumption.
The maintenance of the cooling system at Sabaf Turkey also made a significant contribution to the reduction in consumption in 2019. At the Ospitaletto factory, there is a plant for the collection of rainwater intended for use in industrial activities that allows to reduce the withdrawal from the well. Currently, the volume of rainwater collected is not reported.
WASTE Trimmings and waste from the production process are identified and collected separately for recycling or disposal. The risers deriving from
aluminium die-casting are intended for direct reuse. The waste, broken down by type and method of disposal, is summarised below23.
2019 (t)
% INCIDENCE
Similar to urban
225
2.8
Total hazardous
1,631
20.3
92
1.2
1
0.0
- incineration
746
9.3
- other
733
9.1
- temporary deposit and/or past year storage
59
0.7
Total non-hazardous
6,164
76.9
- reuse
2,370
29.6
- recycling
747
9.3
- recovery
111
1.4
- incineration
1,359
17.0
- other
870
10.8
- temporary deposit and/or past year storage
707
8.8
8,020
100.0
TYPE OF WASTE AND METHOD OF DISPOSAL24
- reuse - recycling
TOTAL WASTE
Economic value generated by the Group (€/000) Tot. waste/Generated economic value (t/€)
0.05
Tot. hazardous waste/Generated economic value (t/€)
0.01
23 24
86
160,095
Following a completion of the data collection system, the disposal methods for 2019 present a more detailed classification. Data does not include C.M.I. Polska. The company undertakes to report the data for the next financial year.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
2018 (t)
% INCIDENCE
2017 (t)
% INCIDENCE
186
2.2
189
2.2
Non-hazardous (disposal)
1,722
20.0
1,810
21.3
Non-hazardous (recycling)
4,286
49.6
4,391
51.8
Total non-hazardous
6,008
69.6
6,201
73.1
Hazardous (disposal)
992
11.5
952
11.2
Hazardous (recycling)
1,442
16.7
1,143
13.5
Total hazardous
2,434
28.2
2,095
24.7
TOTAL
8,628
100.0
8,485
100.0
TYPE OF WASTE AND METHOD OF DISPOSAL Similar to urban
160,054
155,408
Tot. waste/Generated economic value (t/€)
0.05
0.05
Tot. hazardous waste/Generated economic value (t/€)
0.02
0.01
Economic value generated by the Group (€/000)
During 2019, the incidence of waste on the economic value generated by the Group remained in line with 2018. The company’s commitment focused on reducing the production of hazardous special waste, investing in the search for raw materials and substances, at the input stage, already not hazardous originally. During 2019, at the Ospitaletto factory, the wastewater management plant for the enamelling process of the covers was replaced. In detail, the previous evaporator plant, which generated a liquid waste with an annual volume of about 500 tons and a high energy consumption, has been replaced by a chemical-physical treatment plant, which generates a solid waste of about 10 tons, almost eliminating energy consumption.
Moreover, in 2019, a plant for the management of wastewater from the process of enamelling covers was installed at the Brazilian factory. Until then, the waste generated was collected, stored and sent for disposal as waste. Following the positioning of the new plant for the reuse of process water for general use, the volume of liquid waste has been halved, also allowing a reduction in water consumption. All Group companies have separate waste collection. No significant spills occurred in 2019.
EMISSIONS INTO THE ATMOSPHERE A large part of atmospheric emissions of the Sabaf Group derives from activities defined as “negligible pollution”. • Three production processes are carried out at Sabaf S.p.A: 1. the production of the components that make up the burners (nozzle holder sumps and flame spreaders) involves the casting and subsequent die-casting of the aluminium alloy, sandblasting of the pieces, a series of mechanical processes with removal of material, washing of some components, assembly and testing. This production process results in the emission of negligible amounts of oily mists, as well as dust and carbon dioxide; 2. the production of burner covers, where steel is used as raw material, which is submitted to blanking and minting. The semi-finished covers are then used for washing, sandblasting, application and firing of enamel, a process that generates the emission of dust; 3. the production of valves and thermostats, in which mainly aluminium alloy, brass bars and moulded bodies and, to a much lesser extent, steel bars are used as raw materials. The production cycle is divided into the following phases: mechanical machining with removal of material, washing of semi-finished products and components obtained in this way, finishing of the coupling surface of bodies and masks with a diamond tool, assembly and final inspection of the finished product. This process generates negligible oily mists.
• The entire burner production process is carried out at Sabaf do Brasil and Sabaf Turkey. An analysis of the internal process shows that there are no significant emissions. • In Faringosi Hinges s.r.l. and in the companies of the C.M.I. Group, steel is used as the main raw material for the production of hinges, and is subjected to a series of mechanical processing and assembly that do not involve any significant emissions. • In A.R.C. s.r.l., professional burners are produced through mechanical processing and assembly, no significant emissions are recorded. • Sabaf China carries out mechanical processing and burner assembly operations. Emissions are completely negligible. • Electronic components (boards, timers, etc.) are assembled in Okida, the production activity generates negligible emissions. The efficiency level of the purification systems is ensured through their regular maintenance and the regular monitoring of all emissions. Monitoring in 2019 showed that all emissions complied with the limits imposed by the law.
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SABAF . 2019 ANNUAL REPORT
CO 2 EMISSIONS (tons) 25
2019
2018
2017
59
-
-
Scope 1 (direct emissions) from refrigerant gases
tCO2eq
Scope 1 (direct emissions) from fuel consumption
tCO2
7,734
8,022
8,508
Total Scope 1 (direct emissions)
tCO2eq
7,793
8,022
8,508
Scope 2 (indirect emissions) - location based
tCO2
9,979
10,498
11,570
Scope 2 (indirect emissions) - market based
tCO2
12,484
13,133
n.a.
Total emissions Scope 1+2 (location based)
tCO2eq
17,772
18,520
20,078
The use of natural gas to power melting furnaces results in the emission of NOX and SOX into the atmosphere, however these emissions are not significant. Sabaf does not currently contain any substances that damage the
atmospheric ozone layer, with the exception of the refrigerant used in some air conditioners (R22), which is managed in compliance with the reference standards.
Environmental investments The main environmental investments in 2019 concerned: • the concentration plant of enamelling wastewater at the Brazilian factory; • the plant for the chemical-physical treatment of enamelling waste at the Ospitaletto factory.
Disputes In 2019, the Group did not suffer any sanctions related to environmental compliance and no dispute is pending.
25
88
The factors used for calculating emissions are: • year 2017: Department for Business, Energy & Industrial Strategy (BEIS) 2015 - Defra 2017 for emissions related to natural gas consumption; • year 2018: Scope 1 fuels: Defra 2018 - Scope 2 Location-based: Terna 2016 - Scope 2 Market-based: AIB 2017, where available, otherwise Terna 2016; • year 2019: Scope 1 fuels and F-GAS: Defra 2019 - Scope 2 Location-based: Terna 2017 - Scope 2 Market-based: AIB 2018, where available, otherwise Terna 2017. Following the completion of the data collection system, direct emissions (Scope 1) for the year 2019 also include refrigerants used in air conditioners.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Sabaf, the management of product quality and customer relations Risks The new UNI EN ISO 9001:2015 standard which Sabaf complies, introduces the concept of a “risk-based approach”, which is fundamental for planning the quality management system. Strategic risks, including intellectual property protection (there is a risk that some Group products, even if under patent protection, may be copied by competitors) and collaboration with critical suppliers.
Legal and compliance risks, relating to non-compliance with product regulations: Sabaf operates in international markets that adopt different laws and regulations. The product must therefore comply with the mandatory and voluntary requirements and the organisation must be able to show this consistency to the certification bodies responsible for control.
Quality management policy The Quality Management System has the aim of enabling the achievement of the following objectives: • increasing customer satisfaction by understanding and meeting their present and future requirements; • continuous improvement of processes and products, also aimed at protecting the environment and the safety of employees; • involvement of partners and suppliers in the continuous improvement process, favouring the “comakership” logic; • valuation of human resources; • improvement of business performance and of the quality management system based on risk-based thinking. In order to contribute consistently to the pursuit of these objectives, the Sabaf Group undertakes a series of commitments explicitly stated in the Charter of Values: • to act with transparency, correctness and contractual fairness; • to communicate product information in a clear and transparent manner; • to adopt a professional and helpful behaviour towards customers; • not to give gifts to customers that exceed normal courtesy practices and that may tend to influence their objective assessment of the product; • to guarantee high quality standards of the offered products; • to ensure constant attention in technological research in order to offer innovative products; • to collaborate with customer companies to ensure that the end user is fully confident in using the products; • to promote social responsibility actions throughout the production chain; • to listen to customers’ requirements through constant monitoring of customer satisfaction and complaints, if any; • to inform customers of potential risks related to the use of products, as well as the related environmental impact.
Group companies that have obtained quality certification according to the ISO 9001 standard
COMPANY
YEAR OF FIRST CERTIFICATION
Sabaf S.p.A.
1993
Faringosi Hinges s.r.l.
2001
C.M.I. s.r.l.
2003
Okida
2005
Sabaf do Brasil
2008
Sabaf Turkey
2015
During 2019, the Quality Management System was constantly monitored and maintained to ensure the correct implementation and compliance with the requirements of the ISO 9001 standard. As part of the internal audit plan for 2019, a total of 16 functional areas of offices and production departments were checked at the Ospitaletto factory, 14 at Sabaf do Brasil and 14 at Sabaf Turkey. The results of these checks did not reveal any critical aspects of the system, which therefore fully complies with the standard. With regard to third party inspections of the Quality Management System, in 2019 CSQ (IMQ Certification Body) carried out the annual inspection at the premises of Ospitaletto and at the factory of Sabaf do Brasil, confirming the adequacy of the System and the maintenance of ISO 9001 certification. For the factory located in Turkey, the next inspection by the certification body is scheduled for 2020. In October 2019, the TUV NORD certification body carried out the audit for the maintenance of the certification of the Quality Management System of Faringosi Hinges s.r.l., in accordance with UNI EN ISO 9001:2015. The intervention ended successfully.
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SABAF . 2019 ANNUAL REPORT
In February 2019, the Certification Body NQA carried out the annual supervisory audit for the maintenance of the ISO 9001:2015 certification of the Quality Management System of Okida. The audit was successfully completed.
During 2019, the Certification Body TUV Italia S.r.l. carried out the periodic supervisory audit at C.M.I. s.r.l. confirming the adequacy of the Quality Management System and the maintenance of the ISO 9001:2015 certification.
Customer Health and Safety Sabaf protects the health of consumers by checking that the materials that make up its products comply with the international directives in force (such as REACH and RoHS). To ensure the safe operation of valves, thermostats and burners, Sabaf carries out leak tests on 100% of its production. Valves and thermostats are also certified by third parties that guarantee compliance with the operating and safety requirements required to be marketed on the world market.
Hinges and electronic components do not pose a significant risk to consumer safety. During the reporting period, there were no instances of non-compliance with regulations regarding the health and safety impacts of products.
Customer satisfaction The customer satisfaction survey, carried out every two years, is part of the stakeholder engagement activities that Sabaf undertakes in order to constantly improve the quality of the services offered and to respond to customer expectations.
The latest survey, carried out in 2019 through a questionnaire circulated to customers through an online survey (Survey Monkey), confirmed the positive opinion of customers by pointing out that the quality of its products and its timeliness, professionalism and competence in technical and commercial assistance are among its strong points.
Customer complaint handling Sabaf systematically handles all complaints from customers. A specific process is in place and envisages: • analysis of the alleged defect to assess its validity; • identification of the causes of the defect; • corrective actions necessary to prevent or limit the recurrence of the problem; • customer feedback through 8D reports (quality management tool that enables a cross-functional team to determine the causes of problems and provide effective solutions).
Disputes There is no dispute with customers.
90
The causes of complaints vary from product to product and can be summarised mainly in: • aesthetic defects for the families of covers and burner flame spreaders; • size and/or operating anomalies for the family of valves, thermostats, hinges and electronic control boards; • die-casting defects and/or blanking for burners and hinges.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Sabaf and supply chain management Risks Strategic risks related to a socially responsible approach along the supply chain (quality of supply, respect for human rights and protection of workers, respect for the environment, energy consumption). The definition of the criticality level, especially environmental and social, derives from a risk assessment that takes into account the type of process, product or service provided and the geographical location of the supplier.
The supply chain presents different types of risks, which must be assessed and monitored in order to limit the possibility of damage to the companies of the Group. Risks of external context. Considering that a significant (although not predominant) portion of purchases takes place on international markets, the Group monitors and manages the risk of instability in supplier countries.
Operational risks: including continuity of supplies, assessed by also paying attention to the financial sustainability of the suppliers.
Supply chain management policy All Group companies comply with the principles of conduct defined in the Charter of Values in managing relations with suppliers. The Group is gradually implementing a purchasing management policy valid for all Group companies. As things stand, the management of relations with suppliers in Sabaf S.p.A., Sabaf do Brasil, Sabaf Turkey, Sabaf
China and Faringosi Hinges s.r.l. is conducted on the basis of uniform procedures. For the most recently acquired companies (A.R.C., Okida and C.M.I.) the general policies are shared, with a special reference to the management of the risks exposed above, and possible synergies are identified and fulfilled.
Sabaf S.p.A., the SA8000 Standard and suppliers In 2009, Sabaf S.p.A. obtained the certification of compliance with the requirements of the SA8000 (Social Accountability 8000) Standard and, therefore, the Company requires its suppliers to comply, in all their activities, with the principles of the Standard, as a minimum criterion for establishing a lasting relationship based on the principles of social responsibility. Supply contracts include an ethical clause inspired by the SA8000 Standard, which commits suppliers to ensure respect for human and social rights and in particular: avoid the employment of persons below the age established by the Standard, provide workers with a safe workplace, protect trade union freedom, comply with the law on working hours, ensure workers that the minimum salary required by law will be complied with. In 2017, Sabaf S.p.A. complied with the updating of the SA8000:2014 Standard and asked all suppliers, bound by con-
tract, to act in the same way and comply with the latest version of the principles. During the year, Sabaf S.p.A. updated a risk analysis of the supply chain in line with the requirements of SA8000 in order to prepare an action plan and monitor the suppliers considered critical for the purposes of the Standard. The analysis was carried out taking into account the geographical location, the sector to which it belongs, the type of business and the importance of turnover with regard to Sabaf. A questionnaire was sent out to verify understanding of the standard and assess the social responsibility aspects of each supplier. The replies received did not show any non-compliance. Failure to comply with the principles of the SA8000 Standard does not result in the immediate termination of supply contracts. On the contrary, reasonable efforts must be made to ensure that any irregularities are properly dealt with and to stimulate their adjustment. The aim is to spread the culture of social responsibility.
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SABAF . 2019 ANNUAL REPORT
With regard to the management by suppliers of quality, environment and social responsibility, if the law in force already requires Sabaf to meet the minimum requirements, the risk is considered to be lower, otherwise periodic audits are carried out on the management of these aspects. In 2019, class A and B suppliers were analysed to cover 95% of the expenditure26.
This analysis revealed 34 cases of suppliers considered potentially critical, following which 25 audits were carried out (17 in 2018) from which no critical non-conformities were found but only observations. In connection with non-critical non-compliances, the suppliers were asked to take appropriate action.
RELATIONS WITH SUPPLIERS AND CONTRACTUAL CONDITIONS Relations with suppliers are based on long-term collaboration and on fairness in negotiations, integrity and contractual fairness and the sharing of growth strategies. To encourage the sharing with suppliers of the values that underpin its business model, Sabaf has distributed the Charter of Values in a widespread manner. Sabaf guarantees absolute impartiality in the choice of suppliers and undertakes to strictly comply with the agreed payment terms.
Very short payment terms are agreed for artisan and less structured suppliers (mainly 30 days). Sabaf requires its suppliers to be able to renew themselves technologically, so that the best quality/price ratios can always be proposed, and favours suppliers who have obtained or are obtaining Quality and Environmental System certifications. In 2019, the turnover of suppliers of the Sabaf Group with a Certified Quality System was equal to 74% of the total (72% in 2018).
Purchase analysis As shown in the table below, the Sabaf Group aims to encourage development in the area in which it operates and, therefore, in selecting suppliers, favours local companies27. TOTAL 2019 PURCHASES (â‚Ź/000) 28
% LOCAL PURCHASES
56,466
79%
Faringosi Hinges s.r.l.
8,331
99%
A.R.C. s.r.l.
3,466
83%
C.M.I. Group
24,916
71%
Sabaf Turkey
10,242
72%
Okida
5,537
68%
Sabaf do Brasil
7,491
95%
Sabaf China
534
98%
Sabaf S.p.A.
Most of the purchases outside the European Union come from suppliers located in China. Chinese suppliers signed the clause for compliance with the principles of the SA8000 Standard.
For all Group companies, the main machinery used (die-casting machines, processing and assembly transfer) is supplied by Italy to ensure homogeneous production processes in terms of quality and safety.
Disputes No disputes with suppliers have arisen in the last three years.
26 27 28
92
The valuation is made for suppliers with an average annual turnover to Sabaf of more than â‚Ź 5,000 over the previous three years. Residual suppliers are considered not significant. The data in the table does not take account of intercompany supplies. Values converted into euro at the annual average exchange rate.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Sabaf, Public Administration and Community Relations with the Public Administration In line with the reference policy lines, the relations of Sabaf with the Public Administration and the Tax Authorities are based on the utmost transparency and fairness.
Sabaf has always had an open dialogue with the authorities in every local community in which it is present, in order to promote shared and sustainable industrial development, with positive repercussions for local communities.
Relations with industrial associations Sabaf S.p.A. is one of the founders of APPLiA Italia (former CECED Italia), the association that develops and coordinates in Italy the study activities promoted at European level by APPLiA – Home Appliance Europe with the related scientific, legal and institutional implications in the household appliances sector.
Sabaf S.p.A. has been a member of Associazione Industriale Bresciana (AIB) since 2014, which is a member of the Confindustria system.
Relations with universities and the student world Sabaf S.p.A. systematically organises company visits with groups of students and bears witness of best practices on social responsibility at
important conferences in different cities in Italy.
Charitable initiatives and perks In 2019, Sabaf S.p.A. joined the Fondazione Spedali Civili of Brescia, contributing to the purchase of Apotecachemo, a system that automates the preparation of chemotherapy drugs.
The Group’s humanitarian initiatives include support for the Associazione Volontari per il Servizio Internazionale (AVSI), a non-governmental, non-profit organisation engaged in international development aid projects. The donations are intended to support twenty children living in different countries of the world at a long distance.
Disputes There are no significant disputes with Public Bodies or other representatives of the community.
93
SABAF . 2019 ANNUAL REPORT
Sabaf and shareholders The composition of the share capital The share capital of Sabaf S.p.A., fully subscribed and paid-up, is € 11,533,450, consisting of 11,533,450 ordinary shares having the par value of € 1.00 each. On 24 March 2020, a total of 5,186,334 shares had acquired voting rights (two votes for each share).
NO. OF SHARES MAKING UP THE SHARE CAPITAL
NUMBER OF VOTING RIGHTS
11,533,450
16,719,784
Ordinary shares IT0001042610
6,347,116
6,347,116
Ordinary shares with increased vote IT0005253338
5,186,334
10,372,668
TOTAL of which:
THE SHAREHOLDERS ENTERED IN THE SHAREHOLDERS’ REGISTER AT 6 MARCH 2020 WERE
1,845
OF WHOM:
1,568
195
27
55
own up to 1,000 shares
own 1,001 to 5,000 shares
own 5,001 to 10,000 shares
own over 10,000 shares
28.75%
94
of the share capital is held by shareholders resident abroad.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
RELEVANT SHAREHOLDERS SHAREHOLDER
NUMBER OF SHARES
% OF SHARE CAPITAL
VOTING RIGHTS
% HELD
GIUSEPPE SALERI S.a.p.A.
2,535,644
21.99%
5,015,288
29.99%
QUAESTIO CAPITAL MANAGEMENT SGR SPA
2,306,690
20.00%
4,613,380
28.83%
DELTA LLOYD AM
1,151,464
9.98%
1,151,464
7.20%
FINTEL s.r.l.
850,000
7.37%
850,000
5.31%
There are no other shareholders other than those highlighted above with a shareholding of more than 5%.
Investor relations and financial analysts Since its listing on the Stock Exchange (1998), the Company has attributed strategic importance to financial communication. Sabaf’s financial communication policy is based on the principles of fairness, transparency and continuity, in the belief that this approach allows investors to correctly evaluate the Company. In this perspective, Sabaf guarantees maximum willingness to engage in dialogue with financial analysts and
institutional investors. In 2019, the Company met with institutional investors as part of roadshows organised in Milan and London. Some investors also held meetings with the management at the company headquarters in Ospitaletto, taking the opportunity to visit the production facilities.
95
SABAF . 2019 ANNUAL REPORT
Remuneration of shareholders and share performance In 2019, the Sabaf share recorded the highest official price on 26 March (€ 16.538) and lowest on 31 October (€ 12.068). The average volume traded was 4,971 shares per day, equal to an average value of € 71,894 (€ 164,508 in 2018).
2019 PERFORMANCE OF SABAF SHARES (PRICE AND VOLUMES TRADED) PRICE
16.30 14.87 13.44 12.01 10.58
9.146 VOLUMES
50 K
0 January 2019
96
May 2019
September 2019
December 2019
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
SABAF VS. FTSE ITALIAN STAR INDEX
20%
10%
0%
-10%
-20% January 2019
May 2019
September 2019
December 2019
Sabaf FTSE Italian STAR index
The dividend policy adopted by Sabaf aims to guarantee a valid remuneration of shareholders also through the annual dividend of â‚Ź 0.55 per share in 2019. With regard to the current financial year, the Directors, having acknowledged the significant change in the global economic scenario following the spread of the coronavirus pandemic, deemed it
appropriate, as a matter of prudence, to propose to the Shareholders’ Meeting to allocate the profit for 2019 of the Parent Company Sabaf S.p.A. entirely to the extraordinary reserve. The distribution of a 2019 profit dividend will be reviewed when the current coronavirus situation is overcome.
Socially responsible investments Sabaf shares have frequently been analysed by analysts and managers of SRI funds, who have also invested in Sabaf on several occasions.
Disputes There is no dispute with shareholders.
97
SABAF . 2019 ANNUAL REPORT
Sabaf and lenders Relations with credit institutions The 2018-2022 Business Plan envisages the financing of growth also through greater use of financial debt, which is expected to remain within the parameters of absolute security (net financial debt to EBITDA ratio below 2). At 31 December 2019, the net financial debt was € 55.1 million, compared with € 53.5 million on 31 December 2018; the ratio between the net financial debt and the pro-forma EBITDA29 was 1.86 (1.59 at 31 December 2018).
Relations with banks have always been based on maximum transparency. Relations with institutions that are able to support the Group in all its financial needs and to propose solutions in a timely manner to meet specific needs are privileged.
Disputes There is no dispute with the lenders.
Sabaf and competitors Trends in the cooking appliance manufacturer sector The household appliance industry shows the following trends: • Concentration, with a small number of large players present on a global scale. This trend is less evident for cooking appliances than for other household appliances: in the cooking sector, in fact, design and aesthetics on the one hand and the lower intensity of investments on the other allow the success of even small and highly innovative producers. • Internationalisation of production, increasingly relocated to countries with low labour costs.
• Outsourcing the design and production of components to highly specialised suppliers who, like Sabaf, are active in the main world markets and are able to provide a range of products that meets the specific requirements of different markets.
Main Italian and international competitors In Europe, Sabaf estimates that it has a market share of about 40% in the sector of gas parts. The world market share is estimated at about 10%. The main competitors of the Sabaf on the international market are Copreci, Defendi and Robertshaw.
Copreci is a cooperative located in Spain in the Basque Country, part of Mondragon Cooperative Corporation and represents Sabaf’s main competitor in terms of valves and thermostats. Defendi is an Italian company, acquired in 2013 by the German group EGO, and is mainly active in the production of burners in Italy and Brazil. Robertshaw is the leading producer of gas parts for the North American market.
29
98
The pro-forma EBITDA is calculated taking into account, for companies acquired and entering the scope of consolidation during the year, the EBITDA for the entire year.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Main Italian and international competitors VALVES AND THERMOSTATS
BURNERS
ELECTRONIC COMPONENTS
HINGES
SABAF GROUP Copreci (Spain) Defendi Italy (Italy) Robertshaw (USA) Somipress (Italy) Nuova Star (Italy)
2017 and 2018 economic data of the main Italian competitors (â‚Ź/000)30 2018 in thousands of Euros
2017
SALES
EBIT
NET RESULT
SALES
EBIT
NET RESULT
SABAF GROUP
150,642
16,409
15,614
150,223
18,117
14,835
DEFENDI ITALY
50,383
(98)
577
56,562
3,516
2,534
SOMIPRESS GROUP
36,456
2,162
1,824
37,797
3,060
1,996
NUOVA STAR
35,485
366
321
33,418
323
189
No further information is available on competitors due to the difficulty of finding the data.
Sabaf firmly believes that competition between companies promotes both an effective economy and sustainable growth. In making business decisions, Sabaf also takes into account the risk of behaviour that is detrimental to free competition. Currently, the Group has not adopted a
formalised policy aimed at preventing anti-competitive behaviour. According to the information available, there is no evidence of anti-competitive behaviour or infringement of antitrust regulations.
Disputes There is a dispute pending against a competitor following an alleged violation of one of our patents. There is also a dispute in place brought by a competitor for alleged infringement of a patent that the Group considers totally groundless.
30
Sabaf processing from the financial statements of the various companies. Latest available data.
99
SABAF . 2019 ANNUAL REPORT
GRI Content Index GRI STANDARD
DISCLOSURE
PAGE (or direct reference)
GRI 101: Foundation 2016 General Disclosures ORGANISATIONAL PROFILE
102-1
Name of the organisation
Front cover
102-3
Location of headquarters
Via dei Carpini, 1 25035 Ospitaletto (Brescia)
102-4
Location of operations
pp. 20-23
102-6
Markets served
pp. 20-23
102-2
102-5 102-7
102-8 102-9
102-10 102-11
102-12 102-13
Activities, brands, products, and services
Ownership and legal form Scale of the organisation
Information on employees and other workers Supply chain
pp. 18-21
pp. 44-46; 94-95 pp. 12-23
pp. 66-68; 75 pp. 91-92
Significant changes to the organization and its supply chain p. 27 Precautionary Principle or approach
pp. 37; 57
Membership of associations
p. 93
External initiatives
pp. 30; 39-40;
STRATEGY
102-14
Statement from senior decision-maker (Chairman and CEO) pp. 28-29
ETHICS AND INTEGRITY
102-16
Values, principles, standards, and norms of behavior
pp. 30-32
GOVERNANCE
GRI 102: General Disclosures 2016
102-18
Governance Structure
pp. 44-56
102-22
Composition of the highest governance body and its committees
pp. 46-51
STAKEHOLDER ENGAGEMENT
102-40
List of stakeholder groups
p. 38
102-41
Collective bargaining agreements
pp. 76-78
102-42
Identifying and selecting stakeholders
p. 38
102-43
Approach to stakeholder engagement
p. 38
102-44
Key topics and concerns raised
pp. 38; 90
REPORTING PRACTICE
102-45
Entities included in the consolidated financial statements
pp. 20-21; 27
102-46
Defining report content and topic Boundaries
pp. 27; 41
102-48
Restatements of information
p. 27
102-47
102-49 102-50 102-51
102-52
Changes in reporting Reporting period
Date of most recent report Reporting cycle
pp. 41-43
pp. 27; 41 p. 27
Year 2018 p. 27
102-53
Contact point for questions regarding the report
Tel.: +39 030 - 6843001 Fax: +39 030 - 6848249 E-mail: info@sabaf.it
102-54
Claims of reporting in accordance with the GRI Standards
p. 27
102-56
External assurance
pp. 105-107
102-55
100
List of material topics
GRI Content Index
pp. 100-104
OMISSION
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
GRI STANDARD
PAGE OMISSION (or direct reference)
DISCLOSURE
Material Topics GRI 200 Economic Standards Series ECONOMIC PERFORMANCE
GRI 103: Management Approach 2016
103-1
103-2
103-3 GRI 201: Economic 201-1 Performance 2016
Explanation of the material topic and its Boundary
pp. 41-43
Evaluation of the management approach
p. 57
The management approach and its components
Direct economic value generated and distributed
p. 57
p. 36
MARKET PRESENCE
GRI 103: Management Approach 2016 GRI 202: Market Presence 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-3
Evaluation of the management approach
pp. 57; 64-65; 76-78
103-2
202-1
The management approach and its components
Ratios of standard entry level wage by gender compared to local minimum wage
pp. 57; 64-65; 76-78 p. 78
ANTI-CORRUPTION
GRI 103: Management Approach 2016 GRI 205: Anti-corruption 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-3
Evaluation of the management approach
pp. 57; 60
103-2
205-3
The management approach and its components
Confirmed incidents of corruption and actions taken
pp. 57; 60
p. 60
ANTI-COMPETITIVE BEHAVIOR
GRI 103: Management Approach 2016 GRI 206: Anti-competitive Behavior 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57; 98-99
103-3
Evaluation of the management approach
pp. 57; 98-99
206-1
Legal actions for anti-competitive behavior, anti-trust, and monopoly practices
p. 99
GRI 300 Environmental Standards Series MATERIALS
GRI 103: Management Approach 2016 GRI 301: Materials 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-3
Evaluation of the management approach
pp. 57; 83-84
103-2
301-1
The management approach and its components
pp. 57; 83-84
Materials used by weight or volume
p. 84
Explanation of the material topic and its Boundary
pp. 41-43
Evaluation of the management approach
pp. 57; 83-85
ENERGY
GRI 103: Management Approach 2016
103-1
GRI 302: Energy 2016
302-1
103-2 103-3
302-3
The management approach and its components
Energy consumption within the organisation Energy intensity
pp. 57; 83-85 p. 85 p. 85
101
SABAF . 2019 ANNUAL REPORT
GRI STANDARD
PAGE OMISSION (or direct reference)
DISCLOSURE EMISSIONS
GRI 103: Management Approach 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-3
pp. 57; 83-84; 87-88
GRI 305: Emissions 2016
305-1
Evaluation of the management approach
103-2
305-2
The management approach and its components
Direct (Scope 1) GHG emissions
Energy indirect (Scope 2) GHG emissions
pp. 57; 83-84; 87-88 p. 88 p. 88
EFFLUENTS AND WASTE
GRI 103: Management Approach 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-3
Evaluation of the management approach
pp. 57; 83-84; 86-87
103-2
GRI 306: Effluents 306-2 and Waste 2016
The management approach and its components
Waste by type and disposal method
pp. 57; 83-84; 86-87 pp. 86-87
ENVIRONMENTAL COMPLIANCE
GRI 103: Management Approach 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-3
Evaluation of the management approach
pp. 57; 83-84; 88
103-2
GRI 307: 307-1 Environmental Compliance 2016
The management approach and its components
pp. 57; 83-84; 88
Non-compliance with environmental laws and regulations p. 88
GRI 400 Social Standards Series EMPLOYMENT
GRI 103: Management Approach 2016 GRI 401: Employment 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57; 64-65; 69; 73
103-3
Evaluation of the management approach
pp. 57; 64-65; 69; 73
401-1
New employee hires and employee turnover
pp. 69-73
INDUSTRIAL RELATIONS
GRI 103: Management Approach 2016 GRI 402: Labour Management Relations 2016
102
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57; 64-65; 81-82
103-3
Evaluation of the management approach
pp. 57; 64-65; 81-82
402-1
Minimum notice periods regarding operational changes
p. 81
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
GRI STANDARD
PAGE OMISSION (or direct reference)
DISCLOSURE HEALTH AND SAFETY
GRI 103: Management Approach 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57; 79-81
103-3
Evaluation of the management approach
pp. 57; 79-81
403-1
Occupational health and safety management system
pp. 79-81
403-2
Hazard identification, risk assessment, and incident investigation
pp. 79-81
403-3
Occupational health services
pp. 79-81
Worker participation, consultation, and communication on occupational health and safety
pp. 79-81
Worker training on occupational health and safety
pp. 79-81
403-6
Promotion of worker health
pp. 79-81
403-7
Prevention and mitigation of occupational health and safety impacts directly linked by business relationships
pp. 79-81
403-9
Work-related injuries
p. 80
GRI 403: 403-4 Occupational Health and Safety 403-5 2018
TRAINING AND EDUCATION
GRI 103: Management Approach 2016 GRI 404: Training and Education 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57; 64-65; 74
103-3
Evaluation of the management approach
pp. 57; 64-65; 74
404-1
Average hours of training per year per employee
p. 74
DIVERSITY AND EQUAL OPPORTUNITIES
GRI 103: Management Approach 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 50; 57; 64-65; 75
103-3
Evaluation of the management approach
pp. 50; 57; 64-65; 75
Diversity of governance bodies and employees
pp. 47-53; 75
GRI 405: Diversity and Equal Opportunity 405-1 2016
NON-DISCRIMINATION
GRI 103: Management Approach 2016 GRI 406: Non-discrimination 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57; 64-65
103-3
Evaluation of the management approach
pp. 57; 64-65
406-1
Incidents of discrimination and corrective actions taken
p. 65
103
SABAF . 2019 ANNUAL REPORT
GRI STANDARD
DISCLOSURE
PAGE OMISSION (or direct reference)
SUPPLIER SOCIAL ASSESSMENT
GRI 103: Management Approach 2016 GRI 414: Supplier Social Assessment 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57; 91-92
103-3
Evaluation of the management approach
pp. 57; 91-92
414-2
Negative social impacts in the supply chain and actions taken
pp. 91-92
CUSTOMER HEALTH AND SAFETY
GRI 103: Management Approach 2016 GRI 416: Customer Health and Safety 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57; 89-90
103-3
Evaluation of the management approach
pp. 57; 89-90
416-1
Assessment of the health and safety impacts of product and service categories
p. 90
CUSTOMER SATISFACTION AND CUSTOMER SUPPORT
GRI 103: Management Approach 2016 GRI 416: Customer Health and Safety 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57; 89-90
103-3
Evaluation of the management approach
pp. 57; 89-90
416-2
Incidents of non-compliance concerning the health and safety impacts of products and services
p. 90
Topics not covered by the topic-specific Standards PARTNERSHIP WITH MULTINATIONAL GROUPS
GRI 103: Management Approach 2016
104
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 33; 57
103-3
Evaluation of the management approach
pp. 33; 57
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
105
SABAF . 2019 ANNUAL REPORT
106
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
107
SABAF . 2019 ANNUAL REPORT
Report on operations 111
Business and financial situation of the Group
114
The acquisition of C.M.I. s.r.l.
114
Risk factors
116
Research and development
116
Disclosure of non financial information
116
Personnel
116
Environment
116
Corporate governance
116
Internal control system on financial reporting
117
Model 231
117
Personal data protection
117
Derivative financial instruments
117
Atypical or unusual transactions
117
Secondary offices
117
Management and coordination
117
Intra-group transaction and related-party transactions
117
Significant events after the end of the reporting period and business outlook
117
Business and financial situation of Sabaf S.p.A
119
Reconciliation between parent company and consolidated shareholders’ equity and net profit for the period
119
110
Use of the longer time limit for calling the shareholders’ meeting
REPORT ON OPERATIONS
BUSINESS AND FINANCIAL SITUATION OF THE GROUP (€/000)
2019
%
2018
%
2019-2018 CHANGE
% CHANGE
Sales revenue
155,923
100%
150,642
100%
5,281
+3.5%
EBITDA
27,033
17.3%
29,959
19.9%
(2,926)
-9.8%
EBIT
11,896
7.6%
16,409
10.9%
(4,513)
-27.5%
Pre-tax profit
9,776
6.3%
20,960
13.9%
(11,184)
-53.4%
Profit attributable to the Group
9,915
6.4%
15,614
10.4%
(5,699)
-36.5%
Basic earnings per share (€)
0,895
1.413
(0.518)
-36.7%
Diluted earnings per share (€)
0,895
1.413
(0.518)
-36.7%
turnover, compared to € 30 million (19.9% of turnover) in 2018, EBIT reached € 11.9 million, equivalent to 7.6% of turnover, compared to €16.4 million (10.9%) in 2018. Net profit of 2019, equal to € 9.9 million (6.4% of turnover), is 36.5% lower than the € 15.6 million of 2018.
In 2019, the Sabaf Group reported a sales revenue of € 155.9 million, an increase of 3.5% versus the figure of € 150.6 million in 2018 (-8.9% taking into consideration the same scope of consolidation). The slowdown in organic activity partly affected profitability, which, however, is at a high level: 2019 EBITDA amounted to € 27 million, equivalent to 17.3% of
The subdivision of sales revenues by product line is shown in the table below: (€/000)
2019
%
2018
%
% CHANGE
Valves and thermostats
39,989
25.6%
48,463
32.2%
-17.5%
Burners
63,858
41.0%
66,953
44.4%
-4.6%
Accessories
12,924
8.3%
15,422
10.2%
-16.2%
Total household gas parts
116,771
74.9%
130,838
86.9%
-10.8%
Professional gas parts
5,434
3.5%
5,331
3.5%
+1.9%
Hinges
23,774
15.2%
10,436
6.9%
+127.8%
Electronic components
9,944
6.4%
4,037
2.7%
+146.3%
155,923
100%
150,642
100%
+3.5%
Total
The contribution from recent acquisitions resulted in a sharp increase in sales of hinges and electronic components, which more than offset the
decline in sales of components for domestic gas cooking appliances.
111
SABAF . 2019 ANNUAL REPORT
The geographical breakdown of revenues is shown below: (€/000)
2019
%
2018
%
% CHANGE
Italy
31,161
20.0%
31,579
21.0%
-1.3%
Western Europe
12,277
7.9%
12,337
8.2%
-0.5%
Eastern Europe
55,059
35.3%
46,301
30.7%
+18.9%
Middle East and Africa
7,050
4.5%
12,303
8.2%
-42.7%
Asia and Oceania
9,198
5.9%
7,590
5.0%
+21.2%
South America
23,451
15.0%
25,461
16.9%
-7.9%
North America and Mexico
17,727
11.4%
15,071
10.0%
+17.6%
155,923
100%
150,642
100%
+3.5%
Total
The trend in revenue was affected by the overall uncertainty of the macroeconomic scenario. In Turkey, main destination market, the Group recorded a 10% decrease in sales - taking into consideration the same scope of consolidation - which was more pronounced in the first half of the year and showed a clear recovery in recent months. In Italy, sales suffered from the reduction in the production of domestic appliances. Downturns were also recorded in the Middle East and South America, where the crisis in
Argentina and the stagnation of demand in Brazil weighed heavily. Among the markets that showed a positive trend was China, where revenue benefited from new supply contracts to primary customers. The acquisition of C.M.I. also led to an increase in the weight of North America and Eastern Europe in the distribution of sales. North America accounted for more than 11% of total Group sales in 2019 (+18% compared to 2018).
Average sales prices in 2019 were 0.7% lower than in 2018, offset by a corresponding reduction in average purchase prices of the main raw materials (aluminium alloys, steel and brass).
the income statement negative forex differences of € 1.4 million, mainly due to fluctuations in exchange rates with the Turkish lira (€ 5.4 million of positive forex differences were recognised in 2018).
The impact of labour cost on sales increased from 23.1% in 2018 to 23.8% in 2019.
In 2019, the Group recognised positive income taxes of € 0.4 million, which include non-recurring income of € 1.1 million, following the favourable outcome of a tax dispute in Turkey and other tax benefits relating to investments made in Italy and Turkey, illustrated in Note 31 to the consolidated financial statements.
The ratio of net financial expenses to turnover remained low, equal to 0.5% of turnover (0.6% in 2018). During the year, the Group recorded in
The Group’s statement of financial position, reclassified based on financial criteria, is illustrated below1: 31.12.2019
31.12.2018
138,506
119,527
88,189
92,111
(38,496)
(32,381)
49,693
59,730
Provisions for risks and charges, Post-employment benefits, deferred taxes
(11,966)
(6,387)
Net invested capital
176,233
172,870
(€/000) Non-current assets Short-term assets
2
Short-term liabilities Working capital
3
4
Short-term net financial position
(3,698)
(9,180)
Medium/long-term net financial position
(51,430)
(44,344)
Net financial debt
(55,128)
(53,524)
Shareholders’ equity
121,105
119,346
Net financial debt and liquidity shown in the tables below 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. 2 Sum of Inventories, Trade receivables, Tax receivables and Other current receivables. 3 Sum of Trade payables, Tax payables and Other liabilities. 4 Difference between short-term assets and short-term liabilities. 1 1
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REPORT ON OPERATIONS
Cash flows for the financial year are summarised in the table below: (€/000)
2019
2018
Opening liquidity
13,426
11,533
Operating cash flow
40,932
25,814
Cash flow from investments
(12,014)
(11,467)
Free cash flow
28,918
14,347
Cash flow from financing activities
(12,080)
21,579
Acquisitions
(10,792)
(24,077)
482
(9,956)
Cash flow for the period
6,528
1,893
Closing liquidity
19,954
13,426
Foreign exchange differences
In 2019, the Group generated free cash flow of € 28.9 million (€ 14.3 million in 2018). The financial management benefited from a reduction in net working capital of € 16.3 million: in addition to the lower levels of activity, the improvement in net working capital was achieved as a result of structural actions on internal logistics, which allowed a significant reduction of work in progress stocks. At 31 December 2019, working capital stood at € 49.7 million compared with € 59.7 million at the end of the 2018: its impact on pro-forma turnover (i.e. considered the contribution of C.M.I. for the entire financial year 2019) was 29% (38% in 2018). 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. The Sabaf Group carried out organic investments of € 12 million: the main investments in the financial year were aimed at increasing and automating the production capacity of special burners and the manufacturing of machinery and moulds for new burners. Investments in maintenance and replacement, so that production equipment is kept constantly up to date and efficient, are systematic.
Net financial debt at 31 December 2018
The acquisition of the majority shareholding in C.M.I. s.r.l. (an operation described in the next paragraph of this report) involved a financial outlay of € 10.5 million and the recognition of a liability of € 8.7 million against put options on minority interests granted to sellers. During the year, the Group paid dividends of € 6.1 million. On 5 December 2019, as part of the cooperation started with the Japanese group Paloma, Sabaf sold 230,669 treasury shares, equal to 2% of the share capital, for a total value of € 3.1 million. A further 113,962 treasury shares were sold as part of the acquisition of the majority shareholding in C.M.I. s.r.l., in exchange for 8.5% of the shares of this company. During 2019, the Group did not purchase treasury shares. At 31 December 2019, the net financial debt was € 55.1 million, compared with € 53.5 million on 31 December 2018. The change in net financial debt during the year is summarised in the table below:
(53,524)
Free cash flow
28,918
Acquisitions
(10,792)
Financial liabilities for put options on C.M.I. minority interests
(8,700)
C.M.I. debt at the date of acquisition Dividends paid out Sale of treasury shares Financial liabilities for application of IFRS 16 Foreign exchange differences and other changes Net financial debt at 31 December 2019
(4,113) (6,060) 3,146 (3,905) (98) (55,128)
At 31 December 2019, shareholders’ equity amounted to € 121.1 thousand; the ratio between the net financial debt and the shareholders’ equity was 0.46 versus 0.45 in 2018.
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SABAF . 2019 ANNUAL REPORT
Economic and financial indicators 2019
2018 pro-forma
pro-forma5
5
Change in turnover
+3.5%
-8.9%
+0.2%
-2.4%
ROCE (return on capital employed)
6.8%
7.1%
9.5%
11.3%
Net debt/EBITDA
2.04
1.86
1.79
1.59
Net debt/equity ratio
46%
45%
Market capitalisation (31.12)/equity ratio
1.28
1.44
-
0.55
Dividends per share (€)
Please refer to the introductory part of the Annual Report for a detailed examination of other key performance indicators.
THE ACQUISITION OF C.M.I. S.R.L. On 31 July 2019, the Group completed the acquisition of 68.5% of the company C.M.I. s.r.l., one of the main players in the design, production and sale of hinges for household appliances (mainly for dishwashers and ovens). The C.M.I. Group operates with production units in Italy (Crespellano, BO) and Poland and, through its subsidiary C.G.D. s.r.l., is also active in the production of presses for steel and sheet metal pressed articles. The acquisition of C.M.I. s.r.l. allows the Sabaf Group to achieve a leadership position on a global scale in the hinges sector, proposing itself also in this area as a reference partner for all manufacturers of household appliances. The C.M.I. Group was consolidated as from 31 July 2019, contributing € 12.5 million to consolidated turnover in 2019, € 1.9 million to consolidated EBITDA and € 0.3 million to consolidated net profit attributable to the Group. The Group ended the entire 2019 financial year with sales of € 30.8 million.
RISK FACTORS The results of the risk identification and assessment process carried out in 2019 showed that the Sabaf Group is exposed to certain risk factors, which can be traced back to the macro-categories described below.
Risks of external context 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 the possible instability in the emerging countries in which the Group operates.
Strategic risks Strategic risks that could negatively impact Sabaf’s medium-term performance, including, for example, risks related to increasing product customisation and the loss of business opportunities in the Chinese market.
5
Operational risks 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, from fluctuations in exchange rates or from the management of trade receivables), risks related to production processes (e.g. product liability, saturation level of production capacity), organisational risks (e.g. loss of key staff and expertise and the difficulty of replacing them, resistance to change by the organisation) and Information Technology risks.
Legal and compliance risks 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. The main risks are described in detail below as well as the relevant risk management actions that are currently being implemented.
Performance of the sector
The Group’s financial position, results and cash flows are affected by several factors related to the performance of the sector, including: • general macro-economic performance: the household appliance market is affected by macro-economic factors such as gross domestic product, consumer and business confidence, interest rate trend, the cost of raw materials, the unemployment rate and the ease of access to credit; • concentration of the end markets: as a result of mergers and acquisitions, customers have acquired bargaining power; • stagnation of demand in mature markets (i.e. Europe) in favour of growth in emerging Countries, characterised by different sales conditions and a more unstable macro-economic environment; • increasing competition, which in some cases imposes aggressive pricing policies.
The change in pro-forma turnover is calculated taking into consideration the same scope of consolidation. The return on capital employed and the pro-forma net debt/EBITDA ratio are calculated considering, for the companies acquired and included in the scope of consolidation during the year, the EBIT and EBITDA for the entire year.
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REPORT ON OPERATIONS
To cope with this situation, the Group aims to retain and reinforce its leadership position wherever possible through: • the maintenance of high quality and safety standards, which make it possible to differentiate the product through the use of resources and implementation of production processes that are not easily sustainable by competitors; • development of new products characterised by superior performance compared with market standards, and tailored to the needs of the customer; • strengthening of business relations with the main players in the sector; • diversification of commercial investments in growing and emerging markets with local commercial and productive investments; • entry into new segments / business sectors.
In recent years, the Group carried out strategic operations aimed at reducing the dependence of its business on the gas cooking sector, concluding significant acquisitions of companies operating in related sectors (Okida, C.M.I.).
Instability of Emerging countries in which the Group operates
Loss of business opportunities in the Chinese market
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: • diversifying investments at international level, setting different strategic priorities that, in addition to business opportunities, also consider the different associated risk profiles; • monitoring of the economic and social performance of the target countries, also through a local network of agents and collaborators; • timely assessment of (potential) impacts of any business interruption on the markets of Emerging countries; • adoption of contractual sales conditions that protect the Group (e.g. insuring business loans or advance payments). The presence of Sabaf in Turkey, the country that represents the main production hub of household appliances at European level, is of particular importance: 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. Turkey represents approximately 15% of the Group’s production and 25% of its total sales. The social and political tensions in Turkey over the last few years had no effect on the production 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.
Product competition 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 (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.
Moreover, the Group is analysing the opportunity to enter the induction hob market, verifying its technical and commercial feasibility. Finally, the development of new gas cooking components able to satisfy the needs that lead some consumers to prefer induction continues (aesthetic factors, practicality and ease of cleaning, technological integration with electronic components).
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 a small production unit, which still does not guarantee an adequate economic return. The Group is reviewing its strategy for approaching the Chinese market and intends to: • implement shortly a plan suitable for using growth opportunities offered by the local market; • continue to develop product lines in accordance with the needs of the Chinese market and in compliance with local regulations; • adopt and maintain a quality-price mix in line with the expectations of potential local customers.
Financial risks The Sabaf Group is exposed to a series of finacial risks, due to: • Commodity price volatility: Sabaf uses metals and alloys in its production processes, the prices of which are generally negotiated semi-annually or annually; as a result, Group companies may not be able to immediately pass on to customers changes in the prices of commodities that occur during the year, which has an impact on margins. • Exchange rate fluctuation: the Group carries out transactions primarily in euro; however, transactions also take place in other currencies, such as the U.S. dollar, the Brazilian real, the Turkish lira and the Chinese renminbi. in particular, since turnover in US dollars accounted for about 16% of consolidated turnover, the possible depreciation against the euro and the real could lead to a loss in competitiveness on the markets in which sales are made in that currency (mainly South and North America). • Trade receivable: the high concentration of turnover on a small number of customers generates a concentration of the respective trade receivables, with a resulting increase in the negative impact on economic and financial results in the event of insolvency of any one of them. In particular, given the structural difficulties of the household appliance sector in mature markets, it is possible that situations of financial difficulty and insolvency among customers could arise. 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.
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SABAF . 2019 ANNUAL REPORT
Risks related to coronavirus pandemic The spread of the new coronavirus, which occurred in China from January 2020, initially had a negligible impact on the Group’s production and commercial activities, also in view of the Group’s limited exposure to China both as a procurement market and as a sales area. The subsequent spread of the virus, first in Northern Italy and then in many other areas, is significantly changing the scenario. The Group set up a dedicated task force and implemented mitigation actions to reduce the economic consequences while safeguarding the safety and health of workers. At the date of this report, the development of the situation presents elements of uncertainty such that the potential impacts cannot be reasonably quantified.
RESEARCH AND DEVELOPMENT The most important research and development projects carried out in 2019 were as follows:
Gas parts • various models of customised burners were developed; • product variants are being developed for specific markets or market segments from existing special burner platforms; • valve variants are being developed to meet the specific technical requirements of some customers. Hinges • a hinge model for dishwashers was developed to allow the front panel to be moved; • a hinge model for dishwashers with integrated brake and balancing system was developed; • a motorised hinge fitted in the oven was developed for built-in ovens; • a hinge model for cover is being developed; • a modular hinge model for oven door is being developed; • a soft hinge model for large oven doors is being developed. Electronic components • a new product was developed for the electronic control system of radiant pyroceram hobs; • an electronic control system for pyrolytic ovens with meat probe has been implemented; • an electronic control platform for ovens with steam and microwave function is being developed. The improvement in production processes continued throughout the Group, accompanied by the development and internal production of machinery, equipment and presses. Development costs to the tune of € 460,000 were capitalised, as all the conditions set by international accounting standards were met; in other cases, they were charged to the income statement.
DISCLOSURE OF NON FINANCIAL INFORMATION Starting from 2017, the Sabaf Group publishes the Disclosure of non financial information required by Legislative Decree no. 254/2016 in a report separate from this Management Report. The Disclosure of non financial information provides all the information needed to ensure understanding 116
of the Group’s activities, performance, results and impact, with particular reference to environmental, social and personnel issues, respect for human rights and the fight against active and passive corruption, which are relevant considering the Group’s activities and characteristics. The 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.
PERSONNEL In 2019, 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 Disclosure of non financial information.
ENVIRONMENT In 2019 there was no: • damage caused to the environment for which the Group was held definitively responsible; • definitive fines or penalties imposed on the Group for environmental crimes or damage. For all other information, please refer to the Disclosure of non financial information.
CORPORATE GOVERNANCE 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.
INTERNAL CONTROL SYSTEM ON FINANCIAL REPORTING 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
REPORT ON OPERATIONS
a), b) and c) of the Market Regulations issued by CONSOB. During the year, the financial reporting system of Okida Elektronik, a Turkish-based company acquired in September 2018, was fully integrated.
MODEL 231 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.
PERSONAL DATA PROTECTION 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.
DERIVATIVE FINANCIAL INSTRUMENTS For the comments on this item, please see Note 35 of the consolidated financial statements..
ATYPICAL OR UNUSUAL TRASACTIONS Sabaf Group companies did not execute any unusual or atypical transactions in 2019.
SECONDARY OFFICES Neither Sabaf S.p.A. nor its subsidiaries have secondary operating offices.
MANAGEMENT AND COORDINATION 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., A.R.C. s.r.l., C.M.I. s.r.l. and C.G.D. s.r.l.
INTRA-GROUP TRANSACTIONS AND RELATED-PARTY TRANSACTIONS 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 intra-group transactions and other related-party transactions are given in Note 36 of the consolidated financial statements and in Note 35 of the separate financial statements of Sabaf S.p.A..
SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD AND BUSINESS OUTLOOK Based on the negotiations concluded with its main customers, the Group prepared a budget that projected sales of € 185 million (+19% over 2019) and a solid improvement in gross operating profitability (EBITDA %) compared with 2019. The trend in orders and production in the first quarter of 2020 was confirming a strong recovery in the level of activity at even higher rates than budgeted. The rapid spread of the coronavirus epidemic is impacting areas where Sabaf has important production units (Lombardy). The management set up a dedicated task force that constantly monitors the development of the situation and works to manage its effects. A number of measures have been taken to prevent and combat the possibility of contagion and the Ospitaletto (Brescia) and Bareggio (Milan) plants, which account for about 60% of the Group’s total production, suspended production from 16. As a result of the legislative measures adopted, the other Italian plants have also stopped operating as of yesterday 23 March. To date, in the foreign plants (Turkey, Brazil, Poland and China), production is proceeding at full capacity. As things stand, the elements of uncertainty regarding the worldwide spread of the epidemic and the effectiveness of the countermeasures adopted in the various countries are such that it is not possible to quantify the effects on the activities of the Group and the markets in which it operates, and at the moment it is not possible to confirm the previous estimates for 2020.
BUSINESS AND FINANCIAL SITUATION OF SABAF S.P.A.
2019
2018
CHANGE
% CHANGE
94,899
110,065
(15,166)
-13.8%
EBITDA
13,127
13,644
(517)
-3.8%
EBIT
2,948
5,543
(2,595)
-46.8%
Pre-tax profit (EBT)
3,691
9,227
(5,536)
-60.0%
Net Profit
3,822
8,040
(4,218)
-52.5%
(€/000) Sales revenue
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SABAF . 2019 ANNUAL REPORT
The reclassification based on financial criteria is illustrated below: 31.12.2019
31.12.2018
120,147
96,495
Non-current financial assets
5,340
5,367
Short-term assets 7
50,750
64,927
(22,751)
(25,626)
27,999
39,301
(4,862)
(3,278)
148,624
138,885
Short-term net financial position
(3,149)
(12,056)
Medium/long-term net financial position
(36,719)
(33,789)
Net financial position
(39,868)
(45,845)
Shareholders’ equity
108,755
92,040
(€/000)
2019
2018
Opening liquidity
2,16910
2,697
Operating cash flow
27,682
8,796
Cash flow from investments
(17,903)
(15,219)
9,779
(6,423)
(3,605)
5,685
Cash flow for the period
6,174
(738)
Closing liquidity
8,343
1,959
(€/000) Non-current assets 6
Short-term liabilities Working capital
8
9
Provisions for risks and charges, Post-employment benefits, deferred taxes Net invested capital
Cash flows for the financial year are summarised in the table below:
Free cash flow Cash flow from financing activities
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 2019 financial year ended with a turnover 13.8% lower than 2018 due to the slowdown in demand in some of the main markets in which the Company operates (Turkey, Middle East, South America). Due to the merger through incorporation of Sabaf Immobiliare s.r.l., whose accounting effects have been backdated to 1 January 2019, the economic data for the year is not directly comparable with that of 2018. Please refer to the Explanatory Notes to the Separate Financial Statements for a detailed analysis of the performance of the individual items in the company’s financial statements.
At 31 December 2019, working capital stood at € 28 million compared with € 39.3 million at the end of the previous year: its percentage impact on turnover stood at 29.5% from 35.7% at the end of 2018. The net financial debt was € 39.9 million, compared with € 45.8 million on 31 December 2018. At the end of the year, shareholders’ equity amounted to € 108.8 million, compared with € 92 million in 2018. The ratio between the net financial debt and the shareholders’ equity was 36.7%; it was 49.8% at the end of 2018.
In 2019, Sabaf S.p.A. invested approximately € 7 million. The main investments in the financial year were aimed at increasing and automating the production capacity of special burners and making moulds for new burners. Investments in maintenance and replacement, so that production equipment is kept constantly up to date and efficient, are systematic. Excluding Financial assets. Sum of Inventories, Trade receivables, Tax receivables and Other current receivables. 8 Sum of Trade payables, Tax payables and Other liabilities. 9 Difference between short-term assets and short-term liabilities. 10 The value of cash and cash equivalents refers to the pro-forma financial statements at 31 December 2018 including Sabaf Immobiliare s.r.l.. 6 7
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REPORT ON OPERATIONS
RECONCILIATION BETWEEN PARENT COMPANY AND CONSOLIDATED SHAREHOLDERS’ EQUITY AND NET PROFIT FOR THE PERIOD Pursuant to the CONSOB memorandum of 28 July 2006, a reconciliation statement of the result of the 2019 financial year and Group shareholders’ equity at 31 December 2019 with the same values of the parent company Sabaf S.p.A. is given below:
31.12.2019
31.12.2018
Prof it for the year
Shareholders’ equity
Prof it for the year
Shareholders’ equity
Profit and shareholders’ equity of parent company Sabaf S.p.A.
3,822
108,755
8,040
92,039
Equity and consolidated company results
7,833
105,637
15,324
113,123
Elimination of the carrying value of consolidated equity investments
580
(81,502)
640
(83,622)
Put options on minorities
168
(10,350)
55
(1,818)
(2,189)
(931)
(8,005)
(427)
(31)
(124)
(256)
51
Minority interests
(268)
(7,077)
(184)
(1,644)
Profit and shareholders’ equity attributable to the Group
9,915
114,408
15,614
117,702
Description
Intercompany eliminations Other adjustments
USE OF THE LONGER TIME LIMIT FOR CALLING THE SHAREHOLDERS’ MEETING 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 2019 financial statements. The Shareholders’ Meeting will be convened on a single date for 4 May 2020.
Proposal for allocation of 2019 profit As we thank our employees, the Board of Statutory Auditors, the Independent Auditors and the supervisory authorities for their invaluable cooperation, we would kindly ask the shareholders to approve the financial statements ended 31 December 2019 with a profit for the year of € 3,821,876. The Board of Directors, having acknowledged the significant change in the global economic scenario following the spread of the coronavirus pandemic, on a prudential basis, proposes to allocate the profit for 2019 of the parent company Sabaf S.p.A. entirely to the extraordinary reserve.
Ospitaletto, 24 March 2020 The Board of Directors
119
SABAF . 2019 ANNUAL REPORT
Consolidated financial statements at 31 December 2019 123
Group structure and corporate bodies
124
Consolidated statement of financial position
125
Consolidated income statement
126
Consolidated statement of comprehensive income
126
Statement of changes in consolidated shareholders’ equity
127
Consolidated statement of cash flows
128
Explanatory notes
163
Certification of the Consolidated Financial Statements
164
Report on the Audit of the Consolidated Financial Statements
122
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Group structure and corporate bodies Group structure Parent company:
SABAF S.p.A.
Subsidiaries and equity interest pertaining to the Group Companies consolidated on a line-by-line basis Faringosi Hinges s.r.l.
100%
Okida Elektronik Sanayi ve Tickaret A.S
100%
Sabaf do Brasil Ltda.
100%
Sabaf US Corp.
100%
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf Turkey)
100%
C.M.I. s.r.l.
68.5%
Sabaf Appliance Components Trading (Kunshan) Co., Ltd.
C.G.D. s.r.l.
68.5%
100%
C.M.I. Polska Sp. Zoo.
68.5%
Sabaf Appliance Components (Kunshan) Co., Ltd.
100%
Companies measured at equity
70%
Handan ARC Burners Co., Ltd.
A.R.C. s.r.l.
35.7%
Board of Directors Chairman
Giuseppe Saleri
Director
Alessandro PotestĂ
Vice Chairman*
Nicla Picchi
Director*
Carlo Scarpa
Chief Executive Officer
Pietro Iotti
Director*
Daniela Toscani
Director
Gianluca Beschi
Director*
Stefania Triva
Director
Claudio Bulgarelli
Board of Statutory Auditors Chairman
Alessandra Tronconi
Statutory Auditor
Luisa Anselmi
Statutory Auditor
Mauro Vivenzi
* independent directors
Independent Auditors EY S.p.A.
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SABAF . 2019 ANNUAL REPORT
Consolidated statement of financial position NOTES
31.12.2019
31.12.2018
Property, plant and equipment
1
75,885
70,765
Investment property
2
3,976
4,403
Intangible assets
3
51,668
39,054
Equity investments
4
115
380
Non-current financial assets
10
60
120
Non-current receivables
5
297
188
Deferred tax assets
21
6,505
4,617
138,506
119,527
(€/000) ASSETS NON-CURRENT ASSETS
TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories
6
35,343
39,179
Trade receivables
7
46,929
46,932
Tax receivables
8
4,458
4,466
Other current receivables
9
1,459
1,534
Current financial assets
10
1,266
3,511
Cash and cash equivalents
11
18,687
13,426
108,142
109,048
0
0
246,648
228,575
TOTAL CURRENT ASSETS ASSETS HELD FOR SALE TOTAL ASSETS SHAREHOLDERS’ EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY Share capital
12
11,533
11,533
Retained earnings, Other reserves
13
92,580
90,555
9,915
15,614
114,028
117,702
7,077
1,644
121,105
119,346
Profit for the year Total equity interest of the Group Minority interests TOTAL SHAREHOLDERS’ EQUITY NON-CURRENT LIABILITIES Loans
14
44,046
42,406
Other financial liabilities
15
7,383
1,938
Post-employment benefit and retirement provisions
16
3,698
2,632
Provisions for risks and charges
17
995
725
Deferred tax liabilities
21
7,273
3,030
63,395
50,731
TOTAL NON-CURRENT LIABILITIES CURRENT LIABILITIES Loans
14
19,015
18,435
Other financial liabilities
15
4,637
7,682
Trade payables
18
27,560
21,215
Tax payables
19
1,802
3,566
Other payables
20
9,134
7,600
62,148
58,498
0
0
246,648
228,575
TOTAL CURRENT LIABILITIES LIABILITIES HELD FOR SALE TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 124
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Consolidated income statement NOTES
2019
2018
Revenue
23
155,923
150,642
Other income
24
(€/000) INCOME STATEMENT COMPONENTS OPERATING REVENUE AND INCOME
Total operating revenue and income
3,621
3,369
159,544
154,011
(57,464)
(62,447)
(8,617)
4,603
OPERATING COSTS Materials
25
Change in inventories Services
26
(29,488)
(31,297)
Personnel costs
27
(37,103)
(34,840)
Other operating costs
28
(1,698)
(1,670)
1,859
1,599
(132,511)
(124,052)
27,033
29,959
(15,183)
(12,728)
46
28
0
(850)
11,896
16,409
638
373
Costs for capitalised in-house work Total operating costs
OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION, CAPITAL GAINS/ LOSSES, AND WRITE-DOWNS/WRITE-BACKS OF NON-CURRENT ASSETS Depreciations and amortisation
1, 2, 3
Capital gains on disposals of non-current assets Value adjustments of non-current assets
EBIT Financial income Financial expenses
29
(1,339)
(1,206)
Exchange rate gains and losses
30
(1,380)
5,384
Profits and losses from equity investments
4
(39)
0
9,776
20,960
407
(5,162)
10,183
15,798
PROFIT BEFORE TAXES Income taxes
31
PROFIT FOR THE YEAR of which: Minority interests
268
184
9,915
15,614
Base
€ 0.895
€ 1.413
Diluted
€ 0.895
€ 1.413
PROFIT ATTRIBUTABLE TO THE GROUP
EARNINGS PER SHARE (EPS)
32
125
SABAF . 2019 ANNUAL REPORT
Consolidated statement of comprehensive income (€/000)
2019
2018
PROFIT FOR THE YEAR
10,183
15,798
(26)
32
Total profits/losses that will not be subsequently reclassified under profit (loss) for the year Actuarial evaluation of post-employment benefit Tax effect
6
(8)
(20)
24
Forex differences due to translation of financial statements in foreign currencies
(3,323)
(3,940)
TOTAL OTHER PROFITS/(LOSSES) NET OF TAXES FOR THE YEAR
(3,343)
(3,916)
TOTAL PROFIT
6,840
11,882
Total profits/losses that will not be subsequently reclassified under profit (loss) for the year
of which: Minority interests TOTAL PROFIT ATTRIBUTABLE TO THE GROUP
268
184
6,572
11,698
Statement of changes in consolidated shareholders’ equity Balance at 31 December 2017
Share capital
Share premium reserve
Legal reserve
Treasury shares
Translation reserve
Post-employment benefit discounting reserve
11,533
10,002
2,307
(4,509)
(12,194)
(550)
Other Profit for reserves the year
Total Group shareholders’ equity
Minority interests
Total shareholders’ equity
1,460
115,055
92,171
14,835
113,595
(6,071)
(6,071)
(6,071)
8,764
(8,764) (2,359)
(2,359)
Allocation of 2017 profit - dividends paid out - carried forward Purchase of treasury shares
(2,359)
IFRS 2 measurement stock grant plan
321
321
321
Other changes
518
518
518
Total profit at 31 December 2018
Balance at 31 December 2018
11,533
10,002
2,307
(6,868)
(3,940)
24
(16,134)
(526)
15,614
11,698
184
11,882
15,614
117,702
1,644
119,346
(6,060)
(6,060)
(6,060)
681
681
681
208
4,808
4,808
(981)
(981)
(8,700)
(8,700)
(8,700)
(512)
6
6
101,774
Allocation of 2018 profit - dividends paid out - carried forward
9,554
IFRS 2 measurement stock grant plan Sale of treasury shares
4,600
Change in the scope of consolidation C.M.I. Group put option Other changes
518
Total profit at 31 December 2019 Balance at 31 December 2019
126
11,533
10,002
2,307
(2,268)
(3,323)
(20)
(18,939)
(546)
102,024
(9,554)
5,165
4,184
9,915
6,572
268
6,840
9,915
114,028
7,077
121,105
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Consolidated statement of cash flows (â‚Ź/000)
2019
2018
Cash and cash equivalents at beginning of year
13,426
11,533
Profit for the year
10,183
15,798
15,183
12,728
0
850
- Realised gains/losses
(46)
(28)
- Valuation of the stock grant plan
681
321
- Profits and losses from equity investments
39
0
Adjustments for: - Depreciation and amortisation - Write-downs of non-current assets
- Net financial income and expenses
701
833
(407)
5,162
Change in post-employment benefit
300
(241)
Change in risk provisions
270
340
Change in trade receivables
10,148
(3,003)
Change in inventories
9,090
(4,374)
Change in trade payables
(2,901)
556
Change in net working capital
16,337
(6,821)
Change in other receivables and payables, deferred tax liabilities
1,344
2,537
Payment of taxes
(2,952)
(4,860)
Payment of financial expenses
(1,339)
(1,178)
- Income tax
Collection of financial income
638
373
Cash flows from operations
40,932
25,814
- intangible
(1,016)
(589)
- tangible
(11,510)
(11,348)
- financial
0
(99)
Investments in non-current assets
512
569
Cash flow absorbed by investments
(12,014)
(11,467)
Free cash flow
28,918
14,347
Repayment of loans
(29,682)
(19,579)
Disposal of non-current assets
Raising of loans
18,271
52,972
Short-term financial assets
2,245
(3,384)
Purchase/sale of treasury shares Payment of dividends Cash flow absorbed by financing activities Acquisition of Okida Elektronik
3,146
(2,359)
(6,060)
(6,071)
(12,080)
21,579
(317)
(24,077)
(10,475)
0
482
(9,956)
Net cash flows for the year
6,528
1,893
Cash and cash equivalents at end of year (Note 10 and 11)
19,954
13,426
Current financial debt
23,652
22,606
Non-current financial debt
51,430
44,344
Net financial debt (Note 22)
55,128
53,524
C.M.I. acquisition Foreign exchange differences
127
SABAF . 2019 ANNUAL REPORT
Explanatory Notes Accounting standards STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION
Handan A.R.C. Burners Co. Ltd., an associate company, is consolidated starting from this year using the equity method.
The consolidated financial statements of the Sabaf Group for the financial year 2019 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 changes in the scope of consolidation compared to 31 December 2018 are related to the • companies of the C.M.I. Group (C.M.I. s.r.l., C.G.D. s.r.l. and C.M.I. Polska Sp. Zoo), over which the Group acquired control on 31 July 2019; • Sabaf U.S. consolidated using the line-by-line consolidation method as from this year
FINANCIAL STATEMENTS The Group has adopted the following formats: • current and non-current assets and current and non-current liabilities are stated separately in the statement of the financial position; • an income statement that expresses costs using a classification based on the nature of each item; • a comprehensive income statement that expresses revenue and expense items not recognised in profit (loss) for the year as required or permitted by IFRS; • a cash flow statement that presents cash flows originating from operating activity, using the indirect method. Use of these formats permits the most meaningful representation of the Group’s operating results, financial position and cash flows.
SCOPE OF CONSOLIDATION The scope of consolidation at 31 December 2019 comprises the parent company Sabaf S.p.A. and the following companies controlled by Sabaf S.p.A.: • Faringosi Hinges s.r.l. • Sabaf do Brasil Ltda. • Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf Turkey) • Sabaf Appliance Components Trading (Kunshan) Co., Ltd. • A.R.C. s.r.l. • Okida Elektronik Sanayi ve Tickaret A.S • Sabaf U.S. • C.M.I. s.r.l. • C.G.D. s.r.l. • C.M.I. Polska Sp. Zoo
128
Also note that on 29 November 2019 the merger by incorporation of Sabaf Immobiliare s.r.l., previously consolidated on a line-by-line basis, into Sabaf S.p.A. became effective for third parties. The tax and accounting effects of this transaction were backdated to 1 January 2019. The approach adopted, in accordance with the ASSIREVI Preliminary Guidelines on IFRS (OPI no. 2 – Revised), resulted in retaining the continuity of values with respect to the consolidated financial statements. 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. Subsidiaries are consolidated from the date on which control begins until the date on which control ceases.
CONSOLIDATION CRITERIA 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: a) Assets and liabilities, income and costs in the financial statements consolidated on a line-by-line basis are incorporated into the Group financial statements, regardless of the entity of the equity interest concerned. In addition, the carrying value of equity interests is eliminated against the shareholders’ equity relating to investee companies. b) Positive differences arising from elimination of equity investments against the carrying value of shareholders’ equity at the date of firsttime consolidation are attributed to the higher values of assets and liabilities when possible and, for the remainder, to goodwill. In accordance with the provisions of IFRS 3. Since 1 January 2004, the Group has not amortised goodwill and instead subjects it to impairment testing. c) Payable/receivable and cost/revenue items between consolidated companies and profits/losses arising from intra-group transactions are eliminated. d) The portion of shareholders’ equity and net profit for the period pertaining to minority shareholders is posted in specific items of the balance sheet and income statement.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
INFORMATION RELATED TO IFRS 3 As from 31 July 2019, the C.M.I.1 Group, one of the main players in the design, production and sale of hinges for household appliances was consolidated, active with production units in Italy and Poland. The acquisition of C.M.I. s.r.l. allows the Sabaf Group to achieve a leadership position on a global scale in the hinges sector, proposing itself also in this area as a reference partner for all manufacturers of household appliances.
Original values at 31.07.2019
The allocation of the price paid for the acquisition of the C.M.I. Group on the net assets acquired (Purchase Price Allocation) was completed during 2019. Specifically, in accordance with IFRS 3 revised, the fair value of assets, liabilities and contingent liabilities was recognised at the acquisition date, the effects of which are shown in the table below:
Purchase Price Allocation
Other changes
Fair value of assets and liabilities acquired
ASSETS Property, plant and equipment
5,931
Intangible Fixed Assets
2,218
5,931 12,647
- Customer Relationship
4,315
- Brand
4,180
- Patents
4,152
14,865
127
159
286
Inventories
5,254
17
5,271
Trade receivables
10,145
Other non-current assets
10,145
Other receivables
1,253
1,253
Cash and cash equivalents
1,255
1,255
TOTAL ASSETS
26,183
12,823
39,006
(766)
(166)
(932)
(400)
(400)
(3,528)
(3,745)
LIABILITIES Post-employment benefit provision Provisions for risks and charges Deferred tax liabilities
(217)
Financial payables
(6,511)
(6,511)
Trade payables
(9,246)
(9,246)
Other payables
(1,733)
(1,733)
(18,473)
(4,094)
(22,567)
Value of net assets acquired
7,710
8,729
16,439
- % pertaining to Sabaf (68.5%) (a)
5,281
5,979
11,260
TOTAL LIABILITIES
(1,788)
Carve out of goodwill recorded in C.M.I. (b) Total cost of acquisition (c)
13,392
(1,788) 13,392
Receivables from current minority shareholder (d)
240
240
1,548
3,680
Goodwill deriving from acquisition (e = c-a-b-d)
8,111
Acquired cash and cash equivalents (f)
1,255
1,255
Sale of treasury shares in exchange (g)
1,662
1,662
Net cash outlay (c-f-g)
10,475
10,475
1
(5,979)
Financial data at 31 December 2019 and economic results for the period for which the Group held control (31 July - 31 December 2019) were consolidated.
129
SABAF . 2019 ANNUAL REPORT
The financial payables of the C.M.I. Group at the acquisition date amounted to € 6.511 million, of which € 2.398 million deriving from the application of IFRS 16 according to the modified retrospective approach. 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: • Customer Relationship: fair value of € 4.315 million determined using the “Multi-period Excess Earnings” method, taking the following parameters as reference: • revenue relating to customers with whom there is a strong technical and commercial relationship • profitability in line with the historical average • economic useful life of 15 years • discount rate of 11.68% • g growth rate of 1.15%
• Patents: fair value of € 4.152 million determined using the “Relief from Royalty” method, taking the following parameters as reference: • revenues from products covered by patents at the valuation date • royalty rate equal to 4.10% • economic useful life of 9 years • discount rate of 11.68% • g growth rate of 1.15% The related tax effect was recognised on the fair value of the intangible assets identified above (recognition of deferred taxes of € 3.528 million). The Purchase Price Allocation also led to the recognition of provisions for risks and charges totalling € 0.4 million (Note 17). In the period for which the Group held control (31 July 2019 - 31 December 2019), the C.M.I. Group achieved sales revenue of € 12.5 million and a net profit of € 0.43 million.
• Brand: fair value of € 4.180 million determined using the “Relief from Royalty” method, taking the following parameters as reference: • total revenue at the valuation date • royalty rate equal to 2% • economic useful life of 15 years • discount rate of 11.68% • g growth rate of 1.15%
CONVERSION INTO EURO OF FOREIGN-CURRENCY INCOME STATEMENTS AND STATEMENTS OF FINANCIAL POSITION 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. Description of currency
EXCHANGE RATE IN EFFECT AT 31.12.19
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:
2019 AVERAGE EXCHANGE RATE
EXCHANGE RATE IN EFFECT AT 31.12.18
2018 AVERAGE EXCHANGE RATE 4.3085
Brazilian real
4.5157
4.4151
4.4440
Turkish lira
6.6843
6.3486
6.0588
5.7145
Chinese renminbi
7.8205
7.7336
7.8751
7.8038
Polish Zloty
4.2568
4.3123
-
-
SEGMENT REPORTING 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:
130
• gas parts (household and professional) • hinges • electronic components for household appliances.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
ACCOUNTING POLICIES
Goodwill
The accounting standards and policies applied for the preparation of the consolidated financial statements at 31 December 2019, unchanged versus the previous year, with the exception of the new accounting standards adopted as from 1 January 2019 (IFRS 16 and IFRIC 23), are shown below:
Property, plant and equipment 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 Electronic equipment Vehicles and other transport means
8 5 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.
Leased assets The Group assesses at the time of signing an agreement whether it is, or contains, a lease, or if the contract gives the right to control the use of an identified asset for a period of time in exchange for a consideration. The Group adopts a single recognition and measurement model for all leases according to which the assets acquired relating to the right of use are shown under assets at purchase value less depreciation, any impairment losses and adjusted for any re-measurement of lease liabilities. Assets are depreciated on a straight-line basis from the starting date of the agreement until the end of the useful life of the asset or the end of the lease agreement, whichever comes first. Set against recognition of such assets, the amounts payable to the lessor, are posted among short- and medium-/long-term payables, by measuring them at the present value of the lease payments not yet made. Moreover, financial charges pertaining to the period are charged to the income statement. The Group applies the exemption for the recognition of short-term leases and leases relating to low-value assets the lease payments of which are recognised in the income statement as expenses on a straight-line basis over the lease term. Further details on the criteria used to recognise leased assets and the related impact on the Group’s consolidated financial statements are described in the paragraph “Adoption of the accounting standard IFRS 16 “Leases””.
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).
Equity investments in associates and joint ventures An associated company is a company on which the Group exercises significant influence. Significant influence is the power to participate in determining the financial and operational policies of the associated company without having control or joint control over it. A joint venture is a joint control agreement in which the parties holding the joint control have rights on the net assets of the agreement. The Group’s equity investment in associates and joint ventures are measured using the equity method: the equity investment are initially entered at cost, subsequently, the carrying value of the equity investment is increased or decreased to reflect the investor’s share of the investee’s profits and losses realised after the acquisition date. Goodwill pertaining to the associated company or joint venture is included at the carrying value of the equity investment and is not subject to individual assessment of impairment).
Other intangible assets 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
Patents
9
Know-how
7
Development costs Software
10 3-5
131
SABAF . 2019 ANNUAL REPORT
Impairment
Inventories
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 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 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.
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.
Investment property 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 and non-current receivables 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. 132
Trade receivables and other financial assets Initial recognition 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. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below. Financial assets at amortised cost (debt instruments) 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: • the financial asset is held as part of a business model whose objective is to hold financial assets for the purpose of collecting contractual cash flows and • the contractual terms of the financial asset envisage, at certain dates, cash flows represented solely by payments of principal and interest on the amount of principal to be repaid 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.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Financial assets at fair value through profit or loss 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.
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 cash 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 cash 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 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 cash 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.
Post-employment benefit The post-employment benefit 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 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)”.
Trade payables and other financial liabilities Initial recognition 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. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below. Financial liabilities at fair value recognised in the income statement 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. Loans and payables 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.
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Derecognition 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.
Policy for conversion of foreign currency items Receivables and payables originally expressed in foreign currencies are converted into euro at the exchange rates in force on the date of the transactions originating them. Forex differences realised upon collection of receivables and payment of payables in foreign currency are posted in the income statement. Income and costs relating to foreign-currency transactions are converted at the rate in force on the transaction date. At year-end, assets and liabilities expressed in foreign currencies, with the exception of non-current items, are posted at the spot exchange rate in force at the end of the reporting period and related foreign exchange gains and losses are posted in the income statement. If conversion generates a net gain, this value constitutes a non-distributable reserve until it is effectively realised.
Derivative instruments and hedge accounting 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 134
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 from contracts with customers The Group is engaged in the supply of components for household appliances (mainly gas parts, 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.
Financial income 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 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 for the year 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.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Dividends
Use of estimates
Dividends are posted on an accrual basis when the right to receive them materialises, i.e. when shareholders approve dividend distribution.
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:
Treasury shares 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.
Equity-settled transactions Some Group 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 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.
Earnings per share 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.
Recoverable amount of tangible and intangible assets The procedure for determining impairment losses 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. Provisions for bad debts 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. Provisions for inventory obsolescence 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. Employee benefits 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. Share-based payments 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. Income taxes 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. 135
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Other provisions 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.
New accounting standards Accounting standards, amendments and interpretations applicable from 1 January 2019
Standard IFRS 16 “LEASES” (published on 13 January 2016), which replaced 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 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 lease 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 impacts resulting from the first-time adoption of this standard are described in detail in the paragraph “Adoption of the accounting standard IFRS 16 “Leases””. Interpretation of IFRIC 23 “UNCERTAINTY OVER INCOME TAX TREATMENTS”. The Interpretation defines the accounting treatment of income taxes when the tax treatment involves uncertainties that have an effect on the application of IAS 12 and does not apply to taxes or duties that do not fall within the scope of IAS 12. The Group defines whether to consider each uncertain tax treatment separately or together with other uncertain tax treatments and uses the approach that provides better predictions of the resolution of the uncertainty. At the time the interpretation was adopted, the Group examined the existence of uncertain tax positions and determined that its tax treatment (including that of its subsidiaries) is likely to be accepted by the tax authorities. Therefore, the interpretation had no impact on the Group’s consolidated financial statements. Amendment to IFRS 9 “PREPAYMENT FEATURES WITH NEGATIVE COMPENSATION”. Under IFRS 9, a debt instrument may be measured at amortised cost or at fair value through other comprehensive income (FVOCI), on condition that the contractual cash flows are “solely payments of principal and interest on the reference amount” (the SPPI criterion) and that the instrument is classified in the appropriate business model. The amendments to IFRS 9 clarify that a financial asset meets the SPPI criterion regardless of the event of the circumstance that caused the early 136
termination of the contract and regardless of which is the party paying or receiving a reasonable compensation for the early termination of the contract. These amendments had no impact on the Group’s consolidated financial statements. Amendment to IAS 19 “PLAN AMENDMENT, CURTAILMENT OR SETTLEMENT”. The amendments clarify how pension costs are determined when a change occurs in a defined benefit plan. These amendments had no impact on the consolidated financial statements insofar as the Group, in the reference period, did hot record any amendment, curtailment or settlement of the plans. Amendment to IAS 28 “LONG-TERM INTERESTS IN ASSOCIATES AND JOINT VENTURES”. 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. These amendments did not have any impact on the Group’s consolidated financial statements, insofar as the Group does not have equity investments in associates and joint ventures that are not measured with the equity method. Document “ANNUAL IMPROVEMENTS TO IFRSS 2017–2015 CYCLE”, which implements the amendments to the standards as part of their annual process of improvement: • IFRS 3 Business combinations: The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination, which is carried out in different stages, including the re-measurement of the fair value of the interest previously held in the assets and liabilities of the joint operation. In doing this, the acquirer reassess the interest previously held in the joint operation. This amendment had no impact on the Group’s consolidated financial statements; • IFRS 11 Joint Arrangements: An entity that participates in a joint operation, without having joint control, could obtain joint control of the joint operation if its activity constitutes a business as defined in IFRS 3. The amendments clarify that previously held interests in this joint operation are not re-measured. This amendment had no impact on the Group’s consolidated financial statements; • IAS 12 Income Taxes: The amendments clarify that the tax consequences of dividends are related to past transactions or to events that generated distributable profits rather than to distributions to shareholders. As the Group’s current practice is in line with these amendments, the Group did not recognise any impact resulting from said amendments on its consolidated financial statements; • IAS 23 Borrowing Costs: The amendments clarify that any borrowing made, which right from the start was intended to improve an asset, must be treated by the entity as non-specific if all of the measures needed to prepare said asset for use or sale have been completed. As the Group’s current practice is in line with these amendments, the Group did not recognise any impact resulting from said amendments on its consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
IFRS and IFRIC accounting standard, amendments approved by the European Union, not yet universally applicable and not adopted early by the Group at 31 December 2019 Amendments to IFRS 3 “DEFINITION OF A BUSINESS”. In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 to support entities in determining whether or not a set of assets acquired constitutes a business. The amendments clarify the minimum requirements for having a business, remove the assessment of whether market participants can replace any missing elements, add guidelines to support entities in assessing whether an acquired process is substantial, narrow the definitions of business and output, and introduce an optional fair value concentration test. Since the amendments apply prospectively to transactions or other events occurring on or after the date of first-time adoption, the Group is not affected by these amendments. Amendments to IAS 1 AND IAS 8 “DEFINITION OF MATERIAL”. In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of “material” in standards and to clarify certain aspects of the definition. The new definition indicates that information is material if, as a result of its omission, or as a result of its incorrect or incomprehensible presentation, one could reasonably expect to influence the decisions that the main users of the financial statements would make on the basis of the financial information contained therein. The application is required, prospectively, starting from the financial statements of the financial years starting from 1 January 2020. The directors do not expect a significant effect on the Group’s consolidated financial statements through the adoption of these changes.
Adoption of the accounting standard IFRS 16 “Leases” The Group applied IFRS 16 from 1 January 2019 by using the amended retrospective approach. Therefore, the cumulative effect of the adoption of IFRS 16 was recognised as an adjustment to the opening balance of retained earnings at 1 January 2019, without recalculating the comparative information. In particular, the Group analysed all agreements in force since 1 January 2019 and relating to the use of third-party assets in the light of the new definition of lease contained in the standard and recognised: • a financial liability, the initial recognition of which is equal to the present value of remaining future payments at the transition date. The liability for leased assets is subsequently increased by the interest accruing on that liability and decreased in correlation with the lease payments; • a right of use, the value of which was initially set equal to the value of the financial liability and subsequently depreciated on a straight-line basis until the end of the useful life of the asset or the end of the lease term, whichever comes first. In adopting IFRS 16, the Group made use of the exemption granted in paragraph 5 a) in relation to leases with a duration of less than 12 months (known as short-term leases) and the exemption granted in paragraph 5 b) in relation to lease agreements whose underlying asset is a low-value asset. For these agreements, lease payments are recognised in the income statement on a straight-line basis for the duration of the respective agreements. The following table summarises the main characteristics of the agreements that have been the subject matter of the above exemptions:
IFRS accounting standards, amendments and interpretations not yet approved by the European Union 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. 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. The directors do not expect the adoption of these amendments to have any impact on the Group’s consolidated financial statements.
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(€/000) SUBJECT-MATTER OF THE AGREEMENT
APPLIED EXEMPTION
VALUE OF THE AGREEMENT
Fork lifts
Short-term leases
25
Fork lifts
Low-value asset
10
Property
Short-term leases
25
Company cars
Short-term leases
24
Machinery
Short-term leases
9
Printers
Low-value asset
6
Total value of agreements subject matter of the exemption
When evaluating the lease liabilities, the Group discounted the payments due for the lease using the incremental borrowing rate, the weighted average of which was 7.56% on 1 January 2019 and 7.08% on 31 December 2019. The rate was defined taking also account of the currency in which the lease agreements are denominated and the country in which the leased asset is located. The lease term is calculated based on the non-cancellable period of the lease, including the periods covered by the option to extend or to terminate the lease if it is reasonably certain that those options will be exercised or not exercised, taking account of all relevant factors that create an economic incentive relating to those decisions. Moreover, with reference to the transition rules, upon first time adoption the Group adopted some practical expedients provided for by the Standard: • agreements with a term of less than 12 months of the transition date were classified as short-term leases, therefore the related lease payments are recognised in the income statement on a straight-line basis; • initial costs were excluded from the valuation of the asset for the right of use on the initial application date;
Adoption of IFRS 16 Effects at 1 January 2019
98
• the information present at the transition date was used to determine the lease term, with a special reference to the exercise of renewal and early closure options; • payments for the use of the asset (lease component) and payments for services or maintenance (non-lease component) related to the same asset were not separated; • the Group did not change the carrying value of assets and liabilities at the date of first-time adoption for leases previously classified as finance leases, i.e. the right-of-use assets and lease liabilities are measured at the same value as they were when applying IAS 17. The following tables summarise the effects of the adoption of IFRS 16 according to the amended retrospective approach at the date of first-time adoption, 1 January 2019, and at 31 December 2019. Further details are provided in the notes relating to the specific items on which the standard has had an impact: Note 1 “Property, plant and equipment”, Note 2 “Investment property” and Note 14 “Loans”.
BOOK VALUE AT 01.01.2019 IN CASE OF NONADOPTION OF IFRS 16
EFFECT OF IFRS 16
BOOK VALUE AT 01.01.2019
75,168
1,209
76,377
44,344
914
42,258
26,117
295
26,412
90,555
-
90,555
ASSETS Property, plant and equipment and investment property LIABILITIES Loans beyond 12 months Loans within 12 months SHAREHOLDERS’ EQUITY Retained earnings, Other reserves
138
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
BOOK VALUE AT 31.12.2019 IN CASE OF NONADOPTION OF IFRS 16
EFFECT OF IFRS 16
BOOK VALUE AT 31.12.2019
76,718
3,143
79,861
Loans beyond 12 months
49,174
2,255
51,429
Loans within 12 months
22,688
964
23,652
92,557
23
92,580
BOOK VALUE AT 31.12.2019 IN CASE OF NONADOPTION OF IFRS 16
EFFECT OF IFRS 16
BOOK VALUE AT 31.12.2019
Costs for services
30,230
(742)
29,488
Depreciations and amortisation
14,478
705
15,183
1,249
90
1,339
Shareholders’ equity
121,134
(29)
121,105
Net financial debt
51,909
3,219
55,128
EBITDA
26,291
742
27,033
EBIT
11,859
37
11,896
Net profit for the period
9,967
(52)
9,915
Adoption of IFRS 16 Effects at 31 December 2019 ASSETS Property, plant and equipment and investment property LIABILITIES
SHAREHOLDERS’ EQUITY Retained earnings, Other reserves
Adoption of IFRS 16 Effects at 31 December 2019 INCOME STATEMENT 12 MONTHS 2019
Financial expenses ECONOMIC AND FINANCIAL INDICATORS
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SABAF . 2019 ANNUAL REPORT
Comments on significant balance sheet items 1. PROPERTY, PLANT AND EQUIPMENT PROPERTY
PLANT AND EQUIPMENT
OTHER ASSETS
ASSETS UNDER CONSTRUCTION
TOTAL
52,061
189,883
41,818
3,322
287,084
COST At 31 December 2017 Increases
309
6,120
1,703
3,250
11,382
Disposals
-
(1,644)
(125)
-
(1,769)
Change in the scope of consolidation
-
350
340
-
690
Reclassifications
5
1,647
84
(1,770)
(34)
Forex differences At 31 December 2018 Increases Disposals
(868)
(1,840)
(563)
(114)
(3,385)
51,507
194,516
43,257
4,688
293,968
236
3,946
3,932
3,282
11,396
-
(1,224)
(767)
-
(1,991)
362
-
1,035
-
1,397
Change in the scope of consolidation
2,900
15,183
6,034
137
24,254
Reclassifications
1,376
3,742
91
(4,850)
359
First-time adoption of IFRS 16
Forex differences At 31 December 2019
(307)
(532)
(154)
(93)
(1,086)
56,074
215,631
53,428
3,164
328,297
214,015
ACCUMULATED DEPRECIATIONS At 31 December 2017
18,284
159,042
36,689
-
Depreciations for the year
1,466
7,781
2,125
-
11,372
Eliminations for disposals
-
(1,178)
(92)
-
(1,270)
Change in the scope of consolidation
-
289
212
-
501
Reclassifications
4
40
28
-
72
Forex differences
(151)
(956)
(380)
-
(1,487)
19,603
165,018
38,582
-
223,203
Depreciations for the year
1,681
8,168
2,339
-
12,188
Eliminations for disposals
-
(1,593)
(159)
-
(1,752)
Change in the scope of consolidation
1,314
12,334
5,301
-
18,949
Reclassifications
256
49
28
-
333
At 31 December 2018
Forex differences At 31 December 2019
(75)
(312)
(122)
-
(509)
22,779
183,664
45,969
-
252,412
NET CARRYING VALUE At 31 December 2019
33,295
31,967
7,459
3,164
75,885
At 31 December 2018
31,904
29,498
4,675
4,688
70,765
The breakdown of the net carrying value of Property was as follows: 31.12.2019
31.12.2018
CHANGE
Land
6,659
6,699
(40)
Industrial buildings
26,636
25,205
1,431
Total
33,295
31,904
1,391
140
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Changes in property, plant and equipment resulting from the application of IFRS 16 are shown below:
1 January 2019 First-time adoption of IFRS 16 Increases Change in the scope of consolidation Decreases
PROPERTY
PLANT AND EQUIPMENT
OTHER ASSETS
TOTAL
-
-
-
-
362
-
736
1,098
-
-
298
298
1,516
513
-
2,029
-
-
-
-
Depreciations
(74)
-
(253)
(327)
Foreign exchange differences
(28)
-
-
(28)
-
-
-
-
1,776
513
781
3,070
Other changes including reclassifications At 31 December 2019
The main investments in the financial year were aimed at increasing and automating the production capacity of special burners. Other investments were made in the production of moulds 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 2019, 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.
2. INVESTMENT PROPERTY COST At 31 December 2017
12,937
Increases
-
Disposals
(19)
At 31 December 2018
12,918
Increases
-
Disposals
(1,191)
First-time adoption of IFRS 16 At 31 December 2019
109 11,836
DEPRECIATIONS AND WRITE-DOWNS At 31 December 2017
7,240
Depreciations for the year
427
Write-downs for the year
850
Eliminations for disposals At 31 December 2018 Depreciations for the year
Changes in investment property resulting from the application of IFRS 16 are shown below: INVESTMENT PROPERTY 1 January 2019 First-time adoption of IFRS 16 Increases Decreases Depreciations
109 (36)
Foreign exchange differences
-
Other changes including reclassifications
-
At 31 December 2019
73
(2) 8,515 430
Write-downs for the year
-
Eliminations for disposals
(1,085)
At 31 December 2019
7,860
NET CARRYING VALUE At 31 December 2019
3,976
At 31 December 2018
4,403
The item Investment property includes non-operating buildings owned by the Group: these are mainly properties for residential use, held for rental or sale. At 31 December 2019, 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.
141
SABAF . 2019 ANNUAL REPORT
3. INTANGIBLE ASSETS GOODWILL
PATENTS AND SOFTWARE
DEVELOPMENT COSTS
OTHER INTANGIBLE ASSETS
TOTAL
10,778
6,859
5,372
793
23,802
-
227
340
22
589
-
-
(59)
(19)
(78)
18,632
136
-
11,983
30,751
COST At 31 December 2017 Increases Decreases Change in the scope of consolidation Reclassifications
-
-
-
-
-
Forex differences
-
(18)
-
-
(18)
At 31 December 2018
29,410
7,204
5,653
12,779
55,046
Increases
292
356
460
200
1,308
Decreases
-
(8)
(102)
(11)
(121)
3,680
1,425
717
13,664
19,486
Change in the scope of consolidation Reclassifications
(24)
-
-
(643)
(667)
Forex differences
(1,743)
(15)
-
(1,030)
(2,788)
At 31 December 2019
31,615
8,962
6,728
24,959
72,264
AMORTISATION/WRITE-DOWNS 4,563
6,254
3,041
661
14,519
Amortisation for the year
-
261
367
288
916
Decreases
-
-
-
(12)
(12)
Change in the scope of consolidation
-
52
-
525
577
Reclassifications
-
-
-
-
-
Forex differences
-
(8)
-
-
(8)
4,563
6,559
3,408
1,462
15,992
Amortisation for the year
-
296
371
1,048
1,715
Decreases
-
-
-
-
-
-
1,337
559
1,337
3,233
(17)
-
-
(250)
(267)
At 31 December 2017
At 31 December 2018
Change in the scope of consolidation Reclassifications
-
(13)
-
(64)
(77)
4,546
8,179
4,338
3,533
20,596
At 31 December 2019
27,069
783
2,390
21,426
51,668
At 31 December 2018
24,847
645
2,245
11,317
39,054
Forex differences At 31 December 2019
NET CARRYING VALUE
Goodwill Goodwill recognised at 31 December 2019 is allocated: • to the “Hinges” (CGU) cash generating units of € 4.414 million; • to the “Professional burners” CGU of € 1.770 million; • to the “Electronic components” CGU of € 17.205 million; • to the “C.M.I. hinges” CGU of € 3.680 million. 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.
Goodwill allocated to the Hinges CGU In 2019, 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 2020-2024 forward plan envisages a further increase in sales and the maintenance of high levels of profitability. At 31 December 2019, the Group tested - with 142
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 2020 to 2024 were augmented by the socalled terminal value, which expresses the operating flows that the CGU is expected to generate from the sixth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 9.54% (10.45% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2018) and a growth rate (g) of 2% (1.5% at 31 December 2018). The recoverable amount calculated on the basis of the above-mentioned assumptions and valuation techniques is € 17.182 million, compared with a carrying value of the assets allocated to the Hinges unit of € 7.923 million; consequently, the value recorded for goodwill at 31 December 2019 was deemed recoverable.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Sensitivity analysis 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%
1.75%
2.00%
2.25%
2.50%
8.54%
18,807
19,376
19,988
20,649
21,365
9.04%
17,749
17,965
18,485
19,043
19,645
9.54%
16,317
16,736
17,182
17,659
18,170
10.04%
15,293
15,657
16,043
16,454
16,892
10.54%
14,383
14,702
15,038
15,395
15,775
Goodwill allocated to the Professional burners CGU At 31 December 2019, 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 2020. Cash flows for the period from 2020 to 2024 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 6.07% (7.73% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2018) and a growth rate (g) of 1.50%, unchanged from the 2018 impairment test. The recoverable amount calculated on the basis of the above-mentioned assumptions and valuation techniques is € 8.961 million, compared with a carrying value of the assets allocated to the Professional burners unit of € 2.917 million (including minority interests); consequently, the value recorded for goodwill at 31 December 2019 was deemed recoverable.
Sensitivity analysis 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%
5.07%
10,348
10,973
11,687
12,507
13,461
5.57%
9,129
9,613
10,156
10,769
11,469
6.07%
8,152
8,536
8,961
9,435
9,968
6.57%
7,352
7,662
8,003
8,379
8,796
7.07%
6,684
6,939
7,218
7,522
7,857
Goodwill allocated to the Electronic components CGU At 31 December 2019, the Group tested - with the support of independent experts - the carrying value of its CGU Electronic components 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 2020 to 2024 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
12.92% (11.05% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2018) and a growth rate (g) of 2.50%, unchanged from the 2018 impairment test. The recoverable amount calculated on the basis of the above-mentioned assumptions and valuation techniques is € 31.366 million, compared with a carrying value of the assets allocated to the Electronic components unit of € 25.780 million; consequently, the value recorded for goodwill at 31 December 2019 was deemed recoverable.
Sensitivity analysis 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
2.00%
2.25%
2.50%
2.75%
3.00%
11.92%
33,568
34,206
34,877
35,586
36,334
12.42%
31,869
32,436
33,032
33,659
34,318
12.92%
30,328
30,835
31,366
31,923
32,508
13.42%
28,923
29,377
29,853
30,351
30,872
13.92%
27,637
28,046
28,474
28,921
29,388 143
SABAF . 2019 ANNUAL REPORT
Goodwill allocated to the C.M.I. Hinges CGU.
of use was calculated based on a discount rate (WACC) of 10.49% and a growth rate (g) of 1.15%, representative of expected future growth rates for the reference market.
At 31 December 2019, the Group tested - with the support of independent experts - the carrying value of its CGU Hinges C.M.I. 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 2020 to 2022 were augmented by the so-called terminal value, which expresses the operating flows that the CGU is expected to generate from the third year to infinity and determined based on the perpetual income. The value
The recoverable amount calculated on the basis of the above-mentioned assumptions and valuation techniques is € 32.030 million, compared with a carrying value of the assets allocated to the C.M.I. Hinges unit of € 26.211 million; consequently, the value recorded for goodwill at 31 December 2019 was deemed recoverable.
Sensitivity analysis 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
0.15%
0.65%
1.15%
1.65%
2.15%
9.50%
32,449
34,089
35,926
37,997
40,349
10.00%
30,775
32,238
33,867
35,691
37,748
10.50%
29,263
30,576
32,030
33,648
35,460
11.00%
27,892
29,076
30,380
31,824
33,431
11.50%
26,643
27,715
28,891
30,186
31,621
The net carrying value of intangible assets is broken down as follows:
Patents and software
31.12.2019 31.12.2018
Software investments are related to the extension of the application and corporate scope of the Group management system (SAP).
Development costs
CHANGE
Customer Relationship
11,355
8,477
2,878
Brand
5,055
1,174
3,881
933
1,081
(148)
3,960
-
3,960
Know-how
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).
Patents
Other intangible assets
At 31 December 2019, the recoverability of the amount of other intangible assets was verified as part of the impairment test of the related goodwill described in the previous paragraph.
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 of C.M.I. s.r.l., the latter described in the previous paragraph “Information related to IFRS 3”.
Other
123
585
(462)
Total
21,426
11,317
10,109
4. EQUITY INVESTMENTS 31.12.2018
Change in scope of consolidation/ consolidation criteria
Disposals
31.12.2019
Handan ARC Burners Co.
139 201
(139) (120)
-
81
Other equity investments
40
-
(6)
34
380
(259)
(6)
115
Sabaf US
Total
The negative changes shown in the Table concern, as previously indicated in the paragraph “Scope of consolidation”, the consolidation according to the line-by-line method of the subsidiary Sabaf U.S. and the consolidation according to the equity method of Handan A.R.C. Burners Co. Ltd., whose pro-rata result contributed € 39,000 negatively to the Group’s result.
144
Handan A.R.C. Burners Co. Ltd. is a Chinese joint venture with the aim to produce and market in China burners for professional cooking. The Group’s share is 35.7%, held through ARC s.r.l. - which owns a 51% interest in the share capital of the joint venture.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
5. NON-CURRENT RECEIVABLES 31.12.2019
31.12.2018
CHANGE
Tax receivables
183
145
38
Guarantee deposits
98
43
55
Other
16
-
16
Total
297
188
109
Tax receivables relate to indirect taxes expected to be recovered after 31 December 2019.
6. INVENTORIES Raw Materials
31.12.2019
31.12.2018
CHANGE
14,792
14,680
112
Semi-processed goods
9,025
11,727
(2,702)
Finished products
14,849
15,576
(727)
Provision for inventory write-downs
(3,323)
(2,804)
(519)
Total
35,343
39,179
(3,836)
The value of final inventories at 31 December 2019 is significantly lower than the value of the previous year. This improvement was achieved thanks to structural actions on internal logistics, which made it possible to significantly reduce the stocks of work in progress. The write-down provision is allocated mainly to cover the risk of obsolescence. At the end of the financial year, the appropriation is adjusted based on specific analyses carried out on slow-moving and non-moving products.
The following table shows the changes in the Provision for inventory write-downs during the current financial year: 31.12.2018
2,804
Provisions
718
Utilisation
(322)
Change in the scope of consolidation
133
Exch. rate diff.
(10) 3,323
31.12.2019
7. TRADE RECEIVABLES
Total trade receivables
31.12.2019
31.12.2018
CHANGE
48,463
48,061
402
Bad debt provision
(1,534)
(1,129)
(405)
Net total
46,929
46,932
(3)
Despite the change in the scope of consolidation, the amount of trade receivables at 31 December 2019 is substantially unchanged from the balance at the end of 2018 due to lower levels of activity in 2019. There were no significant changes in the payment terms agreed with customers. The amount of trade receivables recognised in the financial statements includes approximately â‚Ź 25.3 million in insured receivables (â‚Ź 26.1 million
at 31 December 2018). Receivables assigned to factors without recourse are eliminated from the Statement of Financial Position in that the reference contract provides for the assignment of ownership of the receivables, together with ownership of the cash flows generated by the receivable, as well as of all risks and benefits, to the assignee.
31.12.2019
31.12.2018
CHANGE
39,789
38,980
809
Outstanding up to 30 days
3,718
3,972
(254)
Outstanding from 30 to 60 days
2,102
1,019
1,083
Outstanding from 60 to 90 days
1,261
3,062
(1,801)
Outstanding for more than 90 days
1,593
1,028
565
48,463
48,061
402
Current receivables (not past due)
Total
145
SABAF . 2019 ANNUAL REPORT
The bad debt provision was adjusted to the better estimate of the credit risk and expected losses at the end of the reporting period. Changes during the year were as follows:
31.12.2018
1,129
Provisions
509
Utilisation
(364)
Change in the scope of consolidation
266
Exch. rate diff.
(6) 1,534
31.12.2019
8. TAX RECEIVABLES 31.12.2019
31.12.2018
CHANGE
For income tax
2,563
3,435
(872)
For VAT and other sales taxes
1,708
851
857
187
180
7
4,458
4,466
(8)
Other tax credits Total
At 31 December 2019, income tax receivables include € 607,000 (€ 1,158,000 at 31 December 2018) for the residual amount of the receivable originating from the full deduction from IRES of IRAP relating to expenses incurred for employees and similar for the period from 2006 to 2011 (Italian Decree Law 201/2011). During 2019, the Group received a partial refund of € 551,000; an additional refund of € 180,000 was
received at the beginning of 2020. Income tax receivables also include payments on account on 2019 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.
9. OTHER CURRENT RECEIVABLES 31.12.2019
31.12.2018
CHANGE
Credits to be received from suppliers
141
385
(244)
Advances to suppliers
384
411
(27)
Accrued income and prepaid expenses
536
434
102
Other
398
304
94
Total
1,459
1,534
(75)
Credits to be received from suppliers mainly refer to bonuses paid to the Group for the attainment of purchasing objectives.
10. FINANCIAL ASSETS 31.12.2019 Escrow bank accounts Currency derivatives Total
Non current
Current
Non current
1,233
60
3,510
120
33
-
1
-
1,266
60
3,511
120
At 31 December 2019, the following were taken out: • a term deposit of € 0.12 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);
146
31.12.2018
Current
• a term deposit of € 1.173 million for the portion of the price not yet paid to the sellers of the C.M.I. equity investment and deposited as collateral in accordance with the terms of the C.M.I. acquisition agreement (Note 15).
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
11. CASH AND CASH EQUIVALENTS The item Cash and cash equivalents, equal to € 18,687,000 at 31 December 2019 (€ 13,426,000 at 31 December 2018) refers to bank current account balances of approximately € 18.6 million.
12. SHARE CAPITAL 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 2019, the structure of the share capital is shown in the table below. NO. OF SHARES
% OF SHARE CAPITAL
RIGHTS AND OBLIGATIONS
Ordinary shares
7,065,449
61.26%
--
Ordinary shares with increased vote
4,468,001
38.74%
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.
13. TREASURY SHARES AND OTHER RESERVES As a result of the above transactions, at 31 December 2019, the Parent Company held 169,875 treasury shares, equal to 1.473% of share capital, recorded in the financial statements as an adjustment to shareholders’ equity at a unit value of € 13.35 (the market value at year-end was € 13.40).
During the financial year, Sabaf S.p.A. sold 344,631 treasury shares with reference to the following transactions: • acquisition of 68.5% of the share capital of C.M.I. Cerniere Meccaniche Industriali s.r.l. on 31 July 2019, following which 8.5% of the share capital was acquired through the sale of 113,962 Sabaf shares, equal to 0.99% of the share capital, at a unit price of 14.5815 per share; • partnership agreement with the Japanese group Paloma, active globally in the gas equipment sector. Paloma Rheem Investments Inc. acquired 230,669 Sabaf shares, equal to 2% of the share capital, at a unit price of € 13.64 per share.
There were 11,363,575 outstanding shares at 31 December 2019 (11,018,944 at 31 December 2018). Items “Retained earnings, other reserves” of € 92,580,000 included, at 31 December 2019, the stock grant reserve of € 1,002,000, which included the measurement at 31 December 2019 of fair value of rights assigned to receive shares of the Parent Company. For details of the Stock Grant Plan, refer to Note 37.
14. LOANS 31.12.2019
31.12.2018
Current
Non current
Total
Current
Non current
Total
Leases
1,050
3,478
4,528
153
1,309
1,462
Unsecured loans
14,653
40,568
55,221
10,741
41,097
51,838
Short-term bank loans
1,783
-
1,783
5,247
-
5,247
Advances on bank receipts or invoices
1,523
-
1,523
1,942
-
1,942
Interest payable
6
-
6
44
-
44
Derivative instruments on interest rates
-
-
-
308
-
308
19,015
44,046
63,061
18,435
42,406
60,841
Total
During the year, the Group took out new unsecured loans for a total of € 12 million to finance the investments made, with particular reference to the acquisition of C.M.I.. 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: • commitment to maintain a ratio of net financial position to shareholders’ equity of less than 1 (residual amount of the loans at 31 December 2019 equal to € 19 million) 147
SABAF . 2019 ANNUAL REPORT
• commitment to maintain a ratio of net financial position to EBITDA of less than 2.5 (residual amount of the loans at 31 December 2019 equal to € 31 million) widely observed at 31 December 2019. 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 consolidated financial statements include the negative fair value of the IRSs hedging rate risks of unsecured loans pending, for residual notional amounts of approximately € 33.8 million and expiry until 31 December 2025. Financial expenses were recognised in the income statement with a balancing entry.
The following table shows the reconciliation between commitments for operating leases at 31 December 2018 and liabilities relating to leases at 31 December 2019: Commitments for operating leases at 31 December 2018
1,301
Payments relating to the exercise of renewal options on operating leases at 31 December 2018
-
Incremental borrowing rate at 1 January 2019
7.5%
Discounting effect
(92)
Commitments for operating leases discounted at 1 January 2019
1,209
Commitments relating to leases previously classified as finance leases
1,462
Lease liabilities at 1 January 2019
2,671
Change in the scope of consolidation (31 July 2019)
2,398
New agreements signed during 2019
298
Repayments during 2019
(804)
Forex differences
(35)
Lease liabilities at 31 December 2019
4,528
Note 35 provides information on financial risks, pursuant to IFRS 7.
15. OTHER FINANCIAL LIABILITIES 31.12.2019 Current
31.12.2018
Non current
Current
Non current
Payables to former Okida shareholders
-
-
7,622
-
Option on A.R.C. minorities
-
1,650
-
1,818
Option on C.M.I. minorities
4,200
4,500
-
-
60
60
60
120
Payables to A.R.C. shareholders Payables to C.M.I. shareholders Derivative instruments on interest rates Total
-
1,173
-
-
377
-
-
-
4,637
7,383
7,682
1,938
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 and postponed compared to the effective date of the transaction (4 September 2018). The payables to Okida shareholders recorded at 31 December 2018, representing the remaining part of the price, was paid in March 2019. As part of the acquisition of A.R.C. s.r.l., carried out in June 2016, and C.M.I. s.r.l., carried out in July 2019, purchase and sale options (call/put) were subscribed in favour of Sabaf. Specifically: • 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 agree-
148
ments. 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. • Sabaf subscribed with the Chinese group Guandong Xingye Investment, seller of C.M.I., purchase options in favour of Sabaf for the remaining 31.5% of the share capital and simultaneous put options in favour of the seller, which can be exercised in two equal tranches following approval of the C.M.I. financial statements at 31 December 2019 and following approval of the C.M.I. financial statements at 31 December 2020. The strike prices are contractually defined on the basis of final income and financial parameters from the C.M.I. Group.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
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 € 1.818 million was recognised in the consolidated financial statements at 31 December 2018 with reference to the option to purchase the remaining 30% of A.R.C. At 31 December 2019, 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 2020. The recalculation of the fair value, in compliance with IAS 39, led to a decrease of € 168,000 in the liability; financial income was recognised as a balancing entry.
With regard to C.M.I. options, a financial liability of € 8.7 million was recognised in these consolidated financial statements, of which € 4.2 million recognised under current financial liabilities and € 4.5 million recognised under non-current financial liabilities. The payable to the A.R.C. shareholders of € 120,000 at 31 December 2019 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 2 years, in accordance with contractual agreements and guarantees issued by the sellers. The payable to C.M.I. shareholders of € 1,173,000 at 31 December 2019 is related to the part of the price still to be paid to the Chinese group Guandong Xingye Investment, seller of C.M.I., which was deposited on an non-interest-bearing escrow account in accordance with contractual agreements and guarantees issued by the seller.
16. POST-EMPLOYMENT BENEFIT AND RETIREMENT PROVISIONS 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”.
PEB At 31 December 2018
2,632 200
Provisions Financial expenses
32
Payments made
Post-employment benefits are calculated as follows:
(118)
Tax effect
101
Change in the scope of consolidation
864
Forex differences
(13)
At 31 December 2019
FINANCIAL ASSUMPTIONS
3,698
31.12.2019
31.12.2018
Discount rate
0.40%
1.30%
Inflation
1.20%
1.70%
DEMOGRAPHIC THEORY 31.12.2019
31.12.2018
Mortality rate
IPS55 ANIA
ISTAT 2016 M/F
Disability rate
INPS 2000
INPS 1998 M/F
Staff turnover
3% - 6%
3% - 6%
Advance payouts
5% - 7% per year
5% - 7% per year
Retirement age
pursuant to legislation in force on 31 December 2019
pursuant to legislation in force on 31 December 2018
17. PROVISIONS FOR RISKS AND CHARGES 31.12.2018
Provisions
Utilisation
Change in the scope of consolidation
Exchange rate diffrences
31.12.2019
Provision for agents’ indemnities
217
17
(29)
-
-
205
Product guarantee fund
60
38
(38)
-
-
60
Provision for legal risks
175
36
(130)
400
1
482
Other provisions for risks and charges
273
-
-
-
(25)
248
Total
725
91
(197)
400
(24)
995
The provision 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 provision for legal risks, set aside for moderate disputes, was adjusted to reflect the outstanding disputes. Note also that following the allocation process of the price paid for the acquisition of the C.M.I. Group on the net
assets acquired (Purchase Price Allocation), completed during 2019, a provision for legal risks of € 400,000 was recorded. 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. 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. 149
SABAF . 2019 ANNUAL REPORT
18. TRADE PAYABLES
19. TAX PAYABLES
31.12.2019
31.12.2018
CHANGE
27,560
21,215
6,345
Total
31.12.2019 31.12.2018
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 2019, there were no overdue payables of a significant amount and the Group did not receive any injunctions for overdue payables.
CHANGE
For income tax
506
2,672
(2,166)
Withholding taxes
923
680
243
Other tax payables
373
214
159
1,802
3,566
(1,764)
Total
The income tax payables refer to the taxes for the year, for the portion exceeding the advances paid.
20. OTHER CURRENT PAYABLES 31.12.2019
31.12.2018
CHANGE
To employees
5,016
4,383
633
To social security institutions
2,403
2,148
255
231
312
(81)
To agents Advances from customers
411
250
161
Other current payables
1,073
507
566
Total
9,134
7,600
1,534
At the beginning of 2020, payables due to employees and social security institutions were paid in accordance with the scheduled expiry dates. Other current payables include accrued liabilities and deferred income.
21. DEFERRED TAX ASSETS AND LIABILITIES 31.12.2019
31.12.2018
CHANGE
Deferred tax assets
6,505
4,617
1,888
Deferred tax liabilities
(7,273)
(3,030)
(4,243)
Net position
(768)
1,587
(2,355)
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.
31.12.2018 To the income statement To shareholders’ equity Forex differences 31.12.2019
Other temporary differences
Total
-
182
291
1,587
681
586
-
(12)
1,967
-
-
31
-
(4,445)
Provisions and value adjustments
Fair value of derivative instruments
Goodwill
(2,216)
1,164
56
1,771
339
760
296
10
(354)
(4,501)
25
-
-
Tax Tax losses incentives
194
(4)
-
-
(66)
-
-
(1)
123
(5,763)
1,481
66
1,417
954
586
213
278
(768)
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 C.M.I. s.r.l. (shareholders’ equity effect of € 3,528,000). Deferred tax assets relating to goodwill refer to the exemption of the val-
150
Actuarial evaluation of post-employment benefit
Non-current tangible and intangible assets
ue of the investment in Faringosi Hinges s.r.l. made in 2011 pursuant to Italian law Decree 98/2011, deductible in ten instalments starting in 2018. Deferred tax assets relating to tax incentives are commensurate to investments made in Turkey.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
22. NET FINANCIAL POSITION As required by the CONSOB memorandum of 28 July 2006, we disclose that the Group’s net financial position is as follows: 31.12.2019
31.12.2018
CHANGE
19
19
-
18,590
7,067
11,523
79
6,340
(6,261)
18,688
13,426
5,262
1,266
3,511
(2,245)
3,313
7,233
(3,920)
14,653
10,741
3,912
A. Cash (Note 11) B.
Positive balances of unrestricted bank accounts (Note 11)
C.
Other cash equivalents (Note 11)
D. Liquidity (A+B+C) E. Current financial receivables (Note 10) F.
Current bank payables (Note 14)
G. Current portion of non-current debt (Note 14) H. Other current financial payables (Note 15)
5,686
8,143
(2,457)
23,652
26,117
(2,465)
I.
Current financial debt (F+G+H)
J.
Net current financial debt (I-D-E)
3,698
9,180
(5,482)
K.
Non-current bank payables (Note 14)
40,569
41,097
(528)
L.
Other non-current financial payables (Note 14)
10,861
3,247
7,614
M. Non-current financial debt (K+L)
51,430
44,344
7,086
N. Net financial debt (J+M)
55,128
53,524
1,604
The consolidated statement of cash flows, 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.
Comments on key income statement items 23. REVENUE In 2019, sales revenue totalled € 155,923,000, up by € 5,281,000 (+3.51%) compared with 2018. Taking into consideration the same scope of consolidation, revenue decreased by 8.9%.
Revenue by geographical area 2019
%
2018
%
% CHANGE
Italy
31,161
20.0%
31,579
21.0%
-1.3%
Western Europe
12,277
7.9%
12,337
8.2%
-0.5%
Eastern Europe
55,059
35.3%
46,301
30.7%
+18.9%
Middle East and Africa
7,050
4.5%
12,303
8.2%
-42.7%
Asia and Oceania
9,198
5.9%
7,590
5.0%
+21.2%
South America
23,451
15.0%
25,461
16.9%
-7.9%
North America and Mexico
17,727
11.4%
15,071
10.0%
+17.6%
155,923
100.0%
150,642
100.0%
+3.5%
Total
The trend in revenue was affected by the overall uncertainty of the macroeconomic scenario. In Turkey, main destination market, the Group recorded a 10% decrease in sales - taking into consideration the same scope of consolidation - which was more pronounced in the first half of the year and showed a clear recovery in recent months. In Italy, sales suffered from the reduction in the production of domestic appliances. Downturns were also recorded in the Middle East and South America, where the crisis in
Argentina and the stagnation of demand in Brazil weighed heavily. Among the markets that showed a positive trend was China, where revenue benefited from new supply contracts to primary customers. The acquisition of C.M.I. also led to an increase in the weight of North America and Eastern Europe in the distribution of sales. North America accounted for more than 11% of total Group sales in 2019 (+18% compared to 2018).
151
SABAF . 2019 ANNUAL REPORT
Revenue by product family 2019
%
2018
%
% CHANGE
Valves and thermostats
39,989
25.6%
48,463
32.2%
-17.5%
Burners
63,858
41.0%
66,953
44.4%
-4.6%
Accessories
12,924
8.3%
15,422
10.2%
-16.2%
Total gas parts
116,771
74.9%
130,838
86.9%
-10.8%
Professional burners
5,434
3.5%
5,331
3.5%
+1.9%
Hinges
23,774
15.2%
10,436
6.9%
+127.8%
Electronic components
9,944
6.4%
4,037
2.7%
+146.3%
155,923
100.0%
150,642
100.0%
+3.5%
Total
The contribution from recent acquisitions resulted in a sharp increase in sales of hinges and electronic components, which more than offset the decline in sales of components for domestic gas cooking appliances. Average sales prices in 2019 were on average 0.7% lower compared with 2018.
25. MATERIALS
24. OTHER INCOME Sale of trimmings
2019
2018
CHANGE
2,072
2,507
(435)
Contingent income
336
88
248
Rental income
118
88
30
Use of provisions for risks and charges
64
71
(7)
Other income
1,031
615
416
Total
3,621
3,369
252
Other income includes revenue from the sale of moulds and government grants.
2019
2018
CHANGE
Outsourced processing
8,659
10,017
(1,358)
Natural gas and power
4,425
4,561
(136)
Maintenance
4,375
4,468
(93)
Transport
2,182
2,340
(158)
Advisory services
2,384
2,326
58
Travel expenses and allowances
740
780
(40)
Commissions
765
736
29
Directors’ fees
723
685
38
Insurance
568
545
23
Canteen
437
393
44
Other costs
4,230
4,446
(216)
29,488
31,297
(1,809)
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. The reduction in costs for outsourced processing reflects the lower levels of activity compared to the previous year. Other costs included expenses for the registration of patents, waste disposal, cleaning, leasing third-party assets and other minor charges.. 152
Consumables Total
2018
CHANGE
52,241
56,347
(4,106)
5,223
6,100
(877)
57,464
62,447
(4,983)
In 2019, the effective purchase prices of the main raw materials (aluminium alloys, steel and brass) were on average lower than in 2018, with a positive impact of 0.8% of sales.
27. PERSONNEL COSTS
26. COSTS FOR SERVICES
Total
Commodities and outsourced components
2019
2019
2018
CHANGE
Salaries and wages
25,080
23,141
1,939
Social Security costs
7,905
7,429
476
Temporary agency workers
1,394
2,121
(727)
Post-employment benefit and other costs
2,043
1,828
215
681
321
360
37,103
34,840
2,263
Stock grant plan Total
The number of Group employees at 31 December 2019 was 1,035, 854 at 31 December 2018: the increase in the number of employees compared to the previous year was 181, of which 170 following the acquisition of C.M.I.. The number of temporary staff was 42 at 31 December 2019 (57 in 31 December 2018). The item “Stock Grant Plan” included the measurement at 31 December 2019 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.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
28. OTHER OPERATING COSTS
29. FINANCIAL EXPENSES 2019
2018
CHANGE
Interest paid to banks
890
829
61
Interest paid on finance lease cotracts
102
17
85
Banking expenses
275
287
(12)
-
55
(55)
72
18
54
1,339
1,206
133
2019
2018
CHANGE
Non-income taxes
501
506
(5)
Other operating expenses
496
371
125
Contingent liabilities
101
217
(116)
Losses and write-downs of trade receivables
509
421
88
Provisions for risks
74
127
(53)
Other provisions
17
28
(11)
Other financial expense
1,698
1,670
28
Total
Total
Adjustment to the fair value of the ARC option (Note 15)
Non-income taxes chiefly relate to property tax. Provisions refer to the allocations described in Note 17.
The increase in interest paid on leases is related to the change in the scope of consolidation and the application of IFRS 16 as described in the specific paragraph “Adoption of the accounting standard IFRS 16 “Leases”” starting from the current financial year. Interest paid to banks includes IRS spreads payable that hedge interest rate risks (Note 35).
30. EXCHANGE RATE GAINS AND LOSSES
31. INCOME TAXES
In 2019, the Group reported net foreign exchange losses of € 1,380,000 (net gains of € 5,384,000 in 2018). The main portion of 2019 foreign exchange losses were recorded by Sabaf Turkey and is related to financial payables taken out in euro and reflects the devaluation of the Turkish lira during the current financial year.
2019
2018
CHANGE
727
5,142
(4,415)
Taxes related to previous financial years
(1,135)
21
(1,114)
Total
(408)
5,163
(5,571)
Current/deferred taxes for the year
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: 2019
2018
2,386
5,030
Permanent tax differences
(216)
937
Taxes related to previous financial years
(1,135)
18
Tax effect from different foreign tax rates
23
(25)
Effect of non-recoverable tax losses
137
154
(306)
(323)
Theoretical income tax
“Patent box” tax benefit “Super e Iperammortamento” tax benefit
(653)
(449)
Tax incentives for investments in Turkey
(709)
(710)
Other differences
(206)
22
Income taxes booked in the accounts, excluding IRAP and withholding taxes (current and deferred)
(680)
4,654
272
509
(408)
5,163
IRAP (current and deferred) Total
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 consolidated financial statements, the Group recognised: • the tax benefit related to the Patent Box for 2019 of € 356,000 (€ 306,000 for IRES and € 50,000 for IRAP); • the tax benefits relating to “Superammortamento” (Super amortisation) and “Iperammortamento” (Hyper amortisation), related to the investments made in Italy, amounting to € 653,000 (€ 449,000 in 2018);
• the tax benefits deriving from the investments made in Turkey amounting to € 709,000 (€ 710,000 in 2018). Positive taxes relating to previous financial years of € 1,135,000 include € 1,110,000 for the benefit resulting from the favourable outcome in the first instance of a tax dispute in Turkey. The Group expects the judgement to be upheld at subsequent instances. No significant tax disputes were pending at 31 December 2019.
153
SABAF . 2019 ANNUAL REPORT
32. EARNINGS PER SHARE Basic and diluted EPS are calculated based on the following data: EARNINGS
2018
(€/000)
2019
2018
Profit for the year
10,296
15,614
2019
2018
11,363,575
11,051,570
-
-
11,363,575
11,051,570
(€/000)
2019
2018
Basic earnings per share
0.895
1.413
Diluted earnings per share
0.895
1.413
2018
NUMBER OF SHARES (€/000) Weighted average number of ordinary shares for determining basic earnings per share Dilutive effect from potential ordinary shares Weighted average number of ordinary shares for determining diluted earnings per share
2018
EARNINGS PER SHARE (€)
Basic earnings per share are calculated on the average number of outstanding shares minus treasury shares, equal to 169,875 in 2019 (481,880 in 2018). Diluted earnings per share are calculated taking into account any shares approved but not yet subscribed, of which there were none in 2019 and 2018.
33. DIVIDENDS On 29 May 2019, shareholders were paid an ordinary dividend of € 0.55 per share (total dividends of € 6,060,000). The Directors, having acknowledged the significant change in the global economic scenario following the spread of the coronavirus pandemic,
considered it appropriate, on a prudential basis, to propose to the Shareholders’ meeting to allocate the profit for 2019 of the parent company Sabaf S.p.A. entirely to the extraordinary reserve.
34. INFORMATION BY BUSINESS SEGMENT Information by business segment for 2019 and 2018 is provided below. 2019 FY Gas parts (household and professional)
Hinges
Electronic components
Total
Sales
122,223
23,779
9,921
155,923
Ebit
8,364
1,879
1,653
11,896
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
154
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
35. INFORMATION ON FINANCIAL RISK Categories of financial instruments In accordance with IFRS 7, a breakdown of the financial instruments is shown below, among the categories set forth in IAS 39. 31.12.2019
31.12.2018
18,687
13,426
Financial assets Amortised cost Cash and cash equivalents Escrow bank deposits
1,293
3,630
48,685
48,654
33
1
63,061
60,533
1,293
7,802
27,560
21,215
ARC put option (Note 15)
1,650
1,818
C.M.I. put options (Note 15)
8,700
-
377
308
Trade receivables and other receivables Income statement fair value Derivative to hedge cash flows Financial liabilities Amortised cost Loans Other financial liabilities Trade payables Income statement fair value
Derivative to hedge cash flows
The Group is exposed to financial risks related to its operations, mainly: • credit risk, with special reference to normal trade relations with customers; • market risk, relating to the volatility of prices of commodities, foreign exchange and interest rates; • liquidity risk, which can be expressed by the inability to find financial resources necessary to ensure Group operations.
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.
Credit risk management
Forex risk management
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. The Group factors receivables with factoring companies based on without recourse agreements, thereby transferring the related risk. A credit insurance policy is in place, which guarantees cover for approximately 54% 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 23% of total turnover in 2019, while purchases in dollars represented 5% of total turnover. During the year, operations in dollars were partially hedged through forward sales contracts; at 31 December 2019, the Group had in place forward sales contracts for a total of USD 2 million, maturing in April 2020.
Sensitivity analysis With reference to financial assets and liabilities in US dollars at 31 December 2019, a hypothetical and immediate revaluation of 10% of the euro against the dollar would have led to a loss of € 804,000.
155
SABAF . 2019 ANNUAL REPORT
Interest rate risk management
Commodity price risk management
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 2019, IRS totalling € 33.8 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.
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 2019 and 2018, 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.
Sensitivity analysis Considering the IRS in place, at the end of 2019 almost all of the Group’s financial debt was at a fixed rate. Therefore, at 31 December 2019 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.
Liquidity risk management The Group operates with a debt ratio considered physiological (net financial debt / shareholders’ equity at 31 December 2019 of 46%, net financial debt / pro-forma EBITDA of 1.86) and has unused short-term lines of credit. To minimise the risk of liquidity, the Administration and Finance Department: • maintains a correct balance of net financial debt, financing investments with capital and with medium to long-term debt;
• verifies systematically that the short-term accrued cash flows (amounts received from customers and other income) are expected to accommodate the deferred cash flows (short-term financial debt, payments to suppliers and other outgoings); • regularly assesses expected financial needs in order to promptly take any corrective measures.
An analysis by expiry date of financial payables at 31 December 2019 and 31 December 2018 is shown below:
Short-term bank loans
3,689
Contractual cash flows 3,689
Unsecured loans
55,221
56,474
2,073
13,048
40,126
1,227
Finance leases
4,528
4,898
352
895
3,088
563
AT 31 DECEMBER 2019
Carrying value
Within 3 months 3,689
From 3 months to 1 year -
From 1 to 5 years -
More than 5 years -
Payables to ARC shareholders
120
120
-
60
60
-
Payables to C.M.I shareholders
1,173
1,173
-
-
1,173
-
ARC option
1,650
1,650
-
-
1,650
-
C.M.I. option
8,700
8,700
-
4,200
4,500
-
Total financial payables
75,081
76,704
6,114
18,203
50,597
1,790
Trade payables
27,560
27,560
25,993
1,567
-
-
Total
102,641
104,264
32,107
19,770
50,597
1,790
Carrying value
Within 3 months 8,063
From 3 months to 1 year -
From 1 to 5 years -
More than 5 years -
Short-term bank loans
7,233
Contractual cash flows 8,063
Unsecured loans
51,838
53,219
1,947
9,256
39,603
2,413
Finance leases
1,462
1,630
47
142
754
687
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 2018
Payables to ARC shareholders
156
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Hierarchical levels of fair value assessment
The various due dates are based on the period between the end of the reporting period and the contractual expiry 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: • Level 1 – quotations found on an active market for assets or liabilities subject to assessment; • Level 2 - input other than prices listed in the previous point, which can be observed directly (prices) or indirectly (derived from prices) on the market; • Level 3 – input based on observable market data.
The following table shows the financial assets and liabilities valued at fair value at 31 December 2019, by hierarchical level of fair value assessment. LEVEL 1 -
LEVEL 2 33
-
-
TOTAL ASSETS
-
33
-
-
Other financial liabilities (interest rate derivatives)
-
377
-
377
Other financial liabilities (ARC and C.M.I. put options)
-
-
10,350
10,350
TOTAL LIABILITIES
-
377
10,350
10,727
Other financial assets (currency derivatives)
LEVEL 3
TOTAL
36. RELATED-PARTY TRANSACTIONS 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.
Impact of related-party transactions on balance sheet items TOTAL 2019
GIUSEPPE NON-CONSOLIDATED OTHER TOTAL SALERI S.A.P.A. SUBSIDIARIES RELATED PARTIES RELATED PARTIES
IMPACT ON THE TOTAL
Trade receivables
46,929
-
-
-
-
0.00%
Tax receivables
4,458
-
-
-
-
0.00%
Trade payables
27,560
-
-
4
4
0.01%
TOTAL 2018
GIUSEPPE NON-CONSOLIDATED OTHER TOTAL SALERI S.A.P.A. SUBSIDIARIES RELATED PARTIES RELATED PARTIES
Trade receivables
46,932
12
88
Tax receivables
4,466
1,158
Trade payables
21,215
-
IMPACT ON THE TOTAL
-
100
0.21%
-
-
1,158
25.93%
-
5
5
0.02%
Impact of related-party transactions on income statement items TOTAL 2019 Other income Services
Services
IMPACT ON THE TOTAL
3,621
-
-
-
-
0.00%
(29,488)
-
-
(21)
(21)
0.07%
TOTAL 2018 Other income
GIUSEPPE NON-CONSOLIDATED OTHER TOTAL SALERI S.A.P.A. SUBSIDIARIES RELATED PARTIES RELATED PARTIES
GIUSEPPE NON-CONSOLIDATED OTHER TOTAL SALERI S.A.P.A. SUBSIDIARIES RELATED PARTIES RELATED PARTIES
IMPACT ON THE TOTAL
3,369
40
-
-
40
1.19%
(31,297)
-
(263)
(22)
(285)
0.91%
Transactions are regulated by specific contracts regulated at arm’s length conditions.
157
SABAF . 2019 ANNUAL REPORT
Fees to directors, statutory auditors and executives with strategic responsibilities Please see the 2019 Report on Remuneration for this information.
37. SHARE-BASED PAYMENTS 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, subsequently amended as resolved by the Board of Directors on 14 May 2019.
Purpose of the plan 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. Beneficiaries of the plan 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: • Cluster 1: Beneficiaries already identified in the Plan or who will be identified by the Board of Directors by 30 June 2018 on the Shareholders’ Meeting authority. • Cluster 2: Beneficiaries who will be identified by the Board of Directors from 1 July 2018 to 30 June 2019 on the Shareholders’ Meeting authority.
158
The Board of Directors, in its meeting of 15 May 2018, identified the Beneficiaries of Cluster 1 of the Plan to whom a total of 185,600 rights were assigned; and the Board of Directors in its meeting of 14 May 2019, identified the Beneficiaries of Cluster 2 of the Plan to whom a total of 184,400 rights were assigned.
Subject-matter of the plan 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, TSR indicators and Individual objectives, i.e. performance objectives of each beneficiary determined by the Board of Directors at the suggestion of the Remuneration and Nomination Committee. Deadline of the Plan The Plan expires on 31 December 2022 (or on a different subsequent date set by the Board of Directors). Fair Value measurement methods 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 for Cluster 1 and 14 May 2019 for Cluster 2.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
The main assumptions made at the beginning of the vesting period are illustrated below:
CLUSTER 1 FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON ROI 2018
2019
2020
2018-2020
19.48
19.48
19.48
19.48
Expected probability of business objective achievement
31%
0%
44.5%
15.5%
Total value on ROI
4.59
Fair Value
1.53
Share price at the start of the vesting period
33.40%
Rights on ROI
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON EBITDA 2018
2019
2020
19.48
19.48
19.48
Expected probability of business objective achievement
41%
0%
60.9%
Total value on EBITDA
7.04
Share price at the start of the vesting period
Fair Value
33.30%
Rights on EBITDA
2.35
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON TSR 2018
2019
2020
2018 - 2020
20.2
14.9
12.44
20.2
-0.28%
-0.30%
-0.38%
-0.38%
31%
18%
29%
29%
0.00%
0.00%
0.00%
0.00%
Strike Price
22.61
17.39
14.51
28.34
Total value on TSR
7.57
Fair Value
2.52
Share price at the start of the vesting period Risk free rate Expected volatility Dividend yield
Rights on TSR
33.30%
Fair value per share at intial date of the vesting period
6.40
159
SABAF . 2019 ANNUAL REPORT
CLUSTER 2 FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON ROI 2019
2020
2019-2020
13.66
13.66
13.66
Expected probability of business objective achievement
0%
36.90%
15.50%
Total value on ROI
2.80
Share price at the start of the vesting period
Fair Value
23.38%
Rights on ROI
0.65
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON EBITDA
Share price at the start of the vesting period Expected probability of business objective achievement
2019
2020
13.66
13.66
0%
53.50%
4.50
Total value on EBITDA
Fair Value
23.31%
Rights on EBITDA
1.05
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON TSR 2019
2020
2019-2020
14.9
12.44
14.9
-0.30%
-0.38%
-0.38%
18%
29%
29%
0.00%
0.00%
0.00%
Strike Price
17.39
14.51
22.86
Total value on TSR
2.53
Share price at the start of the vesting period Risk free rate Expected volatility Dividend yield
Fair Value
23.31%
Rights on TSR
0.59
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON INDIVIDUAL OBJECTIVES 2019
2020
Share price at the start of the vesting period
13.66
13.66
Expected probability of objectives achievement
50%
50%
Total value on individual objectives
6.83
Rights on individual objectives
30%
Fair Value
Fair value per share at intial date of the vesting period
The accounting impacts of the Plan on these consolidated financial statements are illustrated in Note 13 and Note 27. 160
2.05
4.34
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
38. CAPITAL MANAGEMENT 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 2019 and 2018, no changes were made to the objectives, policies and procedures for capital management.
39. SIGNIFICANT NON-RECURRING EVENTS AND TRANSACTIONS Pursuant to CONSOB memorandum of 28 July 2006, the following section describes and comments on significant non-recurring events, the consequences of which are reflected in the economic, equity and financial results for the year: SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO THE GROUP
PROFIT ATTRIBUTABLE TO THE GROUP
NET FINANCIAL DEBT
CASH FLOWS
121,105
9,915
55,128
6,528
(1,110)
(1,110)
-
-
119,995
8,805
55,128
6,528
Financial statement values (A) Recording of tax income Turkey (B) Financial statement notional value (A + B)
As described in Note 31, in these consolidated financial statements the Group recorded non-recurring income under income taxes following the favourable outcome of a tax dispute in Turkey. The effects of the acquisition of C.M.I. are described in detail in the paragraph - “Information related to IFRS 3”.
40. ATYPICAL AND/OR UNUSUAL TRANSACTIONS 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 2019.
41. COMMITMENTS Guarantees issued The Sabaf Group has issued sureties to guarantee consumer and mortgage loans granted by banks to Group employees for a total of € 4,024,000 (€ 4,734,000 at 31 December 2018).
42. SCOPE OF CONSOLIDATION AND SIGNIFICANT EQUITY INVESTMENTS COMPANIES CONSOLIDATED USING THE LINE-BY-LINE CONSOLIDATION METHOD REGISTERED OFFICES
SHARE CAPITAL
SHAREHOLDERS
OWNERSHIP %
Faringosi Hinges s.r.l.
Ospitaletto (BS)
EUR 90,000
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 Ltd.
Kunshan (China)
EUR 4,900,000
Sabaf S.p.A.
100%
Campodarsego (PD)
EUR 45,000
Sabaf S.p.A.
70%
Sabaf S.p.A.
30%
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki
70%
COMPANY NAME
A.R.C. s.r.l.
Okida Elektronik Sanayi ve Tickaret A.S
Istanbul (Turkey)
TRY 5,000,000
161
SABAF . 2019 ANNUAL REPORT
COMPANIES CONSOLIDATED USING THE LINE-BY-LINE CONSOLIDATION METHOD REGISTERED OFFICES
SHARE CAPITAL
SHAREHOLDERS
OWNERSHIP %
Plainf ield (USA)
USD 200,000
Sabaf S.p.A.
100%
C.M.I. Cerniere Meccaniche Industriali s.r.l
Valsamoggia (BO)
EUR 1,000,000
Sabaf S.p.A.
68.5%
C.G.D. s.r.l.
Valsamoggia (BO)
EUR 26,000
C.M.I. s.r.l.
100%
CMI Polska sp. z.o.o.
Myszków (Polonia)
PLN 40,000
C.M.I. s.r.l.
97.5%
C.G.D. s.r.l.
2.5%
COMPANY NAME Sabaf US Corp.
COMPANIES CONSOLIDATED USING THE EQUITY METHOD COMPANY NAME Handan ARC Burners Co., Ltd.
REGISTERED OFFICES
SHARE CAPITAL
SHAREHOLDERS
OWNERSHIP %
HOLDING %
Handan (China)
RMB 3,000,000
A.R.C. s.r.l.
51%
35.7%
43. GENERAL INFORMATION ON THE PARENT COMPANY Registered and administrative office
Via dei Carpini, 1 25035 - Ospitaletto (Brescia)
Contacts
Tel: +39 030 - 6843001
Tax Code 03244470179
Fax: +39 030 - 6848249
VAT number 01786910982
Tax information
R.E.A. Brescia 347512
E-mail: info@sabaf.it www.sabaf.it
APPENDIX Information as required by Article 149-duodecimos of the CONSOB Issuers’ Regulation The following table, prepared pursuant to Article 149-duodecies of the CONSOB Issuers’ Regulation, shows fees relating to 2019 for auditing and for services other than auditing provided by the Independent Auditors and their network. (€/000)
Audit
Other services
PARTY PROVIDING THE SERVICE
RECIPIENT
FEES PERTAINING TO THE 2019 FINANCIAL YEAR
EY S.p.A.
Parent company
43
EY S.p.A.
Italian subsidiaries
46
EY network
Foreign subsidiaries
35
EY S.p.A.
Parent company
382
EY network
Foreign subsidiaries
113
Total 2 3
Auditing procedures agreement relating to interim management reports; limited review of consolidated Disclousure of non-financial information. Tax assistance.
162
173
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
CERTIFICATION OF THE CONSOLIDATED FINANCIAL STATEMENTS in accordance with Article 154 bis of Italian Legislative Decree 58/98 Pietro Iotti, the Chief Executive Officer, and Gianluca Beschi, the Financial Reporting Officer of Sabaf S.p.A., have taken into account the requirements of Article 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of 24 February 1998 and can certify: • the adequacy, in relation to the business characteristics and • the actual application of the administrative and accounting procedures for the formation of the consolidated financial statements during the 2019 financial year. They also certify that: • the Consolidated financial statements:
- were prepared in accordance with the international accounting policies recognised in the European Community in accordance with EC regulation 1606/2002 of the European Parliament and Council of 19 July 2002 and with the measures issued in implementation of Article 9 of Italian Legislative Decree 38/2005;
- are consistent with accounting books and records;
- provide a true and fair view of the operating results, financial position and cash flows of the issuer and of the companies included in the consolidation;
• the report on operations contains a reliable analysis of the performance and results of operations and the situation of the issuer and the companies included in the scope of consolidation, along with a description of the key risks and uncertainties to which they are exposed.
Ospitaletto, 24 March 2020
Chief Executive Officer
The Financial Reporting Officer
Pietro Iotti
Gianluca Beschi
163
SABAF . 2019 ANNUAL REPORT
164
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
165
SABAF . 2019 ANNUAL REPORT
166
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
167
SABAF . 2019 ANNUAL REPORT
168
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019
169
SABAF . 2019 ANNUAL REPORT
Separate financial statements at 31 December 2019 173
Corporate bodies
174
Statement of financial position
175
Income statement
176
Comprehensive income statement
176
Statement of changes in shareholders’ equity
177
Statement of Cash Flows
178
Explanatory notes
187
Reclassified statement of financial position at 31 December 2018
188
Reclassified Income Statement at 31 December 2018
189
Reclassified statement of cash flows at 31 December 2018
190
Comments on the main items of the statement of financial position
203
Comments on key income statement items
216
Certification of Separate financial statements
217
Report on the Audit of the consolidated Financial Statements
222
Report of the Board of Statutory Auditors to the Shareholders’ Meeting of SABAF S.p.A.
172
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Corporate bodies Board of Directors Chairman
Giuseppe Saleri
Director
Alessandro PotestĂ
Vice Chairman*
Nicla Picchi
Director*
Carlo Scarpa
Chief Executive Officer
Pietro Iotti
Director*
Daniela Toscani
Director
Gianluca Beschi
Director*
Stefania Triva
Director
Claudio Bulgarelli
Board of Statutory Auditors Chairman
Alessandra Tronconi
Statutory Auditor
Luisa Anselmi
Statutory Auditor
Mauro Vivenzi
*
Independent directors
Independent Auditors EY S.p.A.
173
SABAF . 2019 ANNUAL REPORT
Statement of financial position NOTES
31.12.2019
31.12.2018
Property, plant and equipment
1
51,470,506
30,497,881
Investment property
2
3,975,991
1,261,716
Intangible assets
3
2,452,857
3,094,293
Equity investments
4
57,950,775
58,150,073
Non-current financial assets
5
5,340,310
5,366,725
- of which from related parties
35
5,280,310
5,246,725
19,871
19,871
(in €) ASSETS NON-CURRENT ASSETS
Non-current receivables Deferred tax assets
21
TOTAL NON-CURRENT ASSETS
4,276,366
3,471,716
125,486,676
101,862,275
CURRENT ASSETS Inventories
6
19,862,180
26,627,854
Trade receivables
7
28,563,314
35,157,543
- of which from related parties
35
9,094,290
6,080,706
Tax receivables
8
1,736,169
2,377,224
- of which from related parties
35
0
1,083,666
Other current receivables
9
588,494
764,471
Current financial assets
10
2,832,998
5,110,000
- of which from related parties
35
1,600,000
1,600,000
Cash and cash equivalents
11
8,343,105
1,958,805
61,926,260
71,995,897
TOTAL CURRENT ASSETS ASSETS HELD FOR SALE TOTAL ASSETS
0
0
187,412,936
173,858,172
11,533,450
11,533,450
93,399,901
72,464,975
3,821,876
8,040,214
108,755,227
92,038,639
35,485,756
33,669,253
SHAREHOLDERS’ EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY Share capital
12
Retained earnings, Other reserves Profit for the year TOTAL SHAREHOLDERS’ EQUITY NON-CURRENT LIABILITIES Loans
14
Other financial liabilities
15
1,233,000
120,000
Post-employment benefit and retirement provisions
16
2,064,001
2,083,922
Provisions for risks and charges
17
1,064,482
1,088,183
Deferred tax liabilities
21
TOTAL NON-CURRENT LIABILITIES
1,733,755
106,646
41,580,994
37,068,004
CURRENT LIABILITIES Loans
14
13,994,308
17,330,136
Other financial liabilities
15
331,505
1,795,310
Trade payables
18
15,734,266
18,944,590
- of which to related parties
35
761,431
3,858,114
Tax payables
19
695,008
589,828
- of which to related parties
35
74,375
0
Other payables
20
6,321,628
6,091,665
37,076,715
44,751,529
0
0
187,412,936
173,858,172
TOTAL CURRENT LIABILITIES LIABILITIES HELD FOR SALE TOTAL LIABILITIES AND SHAREHOLDERS’EQUITY 174
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Income statement NOTES
2019
2018
23
94,899,421
110,065,252
- of which from related parties
35
13,984,435
11,496,883
Other income
24
(in €) INCOME STATEMENT COMPONENTS OPERATING REVENUE AND INCOME Revenue
TOTAL OPERATING REVENUE AND INCOME
4,045,581
2,985,254
98,945,002
113,050,506
(32,805,599)
(45,084,626)
(6,765,674)
1,858,927
(20,124,041)
(27,540,143)
OPERATING COSTS Materials
25
Change in inventories Services
26
- of which to related parties
35
(1,698,535)
(3,991,378)
Personnel costs
27
(26,785,293)
(28,388,299)
Other operating costs
28
(926,250)
(1,852,013)
1,588,760
1,599,795
(85,818,097)
(99,406,359)
13,126,905
13,644,147
(9,808,641)
(8,596,924)
130,018
495,659
(500,000)
0
- of which by related parties
(500,000)
0
EBIT
2,948,282
5,542,882
211,324
122,845
Costs for capitalised in-house work TOTAL OPERATING COSTS
OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION, CAPITAL GAINS/LOSSES, WRITE-DOWNS/ WRITE-BACKS OF NON-CURRENT ASSETS Depreciations and amortisation
1,2,3
Capital gains/(losses) on disposal of noncurrent assets Write-downs/write-backs of non-current assets
4
Financial income - of which from related parties
199,308
118,874
Financial expenses
29
(816,612)
(918,213)
Exchange rate gains and losses
30
(10,015)
157,102
Profits and losses from equity investments
31
1,357,665
4,322,070
1,357,665
4,322,070
3,690,644
9,226,686
131,232
1,186,472
3,821,876
8,040,214
- of which from related parties
PROFIT BEFORE TAXES Income taxes
PROFIT FOR THE YEAR
32
175
SABAF . 2019 ANNUAL REPORT
Comprehensive income statement (in €) PROFIT FOR THE YEAR
2019
2018
3,821,876
8,040,214
(63,367)
26,538
15,208
(6,369)
(48,159)
20,169
3,773,717
8,060,383
Total profits/losses that will not be subsequently reclassified under profit (loss) for the year: Actuarial evaluation of post-employment benefit Tax effect TOTAL OTHER PROFITS/(LOSSES) NET OF TAXES FOR THE YEAR TOTAL PROFIT
Statement of changes in shareholders’ equity (€/000) Balance at 31 December 2017
Share capital
Share premium reserve
Legal reserve
Treasury shares
Actuarial evalution of post-employment benefit provision
Other reserves
Profit for the year
Total Group shareholders’ equity
11,533
10,002
2,307
(4,509)
(477)
65,230
8,001
92,087
1,930
(8,001)
2018 dividend payment Purchase of treasury shares
(2,359)
Stock grant plan (IFRS 2)
322
Total profit at 31 December 2018
Balance at 31 December 2018
20
11,533
10.002
2,307
(6,868)
(457)
2019 dividend payment Sale of treasury shares
4,600
Stock grant plan (IFRS 2) Sabaf Immobiliare merger Total profit at 31 December 2019 Balance at 31 December 2019
176
10,002
2,307
(2,268)
(505)
322 8,040
8,060
67,482
8,040
92,039
1,980
(8,040)
(6,060)
208
4,808
680
680
13,514
13,514
(48) 11,533
(6,071) (2,359)
83,864
3,822
3,774
3,822
108,755
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Statement of Cash Flows (â‚Ź/000) Cash and cash equivalents at beginning of year
2019 FY
2018 FY
2,1691
2,697
3,822
8,040
- Depreciation and amortisation
9,809
8,597
- Realised gains
(130)
(496)
Profit for the year Adjustments for:
- Write-downs of non-current assets - Profits and losses from equity investments
500
0
(1,358)
(4,322)
- Valuation of the stock grant plan
681
321
- Net financial income and expenses
605
795
- Non-monetary foreign exchange differences - Income tax
34
79
(131)
1,186
Change in post-employment benefit
(94)
(139)
Change in risk provisions
(24)
719
Change in trade receivables
6,610
(4,003)
Change in inventories
6,766
(1,859)
Change in trade payables
185
2,375
Change in net working capital
13,561
(3,487)
Change in other receivables and payables, deferred tax liabilities
1,325
(407)
Payment of taxes
(339)
(1,319)
Payment of financial expenses
(790)
(895)
Collection of financial income
211
123
Cash flows from operations
27,682
8,796
(494)
(526)
Investments in non-current assets - intangible - tangible
(6,622)
(7,836)
- financial
(12,314)
(8,698)
Disposal of non-current assets
1,527
1,841
(17,903)
(15,219)
9,779
(6,423)
Repayment of loans
(17,376)
(14,166)
Raising of loans
13,057
31,600
Change in financial assets
2,270
(7,641)
Purchase/Sale of treasury shares
3,146
(2,359)
Payment of dividends
(6,060)
(6,071)
Collection of dividends
1,358
4,322
(3,605)
5,685
Total cash flows
6,174
(738)
Cash and cash equivalents at end of year (Note 11)
8,343
1,959
Cash flow absorbed by investments Free cash flow
Cash flow absorbed by financing activities
1
Net current financial debt
11,493
14,015
Non-current financial debt
36,719
33,789
Net financial debt (Note 22)
39,868
45,845
The value of cash and cash equivalents refers to the sum of the data of Sabaf S.p.A. and Sabaf Immobiliare s.r.l.
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SABAF . 2019 ANNUAL REPORT
Explanatory notes Accounting standards STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION The separate financial statements of Sabaf S.p.A. for the financial year 2019 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. With reference to this assumption, 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 2019.
FINANCIAL STATEMENTS The Company adopted the following formats: • current and non-current assets and current and non-current liabilities are stated separately in the statement of the financial position; • an income statement that expresses costs using a classification based on the nature of each item; • a comprehensive income statement that expresses revenue and expense items not recognised in profit for the year as required or permitted by IFRS; • a statement of cash flows that presents cash flows originating from operating activity, using the indirect method. Use of these formats permits the most meaningful representation of the Company’s capital, business and financial status.
ACCOUNTING POLICIES The accounting standards and policies applied for the preparation of the separate financial statements at 31 December 2019, unchanged versus the previous year, with the exception of the new accounting standards adopted as from 1 January 2019 (IFRS 16 and IFRIC 23), are shown below:
178
Property, plant and equipment 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 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.
Intangible assets 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
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
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 Equity investments not classified as held for sale are booked at cost, reduced for impairment.
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 four-year 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 of value in the income statement. When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or 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.
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.
Trade receivables and other financial assets Initial recognition 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.
Subsequent measurement The measurement of financial liabilities depends on their classification, as described below. Financial assets at amortised cost (debt instruments) 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: • the financial asset is held as part of a business model whose objective is to hold financial assets for the purpose of collecting contractual cash flows and • the contractual terms of the financial asset envisage, at certain dates, cash flows represented solely by payments of principal and interest on the amount of principal to be repaid. 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 Company include trade receivables.
Inventories 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 179
SABAF . 2019 ANNUAL REPORT
Financial assets at fair value through profit or loss 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 through profit or loss. 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.
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: • the rights to receive cash flows from the asset are extinguished, or • the Company 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 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 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 cash 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. 180
Post-employment benefit The post-employment benefit 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 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)”.
Trade payables and other financial liabilities Initial recognition 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.
Subsequent measurement The measurement of financial liabilities depends on their classification, as described below. Financial liabilities at fair value through profit or loss 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. Loans and payables 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.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Derecognition 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.
Policy for conversion of foreign currency items 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.
Derivative instruments and hedge accounting 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 reporting 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.
Financial income 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 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 for the year 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 Dividends are posted on an accrual basis when the right to receive them materialises, i.e. when shareholders approve dividend distribution.
Treasury shares 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.
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Equity-settled transactions 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 41. 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.
Use of estimates 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. Specifically:
Recoverability of value of tangible and intangible assets and investments The procedure for determining impairment losses 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 182
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.
Provisions for bad debts Receivables are adjusted by the related bad debt provision to take into account their recoverable amount. To determine the size of the writedowns, 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.
Provisions for inventory obsolescence Inventories subject to obsolescence and slow turnover are systematically measured and written down if their recoverable value is less than their carrying value. Write-downs are calculated based on management assumptions and estimates, resulting from experience and historical results.
Employee benefits 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.
Share-based payments 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.
Income taxes 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.
Other provisions 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.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
New accounting standards Accounting standards, amendments and interpretations applicable from 1 January 2019 Standard IFRS 16 “Leases” (published on 13 January 2016), which replaced 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 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 lease 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 impacts resulting from the first-time adoption of this standard are described in detail in the paragraph “Adoption of the accounting standard IFRS 16 “Leases””. Interpretation of IFRIC 23 - Uncertainty over income tax treatments. The Interpretation defines the accounting treatment of income taxes when the tax treatment involves uncertainties that have an effect on the application of IAS 12 and does not apply to taxes or duties that do not fall within the scope of IAS 12. The Company defines whether to consider each uncertain tax treatment separately or together with other uncertain tax treatments and uses the approach that provides better predictions of the resolution of the uncertainty. At the time the interpretation was adopted, the Company examined the existence of uncertain tax positions and determined that its tax treatment (including that of its subsidiaries) is likely to be accepted by the tax authorities. Therefore, the interpretation had no impact on the Company’s financial statements. Amendment to IFRS 9 Prepayment Features with Negative Compensation. Under IFRS 9, a debt instrument may be measured at amortised cost or at fair value through other comprehensive income (FVOCI), on condition that the contractual cash flows are “solely payments of principal and interest on the reference amount” (the SPPI criterion) and that the instrument is classified in the appropriate business model. The amendments to IFRS 9 clarify that a financial asset meets the SPPI criterion regardless of the event of the circumstance that caused the early termination of the contract and regardless of which is the party paying or receiving a reasonable compensation for the early termination of the contract. These amendments had no impact on the Company’s financial statements. Amendment to IAS 19 Plan Amendment, Curtailment or Settlement. The amendments clarify how pension costs are determined when a change occurs in a defined benefit plan. These amendments had no impact on the financial statements insofar as the Company, in the reference period, did hot record any amendment, curtailment or settlement of the plans.
Amendment to IAS 28 Long-term Interests in Associates and Joint Ventures. 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. These amendments did not have any impact on the Company’s financial statements, insofar as Sabaf does not have equity investments in associates and joint ventures that are not measured with the equity method. Document “Annual Improvements to IFRSs 2017–2015 Cycle”, which implements the amendments to the standards as part of their annual process of improvement: • IFRS 3 Business combinations: The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination, which is carried out in different stages, including the re-measurement of the fair value of the interest previously held in the assets and liabilities of the joint operation. In doing this, the acquirer reassess the interest previously held in the joint operation. This amendment had no impact on the Company’s financial statements; • IFRS 11 Joint Arrangements: An entity that participates in a joint operation, without having joint control, could obtain joint control of the joint operation if its activity constitutes a business as defined in IFRS 3. The amendments clarify that previously held interests in this joint operation are not re-measured. This amendment had no impact on the Company’s financial statements; • IAS 12 Income Taxes: The amendments clarify that the tax consequences of dividends are related to past transactions or to events that generated distributable profits rather than to distributions to shareholders. As the Company’s current practice is in line with these amendments, the Company did not recognise any impact resulting from said amendments on its financial statements; • IAS 23 Borrowing Costs: The amendments clarify that any borrowing made, which right from the start was intended to improve an asset, must be treated by the entity as non-specific if all of the measures needed to prepare said asset for use or sale have been completed. As the Company’s current practice is in line with these amendments, the Company did not recognise any impact resulting from said amendments on its financial statements. IFRS and IFRIC accounting standards, amendments and interpretations approved by the European Union, not yet universally applicable and not adopted early by the Company at 31 December 2019 Amendments to IFRS 3 Definition of a Business. In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 to support entities in determining whether or not a set of assets acquired constitutes a business. The amendments clarify the minimum requirements for having a business, remove the assessment of whether market participants can replace any missing elements, add guidelines to support entities in assessing whether an acquired process is substantial, narrow the definitions of business and output, and introduce an optional fair value concentration test. Since the amendments apply prospectively to transactions or other events occurring on or after the date of first-time adoption, the Company is not affected by these amendments.
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Amendments to IAS 1 and IAS 8 Definition of Material. In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of “material” in standards and to clarify certain aspects of the definition. The new definition indicates that information is material if, as a result of its omission, or as a result of its incorrect or incomprehensible presentation, one could reasonably expect to influence the decisions that the main users of the financial statements would make on the basis of the financial information contained therein. The application is required, prospectively, starting from the financial statements of the financial years starting from 1 January 2020. The directors do not expect a significant effect on the Company’s financial statements through the adoption of these changes. IFRS accounting standards, amendments and interpretations not yet approved by the European Union On the reference date of these 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. 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. The directors do not expect the adoption of these amendments to have any impact on the Company’s financial statements. Adoption of the accounting standard IFRS 16 “Leases” The Company applied IFRS 16 from 1 January 2019 by using the amended retrospective approach. Therefore, the cumulative effect of the adoption of IFRS 16 was recognised as an adjustment to the opening balance of retained earnings at 1 January 2019, without recalculating the comparative information. In particular, the Company analysed all agreements in force as of 1 January 2019 and relating to the use of third-party assets in the light of the new definition of lease contained in the standard and recognised: • a financial liability equal to the present value of remaining future payments at the transition date; • a right of use, the value of which was set equal to the value of the financial liability at the transition date. In adopting IFRS 16, the Company made use of the exemption granted in paragraph 5 a) in relation to leases with a duration of less than 12 months (known as short-term leases) and the exemption granted in paragraph 5 b) in relation to lease agreements whose underlying asset is a low-value asset. For these agreements, lease payments are recognised in the income statement on a straight-line basis for the duration of the respective agreements.
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The following table summarises the main characteristics of the agrments that have been the subject matter of the above exemptions: (€/000) Subject-matter of the agreement
Applied exemption
Value of the agreement
Fork lifts
Short-term leases
23
Fork lifts
Low-value asset
8
Company cars
Short-term leases
24
Total value of agreements subject matter of the exemption
55
The amount of the lease payments for these types of agreements was not significant at 31 December 2019. When evaluating the lease liabilities, Sabaf S.p.A. discounted the payments due for the lease using the incremental borrowing rate at 1 January 2019. The weighted average of the applied rate was 1.5% on 1 January 2019 and on 31 December 2019. The lease term is calculated based on the non-cancellable period of the lease, including the periods covered by the option to extend or to terminate the lease if it is reasonably certain that those options will be exercised or not exercised, taking account of all relevant factors that create an economic incentive relating to those decisions. Moreover, with reference to the transition rules, the Company adopted some practical expedients provided for by the Standard and in particular: • agreements with a term of less than 12 months of the transition date were classified as short-term leases, therefore the related lease payments are recognised in the income statement on a straight-line basis; • initial costs were excluded from the valuation of the asset for the right of use on the initial application date; • the information present at the transition date was used to determine the lease term, with a special reference to the exercise of renewal and early closure options; • payments for the use of the asset (lease component) and payments for services or maintenance (non-lease component) related to the same asset were not separated.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
The following tables summarise the effects of the adoption of IFRS 16 according to the amended retrospective approach at the date of first-time adoption, 1 January 2019, and at 31 December 2019. Further details are provided in the notes relating to the specific items on which the standard has had an impact: Note 1 “Property, plant and equipment”, Note 2 “Investment property” and Note 14 “Loans”. BOOK VALUE AT 01.01.2019 IN CASE OF NON-ADOPTION OF IFRS 16
EFFECT OF IFRS 16
BOOK VALUE AT 01.01.2019
30,498
688
31,186
Loans beyond 12 months
33,789
460
34,249
Loans within 12 months
19,125
228
19,353
72,465
-
72,465
BOOK VALUE AT 31.12.2019 IN CASE OF NON-ADOPTION OF IFRS 16
EFFECT OF IFRS 16
BOOK VALUE AT 31.12.2019
50,737
733
51,470
Loans beyond 12 months
36,239
480
36,719
Loans within 12 months
14,068
258
14,326
93,400
-
93,400
20,382
(258)
20,124
9,556
253
9,809
807
10
817
108,760
5
108,755
Net financial debt
41,963
738
42,701
EBITDA
12,369
(258)
12,627
EBIT
2,943
(5)
2,948
Net profit for the period
3,827
5
3,822
ADOPTION OF IFRS 16 EFFECTS AT 1 JANUARY 2019 Assets Property, plant and equipment
Liabilities
Shareholders’ equity Retained earnings, Other reserves
ADOPTION OF IFRS 16 EFFECTS AT 31 DECEMBER 2019 Assets Property, plant and equipment
Liabilities
Shareholders’ equity Retained earnings, Other reserves
Income Statement 12 months 2019 Costs for services Depreciations Financial expenses
Economic and financial indicators Shareholders’ equity
185
SABAF . 2019 ANNUAL REPORT
Merger of Sabaf Immobiliare s.r.l. On 25 June 2019, the Board of Directors of Sabaf S.p.A. approved, pursuant to Article 2505, paragraph 2 of the Italian Civil Code, the plan for the merger through incorporation into Sabaf S.p.A. of Sabaf Immobiliare s.r.l., a single-member company subject to the management and coordination of Sabaf S.p.A.. Sabaf Immobiliare s.r.l. was engaged in the management of the real estate assets of the Sabaf Group. In detail, Sabaf Immobiliare s.r.l. owned industrial buildings leased to Sabaf S.p.A. Moreover, the Company managed other residential investment properties intended for rent or sale. On 18 November 2019, the merger was carried out with effect from 29 November 2019. The transactions of the merged company Sabaf Immobiliare s.r.l. were booked to the financial statements of the merging company Sabaf S.p.A. with effect from 1 January 2019, with the same effect for tax purposes. The operation meets the requirement to concentrate the activities of the two companies in order to optimise the management of resources, synergies and economic and financial flows. A merger through incorporation of a wholly-owned company is excluded from the scope of IFRS 3 Business Combinations in that it does not involve the merging company gaining control of the other participating company. The approach adopted is in accordance with the ASSIREVI Preliminary Guidelines on IFRS (OPI no. 2 – Revised), concerning the accounting treatment of mergers in the financial statements, resulted in retaining the continuity of values with respect to the consolidated financial statements.
A merger of a restructuring nature results in the convergence of the consolidated financial statements of the merging company at the merger date with the separate financial statements of merging company after the merger, implementing the legal consolidation. Moreover, the merger of wholly-owned subsidiaries, which determines the transition from indirect to direct control and the continuity of values with respect to the consolidated financial statements, involves the backdating in the accounts of the effects of the merger also with reference to the costs and revenues of the merged company from the beginning of the financial year. In view of the backdating of the accounting effects of the merger to 1 January 2019, reclassified financial statements at 31 December 2018 were prepared, as if the merger had taken place from the beginning of the comparative year: • recognition in the balance sheet of the values that would have resulted if Sabaf S.p.A. had always been a single entity with the merged company; • the sum of the relevant Income statement accounts is included in the profit and loss account; • derecognition of all items with the merged company, including the reversal of the dividend distributed during the year by the merged company Sabaf Immobiliare s.r.l.; • recognition of a merger surplus resulting from the elimination of the equity investment in Sabaf Immobiliare s.r.l., lower than the recognition of the value of the shareholders’ equity, in a specific equity reserve of Sabaf S.p.A..
The effects are shown in the table below: (in €)
1 JANUARY 2019
Shareholders’ Equity of Sabaf Immobiliare s.r.l.
26,989,413
Value of the equity investment
13,475,000
Merger surplus of Sabaf Immobiliare s.r.l.
13,514,413
186
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Reclassified statement of financial position at 31 December 2018 (in €)
SABAF S.P.A. 2018 FY
SABAF IMMOBILIARE 2018 FY
ELIMINATIONS
SABAF S.P.A. RECLASSIFIED 2018 FY
30,497,881
22,807,853
463,748
53,769,482
1,261,716
3,140,939
ASSETS Property, plant and equipment Investment property
4,402,655
Intangible assets
3,094,293
(463,748)
2,630,545
Equity investments
58,150,073
(13,475,000)
44,675,073
Non-current financial assets
5,366,725
5,366,725
19,871
19,871
Non-current receivables Deferred tax assets
3,471,716
601,869
TOTAL NON-CURRENT ASSETS
101,862,275
26,550,661
Inventories
26,627,854
Trade receivables
35,157,543
Tax receivables
2,377,224
Other current receivables
764,471
3,444,214
(3,428,091)
19,596
(3,355)
35,173,666 2,377,224
5,110,000
Cash and cash equivalents
1,958,805
210,415
TOTAL CURRENT ASSETS
71,995,897
3,674,225
0
0
173,858,172
30,224,886
TOTAL ASSETS
114,937,936
26,627,854
Current financial assets
ASSETS HELD FOR SALE
4,073,585 (13,475,000)
780,712 5,110,000 2,169,220
(3,431,446)
72,238,676 0
(16,906,446)
187,176,612
SHAREHOLDERS’ EQUITY AND LIABILITIES Share capital
11,533,450
25,000
(25,000)
11,533,450
Retained earnings, Other reserves
72,464,975
26,351,273
(10,450,000)
88,366,248
8,040,214
613,140
(3,000,000)
5,653,354
TOTAL SHAREHOLDERS’ EQUITY
92,038,639
26,989,413
(13,475,000)
105,553,052
Loans
33,669,253
1,308,612
Profit for the year
Other financial liabilities
34,977,865
120,000
120,000
Post-employment benefit and retirement provisions
2,083,922
2,083,922
Provisions for risks and charges
1,088,183
1,088,183
Deferred tax liabilities
106,646
1,712,794
1,819,440
37,068,004
3,021,406
40,089,410
Loans
17,330,136
153,104
17,483,240
Other financial liabilities
1,795,310
TOTAL NON-CURRENT LIABILITIES
Trade payables Tax payables Other payables TOTAL CURRENT LIABILITIES Liabilities held for sale TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
1,795,310
18,944,590
36,178
589,828
19,801
6,091,665
4,984
44,751,529
214,067
0
0
173,858,172
30,224,886
(3,431,446)
15,549,322 609,629 6,096,649
(3,431,446)
41,534,150 0
(16,906,446)
187,176,612
187
SABAF . 2019 ANNUAL REPORT
Reclassified Income Statement at 31 December 2018 SABAF S.P.A. 2018 FY
SABAF IMMOBILIARE 2018 FY
ELIMINATIONS
SABAF S.P.A. RECLASSIFIED 2018 FY
110,065,252
4,007,481
(3,973,295)
110,099,438
2,985,254
35
(33,223)
2,952,066
TOTAL OPERATING REVENUE AND INCOME
113,050,506
4,007,516
(4,006,518)
113,051,504
Materials
(45,084,626)
(456)
(in €)
INCOME STATEMENT COMPONENTS Revenue Other income
Change in inventories
1,858,927
Services
(27,540,143)
Personnel costs
(28,388,299)
Other operating costs Costs for capitalised in-house work TOTAL OPERATING COSTS
(45,085,082)
(1,852,013)
1,858,927 (94,312)
4,006,518
(23,627,937) (28,388,299)
(214,891)
(2,066,904)
1,599,795
1,599,795
(99,406,359)
(309,659)
EBITDA
13,644,147
3,697,857
17,342,004
Depreciations and amortisation
(8,596,924)
(1,410,022)
(10,006,946)
495,659
(3,871)
491,788
0
(850,000)
(850,000)
OPERATING PROFIT (EBIT)
5,542,882
1,433,964
6,976,846
Net financial income (expenses)
(795,368)
(18,211)
(813,579)
Exchange rate gains and losses
157,102
Capital gains/(losses) on non-current assets Write-downs/write-backs of non-current assets
(95,709,500)
157,102
Profits and losses from equity investments
4,322,070
PROFIT BEFORE TAXES
9,226,686
1,415,753
Income taxes
(1,186,472)
(802,613)
PROFIT FOR THE YEAR
8,040,214
613,140
188
4,006,518
(3,000,000)
1,322,070
(3,000,000)
7,642,439 (1,989,085)
(3,000,000)
5,653,354
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Reclassified statement of cash flows at 31 December 2018 SABAF S.P.A. 2018 FY
SABAF IMMOBILIARE 2018 FY
Cash and cash equivalents at beginning of year
2,697
3,615
Profit for the year
8,040
613
- Depreciations and amortisation
8,597
1,410
10,007
- Realised gains
(496)
4
(492)
(â‚Ź/000)
ELIMINATIONS
SABAF S.P.A. RECLASSIFIED 2018 FY 6,312
(3,000)
5,653
Adjustments for:
- Write-downs of non-current assets
0
850
(4,322)
0
- Valuation of the stock grant plan
321
0
321
- Net financial income and expenses
795
18
813
- Non-monetary foreign exchange differences
79
0
79
1,186
803
1,989
(139)
0
(139)
719
0
719
Change in trade receivables
(4,003)
(3,425)
Change in inventories
(1,859)
0
Change in trade payables
2,375
32
(3,431)
(1,024)
(3,487)
(3,393)
(3)
(6,883)
Change in other receivables and payables, deferred tax liabilities
(407)
74
3
(330)
Payment of taxes
(1,319)
(643)
(1,962)
Payment of financial expenses
(895)
(1)
(896)
Collection of financial income
123
0
123
Cash flows from operations
8,796
(264)
8,532
Net investments
(15,219)
9
(15,210)
Cash flow absorbed by investments
(15,219)
9
(15,210)
Repayment of loans
(14,166)
(149)
(14,315)
Raising of loans
31,600
0
31,600
Change in financial assets
(7,641)
0
(7,641)
Buy-back of shares
(2,359)
0
(2,359)
Payment of dividends
(6,071)
(3,000)
3,000
(6,071)
Collection of dividends
4,322
0
(3,000)
1,322
Cash flow absorbed by financing activities
5,685
(3,149)
2,536
Total cash flows
(738)
(3,404)
(4,142)
Cash and cash equivalents at beginning of year
1,959
210
2,169
Current financial debt
14,015
153
14,168
Non-current financial debt
33,789
1,309
35,098
Net financial debt
45,845
1,252
47,097
- Profits and losses from equity investments
- Income tax Change in post-employment benefit Change in risk provisions
Change in net working capital
850 3,000
3,428
(1,322)
(4,000) (1,859)
189
SABAF . 2019 ANNUAL REPORT
Comments on the main items of the statement of financial position 1. PROPERTY, PLANT AND EQUIPMENT PROPERTY
PLANT AND EQUIPMENT
OTHER ASSETS
ASSETS UNDER CONSTRUCTION
TOTAL
6,401
163,568
33,218
2,296
205,483
COSTS At 31 December 2017 Increases
164
4,772
960
1,940
7,836
Disposals
-
(3,436)
(129)
-
(3,565)
Reclassification At 31 December 2018 Increases Sabaf Immobiliare merger
5
1,552
19
(1,589)
(13)
6,570
166,456
34,068
2,647
209,741
152
3,132
1,723
1,893
6,900
35,896
4,723
367
-
40,986
IFRS 16 assets
-
-
878
-
878
Disposals
-
(1,998)
(642)
-
(2,640)
Reclassification At 31 December 2019
706
3,073
53
(2,323)
1,509
43,324
175,386
36,447
2,217
257,374
173,872
ACCUMULATED DEPRECIATION At 31 December 2017
3,064
140,843
29,965
-
Depreciations for the year
180
6,049
1,433
-
7,662
Eliminations for disposals
-
(2,175)
(116)
-
(2,291)
3,244
144,717
31,282
-
179,243
At 31 December 2018 Depreciations for the year
1,210
6,131
1,479
-
8,820
Sabaf Immobiliare merger
13,613
4,198
367
-
18,178
Eliminations for disposals
-
(1,642)
(44)
-
(1,686)
464
884
-
-
1,348
18,531
154,288
33,084
-
205,903
At 31 December 2019
24,793
21,098
3,363
2,217
51,471
At 31 December 2018
3,326
21,739
2,786
2,647
30,498
Reclassification At 31 December 2019
NET CARRYING VALUE
The breakdown of the net carrying value of Property was as follows: 31.12.2019
31.12.2018
CHANGE
Land
5,404
1,291
4,113
Industrial buildings
19,389
2,035
17,354
Total
24,793
3,326
21,456
As a result of the merger, Sabaf acquired the entire industrial complex of Ospitaletto where it carries out its production activities.
190
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Changes in property, plant and equipment resulting from the application of IFRS 16 are shown below:
PROPERTY
PLANT AND EQUIPMENT
OTHER ASSETS
TOTAL
-
-
-
-
108
-
580
688
Increases
-
-
298
298
Decreases
-
-
-
-
(35)
-
(218)
(253)
Foreign exchange differences
-
-
-
-
Other changes including reclassifications
-
-
-
-
73
-
660
733
1 January 2019 First-time adoption of IFRS 16
Depreciations
At 31 December 2019
The main investments in the financial year were aimed at increasing and automating the production capacity of special burners. Other investments were made in the production of moulds 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.
The reclassification mainly refers to the recalculation of the “Improvements on third-party assets” class in the respective “buildings” and “plant” asset classes, an operation carried out following the merger through incorporation of Sabaf Immobiliare s.r.l.. At 31 December 2019, 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.
2. INVESTMENT PROPERTY COST At 31 December 2017
6,675
Increases
-
Disposals
-
At 31 December 2018 Increases Sabaf Immobiliare merger IFRS 16 assets Disposals At 31 December 2019
6,675 -
Depreciations for the year At 31 December 2018
INVESTMENT PROPERTY 1 January 2019 First-time adoption of IFRS 16
108
5,052
Increases
-
108
Decreases
-
11,835
ACCUMULATED DEPRECIATIONS At 31 December 2017
Changes in investment property resulting from the application of IFRS 16 are shown below:
5,221 192 5,413
Depreciations for the year
429
Sabaf Immobiliare merger
2,017
At 31 December 2019
7,859
Depreciations
(35)
Foreign exchange differences
-
Other changes including reclassifications
-
At 31 December 2019
73
This item includes non-operating buildings owned by the Company. At 31 December 2019, 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.
NET CARRYING VALUE At 31 December 2019
3,976
At 31 December 2018
1,262
191
SABAF . 2019 ANNUAL REPORT
3. INTANGIBLE ASSETS PATENTS, KNOW-HOW AND SOFTWARE
DEVELOPMENT COSTS
OTHER INTANGIBLE ASSETS
TOTAL
6,603
5,264
2,369
14,236 526
COST At 31 December 2017 Increases
153
284
89
Reclassifications
-
-
-
-
Decreases
-
(59)
-
(59)
At 31 December 2018
6,756
5,489
2,458
14,703
Increases
34
460
-
494
Decreases
-
-
(11)
(11)
Reclassifications
-
(101)
(1,812)
(1,913)
6,790
5,848
635
13,273
At 31 December 2017
6,101
3,038
1,727
10,866
Amortisation
220
362
161
743
-
-
-
-
6,321
3,400
1,888
11,609
187
367
5
559
Decreases
-
-
-
-
Reclassifications
-
-
(1,348)
(1,348)
6,508
3,767
545
10,820
At 31 December 2019 AMORTISATION AND WRITE-DOWNS
Decreases At 31 December 2018 Amortisation
At 31 December 2019
NET CARRYING VALUE At 31 December 2019
282
2,081
90
2,453
At 31 December 2018
435
2,089
570
3,094
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). The reclassification mainly refers to the recalculation of the “Improvements on third-party assets” class in the respective “buildings” and
192
“plant” asset classes, an operation carried out following the merger through incorporation of Sabaf Immobiliare s.r.l.. At 31 December 2019, 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.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
4. EQUITY INVESTMENTS 31.12.2019
31.12.2018
CHANGE
57,917
58,116
(199)
In subsidiaries Other equity investments Total
34
34
-
57,951
58,150
(199)
The change in equity investments in subsidiaries is broken down in the table below:
FARINGOSI HINGES
SABAF DO BRASIL
SABAF U.S.
SABAF APPLIANCE COMPONENTS (CHINA)
SABAF A.C. KUNSHAN (CHINA)
SABAF TURKEY
A.R.C. S.R.L.
OKIDA
C.M.I. S.R.L.
TOTAL
13,475
10,329
8,469
139
4,400
200
12,005
4,800
-
-
53,817
-
-
-
-
-
-
-
-
8,698
-
8,698
13,475
10,329
8,469
139
4,400
200
12,005
4,800
8,698
-
62,515
Purchase
-
-
-
-
500
-
-
-
84
13,392
13,976
Liquidation
-
-
-
-
-
(200)
-
-
-
-
(200)
Merger
(13,475)
-
-
-
-
-
-
-
-
-
(13,475)
31.12.19
0
10,329
8,469
139
4,900
0
12,005
4,800
8,782
13,392
62,816
SABAF IMMOBILIARE
HISTORICAL COST 31.12.17 Purchase 31.12.18
PROVISION FOR WRITE-DOWNS 31.12.17
0
0
0
0
4,400
0
0
0
0
0
4,400
Write-downs
-
-
-
-
-
-
-
-
-
-
-
31.12.18
0
0
0
0
4,400
0
0
0
0
0
4,400
Write-downs
-
-
-
-
500
-
-
-
-
-
500
31.12.19
0
0
0
0
4,900
0
0
0
0
0
4,900
NET CARRYING VALUE 31.12.19
0
10,329
8,469
139
0
0
12,005
4,800
8,782
31.12.18
13,475
10,329
8,469
139
0
200
12,005
4,800
8,698
0
58,116
13,392
57,916
PORTION OF SHAREHOLDERS’ EQUITY (CALCULATED IN COMPLIANCE WITH IFRS) 31.12.19
0
7,319
11,524
(51)
(772)
0
25,109
3,965
1,785
5,103
53,982
31.12.18
27,674
7,248
10,870
(28)
(697)
248
23,425
3,630
1,719
0
74,089
DIFFERENCE BETWEEN SHAREHOLDERS’ EQUITY AND CARRYING VALUE 31.12.19
0
(3,010)
3,055
(190)
(772)
0
13,104
(835)
(6,997)
(8,289)
(3,934)
31.12.18
14,199
(3,081)
2,401
(167)
(697)
48
11,420
(1,170)
(6,979)
0
15,974
193
SABAF . 2019 ANNUAL REPORT
Faringosi Hinges s.r.l. In 2019, 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 2020-2024 forward plan, drafted at the beginning of 2020, envisages a further increase in sales. At 31 December 2019, 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 2020 to 2024 were augmented by the terminal value, which expresses the operating flows that the investee is expected to generate from the sixth year to infinity and determined based on the perpetual income. The
value of use was calculated based on a discount rate (WACC) of 9.54% (10.45% in the impairment test carried out while preparing the Separate financial statements at 31 December 2018) and a growth rate (g) of 2% (1.5% at 31 December 2018). The recoverable amount calculated on the basis of the above-mentioned assumptions and valuation techniques is € 16,904 million, compared with a carrying value of the equity investment of € 10,329 million; consequently, the amount recorded for equity investment at 31 December 2019 was deemed recoverable.
Sensitivity analysis The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g: GROWTH RATE
(€/000) DISCOUNT RATE
1.50%
1.75%
2.00%
2.25%
2.50%
8.54%
18,500
19,069
19,682
20,343
21,058
9.04%
17,186
17,672
18,192
18,751
19,352
9.54%
16,039
16,457
16,904
17,380
17,891
10.04%
15,028
15,391
15,777
16,188
16,627
14,131
14,449
14,786
15,143
15,522
10.54%
Sabaf do Brasil
Sabaf Appliance Components Trading
In 2019, Sabaf do Brasil continued to obtain positive results. Shareholders’ equity (converted into euros at the end-of-year exchange rate) is higher than the carrying amount of the investment.
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; therefore, the company went into liquidation; the process of liquidation ended in 2019.
Sabaf U.S. 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 Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf Turkey) Sabaf Turkey achieved extremely satisfactory results in 2019 as well. The shareholders’ equity remains well above the carrying value of the equity investment.
Sabaf Appliance Components
A.R.C. s.r.l.
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 2019. A share capital increase of € 500,000 was made during the year; a write-down of the same amount was made against the loss for the year. At 31 December 2019, a provision for risks on equity investments of € 780,000 (€ 80,000 of which allocated in 2019) was also recognised, in line with the negative equity value of the investee company. For further details, refer to Note 36.
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.
194
At 31 December 2019, 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
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
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 € 10.906 million (70% of total recoverable amount, equal to € 15.580 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 2019 was deemed recoverable.
cash flows in the forward plan drafted at the beginning of 2020. Cash flows for the period from 2020 to 2024 were augmented by the terminal value, which expresses the operating flows that the investee is expected to generate from the fourth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 6.07% (7.73% in the impairment test carried out while drafting the separate financial statements at 31 December 2018) and a
Sensitivity analysis The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g: GROWTH RATE
(€/000) DISCOUNT RATE
1.00%
1.25%
1.50%
1.75%
2.00%
5.07%
12,285
12,911
13,624
14,445
15,398
5.57%
11,071
11,554
12,097
12,711
13,411
6.07%
10,097
10,481
10,906
11,380
11,913
6.57%
9,300
9,611
9,952
10,329
10,745
7.07%
8,636
8,892
9,170
9,48
9,809
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 strike 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 at 31 December 2019.
Okida Elektronik Sanayi Limited Sirket In 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 2019, the Company tested - with the support of independent experts - the carrying value of the equity investment for impairment, determining its recoverable amount by discounting expected future cash flows in the forward plan drafted at the beginning of 2020. Cash flows for the period from 2020 to 2024 were augmented by the 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 12.92% (11.05% in the impairment test carried out while preparing the separate financial statements at 31 December 2018) and a growth rate (g) of 2.50%, unchanged from the 2018 impairment test. 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 € 9.464 million (30% of total equity value, equal to € 31.547 million), compared with a carrying value of the equity investment of € 8.782 million; consequently, the carrying value recorded for equity investment at 31 December 2019 was deemed recoverable.
Sensitivity analysis The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g: GROWTH RATE
(€/000) DISCOUNT RATE
2.00%
2.25%
2.50%
2.75%
3.00%
11.92%
10,113
10,304
10,506
10,718
10,943
12.42%
9,610
9,780
9,959
10,147
10,345
12.92%
9,154
9,306
9,464
9,632
9,808
13.42%
8,738
8,874
9,017
9,166
9,323
13.92%
8,358
8,481
8,609
8,743
8,883 195
SABAF . 2019 ANNUAL REPORT
C.M.I. s.r.l. In July 2019, the Company acquired 68.5% of C.M.I. s.r.l., one of the main players in the design, production and sale of hinges for household appliances. The acquisition of C.M.I. s.r.l. allowed the Sabaf Group to achieve a leadership position on a global scale in the hinges sector, proposing itself also in this area as a reference partner for all manufacturers of household appliances. At 31 December 2019, the Company tested - with the support of independent experts - the carrying value of the equity investment for impairment, determining its recoverable amount by discounting expected future cash flows in the forward plan drafted by the management. Cash flows for the period from 2020 to 2022 were augmented by the terminal value, which expresses the operating flows that the company is expected
to generate from the third year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 10.49% and a growth rate (g) of 1.15%, representative of expected future growth rates for the reference 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 € 19.102 million (68.5% of total equity value , equal to € 27.886 million), compared with a carrying value of the equity investment of € 13.392 million; consequently, the carrying value recorded for equity investment at 31 December 2019 was deemed recoverable.
Sensitivity analysis The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g: GROWTH RATE
(€/000) DISCOUNT RATE
0.15%
0.65%
1.15%
1.65%
2.15%
9.50%
19,389
20,513
21,771
23,190
24,801
10.00%
18,242
19,245
20,361
21,521
23,019
10.50%
17,207
18,107
19,102
20,211
21,452
11.00%
16,268
17,079
17,972
18,961
20,062
11.50%
15,412
16,147
16,952
17,840
18,822
The option for the purchase of the residual 31.5% of C.M.I. represents a derivative instrument; since the strike 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 at 31 December 2019.
5. NON-CURRENT FINANCIAL ASSETS Financial receivables from subsidiaries Escrow bank account Total
31.12.2019
31.12.2018
CHANGE
5,280
5,247
33
60
120
(60)
5,340
5,367
(27)
At 31 December 2019, financial receivables from subsidiaries consist of: • an interest-bearing loan of USD 2 million (€ 1.780 million at the endof-year exchange rate), granted to the subsidiary Sabaf do Brasil with the aim of optimising the Group’s exposure to foreign exchange rate risk and whose maturity at the beginning of 2019 was postponed to March 2021; • an interest-bearing loan of € 3.5 million to the subsidiary Sabaf Turkey, disbursed during the year 2018 as part of the coordination of the Group’s financial management, with maturity in August 2021.
196
As part of the acquisition of 70% of A.R.C., in 2016, Sabaf S.p.A. paid to a non-interest-bearing escrow 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 2019, the portion due beyond 12 months amounted to € 60,000, whereas the portion due within 12 months amounted to € 60,000 (Note 10).
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
6. INVENTORIES 31.12.2019
31.12.2018
CHANGE
Raw Materials
7,248
9,358
(2,110)
Semi-processed goods
6,071
9,633
(3,561)
Finished products
7,833
9,231
(1,398)
Provision for inventory write-downs
(1,290)
(1,594)
304
Total
19,862
26,628
(6,765)
The value of final inventories at 31 December 2019 is significantly lower than the value of the previous year. This improvement was achieved thanks to structural actions on internal logistics, which made it possible to significantly reduce the stocks of work in progress. 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 € 453,000, semi-finished products for € 326,000 and finished products
for € 511,000. The following table shows the changes in the Provision for inventory write-downs during the current financial year: 1,594
31.12.2018 Provisions
18
Utilisation
(322)
31.12.2019
1,290
7. TRADE RECEIVABLES Total trade receivables Bad debt provision Net total
31.12.2019
31.12.2018
CHANGE
29,413
36,157
(6,744)
(850)
(1,000)
150
28,563
35,157
(6,594)
At 31 December 2019, trade receivables included balances totalling USD 3,214,000, booked at the EUR/USD exchange rate in effect on 31 December 2019, i.e. 1.1234. The amount of trade receivables recognised in the financial statements includes approximately € 15 million in insured receivables (€ 18 million at 31 December 2018). There were no significant changes in average payment terms agreed with customers.
Receivables assigned to factors without recourse are eliminated from the Statement of Financial Position in that the reference contract provides for the assignment of ownership of the receivables, together with ownership of the cash flows generated by the receivable, as well as of all risks and benefits, to the assignee.
31.12.2019
31.12.2018
CHANGE
Current receivables (not past due)
21,929
29,966
(8,038)
Outstanding up to 30 days
2,530
1,996
534
Outstanding from 31 to 60 days
1,935
494
1,441
Outstanding from 61 to 90 days
1,958
3,030
(1,072)
Outstanding for more than 90 days Total
1,061
671
390
29,413
36,157
(6,745)
The bad debt provision was adjusted to the better estimate of the credit risk and expected losses at the end of the reporting period. Changes during the year were as follows:
Bad debt provision
31.12.2018
PROVISIONS
UTILISATION
31.12.2019
1,000
42
(192)
850
197
SABAF . 2019 ANNUAL REPORT
8. TAX RECEIVABLES For income tax for VAT Total
31.12.2019
31.12.2018
CHANGE
1,323
2,002
(679)
413
375
38
1,736
2,377
(641)
At 31 December 2019, income tax receivables include € 559,000 (€ 1,083,000 at 31 December 2018) for the residual amount of the receivable originating from the full deduction from IRES of IRAP relating to expenses incurred for employees and similar for the period from 2009 to 2011 (Italian Decree Law 201/2011).
During 2019, the Company received a partial refund of € 524,000; an additional refund of € 168,000 was received at the beginning of 2020. Income tax receivables also include payments on account on 2019 income, for the part exceeding the tax to be paid.
9. OTHER CURRENT RECEIVABLES 31.12.2019
31.12.2018
CHANGE
Credits to be received from suppliers
127
374
(247)
Advances to suppliers
104
112
(8)
31
10
21
Other
326
268
58
Total
588
764
(176)
Due from INAIL
Credits to be received from suppliers mainly refer to bonuses paid to the Company for the attainment of purchasing objectives.
10. CURRENT FINANCIAL ASSETS 31.12.2019
31.12.2018
Financial receivables from subsidiaries
1,600
1,600
-
Escrow bank accounts
1,233
3,510
(2,277)
Total
2,833
5,110
(2,277)
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 2019, the following were taken out:
CHANGE
• a term deposit of € 60 thousand, due on 30 June 2021, for the portion of the price not yet paid to the sellers of the A.R.C. equity investment; • a term deposit of € 1.173 million for the portion of the price not yet paid to the sellers of the C.M.I. equity investment and deposited as collateral in accordance with the terms of the C.M.I. acquisition agreement.
11. CASH AND CASH EQUIVALENTS The item Cash and cash equivalents, equal to € 8,343,000 at 31 December 2019 (€ 1,959,000 at 31 December 2018), refers almost exclusively to bank current account balances.
198
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
12. SHARE CAPITAL 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 2019, the structure of the share capital is shown in the table below. NO. OF SHARES
% OF SHARE CAPITAL
RIGHTS AND OBLIGATIONS
Ordinary shares
7,065,449
61.26%
--
Ordinary shares with increased vote
4,468,001
38.74%
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.
13. TREASURY SHARES AND OTHER RESERVES There were 11,363,575 outstanding shares at 31 December 2019 (11,018,944 at 31 December 2018).
During the financial year, Sabaf S.p.A. sold 344,631 treasury shares with reference to the following transactions: • acquisition of 68.5% of the share capital of C.M.I. Cerniere Meccaniche Industriali s.r.l. on 31 July 2019, following which 8.5% of the share capital was acquired through the sale of 113,962 Sabaf shares, equal to 0.99% of the share capital, at a unit price of 14.5815 per share; • partnership agreement with the Japanese group Paloma, active globally in the gas equipment sector. Paloma Rheem Investments Inc. purchased 230,669 Sabaf shares, equal to 2% of the share capital, at a unit price of € 13.64 per share.
Items “Retained earnings, other reserves” of € 93,400,000 included, at 31 December 2019: • the stock grant reserve of € 1,002,000 thousand, which included the measurement at 31 December 2019 of fair value of rights assigned to receive Sabaf shares. For details of the Stock Grant Plan, refer to Note 42; • € 13,514,000 for the merger surplus resulting from the merger of Sabaf Immobiliare s.r.l., as explained in the specific section of these Explanatory Notes.
At 31 December 2019, the Company held 169,875 treasury shares, equal to 1.473% of share capital (514,506 treasury shares at 31 December 2018), 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 € 13.40).
14. LOANS 31.12.2019
31.12.2018
Current
Non current
Total
Corrent
Non current
Total
297
1,750
2,047
-
-
-
Unsecured loans
11,904
33,736
45,640
9,911
33,669
43,580
Short-term bank loans
1,793
-
1,793
7,188
-
7,188
Leases
Derivative instruments on interest rates TOTAL
-
-
-
231
-
231
13,994
35,486
49,480
17,330
33,669
50,999
During the year, the Company took out new unsecured loans for a total of € 12 million to finance the investments made, with particular reference to the acquisition of C.M.I. 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 financial statements at the end of the reporting period, as specified below: • commitment to maintain a ratio of net financial position to shareholders’ equity of less than 1 (residual amount of the loans at 31 December 2019 equal to € 19 million)
• commitment to maintain a ratio of net financial position to EBITDA of less than 2.5 (residual amount of the loans at 31 December 2019 equal to € 31 million) widely observed at 31 December 2019. All bank loans are denominated in euro, with the exception of a short-term loan of USD 2 million.
199
SABAF . 2019 ANNUAL REPORT
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 € 33.2 million and expiry until 30 June 2025. Financial expenses were recognised in the income statement with a balancing entry.
Following the merger through incorporation of the company Sabaf Immobiliare s.r.l., Sabaf took over the finance lease of an industrial building, whose residual debt on 1 January 2019 was € 1,462,000.
The following table shows the reconciliation between commitments for operating leases at 31 December 2018 and liabilities relating to leases at 31 December 2019: Commitments for operating leases at 31 December 2018
698
Incremental borrowing rate at 1 January 2019
1.5%
Discounting effect
(10)
Commitments for operating leases discounted at 1 January 2019
688
Commitments relating to leases previously classified as finance leases
1,462
Lease liabilities at 1 January 2019
2,150
New agreements signed during 2019
297
Repayments during 2019
(400)
Lease liabilities at 31 December 2019
2,047
Note 36 provides information on financial risks, pursuant to IFRS 7.
15. OTHER FINANCIAL LIABILITIES 31.12.2019
31.12.2018
Current
Non current
Current
Non current
-
-
1,735
-
Payables to A.R.C. shareholders
60
60
60
120
Payables to C.M.I. shareholders
-
1,173
-
-
Payables to former Okida shareholders
Derivative instruments on interest rates
271
-
-
-
TOTAL
331
1,233
1,795
120
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 and postponed compared to the effective date of the transaction (4 September 2018). The payables to Okida shareholders recorded at 31 December 2018, representing the remaining part of the price, was paid in March 2019. The payable to the A.R.C. shareholders of € 120.000 at 31 December 2019 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 2 years, in accordance with contractual agreements and guarantees issued by the sellers. The payable to C.M.I. shareholders of € 1,173,000 at 31 December 2019 is related to the part of the price still to be paid to the Chinese group Guandong Xingye Investment, seller of C.M.I., which was deposited on a non-interest-bearing escrow account in accordance with contractual agreements and guarantees issued by the seller.
16. POST-EMPLOYMENT BENEFIT AT 31 DECEMBER 2018 Financial expenses Payments made Tax effect
AT 31 DECEMBER 2019
200
2,084 26 (110) 64
2,064
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”.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Post-employment benefits are calculated as follows:
FINANCIAL ASSUMPTIONS
DEMOGRAPHIC THEORY
31.12.2019
31.12.2018
Discount rate
0.40%
1.30%
Inflation
1.20%
1.70%
31.12.2019
31.12.2018
Mortality rate
IPS55 ANIA
ISTAT 2016 M/F
Disability rate
INPS 2000
INPS 1998 M/F
6%
6%
5% per year
5% per year
pursuant to legislation in force on 31 December 2019
pursuant to legislation in force on 31 December 2018
Staff turnover Advance payouts Retirement age
17. PROVISIONS FOR RISKS AND CHARGES 31.12.2018
PROVISIONS
UTILISATION
31.12.2019
Provision for agents’ indemnities
208
17
(27)
198
Product guarantee fund
60
38
(38)
60
Provision for risks on equity investments
700
80
-
780
Provision for legal risks
120
36
(130)
26
1,088
171
(195)
1,064
Total
The provision 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 fund was adjusted at the end of the year, on the basis of analyses conducted and past experience. 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 2019.
The provision for legal risks, set aside for moderate disputes, was adjusted to reflect the outstanding disputes. 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.
18. TRADE PAYABLES
19. TAX PAYABLES
Total
31.12.2019
31.12.2018
CHANGE
15,734
18,945
(3,211)
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 2019, there were no overdue payables of a significant amount and the Company did not receive any injunctions for overdue payables.
31.12.2019
31.12.2018
CHANGE
To inland revenue for IRPEF tax deductions
621
590
31
Other tax payables
74
-
74
695
590
105
Total
Payables for IRPEF tax deductions, relating to employment and self-employment, were duly paid at maturity.
20. OTHER CURRENT PAYABLES 31.12.2019
31.12.2018
To employees
3,697
3,649
48
To social security institutions
1,806
1,901
(95)
165
91
74
To agents
193
235
(42)
Other current payables
461
216
245
6,322
6,092
230
Advances from customers
Total
CHANGE
At the beginning of 2020, payables due to employees and social security institutions were paid in accordance with the scheduled expiry dates. Other current payables include accrued liabilities and deferred income.
201
SABAF . 2019 ANNUAL REPORT
21. DEFERRED TAX ASSETS AND LIABILITIES 31.12.2019
31.12.2018
Deferred tax assets
4,276
3,472
Deferred tax liabilities
(1,734)
(107)
Net position
2,542
3,365
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
TAX LOSS
ACTUARIAL EVALUATION OF POSTEMPLOYMENT BENEFIT
OTHER TEMPORARY DIFFERENCES
TOTAL
At 31 December 2017
347
919
2
1,771
-
159
189
3,387
Through profit or loss
69
(45)
53
-
-
-
(93)
(16)
To shareholders’ equity
-
-
-
-
-
(6)
-
(6)
At 31 December 2018
416
874
55
1,771
-
153
96
3,365
219
22
10
(354)
419
-
(43)
273
To shareholders’ equity
(1,111)
-
-
-
-
15
-
(1,096)
At 31 December 2019
(476)
896
65
1,417
419
168
53
2,542
Through profit or loss
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, deductible in ten instalments starting in 2018. The change in shareholders’ equity relating to the item Amortisation and leasing of approximately Euro 1.111 million relates to the merger of Sabaf Immobiliare s.r.l..
22. NET FINANCIAL POSITION As required by the CONSOB memorandum of 28 July 2006, we disclose that the Company’s net financial position is as follows: 31.12.2019
31.12.2018
CHANGE
8
6
2
8,335
1,953
6,382
-
-
-
A.
Cash (Note 11)
B.
Positive balances of unrestricted bank accounts (Note 11)
C.
Other cash equivalents
D.
Liquidity (A+B+C)
8,343
1,959
6,384
E.
Current financial receivables
2,833
5,110
(2,277)
F.
Current bank payables (Note 14)
1,793
7,419
(5,626)
G.
Current portion of non-current debt (Note 14)
12,201
9,911
2,290
H.
Other current financial payables (Note 15)
331
1,795
(1,464)
I.
Current financial debt (F+G+H)
14,325
19,125
(4,800)
J.
Net current financial debt (I-D-E)
3,149
12,056
(8,907)
K.
Non-current bank payables (Note 14)
35,486
33,669
1,817
L.
Other non-current financial payables
1,233
120
1,113
M. Non-current financial debt (K+L)
36,719
33,789
2,930
N.
39,868
45,845
(5,977)
Net financial debt (J+M)
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.
202
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Comments on key income statement items 23. REVENUE In 2019, sales revenue totalled â‚Ź 94,899,421, down 13.8% from â‚Ź 110,065,252 in 2018.
Revenue by geographical area 2019
%
2018
%
% CHANGE
22,053
23.2%
24,762
22.5%
(10.9%)
8,661
9.1%
8,925
8.1%
(3%)
Eastern Europe and Turkey
30,690
32.3%
36,807
33.4%
(16.6%)
Asia and Oceania (excluding Middle East)
7,808
8.2%
4,893
4.4%
59.6%
Central and South America
11,389
12%
11,912
10.8%
(4.4%)
Middle East and Africa
6,070
6.4%
13,323
12.1%
(54.4%)
North America and Mexico
8,228
8.7%
9,443
8.6%
(12.9%)
94,899
100%
110,065
100%
(13.8%)
Italy Western Europe
Total
The trend in revenue was affected by the overall uncertainty of the macroeconomic scenario. In Turkey, main destination market, the Company recorded a 20% decrease in sales in 2019, more pronounced in the first part of the year and showed a clear recovery in recent months.
In Italy, sales suffered from the reduction in the production of domestic appliances. Downturns were also recorded in the Middle East and Africa. Among the markets that have shown a positive trend is China, thanks to the launch of new supply contracts to primary customers.
Revenue by product family 2019
%
2018
%
% CHANGE
Valves and thermostats
40,003
42.2%
48,466
44.0%
(17.5%)
Burners
43,304
45.6%
45,838
41.6%
(5.5%)
11,592
12.2%
15,761
14.3%
(26.5%)
94,899
100%
110,065
100%
(13.8%)
Accessories and other revenues Total
The sales analysis by product category shows a marked drop in valves while burners show an improved performance.
Average sales prices in 2019 were 0.4% lower compared to 2018.
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SABAF . 2019 ANNUAL REPORT
27. PERSONNEL COSTS
24. OTHER INCOME Sale of trimmings Services to subsidiaries Royalties vs. subsidiaries Contingent income Rental income Use of provisions for risks and charges Services to parent company Other income Total
2019
2018
CHANGE
912
1,424
(512)
1,332
536
796
97
93
4
317 118
55 87
262 31
64
26
38
-
40
(40)
1,205 4,045
724 2,985
481 1,060
Services to subsidiaries refer to administrative, commercial and technical services provided within the scope of the Group.
25. MATERIALS Commodities and outsourced components Consumables Total
2019
2018
CHANGE
29,860
41,286
(11,425)
2,945
3,799
(854)
32,805
45,085
(12,279)
In 2019, the effective purchase prices of the main raw materials (aluminium alloys, steel and brass) were on average lower than in 2018, with a positive impact of 0.8% of sales.
26. COSTS FOR SERVICES Outsourced processing Property rental Electricity and natural gas Maintenance Advisory services Transport and export expenses Directors’ fees Insurance Commissions Travel expenses and allowances Waste disposal Canteen Temporary agency workers Other costs Total
2019
2018
CHANGE
6,674
8,815
(2,141)
-
4,009
(4,009)
2,800
3,271
(471)
3,020 2,020
3,081 1,977
(61) 43
1,091
1,394
(303)
482 466 565
475 468 631
7 (2) (66)
402
550
(148)
368 260
378 291
(10) (31)
111
196
(85)
1,865
2,004
(139)
20,124
27,540
(7,416)
The main outsourced processing carried out by the Company include aluminium die-casting, hot moulding of brass and some mechanical processing and assembly. The reduction in costs for outsourced processing reflects the lower levels of activity compared to the previous year. As a result of the merger of Sabaf Immobiliare, property rental costs were zeroed. Other costs included expenses for the registration of patents, waste disposal, cleaning, leasing third-party assets and other minor charges.
204
2019
2018
CHANGE
Salaries and wages
17,996
18,744
(748)
Social Security costs
5,764
6,099
(335)
Temporary agency workers
972
1,779
(807)
Post-employment benefit and other costs
1,373
1,445
(72)
Stock grant plan
680
321
359
26,785
28,388
(1,282)
Total
Average of the Company headcount at 31 December 2019 totalled 488 employees (360 blue-collars, 118 white-collars and supervisors, 10 managers), compared with 503 in 2018 (376 blue-collars, 117 white-collars and supervisors, 10 managers). The number of temporary staff with temporary work contract was 18 at 31 December 2019 (47 in 2018). The item “Stock Grant Plan” included the measurement at 31 December 2019 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 41.
28. OTHER OPERATING COSTS 2019
2018
CHANGE
Losses and write-downs of trade receivables
42
402
(360)
Non-income related taxes and duties
400
217
183
Contingent liabilities
99
192
(93)
Provisions for risks
74
77
(3)
Other provisions
97
668
(571)
Other operating expenses
214
296
(82)
Total
926
1,852
(926)
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.
29. FINANCIAL EXPENSES 2019
2018
CHANGE
Interest paid to banks
592
641
(49)
Banking expenses
173
240
(67)
Other financial expense
52
37
15
Total
817
918
(101)
Interest paid to banks includes IRS spreads payable that hedge interest rate risks.
30. EXCHANGE RATE GAINS AND LOSSES In 2019, the Company reported net foreign exchange losses of € 10,000 (net gains of € 157,000 in 2018).
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
31. PROFITS AND LOSSES FROM EQUITY INVESTMENTS 2019
2018
CHANGE
47
-
47
Dividends received from Sabaf Immobiliare
996
3,000
Dividends received from Okida Elektronik
315 1,358
Dividends received from Sabaf Kunshan Trading
Total
32. INCOME TAXES 2019
2018
CHANGE
127
967
(840)
Deferred tax assets and liabilities
(273)
16
(289)
(2,004)
Taxes related to previous financial years
(29)
21
(50)
1,322
(1,007)
44
182
(138)
4,322
(2,964)
Taxes on foreign dividends
(131)
1,186
(1,317)
This item includes dividends received from investee companies.
Current taxes
Total
Current taxes for 2019 are related to IRAP (IRES of € 672,000 and IRAP of € 295,000 in 2018). Deferred tax assets and liabilities include an IRES income of € 419,000 relating to the tax loss for 2019.
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 income tax
2019
2018
886
2,214
Taxes related to previous financial years
(25)
18
Tax effect of dividends from investee companies
(265)
(803)
“Patent box” tax effect
(306)
(323)
“Iper e Superammortamento” tax benefit
(581)
(449)
Permanent tax differences Other differences
4
279
(4)
4
IRES (current and deferred)
(291)
940
IRAP (current and deferred)
160
246
Total
(131)
1,186
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 2019 of € 356,000 (€ 306,000 for IRES and € 50,000 for IRAP).
33. DIVIDENDS
34. SEGMENT REPORTING
On 29 May 2019, shareholders were paid an ordinary dividend of € 0.55 per share (total dividends of € 6,060,000). The Directors, having acknowledged the significant change in the global economic scenario following the spread of the coronavirus pandemic, considered it appropriate, on a prudential basis, to propose to the Shareholders’ meeting to allocate the profit for 2019 entirely to the extraordinary reserve.
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.
No tax disputes were pending at 31 December 2019.
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SABAF . 2019 ANNUAL REPORT
35. INFORMATION ON FINANCIAL RISK Categories of financial instruments In accordance with IFRS 7, a breakdown of the financial instruments is shown below, among the categories set forth in IFRS 9. 31.12.2019
31.12.2018
Financial assets Amortised cost Cash and cash equivalents
8,343
1,959
Trade receivables and other receivables
29,152
35,922
Non-current loans
1,780
5,246
Current loans
1,600
1,600
Other financial assets
1,293
3,630
271
231
49,480
50,999
Financial liabilities Fair Value through profit or loss Derivative cash flow hedges (on interest rates) Amortised cost Loans Other financial liabilities Trade payables
The Company is exposed to financial risks related to its operations, mainly: • credit risk, with special reference to normal trade relations with customers; • market risk, relating to the volatility of prices of commodities, foreign exchange and interest rates; • liquidity risk, which can be expressed by the inability to find financial resources necessary to ensure Company operations. 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.
Credit risk management 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. The Company factors receivables with factoring companies based on without recourse agreements, thereby transferring the related risk. A credit insurance policy is in place, which guarantees cover for approximately 54% of trade receivables. Credit risk relating to customers operating in emerging economies is generally attenuated by the expectation of revenue through letters of credit.
206
1,293
1,915
15,734
18,945
Forex risk management The main exchange rate to which the Company is exposed is the euro/US dollars 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 14% of total turnover in 2019, while purchases in dollars represented 3% of total turnover. During the year, operations in dollars were partially hedged through forward sales contracts; no currency derivatives were pending at 31 December 2019.
Sensitivity analysis With reference to financial assets and liabilities in US dollars at 31 December 2019, a hypothetical and immediate revaluation of 10% of the euro against the dollar would have led to a loss of € 185,000.
Interest rate risk management Owing to the current trend in interest rates, the Company favours fixedrate 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 2019, IRS totalling € 33.2 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. The derivative contracts were not designated as a cash flow hedge and were therefore recognised using the “fair value through profit or loss” method.
Sensitivity analysis Considering the IRS in place, at the end of 2019 almost all of the Company’s financial debt was at a fixed rate. Therefore, at 31 December 2019 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.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Commodity price risk management
Liquidity risk management
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 2019 and 2018, 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 2019 of 46%, net financial debt / pro-forma EBITDA2 of 1.86) and has unused short-term lines of credit. To minimise the risk of liquidity, the Administration and Finance Department: • maintains a correct balance of net financial debt, financing investments with capital and with medium to long-term debt; • verifies systematically that the short-term accrued cash flows (amounts received from customers and other income) are expected to accommodate the deferred cash flows (short-term financial debt, payments to suppliers and other outgoings); • regularly assesses expected financial needs in order to promptly take any corrective measures. An analysis by expiry date of financial payables at 31 December 2019 and 31 December 2018 is shown below.
AT 31 DECEMBER 2019 Unsecured loans Short-term bank loans
Carrying value
Contractual cash flows
Within 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years
47,687
48,588
1,723
11,009
33,251
2,605
1,793
1,793
1,793
-
-
-
Payables to A.R.C. shareholders
120
120
-
60
60
-
Payables to former C.M.I. shareholders
1,173
1,173
-
-
1,173
-
Total financial payables
50,773
51,674
3,516
11,069
34,484
2,605
Trade payables
15,734
15,734
15,707
27
-
-
Total
66,507
67,408
19,223
11,096
34,484
2,605
Carrying value
Contractual cash flows
Within 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years
43,580
44,414
1,795
8,422
32,621
1,576
7,419
7,419
7,419
-
-
-
Payables to A.R.C. 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 2018 Unsecured loans Short-term bank loans
The various due dates are based on the period between the end of the reporting period and the contractual expiry date of the commitments, the values indicated in the table correspond to non-discounted cash flows.
2 2
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 return on capital employed and the pro-forma net debt/EBITDA ratio are calculated considering, for the companies acquired and included in the scope of consolidation during the year, the EBIT and EBITDA for the entire year.
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SABAF . 2019 ANNUAL REPORT
Hierarchical levels of fair value assessment 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: • Level 1 – quotations found on an active market for assets or liabilities subject to assessment;
• Level 2 - input other than prices listed in the previous point, which can be observed directly (prices) or indirectly (derived from prices) on the market; • Level 3 – input based on observable market data.
The following table shows the assets and liabilities valued at fair value at 31 December 2019, by hierarchical level of fair value assessment. LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
Other financial liabilities (interest rate derivatives)
-
(271)
-
(271)
Option on A.R.C. minorities
-
-
-
-
Total assets and liabilities at fair value
-
(271)
-
(271)
36. RELATIONS BETWEEN GROUP COMPANIES AND WITH RELATED PARTIES 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.
Impact of related-party transactions or positions on statement of financial position items TOTAL 2019
SUBSIDIARIES
GIUSEPPE SALERI SAPA
Non-current financial assets
5,340
5,280
-
-
5,280
98.88%
Trade receivables
28,563
9,676
-
-
9,676
33.88%
Current financial assets
3,421
1,600
-
-
1,600
46.77%
Trade payables
15,734
765
-
4
769
4.89%
TOTAL 2018
SUBSIDIARIES
GIUSEPPE SALERI SAPA
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%
208
OTHER TOTAL IMPACT RELATED PARTIES RELATED PARTIES ON THE TOTAL
OTHER TOTAL IMPACT RELATED PARTIES RELATED PARTIES ON THE TOTAL
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Impact of related-party transactions on income statement items TOTAL 2019
SUBSIDIARIES
GIUSEPPE SALERI SAPA
OTHER TOTAL RELATED PARTIES RELATED PARTIES
IMPACT ON THE TOTAL
Revenue
94,899
11,820
-
-
11,820
12.46%
Other income
4,045
1,760
-
-
1,760
43.51%
Materials
32,806
1,852
-
-
1,852
5.65%
Services
20,124
465
-
21
486
2.42%
Capital gains on non-current assets
130
90
-
-
90
69.23%
Other operating costs
926
80
-
-
80
8.64%
Write-downs of non-current assets
500
500
-
-
500
100%
211
175
-
-
175
82.94%
TOTAL 2018
SUBSIDIARIES
GIUSEPPE SALERI SAPA
OTHER RELATED PARTIES
TOTAL RELATED PARTIES
IMPACT ON THE TOTAL
110,065
11,520
-
-
11,520
10.46%
Financial income
Revenue 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%
Relations with subsidiaries mainly consist of: • trade relations, relating to the purchase and sale of semi-processed goods or finished products with Sabaf do Brasil, Faringosi Hinges, Sabaf Turkey and Sabaf Kunshan Trading; • sales of machinery to Sabaf do Brasil and Sabaf Turkey, which generated the capital gains highlighted; • charging for the provision of intra-group technical, commercial and administrative services; • charging for intra-group royalties; • intra-group loans; • group VAT.
39. COMMITMENTS Guarantees issued Sabaf S.p.A. also issued sureties to guarantee mortgage loans granted by banks to employees for a total of € 4,024,000 (€ 4,734,000 at 31 December 2018).
40. FEES TO DIRECTORS, STATUTORY AUDITORS AND EXECUTIVES WITH STRATEGIC RESPONSIBILITIES
Related-party transactions are regulated by specific contracts regulated at arm’s length conditions.
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.
37. SIGNIFICANT NON-RECURRING EVENTS AND TRANSACTIONS
41. SHARE-BASED PAYMENTS
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 2019.
38. ATYPICAL AND/OR UNUSUAL TRANSACTIONS 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 2019.
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, subsequently amended as resolved by the Board of Directors on 14 May 2019.
209
SABAF . 2019 ANNUAL REPORT
Purpose of the plan 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 and of the Group. Beneficiaries of the plan 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: • Cluster 1: Beneficiaries already identified in the Plan or who will be identified by the Board of Directors by 30 June 2018 on the Shareholders’ Meeting authority. • Cluster 2: Beneficiaries who will be identified by the Board of Directors from 1 July 2018 to 30 June 2019 on the Shareholders’ Meeting authority. The Board of Directors, in its meeting of 15 May 2018, identified the Beneficiaries of Cluster 1 of the Plan to whom a total of 185,600 rights were assigned; and the Board of Directors in its meeting of 14 May 2019, identified the Beneficiaries of Cluster 2 of the Plan to whom a total of 184,400 rights were assigned.
210
Subject-matter of the plan 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 and Individual objectives, i.e. performance objectives of each beneficiary determined by the Board of Directors at the suggestion of the Remuneration and Nomination Committee. Deadline of the Plan The Plan expires on 31 December 2022 (or on a different subsequent date set by the Board of Directors). Fair Value measurement methods 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 for Cluster 1 and 14 May 2019 for Cluster 2. The main assumptions made at the beginning of the vesting period are illustrated below:
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
CLUSTER 1 FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON ROI 2018
2019
2020
2018-2020
19.48
19.48
19.48
19.48
Expected probability of business objective achievement
31%
0%
44.5%
15.5%
Total value on ROI
4.59
Fair Value
1.53
Share price at the start of the vesting period
33.40%
Rights on ROI
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON EBITDA 2018
2019
2020
19.48
19.48
19.48
Expected probability of business objective achievement
41%
0%
60.9%
Total value on EBITDA
7.04
Share price at the start of the vesting period
Fair Value
33.30%
Rights on EBITDA
2.35
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON TSR 2018
2019
2020
2018-2020
20.2
14.9
12.44
20.2
-0.28%
-0.30%
-0.38%
-0.38%
31%
18%
29%
29%
0.00%
0.00%
0.00%
0.00%
Strike Price
22.61
17.39
14.51
28.34
Total value on TSR
7.57
Fair Value
2.52
Share price at the start of the vesting period Risk free rate Expected volatility Dividend yield
Rights on TSR
33.30%
Fair Value per share at initial date of the vesting period
6.40
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SABAF . 2019 ANNUAL REPORT
CLUSTER 2 FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON ROI 2019
2020
2019-2020
13.66
13.66
13.66
Expected probability of business objective achievement
0%
36.90%
15.50%
Total value on ROI
2.80
Share price at the start of the vesting period
Fair Value
23.38%
Rights on ROI
0.65
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON EBITDA
Share price at the start of the vesting period Expected probability of business objective achievement
2019
2020
13.66
13.66
0%
53.50%
4.50
Total value on EBITDA
Fair Value
23.31%
Rights on EBITDA
1.05
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON TSR 2019
2020
2019-2020
14.9
12.44
14.9
-0.30%
-0.38%
-0.38%
18%
29%
29%
0.00%
0.00%
0.00%
Strike Price
17.39
14.51
22.86
Total value on TSR
2.53
Share price at the start of the vesting period Risk free rate Expected volatility Dividend yield
Fair Value
23.31%
Rights on TSR
0.59
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON INDIVIDUAL OBJECTIVES 2019
2020
Share price at the start of the vesting period
13.66
13.66
Expected probability of objective achievement
50%
50%
Total value on individual objectives
6.83
Rights on individual objectives
30.00%
Fair Value
Fair Value per share at initial date of the vesting period
The accounting impacts of the Plan concerning these financial statements are illustrated in Note 13 and Note 27.
212
2.05
4.34
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
Summary of public grants pursuant to Article 1, paragraphs 125-129, Italian Law no. 124/2017 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”. CONTRIBUTION VALUE
DISBURSING SUBJECT
Patent Box
356
Italian State
Super/Iper ammortamento (Super/ Hyper amortisation)
581
Italian State
Energy-intensive contributions
468
Italian State
STATUTORY REFERENCES
Total
1,405
Patent Box: 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. Super ammortamento (Super amortisation): 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. Energy-intensive contributions: accessible grants for companies that consume a lot of electricity, whose regulatory reference is the MISE Decree of 21 December 2017.
LIST OF INVESTMENTS WITH ADDITIONAL INFORMATION REQUIRED BY CONSOB (COMMUNICATION DEM6064293 of 28 July 2006) IN SUBSIDIARIES3
COMPANY NAME
REGISTERED OFFICES
SHARE CAPITAL AT 31 DECEMBER 2019
SHAREHODERS
OWNERSHIP %
SHAREHOLDERS’ EQUITY AT 31 DECEMBER 2019
2019 PROFIT (LOSS)
Faringosi Hinges s.r.l.
Ospitaletto (BS)
EUR 90,000
Sabaf S.p.A.
100%
EUR 7,318,972
EUR 1,076,057
Sabaf do Brasil Ltda
Jundiaì (Brazil)
BRL 24,000,000
Sabaf S.p.A.
100%
BRL 52,039,450
BRL 3,734,068
Sabaf US Corp.
Plainfield (USA)
USD 200,000
Sabaf S.p.A.
100%
USD -56,826
USD 71,516
Sabaf Appliance Components (Kunshan) Co., Ltd.
Kunshan (China)
EUR 4,900,000
Sabaf S.p.A.
100%
CNY -6,037,256
CNY-4,420,172
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki
Manisa (Turkey)
TRY 28,000,000
Sabaf S.p.A.
100%
TRY 167,844,599
TRY 25,918,705
A.R.C. s.r.l.
Campodarsego (PD)
EUR 45,000
Sabaf S.p.A.
70%
EUR 5,663,939
EUR 571,572
TRY 39,770,099
TRY 12,807,253
EUR 7,450,225
EUR 481,009
Okida Elektronik Sanayi ve Tickaret A.S
C.M.I s.r.l.
Istanbul (Turkey)
TRY 5,000,000
Valsamoggia (BO)
EUR 1,000,000
Sabaf S.p.A.
30%
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki
70%
Sabaf S.p.A.
68.5%
OTHER SIGNIFICANT EQUITY INVESTMENTS None.
3
Values taken from the separate financial statements of subsidiaries, prepared in accordance with locally applicable accounting standards.
213
SABAF . 2019 ANNUAL REPORT
Origin, possibility of utilisation and availability of reserves
AMOUNT
POSSIBILITY OF UTILISATION
AVAILABLE SHARE
AMOUNT SUBJECT TO TAXATION FOR THE COMPANY IN CASE OF DISTRIBUTION
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
2,307
B
0
0
78,960
A, B, C
78,960
0
DESCRIPTION
CAPITAL RESERVES: Share premium reserve
RETAINED EARNINGS: Legal reserve Other retained earnings
VALUATION RESERVE: Post-employment benefit actuarial provision
(505)
0
0
Reserve for stock grant plan
1,002
0
0
93,400
90,596
1,634
TOTAL
KEY: A. for share capital increase B. to hedge losses C. for distribution to shareholders
Statement of revaluations of equity assets at 31 December 2019
Investment property
Plant and machinery
GROSS VALUE
CUMULATIVE DEPRECIATION
NET VALUE
Law 72/1983
137
(137)
0
1989 merger
516
(484)
32
Law 413/1991
47
(44)
3
1994 merger
1,483
(1,136)
347
Law 342/2000
2,870
(2,540)
330
5,053
(4,341)
712
Law 576/75
205
(205)
0
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
20,648
(19,936)
712
TOTAL
214
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
GENERAL INFORMATION Sabaf S.p.A. is a company organised under the legal system of the Republic of Italy.
Registered and administrative office
Via dei Carpini, 1 25035 - Ospitaletto (Brescia)
Contacts
Tel: +39 030 - 6843001 Fax: +39 030 - 6848249 E-mail: info@sabaf.it Website: www.sabaf.it
Tax information
R.E.A. Brescia 347512 Tax Code 03244470179 VAT Number 01786910982
APPENDIX
Information as required by Article 149-duodecies of the CONSOB Issuers’ Regulation The following table, prepared pursuant to Article 149-duodecies of the CONSOB Issuers’ Regulation, shows fees relating to 2019 for auditing services and for services other than auditing provided by the Independent Auditors. No services were provided by entities belonging to the network.
PARTY PROVIDING THE SERVICE
FEES PERTAINING TO THE 2019 FINANCIAL YEAR
Audit
EY S.p.A.
47
Certification services
EY S.p.A.
---
Other services
EY S.p.A.
39 4
(€/000)
Total
4
86
auditing procedures agreement relating to interim management reports.
215
SABAF . 2019 ANNUAL REPORT
CERTIFICATION OF SEPARATE FINANCIAL STATEMENTS pursuant to Article 154-bis of Italian Legislative Decree 58/98 Pietro Iotti, the Chief Executive Officer, and Gianluca Beschi, the Financial Reporting Officer of Sabaf S.p.A., have taken into account the requirements of Article 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of 24 February 1998 and can certify: • the adequacy, in relation to the business characteristics and • the actual application of the administrative and accounting procedures for the formation of the separate financial statements during the 2019 financial year. They also certify that: • the separate financial statements:
- were prepared in accordance with the international accounting policies recognised in the European Community in accordance with EC regulation 1606/2002 of the European Parliament and Council of 19 July 2002 and with the measures issued in implementation of Article 9 of Italian Legislative Decree 38/2005; - are consistent with accounting books and records; - provide a true and fair view of the financial position and performance of the issuer;
• the report on operations contains a reliable analysis of the performance and results of operations and the situation at the issuer, along with a description of the key risks and uncertainties to which it is exposed.
Ospitaletto, 24 March 2020
216
Chief Executive Officer
The Financial Reporting Officer
Pietro Iotti
Gianluca Beschi
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
217
SABAF . 2019 ANNUAL REPORT
218
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
219
SABAF . 2019 ANNUAL REPORT
220
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
221
SABAF . 2019 ANNUAL REPORT
Report of the Board of Statutory Auditors to the Shareholders’ Meeting of SABAF S.p.A. 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.
Introduction
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 2019.
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.
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.
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 2019 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. In any case, note that, due to the situation regarding the spread of the health emergency related to COVID-19, pursuant to Article 106 of Italian Decree Law no. 18 of 2020 “the ordinary shareholders’ meeting is convened within one hundred and eighty days from the end of the reporting period”, as an exception to the ordinary rules on the subject.
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.
During the year ended 31 December 2019 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.
222
Appointment and Independence of the Board of Statutory Auditors
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
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
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 17 March 2020 and consequently communicated to the Board of Directors, which disclosed it in the Report prepared pursuant to Art. 123-bis of the TUF of both financial years. This assessment was carried out again on 12 March 2019 and 17 March 2020 and consequently communicated to the Board of Directors, which disclosed it in the Report prepared pursuant to Art. 123-bis of the TUF of both financial years.
Supervision and control of the Board of Statutory Auditors Supervisory activity on compliance with the law and articles of association 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: • attended the meetings of the Shareholders and Board of Directors, monitoring compliance with the statutory, legislative and regulatory provisions regulating the operation of the Company’s bodies as well as compliance with the principles of proper management; • supervised, for what of direct concern, the adequacy of the Company’s organisational structure and compliance with the principles of proper management, through direct observation, gathering information from heads of the corporate functions and meetings with the Independent auditors to exchange data and information; • assessed and supervised the adequacy of the internal control system and the administrative and accounting system, as well as its reliability in providing a fair presentation of operational transactions, through the information of the heads of the respective functions, the examination of company documents and the analysis of the results of the work carried out by the Independent Auditors; • held 9 meetings during the year, lasting approximately 2 hours and a half, and also attended all the meetings of the Board of Directors, as well as of the board committees (Control and Risk Committee, Remuneration and Nomination Committee); • supervised the adequacy of the reciprocal flow of information between SABAF and its subsidiaries pursuant to Art. 114, paragraph 2, of Italian Legislative Decree no. 58 of 1998, ensured by the instructions issued by the Company’s management to Group companies; • supervised compliance with the rules of “Market abuse”, “Protection of savings” and “Internal Dealing”, with a special reference to the processing of inside information and the procedure for the dissemination of statements and information to the public. The adjustment of the procedure adopted by the Company for the management of inside relevant information, drawn up in the light of CONSOB Guidelines no. 1/2017, was monitored.
Moreover, the Board: • 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; • held meetings with representatives of the Independent Auditors pursuant to Art. 150, paragraph 3 of the TUF and there were no significant data and/or information to be reported; • had exchanges of information with corresponding control bodies (if any) of the companies directly or indirectly controlled by SABAF S.p.A. pursuant to Art. 151, paragraph 1 and 2 of the TUF; • supervised the procedures for effective implementation of the corporate governance rules envisaged in the Corporate Governance Code complied with, as adequately represented in the Report on Corporate Governance and Ownership Structure, in compliance with Art. 124-ter of the TUF and Art. 89-bis of the Issuers’ Regulations; • checked, in relation to the periodic assessment to be carried out pursuant to Application Principle 3.C.5 of the Corporate Governance Code, as part of the supervision of the procedures for effective implementation of the corporate governance rules, the correct application of the assessment criteria and procedures adopted by the Board of Directors, with regard to the positive assessment of the independence of the Directors. 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 filled in by all the members of the Board of Directors - used the assessment criteria already adopted in the previous year. The Board also acknowledges that it has issued: • its favourable opinion on the appointment and remuneration to be assigned to the head of the Internal Audit Department as required by Application Principle 7.C.1 of the Corporate Governance Code; • its favourable opinion with regard to the annual Audit Plan prepared by the Head of the Internal Audit Department; • its consent, pursuant to Article 5, paragraph 4, of Regulation (EU) 2014/537, on two occasions, to the provision by the Independent Auditors EY S.p.A. of services other than the external audit to the Company and to companies belonging to the SABAF Group, after having carefully assessed the potential risks for the independence of the auditor. 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 € 460,000.
223
SABAF . 2019 ANNUAL REPORT
Supervisory activity on the adequacy of the administrative and accounting system and the auditing activity Pursuant to Art. 19 of Italian Legislative Decree 39/2010 (Consolidated External Audit Act), the Board of Statutory Auditors is required to supervise: • the financial reporting process; • the effectiveness of the internal control and risk management systems; • the External audit of annual accounts and consolidated accounts; • the independence of the Independent Auditors, specifically as far as the provision of non-audit services is concerned. 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.
Financial reporting process 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. In this regard, note that, in order to take account of the developments in the company’s business and bring the procedures into line with current operating practices, during 2019 two administrative-accounting procedures drawn up pursuant to Italian Law 262/2005 were updated, approved by the Financial Reporting Officer, and reported to the Board of Directors in December. 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 2019, 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. 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 2019 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. 224
Furthermore, it is acknowledged that • the Independent Auditors appointed to carry out the external audit currently in office, EY S.p.A., were appointed for the 2018-2026 period at the Shareholders’ Meeting held on 8 May 2018: the procedure for the appointment was carried out in compliance with the provisions of Article 16 of Regulation (EU) 2014/537. The Board of Statutory Auditors in office at that time submitted to the Board of Directors a reasoned recommendation containing the name of two Independent Auditors suitable to replace the one that is due to expire, expressing preference for one of them. This recommendation was developed at the end of a detailed selection procedure that was carried out in compliance with the provisions contained in Regulation (EU) 2014/537; • the Independent Auditors appointed to audit the company illustrated to the Board of Statutory Auditors the checks carried out and did not report any findings in the periodic meetings with the Board of Statutory Auditors; • the Board of Statutory Auditors supervised the auditing of the annual and consolidated financial statements, obtaining information and periodically discussing with the Independent Auditors. • 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 on 3 April 2020 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: • to the Management report; • to the information referred to in Art. 123-bis, paragraph 4, Italian Legislative Decree 58/98 contained in the Report on corporate governance and ownership structure. 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 Inpendent 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:
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
ACTIVITIES Audit Certification services
AMOUNT EUR 124 -
Other services
49
Total
173
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 2019 there were changes in the scope of the audit, in relation to the inclusion in the consolidation area of the company C.M.I. S.r.l. and of the companies controlled by it (C.G.D S.r.l. and C.M.I. Polska Sp. Zoo) as a result of the acquisition, by SABAF, of the C.M.I. group, on 31 July 2019. The companies of the C.M.I. group contributed Euro 12.5 million to consolidated turnover.
Supervisory activity on the adequacy of the internal control system and the organisational structure 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: • members of the Control and Risk Committee; • members of the Board of Statutory Auditors; • the Chief Executive Officer and director in charge of the internal control and risk management system; • the Internal Audit department and its Head; • the Financial Reporting Officer. The Board of Statutory Auditors also acknowledges that it attended the periodic meetings among the Company’s control bodies attended by: • • • •
members of the Control and Risk Committee; members of the Board of Statutory Auditors; the Independent Auditors; the Chief Executive Officer and Director in charge of the internal control system; • the Financial Reporting Officer; • the Internal Audit department and its Head; • the Supervisory Body. In particular, as part of these activities, the Board of Statutory Auditors acknowledges that it has received and examined: • t he periodic reports on the activities carried out, prepared by the Control and Risks Committee and the Internal Audit department; • the reports drawn up at the end of the verification and monitoring activities by the Internal Audit department, with the relative results, the recommended actions and the controls on the implementation of the aforesaid actions; • 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 2019. Similarly, the Board of Statutory Auditors acknowledged the compliance with the provisions of Italian Legislative Decree no. 231/2001 and the activity plan for 2019, 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 2019 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, on 5 February 2019, Emma Marcandalli, Head of the Internal Audit department and member of the Supervisory Body, resigned, effective as from 1 May 2019. On 25 June 2019, the Board of Directors resolved to entrust the Group Internal Audit Department, for the period between 1 July 2019 and 31 December 2021, to PricewaterhouseCoopers S.p.A. (PwC) and to appoint Giuseppe Garzillo as Head of the Internal Audit Department for the same period. Giusepe Garzillo was also appointed member of the Supervisory Body until May 2021. The Supervisory Body is now composed of Nicla Picchi (Chairman) and Giuseppe Garzillo.
Supervisory activity on compliance the principles of proper management The main transactions carried out by the Company during the year, with respect to which the Board of Statutory Auditors monitored compliance with the principles of proper management, are summarised below. On 25 June 2019, the Board of Directors of SABAF S.p.A. approved, pursuant to Article 2505, paragraph 2 of the Italian Civil Code, the plan for the merger through incorporation into SABAF S.p.A. of Sabaf Immobiliare s.r.l.. The company was entrusted with the management of the real estate assets of the Sabaf Group; the operation was put in place in order to optimise the management of resources, synergies and economic and financial flows. The merger deed was signed on 18 November 2019 effective as from 1 January 2019. This transaction generated a merger surplus of € 13.5 million, which was recorded in a special equity reserve. Moreover, 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, on 31 July 2019 the Group completed the acquisition of 68.5% of the company C.M.I. S.r.l., one of the main players in the design, production and sale of hinges for household appliances. The C.M.I. Group operates with production units in Italy (Crespellano, BO) and Poland and, through its subsidiary C.G.D. S.r.l., is also active in the production of presses for steel and sheet metal pressed articles. The acquisition of C.M.I. S.r.l. allowed the SABAF Group to achieve a leadership position on a global scale in the sector of hinges. The acquisition of the majority shareholding in C.M.I. involved a total investment of € 13.4 million. In this regard, note that the agreement signed with the seller provides for a call option, for SABAF, and a put option, for the counterparty, for the remaining 31.5% of the capital of CMI S.r.l., against which, in application of IAS 32, a financial liability of € 8.7 million was recorded in the consolidated financial statements, which resulted in a corresponding decrease in consolidated shareholders’ equity. 225
SABAF . 2019 ANNUAL REPORT
Finally, on 5 December 2019, the Company announced that it had started an important cooperation with the Japanese group Paloma, which is part of Paloma Co. Ltd, active globally in the gas equipment sector. SABAF entered also into an agreement with Paloma Rheem Investments, Inc. for the sale of treasury shares for a total of about 2% of SABAF’s share capital (230,669 SABAF shares), at a unit price of € 13.64 per share, in accordance with the shareholders’ resolution of 7 May 2019. This transaction is considered the basis for new business opportunities and strategic development for both the SABAF Group and the Paloma Group. 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 € 12 million mainly aimed at increasing and automating the production capacity of special burners and the manufacturing of machinery and moulds for new burners. Part of these investments was instead allocated to maintenance and replacement activities to keep the production equipment constantly updated and efficient. Following the supervision and control activities carried out during the year, the Board of Statutory Auditors can certify that: • during the course of the activity carried out, no omissions, irregularities or reprehensible or significant facts that would require reporting to the control bodies or mention in this Report emerged; • 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; • all the transactions and management choices adopted are inspired by the principle of proper management and reasonableness, and comply with the 2018-2022 Business Plan approved by the Board of Directors.
Supervisory activity on implementation of the corporate governance rules 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. 123bis 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..
226
Supervisory activities in relation to the Financial Statements, the Consolidated financial statements and the consolidated Disclosure of non-financial information With regard to the Separate financial statements for the year ended 31 December 2019, the Consolidated financial statements for the year ended on the same date 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., C.M.I. S.r.l. and Okida Elektronik (“Hinges” CGU for Faringosi Hinges S.r.l.; “Professional burners” CGU for A.R.C. S.r.l.; “C.M.I. hinges” CGU for C.M.I. S.r.l. and “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 pursuance of CONSOB Resolution 15519/2006, the effects of transactions with related parties are expressly indicated in the financial statements. In pursuance of this Resolution in the Explanatory Notes, it is specified that during the year there were no significant non-recurring events or operations and no transactions deriving from atypical and/or unusual operations were carried out; • the Financial statements are in keeping with the facts and information of which the Board of Statutory Auditors has become aware within its supervisory duties and its control and inspection powers; • as far as the Board of Statutory Auditors is aware, the Directors, when preparing the financial statements, did not depart from the law provisions pursuant to Art. 2423, paragraph 5 of the Italian Civil Code; • the Chief Executive Officer and the Financial Reporting Officer issued the certificate, pursuant to Art. 81-ter of CONSOB Regulation no. 11971/1999 as amended and Art. 154-bis of the TUF; • the Report on Operations complies with legal requirements and is consistent with the data and results of the Financial Statements; it provides the necessary information on the activities and significant transactions of which the Board of Statutory Auditors was informed during the year, on the main risks of the Company and its subsidiaries, on intra-group and related-party transactions, as well as on the process of adapting the corporate organisation to the principles of corporate governance, in accordance with the Corporate Governance Code for listed companies;
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2019
• pursuant to the provisions of Art. 123-ter of the TUF, the Remuneration Report is presented to the Shareholders’ Meeting (for approval in its first section, for reporting purposes in its second section): the Board of Statutory Auditors examined and agreed with the approach followed in preparing this report, at a joint meeting with the Remuneration Committee. 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 3 April 2020. This activity did not reveal any facts that could be reported in this report.
Supervisory activity on relationships with Subsidiaries 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 containing findings to be noted in this report.
Supervisory activity on related-party transactions 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 last updated 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.
Risks related to the Coronavirus pandemic In the Report on Operations, the Company highlighted the initiatives taken to contain the impact on the Company of the worldwide spread of the pandemic caused by the COVID-19 virus. Note that the (DPCM) decree of the prime minister of 22 March 2020 imposed the closure until 3 April 2020 of the production units of the Company and its Italian subsidiaries. The SABAF Group set up a dedicated task force to deal with this emergency situation and is implementing mitigation actions to reduce the economic consequences while safeguarding the safety and health of workers. At the date of the Report on Operations, 24 March 2020, the development of the above-mentioned situation presented elements of uncertainty such that the potential impacts on the Group’s activities and markets could not be reasonably quantified and the estimates for 2020 could not be confirmed. The situation now described does not appear to have changed significantly in the period between 24 March and today. The Board of Directors, following the above considerations, deemed it appropriate, as a matter of prudence, to propose to the Shareholders’ Meeting to allocate the Company’s profit for 2019 entirely to the extraordinary reserve, with the clarification that, as announced to the market on 24 March 2020, the distribution of a dividend on the profit for 2019 will be reviewed when the situation related to the Coronavirus is overcome.
Proposal to the Shareholders’ Meeting The Board of Statutory Auditors expresses its favourable opinion for the approval of the Separate financial statements at 31 December 2019 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, 6 April 2020 The Board of Statutory Auditors Chairman Alessandra Tronconi Statutory Auditor Luisa Anselmi Statutory Auditor Mauro Vivenzi
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SABAF . 2019 ANNUAL REPORT
Report on remuneration pursuant to Article 123-ter of the TUF and Article 84-quater of the Issuers’ Regulations
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Section I - Remuneration policy
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Section II - Remuneration of the members of the Board of Directors and the Board of Statutory Auditors and other executives with strategic responsibilities in 2019
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REPORT ON REMUNERATION
SECTION I - REMUNERATION POLICY 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, 26 September 2017 and 24 March 2020, 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: • complying with the recommendations of the current Corporate Governance Code, approved in March 2010 and subsequently amended and supplemented, subject to adaptation to the new Corporate Governance Code for listed companies, approved in January 2020 and that will be applicable from the first financial year beginning after 31 December 2020; • in line with Recommendations 2004/913/EC and 2009/385, which were incorporated into law with Article 123-ter of the Consolidated Law on Finance (TUF), as last amended by Legislative Decree no. 49/19. The remuneration policy lasts three years. With regard to the remuneration policy submitted to shareholders at the Shareholders’ Meeting of 7th May 2019, it should be noted the addition based on which ìthe Board of Directors, on the proposal of the Remuneration and Nomination Committee and subject to the opinion of the Board of Statutory Auditors in the cases referred to in Article 2389 of the Italian Civil Code, has the power to approve the payment of a one-off bonus to Directors holding specific positions and/or to Executives with strategic responsibilities under the conditions and within the limits referred to in Article 3 of the remuneration policy.
1. Corporate bodies and persons involved in preparing, approving and implementing the remuneration policy SHAREHOLDERS’ MEETING • Determines the remuneration due to the members of the Board of Directors, including a fixed amount and attendance fees • Resolves remuneration plans based on the allocation of financial instruments with regard to directors and employees • Gives a binding vote on the Remuneration Policy, described in the first section of the Report on Remuneration • Gives a non-binding vote on the second section of the Report on Remuneration. BOARD OF DIRECTORS • At the suggestion of the Remuneration and Nomination Committee and subject to the opinion of the Board of Statutory Auditors, determines the fee for Directors holding specific positions • Defines the remuneration policy of Executives with strategic responsibilities • After obtaining the opinion of the Remuneration and Nomination Committee, resolves to sign Non-competition agreements with regard to the Chief Executive Officer and to executives
• At the suggestion of the Remuneration and Nomination Committee, defines incentive plans based on short- and long-term variable remuneration to be assigned to the Chief Executive Officer and to the Executives with strategic responsibilities • At the suggestion of the Chief Executive Officer, defines the incentive plans based on short-term variable remuneration for company Management and other employees • At the suggestion of the Remuneration and Nomination Committee, resolves to assign non-monetary benefits to executives • Makes proposals to the Shareholders’ Meeting on remuneration plans based on the allocation of financial instruments with regard to directors and employees • Prepares the Report on Remuneration pursuant to Article 123-ter of the Consolidated Law on Finance and Article 84-quater of the Issuers’ Regulations • Ensures that the remuneration paid and accrued is consistent with the principles and criteria defined in the remuneration policy, in the light of the results achieved and other circumstances relevant to its implementation • On termination of office and/or termination of the relationship with the Chief Executive Officer, with Directors holding specific positions or with a General Manager, discloses in a press release to the market at the end of internal processes leading to the allocation or recognition of any indemnity and/or other benefits, detailed information concerning: a) the allocation or recognition of indemnities and/or other benefits, the circumstances justifying their accrual and the deliberative procedures followed for this purpose within the company; b) the total amount of the indemnity and/or other benefits, the related components (including non-monetary benefits, the maintenance of rights related to incentive plans, the fee for non-competition commitments or any other remuneration allocated for any reason and in any form) and the timing of their payment (distinguishing the part paid immediately from the part subject to deferral mechanisms); c) the application of any claw-back or malus clause of part of the sum; d) the compliance of the elements indicated in letters a), b) and c) above with what is indicated in the remuneration policy, with a clear indication of the reasons and the deliberative procedures followed in the event of even partial non-compliance with the policy; e) information on any procedures that have been or will be followed for the replacement of the executive director or general manager no longer in office. At present, no independent experts or advisors contributed to the preparation of the policy, but the company reserves the right to avail itself of them if necessary; the remuneration of both executive and non-executive directors and of the members of the supervisory body was defined taking into account the remuneration practices widespread in the reference sectors and for companies of similar size. The Board of Directors is responsible for properly implementing the remuneration policy.
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REMUNERATION AND NOMINATION COMMITTEE • Makes proposals to the Board of Directors, in the absence of the persons directly concerned, for remuneration of the Chief Executive Officer and Directors holding specific positions • Examines, with the support of the Human Resources Department, the policy for the remuneration of executives, with a special attention to Executives with strategic responsibilities • Makes suggestions and proposals to the Board of Directors concerning the setting of targets on which the annual variable component and long-term incentives for the Chief Executive Officer, Directors holding specific positions and Executives with strategic responsibilities should be dependent, in order to ensure alignment with shareholders’ longterm interests and the company’s strategy • Monitors the actual application of the remuneration policy and assesses the level of achievement of the short- and long-term variable incentive targets of Directors and executives • Prepares the proposals to the Board of Directors of remuneration plans based on financial instruments • Assesses the adequacy, actual application and consistency of the remuneration policy, also with reference to the actual company performance, making suggestions and proposals for change • Follows the development of the regulatory framework of reference and best market practices on remuneration, getting inspired by them for formulating the remuneration policy and identifying aspects for improving the Report on Remuneration.
2. Purpose of the remuneration policy The Company’s intention is that the Remuneration Policy: • Ensures the competitiveness of the company on the labour market and attracts, motivates and increases the loyalty of persons with appropriate professional expertise; • Protects the principles of internal equity and diversity; • Brings the interests of the management into line with those of the shareholders; • Favours the creation of sustainable value for shareholders in the medium to long term and maintains an appropriate level of competitiveness for the company in the sector in which it operates; • Pursues the sustainable success of the company and takes into account the need to have, retain and motivate people with the competence and professionalism required by their role in the company.
The remuneration policy envisages the structuring of the remuneration of Executive Directors and Executives with Strategic Responsibilities in such a way that it is significantly made up of variable remuneration, including financial instruments: (i) whose payment is conditional on the achievement of common targets (in particular, Group EBIT) and/or individual targets, not only of an economic-financial nature, but also of a technical-produc-
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The Remuneration and Nomination Committee currently in office comprises three non-executive members, the majority of them independent (Daniela Toscani, Stefania Triva, e Alessandro Potestà), with the knowledge and experience in accounting, finance and remuneration policies that is deemed adequate by the Board of Directors. BOARD OF STATUTORY AUDITORS • The Board of Statutory Auditors expresses the opinions required by the regulations in force on proposals for remuneration of Directors holding specific positions. • The Board of Statutory Auditors, i.e. the Chairman of the Board of Statutory Auditors or another Statutory Auditor designated by him/her can attend the meetings of the Remuneration and Nomination Committee. HUMAN RESOURCES DEPARTMENT Actually enacts what is decided upon by the Board.
Attracts, motivates and increases the loyalty of PERSONS, with appropriate professional expertise
Brings the interests of the MANAGEMENT into line with those of the SHAREHOLDERS
Favours the creation of SUSTAINABLE VALUE for shareholders in the medium to long term
Protects the principles of INTERNAL EQUITY and DIVERSITY
tive and/or socio-environmental nature; (ii) subject, in part, to adequate retention and deferral mechanisms. In this context, the policy aims to encourage the achievement of the strategic objectives set out in the pro tempore business plans in force and to create long-term value for stakeholders, also in line with the principles of corporate social responsibility.
REPORT ON REMUNERATION
3. Remuneration policy guidelines and instruments The definition of a fair and sustainable remuneration package takes into account three main tools: • Fixed remuneration • Variable remuneration (short- and medium- to long-term) • Benefits Each remuneration component is analysed below.
ation, 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.
FIXED ANNUAL COMPONENT The fixed component of the Directors’ remuneration 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 specific positions, 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 remuner-
INDEMNITY AGAINST THE EARLY TERMINATION OF EMPLOYMENT There is an agreement for the Chief Executive Officer regulating ex ante the economic part concerning the early termination of the employment relationship, in which the amount of the indemnity payable is predetermined. 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. CORPORATE OFFICES
COMPONENTS OF THE REMUNERATION
Executive Directors
Non-Executive Directors
Members of committees within the BoD
Fixed remuneration for the office of Director
Fixed remuneration for the office of Director
Fixed remuneration for Directors members of committees within the BoD
FIXED COMPONENTS
INDEMNITY AGAINST THE EARLY TERMINATION OF EMPLOYMENT
Fixed remuneration for Directors holding specific positions
Attendance fee
Attendance fee
Remuneration for non-competition agreement (only for Chief Executive Officer)
N/A
N/A
SHORT-TERM VARIABLE COMPONENT (ANNUAL) 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 • 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.
Executives with strategic responsibilities
Statutory Auditors
Collective National Contract for Industrial Managers
Fixed remuneration
Remuneration for non-competition agreement
N/A
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. The Board of Directors, at the proposal of the Remuneration and Nomination Committee and subject to the opinion of the Board of Statutory Auditors in the cases referred to in Article 2389 of the Italian Civil Code, may decide to pay a one-off bonus to Directors holding specific positions and/or to Executives with strategic responsibilities. The resolution must be motivated and justified by exceptional circumstances, consistent with the objectives of the remuneration policy and, in particular, with that of pursuing the sustainable success of the company. In no case may the one-off bonus exceed 50% of the fixed annual component of the remuneration of the Director holding specific positions or the Executive with strategic responsibilities concerned. Non-executive directors are not granted any variable remuneration. 233
SABAF . 2019 ANNUAL REPORT
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. The allocation of actions related to the achievement of business targets is not envisaged, not even in part, in the event of failure to achieve at least 80% of these targets. The allocation of the shares is conditional on the continuation of the employment and/or collaboration and/or administration relationship between the beneficiary and the company at the date of approval of the financial statements for the year in which the allocation is envisaged, according to the criteria established by the incentive plan. Share-based incentive plans, if approved starting from 2021, will require a prevalent part of the plan to have a total period of vesting and maintenance of the shares assigned of at least five years.
ANNUAL MBO
STOCK GRANTS PLAN
Related to the budget for the year
Related to the Business Plan
• OTHER MANAGERS PROPOSED BY THE CHIEF EXECUTIVE OFFICIER
• OTHER MANAGERS IDENTIFIED BY THE BoD who hold or will hold key positions in the impiementation of the Business Plan
• COMMON TARGET: GROUP EBIT
• COMMON BUSINESS TARGETS: EBIT, ROI, TSR
• INDIVIDUAL TARGETS: ECONOMIC/FINANCIAL AND TECHNICAL AND PRODUCTIVE
• INDIVIDUAL PERFORMANCE TARGETS: IDENTIFIELD BY THE BoD FOR EACH BENEFICIARY
TARGETS
TARGETS
• CFO
• EXECUTIVES WITH STRATEGIC RESPONSIBILITIES
COMPONENTS OF THE REMUNERATION
CORPORATE OFFICES
SHORT-TERM VARIABLE COMPONENT VARIABLE COMPONENTS LONG-TERM VARIABLE COMPONENT
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• CHIEF EXECUTIVE OFFICER
• EXECUTIVE DIRECTORS (excluding the President)
BENEFICIARES
BENEFICIARES
LONG-TERM VARIABLE COMPONENT 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.
Executive directors and Executives with strategic responsibilities
Other persons identified by the CEO/BoD
Annual MBO plan based on achieving a common target and individual targets
Annual MBO plan based on achieving a common target and individual targets
Possible one-off bonus
Possible one-off bonus
Stock Grant Plan based on achieving business targets and individual performance targets
Stock Grant Plan based on achieving business targets and individual performance targets
REPORT ON REMUNERATION
NON-MONETARY BENEFITS 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.
COMPONENTS OF THE REMUNERATION
ENTRY BONUS With the aim of attracting highly professional individuals, the Board may decide to give entry bonuses to newly hired executives. CLAW BACK AND MALUS CLAUSES 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. REMUNERATION FOR OFFICES IN SUBSIDIARIES Directors and other executives with strategic responsibilities may be paid remuneration – exclusively as a fixed amount – for offices held in subsidiaries. In addition to the approval of the subsidiaries’ corporate bodies, this remuneration is subject to the favourable opinion of the Remuneration and Nomination Committee.
CORPORATE OFFICES Non-Executive Directors
Executive Directors
Executives with strategic responsibilities
Statutory Auditors
Third-party liability insurance policy
BENEFITS AND OTHER COMPONENTS
NONMONETARY BENEFITS
Third-party liability insurance policy
Third-party liability insurance policy
Life insurance policy to cover medical expenses (FASI), supplementary medical expenses
Third-party liability insurance policy
Company cars
OFFICES IN SUBSIDIARIES
Fixed remuneration for offices in subsidiaries
N/A
Fixed remuneration for offices in subsidiaries
N/A
4. Remuneration of the Board of Directors, Chairman and Vice Chairmen of the Board of Directors, Chief Executive Officer, Executives with strategic responsibilities and Board of Statutory Auditors REMUNERATION OF THE BOARD OF DIRECTORS 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. REMUNERATION OF THE CHAIRMAN OF THE BOARD OF DIRECTORS AND VICE CHAIRMAN 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 specific positions held.
REMUNERATION OF THE CHIEF EXECUTIVE OFFICER 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.
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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. • Non-competition agreement: assignment of a fixed annual remuneration against the signing of a Non-competition Agreement with the Company. • Short-term variable component: annual incentive, dependent on the achievement of the targets envisaged by the MBO plan, approved by the Board of Directors at the suggestion of the Remuneration and Nomination Committee. On the occasion of the annual approval, the Board of Directors decides on the maximum amount of the annual variable component, the methods and timing for its payment. The Chief Executive Officer may be paid a one-off bonus under the conditions and within the limits set out in the remuneration policy. • Benefits: the benefits envisaged for the management of the Company can be assigned: Life insurance policy and cover for medical expenses, assignment of company car; reimbursement of the rent for the house. REMUNERATION OF EXECUTIVES WITH STRATEGIC RESPONSIBILITIES • 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 remuner-
ation 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. Executives with strategic responsibilities can be paid a one-off bonus under the conditions and within the limits set out in the remuneration policy. • 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. REMUNERATION OF THE BOARD OF STATUTORY AUDITORS 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.
5. Departures from the remuneration policy Pursuant to Article 123-ter (3)-bis of the TUF, in the presence of exceptional circumstances (as defined below), the company may temporarily depart from the remuneration policy, with regard to the provisions concerning longterm variable remuneration and indemnity against the early termination of employment, referred to in paragraph 3 of the remuneration policy. The departure may only be made in compliance with the procedures of Consob Regulation no. 17221 of 12 March 2010 (Related-party Transactions).
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Exceptional circumstances are only situations where the departure from the remuneration policy is required to pursue the long-term interests and sustainability of the company as a whole or to ensure its ability to stay in the market.
REPORT ON REMUNERATION
SECTION II – REMUNERATION OF THE MEMBERS OF THE BOARD OF DIRECTORS AND THE BOARD OF STATUTORY AUDITORS AND OTHER EXECUTIVES WITH WITH STRATEGIC RESPONSIBILITIES IN 2019 This section, by name of Directors and Statutory Auditors: • describes each of the items that make up the remuneration, showing their consistency with the remuneration policy of Sabaf; • analytically illustrates the remuneration paid in the financial year under review (2019), for any reason and in any form, by the Company or by subsidiaries or affiliates, identifying any components of this remuneration that relate to activities undertaken in previous years to the year under review.
The components of the remuneration paid to directors for 2019 The remuneration paid to directors for 2019 consisted of the following components: - An annual fixed remuneration, approved by the Shareholders’ meeting of 8 May 2018 that the Board of Directors decided to divide, in compliance with the maximum limit of € 400,000.00 established by the Shareholders’ Meeting, as follows: . € 20,000 assigned to each director without distinction; . € 10,000 assigned to each member of the committees set up within the Board itself (Internal Control and Risk Committee and Remuneration and Nomination Committee); . additional remuneration of € 160,000 divided among the Chairman of the Board of Directors, Vice Chairman and Chief Executive Officer as detailed in the table below; - An attendance fee of € 1,000, due to non-executive directors only, for every occasion on which they attend Board of Directors’ meetings and the meetings of committees formed within the Board. 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 relation to the annual variable incentive plan established for 2018, remuneration of € 99,374 accrued in the previous financial year (and disbursed in 2019). - With reference to the annual incentive plan for 2019, the Chief Executive Officer Pietro Iotti accrued variable remuneration of € 45,000, whereas the Director Gianluca Beschi accrued variable remuneration of € 15,892, for the partial achievement of the targets of the 2019 MBO plan.
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.
Remuneration of Statutory Auditors for 2019 The remuneration paid to the Statutory Auditors for 2019 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 for 2019 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 reference to the variable incentive plan (MBO) of 2018, during 2019, remuneration totalling € 51,635 was paid. - With reference to the variable incentive plan (MBO) for 2019, remuneration totalling € 50,890 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.
237
SABAF . 2019 ANNUAL REPORT
For a breakdown of the remuneration paid in 2019, please refer to the tables below (Table 1, Table 2 and Table 3), which contain remuneration paid to Directors and Statutory Auditors, and, at the aggregate level, to other executives with strategic responsibilities, taking into account any office held for a fraction of a year. Remuneration received from subsidiaries and/or affiliates, with the exception of that waived or paid back to the Company, is also indicated separately. With particular reference to Table 1, the column: - “Fixed remuneration” shows, for the portion attributable to 2019, the fixed remuneration approved by the Shareholders’ meeting (and distributed with resolution of the Board of Directors), including the remuneration received for the carrying-out of special offices (pursuant to Article 2389, paragraph 3, Italian Civil Code; attendance fees as approved by the Shareholders’ meeting; employee salaries due for the year gross of social security contributions and income taxes owed by the employee. - “Remuneration for attendance at Committee meetings”, shows, for the portion relating to 2019, the remuneration due to directors who attended the meetings of the Committees set up within the Board and the related attendance fees. - “Bonus and other incentives” includes the variable remuneration accrued during the year, for monetary incentive plans. This value corresponds to the sum of the amounts provided in Table 3 in the “Bonus for the year - payable/paid”, “Bonus of previous years - payable/paid” and “Other bonuses” columns. - “Non-monetary benefits” shows, according to accrual and tax liability criteria, the value of outstanding insurance policies and the company cars assigned. - “Other remuneration” shows, for the portion attributable to 2019, any other remuneration resulting from other services provided. - “Total” shows the sum of the amounts provided under the previous items. 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: - “Financial instruments assigned in previous financial years not vested during the financial year” shows the financial instruments assigned in previous years and not vested during the year, indicating the vesting period; - “Financial instruments assigned during the financial year” shows the financial instruments assigned during the year, indicating the fair value at the assignment date, the vesting period, the assignment date and the market price at the assignment; - “Financial instruments vested during the year and not assigned” shows the number and type of instruments vested during the financial year and not assigned; - “Financial instruments vested during the year and attributable” contains information on instruments vested during the financial year of reference and attributable, indicating the value at the vesting date.
238
“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). 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:
For the section “Bonus for the year” - In the column “payable/paid”, the bonus accrued for the year for the targets reached during the year and paid or payable because not subject to further conditions (known as upfront fee). - The column “Deferred” shows the bonus dependent on the targets to be reached during the year but not payable because subject to further conditions (known as deferred bonus). For the section “Bonus of previous years” - The column “No longer payable” shows the sum of bonuses deferred in previous years still to be paid at the beginning of the financial year and no longer payable for failure to meet the conditions to which they are subject. - The column “Payable/Paid” shows the sum of bonuses deferred in previous years still to be paid at the beginning of the financial year and paid during the year or payable. - The column “Still deferred” shows the sum of bonuses deferred in previous years still to be paid at the beginning of the financial year and still deferred. 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.
REPORT ON REMUNERATION
TAB. 1 - Remuneration paid to members of the Board of Directors and Board of Statutory Auditors and other executives with strategic responsibilities in 2019 (figures in euro)
BOARD OF DIRECTORS
Name and surname
Office
Giuseppe Saleri
Chairman
Period of office
Expiry of office
1 Jan 31 Dec 2019
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (a)
Fixed remuneration
Remuneration for attendance at Committee meetings
160,000(a)
Variable remuneration (non equity)
Indemnity for end of office or termination of employment relationship
Non-monetary benefits
Other remuneration
Total
Fair Value of equity remuneration
0
0
0
160,000
0
0
0
0
0
0
8,000
0
0
0
0
0
0
0
168,000
0
0
38,000(a)
14,000(b)
0
0
0
15,000
67,000
0
0
0
0
0
0
0
5,000
5,000
0
0
38,000
14,000
0
0
0
20,000(c)
72,000
0
0
Bonus and other incentives
Profit sharing
0
0
8,000
0
168,000
of which € 20,000 as Director and € 140,000 as Chairman.
Nicla Picchi
Vice Chairman
1 Jan 31 Dec 2019
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total
of which € 20,000 as director, € 10,000 as Vice Chairman’ and € 8,000 as BoD meeting attendance fees. of which € 10,000 as a member of the Internal Control and Risk Committee and € 4,000 as 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.. (a)
(b)
Pietro Iotti
1 Jan Chief Executive 31 Dec 2019 Officer
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (a)
Director
1 Jan 31 Dec 2019
(II) Remuneration from subsidiaries and affiliates (III) Total
0
10,197
0
413,197
0
0
44,083
0
0
0
0
0
44,083
0
0
374,083
0
73,000
0
10,197
0
457,280
0
0
161,265(a)
0
26,374
0
5,395
0
193,034
0
0
70,000
0
0
0
0
0
70,000
0
0
231,265
0
26,374
0
5,395
0
263,034
0
0
27,000(a)
13,000(b)
0
0
0
0
40,000
0
0
0
0
0
0
0
0
0
0
0
27,000
13,000
0
0
0
0
40,000
0
0
of which € 20,000 as director and € 141,265 as Administration, Finance and Control Director.
Carlo Scarpa
Director
1 Jan 31 Dec 2019
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total
(b)
73,000
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A.
(a)
0
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
(a)
330,000(a)
of which € 20,000 as director and €7,000 as BoD meeting attendance fees. of which € 10,000 as a member of the Internal Control and Risk Committee and € 3,000 as Committee meeting attendance fees.
239
SABAF . 2019 ANNUAL REPORT
(figures in euro)
BOARD OF DIRECTORS
Name and surname
Office
Alessandro Potestà
Director
Period of office
1 Jan 31 Dec 2019
Expiry of office
(II) Remuneration from subsidiaries and affiliates (III) Total
(b)
Director
1 Jan 31 Dec 2019
(II) Remuneration from subsidiaries and affiliates (III) Total
Director
1 Jan 31 Dec 2019
(II) Remuneration from subsidiaries and affiliates (III) Total
Director
1 Jan 31 Dec 2019
0
0
41,000
0
0
0
0
0
0
0
0
0
0
0
0
0
41,000
0
0
14,000(b)
0
0
0
27,000
14,000
25,000(a)
0
0
0
0
0
25,000
0
0
0
0
0
0
0
0
0
0
0
25,000
0
0
0
0
0
25,000
0
0
27,000(a)
27,000(b)
0
0
0
0
54,000
0
0
0
0
0
0
0
0
0
0
0
27,000
27,000
0
0
0
0
54,000
0
0
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total
240
0
Profit sharing
of which € 20,000 as director and € 7,000 as BoD meeting attendance fees. 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 € 7,000 as Committee meeting attendance fees.
Stefania Triva
(b)
Fair Value of equity remuneration
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A.
(a)
Total
of which € 20,000 as director and € 5,000 as BoD meeting attendance fees.
Daniela Toscani
(b)
Other remuneration
Bonus and other incentives
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A.
(a)
Non-monetary benefits
Indemnity for end of office or termination of employment relationship
of which € 20,000 as director and € 7,000 as BoD meeting attendance fees . of which € 10,000 as a member of the Remuneration and Nomination Committee and € 4,000 as Committee meeting attendance fees.
Claudio Bulgarelli
(a)
27, 000(a)
Variable remuneration (non equity)
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A.
(a)
Fixed remuneration
Remuneration for attendance at Committee meetings
26,000(a)
14,000(b)
0
0
0
0
40,000
0
0
0
0
0
0
0
0
0
0
0
26,000
14,000
0
0
0
0
40,000
0
0
of which € 20,000 as director and € 6,000 as BoD meeting attendance fees. of which € 10,000 as a member of the Remuneration and Nomination Committee and € 4,000 as Committee meeting attendance fees.
REPORT ON REMUNERATION
(figures in euro)
DIRECTORS NO LONGER IN OFFICE DURING THE YEAR UNDER REVIEW
Fixed remuneration
Remuneration for attendance at Committee meetings
(I) Remuneration at Sabaf S.p.A.
0
(II) Remuneration from subsidiaries and affiliates (III) Total
Name and surname
Office
Renato Camodeca
Director
Period of office
Expiry of office
1 Jan 31 Dec 2019
Approval of 2020 financial statements
Variable remuneration (non equity)
Indemnity for end of office or termination of employment relationship
Non-monetary benefits
Other remuneration
Total
Fair Value of equity remuneration
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Bonus and other incentives
Profit sharing
0
0
0
0
0
0
BOARD OF STATUTORY AUDITORS
Fixed remuneration
Remuneration for attendance at Committee meetings
(I) Remuneration at Sabaf S.p.A.
30,000
(II) Remuneration from subsidiaries and affiliates
Name and surname
Office
Alessandra Tronconi
Chairman
Period of office
Expiry of office
1 Jan 31 Dec 2019
Approval of 2020 financial statements
(III) Total
Luisa Anselmi
Standing Statutory Auditor
1 Jan 31 Dec 2019
(II) Remuneration from subsidiaries and affiliates (III) Total
Standing Statutory Auditor
1 Jan 31 Dec 2019
Indemnity for end of office or termination of employment relationship
Non-monetary benefits
Other remuneration
Total
Fair Value of equity remuneration
0
0
0
30,000
0
0
0
0
0
0
3,750
0
0
0
0
0
0
0
33,750
0
0
20,000
0
0
0
0
0
20,000
0
0
0
0
0
0
0
0
0
0
0
20,000
0
0
0
0
0
20,000
0
0
20,000
0
0
0
0
0
20,000
0
0
0
0
0
0
0
0
0
0
0
20,000
0
0
0
0
0
20,000
0
0
Bonus and other incentives
Profit sharing
0
0
3,750
0
33,750
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A.
Mauro Vivenzi
Variable remuneration (non equity)
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total
OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES Other executives with strategic responsibilities (no. 3)
1 Jan 31 Dec 2019
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (a)
n/a 420,743(a)
0
51,635
0
15,606
0
487,984
0
0
94,500
0
0
0
0
0
94,500
0
0
515,243
0
51,635
0
15,606
0
582,484
0
0
remuneration including â‚Ź 44,613 related to Remuneration for non-competition agreement.
241
SABAF . 2019 ANNUAL REPORT
TAB. 2 - Incentive plans based on financial instruments, other than stock options, for members of the board of directors, general managers and other executives with strategic responsibilities (FIGURES IN EURO) MARKET PRICE ON ASSIGNMENT
Name and surname
Office
Pietro Iotti
Financial instruments assigned during financial year
Financial instruments vested during financial year and not assigned
Financial instruments vested during financial year and assigned
Financial instruments pertaining to the financial year
Number and type Value at of financial vesting date instruments
Fair value
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
2018 Stock Grant Plan (May 2018)
56,000 rights corresponding to 56,000 shares
3 years
54,023 rights corresponding to 54,023 shares
234,617
2 years
14 May 2019
€ 15.348 / share
-
-
-
203,076
2018 Stock Grant Plan (May 2018)
33,600 rights corresponding to 33,600 shares
3 years
32,414 rights corresponding to 32,414 shares
140,771
2 years
14 May 2019
€ 15.348 / share
-
-
-
121,846
2018 Stock Grant Plan (May 2018)
46,000 rights corresponding to 46,000 shares
3 years
52,092 rights corresponding to 52,092 shares
226,231
2 years
14 May 2019
€ 15.348 / share
-
-
-
177,983
-
502,905
Chief Executive Officer
Remuneration at Sabaf S.p.A.
Gianluca Beschi
Plan
Financial instruments assigned in previous financial years not vested during the financial year
Director
Remuneration at Sabaf S.p.A.
Other executives with strategic responsibilities (no. 3)
Remuneration at Sabaf S.p.A.
TOTAL
242
601,619
REPORT ON REMUNERATION
TAB. 3 - Monetary incentive plans for members of the board of directors and other executives with strategic responsibilities
(FIGURES IN EURO) Bonus for the year
Name and surname
Office
Pietro Iotti
Chief Executive Officer
Plan
Payable / paid
Deferred
Remuneration at Sabaf S.p.A.
2018 MBO Plan (March 2018)
0
0
Remuneration at Sabaf S.p.A.
2019 MBO Plan (March 2019)
0
45,000
Remuneration at Sabaf S.p.A.
2018 MBO Plan (March 2018)
0
0
Remuneration at Sabaf S.p.A.
2019 MBO Plan (March 2019)
0
15,892
Remuneration at Sabaf S.p.A.
2018 MBO Plan (March 2018)
0
0
Remuneration at Sabaf S.p.A.
2019 MBO Plan (March 2019)
0
50,890
0
111,782
Gianluca Beschi
Bonus of previous years Deferment period
March 2020
Other bonuses
No longer payable
Payable / Paid
Still deferred
0
73,000
0
0
0
0
0
0
0
26,374
0
0
0
0
0
0
0
51,635
0
0
0
0
0
0
0
151,009
0
0
Executive Director
March 2020
Other executives with strategic responsibilities (no. 3)
Total
March 2020
TAB. 4 - Shareholdings of members of the administration and control bodies and other executives with strategic responsibilities (FIGURES IN EURO) Surname and Name
Office
Saleri Giuseppe
Chairman
Iotti Pietro
Chief Executive Officer
Toscani Daniela
Director
Bulgarelli Claudio
Director
Vivenzi Mauro Giorgio
Auditor
Type of Ownership
Investee Company
No. shares held at 31 Dec 2018
No. shares acquired
No. shares sold
No. shares held at 31 Dec 2019
Indirect through the subsidiary Giuseppe Saleri S.a.p.A.
Sabaf S.p.A.
2,766,313
-
230,669
2,535,644
Direct
Sabaf S.p.A.
11,000
6,700
-
17,700
Indirect through spouse
Sabaf S.p.A.
2,419
-
-
2,419
Direct
Sabaf S.p.A.
498
-
-
498
Indirect through the company Fintel Srl
Sabaf S.p.A.
850,000
-
-
850,000
Direct
Sabaf S.p.A.
1,567
-
-
1,567
Indirect through spouse
Sabaf S.p.A.
600
-
-
600
243
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