2022 ANNUAL FINANCIAL
REPORT
TABLE OF CONTENTS
01 REPORT ON OPERATIONS
17 SABAF GROUP CONSOLIDATED FINANCIAL STATEMENTS at 31 December 2022
82 SABAF S.P.A. SEPARATE FINANCIAL STATEMENTS at 31 December 2022
Sabaf Group | 2022 Report on Operations
1
SABAF GROUP
REPORT ON OPERATIONS
Sabaf Group | 2022 Report on Operations
2
Business and Financial situation of the Group
(
€
/000)
2022
%
2021
%
2022-2021
change
% change
Sales revenue
253,053
100%
263,259
100%
(10,206)
-3.9%
EBITDA
40,092
15.8%
54,140
20.6%
(14,048)
-25.9%
EBIT
21,887
8.6%
37,508
14.2%
(15,621)
-41.6%
Pre-tax profit
12,209
4.8%
29,680
11.3%
(17,471)
-58.9%
Profit attributable to the Group
15,249
6.0%
23,903
9.1%
(9,434)
-38.2%
Basic earnings per share (€)
1.355
2.132
(0.778)
-36.47%
Diluted earnings per share (€)
1.355
2.132
(0.778)
-36.47%
The Sabaf Group ended the 2022 financial year with sales revenue of €253.1 million, down
3.9% (-4.9% on a like-for-like basis) compared to €263.3 million in 2021, the company's
historic record year. The household appliance market continued its positive trend in the
first half of 2022, but then experienced a sharp downturn in the second half of the year,
accentuated by a sharp decline in our customer inventories.
Sales prices in 2022 were 8.4% higher than in 2021, largely offsetting considerable
increases in the purchase prices of the main raw materials (aluminium alloys, steel and
brass), electricity and gas.
EBITDA was €40.1 million (15.8% of turnover), down 25.9% from €54.1 million in 2021
(20.6% of turnover), and EBIT was €21.9 million (8.6% of turnover) compared to €37.5
million in 2021. Net profit was €15.2 million (6% of sales) compared to €23.9 million in
2021.
Sabaf Group | 2022 Report on Operations
3
The subdivision of sales revenues by product line is shown in the table below:
2022
%
2021
%
% change
158,340
62.6%
182,468
69.3%
-13.2%
68,627
27.1%
58,375
22.3%
+17.6%
26,086
10.3%
22,416
8.4%
+16.4%
253,053
100%
263,259
100%
-3.9%
Hinges and Electronic Components also confirmed a growth trend in 2022, while sales of
gas components were adversely affected by the downturn in the main target markets
(Europe and South America).
The geographical breakdown of revenues is shown below:
2022
%
2021
%
% change
Europe (excluding Turkey)
87,282
34.5%
92,935
35.3%
-6.1%
Turkey
66,845
26.4%
65,526
24.9%
+2.0%
North America
39,800
15.7%
30,472
11.6%
+30.6%
South America
28,503
11.3%
39,589
15.0%
-28.0%
Africa and Middle East
19,098
7.5%
19,614
7.5%
-2.6%
Asia and Oceania
11,525
4.6%
15,123
5.7%
-23.8%
Total
253,053
100%
263,259
100%
-3.9%
The best performing area was North America, up 30.6% to €39.8 million and where the
Group aims to further increase its presence. The markets with the most significant declines
were South America, although this was compared to an exceptionally strong 2021 (when
sales were 43% higher than the 27.6 million euro in 2020), and Asia, which is still heavily
affected by pandemic-related restrictions.
The impact of labour cost on sales decreased from 20.5% in 2021 to 19.7% in 2022.
The ratio of net financial expenses to turnover remained extremely low, while the
application of IAS 29 to the financial statements of the Turkish subsidiaries resulted in a
hyperinflationary expense of €9 million in the current year (for further details, please refer
to the specific section "Hyperinflation – Turkey: application of IAS 29" in the Notes to the
Consolidated Financial Statements at 31 December 2022).
During the year, the Group recognised in the income statement negative forex differences
of €0.5 million (€7.4 million of negative forex differences were recognised in 2021).
In 2022, the Group recognised positive income taxes of €3 million with a positive tax rate
of 25%. The main impacts on the tax rate are shown in Note 34 to the consolidated
financial statements.
Sabaf Group | 2022 Report on Operations
4
The Group’s statement of financial position, reclassified based on financial criteria, is
illustrated below
1
:
(
€
/000)
31/12/2022
31/12/2021
Non-current assets
171,276
130,093
Short-term assets
2
134,709
141,494
Short-term liabilities
3
(55,329)
(72,863)
Working capital
4
79,380
68,631
Provisions for risks and charges, Post-employment
benefits, deferred taxes
(10,128)
(8,681)
Net invested capital
240,528
190,043
Short-term net financial position
(6,030)
18,897
Medium/long-term net financial position
(78,336)
(86,504)
Net financial debt
(84,366)
(67,607)
Shareholders’ equity
156,162
122,436
Cash flows for the financial year are summarised in the table below:
(
€
/000)
2022
2021
Opening liquidity
43,649
13,318
Operating cash flow
24,293
23,216
Cash flow from investments
(20,856)
(23,752)
Free cash flow
3,437
(536)
Cash flow from financing activities
(16,886)
41,233
Acquisitions
(5,045)
(6,296)
Foreign exchange differences
(4,232)
(4,070)
Cash flow for the period
(22,726)
30,331
Closing liquidity
20,923
43,649
In 2022, the Group generated operating cash flow of €24.3 million (€23.2 million in 2021).
At 31 December 2022, the impact of the net working capital on revenue was 31.4%
compared to 26.1% at 31 December 2021.
In 2022, in line with the Business Plan, the Group invested €20.9 million (€23.8 million in
2021). This is mainly a non-recurring investment, aimed at expanding the international
production footprint:
1
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
Sabaf Group | 2022 Report on Operations
5
▪ in Turkey, where an integrated production line of hinges for dishwashers was
started;
▪ in India, where the production of gas components (valves and burners) was started);
▪ in Mexico, where work on the construction of the plant in San Luis de Potosi
continued.
The Group announced its entry into the induction cooking components market, a strategic
initiative supported by a major research and development investment plan, for which a
dedicated project team has been set up in Italy. The first prototypes were presented in the
second half of 2022, while production will start no later than the first half of 2023.
On 3 October 2022, Sabaf S.p.A. completed the acquisition of 100% of P.G.A. S.r.l., a
company based in Fabriano (AN) and operating for over 25 years in the field of design and
assembly of electronic control boards for the household appliances sector, for an
Enterprise Value of €9.76 million. The acquisition of P.G.A. reflects the objective of
diversifying and broadening the offer set out in the Business Plan of the Group, in which
the Electronics Division plays a fundamental role. P.G.A., which is excellent in terms of
development capacity and at the forefront of quality production processes, integrates with
Okida, which is increasingly contributing to the Group's results. Synergies to be developed
include those for the production of induction cooking components.
In 2022,
the positive free cash flow
5
generated by the Sabaf Group was €3.4 million
(negative €0.5 million in 2021).
During the financial year, the Group paid dividends for €6.7 million and purchased treasury
shares for €1.9 million. At 31 December 2022, net financial debt, including the acquisition
of P.G.A., was €84.4 million (€67.6 million at 31 December 2021). The change in net
financial debt is summarised in the table below:
Net financial debt at 31 December 2021
(67,607)
Free cash flow
3,437
Dividends paid out
(6,690)
Buy-back of shares
(1,862)
Financial liabilities IFRS 16 - new contracts entered into in 2022
(437)
Change in fair value of derivative financial instruments
1,111
Change in the scope of consolidation
(7,941)
Foreign exchange differences and other changes
(4,377)
Net financial debt at 31 December 2022
(84,366)
At 31 December 2022, shareholders' equity amounted to €156.2 thousand; the ratio
between the net financial debt and the shareholders’ equity was 0.54 versus 0.55 in 2021.
5
Free cash flow is the difference between Cash Flows from operations and Net investments.
Sabaf Group | 2022 Report on Operations
6
Economic and financial indicators
2022
2021
pro-forma
6
pro-forma
6
Change in turnover
-3.9%
-4.9%
+42.4%
+42.3%
ROCE (return on capital employed)
9.10%
19.7%
Net debt/EBITDA
2.10
1.25
Net debt/equity ratio
54%
55%
Market capitalisation (31/12)/equity ratio
1.23
2.26
Please refer to the introductory part of the Annual Report for a detailed examination of
other key performance indicators.
Risk Factors
Risks related to the conflict between Russia and Ukraine
The Sabaf Group has no significant direct exposure to the markets affected by the conflict
or to sanctioned entities. These are markets supplied by our customers, who have
generally reduced their business in the countries concerned in 2022, with an indirect
impact on Sabaf Group sales that is difficult to quantify.
The conflict had a broad impact on the global economy, exacerbating price pressures and
leading to a tightening of monetary policies, with obvious repercussions on the demand
for consumer goods. For the Sabaf Group, the most significant impacts are related to price
increases for steel, aluminium, natural gas and electricity, as described in the paragraph
"Financial risks" below.
Climate change and energy transition
With regard to physical risks related to climate change, such as the increase in global
temperatures, sea level and the increase in extreme weather events, the Group has not
identified any significant risks to date.
On the other hand, transitional risks, such as the increase in energy costs, changes in
consumer choices or those related to the introduction of new technologies, which the
Group manages at a strategic level, are of significant impact and probability. In line with
its energy transition plans, the Group launched a major investment plan to enter the
market for electromagnetic induction cooking components, which will complement the
other cooking technologies already in the Sabaf range: gas and traditional electric.
As part of its periodic risk assessment process, the Group identified and assessed the
following main risks:
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.
6
The change in pro-forma turnover is calculated on a like-for-like basis
Sabaf Group | 2022 Report on Operations
7
Strategic risks
Strategic risks that could negatively impact Sabaf's medium-term performance, including,
for example, risks related to low profitability of certain product lines, the risks arising from
the mismatch between market needs and product innovation.
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 and from fluctuations in exchange rates), 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/or the difficulty of
replacing them) 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.
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.
Sabaf Group | 2022 Report on Operations
8
Instability of Emerging countries in which the Group operates
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. In 2021, Sabaf opened a new plant in Turkey to
increase production capacity for electronic components. Production of hinges for
dishwashers for customers with production sites in Turkey was also started in 2022. In
2022, Turkey represented 20% of the Group's production and 26% of its total sales. The
Turkish market is estimated to represent around 5% of the final destination of Sabaf
components. 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 is mainly active in 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 electric
cooking), with the consequence of not adequately making use of any market opportunities
and/or suffering from negative impacts on margins and turnover.
In recent years, the Group 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.
In 2022, the Group also announced its entry into the induction cooking components
market. Sabaf will thus be present in all cooking technologies: gas, traditional electric and
induction. Leveraging a total team of more than 50 electronic engineers, Sabaf developed
Sabaf Group | 2022 Report on Operations
9
its own project know-how internally by filing proprietary patents, software and hardware,
and aspires to create innovative products that better meet customers' needs and new
consumer trends. The first prototypes were presented in the second half of 2022, while
production will start no later than the first half of 2023.
Financial risks
The Sabaf Group is exposed to a series of financial risks, due to:
▪ Commodity price volatility: A significant portion of the Group’s purchase costs
is represented by aluminium, steel and brass. Metal prices rose sharply during 2022,
forcing the Group to renegotiate sales prices several times to compensate for the
increase in costs. Based on market conditions and contractual agreements, the
Group may not be able to pass on changes in raw material prices to customers in a
timely and/or complete manner, with consequent effects on margins.
▪ Increase in energy costs: some of the Group's production processes, such as the
die-casting of aluminium parts and the enamelling of burner covers, use gas as an
energy source. Other production facilities absorb significant electricity
consumption. Rising energy costs, exacerbated by the Russia-Ukraine conflict, can
have a significant impact on margins. In order to mitigate this risk, the Group is
constantly evaluating possible actions to contain energy consumption, including by
improving the efficiency of the most energy-intensive plants.
▪ 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 19.9% 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). Moreover, the net value of assets and liabilities in foreign subsidiaries
constitutes an investment in foreign currency, which generates a translation
difference on consolidation of the Group, with an impact on the comprehensive
income statement and the financial position.
▪ 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.
For more information on financial risks and the related management methods, see Note 38
of the consolidated financial statements as regards disclosure for the purposes of IFRS 7.
Sabaf Group | 2022 Report on Operations
10
Research and Development
The most important research and development projects carried out in 2022 were as
follows:
Gas parts
▪ the feasibility study of a new 4kw multi-ring burner, based on the existing platform,
was completed
▪ burners for the US market have been industrialized
▪ new versions of burners for the Indian market have been developed
▪ new prototypes of burners powered 100% by hydrogen were developed
▪ studies and tests for the qualification of a new alloy for special flame-spreaders
were started
▪ industrialization for the production of burners and valves in India has been
completed
Hinges
▪ a sliding hinge model for dishwashers was designed and developed
▪ a low-cost hinge model for oven doors was industrialised
▪ a system was integrated into the standard dishwasher product to increase the door
balancing range
▪ a new hinge model for dishwashers with an adjustment system was developed
▪ a hinge for built-in and free-standing refrigerators is being studied
Electronic components
▪ a new timer platform for oven is being developed for an important new customer
▪ a new electronic hood control platform with integrated power board was developed
▪ the range of controls for pyroceram hobs with Class B certification was expanded
Induction
▪ five platforms offering over 90 different combinations of inductor, coil size and user
interface are under development, with the aim of providing a modular and
customisable product range based on each customer's specific requirements.
The improvement in production processes continued throughout the Group, also in order
to minimise set-up times and make production more flexible. The Group also develops
and manufactures its own machinery, equipment and moulds.
Development costs to the tune of €2,506,000 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 consolidated disclosure of non-financial
information required by Legislative Decree no. 254/2016 in a report separate from this
Report on Operations. The disclosure of non-financial information provides all the
information needed to ensure understanding of the Group's activities, performance, results
and impact, with particular reference to environmental, social and personnel issues,
Sabaf Group | 2022 Report on Operations
11
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 Annual
Financial Statement is 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 2022, 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 2022 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 a), b) and c) of the Market Regulations issued by CONSOB.
Sabaf Group | 2022 Report on Operations
12
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
Sabaf S.p.A. has an Organisational Model for the management and protection of personal
data consistent with the provisions of European Regulation 2016/679 (General Data
Protection Regulation - GDPR). Specific projects are implemented or 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 38 of the consolidated financial
statements.
Atypical or unusual transactions
Sabaf Group companies did not execute any unusual or atypical transactions in 2022.
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., C.G.D. s.r.l., P.G.A. s.r.l. and PGA2.0 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 39 of the
consolidated financial statements and in Note 38 of the separate financial statements of
Sabaf S.p.A.
Business outlook
The first weeks of 2023 show a gradually improving trend in sales and orders. The
destocking that characterised the second half of 2022 is over now, although sales in the
first half of the year will remain lower than the record levels of early 2022. The Group
expects a recovery in profitability made possible by the recovery in production volumes,
lower energy and raw material prices, measures to reduce energy consumption.
Product diversification and internationalisation initiatives continue as planned. These will
help to improve the Group's economic performance and ensure sustainable growth in the
medium and long term. Specifically:
▪ efforts have been stepped up to develop induction cooking components (first
deliveries are imminent);
▪ the technical and commercial integration of P.G.A. continues with the aim of
strengthening its presence in the smart appliances and IoT sector for household
appliances;
▪ the ramp-up of the production of gas components in India continues;
▪ construction of the plant in Mexico is nearing completion, where production of
burners highly anticipated by the North American market will begin;
Sabaf Group | 2022 Report on Operations
13
▪ at the Ospitaletto plant, work is about to start on a photovoltaic system that, with
an installed capacity of 2 MW, will cover a significant portion of the plant's energy
requirements.
Sabaf Group | 2022 Report on Operations
14
Business and financial situation of Sabaf S.p.A.
(
€
/000)
2022
2021
Change
% change
Sales revenue
119,090
144,034
(24,944)
-17.3%
EBITDA
8,518
23,078
(14,560)
-63.1%
EBIT
790
13,837
(13,047)
-94.3%
Pre-tax profit (EBT)
1,722
14,227
(12,505)
-87.9%
Net Profit
2,247
10,044
(7,797)
-77.6%
The reclassification based on financial criteria is illustrated below:
(
€
/000)
31/12/2022
31/12/2021
Non-current assets
7
170,151
142,549
Non-current financial assets
10,972
10,708
Short-term assets
8
61,496
82,572
Short-term liabilities
9
(30,296)
(46,453)
Working capital
10
31,200
36,119
Provisions for risks and charges, Post-employment benefits,
deferred taxes
(2,664)
(2,954)
Net invested capital
209,659
186,422
Short-term net financial position
(22,298)
10,502
Medium/long-term net financial position
(76,336)
(82,515)
Total financial debt
11
(98,634)
(72,013)
Shareholders’ equity
111,025
114,409
7
Excluding Financial assets
8
Sum of Inventories, Trade receivables, Tax receivables and Other current receivables
9
Sum of Trade payables, Tax payables and Other liabilities
10
Difference between short-term assets and short-term liabilities
11
Determined in accordance with Consob Communication of 28 July 2006 (Note 23 of the separate
financial statements)
Sabaf Group | 2022 Report on Operations
15
Cash flows for the financial year are summarised in the table below:
(
€
/000)
2022
2021
Opening liquidity
29,733
1,595
Operating cash flow
14,096
17,187
Cash flow from investments (net of divestments)
(33,836)
(28,407)
Free cash flow
(19,740)
(11,220)
Cash flow from financing activities
(7,389)
39,358
Cash flow for the period
(27,129)
28,138
Closing liquidity
2,604
29,733
The financial year 2022 ended with a turnover 17.3% lower than in 2021, an extremely
positive year for the Company, due to the progressive deterioration in demand in the main
markets served by the Company.
The investments of the financial year were used:
- for €8.4 million for tangible assets (plant, machinery, equipment);
- for €2.7 million for intangible assets (mainly development costs)
- for €21 million to subscribe to capital increases in subsidiaries, in order to
financially support their development plans;
- for €6.3 million for the acquisition of 100% of the capital of P.G.A. s.r.l.
At 31 December 2022, working capital stood at €31.2 million compared with €36.1 million
at the end of the previous year: its percentage impact on turnover stood at 26.2% from
25.1% at the end of 2021.
The net financial debt was €98.6 million, compared with €72 million at 31 December 2021.
At the end of the year, shareholders' equity amounted to €111 million, compared with
€114.4 million in 2021. The ratio between the net financial debt and the shareholders’
equity was 89%; it was 63% at the end of 2021.
Sabaf Group | 2022 Report on Operations
16
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 2022 financial year and Group shareholders' equity at 31 December 2022 with
the same values of the parent company Sabaf S.p.A. is given below:
31/12/2022
31/12/2021
Description
Profit for
the year
Shareholde
rs’ equity
Profit for
the year
Shareholde
rs’ equity
Profit and shareholders’ equity of parent
company Sabaf S.p.A.
2,247
111,025
10,044
114,409
Equity and consolidated company results
19,541
132,974
15,008
96,538
Derecognition of the carrying value of
consolidated equity investments
722
(110,465)
300
(86,089)
Monetary revaluation - hyperinflation (IAS 29)
(6,077)
25,729
-
-
Put options on minorities
-
-
438
-
Intercompany eliminations
(1,176)
(3,013)
(1,250)
(2,414)
Other adjustments
(8)
(88)
143
(8)
Minority interests
-
-
(780)
(911)
Profit and shareholders’ equity
attributable to the Group
15,249
156,162
23,903
121,525
Proposal for allocation of 2022 profit
As we thank our employees, the Board of Statutory Auditors, the independent auditors and
the Supervisory Authorities for their effective collaboration, we ask the shareholders to
approve the financial statements for the year ended 31 December 2022, with the proposal
to allocate the profit for the year of €2,246,997 entirely to the Extraordinary Reserve.
17
CONSOLIDATED FINANCIAL
STATEMENTS
AT 31 DECEMBER 2022
SABAF S.p.A.
Via dei Carpini, 1 – OSPITALETTO (BS) Italy
Share capital €11,533,450 fully paid in
www.sabafgroup.com
Sabaf Group | Consolidated financial statements at 31 December 2022
18
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%
Sabaf do Brasil Ltda.
100%
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf
Turkey)
100%
Sabaf Appliance Components (Kunshan) Co., Ltd.
100%
Okida Elektronik Sanayi ve Tickaret A.S
100%
Sabaf US Corp.
100%
A.R.C. s.r.l.
100%
Sabaf India Private Limited
100%
Sabaf Mexico Appliance Components S.A. de c.v.
100%
C.M.I. s.r.l.
100%
C.G.D. s.r.l.
100%
P.G.A. s.r.l.
100%
PGA2.0 s.r.l.
100%
Board of Directors
Chairman
Claudio Bulgarelli
Vice Chairman (*)
Nicla Picchi
Chief Executive Officer
Pietro Iotti
Director
Gianluca Beschi
Director
Alessandro Potestà
Director
Cinzia Saleri
Director (*)
Carlo Scarpa
Director (*)
Daniela Toscani
Director (*)
Stefania Triva
(*) independent directors
Board of Statutory Auditors
Chairman
Alessandra Tronconi
Statutory Auditor
Maria Alessandra Zunino de Pignier
Statutory Auditor
Mauro Vivenzi
Independent Auditors
EY S.p.A.
Sabaf Group | Consolidated financial statements at 31 December 2022
19
Consolidated statement of financial position
Notes
31/12/2022
31/12/2021
(
€
/000)
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
1
99,605
82,407
Investment property
2
983
2,311
Intangible assets
4
54,168
35,553
Equity investments
5
97
83
Non-current receivables
6
2,752
1,100
Deferred tax assets
22
13,145
8,639
Total non-current assets
170,750
130,093
CURRENT ASSETS
Inventories
7
64,426
64,153
Trade receivables
8
59,159
68,040
Tax receivables
9
8,214
6,165
Other current receivables
10
2,910
3,136
Current financial assets
11
2,497
1,172
Cash and cash equivalents
12
20,923
43,649
Total current assets
158,129
186,315
ASSETS HELD FOR SALE
3
526
0
TOTAL ASSETS
329,405
316,408
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital
13
11,533
11,533
Retained earnings, Other reserves
14
129,380
86,089
Profit for the year
15,249
23,903
Total equity interest of the Group
156,162
121,525
Minority interests
-
911
Total shareholders’ equity
156,162
122,436
NON-CURRENT LIABILITIES
Loans
15
78,336
86,504
Post-employment benefit and retirement provisions
17
3,661
3,408
Provisions for risks and charges
18
639
1,334
Deferred tax liabilities
22
5,828
3,939
Total non-current liabilities
88,464
95,185
CURRENT LIABILITIES
Loans
15
28,876
24,405
Other financial liabilities
16
574
1,519
Trade payables
19
39,628
54,837
Tax payables
20
2,545
4,951
Other payables
21
13,156
13,075
Total current liabilities
84,779
98,787
LIABILITIES HELD FOR SALE
0
0
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
329,405
316,408
Sabaf Group | Consolidated financial statements at 31 December 2022
20
Consolidated income statement
Notes
2022
2021
(
€
/000)
INCOME STATEMENT COMPONENTS
OPERATING REVENUE AND INCOME
Revenue
24
253,053
263,259
Other income
25
10,188
8,661
Total operating revenue and income
263,241
271,920
OPERATING COSTS
Materials
26
(124,331)
(142,355)
Change in inventories
(513)
29,922
Services
27
(50,180)
(52,377)
Personnel costs
28
(49,926)
(53,964)
Other operating costs
29
(1,631)
(1,531)
Costs for capitalised in-house work
3,432
2,525
Total operating costs
(223,149)
(217,780)
OPERATING PROFIT BEFORE DEPRECIATION AND
AMORTISATION, CAPITAL GAINS/LOSSES, AND
WRITE-DOWNS/WRITE-BACKS OF NON-CURRENT
ASSETS
40,092
54,140
Depreciations and amortisation
1, 2, 4
(18,267)
(16,869)
Capital gains on disposals of non-current assets
251
237
Value adjustments of non-current assets
(189)
-
EBIT
21,887
37,508
Financial income
30
1,917
750
Financial expenses
31
(2,009)
(1,179)
Net income/(expenses) from hyperinflation
31
(9,023)
-
Exchange rate gains and losses
32
(515)
(7,399)
Profits and losses from equity investments
33
(48)
-
PROFIT BEFORE TAXES
12,209
29,680
Income taxes
34
3,040
(4,997)
PROFIT FOR THE YEAR
15,249
24,683
of which:
Minority interests
-
780
PROFIT ATTRIBUTABLE TO THE GROUP
15,249
23,903
EARNINGS PER SHARE (EPS)
35
Base (€)
1.355
2.132
Diluted (€)
1.355
2.132
Sabaf Group | Consolidated financial statements at 31 December 2022
21
Consolidated statement of comprehensive income
2022
2021
(
€
/000)
PROFIT FOR THE YEAR
15,249
24,683
Total profits/losses that will not be subsequently
reclassified under profit (loss) for the year
Actuarial evaluation of post-employment benefit
254
26
Tax effect
(61)
(6)
193
20
Total profits/losses that will be subsequently
reclassified under profit (loss) for the year
Forex differences due to translation of financial statements in foreign currencies
(8,660)
(14,552)
Hedge accounting for derivative financial instruments
151
(398)
Total other profits/(losses) net of taxes for the year
(8,316)
(14,930)
TOTAL PROFIT
6,933
9,753
of which:
Net profit for the period attributable to minority interests
-
780
Total profits/losses that will be subsequently
reclassified under profit (loss) for the year
-
-
Total profit attributable to minority interests
0
780
TOTAL PROFIT ATTRIBUTABLE TO THE GROUP
6,933
8,973
Sabaf Group | Consolidated financial statements at 31 December 2022
22
Statement of changes in consolidated shareholders’ equity
(
€
/000)
Share
capital
Share
premium
reserve
Legal
reserve
Treasury
shares
Translation
reserve
Post-
employment
benefit
discounting
reserve
Other
reserves
Profit for the
year
Total Group
shareholders'
equity
Minority
interests
Total
shareholders’
equity
Balance at 31 December 2020
11,533
10,002
2,307
(4,341)
(31,503)
(541)
111,580
13,961
112,998
4,809
117,807
Allocation of 2020 profit
- carried forward
7,789
(7,789)
- dividends
(6,172)
(6,172)
(6,172)
IFRS 2 measurement stock grant plan
805
805
805
Treasury share transactions
438
(438)
Change in the scope of consolidation
4,909
4,909
(4,678)
231
Other changes
12
12
12
Total profit at 31 December 2021
(14,552)
20
(398)
23,903
8,973
780
9,753
Balance at 31 December 2021
11,533
10,002
2,307
(3,903)
(46,055)
(521)
124,259
23,903
121,525
911
122,436
Monetary revaluation - hyperinflation (IAS 29)
11,402
11,402
11,402
Balance at 1 January 2022 restated
11,533
10,002
2,307
(3,903)
(46,055)
(521)
135,661
23,903
132,927
911
133,838
Allocation of 2021 profit
- carried forward
17,145
(17,145)
0
0
- dividends
(6,758)
(6,758)
(6,758)
IFRS 2 measurement stock grant plan
1,134
1,134
1,134
Treasury share transactions
682
(875)
(193)
(193)
Change in the scope of consolidation
784
784
(911)
(127)
Monetary revaluation - hyperinflation (IAS 29)
21,346
21,346
21,346
Other changes
(11)
(11)
(11)
Total profit at 31 December 2022
(8,660)
193
151
15,249
6,933
6,933
Balance at 31 December 2022
11,533
10,002
2,307
(3,221)
(54,715)
(328)
175,335
15,249
156,162
0
156,162
Sabaf Group | Consolidated financial statements at 31 December 2022
23
Consolidated statement of cash flows
2022
2021
Cash and cash equivalents at beginning of year
43,649
13,318
Profit for the year
15,249
24,683
Adjustments for:
- Depreciations and amortisation
18,267
16,869
- Write-downs of non-current assets
189
-
- Realised gains/losses
(251)
(237)
- Valuation of the stock grant plan
1,134
805
- Profits and losses from equity investments
48
-
Monetary revaluation IAS 29
6,077
-
- Net financial income and expenses
(1,783)
429
- Income tax
(2,472)
4,997
Change in post-employment benefit
(197)
(85)
Change in risk provisions
(860)
(99)
Change in trade receivables
10,312
(4,604)
Change in inventories
3,890
(24,929)
Change in trade payables
(17,156)
13,064
Change in net working capital
(2,954)
(16,469)
Change in other receivables and payables, deferred taxes
1,430
(1,515)
Payment of taxes
(7,733)
(5,296)
Payment of financial expenses
(2,097)
(1,167)
Collection of financial income
246
301
Cash flows from operations
24,293
23,216
Investments in non-current assets
- intangible
(3,153)
(2,106)
- tangible
(19,152)
(22,803)
- financial
-
-
Disposal of non-current assets
1,449
1,157
Cash flow absorbed by investments
(20,856)
(23,752)
Free cash flow
3,437
(536)
Repayment of loans
(37,955)
(47,381)
Raising of loans
29,236
94,726
Short-term financial assets
385
60
Purchase/sale of treasury shares
(1,862)
-
Payment of dividends
(6,690)
(6,172)
Cash flow absorbed by financing activities
(16,886)
41,233
A.R.C. acquisition
-
(1,650)
C.M.I. acquisition
-
(4,743)
P.G.A. acquisition
(4,948)
-
ARC Handan consolidation/deconsolidation
(97)
97
Foreign exchange differences
(4,232)
(4,070)
Net cash flows for the year
(22,726)
30,331
Cash and cash equivalents at end of year (Note 12)
20,923
43,649
Sabaf Group | Consolidated financial statements at 31 December 2022
24
Explanatory Notes
ACCOUNTING STANDARDS
Statement of compliance and basis of presentation
The consolidated financial statements of the Sabaf Group for the 2022 financial year 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). They have been prepared in euro, the currency of the economies in
which the Group mainly operates, rounding to the nearest thousand, and are compared
with the previous year's consolidated financial statements prepared in accordance with
the same standards, except for IAS 29, which has been applied from 2022 onwards to the
financial statements of the Turkish subsidiaries (for further details, please refer to the
specific paragraph Hyperinflation – Turkey: application of IAS 29). They consist of the
statement of financial position, the income statement, the statement of changes in
shareholders’ equity, the statement of cash flows 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 and by Article 2423 bis of the Italian Civil Code), also due
to the strong competitive position, high profitability and solidity of the financial structure.
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 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 Group’s
operating results, financial position and cash flows.
Scope of consolidation
The scope of consolidation at 31 December 2022 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 (Kunshan) Co., Ltd.
▪ A.R.C. s.r.l.
▪ Okida Elektronik Sanayi ve Tickaret A.S
▪ Sabaf U.S.
Sabaf Group | Consolidated financial statements at 31 December 2022
25
▪ Sabaf India Private Limited
▪ Sabaf Mexico Appliance Components S.A. de c.v.
▪ C.M.I. s.r.l.
▪ C.G.D. s.r.l.
▪ P.G.A. s.r.l.
▪ PGA2.0 s.r.l.
Compared to the consolidated financial statements at 31 December 2021, Handan ARC
Burners Co. Ltd. is no longer consolidated. The 51% stake, which was held indirectly
through A.R.C. s.r.l., was sold to a third party during the first quarter of 2022. The plant,
equipment and inventories of Handan ARC Burners Co. Ltd. were simultaneously
acquired by Sabaf Appliance Components Kunshan Co., Ltd. (Sabaf China). This
operation did not have a significant impact on the Group's shareholders' equity.
In October 2022, Sabaf S.p.A. completed the purchase of 100% of the share capital of
P.G.A. S.r.l. (P.G.A.), a company based in Fabriano (AN) and operating for over 25 years
in the field of design and assembly of electronic control boards for the household
appliances sector. P.G.A. s.r.l. holds 100% of the share capital of PGA 2.0 s.r.l., a business
unit dedicated to the design and prototyping of innovative solutions based on
interconnection and the Internet of Things (IoT).
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 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. Moreover, the carrying value of
equity interests is derecognised 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 first-time 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 intercompany transactions are derecognised;
Sabaf Group | Consolidated financial statements at 31 December 2022
26
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.
Information related to IFRS 3
As at 3 October 2022, the P.G.A. Group
12
, which has been active for more than 25 years
in the field of design and assembly of electronic control boards for the household
appliances sector, was consolidated. The Report on Operations describes the purpose of
the transaction and the expected synergies.
The allocation of the price paid for the acquisition of the P.G.A. Group on the net assets
acquired (Purchase Price Allocation) was completed during 2022. 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:
Original values at
03/10/2022
Purchase Price
Allocation
Fair value of assets and
liabilities acquired
Assets
Property, plant and equipment and intangible
assets
3,808
4,541
8,349
Inventories
2,909
(150)
2,759
Trade receivables
1,433
-
1,433
Other receivables
773
848
1,621
Cash and cash equivalents
1,378
-
1,378
Total Assets
10,301
5,239
15,540
Liabilities
Post-employment benefit provision
(643)
-
(643)
Provisions for risks and charges
-
(165)
(165)
Deferred tax liabilities
(18)
(1,290)
(1,308)
Financial payables
(2,350)
-
(2,350)
Trade payables
(1,964)
-
(1,964)
Other payables
(1,194)
(616)
(1,810)
Total liabilities
(6,169)
(2,071)
(8,240)
Value of net assets acquired (a)
4,132
3,168
7,300
Total cost of acquisition (b)
8,427
8,427
Goodwill deriving from acquisition (c = b-a)
4,295
1,127
Price adjustments (d)
433
Acquired cash and cash equivalents (e)
1,378
Sale of treasury shares in exchange (f)
1,668
Net cash outlay (b-d-e-f)
4,948
12
Financial data at 31 December 2022 and economic results for the period for which the Group held
control (3 October - 31 December 2022) were consolidated.
Sabaf Group | Consolidated financial statements at 31 December 2022
27
The acquisition price was determined based on an Enterprise Value of five times the
average annual EBITDA over the three-year period 2020-2022, adjusted for the net
financial position at the time of the transaction. The parties agreed that the payment of
part of the price will be postponed and, in any case, payable by the first half-year of
2023.THERE is also a possible further price adjustment ("earn-out") linked to the
achievement of certain targets.
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 €4.266 million determined using the "Multi-
period Excess Earnings" method, taking the following parameters as reference:
o revenue relating to customers with whom there is a strong technical and
commercial relationship
o profitability in line with the historical average
o economic useful life of 15 years
o discount rate of 11.91%
o g growth rate of 1.80%
- Patents: fair value of €0.275 million determined using the "Relief from Royalty"
method, taking the following parameters as reference:
o revenues from products covered by patents at the valuation date
o royalty rate equal to 3.5%
o economic useful life of 4 years
o discount rate of 11.41%
o g growth rate of 1.80%
The related tax effect was recognised on the fair value of the intangible assets identified
above (recognition of deferred taxes of €1.305 million).
The Purchase Price Allocation also led to the recognition of provisions for risks and
charges totalling €0.2 million (Note 18).
In the period for which the Group held control (3 October 2022 - 31 December 2022), the
P.G.A. Group achieved sales revenue of €2.9 million and a net profit of €0.52 million.
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.
Sabaf Group | Consolidated financial statements at 31 December 2022
28
Income statement items are converted at average exchange rates for the year, with the
exception of the financial statements of companies operating in hyperinflationary
economies whose income statements are converted by applying the end-of-year exchange
rate as required by IAS 21 paragraph 42.b.
Foreign exchange differences arising from the comparison between opening shareholders’
equity converted at current exchange rates and at historical exchange rates, together with
the difference between the net result expressed at average and current exchange rates, are
allocated to “Other Reserves” in shareholders’ equity.
The exchange rates used for conversion into euro of the financial statements of the foreign
subsidiaries, prepared in local currency, are shown in the following table:
Description of
currency
Exchange rate in
effect at
31/12/2022
Average
exchange rate
2022
Exchange rate in
effect at
31/12/2021
Average
exchange rate
2021
Brazilian real
5.6386
5.4399
6.3101
6.3778
Turkish lira
19.9649
n/a
15.233
10.510
Chinese
renminbi
7.3582
7.0788
7.1947
7.6271
US Dollar
1.0666
1.05305
1.1326
1.18275
Polish Zloty
n/a
n/a
4.5969
4.5651
Indian Rupee
88.1710
82.6864
84.229
87.439
Mexican peso
20.8560
21.1869
23.143
23.985
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:
▪ gas parts (household and professional);
▪ hinges;
▪ electronic components for household appliances.
Sabaf Group | Consolidated financial statements at 31 December 2022
29
Accounting policies
The accounting standards and policies applied for the preparation of the consolidated
financial statements at 31 December 2022, unchanged versus the previous year, are shown
below:
Property, plant and equipment
These are recognised at purchase or manufacturing cost. The cost includes directly
chargeable ancillary costs. These costs also include revaluations undertaken in the past
based on monetary revaluation rules or pursuant to company mergers. Depreciation is
calculated according to rates deemed appropriate to spread the carrying value of tangible
assets over their useful working life. Estimated useful working life in years, unchanged
compared to previous financial years, is as follows:
Buildings
33
Light constructions
10
General plant
10
Specific plant and machinery
6 – 10
Equipment
4 – 10
Furniture
8
Electronic equipment
5
Vehicles and other transport means
4 – 5
Ordinary maintenance costs are expensed in the year in which they are incurred; costs
that increase the asset value or useful working life are capitalised and depreciated
according to the residual possibility of utilisation of the assets to which they refer.
Land is not depreciated.
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.
Adoption of the accounting standard IFRS 16 “Leases”
The Group applied IFRS 16 from 1 January 2019 by using the amended retrospective
approach.
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 3.29% on 31
December 2022 and 3.86% on 31 December 2021. The rate was defined taking also
Sabaf Group | Consolidated financial statements at 31 December 2022
30
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.
Assets held for sale
The Group classifies non-current assets as held for sale if their carrying value will be
recovered mainly through a sale transaction, rather than through continuing use. These
non-current assets classified as held for sale are measured at the lower of their carrying
value and their fair value less costs to sell. Selling costs are the additional costs directly
attributable to the sale, excluding financial expenses and taxes.
The condition for classification as held for sale is only met when the sale is highly probable
and the asset is available for immediate sale in its present condition. The actions required
to complete the sale should indicate that significant changes to the sale are unlikely or that
the sale will be cancelled. Management must be committed to the sale, which should be
completed within one year from the date of classification.
Depreciation of property, plant and equipment and amortisation of intangible assets stops
when they are classified as available for sale.
Assets and liabilities classified as held for sale are presented separately among the items
in the financial statements.
Goodwill
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 is measured using the
equity method: the equity investment is initially entered at cost, subsequently, the carrying
Sabaf Group | Consolidated financial statements at 31 December 2022
31
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 finite useful life.
Estimated useful working life in years, unchanged compared to previous financial years, is
as follows:
Customer relationship
15
Brand
15
Patents
9
Know-how
7
Development costs
10
Software
3 - 5
Impairment
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
Sabaf Group | Consolidated financial statements at 31 December 2022
32
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.
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 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.
Equity investments and non-current receivables
Equity investments in companies other than subsidiaries, associates and joint ventures are
classified as financial assets measured at fair value, which normally corresponds to the
transaction price including directly attributable transaction costs. Subsequent changes in
fair value are recognised through profit or loss (FVPL) or, if the option is exercised in
accordance with the standard, in Other comprehensive income (FVOCI) under the heading
"Instrument reserve at FVOCI". Non-current receivables are stated at their presumed
realisable value.
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 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 derecognised
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 through profit or loss.
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.
Sabaf Group | Consolidated financial statements at 31 December 2022
33
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 recognised at fair value plus, in the case of a financial asset not
at fair value through profit or loss, 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.
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 recognised in other comprehensive
income with reclassification of cumulative gains and losses or financial assets recognised
in other comprehensive income without reversal of cumulative gains and losses upon
derecognition.
Sabaf Group | Consolidated financial statements at 31 December 2022
34
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 as at the end of the reporting period). Conversely, portions accruing after that date
Sabaf Group | Consolidated financial statements at 31 December 2022
35
are treated as defined-contribution plans. Actuarial gains or losses are recognised
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.
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
Sabaf Group | Consolidated financial statements at 31 December 2022
36
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 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).
Sabaf Group | Consolidated financial statements at 31 December 2022
37
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 recognised
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
carrying value in the consolidated financial statements, with the exception of goodwill that
is not tax-deductible and of differences stemming from investments in subsidiaries for
which cancellation is not envisaged in the foreseeable future. Deferred tax assets on
unused tax losses and tax credits carried forward are recognised to the extent that it is
probable that future taxable income will be available against which they can be recovered.
Current and deferred tax assets and liabilities are offset when income taxes are levied by
the same tax authority and when there is a legal right to settle on a net basis. Deferred tax
assets and liabilities are measured using the tax rates that are expected to be applicable,
according to the respective regulations of the countries where the Group operates, in the
years when temporary differences will be realised or settled.
Dividends
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.
Sabaf Group | Consolidated financial statements at 31 December 2022
38
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 40.
This cost, together with the corresponding increase in shareholders' equity, is recognised
under personnel costs (Note 28) 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.
Use of estimates
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
Sabaf Group | Consolidated financial statements at 31 December 2022
39
and amortisation, asset write-downs, employee benefits, taxes, and other provisions.
Specifically:
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 and inventory write-downs at their expected sale
value
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.
If the expected sale value is less than the purchase or production cost, inventories of
finished goods are written down to market value, estimated on the basis of current selling
prices.
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
Sabaf Group | Consolidated financial statements at 31 December 2022
40
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 Group in litigation. These estimates are determined taking into
account the gradual development of the disputes, considering existing exemptions.
Climate change
With reference to the potential impact of climate change on the Group's activities, the
Management carries out targeted analyses to identify and manage the main risks and
uncertainties to which the Group is exposed, adapting the corporate strategy accordingly.
To date, these factors have not had a significant impact on the opinions and estimates
used in preparing these Consolidated Financial Statements.
Estimates and assumptions are regularly reviewed and the effects of each change
immediately reflected in the income statement.
Sabaf Group | Consolidated financial statements at 31 December 2022
41
New accounting standards
Amendments to IAS 37
“Provisions, Contingent Liabilities and Contingent
Assets”
The amendment clarifies that all costs directly attributable to the contract must be taken
into account when estimating the possible onerousness of a contract. Accordingly, the
assessment of whether a contract is onerous includes not only incremental costs (such as
the cost of direct materials used in the process) but also all costs directly attributable to
the contractual activities (such as depreciation of equipment used to perform the contract
and costs of contract management and control). General and administrative expenses are
not directly related to a contract and are excluded unless they are specifically charged to
the other party under the contract.
These changes had no impact on the Group’s consolidated financial statements.
Amendments to IAS 16
“Property, Plant and Equipment”
The purpose of the amendments is not to allow the deduction from the cost of property,
plant and equipment of the amount received from the sale of goods produced in the test
phase of the asset. These sales revenues and related production costs will therefore be
recognised in the income statement. These changes had no impact on the Group’s
consolidated financial statements.
Amendments to IFRS 1
“First-time Adoption of International Financial Reporting
Standards – Subsidiary as a first-time adopter”
The amendment allows a subsidiary that chooses to apply paragraph D16(a) of IFRS 1 to
account for cumulative translation differences on the basis of the amounts recognised by
the parent company, taking into account the parent's date of transition to IFRSs. This
amendment had no impact on the Group's consolidated financial statements as the Group
is not a first-time adopter.
Amendments to IFRS 3
“Reference to the Conceptual Framework”
The amendments are intended to replace references to the Framework for the Preparation
and Presentation of Financial Statements with the references to the Conceptual
Framework for Financial Reporting published in March 2018 without a significant change
to the requirements of the standard. The Board also added an exception to the
measurement principles of IFRS 3 to avoid the risk of potential "day-after" losses or gains
arising from liabilities and contingent liabilities that would fall within the scope of IAS 37
or IFRIC 21 Levies, if incurred separately. The exemption requires entities to apply the
requirements of IAS 37 or IFRIC 21, rather than the Conceptual Framework, to determine
whether an obligation exists at the date of acquisition. The amendment also added a new
paragraph to IFRS 3 to clarify that contingent assets do not qualify as recognisable assets
at the date of acquisition. These amendments had no impact on the Group's consolidated
financial statements in that no contingent assets, liabilities or contingent liabilities were
recognised in the year for the purpose of these amendments.
Amendments to IFRS 9
“Financial Instruments”
the amendments clarify what fees can be included in measuring whether the terms of a
new financial liability (or changes to an existing financial liability) are materially different
from the terms of the original financial liability. This amendment had no impact on the
Sabaf Group | Consolidated financial statements at 31 December 2022
42
Group's consolidated financial statements in that there were no changes in the Group's
financial liabilities during the year.
Amendments to IAS 41
“Agriculture”
The amendment removes the requirement to exclude cash flows arising from taxation
when measuring the fair value of assets within the scope of IAS 41. This amendment had
no impact on the Group's consolidated financial statements in that the Group does not
have any assets to which IAS 41 applies.
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 2022
IFRS 17 “
Insurance Contracts”
In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive
new standard on insurance contracts covering recognition and measurement, presentation
and disclosure. IFRS 17 applies to all types of insurance contracts regardless of the type
of entity that issues them, as well as to certain guarantees and financial instruments with
discretionary participation features. IFRS 17 will be effective for financial years beginning
on or after 1 January 2023, and will require the presentation of comparative balances. early
application is permitted, in which case the entity must also have adopted IFRS 9 and IFRS
15 on or before the date of first-time application of IFRS 17. This principle does not apply
to the Group.
Amendments to IAS 1
“Classification of Liabilities as Current or Non-current”
In January 2020, the IAS issued amendments to paragraphs 69-76 of IAS 1 to specify the
requirements for classifying liabilities as current or non-current. The amendments clarify
what is meant by the right to postpone an expiry, that the right to postpone must exist at
the end of the reporting period, that the classification is not affected by the likelihood that
the entity will exercise its right to postpone, that only if a derivative embedded in a
convertible liability is itself an equity instrument does the maturity of the liability have no
impact on classification. The amendments will be effective for financial years beginning
on or after 1 January 2023 and must be applied retrospectively. The Group is assessing
the impact the changes will have on the current situation.
Amendments to IAS 8 “
Definition of accounting estimates
”
In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition
of "accounting estimates". The amendments clarify the distinction between changes in
accounting standards and changes in accounting policies and corrections of errors. They
also clarify how entities use measurement techniques and inputs to develop accounting
estimates. The amendments are effective for financial years beginning on or after 1
January 2023 and apply to changes in accounting standards and changes in accounting
estimates that occur on or after the beginning of that period. Early application is permitted
provided that this fact is disclosed.
The changes are not expected to have a significant impact on the Group.
Sabaf Group | Consolidated financial statements at 31 December 2022
43
Amendments to IAS 1 and IFRS Practice Statement 2 "
Disclosure of Accounting
Standards
"
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2
Making Materiality Judgements, in which it provides guidance and examples to help
entities apply materiality judgements to the disclosure of accounting standards. The
amendments to IAS 1 are effective for annual periods beginning on or after 1 January
2023. Earlier application is permitted. Since the amendments to PS 2 provide non-
mandatory guidance on the application of the definition of materiality to the disclosure of
accounting standards, there is no need for an effective date for these amendments.
The Group is currently assessing the impact of the amendments to determine the effect
they will have on the Group's disclosure of accounting standards.
Amendments to IAS 12
"Deferred Taxes on Assets and Liabilities Arising from a
Single Transaction"
In May 2021, the IASB issued amendments to IAS 12 that narrow the scope of the initial
recognition exception in IAS 12, which no longer applies to transactions that give rise to
both taxable and deductible temporary differences.
Amendments are to be applied to transactions occurring after or at the beginning of the
comparative period presented. In addition, deferred tax assets (if sufficient taxable income
is available) and deferred tax liabilities are recognised at the beginning of the comparative
period for all deductible and taxable temporary differences relating to leases and
provisions for restoration.
The Group is currently assessing the impact of these changes.
Sabaf Group | Consolidated financial statements at 31 December 2022
44
Hyperinflation – Turkey: application of IAS 29
As from 1 April 2022, the Turkish economy is considered and hyperinflationary economy
in accordance with the criteria set out in "IAS 29 - Financial Reporting in Hyperinflationary
Economies", i.e. following the assessment of qualitative and quantitative elements
including the presence of a cumulative inflation rate greater than 100% over the previous
three years.
Therefore, as from these financial statements, IAS 29 is concretely applied with reference
to the parent company's subsidiaries in Turkey: Sabaf Turkey (Sabaf Beyaz Esya Parcalari
Sanayi Ve Ticaret Limited Sirteki) and Okida (Okida Elektronik Sanayi Ve Ticaret A.S.). In
order to reflect the changes in the purchasing power of the Turkish lira at the end of this
reporting period, the Group restated the value of non-monetary items, shareholders' equity
and income statement account items of the investee companies in Turkey to the extent of
their recoverable amount, applying the change in the general consumer price index to
historical data.
The value of the general consumer price index at the end of the reporting period and the
changes in the index during the current and previous financial year are shown below:
Consumer price index
Value at
31/12/2021
Value at
31/12/2022
Change
TURKSTAT
686.95
1,128.45
+64.27%
Consumer price index
Value at
01/01/2003
Value at
31/12/2021
Change
TURKSTAT
100
686.95
+586.95%
Accounting effects
The accounting effects of the restatement were recognised as follows.
1) The financial statements of the Turkish subsidiaries were restated before being
included in the consolidated financial statements of the Group:
▪ the effect of the inflation adjustment until 31 December 2021 of non-monetary
assets and liabilities and of shareholders' equity, net of the related tax effect,
was recognised as a balancing entry to Other Reserves in shareholders' equity;
▪ the effect related to the re-measurement of the same non-monetary items,
shareholders' equity items and income statement items recognised in 2022 was
recognised in a separate item in the income statement under financial income
and expenses. The related tax effect was recognised in taxes for the period.
2) On consolidation, as required by IAS 21, these restated financial statements were
converted using the final exchange rate in order to restore the amounts to current
values.
In accordance with IAS 21 (paragraph 42.b), it was not necessary to restate the financial
and economic data for the year 2021 for comparative purposes only, as the Group's
functional currency does not belong to a hyperinflationary economy.
The first-time adoption of IAS 29 generated a positive adjustment (net of the related tax
effect) recognised in shareholders' equity reserves in the consolidated financial statements
at 1 January 2022 of €11,402 thousand. Moreover, during 2022, the application of IAS 29
resulted in the recognition of a net financial expense (before tax) of €9,023 thousand.
Sabaf Group | Consolidated financial statements at 31 December 2022
45
The effects of the application of hyperinflation on the Consolidated Statement of Financial
Position and Consolidated Income Statement are shown below.
Consolidated statement of
financial position
(
€
/000)
31/12/2022
Hyperinflation
effect
31/12/2022
with Hyperinflation
effect
Total non-current assets
145,930
24,820
170,750
Total current assets
156,713
1,416
158,129
Available-for-sale non-current
assets
526
-
526
Total Assets
303,169
26,236
329,405
Total shareholders’ equity
130,433
25,729
156,162
Total non-current liabilities
87,957
507
88,464
Total current liabilities
84,779
-
84,779
Total liabilities and shareholders'
equity
303,169
26,236
329,405
Consolidated income
statement
(
€
/000)
12M
2022
Hyperinflation
effect
12m 2022
with Hyperinflation
effect
Operating revenue and income
262,092
1,149
263,241
Operating costs
(226,469)
3,320
(223,149)
Operating profit before
depreciation & amortisation,
capital gains/losses and write-
downs/write-backs of non-
current assets (EBITDA)
35,623
4,469
40,092
EBIT
19,049
2,838
21,887
Result before taxes
18,570
(6,361)
12,209
Income taxes
2,756
284
3,040
Profit for the year
21,326
(6,077)
15,249
Sabaf Group | Consolidated financial statements at 31 December 2022
46
Comments on significant balance sheet items
1. PROPERTY, PLANT AND EQUIPMENT
Property
Plant and
equipment
Other
assets
Assets under
construction
Total
Cost
At 31 December 2020
57,226
219,592
55,877
4,535
337,230
Increases
1,589
11,097
4,421
5,120
22,227
Disposals
(48)
(1,366)
(398)
(596)
(2,408)
Change in the scope of
consolidation
942
83
-
1,531
2,556
Reclassifications
375
2,092
18
(3,480)
(995)
Forex differences
(654)
(3,201)
(1,089)
(474)
(5,418)
At 31 December 2021
59,430
228,297
58,829
6,636
353,192
Increases
331
3,513
3,699
12,141
19,684
Disposals
-
(2,958)
(479)
-
(3,437)
Change in the scope of
consolidation
2,337
3,732
869
-
6,938
Reclassifications
300
8,527
376
(9,432)
(229)
Monetary revaluation (IAS
29)
4,503
10,921
3,518
-
18,942
Forex differences
(225)
(422)
(154)
(116)
(917)
At 31 December 2022
66,676
251,610
66,658
9,229
394,173
Accumulated
depreciations
At 31 December 2020
24,147
188,938
47,638
-
260,723
Depreciations for the year
2,367
8,457
3,290
-
14,114
Derecognition due to
disposal
(14)
(1,462)
(319)
-
(1,795)
Reclassifications
-
(116)
3
-
(113)
Forex differences
(297)
(1,287)
(560)
-
(2,144)
At 31 December 2021
26,203
194,530
50,052
-
270,785
Depreciations for the year
2,323
9,049
3,945
-
15,317
Derecognition due to
disposal
-
(2,807)
(216)
-
(3,023)
Change in the scope of
consolidation
248
2,321
657
-
3,226
Reclassifications
3
(1)
135
-
137
Monetary revaluation (IAS
29)
1,734
4,752
1,748
-
8,234
Forex differences
(81)
(58)
31
-
(108)
At 31 December 2022
30,430
207,786
56,352
-
294,568
Net carrying value
At 31 December 2022
36,246
43,824
10,306
9,229
99,605
At 31 December 2021
33,227
33,767
8,777
6,636
82,407
The breakdown of the net carrying value of Property was as follows:
31/12/2022
31/12/2021
Change
Land
9,465
8,613
852
Industrial buildings
26,781
24,614
2,167
Total
36,246
33,227
3,019
Sabaf Group | Consolidated financial statements at 31 December 2022
47
Changes in property, plant and equipment resulting from the application of IFRS 16 are
shown below:
Property
Plant and
equipment
Other assets
Total
At 31 December 2021
2,221
203
932
3,356
Increases
-
-
187
187
Depreciations and amortisation
(695)
(185)
(340)
(1,220)
Decreases
-
-
-
-
Foreign exchange differences
(413)
196
(31)
(248)
At 31 December 2022
1,113
214
748
2,075
The main investments in the year were aimed at expanding the international production
footprint:
- in Turkey, where an integrated production line of hinges for dishwashers was started;
- in India, where the production of gas components (valves and burners) was started);
- in Mexico, where work on the construction of the plant in San Luis de Potosi continued.
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 2022, 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 2020
11,284
Increases
-
Disposals
(1,107)
At 31 December 2021
10,177
Increases
144
Disposals
(1,381)
Reclassifications
(6,675)
At 31 December 2022
2,265
Depreciations and write-downs
At 31 December 2020
8,031
Depreciations for the year
369
Write-downs for the year
-
Derecognition due to disposal
(534)
At 31 December 2021
7,866
Depreciations for the year
299
Derecognition due to disposal
(734)
Reclassifications
(6,149)
At 31 December 2022
1,282
Sabaf Group | Consolidated financial statements at 31 December 2022
48
Net carrying value
At 31 December 2021
983
At 31 December 2022
2,311
During the year, property with a net carrying value of €526 thousand was reclassified under
Available-for-sale non-current assets (Note 3).
Changes in investment property resulting from the application of IFRS 16 are shown
below:
Investment
property
1 January 2022
3
Increases
144
Decreases
-
Depreciations and amortisation
(39)
Foreign exchange differences
-
At 31 December 2022
108
The item Investment property includes non-operating buildings owned by the Group:
these are mainly properties for residential use, held for rental or sale. Disposals during the
period resulted in capital gains totalling €243 thousand.
At 31 December 2022, 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.
3. ASSETS HELD FOR SALE
This item includes the net carrying value of the Parent Company's former production plant
located in Lumezzane (Brescia) amounting to €526 thousand, the value of which will be
recovered through a sale transaction with the characteristics indicated by IFRS 5.
Sabaf Group | Consolidated financial statements at 31 December 2022
49
4. INTANGIBLE ASSETS
Goodwill
Patents and
software
Developme
nt costs
Other
intangible
assets
Total
Cost
At 31 December 2020
27,114
9,401
6,586
21,599
64,700
Increases
-
420
1,770
44
2,234
Decreases
-
(2)
-
(3)
(5)
Reclassifications
-
(70)
(58)
-
(128)
Forex differences
(4,978)
(164)
-
(2,939)
(8,081)
At 31 December 2021
22,136
9,585
8,298
18,701
58,720
Increases
-
591
2,506
56
3,153
Decreases
-
1
(16)
(7)
(22)
Change in the scope of
consolidation
1,127
263
-
4,568
5,958
Reclassifications
-
77
(554)
17
(460)
Monetary revaluation (IAS 29)
10,671
385
-
6,453
17,509
Forex differences
(1,756)
(54)
-
(1,039)
(2,849)
At 31 December 2022
32,178
10,848
10,234
28,749
82,009
Amortisation/Write-downs
At 31 December 2020
4,546
8,573
4,425
4,139
21,683
Depreciations for the year
-
419
375
1,553
2,347
Decreases
-
-
-
-
-
Reclassifications
-
(93)
-
-
(93)
Forex differences
-
(112)
-
(658)
(770)
At 31 December 2021
4,546
8,787
4,800
5,034
23,167
Depreciations for the year
-
479
376
1,797
2,652
Decreases
-
2
-
-
2
Change in the scope of
consolidation
-
226
-
10
236
Reclassifications
-
13
174
24
211
Monetary revaluation (IAS 29)
-
303
-
1,566
1,869
Forex differences
-
(38)
-
(258)
(296)
At 31 December 2022
4,546
9,772
5,350
8,173
27,841
Net carrying value
At 31 December 2022
27,632
1,076
4,884
20,576
54,168
At 31 December 2021
17,590
798
3,498
13,667
35,553
Goodwill
Goodwill recognised at 31 December 2022 is allocated:
- to the “Hinges” (CGU) cash generating units of €4.414 million;
- to the “Professional burners” CGU of €1.770 million;
- for €16.641 million to the “Electronic components” CGU;
- for €1.127 million to the “P.G.A. Electronic components” CGU;
- 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.
The management defined a single plan for each CGU that represents the normal and
expected scenario, with reference to the period from 2023 to 2027, and which was used to
Sabaf Group | Consolidated financial statements at 31 December 2022
50
develop the impairment tests. The development of forward plans and the calculation of
the value in use were carried out following an in-depth analysis that also considered the
impact on profitability of the increase in purchase costs and the possibility of transferring
this increase to sales prices. The recoverable amount of each CGU, determined on the
basis of this plan, was subjected to stress tests and sensitivity analyses.
Goodwill allocated to the Hinges CGU
In 2022, the Hinges CGU achieved positive results - in terms of sales and profitability -
both compared to the previous year and compared to the budget. The 2023-2027 forward
plan envisages a decline in sales in 2023, a gradual recovery in the following years and the
maintenance of a good level of profitability.
At 31 December 2022, the Group tested - with the support of independent experts - the
carrying value of its CGU Hinges for impairment, determining its recoverable amount,
considered to be equivalent to its usable value, by discounting expected future cash flow
in the forward plan drafted by the management. Cash flows for the period from 2023 to
2027 were augmented by the 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
11.65% (10.11% in the impairment test carried out while preparing the consolidated
financial statements at 31 December 2021) and a growth rate (g) of 2%, unchanged from
the 2021 impairment test.
The recoverable amount calculated on the basis of the above-mentioned assumptions and
valuation techniques is €16.245 million, compared with a carrying value of the assets
allocated to the Hinges unit of €10.301 million; consequently, the value recognised for
goodwill at 31 December 2022 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
1.50%
1.75%
2.00%
2.25%
2.50%
10.65%
17,328
17,645
17,981
18,337
18,715
11.15%
16,491
16,771
17,066
17,378
17,708
11.65%
15,735
15,984
16,245
16,520
16,810
12.15%
15,050
15,272
15,504
15,748
16,004
12.65%
14,426
14,624
14,831
15,049
15,277
The table below shows the change in recoverable amount as EBITDA changes according
to the plan.
EBITDA
Accordin
g to the
plan
-10%
-20%
(
€
/000)
16,245
14,441
12,637
Sabaf Group | Consolidated financial statements at 31 December 2022
51
It was determined that the recoverable amount of the CGU exceeds its carrying value
under all of the above assumptions, taking into account changes in discount rate, growth
rate and EBITDA.
Goodwill allocated to the Professional burners CGU
The Professional Burners CGU performed very well during the 2022 financial year in terms
of both turnover and profitability. The 2023-2027 forward plan envisages a decline in sales
in 2023, a gradual recovery in the following years and the maintenance of a good level of
profitability.
At 31 December 2022, 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 2023. Cash flows for the period
from 2023 to 2027 were augmented by the 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 11.19% (6.93% in the impairment test carried out while preparing the
consolidated financial statements at 31 December 2021) and a growth rate (g) of 2%,
unchanged with respect to the 2021 impairment test, considered by management to be the
best estimate of the CGU's growth assumptions, considering the sector in which it operates
and in line with the growth rate of other Italian CGUs.
The recoverable amount calculated on the basis of the above-mentioned assumptions and
valuation techniques is €6.743 million, compared with a carrying value of the assets
allocated to the Professional burners unit of €5.373 million (including minority interests);
consequently, the value recognised for goodwill at 31 December 2022 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
1.50%
1.75%
2.00%
2.25%
2.50%
10.19%
7,270
7,435
7,610
7,796
5,635
10.69%
6,854
6,999
7,151
7,314
7,485
11.19%
6,481
6,608
6,743
6,885
7,035
11.69%
6,145
6,258
6,377
6,502
6,634
12.19%
5,840
5,941
6,047
6,158
6,275
The table below shows the change in recoverable amount as EBITDA changes according
to the plan.
EBITDA
Accordin
g to the
plan
-10%
-20%
(
€
/000)
6,743
5,823
4,903
Sabaf Group | Consolidated financial statements at 31 December 2022
52
Goodwill allocated to the Electronic components CGU
The Electronic Components CGU performed extremely well in 2022.
At 31 December 2022, 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 2023 to 2027 were augmented by the 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 16.81% (15.21% in the impairment test carried out while preparing
the consolidated financial statements at 31 December 2021) and a growth rate (g) of 2.50%,
unchanged from the 2021 impairment test.
The recoverable amount calculated on the basis of the above-mentioned assumptions and
valuation techniques is €44.400 million, compared with a carrying value of the assets
allocated to the Electronic components unit of €36.660 million; consequently, the value
recognised for goodwill at 31 December 2022 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%
15.81%
46,646
47,160
47,694
48,248
48,824
16.31%
45,029
45,500
45,987
46,493
47,018
16.81%
43,521
43,953
44,400
44,863
45,342
17.31%
42,112
42,509
42,920
43,344
43,783
17.81%
40,793
41,159
41,536
41,926
42,330
The table below shows the change in recoverable amount as EBITDA changes according
to the plan.
EBITDA
Accordin
g to the
plan
-10%
-20%
(
€
/000)
44,400
39,801
34,906
Goodwill allocated to the C.M.I. Hinges CGU
The Hinges C.M.I. CGU recognised a strong increase in turnover in 2022 and a good level
of profitability. The 2023-2027 forward plan envisages a decline in sales in 2023, a gradual
recovery in the following years and the maintenance of a good level of profitability.
At 31 December 2022, 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
Sabaf Group | Consolidated financial statements at 31 December 2022
53
2023 to 2027 were augmented by the 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 of use was calculated based on a discount rate (wacc)
of 11.66% (11.31% in the impairment test carried out while preparing the consolidated
financial statements at 31 December 2021) and a growth rate (g) of 2%, unchanged with
respect to the 2021 impairment test, considered by management to be the best estimate
of the CGU's growth assumptions, considering the sector in which it operates and in line
with the growth rate of other Italian CGUs.
The recoverable amount calculated on the basis of the above-mentioned assumptions and
valuation techniques is €50.590 million, compared with a carrying value of the assets
allocated to the C.M.I. Hinges unit of €25.734 million; consequently, the value recognised
for goodwill at 31 December 2022 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
1.50%
1.75%
2.00%
2.25%
2.50%
10.66%
54,242
55,340
56,501
57,732
59,037
11.16%
51,395
52,363
53,384
54,462
55,602
11.66%
48,829
49,687
50,590
51,541
52,544
12.16%
46,505
47,270
48,072
48,916
49,802
12.66%
44,390
45,075
45,792
46,543
47,332
The table below shows the change in recoverable amount as EBITDA changes according
to the plan.
EBITDA
Accordin
g to the
plan
-10%
-20%
(
€
/000)
50,590
46,152
38,885
Goodwill allocated to the "P.G.A. Electronic components” CGU
At 31 December 2022, the Group tested the carrying value of its P.G.A. Electronic
components for impairment, determining its recoverable amount, considered to be
equivalent to its value of use, by discounting expected future cash flows in the forward
plan prepared by the management. Cash flows for the period from 2023 to 2025 were
augmented by the 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 of use was calculated based on a discount rate (WACC) of 10.88% and
a growth rate (g) of 2%, representative of expected future growth rates for the reference
market.
The recoverable amount calculated on the basis of the above-mentioned assumptions and
valuation techniques is €15.569 million, compared with a carrying value of the assets
Sabaf Group | Consolidated financial statements at 31 December 2022
54
allocated to the P.G.A. Electronic components of €10.222 million; consequently, the value
recognised for goodwill at 31 December 2022 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
1.50%
1.75%
2.00%
2.25%
2.50%
9.88%
16,651
17,090
17,558
18,056
18,588
10.38%
15,707
16,094
16,504
16,940
17,403
10.88%
14,863
15,206
15,569
15,953
16,359
11.38%
14,105
14,411
14,734
15,074
15,433
11.88%
13,420
13,694
13,983
14,286
14,606
The table below shows the change in recoverable amount as EBITDA changes according
to the plan.
EBITDA
Accordin
g to the
plan
-10%
-20%
(
€
/000)
15,569
13,658
11,745
Patents and software
Software investments are related to the extension of the application and corporate scope
of the Group management system (SAP).
Development costs
Development costs are mainly related to the decision to extend the product range to
include induction cooking. To this end, a dedicated project team was set up to develop the
project know-how in-house, with patents, proprietary software and hardware. The first
prototypes were presented in 2022, with production starting in 2023.
Increases in development costs include projects in progress and therefore not subject to
amortisation.
With regard to patents, software and development costs, no internal and external
indicators that would necessitate an impairment test were identified.
Other intangible assets
The other intangible assets recognised in these consolidated financial statements mainly
result from the Purchase Price Allocation carried out following the acquisition of Okida
Elektronik in September 2018, the acquisition of C.M.I. S.r.l. in July 2019 and P.G.A. in
October 2022.
Sabaf Group | Consolidated financial statements at 31 December 2022
55
The net carrying value of other intangible assets is broken down as follows:
31/12/2022
31/12/2021
Change
Customer Relationship
13,000
6,301
6,699
Brand
3,807
3,877
(70)
Know-how
577
236
341
Patents
2,835
3,038
(203)
Other
357
215
142
Total
20,576
13,667
6,909
At 31 December 2022, 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.
5. EQUITY INVESTMENTS
31/12/2021
Change
scope of consolidation
31/12/2022
Other equity
investments
83
14
97
Total
83
14
97
Internal and external indicators that would necessitate an impairment test on equity
investments were not identified.
6. NON-CURRENT RECEIVABLES
31/12/2022
31/12/2021
Change
Tax receivables
2,057
985
1,072
Guarantee deposits
98
115
(17)
Receivables from former P.G.A.
shareholders
597
-
597
Total
2,752
1,100
1,652
Tax receivables relate to indirect taxes expected to be recovered after 31 December 2023.
Receivables from former P.G.A. shareholders to Sabaf S.p.A. refer to compensation
obligations envisaged upon the occurrence of certain events (liabilities incurred by P.G.A.)
regulated by the acquisition agreement. These receivables, already accrued and agreed
upon between the parties, were discounted and the effect was recognised under Financial
Expenses (Note 31).
7. INVENTORIES
31/12/2022
31/12/2021
Change
Raw Materials
31,068
26,771
4,297
Semi-processed goods
16,403
15,133
1,270
Finished products
23,771
25,646
(1,875)
Provision for inventory write-
downs
(6,816)
(3,397)
(3,419)
Total
64,426
64,153
273
Sabaf Group | Consolidated financial statements at 31 December 2022
56
The value of final inventories at 31 December 2022 increased compared to the previous
year due to the inflationary effect caused by the increase in the prices of raw materials and
as a result of the monetary revaluation carried out in application of IAS 29 for
hyperinflation in Turkey (of €1,416 thousand). On the other hand, the volumes of products
in stock showed a decline.
At 31 December 2022, the value of inventories was adjusted based on an improved
estimate of the idle capacity and obsolescence risk, measured by analysing slow and non-
moving inventory. The following table shows the changes in the Provision for inventory
write-downs during the current financial year:
31/12/2021
3,397
Provisions
3,018
Utilisation
(164)
Monetary revaluation (IAS 29)
323
Change in the scope of consolidation
300
Forex differences
(58)
31/12/2022
6,816
8. TRADE RECEIVABLES
31/12/2022
31/12/2021
Change
Total trade receivables
59,999
69,139
(9,140)
Bad debt provision
(840)
(1,099)
259
Net total
59,159
68,040
(8,881)
Trade receivables at 31 December 2022 were lower than the balance at the end of 2021
as a result of the decline in sales in the last part of the year. There were no significant
changes in the payment terms agreed with customers.
The amount of trade receivables recognised in the financial statements includes
approximately €25.7 million in insured receivables (€24.3 million at 31 December 2021).
The breakdown of trade receivables by past due period is shown below:
31/12/2022
31/12/2021
Change
Current receivables (not past
due)
45,199
60,358
(15,159)
Outstanding up to 30 days
6,947
4,132
2,815
Outstanding from 30 to 60 days
4,020
1,290
2,730
Outstanding from 60 to 90 days
1,416
794
622
Outstanding for more than 90
days
2,417
2,565
(148)
Total
59,999
69,139
(9,140)
The bad debt provision was adjusted to the better estimate of the credit risk and expected
losses at the end of the reporting period, also carried out by analysing each expired item.
Changes during the year were as follows:
Sabaf Group | Consolidated financial statements at 31 December 2022
57
31/12/2021
1,099
Provisions
-
Utilisation
(296)
Change in the scope of consolidation
23
Forex differences
14
31/12/2022
840
9. TAX RECEIVABLES
31/12/2022
31/12/2021
Change
For income tax
5,061
1,395
3,666
For VAT and other sales taxes
3,144
4,751
(1,607)
Other tax credits
9
19
(10)
Total
8,214
6,165
2,049
At 31 December 2022, income tax receivables mainly include:
▪ €2,014 thousand relating to the tax credit for investments in capital goods;
▪ €148 thousand relating to the tax credit for research and development;
▪ €741 thousand related to the unused tax credit for contributions related to the
increase in gas and electricity costs;
▪ payments on account paid in 2022: IRES for €900 thousand and IRAP for €94
thousand.
10. OTHER CURRENT RECEIVABLES
31/12/2022
31/12/2021
Change
Credits to be received from suppliers
706
1,267
(561)
Advances to suppliers
1,376
859
517
Accrued income and prepaid expenses
660
476
184
Other
168
534
(366)
Total
2,910
3,136
(226)
Credits to be received from suppliers mainly refer to bonuses paid to the Group for the
attainment of purchasing objectives.
11. FINANCIAL ASSETS
31/12/2022
31/12/2021
Current
Non-current
Current
Non-current
Restricted bank accounts
786
-
1,172
-
Derivative instruments on
interest rates
1,711
-
-
-
Total
2,497
-
1,172
0
At 31 December 2022, there were short-term term deposits of €786 thousand. In 2022, the
term deposit of €1.172 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 16) was paid.
Sabaf Group | Consolidated financial statements at 31 December 2022
58
At 31 December 2022, the Group has in place eight interest rate swap (IRS) contracts for
amounts and maturities coinciding with six unsecured loans that are being amortised,
whose residual value at 31 December 2022 is €27,130 thousand. The contracts have not
been designated as capital flow hedges and are therefore at their fair value through profit
and loss, and recognised in the items “Fair Value through profit or loss”, with "Financial
income" as a balancing entry.
12. CASH AND CASH EQUIVALENTS
Cash and cash equivalents, which amounted to €20,923 thousand at 31 December 2022
(€43,649 thousand at 31 December 2021) consisted of bank current account balances of
€20.8 million (€43.2 million at 31 December 2021) and investments in liquidity of €91
thousand (€432 thousand at 31 December 2021). Changes in the cash and cash equivalents
are analysed in the statement cash flows.
13. 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 2022, the structure of the share capital is shown in the table below.
No. of shares
% of share
capital
Rights and obligations
Ordinary shares
7,915,422
68.63%
-
Ordinary shares with
increased vote
3,618,028
31.37%
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.
14. TREASURY SHARES AND OTHER RESERVES
Treasury shares
With regard to the 2018 - 2020 Stock Grant Plan, following the expiry of the three-year
vesting period, during the first half of 2022, 79,128 ordinary shares of the Company were
allocated and transferred to the beneficiaries of Cluster 2, through the use of shares already
available to the issuer.
During the financial year, the following occurred:
▪ 81,321 treasury shares were purchased at an average price of €22.89 per share;
▪ 99,132 treasury shares were sold as part of the acquisition of 100% of the capital
of P.G.A. s.r.l. on 3 October 2022, for which 25% of the price was paid in shares.
At 31 December 2022, Sabaf S.p.A. held 214,863 treasury shares (1.863% of the share
capital), reported in the financial statements as an adjustment to shareholders’ equity at a
weighted average unit value of €14.99 (the closing stock market price of the Share at 31
Sabaf Group | Consolidated financial statements at 31 December 2022
59
December 2022 was €16.69). There were 11,318,587 outstanding shares at 31 December
2022.
Stock grant reserve
Items "Retained earnings, other reserves" of €129,380 thousand included, at 31 December
2022, the stock grant reserve of €1,939 thousand, which included the measurement at 31
December 2022 of the fair value of rights assigned to receive shares of the Parent Company
relating to the 2021 – 2023 Stock Grant Plan, medium- and long-term incentive plan for
directors and employees of the Sabaf Group, for the details of which reference is made to
Note 40.
Cash Flow Hedge reserve
The following table shows the change in the Cash Flow Hedge reserve related to the
application of IFRS 9 on derivative contracts and referring to the recognition in net equity
of the effective part of the derivative contracts signed to hedge the foreign exchange rate
risk for which the Group applies hedge accounting.
Value at 31 December 2021
(151)
Change during the period
149
Value at 31 December 2022
(2)
The characteristics of the derivative financial instruments that gave rise to the Cash Flow
Hedge reserve and the accounting effects on other items in the financial statements are
broken down in Note 38, in the paragraph Foreign exchange risk management.
15. LOANS
31/12/2022
31/12/2021
Current
Non-current
Total
Current
Non-current
Total
Bond issue
-
29,685
29,685
-
29,649
29,649
Unsecured loans
21,613
46,595
68,208
19,044
53,913
72,957
Short-term bank loans
5,308
-
5,308
1,769
-
1,769
Advances on bank
receipts or invoices
921
-
921
2,263
-
2,263
Leases
1,032
2,056
3,088
1,329
2,942
4,271
Interest payable
2
-
2
-
-
-
Total
28,876
78,336
107,212
24,405
86,504
110,909
In December 2021, Sabaf S.p.A. issued a €30 million bond fully subscribed by PRICOA
with a maturity of 10 years, an average life of 8 years and a fixed coupon of 1.85% per
year. The loan has the following covenants, defined with reference to the consolidated
financial statements at the end of each reporting period, widely complied with at 31
December 2022 and for which, according to the Group's business plan, compliance is also
expected in subsequent years:
▪ commitment to maintain a ratio of net financial debt to shareholders’ equity of
less than 1.5;
▪ commitment to maintain a ratio of net financial debt to EBITDA of less than 3;
▪ commitment to maintain a ratio of EBITDA to net financial position of more than 4.
Sabaf Group | Consolidated financial statements at 31 December 2022
60
During the year, the Group took out new unsecured loans for a total of €13 million to
finance the investments made. All loans are signed with an original maturity of 5 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 debt to shareholders’ equity of
less than 1 (residual amount of the loans at 31 December 2022 equal to €49.9
million);
▪ commitment to maintain a ratio of net financial debt to EBITDA of less than 2.5
(residual amount of the loans at 31 December 2022 equal to €40.4 million);
▪ commitment to maintain a ratio of net financial debt to EBITDA of less than 3
(residual amount of the loans at 31 December 2022 equal to €16.1 million);
widely complied with at 31 December 2022 and for which, according to the Group's
business plan, compliance is also expected in subsequent years.
All bank loans are denominated in euro.
To manage interest rate risk, some unsecured loans (with a total residual value of €55.808
million at 31 December 2022) are either fixed-rate or hedged by IRS.
The following table shows the changes in lease liabilities during the year:
Lease liabilities at 31 December 2020
4,896
New agreements signed during 2021
954
Repayments during 2021
(1,581)
Forex differences
2
Lease liabilities at 31 December 2021
4,271
New agreements signed during 2022
331
Repayments during 2022
(1,409)
Forex differences
(105)
Lease liabilities at 31 December 2022
3,088
Financial liabilities related to the application of IFRS 16 at 31 December 2022 amounted
to €2,917 thousand. Note 38 provides information on financial risks, pursuant to IFRS 7.
16. OTHER FINANCIAL LIABILITIES
31/12/2022
31/12/2021
Current
Non-current
Current
Non-current
Payables to former P.G.A.
shareholders
546
-
-
-
Payables to C.M.I. shareholders
-
-
1,173
-
Derivative instruments on
interest rates
-
-
190
-
Currency derivatives
28
-
156
-
Total
574
-
1,519
-
Currency derivatives refer to forward sales contracts recognised using hedge accounting.
These financial instruments are broken down in Note 38 - Forex risk management.
The payable to former P.G.A. shareholders refers to price adjustments following the
completion of the acquisition and determined in accordance with contractual provisions.
Sabaf Group | Consolidated financial statements at 31 December 2022
61
The payable to C.M.I. shareholders, which amounted to €1,173 thousand at 31 December
2021 and related to the portion of the price not yet paid to the sellers of the C.M.I.
shareholding, was paid in 2022.
17. POST-EMPLOYMENT BENEFIT AND RETIREMENT PROVISIONS
Post-
employment
benefit
At 31 December 2021
3,408
Provisions
340
Financial expenses
66
Payments made
(499)
Tax effect
(254)
Change in the scope of consolidation
643
Forex differences
(43)
At 31 December 2022
3,661
Following the revision of IAS 19 - Employee benefits, from 1 January 2013, all actuarial
gains or losses are recognised immediately in the comprehensive income statement
("Other comprehensive income"
) under the item "Actuarial income and losses".
Post-employment benefits are calculated as follows:
Financial assumptions
31/12/2022
31/12/2021
Discount rate
3% - 3.7%
0.40%
Inflation
3%
1.30%
Demographic theory
31/12/2022
31/12/2021
Mortality rate
IPS 55 ANIA
IPS 55 ANIA
Disability rate
INPS 2000
INPS 2000
Staff turnover
3% - 10%
3% - 8%
Advance payouts
1% - 5%
2% - 4%
Retirement age
Pursuant to legislation in force
at 31 December 2022
Pursuant to legislation in force
at 31 December 2021
Sabaf Group | Consolidated financial statements at 31 December 2022
62
18. PROVISIONS FOR RISKS AND CHARGES
31/12/2021
Provi
sions
Utilisation
Change in the
scope of
consolidation
Forex
differences
31/12/2022
Provision
for agents’
indemnities
249
8
(5)
-
-
252
Product
guarantee
fund
60
23
(23)
-
-
60
Provision
for legal
risks
416
13
(358)
-
6
77
Provision
for tax risks
500
-
(500)
-
-
-
Other
provisions
for risks and
charges
109
-
-
165
(24)
250
Total
1,334
21
(863)
165
(18)
639
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.
Uses of the provision for legal risks refer, for €328 thousand, to the settlement of a legal
dispute of the C.M.I. Group. The relevant provision was recognised as part of the Purchase
Price Allocation process carried out following the acquisition of C.M.I.
Following the settlement of a tax dispute, in 2022, the provision for tax risks in which a
specific provision of the same amount was recognised, was used in the amount of €500
thousand.
Other provisions for risks and charges, recognised as part of the Purchase Price Allocation
following the acquisitions of Okida Elektronik and of the P.G.A. Group, reflect the fair value
of the potential liabilities of the acquired entities.
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.
19. TRADE PAYABLES
31/12/2022
31/12/2021
Change
Total
39,628
54,837
(15,209)
The decrease in trade payables is related to the decline in production volumes in the
second half of the year. Average payment terms did not change versus the previous year.
At 31 December 2022, there were no overdue payables of a significant amount and the
Group did not receive any injunctions for overdue payables.
Sabaf Group | Consolidated financial statements at 31 December 2022
63
20. TAX PAYABLES
31/12/2022
31/12/2021
Change
For income tax
235
3,450
(3,215)
Withholding taxes
1,059
954
105
Other tax payables
1,251
547
704
Total
2,545
4,951
(2,406)
21. OTHER CURRENT PAYABLES
31/12/2022
31/12/2021
Change
To employees
5,553
6,706
(1,153)
To social security institutions
2,781
2,844
(63)
To agents
164
283
(119)
Advances from customers
522
1,694
(1,172)
Other current payables
4,136
1,548
2,588
Total
13,156
13,075
81
At the beginning of 2022, 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 totalling €3,882
thousand.
22. DEFERRED TAX ASSETS AND LIABILITIES
31/12/2022
31/12/2021
Change
Deferred tax assets
13,145
8,639
4,506
Deferred tax liabilities
(5,828)
(3,939)
(1,889)
Net position
7,317
4,700
2,617
The table below analyses the nature of the temporary differences that determine the
recognition of deferred tax liabilities and assets and their changes during the year and the
previous year.
Non-
current
tangible
and
intangible
assets
Provisions
, value
adjustments
Fair value
of
derivative
instruments
Good
will
Tax
incentives
Tax
losses
Actuarial
evaluation
of post-
employment
benefit
Hyperinflation
effects
Other
temporary
differences
Total
31/12/2021
(1,912)
1,278
35
1,063
2,586
744
192
0
714
4,700
Through
profit or loss
2,983
302
(420)
(177)
1,459
649
0
284
(148)
4,932
In
shareholders'
equity
(1,290)
0
3
0
0
0
(81)
(261)
0
(1,629)
Forex
differences
30
10
0
0
(613)
(133)
0
0
20
(686)
31/12/2022
(188)
1,590
(382)
886
3,432
1,260
111
23
586
7,317
Deferred tax assets recognised in the income statement in respect of "Non-current tangible
Sabaf Group | Consolidated financial statements at 31 December 2022
64
and intangible assets" included €3,734 thousand in these consolidated financial statements
as a result of the revaluation for tax purposes of the tangible assets of the Group's Turkish
companies. The exercise of the revaluation option resulted in a substitute tax of
approximately €69 thousand, which is accounted for in current taxes for the year.
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.
Deferred tax assets relating to tax incentives are commensurate to investments made in
Turkey, for which the Group will benefit from a direct tax deduction.
At the end of the financial year, the taxation of the Group's Turkish companies was
adjusted to 20% tax rate, recognising tax expenses of €391 thousand in profit or loss.
23. TOTAL FINANCIAL DEBT
As required by the CONSOB memorandum of 28 July 2006, we disclose that the Group’s
net financial debt is as follows:
31/12/202
2
31/12/202
1
Change
A.
Cash
20,832
43,217
(22,385)
B.
Cash equivalents
91
432
(341)
C.
Other current financial assets
2,497
1,172
1,325
D.
Liquidity (A+B+C)
23,420
44,821
(21,401)
E.
Current financial payable
8,098
5,551
2,547
F.
Current portion of non-current financial debt
21,352
20,373
979
G.
Current financial debt (E+F)
29,450
25,924
3,526
H.
Net current financial debt (G-D)
6,030
(18,897)
24,927
I.
Non-current financial payable
48,651
56,855
(8,204)
J.
Debt instruments
29,685
29,649
36
K.
Trade payables and other non-current payables
-
-
-
L.
Non-current financial debt (I+J+K)
78,336
86,504
(8,168)
M.
Total financial debt (H+L)
84,366
67,607
16,759
The consolidated statement of cash flows, which shows the changes in cash and cash
equivalents (sum of letters A. and B. of this statement), describes in detail the cash flows
that led to the change in the net financial debt. In particular, as can be seen from the
Consolidated Statement of Cash Flows, the increase in net financial debt in the period is
mainly attributable to:
- the change in net working capital
- the investments made
- profits distributed to shareholders
- acquisition of P.G.A. S.r.l.
Sabaf Group | Consolidated financial statements at 31 December 2022
65