1

CONTENTS

REPORT ON OPERATIONS

4EVENTS DURING THE YEAR

4

THE SELLE ROYAL GROUP and the CORONAVIRUS-19 PANDEMIC

10THE SELLE ROYAL GROUP and the WAR EVENTS in UKRAINE10ECONOMIC PERFORMANCE

11

STATEMENT OF FINANCIAL POSITION

13DERIVATIVE FINANCIAL INSTRUMENTS

15

INVESTMENTS

15

DATA on TREASURY SHARES and on any EQUITY INVESTMENTS in the PARENT COMPANY

16

RISK ANALYSIS

16

SIGNIFICANT EVENTS AFTER THE END OF THE YEAR

19

BUSINESS OUTLOOK

19

TRANSACTIONS WITH PARENT COMPANIES, AFFILIATES AND RELATED PARTIES19

ENVIRONMENT, PERSONNEL and SECTOR REGULATIONS

19

CONCLUSIONS and PROPOSALS

20

FINANCIAL STATEMENTS

21

CONSOLIDATED INCOME STATEMENT(*)

21

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

22

CONSOLIDATED BALANCE SHEET (*)

23

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

25

CONSOLIDATED CASH FLOW STATEMENT PREPARED USING THE INDIRECT METHOD

26

EXPLANATORY NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL REPORT AS AT 30 JUNE 2022

27

1.

INTRODUCTION

27

2.

MANDATORY ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED BY THE GROUP

28

3.
ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS NOT YET APPLICABLE AND NOT ADOPTED IN
ADVANCE BY THE GROUP
28
4.

IFRS and INTERPRETATIONS APPROVED by the IASB and NOT ENDORSED in EUROPE

32

5.

2018-2020 ANNUAL IMPROVEMENTS

32

6.

FINANCIAL STATEMENT FORMATS AND CLASSIFICATION CRITERIA

337.

ACTIVITIES OF THE COMPANIES BELONGING TO THE GROUP

34

8.

SIGNIFICANT EVENTS DURING THE YEAR

36

9.

GENERAL PREPARATION CRITERIA AND CONSOLIDATION PRINCIPLES

37

10.

MEASUREMENT CRITERIA

40

11.

ESTIMATES AND ASSUMPTIONS

51

12.

SEGMENT REPORTING

53

13.

DERIVATIVE FINANCIAL INSTRUMENTS

55

14.

RISK MANAGEMENT

55

15.

TRANSACTIONS with RELATED PARTIES56

ANALYSIS and COMPOSITION of the INCOME STATEMENT

57

ANALYSIS and COMPOSITION of the BALANCE SHEET62

INDEPENDENT AUDITORS’ REPORT

77

2

Some figures in the document have been rounded. Consequently, homogeneous data presented in different tables
may undergo modest variations and some totals, in some tables, may not be the algebraic sum of the respective
addends.
3

REPORT ON OPERATIONS
Dear Shareholders,
The year ended 30 June 2022 reported a consolidated profit of € 24,503,594, of which € 21,385,884
is attributable to the Group.

EVENTS DURING THE YEAR
“We used to occasionally have black swan events. The problem, at the moment, is we have a whole
flock of black swans coming at us”-

Richard Wilding, Prof. of Supply Chain Strategy“…as in any changing scenario, the big winners will be the ones who happened to guess right. But,
failing that, the most successful players will be the most agile ones”-

Rick Vosper – Columnist and industry expert

Although not all the "black swans" to which the quotation refers fully respect the characteristics of
those events as theorised by Nassim Nicholas Taleb, it is clear that the year in question wascharacterised not only by the continuation of some positive long-term trends for the sector of thecycle to which the Group belongs, but also by a concurrence of adverse events that is unprecedented
in recent history: the persistence of the pandemic emergency, the increasing commodities and energy
costs, the worldwide bottleneck in logistic flows and the escalation of geopolitical tensions, especiallybetween the United States and China. Furthermore, the year 2022 opened in the shadow of growing
tensions on the eastern Ukrainian border, culminating in the Country's invasion by the RussianFederation army and in the continuing war scenario, which further accentuated the tensions on thecurrency, capital and commodities markets, causing a further deterioration to a macroeconomic
framework which was already under pressure due to the forecast of an inflation-driven slowdown inglobal growth.
The production plants of the entire Group had to face a rapid increase in the procurement costs of themain categories of materials (plastic, chemical, ferrous and, also, paper derivatives) and, although to alesser extent, the cost of electricity and gas.
In the course of 2021/22, the critical conditions in global logistics have quickly exacerbated startingfrom the rapid post-shock economic recovery, under the combined effect of: congestion at the main
ports of destination for goods from Asia, especially those on the west coast of the United States,4

where there has been a wait of around 50 days for ships to unload (source: "C-Timing" research byContainer Xchange and Fraunhofer CML, as reported in the article "Imbalance in shipping container supply
chain is far from over" – BikeEurope); of the advent of the Omicron variant, which has led to major

slowdowns in activity or even total closures of some Far Eastern ports; the increase in the cost of oiland, finally, the reduction of the available maritime labour force, which is affected by the RussianUkrainian conflict (the war is blocking about 15% of seafarers, of which 10% are Russian – about
198,000 employees – and 5% Ukrainian – about 76,000 employees; source: "Container, la tempesta
perfetta" – La Repubblica, 28/03/2022).

Despite this macroeconomic and geopolitical scenario, the Group continued to increase both its
turnover and its gross margin compared to the same period of the previous year; therefore, theGroup's ability to create value is consolidated thanks to its position of undisputed leadership in its
reference segments.
Some comments on the main markets in which the Group operates are provided below:
EUROPE
“E-bikes are the most powerful instrument for change. We are way ahead of electric cars”-

Kevin Mayne – CEO of Cycling Industries Europe“You cannot do it (the cycling revolution, ndr.), and cycling will make it easier”-

Frans Timmermans – Executive VP of the European Commission

As reported in the Deloitte E-Mobility Survey 2022, published by the consulting company of the same
name in May 2022, the e-bike was the electric means of mobility of choice for 18% of the participants(a total panel of 1,008 German adults, a statistically representative sample), compared to only 7% ofelectric cars and scooters (the second and third most representative categories). Moreover, this meanof transport has proven to be the most attractive form of alternative mobility (with a score of 2.7 on ascale of 1 to 4), for various reasons: from ease of use, to being a viable alternative to other means oftransport, from environmental sustainability to the fun associated with its use.
At a continental level, sales of cycles, both conventional and pedal-assisted, exceeded 22 million units
in 2021, the highest figure since 2000 (the year these statistics began to be recorded), with a market
value that grew by +7.5% compared to 2020 to € 19.7 billion (source: European Bicycle Industry andMarket Profile, CONEBI). Of the 22 million bicycles sold, approximately 5 million are electric bicycles,

demonstrating the further penetration potential for the coming years, as also pointed out by Deloitte in5the research mentioned above, when compared to the shares of these products in more mature
markets (in Germany, they account for around 43% of bicycles sold, in the Netherlands over 50%).
Also of particular importance is the phenomenon of the return of cycles and components production
to Europe (the so-called “reshoring”, with Eastern European countries and Portugal being thepreferred destinations), driven by national and European incentives, the presence of skilled labour,with the possibility of considerably reducing production lead times and, last but not least, a growing
environmental awareness on the other hand. During 2021, approximately 16 million bicycles were
produced in Europe (+10% over the previous year), while the production of parts and components
grew by +20% to 3.6 billion (source: ibidem). This phenomenon has given and will continue to give
impetus to a sector of the manufacturing industry that already today employs approximately 87,000
people directly and about twice that number also considering the allied industries (source: ibidem), as
well as representing a key element in achieving the ambitious plans to reduce carbon dioxide
consumption set out in the European Green Deal of 2019 and the Cop26 in Glasgow at the end of
2021.
AMERICA“The future ain’t what it used to be”-

Yogi Berra – All star baseball player“It's as if there was a "global bicycle boom" big button and someone pressed it without warning”-

John Burke – CEO Trek Bicycles

During the year under review, the United States was the country that suffered most from the shocks
on both the demand and supply sides.
On the supply side, the first imbalances had already been recorded in 2019, with the imposition of
additional duties for some products (including bicycles) of Chinese manufacture: in fact, that year
recorded the lowest imports of cycles since 1982 (approximately 13.0 million units, excluding e-bikes,
equal to a value of approximately US$ 1.2 billion (source: US Department of Commerce)). Up until theprevious year, China was the country of origin of approximately 64% of bicycles imported into theUSA (source: USA Trade Online/Census Bureau, as reported in an article published on the Bicycle Retailer on 6
June 2022).

Import volumes subsequently rose to 17.2 million units in 2020 and 19.2 million in 2021, equal to almost
US$ 2.0 billion in 2021 (source: US Department of Commerce); in the first quarter of 2022, 4.7 million

6bicycles were imported, i.e. +52% compared to the first quarter of 2021 and +143% compared to thefirst quarter of 2020 (source: USA Trade Online/Census Bureau, as previously mentioned). In the meantime,
the set of cycles originating from the People's Republic of China fell to 45% (figure relating to imports
in the first quarter of 2022, with Cambodia as the country receiving the most American demand;source: USA Trade Online/Census Bureau, as previously mentioned). In light of the growing geopoliticaltensions between the USA and China, it is likely that Yogi Berra will prove to be an easy prophet.
These figures clearly show the extent of the challenges faced by a sector that has had to change its
procurement sources quite radically and at the same time significantly increasing the volumes
offered.
On the demand side, however, the plastic representation evoked by the CEO of Trek Bicycles, one of
the most established global bicycle brands, is effective. As already described in the past, the spread of
the Covid-19 virus actually "detonated" a number of trends that were already emerging. If Europe is a
substantially mature market, albeit with significant differences between individual countries, the samecannot be said of the United States, where the adoption of the cycle is less widespread especially in its
meaning of means of transport. Half of today's (American) cyclists have taken up this activity, or
returned to it after a period of interruption, in the last two years (source: National Bicycle Dealers
Association Bicycle Buying 2021), while 30% of Americans have cycled at least once in the last two years(source: Covid Participation Study by People for Bikes, as cited in Bicycle Retailer on 13 June 2022).

The lengthening of production and logistics lead times, combined with the strong growth in demand,meant that American retailers faced the complex situation of issuing purchase orders with lead timesof 10-12 months, with undoubted difficulties in forecasting in such a dynamic market. A similar
situation was also found upstream in the value chain (national and regional distributors and, even more
upstream, manufacturers of cycles and accessories), creating the so-called bullwhip effect, i.e. theexcess of purchases in times of shortage of stocks that then materialises in an excess of inventories
when demand stabilises, which was actually observed starting from the first months of 2022.
The local market, which has shown a great inclination towards the cycle sector as a new lifestyle,appears to be evolving to date, with all forecasts for the short-term period made even more complex
by expectations regarding the impact of inflationary evolution (and the consequent tightening moves
carried out by the Federal Reserve) on the propensity for private consumption of non-essential goods.

7

ASIA
“The transformation of the Taiwanese industry from producing traditional bicycles… to e-bikes is in fullswing”-

Michael Tseng Chairman of the Taiwan Bicycle Association (2019… but still in office)“The recent production disruptions in China could also add another headwind in the near term”-

Bank of America Monthly Bicycle Industry Tracker (April 2022)

There is no doubt that the increase in demand for e-bikes in Europe and North America has benefited
not only local European producers (together with those who have transferred production from East
Asia, a phenomenon already described above), but also non-EU countries traditionally assemblers for
the Western world. In this regard, in 2021 Taiwan recorded the fourth consecutive double-digit annual
increase in exports of pedal-assisted bicycles, with +30% growth in volume (to just under 1.0 million
units) and +33% in value (to € 1.2 billion; source: Taiwan's Ministry of Economic Affairs), with triple-digit
rates in the UK (+155%) and Germany (+104%, the third largest destination country for bicycles madein Taiwan) and double-digit but extremely high rates in the USA (+62%) and France (+48%) (source:
ibidem). Europe, which imported a total of more than 1.1 million electric bicycles (approx. +30%

compared to 2020), relied mainly on suppliers located “on the island” for almost half of its importrequirements (approximately 480 thousand units compared to approximately 450 thousand in 2020;
source: Taiwan Bicycle Association; data revised by Bike Europe 05/05/2022), followed by China, Vietnam

and Turkey. Also in the first four months of 2022, the positive trend in Taiwanese exports of cycles
and components continued, which recorded a +28.4% compared to the same period of the previous
year, reaching a value of US$ 2.0 billion. Electric bicycles alone increased in value by +12.8% to US$
470 million (source: Taiwan Bicycle Association, as stated in the article “Taiwan sees hike in bicycle export
revenues”, 21/7/2022).

The year under review also saw a resurgence of the pandemic in East Asia, following the spread of theso-called “Omicron variant”, with significant local and global impacts, especially as a result of the
Draconian containment measures implemented in the People's Republic of China. As will be recalled,
the metropolis of Shanghai underwent a lockdown of more than four weeks, between the months ofMarch and April, with heavy repercussions on the levels of operations of its port, the busiest in theworld. In those weeks, the number of ships on hold increased by 35% compared to the same period of
the previous year (source: “L'economia cinese in lockdown”; La Repubblica 26/04/2022). From 11 to 20
April, the turnover of the main Chinese ports fell by -5.2% on an annual basis. More worrying are the8GDP figures of the provinces most affected by these restrictions: Henan (4.7%), Jiangsu (the province
where Selle Royal Vehicle (China) Co, Ltd is located; 4.6%), Guangdong (3.3%), Shanghai (3.1%) andTianjin (0.1%) grew less than the national average. In March, industrial production in Shanghai fell by 7.5% year-on-year, the first drop recorded in two years (source: ibidem). As a result, the Chinese
government had to revise its growth estimates for 2022, in a politically complex year, as thenomenklatura will meet on 16 October to grant a new mandate to President Xi Jinping. Therefore, it isclear that, in discontinuity with the recent past, it is political rather than economic issues that currently
drive the Party’s agenda.
With reference to the Selle Royal Group, on 12 January 2022, the Shareholders' Meeting of the parent
company, in addition to the change of company name (it should be recalled that the company wasformerly Selle Royal S.p.A.), resolved to approve a project aimed at the listing of the same on theelectronic equity market Euronext Milan organised and managed by Borsa Italiana S.p.A., and inparticular on the Euronext STAR Milan segment, if the conditions were met. This placement was
subsequently discontinued in late spring at the company's own instigation, despite the positive courseof the process up to that point, due to the severe and persistent deterioration in stock market
conditions, mainly as a result of inflationary tensions and the continuing Russian-Ukrainian conflict.
Further significant events that occurred in the current tax year, mentioned yet in the consolidated
nine-monthly financial report as at 31 March 2022, are reported below.
As regards the corporate structure, on 6 July 2021, Jiangyin Selle Royal Cycling Co., Ltd., a company
under Chinese law, 68.29% owned by the Selle Royal Group, was established through the Hong Kongholding Selle Royal Asia Limited (the remaining interest is held by the same minority shareholder ofSelle Royal Vehicle (China) Co., Ltd). This company was established in order to take over theconcession of land for industrial use located in the municipality of Jiangyin (province of Jiangsu,
People's Republic of China), to be used for the construction of a new production plant. The land was
optioned and the necessary discussions are underway with the relevant local administration in orderto obtain the necessary authorisations and building permits. This new initiative became necessary due
to the expropriation notification received by the subsidiary Selle Royal Vehicle (China) Co., Ltd. during
the first half of the current fiscal year, and relating to the land on which its production plant stands. The
date of execution of the expropriation measure and the amount to be paid as compensation have notyet been defined.
On 6 December 2021, the merger by incorporation of SR84 S.r.l. into Selle Royal Group S.p.A. was
successfully completed, with tax effect from 1 July 2021.
9

On 22 December 2021, Selle Royal Group S.p.A. signed an agreement with M J K Partecipações Ltda.,
equal shareholder in the Brazilian company Royal Ciclo Industria de Componentes Ltda., aimed at thepurchase of an additional share of 1% of the latter's share capital. As a result of this transaction, Selle
Royal Group S.p.A. holds 51% of the subsidiary's share capital. As illustrated in the explanatory notes
to this consolidated annual financial report, the company was already consolidated using the line-byline method as Selle Royal Group S.p.A. exercised de facto control over it.
Please finally note that the liquidation process of Royal Concept Co., Ltd. has officially ended, as
formal notification of its cancellation from the local Companies Registry was received in March 2022.

THE SELLE ROYAL GROUP and the CORONAVIRUS-19 PANDEMIC
As is known, the period in question was characterised by the persistence of the state of emergency
linked to the Covid-19 pandemic at global level.
As regards the Selle Royal Group, the adoption of urgent prevention and control measures by eachcompany in the perimeter (including, by way of example, the adoption of remote work organisation
forms, free periodic tests for employees and the restructuring of personnel flows and work shifts in the
production sites) have ensured that no outbreaks of the virus have occur within the facilities, thus
making it possible to increase the output volumes needed to deal with the increased demand from thevarious markets in which the Group operates.

THE SELLE ROYAL GROUP and the WAR EVENTS in UKRAINE
Despite having commercial relations with counterparties residing in Ukraine, the Russian Federation
and Belarus, the Selle Royal Group is not significantly exposed to the risks deriving from the ongoing
war events. The turnover generated for the Group in these countries, even in aggregate form,
represents an essentially insignificant portion of the consolidated turnover. At the same time, none of
the Group’s direct suppliers are based in those countries, therefore, so there has been no significant
impact on the supply chain since the start of the conflict, nor is there reasonably expected to be any inthe future should the situation remain unchanged.

10ECONOMIC PERFORMANCE
The following table shows the 2021/22 income statement, compared with the figures for the previous
year:
2021/222020/21% of revenues% of revenues% Change

Revenues

223.762.787

100,0%

205.090.143

100,0%

9,1%

Cost of sales

126.936.347

56,7%117.039.940

57,1%

8,5%

GROSS MARGIN

96.826.440

43,3%

88.050.203

42,9%

10,0%

Operating costs

55.376.706

24,7%

51.699.182

25,2%

7,1%

EBITDA

41.449.734

18,5%

36.351.021

17,7%

14,0%

Amortisation / depreciation and write-downs of fixed assets

8.078.526

3,6%

7.128.778

3,5%

13,3%

EBIT

33.371.208

14,9%29.222.243

14,2%

14,2%

Financial income / (charges) and other financial components(1.629.042)-0,7%(3.850.941)-1,9%-57,7%

PRE-TAX RESULT

31.742.167

14,2%25.371.302

12,4%

25,1%

Taxes for the year

7.238.573

3,2%

6.831.377

3,3%

6,0%

24.503.594

11,0%

18.539.926

9,0%

32,2%

3.117.710

1,4%

3.622.371

1,8%-13,9%

21.385.884

9,6%

14.917.555

7,3%

43,4%

NET PROFIT FOR THE YEAR
Minority interests
NET PROFIT FOR THE YEAR PERTAINING TO THE GROUP

The year in question, which ended on 30 June 2022, recorded sales of € 223.8 million, with a strong
growth compared to the turnover of the previous year (+9,1%). In addition, during the period, the Group
recorded an additional improvement in margins (from 42,9% to 43,3%), despite the impact resulting
from the increase of supplying costs of raw materials.
The increase in operating costs, and in particular in some industrial costs linked to production
volumes, was partly driven by the growth in turnover. Overall, however, the Group greatly benefited
from significant operating leverage effect, which brought the EBITDA margin to 18,5% of revenues(compared to 17,7% in the year of comparison).
In absolute terms, this item reached € 41.4 million compared to € 36.4 million million in the year ofcomparison, signing a significant growth of +14.0%.
Despite the increase of depreciation and amortisation respect to the comparative figure, theoperating result grows up of +14.2% compared to the fiscal year closed at 30 June 2021, signing a
growth more than proportional respect to the growth of the EBITDA.
The financial charges, as such, are substantially in line with the previous year reaching a value equal to€ 2.9 million. The overall figure, including the foreign exchange differences, shows a decrease about €2.2 million, mainly thanks to the above mentioned exchange differences, that bring a positive impactfor € 1.3 million.

11

As anticipated, the year in question closed with a net profit in strong growth (+32.2%) compared to theprevious year (€ 24.5 million and € 18.5 million, respectively), with an incidence of 11,0% on theturnover (9,6% considering solely the profit pertaining to the Group; +43,4% the growth compared tothe previous fiscal year 2020/21).

12

STATEMENT OF FINANCIAL POSITION
The financial position of the Group as at 30 June 2022, compared with the situation emerging fromthe consolidated financial statements for the year ended 30 June 2021, is as follows:
30/06/2022

30/06/2021

ChangeTrade receivables
Inventories
Tax receivables
Other current assets
CURRENT ASSETS

32.964.861
43.649.021
4.726.827
1.317.096
82.657.804

28.453.316
26.318.545
2.266.907
1.480.397
58.519.166

4.511.545
17.330.475
2.459.920(163.301)
24.138.639

Trade payables
Tax payables
Other current liabilities
CURRENT LIABILITIES

20.179.920
6.289.289
13.297.952
39.767.162

22.080.469
6.262.892
9.690.052
38.033.412(1.900.548)
26.3983.607.900
1.733.749

NET WORKING CAPITAL

42.890.643

20.485.753

22.404.889

Tangible assets
Intangible assets
Equity investments
Goodwill
Other non-current assets
NON-CURRENT ASSETS

37.324.083
20.955.107
2.482.007
10.673.404
3.133.904
74.568.504

30.529.614
21.142.693
2.060.638
10.320.071
2.050.345
66.103.361

6.794.469(187.586)
421.369
353.333
1.083.558
8.465.143

2.308.198
893.978
3.202.177

2.500.819
760.9933.261.812(192.621)
132.985(59.635)NET INVESTED CAPITAL

114.256.970

83.327.302

30.929.668

Short-term financial debt, net
Medium/long-term financial debt
NET FINANCIAL DEBT

1.520.247
43.091.687
44.611.935

3.770.491
38.353.309
42.123.800(2.250.244)
4.738.379
2.488.134

Share capital and other reserves
Group profit for the year
GROUP SHAREHOLDERS' EQUITY

35.624.425
21.385.884
57.010.309

17.621.302
14.917.555
32.538.857

18.003.123
6.468.329
24.471.452

Share capital and other reserves
Profit for the year pertaining to minority interests
MINORITY INTERESTS

9.517.017
3.117.710
12.634.727

5.042.274
3.622.371
8.664.645

4.474.743(504.661)
3.970.082

Employee severance indemnity and other provisions
Deferred taxes
NON-CURRENT LIABILITIESThe increase in net working capital (€ +22.4 million) results mainly driven by higher inventories andtrade receivables, while the trands of the other items classified under current assets and liabilities
cancel each other out. The growth of the trade receivables is mainly due to the increase of theturnover. The growth of the inventory value is, instead, linked to more phenomenon: in one side, the13complex situation of the global logistic continues to impact on the final balance and, in the other side, it
has influenced the higher value per unit consequents to the increase of the supplying costs.
With specific reference to Asian products, the strong extension of the lead times between the booking
of maritime leases and the delivering of the goods to the final destination have comported a significant
increase in inventory level as at 30 June, regarding both finished product and goods in transit.
The continue increase of raw materials costs and some occasional critical issues regarding on
sourcing of them, have brought at the valuation of an increase, where possibile, of the inventories, inorder to both reducing the possibile production inefficency and mitigate the infactionary impact; ascommented above, the result of these strategic choices, jointly to the review of pricing lists, haveallowed to increase the gross profitability of the Group.
The operating investments ("capital expenditure") made by the various Group companies, for a total
amount of € 13.8 million (of which € 5.2 million pertaining to the increase in the item “rights of use”
recognised in accordance with the IFRS 16 accounting standard), were mainly aimed at productinnovation, one of the key elements on which the Group bases its future growth, the renewal andimprovement of production sites and the protection of intellectual assets consisting in particular of
the over 70 registered product and/or process patents and trademarks under which the Groupmarkets its products. Net invested capital shows an increase of € 30.9 million, reaching € 114.3 milion,
mainly driven by net working capital dynamic.
Net financial debt increases for € 2.5 million and it is equal to € 44.6 million; this increase is entirely
concentrated on medium / long-term portion, instead the increase of current financial indebtedness
has been resulted more than compensed by the increase of the cash and cash equivalents, as shownin the table below:
30/06/2022

30/06/2021

ChangeA
B
CD

Cash on hand
Cash and cash equivalents
Other current financial assets
Liquidity (A + B + C)

26.283.940
26.283.940

19.846.067
19.846.067

6.437.873
6.437.873

E
F
G

Current financial debt *Current portion of non-current financial debt **Current financial debt (E + F)

9.978.258
17.825.929
27.804.187

10.963.212
12.653.347
23.616.559(984.954)
5.172.582
4.187.629

H

Net current financial debt (G-D)

1.520.247

3.770.491(2.250.244)

I.
J
K
L

Non-current financial debt ***Debt instruments
Trade payables and other non-current payables
Non-current financial debt (I + J + K)

39.147.032
3.944.655
43.091.687

32.477.712
5.875.597
38.353.309

6.669.320(1.930.941)
4.738.379

M
Net financial debt (H + L)
44.611.935
42.123.800* Excluding current portion of non-current financial debt;** Includes the current portion of bank loans and bonds as well as lease liabilities pursuant to IFRS 16*** Includes the non-current portion of mortgages and lease liabilities pursuant to IFRS 16

2.488.134

14

The increasing of net financial indebtedness, anyway, results limited respect to the increase recordedat net working capital level, thanks to the operating cash flow generated during the period, at the net ofthe variation of the net working capital.

DERIVATIVE FINANCIAL INSTRUMENTS
The parent company Selle Royal Group S.p.A. has two derivative financial instruments in place, withthe aim of hedging the risk of fluctuations in interest rates on as many medium/long-term loans.
It should be noted that, during the fiscal year, in particular in May 2022, has arrived to natural maturity
the loan that was on the unique derivative financial contract that until to 30 June 2021 was recorded
under “current financial liabilities at fair value”.
At the end of the financial year 2022, the total value of the two new derivative contracts signed during
the period, maturing in September 2027, is recorded under “non-current financial liabilities at fairvalue”.
As these instruments were effective, the initial recognition and subsequent changes in value wererecognised in a specific equity reserve (“cash flow hedge reserve”), net of the related tax effect. For
further information, please refer to the Explanatory Notes to this consolidated annual financial report.

INVESTMENTS
As already mentioned, during the year 2022, the company made operating investments ("capital
expenditure") of approximately € 13.8 million, as shown in detail below:
30/06/2022
Land and buildings
Right of use of leased assets
Plant and machinery
Industrial and commercial equipment
Other assets
Fixed assets in progress and payments on accountSub-total - Investments in tangible assets

361.6765.243.385
2.946.039
2.170.146
584.654
1.666.475
12.972.375

Industrial patent rights and intellectual property rights
Concessions, licences, trademarks and similar rights
Fixed assets in progress and payments on accountSub-total - Investments in intangible assets

248.437451.797108.071808.305

TOTAL OPERATING INVESTMENTS

13.780.680

As reported in the table above, € 5.2 million are related to goods under rent, leasing or similar contract,
for which the application of IFRS 16 accounting standard is requested.
15

DATA on TREASURY SHARES and on any EQUITY INVESTMENTS in the PARENT COMPANY
Neither the parent company Selle Royal Group S.p.A. nor its associates and subsidiaries held shares in
the parent company at the reporting date.

RISK ANALYSIS
The main financial and operational risks to which the Group is exposed are shown below:
Financial risks
Credit risk
The Group is exposed to credit risk deriving mainly from commercial relations with its customers and,in particular, due to any delays or non-fulfilment of their payment obligations according to the agreed
terms and methods. On the other hand, some Group companies have taken out insurance policies
with a leading international institution to mitigate this risk. At the balance sheet date, approximately
68% of the consolidated receivables (gross of the bad debt provision) were covered by insurance.
Risks associated with changes in interest rates
As at 30 June 2022, approximately 84% of the Group’s consolidated gross financial debt was floating
rate, equal to € 51.6 million. In relation to a portion of this debt (approximately 32% of the total), theparent company Selle Royal Group S.p.A. made use of derivative financial instruments (know as IRS,
interest rate swap) to hedge the risk of fluctuations in interest rates on two medium/long-term loans.
The aggregate mark-to-market value of these derivatives as at 30 June 2022 is positive in the amountof € 964,394. The remaining part of the consolidated gross financial debt at floating rate, equal toapproximately 52% of the total, is not hedged by interest rate risk hedging instruments. Significant
changes in interest rates could result in an increase in financial charges relating to floating rate debt.
Liquidity risk
It should be noted that there are sufficient credit lines to meet the reasonably foreseeable liquidity
requirements, also in view of the typical seasonality of the sector in which the Group operates.
Risks associated with exchange rate trends
Part of the Group’s activities are carried out, also through subsidiaries, outside the Eurozone and thefees for some orders and transactions are agreed in currencies other than the Euro, mainly in US
Dollars, Chinese Renminbi, Brazilian Real and Taiwanese Dollars. In this regard, it should be noted that16

any fluctuations in currencies other than the Euro could have negative effects on the Group’s
operating margins. In addition, fluctuations in the exchange rates used to convert the financial
statements of certain foreign companies of the Group, originally expressed in currencies other thanthe Euro, could affect the economic, equity and financial situation of the Group, which prepares theconsolidated financial statements in Euro.
Operational risks
Risks associated with the operations of production plants
The Group is exposed to the risk of having to interrupt or suspend its production activities due toevents beyond its control, including the revocation of permits and authorisations, breakdowns,
malfunctions, damage or natural disasters. This could have negative effects on the economic, equity
and financial situation of the Group.
Risks associated with fluctuations in the price of raw materials and procurement difficulties, as well as
the congestion of global logistics flows
As mentioned earlier, the purchase prices of some key raw materials in the Group's production
processes increased significantly during the year. In the same way, the global logistics crisis has partly
affected the normal operations of the Group companies, both as regards the procurement ofcomponents and products sold of Asian origin, and as regards shipments to customers. Lastly, theincrease in the cost of electricity and gas, particularly evident at a European level during 2022, may
reverberate its effects not only directly on the Group (which is not, in any case, among the so-called"energy-intensive" or "gas-intensive" businesses), but also and above all on certain supply chains(such as paper and metals), with repercussions both in terms of higher purchase costs and,potentially, temporary shortages of the components themselves.
Risks related to relations with manufacturers and suppliers of products and services and dependence
on a limited number of suppliers for certain product categories
The Group is exposed to the risk that the relationship with the main producers and suppliers of goods
and services that it uses may be interrupted, dissolved or terminated, and/or that the latter do notmeet the contractually agreed quality standards and/or applicable regulations, putting at risk theGroup's ability to meet the delivery of products to its customers according to the pre-establishedobjectives. On the other hand, the strategic decision to develop solid multi-year partnerships with themost critical suppliers also meets the need to maintain adequate supervision in terms of quality

17control, both during the approval of new products and during the mass production of previously
approved products.
Risks related to the impossibility of realising the book value of the stocks and to the increase in theobsolescence of said stocks
The Group is exposed to the risk of inventory obsolescence, against which adjustment provisions
have been made, deemed reasonably adequate by the management based on the analyses carriedout on stock rotation.
Risks associated with dependence on Group brands
These risks may materialise in the form of both a loss of value of the Group's brands, as perceived by
the reference consumer communities, and in the difficulty of protecting and defending the intellectual
property that belongs to the Group in the event of violations by third parties, including in foreign
jurisdictions.
Risks associated with labour shortage and any increase in related costs
The Group is exposed to risks deriving from any increase in labour turnover rates and from difficulties
in sourcing skilled and unskilled labour to an extent that satisfies the trend in demand for Group
products.
Risks related to the consequences of the effects of the Covid-19 pandemic
During the years 2020 and 2021, the Group had to comply with the restrictive measures adopted by
the national governments of the individual countries in which the Group companies operate to deal
with the Covid-19 health emergency (so called “Coronavirus”), which caused a major international
economic crisis, characterised by a significant contraction in demand on the main markets and inglobal gross domestic product. The cycle sector was marginally impacted by the pandemic, so muchso that the Group in the year ended 30 June 2020 recorded substantially stable revenues comparedto the previous year (€ 130.1 million in the year ended 30 June 2020 compared to € 130.6 million in theyear ended 30 June 2019, equal to -0.3%), and a sustained growth during the year ended 30 June
2021 (revenues of € 205.1 million, equal to +58% compared to the previous year).
Nevertheless, if the Covid-19 pandemic, the evolution of which is still uncertain, were to continue orworsen, leading to the adoption of new restrictive measures by the competent national authorities (as,moreover, is still the case in some areas of China), the Group could be exposed to the risk of aslowdown or decrease in sales of its products. Any occurrence of these circumstances could havenegative effects on the Group’s business and economic, equity and financial situation.
18

SIGNIFICANT EVENTS AFTER THE END OF THE YEAR
Without prejudice to the deterioration of the macroeconomic situation (inflation, increased energy
costs, increasing interest rates, etc.) and geopolitics, there are no other significant events that directly
involved the Group.

BUSINESS OUTLOOKThe current environment is significantly affected by numerous factors of uncertainty and disruption of
economic activities: the continuation of the Russian-Ukrainian conflict with no apparent possibility ofresolution in the short term; inflationary tensions substantially present on a global scale; the rise ininterest rates; the dramatic increase in the cost of electricity and gas and the consequences it iscausing and will determine in the coming months (including possible rationing of the same); theongoing geopolitical tensions between China and the United States on the “Taiwan issue”; the possible
resumption of Covid-19 infections. Each of these phenomena has the potential to impact, even to asignificant extent, on the growth prospects of an economic entity. All the more so, the co-presence of
all these events in unprecedented uncertainty, with foreseeable recessionary impacts on thepropensity to consume in many areas of the world, and in particular at the expense of non-essential
goods. On the other hand, the sector in which the Group operates enjoys the above illustrated
medium-long term trends, which have the potential to mitigate the effects outlined above.

TRANSACTIONS WITH PARENT COMPANIES, AFFILIATES AND RELATED PARTIESAs regards transactions with related parties, please refer to the Explanatory Notes to thisconsolidated annual financial report.

ENVIRONMENT, PERSONNEL and SECTOR REGULATIONS
The production, manufacture and sale of Group products is not currently subject to specific sector
regulations. However, in consideration of the use of certain substances, environmental regulations are
particularly important, especially for their treatment, emissions and waste disposal.
The Group carefully monitors the risks deriving from environmental and personnel regulations andany situations that may arise within the scope of operations are handled in compliance with theregulations.
With reference to personnel, the Selle Royal Group protects the health and safety of its workers incompliance with current regulations on health and safety in the workplace.
19

The average number of employees in the current year was 1,127, substiantially flat compared to the
1,153 employees in the previous year. The net decrease (-26 units) is fully attributable to factory
personnel of Brazilian subsidiary Royal Ciclo Industria de Componentes Ltda. . In addition to theemployees hired by the Group companies, a total of an additional 321 employees were hired in thecurrent period through temporary work agencies.
The following tables show, by category, the average workforce and the total workforce for the year2022.
Average workforce
Executives
Employees
Workers
OthersTotal
Workforce(in units)
Executives
Employees
Workers
Others
Total

Financial Year
2021/22

Financial Year
2020/21

Change

24,8
242,5
857,8
1,5
1.126,6

25,5
227,2
899,5
1,0
1.153,2(0,7)
15,4(41,7)
0,5(26,5)

30/06/2022 30/06/2021

25
254
841
4
1.124

25
235
923
1
1.184

Change

0
19
(82)
3,00
(60)

CONCLUSIONS and PROPOSALS
We remain at your full disposal to provide any clarifications and information needed during theShareholders' Meeting.
* * *Pozzoleone (VI), 19 October 2022
The Chairperson of the Board of Directors(Barbara Bigolin)

20

FINANCIAL STATEMENTSCONSOLIDATED INCOME STATEMENT(*)

Revenues

2021/22NOTE
16
223.762.787

Cost of sales

17

GROSS MARGIN

2020/21Var.%

205.090.143

9,1%

126.936.347

117.039.940

8,5%

96.826.440

88.050.203

10,0%Industrial costs

18

7.400.912

6.582.481

12,4%

Sales and promotion costs

19

14.612.990

13.771.565

6,1%

Costs of the management structure20

18.404.093

17.806.989

3,4%

General and administrative costs

21

16.319.256

14.534.680

12,3%

Other operating income and (expenses)

22

1.360.545

996.534

36,5%

EBITDA

41.449.734

36.351.022

14,0%

Amortisation / depreciation and write-downs of fixed assets

8.078.526

7.128.778

13,3%

EBIT

33.371.208

29.222.244

14,2%Profits / (losses) from companies measured at equity--

Gains / (losses) on acquisition/disposal of financial assets-

19.173-100,0%(1.629.042)(3.870.114)-57,9%

31.742.167

25.371.303

25,1%7.238.573

6.831.377

6,0%

24.503.594

18.539.926

32,2%

3.117.710

3.622.371-13,9%

21.385.884

14.917.555

43,4%

Financial income / (charges)

23

PRE-TAX RESULTTaxes for the year
NET PROFIT FOR THE YEAR
Minority interests
NET PROFIT FOR THE YEAR PERTAINING TO THE GROUP

24-

The effects of transactions with related parties are described in the “Transactions with relatedparties” section.
(*)

21

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2021/222020/2124.503.594

18.539.926

Change in fair value of hedging derivatives
net of the tax effect734.392

3.835

Actuarial gains / (losses)

259.986(33.276)

Acquisition of shares in companies already subject to control(689.454)-

Translation differences of foreign financial statements

2.780.644

418.970

Total comprehensive profit / (loss) after tax

27.589.162

18.929.456

Net profit

22

CONSOLIDATED BALANCE SHEET (*)
30/06/2022

30/06/2021

Var.

25, 39262728
29

26.283.940
32.964.861
43.649.021
4.726.827
1.317.096
108.941.745

19.846.067
28.453.316
26.318.546
2.266.907
1.480.397
78.365.233

6.437.873
4.511.545
17.330.475
2.459.920(163.301)
30.576.511

30
31
32
33
34
35, 3936

20.955.107
37.324.083
2.482.007
10.673.404
843.5101.604.547
685.847
74.568.504

21.142.693
30.529.614
2.060.638
10.320.071
871.708509.813668.824
66.103.361(187.586)
6.794.469
421.369
353.333(28.199)
1.094.734
17.0238.465.143

183.510.249

144.468.594

39.041.655

ASSETSNOTESCash and cash equivalents
Trade receivables
Inventories
Tax receivables
Other current assets
TOTAL CURRENT ASSETS
Intangible assets
Tangible assets
Equity investments
Goodwill
Deferred tax assets
Financial assets at fair value
Other non-current assets
TOTAL NON-CURRENT ASSETSTOTAL ASSETS

The effects of transactions with related parties are described in the “Transactions with relatedparties” section.
(*)

23

30/06/2022

30/06/2021

Var.

20.179.920
6.289.289
1.930.941
23.421.806
2.451.440
13.297.952
67.571.349

22.080.469
6.262.892
1.903.363
20.630.896
1.452
1.080.847
9.690.052
61.649.971(1.900.548)
26.39827.5782.790.910(1.452)1.370.593
3.607.900
5.921.378

1.531.744
3.944.655
31.901.782
776.455
893.9787.245.250
46.293.864

1.874.444
5.875.597
26.731.370
626.375
760.9935.746.342
41.615.121(342.700)(1.930.941)
5.170.412
150.079132.985
1.498.908
4.678.743

113.865.213

103.265.092

10.600.12149

6.000.000
1.244.082
3.588.034
10.716.446
14.075.864
21.385.884
57.010.309

6.000.000
1.244.082
807.389
10.716.446(1.146.615)
14.917.555
32.538.857

2.780.644
15.222.479
6.468.329
24.471.452

49

9.517.017
3.117.710
12.634.727

5.042.274
3.622.371
8.664.645

4.474.743(504.661)
3.970.082

183.510.249

144.468.594

39.041.655

LIABILITIESNOTESTrade payables
Tax payables
Bonds - Portion maturing within 12 months
Short-term loans
Current financial liabilities at fair value
Current liabilities for leased assets
Other current liabilities
TOTAL CURRENT LIABILITIES

37
38
39, 4439, 40

Provisions for employees
Bonds - Portion maturing beyond 12 months
Medium / long-term loans
Provisions for risks and charges
Payables for deferred taxes
Non-current liabilities for leased assets
TOTAL NON-CURRENT LIABILITIES

43
39, 4439, 45
46
47
48

41
42

TOTAL LIABILITIESSHAREHOLDERS’ EQUITY
Share capital
Legal reserve
Translation reserve
Reserve for first-time adoption of IAS
Other reserves and undistributed profitsGroup profit / (loss) for the year
GROUP SHAREHOLDERS’ EQUITY
Share capital and undistributed profits pertaining to minority interests
Profit / (loss) for the year of minority interests
MINORITY INTERESTSTOTAL LIABILITIES and SHAREHOLDERS’ EQUITY

24

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Transfer ofEffect of discounting
Balance as at
previous year Fair value IRS
of employee
30 June 2020
resultseverance indemnity

Share capital
Legal reserve
Translation reserve
Reserve for first-time adoption of IAS
Other reserves and undistributed profitsGroup profit / (loss) for the year
TOTAL GROUP SHAREHOLDERS’ EQUITY

6.000.000
1.244.081
388.420
10.716.446
11.800.466
2.582.359
32.731.771

2.582.359(2.582.359)
-

3.835
3.835

(33.276)(33.276)

Share capital and undistributed profits pertaining to minority interests
Profit / (loss) for the year of minority interests
TOTAL MINORITY INTERESTS

3.837.143
1.040.347
4.877.490

1.040.347(1.040.347)---

TOTAL SHAREHOLDERS' EQUITY

37.609.261

-

3.835

Dividend
distribution(15.500.000)(15.500.000)-(33.276) (15.500.000)

Transfer ofEffect of discounting
Balance as at
previous year Fair value IRS
of employee
30 June 2021
resultseverance indemnity

Increase inGroupinterests

Other
Profit / (loss) Balance as atconsolidation
for the year 30 June 2021
adjustments

418.969418.969

14.917.555
14.917.555

6.000.000
1.244.082
807.389
10.716.446(1.146.615)
14.917.555
32.538.857

164.784
164.784

3.622.371
3.622.371

5.042.274
3.622.371
8.664.645

583.753

18.539.926

41.203.502

Other
Profit / (loss) Balance as atconsolidation
for the year 30 June 2022
adjustments

Share capital
Legal reserve
Translation reserve
Reserve for first-time adoption of IAS
Other reserves and undistributed profitsGroup profit / (loss) for the year
TOTAL GROUP SHAREHOLDERS’ EQUITY

6.000.000
1.244.082
807.389
10.716.446(1.146.615)
14.917.555
32.538.857

14.917.555(14.917.555)-

734.392734.392259.986259.986-2.780.644(689.454)
2.091.190

21.385.884
21.385.884

6.000.000
1.244.082
3.588.034
10.716.446
14.075.864
21.385.884
57.010.309

Share capital and undistributed profits pertaining to minority interests
Profit / (loss) for the year of minority interests
TOTAL MINORITY INTERESTS

5.042.274
3.622.371
8.664.645

3.622.371(3.622.371)---(76.826)(76.826)

929.198
929.198

3.117.710
3.117.710

9.517.017
3.117.710
12.634.727

TOTAL SHAREHOLDERS' EQUITY

41.203.502-

734.392259.986(76.826)

3.020.388

24.503.594

69.645.036

25

CONSOLIDATED CASH FLOW STATEMENT PREPARED USING THE INDIRECT METHOD
2021/222020/2131.742.167

25.371.303

5.221.074
1.154.510
1.702.942
1.545.939(219.709)
36.251203.2232.773.782
734.392259.986

4.762.167
1.098.663
1.267.949
3.834.970(186.043)
9.601
95.418(1.124.234)
3.835(28.366)

Cash and cash equivalents generated by transactions before working capital

45.154.555

35.105.263+/+/+/+/+/+/-(20.192.090)(4.219.174)(3.752.743) (13.244.196)
116.862
10.561.861(1.376.779)(334.760)
2.250.335
2.379.571

STATEMENT OF CASH FLOWS FROM OPERATIONS
Pre-tax result
Adjustments for+/non-monetary elements
Depreciation of tangible assets
Amortisation of intangible assets
Amortisation of Right Of Use
Net financial charges
Minor independent works(Gains) / losses on the sale of property, plant and equipment and financial assets
Change in the bad debt provision
Changes in deferred taxes, provisions and employee benefits
Change in cash flow hedge reserve
Change in actuarial reserveschange in working capital
Change in inventories
Change in trade receivables
Change in trade payables
Change in other current assets
Change in other current liabilities

Cash and cash equivalents generated by transactions

22.200.140 30.248.565+-

970.250(2.535.723)(7.727.716)

363.097(3.210.239)(4.208.792)

Net cash and cash equivalents from operating activities (A)12.906.951

23.192.631

STATEMENT OF CASH FLOWS FROM INVESTMENT ACTIVITIESPayments for acquisitions of property, plant, machinery and other tangible assets+
Incassi (corrispettivi ottenuti) per vendita di immobili, impianti, macchinari ed altre immobilizzazioni materiali
Payments for acquisitions of intangible assets and capitalised costs
Payments for the granting of advances or loans to third parties
Payments for derivatives
Payments for acquisitions of investments in subsidiaries, associates or joint venture entities(7.509.280)
4.882(808.305)(2.301.320)(83.102)(783.046)(4.523.549)
35.295(625.323)(1.324.121)(4.120)-Net cash and cash equivalents from / used in investing activities (B)(11.480.173)(6.441.817)

STATEMENT OF CASH FLOWS FROM FINANCING ACTIVITIES+Collections from obtaining loans
Payments for rents that fall under the application of IFRS 16(Redemption) bond loan (known as mini-bond)
Loan repayments
Dividends paid

41.757.999 28.437.427(2.212.640)(1.662.301)(2.000.000) (2.000.000)(33.796.677) (27.400.685)(15.500.000)

Interest collectedInterest paid
Taxes paid

Net cash from / used in financing activities (C)3.748.682 (18.125.559)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (D) = (A + B + C)

5.175.461(1.374.745)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR (E)CONVERSION DIFFERENCE ON CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR (F)19.846.067
1.262.412

20.888.905
331.907

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR (G) = (D + E + F)

26.283.940

19.846.067

26

EXPLANATORY NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL REPORT AS AT 30 JUNE 2022
1.

INTRODUCTION

The consolidated annual financial report as at 30 June 2022 of the Selle Royal Group S.p.A. wasprepared in compliance with the International Financial Reporting Standards (also “IFRS”) issued by
the IASB (International Accounting Standards Board) and approved by the European Commission inaccordance with the procedure pursuant to Article 6 of EC Regulation no. 1606/2002 of the European
Parliament and Council of 19 July 2002 on the date of preparation of this report as well as theprovisions of Italian Legislative Decree 38/2005.
IFRS also means all the revised international accounting standards (“IAS”) and all the interpretationsof the International Financial Reporting Interpretations Committee (“IFRIC”), previously called
Standing Interpretations Committee (“SIC”), which, at the date of approval of the consolidated annual
financial report for the financial year ended 30 June 2022, were subject to endorsement by theEuropean Union in accordance with the procedure envisaged by Regulation (EC) no. 1606/2002 by
the European Parliament and Council of 19 July 2002.
The consolidated annual financial report as at 30 June 2022 consists of the Income Statement, theStatement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Shareholders'Equity, the Cash Flow Statement and the Explanatory Notes that follow.
These consolidated financial statements have been prepared on the basis of the best knowledge of
IFRS and taking into account the best academic literature on the subject; any future guidelines andinterpretative updates will be reflected in subsequent years, according to the methods envisaged fromtime to time by the reference accounting standards.
All amounts included in these financial statements are presented in Euro, which represents thecurrency of the main economic environment in which the Group operates, unless indicated otherwise.
The Consolidated Financial Statements were prepared on the basis of the going concern assumption,
as the directors verified the absence of financial, operational or other indicators that could indicate
critical issues regarding the Group’s ability to meet its obligations in the foreseeable future, and, inparticular, in the next 12 months.
The consolidated financial statements were prepared using as a basis the financial statements of theGroup companies approved by their respective Boards of Directors.
The reference date of the consolidated financial statements coincides with the closing date of thefinancial year of the parent company Selle Royal Group S.p.A. and of the other companies included in
the scope of consolidation.
27

Lastly, it should be noted that the financial statements of the Italian and foreign companies included in
the scope of consolidation, drawn up in accordance with local standards, have been amended inaccordance with IAS / IFRS for the sole purpose of the consolidated financial statements.

2. MANDATORY ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED BY
THE GROUP
The accounting standards adopted by the Group for the preparation of the Consolidated Report as at
30 June 2022 are the same as those adopted for the preparation of the consolidated financial
statements as at 30 June 2021, with the exception of the following accounting standards,
amendments and interpretations:
Amendment to IFRS 16 – Leases: CoViD-19-Related Rent Concessions beyond 30 June 2021
Issued on 31 March 2021, it should have been effective from 1 April 2021, but was approved on 30
August 2021. With this amendment, the IASB further amended IFRS 16 to extend the time limit of oneof the criteria that the lessor must comply with in order to apply the practical expedient to theconcessions received (exemption to lessees from the obligation to determine whether a concession interms of leases is a change to the lease), i.e. that any reduction in lease payments could only affectpayments originally due by 30 June 2021.

3. ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS NOT YET APPLICABLE AND
NOT ADOPTED IN ADVANCE BY THE GROUP
Below are the international accounting standards, interpretations, amendments to existing accounting
standards and interpretations, or specific provisions contained in the standards and interpretations
approved by the IASB that have not yet been endorsed for adoption in Europe at the date of thisfinancial report or were not adopted early.
Amendments to IFRS 17 – Insurance Contracts: Initial Application of IFRS 17 and IFRS 9 - Comparative
Information
On 9 December 2021, the IASB published a further amendment to IFRS 17. The amendment to thetransitional provisions of IFRS 17 allows companies to overcome the one-off classification differencesof the comparative information of the previous year at the time of the first application of IFRS 17 and
IFRS 9 Financial Instruments.
The optional classification overlay introduced by this amendment allows companies to make thecomparative information presented at the time of first-time application of IFRS 17 and IFRS 9 more28

useful. The scope of application includes financial assets linked to insurance liabilities, which until now
have not been restated in accordance with IFRS 9. The amendment will be effective from 1 January2023 or later. No material impacts are expected for the Group with reference to this amendment.
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from aSingle Transaction
Issued in May 2021, IAS 12 requires the recognition of deferred taxes whenever there are temporary
differences, i.e. taxes due or recoverable in the future. In particular, it was established that companies,
in specific circumstances, may be exempted from recognising deferred tax when they recognise
assets or liabilities for the first time. This provision previously raised some uncertainty as to whether
the exemption would apply to transactions such as leasing and dismantling obligations, transactions
for which the companies recognise both an asset and a liability. With the amendment to IAS 12, the
IFRS clarifies that the exemption does not apply and that companies are required to recognisedeferred tax on these transactions. The objective of the amendments is to reduce the diversity in thereporting of deferred taxes on lease agreements and dismantling obligations. The amendments are
effective for years starting on 1 January 2023 and early application is envisaged. No material impacts
are expected for the Group with reference to this amendment.
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosureof Accounting Policies
Presented in February 2021, these amendments are intended to help the drafter of the financial
statements in deciding which accounting policies to present in their financial statements. They will beeffective for financial years beginning on or after 1 January 2023. In particular, the entity is required tomake the disclosure of the material accounting policies, rather than the significant accounting policies
and several paragraphs are introduced that clarify the process of defining the material policies, which
could be such by their very nature, even if the related amounts may be intangible. An accounting
policy is material if the users of financial statements need it to understand other information includedin the financial statements.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
In January 2020, the IASB published amendments to paragraphs 69 to 76 of IAS 1 to specify therequirements for classifying liabilities as current or non-current. The amendments clarify:•

What is meant by the right to defer the maturity date•That the right of deferment must exist at the end of the year29•The classification is not affected by the probability with which the entity will exercise its right ofdeferment•

Only if an embedded derivative in a convertible liability is itself an equity instrument does theliability's maturity have no impact on its classification.

The amendments will be effective for years beginning on or after 1 January 2023, and must be applied
retrospectively. No material impacts are expected for the Group with reference to this amendment.
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of
Accounting Estimates
From February 2021, changes were introduced to the definition of accounting estimates, replacing theconcept of changing them. According to the new definition, accounting estimates are monetaryamounts subject to measurement uncertainty. The Board clarifies that a change in the accounting
estimate, which results from new information or new developments, is not the correction of an error.
Moreover, the effects of a change in the inputs or in the measurement technique used to develop an
accounting estimate are changes in estimates unless they result from the correction of errors ofprevious years. A change in an accounting estimate may affect only the profit (or loss) for the current
period or, alternatively, for both the current period and future periods. These amendments will beapplicable, subject to approval, from 1 January 2023. No material impacts are expected for the Group
with reference to this amendment.
IFRS 17 Insurance Contracts
In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a new comprehensive standard
relating to insurance contracts that covers recognition and measurement, presentation anddisclosure. When it comes into force, IFRS 17 will replace IFRS 4 Insurance Contracts, issued in 2005.
IFRS 17 applies to all types of insurance contracts (e.g. life, non-life, direct insurance, reinsurance)
regardless of the type of entity that issues them, as well as to certain guarantees and financial
instruments with discretionary participation features. For this purpose, limited exceptions will beapplied. The general objective of IFRS 17 is to present an accounting model for insurance contracts
that is more useful and consistent for insurers. In contrast to the provisions of IFRS 4, which are largely
based on the maintenance of previous accounting policies, IFRS 17 provides a complete model for
insurance contracts that covers all relevant accounting aspects. The core of IFRS 17 is the generalmodel, supplemented by:•

A specific adaptation for contracts with direct participation features (the variable fee
approach)30

•A simplified approach (the premium allocation approach) mainly for short-term contracts.

IFRS 17 will be in force for years beginning on or after 1 January 2023, and will require the presentationof comparative balances. Early application is permitted, in which case the entity must also haveadopted IFRS 9 and IFRS 15 at the date of first-time application of IFRS 17 or earlier. No material
impacts are expected for the Group with reference to this amendment.
Reference to the Conceptual Framework – Amendments to IFRS 3
In May 2020, the IASB published the amendments to IFRS 3 Business Combinations – Reference to
the Conceptual Framework. The amendments were approved on 28 June 2021. The Board added an
exception to the measurement standards of IFRS 3 to avoid the risk of potential losses or profits “ofthe day after” deriving from liabilities and contingent liabilities that would fall within the scope of IAS 37
or IFRIC 21 Levies, if contracted separately. At the same time, the Board decided to clarify that theexisting guidance in IFRS 3 for contingent assets will not be impacted by the update of the references
to the Framework for the Preparation and Presentation of Financial Statements. The amendments will
be effective for the years starting on 1 January 2022 and apply prospectively. No material impacts are
expected for the Group with reference to this amendment.
Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16
In May 2020, the IASB published Property, Plant and Equipment – Proceeds before Intended Use,
which prohibits the entity from deducting from the cost of property, plant and equipment any revenue
deriving from the sale of items produced while the company is preparing the asset for its use in testing.
These revenues must be recognised in the income statement under income from sales as well as therelated costs. The amendments were approved on 28 June 2021. The amendment will be effective foryears beginning on or after 1 January 2022 and must be applied retrospectively to items of property,
plant and equipment made available for use at or after the start date of the period prior to the period inwhich the entity applies this amendment for the first time. No material impacts are expected for theGroup with reference to these amendments.
Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37
In May 2020, the IASB published amendments to IAS 37 to specify which costs must be considered byan entity when assessing whether a contract is onerous or loss-making. The amendments wereapproved on 28 June 2021. The amendment provides for the application of a “directly related cost
approach”. Costs that refer directly to a contract for the supply of goods or services include bothincremental costs and costs directly attributed to the contractual activities. General and31administrative expenses are not directly related to a contract and are excluded unless they are
explicitly recharged to the counterparty on the basis of the contract. The amendments will beeffective for years beginning on or after 1 January 2022. The Group will assess the impacts of thesechanges in the event of contracts for which it has not yet satisfied all its obligations at the beginning of
the year of first application.

4. IFRS and INTERPRETATIONS APPROVED by the IASB and NOT ENDORSED in EUROPE
Below are the international accounting standards, interpretations, amendments to existing accounting
standards and interpretations, or specific provisions contained in the standards and interpretations
approved by the IASB that have not yet been endorsed for adoption in Europe at the date of thesefinancial statements.
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or
Non-current and Classification of Liabilities as Current or Non-current - Deferral of Effective Date
With regard to the two amendments issued respectively in January 2020 and July 2020, the IASB, on
19 November 2021, published a new draft disclosure in this regard.

5. 2018-2020 ANNUAL IMPROVEMENTSIFRS 1 First-time Adoption of International Financial Reporting Standards – Subsidiary as a first-time
adopter
As part of the 2018-2020 annual improvements process of the IFRS standards, the IASB published anamendment to IFRS 1 First-time Adoption of International Financial Reporting Standards. This
amendment allows a subsidiary that chooses to apply paragraph D16(a) of IFRS 1 to account for the
cumulative translation differences on the basis of the amounts recorded by the parent company,
considering the date of transition to IFRS by the parent company. This amendment also applies toassociates or joint ventures that choose to apply paragraph D16(a) of IFRS 1. The amendment will beeffective for years beginning on or after 1 January 2022, and early application is permitted. No material
impacts are expected for the Group with reference to this amendment.
IFRS 9 Financial Instruments – Fees in the '10 per cent' test for derecognition of financial liabilities
As part of the 2018-2020 annual improvements process of the IFRS standards, the IASB published anamendment to IFRS 9. This amendment clarifies the fees that an entity includes in determining
whether the conditions of a new or amended financial liability are substantially different with respect
32

to the terms of the original financial liability. These fees include only those paid or received between
the debtor and the lender, including those paid or received by the debtor or the lender on behalf ofothers. An entity applies this amendment to financial liabilities that are amended or exchanged after
the date of the financial year in which the entity applies the amendment for the first time. The
amendment will be effective for years beginning on or after 1 January 2022, and early application ispermitted. The Group will apply this amendment to financial liabilities that are amended or exchanged
subsequently or at the date of the financial year in which the entity applies this amendment for the firsttime. No material impacts are expected for the Group with reference to this amendment.

6. FINANCIAL STATEMENT FORMATS AND CLASSIFICATION CRITERIAWhen preparing the formats of the documents that make up the consolidated annual financial report,
the Group adopted the following criteria:
Income statement
The classification of costs was carried out on the basis of the criterion of their destination, which isconsidered more representative, as well as adhering to the criteria of the reporting used by the
management of the Group companies in determining the strategic direction and the execution of therelated business plans.
Balance Sheet
The assets and liabilities shown in the consolidated annual financial report have been separately
classified as current and non-current in compliance with the provisions of IAS 1.
In particular, an asset must be classified as current when it meets one of the following criteria:(a) it will be realised, or held for sale or consumption, in the normal course of the entity’s
operating cycle;(b) it is held primarily for the purpose of trading;(c) it is expected to be realised within twelve months of the consolidated annual financial
reporting date;(d) these are cash and cash equivalents.
All other assets were classified as non-current.
A liability must be classified as current when it meets one of the following criteria:(a) it is expected to be settled in the normal operating cycle of an entity;(b) it is held primarily for the purpose of trading;(c) it must be settled within twelve months from the consolidated annual financial report;

33

(d) the entity does not have an unconditional right to defer settlement of the liability for at least
twelve months from the consolidated annual financial report.
All other liabilities were classified as non-current.
Moreover, on the basis of the provisions of IFRS 5, those assets (and related liabilities) whose bookvalue will be recovered mainly through a sale transaction rather than continuous use are classified,
where they exist, as “Assets held for sale” and “Liabilities related to assets held for sale”.
Statement of changes in shareholders’ equity
The statement was prepared by showing the items in individual columns with a reconciliation of the
opening and closing balances of each item that makes up Shareholders' equity.
Cash flow statement
The cash flows from operating activities are presented using the indirect method as permitted by IAS
7, since this criterion was considered the most appropriate to the business sector in which thecompany operates. By means of this criterion, the result for the period was adjusted for the effects ofnon-monetary transactions, operating, investing and financial activities.

7. ACTIVITIES OF THE COMPANIES BELONGING TO THE GROUP
The companies that make up the Selle Royal Group produce and sell saddles, sports shoes and cycle
accessories.
The structure of the Group as at the date of these consolidated financial statements is shown below,
with an indication of the equity investment percentages.

* Following the change of company name resolved by the shareholders’ meeting of 12 January 2022** Consolidated using the equity method

This structure changed with respect to the composition of the Group as at 30 June 2021, due to theestablishment, on 6 July 2021, of Jiangyin Selle Royal Cycling Co., Ltd., a company under Chinese law,
68.29% controlled by the Group through the Hong Kong holding company Selle Royal Asia Limited
34

and, for the remainder, by the same local shareholder holding the minority interest in Selle Royal(Vehicle) Co., Ltd.. For further details, please refer to the section “Significant events during the period”.
On 6 december 2021, the merger by incorporation of SR84 S.r.l. into Selle Royal Group S.p.A. wascompleted, as resolved by the respective corporate bodies on 28 September 2021. The statutory
effects of this transaction became effective as from 31 December 2021, while the taxation effectapplied as from 1 July 2021.
Furthermore, please note that on 22 December 2021 Selle Royal Group S.p.A. signed an agreementwith M J K Partecipações Ltda., equal shareholder in the Brazilian company Royal Ciclo Industria deComponentes Ltda., for the purchase of an additional shareholding equal to 1% of the latter's sharecapital. As a result of this transaction, the subsidiary Selle Royal Group S.p.A. holds 51% of thesubsidiary's share capital. The higher value recognised to the minority shareholder in the acquisition,with respect to the portion of shareholders’ equity of Royal Ciclo Industria de Componentes Ltda.
subject to transfer, was recorded as a decrease in shareholders’ equity reserves, as required byinternational accounting standards in the event of increase of interest in companies already subject tocontrol. Finally, during the period under review, the liquidation procedure of the Hong-Kong company
Royal Concept Co., Ltd. was concluded.
The consolidated financial annual report as at 30 June 2022 includes the data of the parent company
Selle Royal Group S.p.A. and those of the subsidiaries in which it has, directly or indirectly, the majorityof the votes that can be exercised at the Shareholders' Meeting or in which it has decision-making
power, i.e. the ability to manage the relevant activities of the investee or those activities that have asignificant influence on the investee’s returns.
In particular, the scope of consolidation is broken down as follows:

Selle Royal Group S.p.A., parent company, with registered office in Pozzoleone (VI), sharecapital of Euro 46,000,000.00, subscribed and paid in for Euro 6,000,000. It should be noted
that, as already described above, following a shareholders’ meeting resolution of 12 January2022, Selle Royal S.p.A. changed its company name as indicated above.



Brooks England Limited , acquired in 2002, with registered office in Smethwick-Birmingham,
United Kingdom, share capital of £ 239,100, equal to approximately € 301,799, 100% owned bySelle Royal Group S.p.A.

Selle Royal USA Inc. (formerly Hi-Move Inc.), established in 2006, with registered office inChicago (Illinois), share capital of US$ 1,000, equal to approximately € 901. The company iswholly owned by Selle Royal Group S.p.A. Also in 2006, a joint venture was established with aleading German operator for the direct distribution of products on the US market. To this end,35

Highway Two Llc. was established, based in the USA, currently 50% owned by Selle Royal USA
Inc. In these consolidated financial statements, Highway Two Llc. is measured using the equity
method. The value at the reporting date was € 2,463,609.
Crank Brothers Inc ., with share capital of US$ 2,000, equal to approximately € 1,802, wholly
owned by Selle Royal Group S.p.A.

Selle Royal Vehicle (China) Co. Ltd ., formerly Jiangyin Justek Vehicle Co., Ltd.; the acquisition,completed in February 2010, was effective retroactively from 1 January 2010. The interest in
Selle Royal Group S.p.A., through its wholly owned subsidiary Selle Royal Asia Ltd., grew in
2014/15 from 51.86% of the share capital held since the acquisition to the 68.29% currently held,
following a corporate reorganisation. Lastly, it should be noted that the aforementioned
company Selle Royal Asia Ltd. is a pure holding company that holds exclusively the equity
investment in Selle Royal Vehicle (China) Co. Ltd and does not carry out any activities.



Selle Royal Jiangyin Cycling Co. Ltd .: established on 6 July 2021, with registered office in
Jiangyin (Jiangsu province, People's Republic of China), the company is 68.29% owned by Selle
Royal Asia Limited.

Pannier Ltd. , with registered office in Smethwick-Birmingham, United Kingdom, share capital of£ 100.00 (corresponding to approximately € 120), fully subscribed and paid in by the subsidiary
Brooks England Ltd.

Royal Ciclo Industria de Componentes, Ltda ., with registered office in Rio do Sul, in the Stateof Santa Catarina, Brazil. The share capital of R$ 11,601,802 is 51% owned by Selle Royal Group
S.p.A..

8. SIGNIFICANT EVENTS DURING THE YEARAs detailed extensively in the Report on Operations, the fiscal year in question was characterised,especially in the first half of the year, by the effects of the sustained post-Covid economic recovery ofsome of the world's largest economies (the US and China, first and foremost), which triggered, also
unexpectedly, to significant shocks in commodities markets and to significant disruptions in global
logistics chains. In this complex and changing macroeconomic context, the cycle sector has
nevertheless proved to be extremely dynamic. The second half of the financial year, although theeffects just described due to the resumption of post-pandemic activities still persisted, was mainly
marked by the military escalation that saw, and still sees, Russia and Ukraine as protagonists. The
conflict has inevitably led to the exacerbation of geopolitical tensions that every day negatively affectthe reactions of the main financial markets, in particular when pricing electricity and gas. In this global
36context, which was positive for the sector it belongs to, but disrupted and deteriorating at a
macroeconomic and geopolitical level, the Group further strengthened its leadership in its areas ofactivity, achieving a further improvement in its fundamentals.

9. GENERAL PREPARATION CRITERIA AND CONSOLIDATION PRINCIPLES
Consolidation methodologies
Consolidation is carried out using the line-by-line method. The criteria adopted for the application ofthis method are mainly the following:-

the book value of the equity investments held by the parent company Selle Royal Group S.p.A.
or by the other companies subject to consolidation is eliminated against the relative
shareholders' equity as a result of the assumption of the assets and liabilities of the investee
companies;-

any higher book value of the equity investments with respect to the shareholders' equity
pertaining to the acquisition is allocated, where possible, to the assets of the companies
included in the scope of consolidation up to the current value of the same and, for the residual
part, to the “Goodwill” item;-

significant transactions between consolidated companies are eliminated, as well as receivables
and payables and unrealised profits deriving from transactions between Group companies, netof any tax effect;-

the portion of shareholders' equity pertaining to minority shareholders is shown in the specificitem of consolidated shareholders’ equity, while the portion pertaining to minority interests of
the result for the year is shown separately in the consolidated income statement;-

the equity investments acquired during the year are included in the scope of consolidation fromthe date of acquisition.

Subsidiaries are those in which the Group simultaneously has:-decision-making power, i.e. the ability to direct the relevant activities of the investee or those
activities that have a significant influence on the investee's returns;-

the right to variable (positive or negative) results from its investment in the entity;-

the ability to use its decision-making power to determine the amount of the returns derivingfrom its investment in the entity.

Control can be exercised either by virtue of the direct or indirect ownership of the majority of shareswith voting rights, or by virtue of contractual or legal agreements, also regardless of shareholder

37

relations. In assessing the existence of control, the company also considers its own and third-party
potential voting rights to determine whether it has power. “Potential voting rights” are rights to obtainvoting rights of an investee, such as those deriving from convertible financial instruments or options.
These rights are considered only if they are substantial.
The existence of control is verified every time that facts or circumstances indicate a change in one ormore of the three elements qualifying the control.
Subsidiaries are consolidated on a line-by-line basis from the date on which control is actuallyacquired and cease to be consolidated from the date on which control is transferred to third parties.
The criteria adopted for line-by-line consolidation are as follows:-

the book value of the equity investments in the companies included in the scope of
consolidation is eliminated against the relative shareholders' equity as a result of theassumption of the assets and liabilities of the investees;-according to the provisions of IFRS 3, subsidiaries acquired by the Group are accounted forusing the acquisition method, according to which the consideration transferred in a businesscombination is measured at fair value, calculated as the sum of the fair value of the assets
transferred and liabilities assumed by the Group at the acquisition date and of the equity
instruments issued in exchange for control of the acquired company. Accessory charges to thetransaction are recognised in the income statement at the time they are incurred;-

the excess of the acquisition cost over the market value of the Group’s share of net assets is
accounted for as goodwill;-

if the acquisition cost is lower than the fair value of the Group’s share in the net assets of theacquired subsidiary, the difference is recognised directly in the income statement;-

profits and losses not yet realised with third parties, deriving from transactions between Group
companies, are eliminated as well as receivables, payables, costs, revenues, margins on
products in inventory and all significant transactions that have taken place between the
consolidated companies;-

dividends distributed among Group companies are eliminated, as are the coverage of losses
and write-downs of equity investments in consolidated companies;-

the portions of shareholders' equity and profit for the year pertaining to minority interests areshown separately, respectively, in a specific item of the consolidated balance sheet and income
statement; pursuant to IFRS 10, the total loss is attributed to the shareholders of the parent
company and to the minority interests, even when the shareholders' equity attributable to theminority interests presents a negative balance;38-acquisitions of minority interests relating to entities for which control already exists or the sale ofminority interests that do not entail the loss of control are considered equity transactions;
therefore, any difference between the acquisition/disposal cost and the relative portion ofshareholders' equity acquired/sold is recorded as an adjustment to the Group’s shareholders’equity. Any obligation, relating to a forward contract, to purchase its own equity instruments forcash and cash equivalents entails the recognition of a liability whose fair value is reclassified
from shareholders' equity. If the contract expires without a delivery, the accounting amount of
the liability is transferred to shareholders' equity. The contractual obligation for the acquisitionof own equity instruments gives rise to a liability for the present value of the redemption amounteven if the obligation is subordinated to the exercise by the counterparty of the redemption
right.

Conversion into Euro of the financial statements of foreign companies
The financial statements of subsidiaries are prepared using the currency of the primary economic
environment in which they operate. The rules for the translation of the financial statements ofcompanies expressed in currencies other than the Euro are as follows:-

the assets and liabilities are converted using the exchange rates in force at the reporting date;-costs and revenues are converted at the average exchange rate for the year;-

the “translation reserve” included among the items of the statement of comprehensive income
includes both the exchange differences generated by the conversion of the economic items at
an exchange rate different from the closing one and those generated by the conversion of the
opening shareholders' equity at a different exchange rate from the one at the end of thereporting period;-

goodwill, if any, and fair value adjustments related to the acquisition of a foreign entity aretreated as assets and liabilities of the foreign entity and converted at the closing exchange rate
for the period.

The exchange rates adopted for the conversion of these financial statements are shown in thefollowing table:
Currency
British Pound (GBP)US Dollar (USD)
Chinese Yuan Renminbi (RMB)
Brazilian Real (BRL)

Exact exchange rate as at
30 June30 June Appreciation /
2022
2021
(deprec.)
0,8582
1,0387
6,9624
5,42290,8581
1,1884
7,6742
5,9050-0,02%
14,41%
10,22%
8,89%

Average exchange rate of the year
Appreciation /2021/22 2020/21(deprec.)
0,8471
1,12797,27895,92050,8865
1,1928
7,89686,4236

4,65%
5,75%
8,49%
8,50%

39

10. MEASUREMENT CRITERIA
The measurement criteria, the accounting standards and the principles applied to the preparation of
the consolidated annual financial report, based on a prudent approach and on a going concern basis,
were as follows.
Revenues, income, costs and charges
On the basis of the five-step model introduced by IFRS 15, the Group recognises revenues after
identifying the contracts with its customers and the related performance obligations to be satisfied(transfer of goods and/or services), determined the consideration to which it expects to be entitled in
exchange for the fulfilment of each of these performance obligations, as well as assessed the mannerof satisfaction of these performance obligations (fulfilment at a given point in time versus fulfilment
over time). In particular, the Group recognises revenues only if the following requirements are met (socalled requirements for identifying the “contract” with the customer):a) the parties to the contract have approved the contract (in writing, orally or in compliance with otherusual commercial practices) and have undertaken to fulfil their respective obligations; there is
therefore an agreement between the parties that creates enforceable rights and obligations
regardless of the form in which said agreement is expressed;b) the Group may identify the rights of each party with regard to the goods or services to betransferred;c) the Group may identify the payment terms for the goods or services to be transferred;d) the contract has commercial substance; ande) it is likely that the Group will receive the consideration to which it is entitled in exchange for the
goods or services that will be transferred to the customer.
If the above requirements are not met, the related revenues are recognised when: (i) the Group nolonger has any obligation to transfer goods and/or provide services to the customer and all, or almost
all, of the consideration promised by the customer has been received and is not refundable; or (ii) thecontract was terminated and the consideration that the Group received from the customer is notrefundable.
If the above requirements are met, the revenues deriving from the sale of goods are recognised at thetime of transfer of ownership, which generally takes place at the time of delivery or shipment, unlessthe delivery terms are such as to cause significant risks and benefits to pass to the purchasing
counterparty at a later time than the aforementioned delivery or shipment of the asset, in which case,40

on the basis of the average delivery time, the sales revenues and the related costs are deferred to thefollowing year.
Revenues from the provision of services are considered to have been achieved on the date on which
the services are completed. Revenues of a financial nature and those deriving from the provision ofcontinuous services are recognised on an accrual basis.
Income taxes
Taxes are allocated on the basis of the rates in force applied to taxable income, taking into accountthe regulations in force at the time of preparation of the financial statements, in compliance with theaccrual principle.
Taxes for the period include current and deferred taxes. Income taxes are generally recognised in theincome statement, except when they relate to items recorded directly in shareholders' equity. In thiscase, income taxes are also charged directly to shareholders' equity.
Current taxes are the taxes that are expected to be paid on the taxable income for the year and are
calculated in compliance with the regulations in force in the various countries in which the Group
operates.
Deferred taxes are calculated using the liability method on the temporary differences between theamount of assets and liabilities in the consolidated financial statements and the corresponding values
recognised for tax purposes. Deferred taxes are calculated on the basis of the tax rate that is
expected to be in force at the time the asset is realised or the liability is extinguished.
Deferred tax assets are recognised only if it is probable that sufficient taxable income will be
generated in subsequent years for the realisation of these assets.
Income taxes relating to previous years include charges and income recognised in the year for income
taxes relating to previous years.
Criteria for the translation of currency items
Receivables and payables in foreign currency and liquid funds in foreign currency at the end of theaccounting period are stated in the financial statements at the exchange rate in force on the reporting
date.
Profits and losses deriving from the translation of individual receivables and payables and of liquid
funds in foreign currency, at the exchange rate in force on the date of the financial statements, arecredited and debited respectively to the income statement as financial income components. If a net
profit emerges from their conversion at the exchange rate in force at the end of the year, when the41

financial statements are approved, this net profit is recorded in a non-distributable reserve for thepart not absorbed by any loss for the year.
Fair value measurement
In compliance with IFRS 13 - Fair value measurement, the Group measures financial instruments likederivatives at fair value at each reporting date. Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date. The measurement of fair value is based on the presumption that the transaction
to sell the asset or transfer the liability takes place in the main market or, in the absence of a mainmarket, in the most advantageous market for the asset or liability.
The Group uses valuation techniques that are appropriate to the circumstances and for which
sufficient data are available to measure the fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs. All assets and liabilities for which the fair value ismeasured or disclosed in the financial statements are classified in the fair value hierarchy, described
below, based on the lowest level input that is significant for the measurement of fair value in its
complex:- Level 1 - (Unadjusted) market prices listed in active markets for identical assets or liabilities;- Level 2 - Valuation techniques for which the lowest level input that is significant for the measurementof fair value is directly or indirectly observable;- Level 3 - Valuation techniques for which the lowest level input that is significant for the measurementof fair value is unobservable.
Cash and cash equivalents
The item consists of cash and current account deposits, recognised at nominal value, corresponding
to the fair value. Cash and cash equivalents are short-term investments, highly liquid and readily
convertible into cash, which are subject to an insignificant risk of change in value.
Trade receivables
Trade receivables are measured on the basis of the impairment model introduced by IFRS 9 on thebasis of which the Group measures receivables by adopting an expected loss approach, replacing the
IAS 39 framework based on the measurement of incurred losses. The Group has applied a simplified
approach in the calculation of Expected Credit Losses (“ECL”); therefore it does not keep track ofchanges in credit risk, but recognises a provision for losses based on “ECL” calculated over the entire
life of the loan (known as lifetime ECL) at each reference date, based on its historical experience of42credit loss, adjusted for specific forward-looking factors of the debtors and the economic context. The
amount of the receivables is shown in the balance sheet net of the related bad debt provision. The
write-downs reported pursuant to IFRS 9 (including recoveries or write-backs) are recognised in theincome statement under the other operating income and charges item.
Inventories
Inventories of raw materials, semi-finished and finished products are measured at the lower of costand net realisable value.
The cost configuration used is that of the “weighted average cost”.
Production costs include the expenses incurred to bring the assets to the state in which they are foundin the financial statements; they include both the specific costs of the individual assets and the overall
costs incurred in the activities carried out for their preparation.
Obsolete and slow-moving stocks are valued in relation to their possibility of use and realisation, withreference to the average duration of the production cycle, with the allocation of a specific write-down
both directly and through the establishment of a provision to adjust their value.
Tangible assets
Property, plant and equipment are recognised according to the cost criterion and recognised at thepurchase price or at the cost of production, revalued if necessary in accordance with the law, including
directly attributable accessory costs necessary to make the assets ready for use.
Financial charges directly attributable to the acquisition, construction or production of a tangible
asset are recognised in the income statement at the time they are incurred if they do not refer to aqualifying asset. The Group does not hold assets for which a certain period of time normally elapses tomake the asset ready for use (qualifying asset).
The expenses incurred for ordinary and/or cyclical maintenance and repairs are directly charged tothe income statement in the year in which they are incurred. The capitalisation of costs relating to the
expansion, modernisation or improvement of structural elements owned or used by third parties iscarried out exclusively to the extent that they meet the requirements to be separately classified as an
asset or part of an asset by applying the “Component approach”.
Property, plant and equipment, with the exception of land, are systematically depreciated each year
on a straight-line basis over the estimated useful life in relation to the remaining useful life of theassets. If the asset being depreciated is composed of distinctly identifiable elements whose useful life
differs significantly from that of the other parts that make up the asset, depreciation is carried out
43separately for each of the parts that make up the asset in application of the “component approach”
principle.
Depreciation begins when the asset is available for use, taking into account the actual moment inwhich this condition occurs.
The depreciation amounts charged to the income statement are calculated on the basis of theresidual possibility of use, taking into account the use, the destination and the economic-technicalduration of the assets. This criterion is considered well represented by the following rates:












Land
Buildings
Generic plants
Machinery
Equipment
Office furniture and equipment
Electronic office equipment
Motor vehicles and internal transport vehicles
Light constructions
Leasehold improvements
Rights of use

0%3%
10% -12.50%
10%-12.50%
10%-35%12%
18% -20%
20% -25%
10%
Duration of the contract on the underlying asset
Duration of the lease

The depreciation rates of tangible assets are reviewed and updated, where necessary, at least at theend of each year.
If, regardless of the depreciation already recorded, there is an impairment loss, the tangible asset iswritten down; if in subsequent years the reasons for the write-down no longer apply, the original value
is restored.
The residual values and the useful life of the assets are reviewed at each reporting date and, if deemednecessary, the appropriate adjustments are made.
Intangible assets
Goodwill and other assets with an indefinite useful life

Other intangible assets.

These are non-monetary assets, identifiable even if they have no physical substance, from which it isprobable that future economic benefits will flow. Intangible assets are recognised at cost, represented
by the purchase price and any direct cost incurred to prepare the asset for use, net of accumulated
amortisation, for intangible assets with a limited useful life, and impairment losses.
If there is objective evidence that an individual asset may have suffered a reduction in value, acomparison is made between the carrying amount of the asset and its recoverable value, equal to the44higher of the fair value, less costs to sell, and the related value in use, intended as the present value of
future cash flows that are expected to originate from the asset. Any value adjustments are recognisedin the income statement.
Intangible assets with an indefinite useful life are not amortised. For these assets, the book value iscompared annually with the recoverable value. If the book value is higher than the recoverable value, aloss equal to the difference between the two values is recognised in the income statement.
In the case of reversal of the value of intangible assets, excluding goodwill, previously written down, theincreased net book value cannot exceed the book value that would have been determined if noimpairment loss had been recognised for the asset in the previous years.
An intangible asset is derecognised from the balance sheet upon disposal or when no future economic
benefits are expected from its use or disposal.
IAS 38 defines as intangible assets those identifiable non-monetary assets without physicalsubstance. The main characteristics to meet the definition of an intangible asset are:-identifiability;-

control of the resource in question;-

existence of future economic benefits.

In the absence of one of the above characteristics, the expense to acquire or generate the sameinternally is considered as a cost in the year in which it was incurred.
With reference to trademarks owned by the Group, it should be noted that they are classified among
intangible assets with an indefinite life, and therefore not amortised, since:-

they play a key role in the Group’s strategy and constitute a primary value driver;-the corporate structure, in its concept of organised tangible assets and organisation in a broad
sense, is heavily committed, at the moment, to the dissemination and development of thebrands on the markets for the products marketed by the Group, although the aforementioned
brands may represent assets that may be freely used in markets adjacent to those of
consolidated entities;-

the trademarks are owned and are correctly registered and constantly protected from a
regulatory perspective, with options for renewing the legal protection at the end of theregistration periods that are inexpensive, easy to implement and without external impediments;-

the products marketed by the Group under these brands are not subject to particulartechnological obsolescence in consideration of the development activities carried out by theGroup that allow them to qualify in the luxury market for the categories of cycling products thatare subject to marketing and in which the Group is perceived by the market;45

-

in fact, the brands are considered by their consumers as constantly innovative and on trend, somuch so that they become models to be imitated or inspired by;-

the brands are distinguished, in the typical national and/or international context for each ofthem, by market positioning and reputation such as to ensure their pre-eminence in therespective market segments, being constantly associated and compared to products ofabsolute reference;-in the reference competitive context, it can be stated that the investments to maintain thebrands are proportionally limited, compared to the substantial and favourable cash flows
expected.

Goodwill
Goodwill recognised in the financial statements is that paid for a business combination, i.e. for theacquisition of control of a company or business unit. It is not subject to amortisation, but to an
impairment test to be carried out at least annually. If the purchasing company can demonstrate that it
is able to achieve the value creation objectives implicit in the acquisition price, it does not make any
adjustments to the goodwill recorded; otherwise, it must record an impairment loss in accordance with
IAS 36. The goodwill generated internally by the company is not recognised. In accordance with IAS
36, the impairment test is based on the discounting of cash flows.
Impairment losses
IAS 36, in the presence of indicators, events or changes in circumstances that suggest the existenceof impairment, requires intangible assets and tangible assets be subjected to the impairment test, inorder to ensure that they are not recognised as assets at a value higher than the recoverable amount.
This test is performed at least annually for assets and goodwill with an indefinite useful life, in the same
way as for tangible and intangible assets not yet in use.
The certification of the recoverability of the values recorded in the financial statements is obtained bycomparing the book value at the reference date and the fair value net of costs to sell (if available) or
the value in use. The value in use of a tangible or intangible asset is determined on the basis of theestimated future cash flows expected from the asset, discounted through the use of an after-tax
discount rate, which reflects the current market valuation of the present value of money and risks
related to the Group’s activities, as well as cash flows deriving from the disposal of the asset at the endof its useful life. If it is not possible to estimate an independent cash flow for an individual asset, thesmallest operating unit (cash generating unit) to which the asset belongs and to which it is possible to46

associate future cash flows that can be objectively determined and independent from thosegenerated by others is identified. The identification of the cash generating units was carried out in linewith the organisational and operating architecture of the Group.
If the impairment test shows an impairment loss on an asset, its book value is reduced to therecoverable value, through direct recognition in the income statement, unless the asset is measured atrevalued value, in which case the write-down is charged to the revaluation reserve. When the reasonsfor a write-down no longer apply, the book value of the asset (or of the cash-generating unit), with the
exception of goodwill, is increased to the new value deriving from the estimate of its recoverable value,
but not beyond the net book value that the asset would have had if the write-down for impairment had
not been made. The write-back is charged to the income statement immediately, unless the asset ismeasured at the revalued amount, in which case the write-back is charged to the revaluation reserve.
LeasesThe Group assesses at the beginning of the contract whether a contract is, or contains, a lease. Thisoccurs if the contract transfers, in exchange for consideration, the right to control the use of an
identified asset for a period of time.
According to IFRS 16 - Leases, the Group applies a recognition and measurement approach for allleases, with the exception of short-term leases and leases of low-value assets. Consequently, thelease payments for short-term leases and the leases of low-value assets are recognised as expenses
on a straight-line basis for the duration of the lease.
The Group recognises the lease liabilities that represent the obligations to pay the lease payments
and the right-of-use assets that represent the right of use for the underlying assets.
The Group recognises the right-of-use assets at the start date of the lease and measures them atcost, less accumulated depreciation and impairment, and adjusted for any re-measurement of leaseliabilities. Right-of-use assets are measured at cost, which includes the following: (i) the amount of theinitial measurement of the lease liability; (ii) any lease payment made on or before the commencement
date, less any lease incentive received; (iii) any initial direct costs and, if applicable, (iv) restoration
costs. Right-of-use assets are depreciated on a straight-line basis for the shorter of the lease term andthe estimated useful life of the assets.
At the start date of the lease, the Group recognises the lease liabilities measured at the present valueof the lease payments to be made during the lease term, of the following: (i) fixed lease payments lessany lease incentives to be received, (ii) variable lease payments that are based on an index or rate and,if applicable, (iii) amounts that are expected to be paid based on residual value guarantees, and (iv)47the exercise price of a purchase option if the lessee is reasonably certain of exercising this option.
Variable lease payments that do not depend on an index or rate are recognised as costs in the period
in which the event or condition that triggers the payment occurs. Lease payments are discounted
using the interest rate implicit in the lease. If this rate cannot be determined, the incremental financing
rate of the reference entity is used, i.e. the rate that the same would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic context with similar terms andconditions. Each lease payment is divided into main payable and interest expense. Interest expense ischarged to the income statement over the lease period using the effective interest rate method.
Financial assets
Other equity investments are recognised at purchase or subscription cost, adjusted if necessary for
impairment losses.
Provisions for risks and charges
Provisions for risks and charges relate to costs and charges of a certain nature and of certain orprobable existence that at the end of the year are undetermined in terms of amount or date ofoccurrence. Allocations to these provisions are recognised when:- it is probable that there is a current legal or implicit obligation deriving from a past event;- it is probable that the fulfilment of the obligation will be onerous;- the amount of the obligation can be reliably estimated.
Provisions are recognised at the value representing the best estimate of the amount that the company
would reasonably pay to extinguish the obligation or to transfer it to third parties at the end of the year.
When the financial effect of time is significant and the payment dates of the obligations can be reliably
estimated, the provision is determined by discounting back the expected cash flows determinedtaking into account the risks associated with the obligation; the increase in the provision related to thepassage of time is recognised in the income statement under “financial income” or “financial charges”.
The provisions are periodically updated to reflect changes in cost estimates, realisation times and thediscount rate; revised estimates are charged to the same income statement item that previously
included the provision.
The existence of contingent liabilities, represented by obligations:- possible, but not probable, arising from past events, the existence of which will be confirmed only
upon the occurrence or otherwise of one or more uncertain future events not fully under the controlof the company; or48

- current events, as they derive from past events, for which, however, the possibility of incurring
charges in the future is considered remote, or the amount of which cannot be reliably estimated;
it does not give rise to the recognition of liabilities recorded in the financial statements, but is
illustrated in an explanatory note.
Employee benefits
The Group has defined benefit pension plans with employees. Defined benefit pension plans typicallydefine the amount of benefit that employees will receive at the time of retirement and which, usually,
depends on one or more factors such as age, years of service and compensation. The liability
recognised in the balance sheet in respect of defined benefit pension plans is equal to the present
value of the pension obligation at the end of the period, also including any adjustment deriving fromunrecognised costs relating to past benefits, less the fair value of pension assets (“plan asset”). The
pension obligation is calculated annually, with the help of external actuaries, using the “Projected Unit
Credit Method”. The present value of the pension obligation is calculated by discounting the
disbursements expected in the future on the basis of the interest rate applied to bonds issued byleading companies in the same currency in which the benefits will be paid and which have a maturity
similar to that of the pension obligation. Actuarial gains and losses relating to defined benefit plans
deriving from changes in the actuarial assumptions used or from changes in the plan conditions arerecognised in the statement of comprehensive income in the year in which they occur. The amountreflects not only the payables accrued at the reporting date, but also future salary increases and therelated statistical trends. Costs relating to services provided in previous periods are recognised
immediately in the income statement.
The benefits guaranteed to employees through defined contribution plans (also by virtue of recentchanges in national pension legislation) are recognised on an accrual basis and at the same time giverise to the recognition of a liability measured at nominal value.
Current and deferred taxation
Provisions for income taxes for the year made by the individual companies included in the scope of
consolidation are calculated in accordance with the current tax regulations of the country where thecompanies are based and are recorded under “tax payables”, net of any tax credits legally offset
during the subsequent tax period.
Deferred taxes are calculated on the cumulative amount of all temporary differences between thevalue of an asset or a liability determined according to statutory criteria and the value attributed to49

that asset or liability for tax purposes, applying the presumed tax rate in force at the moment in which
the temporary differences will reverse, as well as the tax effect of the typical consolidation
adjustments.
It should also be noted that no deferred taxes have been allocated against the revaluation reserves
subject to taxation recognised under shareholders’ equity since, at present, it is believed that notransactions are carried out that would result in taxation.
Deferred tax assets deriving from losses that can be carried forward for tax purposes are also
recognised if the conditions of reasonable certainty of obtaining taxable income that will be able toabsorb the losses carried forward and the losses in question derive from well-identified circumstances
and it is reasonably certain that these circumstances will not be repeated.
Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired from suppliers in
the course of ordinary activities. Trade payables are classified as current liabilities if payment is due
within one year or less from the reference date. Otherwise, they are presented as non-current
liabilities.
Trade payables are stated at their nominal value, modified in the event of returns or invoicing
adjustments. This measurement approximates the fair value in an appropriate manner.
The Group recognises payables from other taxes and social security and other non-financial payablesat the amount payable on the due date.
Payables to banks and other lenders
Payables to banks and other lenders are initially recognised at fair value net of directly attributable
accessory costs and are subsequently measured at amortised cost, applying the effective interest
rate method. If there is a change in the expected cash flows and/or the internal rate of return initiallydetermined, the value of the liabilities is recalculated to reflect this change. Payables to banks andother lenders are classified under current liabilities, unless the Group has an unconditional right todefer their payment for at least 12 months after the reference date. Payables to banks and other
lenders are removed from the financial statements when they are extinguished, i.e. when all risks andcharges relating to the instrument are transferred, derecognised or settled. The bond payable isrecognised on the basis of the amounts collected, net of the transaction costs and subsequently
measured at amortised cost, using the effective interest rate method.

50

Derivative contracts
Derivative contracts can be considered trading or hedging contracts and, based on IAS rules, must berecognised in the financial statements and measured at fair value regardless of their destination andclassification. The hedging transaction must also be attributable to a predefined risk management
strategy, must be consistent with the risk management policies adopted, must be documented andeffective in effectively neutralising the risk to be hedged. This principle of consistency can be
maintained only in the presence of effective hedging contracts. Hedging transactions can be divided
into fair value and cash flow hedges of specific financial statements items.
Share capital
The item is represented by the subscribed and paid-in capital.
Reserve for first-time adoption of IAS/IFRS
The item includes the total amount of IAS/IFRS adjustments recognised directly in shareholders'equity at the time of First Time Adoption (1 July 2014).
Other shareholders' equity reserves
Among others, the item includes the cash flow hedge reserve, where changes in the fair value ofhedging derivatives are recognised directly in shareholders' equity net of the related taxes.
It also includes the employee severance indemnity discounting reserve, where the effects of changes
in the severance indemnity provision of employees of the Italian companies of the Group areaccounted for, as resulting from the actuarial analysis carried out by professionals enrolled in theprofessional register to which the data in question are subjected on an annual basis.
11. ESTIMATES AND ASSUMPTIONS
The preparation of the consolidated annual financial report requires the directors to apply accounting
standards and methods, which, in certain circumstances, are based on difficult and subjective
assessments and estimates based on historical experience and assumptions that are consideredreasonable and realistic from time to time depending on the relevant circumstances.
The application of these estimates and assumptions affects the amounts shown in the financial
statements, such as the balance sheet, the income statement and the cash flow statement, as well as
the information provided.

51

The final results of the items in the consolidated financial statements for which the above-mentioned
estimates and assumptions were used, may differ from those reported in the financial statements of
the individual companies due to the uncertainty that characterises the assumptions and theconditions on which the estimates are based.
The estimates and assumptions are reviewed periodically and the effects of each change arereflected in the income statement of the period in which the estimate is revised.
Below is a summary of the financial statement items that require greater subjectivity than others on
the part of the directors in preparing the estimates and for which a change in the conditions underlying
the assumptions used could have a significant impact on the financial statements:-

Depreciation/amortisation: changes in the economic conditions of the markets, in technology
and in the competitive scenario could significantly affect the useful life of property, plant andequipment and intangible assets and could result in a difference in the timing of the amortisation
process, as well as on the amount of depreciation/amortisation costs.

-

Income taxes: determined in each country in which the Group operates according to a prudent
interpretation of current tax regulations. This sometimes involves complex estimates indetermining the taxable income and the deductible and taxable temporary differences between
the carrying amounts and taxable amounts.

-

Provision for inventory obsolescence: reflects the Group management's estimate of expected
impairment losses in relation to inventories, determined on the basis of past experiences. Any
anomalous trends in market prices could have repercussions in future inventory write-downs.

-

Bad debt provision: the recoverability of receivables is measured taking into account the risk of
non-collectability, their age and losses on receivables recognised in the past for similar types ofreceivables. The Group uses a simplified approach to calculate the ECL (Expected Credit Loss)for trade receivables and contractual assets, initially based on the historical default rates
observed. The Group adjusts the historical experience of credit loss with forward-looking
information. At each reporting date, the historical default rates observed are updated andchanges in forward-looking estimates are analysed. The assessment of the correlation between
the historical default rates observed, the expected economic conditions and the “ECLs” is asignificant estimate. The amount of the “ECLs” is sensitive to changes in circumstances andexpected economic conditions. The company's historical experience of credit loss and theforecast of economic conditions may not be representative of the actual default of the customer
in the future.

52-Non-current assets: the Group periodically reviews the carrying amount of property, plant andequipment, intangible assets, investments in joint ventures and associates and other noncurrent assets, when facts and circumstances require such revision in order to determine theirrecoverable value. The recoverability analysis of the book value is generally carried out using
estimates of expected cash flows from the use or sale of the asset and appropriate discountrates to calculate the present value. When the book value of a non-current asset is impaired, theGroup recognises a write-down equal to the excess between the book value of the asset and its
recoverable value through the use or sale of the same, determined with reference to the cash
flows inherent in the most recent business plans.

-Deferred tax assets: the Group has deferred tax assets on deductible temporary differences
and theoretical tax benefits for losses carried forward that are recognises to the extent it isprobable that future taxable income will be available against which they can be recovered. The
valuation of the recoverability of deferred tax assets, recognised in relation to both tax losses
usable in subsequent years and deductible temporary differences, takes into account theestimate of future taxable income and is based on prudent tax planning.

-

Employee benefits: provisions for employee benefits and net financial charges are measured
using an actuarial method that requires the use of estimates and assumptions to determine thenet value of the obligation. The actuarial methodology considers financial parameters such as,
for example, the discount rate and the growth rates of wages and takes into account theprobability of occurrence of potential future events through the use of demographic parameterssuch as, for example, employee mortality rates and resignation or retirement rates.

-

Contingent liabilities: the Group ascertains a liability for pending disputes and lawsuits when it
deems it probable that a financial outlay will occur and when the amount of the resulting losses
can be reasonably estimated. In the event that a financial outlay becomes possible but theamount cannot be determined, this fact is reported in the explanatory notes to the financial
statements. The lawsuits may concern complex legal and tax issues, subject to a different
degree of uncertainty against which it is possible that the value of the provisions may change asa result of future developments in the ongoing proceedings. The Group monitors the status ofpending lawsuits and consults with its legal advisors and experts.

12. SEGMENT REPORTING
The segment reporting of the Selle Royal Group, in applicazione dell’IFRS 8, in application of IFRS 8, isprovided with reference to the geographical areas in which the Group operates based on the53

availability of financial statements information and in line with the main method used by management
to periodically review the results for performance assessment purposes. More specifically, theGroup’s areas of activity can be broken down as follows:
EUROPE
From a corporate point of view, this area is represented by the parent company Selle Royal Group
S.p.A. and its direct and indirect subsidiaries, whose registered office and operating activities aremainly concentrated in the European Union.
From a business point of view, this sub-scope includes both industrial activities, carried out in thefactories of Selle Royal Group S.p.A. in Pozzoleone (VI) and of Brooks England Ltd. in Smethwick (GB),as well as purely commercial activities. The latter consist of the sale and distribution of own-brandproducts, the result of both internal production and pure marketing, and the distribution of third-party
brand products. With specific reference to the latter aspect, it is recalled that the parent company
Selle Royal Group S.p.A. has, for years now, augmented traditional sales in the OEM ("original
equipment") and aftermarket (sales of spare products to national/regional distributors) channels withdirect sales to retailers in Italy, France and Austria, under the A4 Selection brand name.
AMERICAThis area is represented, from a corporate point of view, by the subsidiaries whose registered officeand operating activities are mainly concentrated in North America and by Royal Ciclo, whose
registered office and reference market are in Brazil.
The activities carried out by the companies belonging to this sub-scope are varied and mainly include
the design, development and marketing of hardware products (defined, for simplicity, as all those“non-saddles” and “non-sports shoes” products); the production of saddles and other accessories in
the Brazilian plant and the marketing of the Group’s brands and selected third-party brands on theAmerican, Canadian and Brazilian markets, through the retail channel and selected specialised
chains.
ASIAThis area is represented, from a corporate point of view, by the subsidiaries whose registered officeand operating activities are mainly concentrated in Asia.
These are primarily industrial activities carried out in the Chinese plants of Selle Royal Vehicle (China)
Co., Ltd., whose products are intended for both the domestic market and the export market. The main
sales channel that includes these products is the so-called “OEM” channel, in which the Group's direct54customers are bicycle assemblers, who operate both on their own behalf and on behalf of third
parties. In the latter case, the Group exploits its relations and its sales force by negotiating supplies
with Western brands (mainly European and American), which then decide to allocate production to its
own and/or third-party plants, mainly in Europe or in the Far East.
Overall, it should be emphasised that the global presence, both in production and commercial terms,
and the portfolio of own brands, which is also accompanied by a service for the development ofspecific products at the request of customers, make the Selle Royal Group a privileged counterparty
for the large groups/agglomerations of brands that have formed over the years in the cycle sector.
The following tables present the data on revenues and on certain balance sheet items relating to theGroup’s business segments for the years 2021-22 and 2020-21.
2021/222020/21EUROPEAMERICAASIAEUROPEAMERICA

ASIA

Revenues

121.212.914

67.375.483

35.174.389

104.397.649

68.447.906

32.244.588

Current assets
Non-current assets
Current liabilities
Non-current liabilities

43.984.428
45.190.084
43.027.967
42.918.309

37.779.974
21.794.078
19.261.411
3.309.926

27.177.343
7.584.342
5.281.971
65.62932.570.097
38.290.469
35.786.701
38.417.919

25.938.873
20.423.318
18.289.299
3.137.661

19.856.263
7.389.573
7.573.971
59.541

13. DERIVATIVE FINANCIAL INSTRUMENTS
As at 30 June 2022, the parent company Selle Royal Group S.p.A. held two derivative financial
instruments, subscribed with a leading Italian bank, for the purpose of hedging against interest rate
volatility ( “IRS”).
These derivative financial instruments were subscribed on 29 October 2021, at the same time as the
opening of two multi-year unsecured mortgages at variable rates.
As they were found to be hedged by the effectiveness tests conducted, the impact relating to thechange in their value were reflected in a specific equity reserve (“cash flow hedge reserve”), net of therelated tax effect. For further information, please refer to the section on financial assets measured atfair value in these Explanatory Notes.

14. RISK MANAGEMENT
In relation to financial and other risks, please refer to the Report on Operations.

55

15. TRANSACTIONS with RELATED PARTIESThe main transactions with related parties are described below:-

Dec. 28, 1928 Holding S.p.A.: parent company of Selle Royal Group S.p.A., of which he holds the
66,6% of share capital, the payable balances for IRES are transferred to it. Following to themerger of SR84 S.r.l. mentioned yet, Selle Royal Group S.p.A. and its majority parent company
participate in the related tax consolidation.

-

Dec. 28, 1928 Real Estate S.r.l.: parent company Selle Royal Group S.p.A., by virtue of a lease
contract signed on 1 July 2021, that has renewed the agreement previously signed on June 2013,
with a duration of 6 years, manages the property leased from Dec. 28, 1928 Real Estate S.r.l. in
which the production and sales activities of Selle Royal Group S.p.A.

-

Wise Equity SGR S.p.A.: some shareholders of Wise Equity SGR S.p.A. (which holds 33.3% of theshare capital of the subsidiary Selle Royal Group S.p.A.) are members of the latter's Board of
Directors, a position for which Wise Equity SGR S.p.A. charges the relative emoluments
periodically; these emoluments are fully paid for the amounts pertaining to the period inquestion.

-

Minority shareholders in subsidiaries: the amount shown in the table below refers to the
remuneration for consultancy activities carried out for the benefit of the subsidiary Royal Ciclo
Industria de Componentes Ltda. by the minority shareholder.

-

Family members of the controlling shareholders of the parent company: the amounts refer tothe residual payables at the reporting date for future lease payments on the property located in
Rossano Veneto, the site of the parent company Selle Royal Group S.p.A. where the offices of
the A4Selection division are located, and recorded in accordance with the provisions of IFRS 16.
This contract, with a duration of 6 years, will expire in February 2025.

The economic and financial relations entertained during the 2021-22 financial year are summarised in
the following table:
COUNTERPARTY
Wise Equity SGR
Dec. 28, 1928 Holding S.p.A.
Dec. 28, 1928 Real Estate S.r.l.
Minority shareholders in subsidiaries
Directors
Family members of the controlling shareholders of the parent company
TOTAL RELATED PARTIES

GENERAL and
ADMINISTRATIVE COSTS
210.000
167.038
1.570.974
1.948.012

OTHER NONCURRENT ASSETS
600.000
25.200625.200

CURRENT
LIABILITIES
1.968.311
1.094.884
1.034
47.4033.111.632

NON-CURRENT
LIABILITIES
4.706.865
81.9904.788.856

56

ANALYSIS and COMPOSITION of the INCOME STATEMENT
16. REVENUES
Revenues for the current year deriving from the Group’s ordinary operations amounted to €223,762,787 and were generated by the sale of saddles, pedals and other accessories, and, residually,
from the sale of raw materials and semi-finished goods as well as the provision of services. The
breakdown of revenues from sales and services by business category is shown in the following table:
Revenues from sales of saddles
Revenues from the sale of accessory components
Revenues from the sale of sundry materials
Revenue from services
Total gross revenues

2021/222020/21118.562.408
100.919.221
4.636.360
198.538224.316.527

108.011.066 10.551.342
94.836.435 6.082.786
2.823.722
1.812.638
224.934(26.396)205.896.157 18.420.370(118.458)(687.555)(806.013)

ChangePrice changes and others
Year-end bonus
Revenue adjustments(56.405)(497.335)(553.740)

62.052190.221252.273

Total revenue from sales

223.762.787

205.090.143 18.672.643

223.762.787
223.762.787

205.090.143 18.672.643
205.090.143 18.672.643

RECOGNITION of REVENUES
Realised at a specific point in time
Realised over time
Total revenue from sales

An additional level of analysis (so-called "segment reporting") used by management in ordinary
operations and in determining strategic initiatives is provided below:
2021/22

SELLE ROYALFIZIKBROOKSCRANK
BROTHERSOTHER / NOT
PEdALED

ALLOCATED(*)

CONSOLIDATEDRevenues

74.665.210

46.198.761

20.245.987

41.774.578

2.809.323

38.068.927

223.762.787

Gross margin

34.652.228
46,4%

21.575.469
46,7%

9.223.544
45,6%

13.937.488
33,4%

1.544.003
55,0%

15.893.709
n.s.

96.826.440
43,3%2020/21FIZIKBROOKSCRANK
BROTHERS

37.485.616

18.859.383

35.547.990

OTHER / NOT(*)

CONSOLIDATED

42.424.128

205.090.143

32.585.297
18.903.207
10.921.093
16.395.355
1.278.633
7.966.618
47,6%
50,4%
57,9%
46,1%
53,7%
n.s.
(*) Revenues represent the turnover of third-party brands that do not exceed the materiality thresholds set for separate disclosure,as envisaged by par. 13 of IFRS 8, as well as non-core turnover. The gross margin instead represents the net balance between the marginof “other” turnover and cost of sales elements not directly attributable to a specific brand.

88.050.203
42,9%

SELLE ROYAL
Revenues
Gross margin

68.390.557

PEdALED2.382.469

ALLOCATED57

17. COST OF SALES
The components of the cost of sales are shown below, compared with the previous year:
2021/22
Purchase of raw materials
Ancillary charges on RM purchases
Outsourcing
LabourChange in inventories
Total cost of sales

104.006.031
6.081.354
6.850.385
23.555.313(13.556.737)
126.936.347

2020/21

Change84.965.430 19.040.601
4.398.552
1.682.803
6.298.710
551.675
21.305.407 2.249.906
71.842 (13.628.579)
117.039.940 9.896.406

18. INDUSTRIAL COSTSThis item includes ancillary production process costs, although not directly variable with respect toproduction volumes, and therefore can be classified under the item “cost of sales”.
2021/22
Electricity
Consumables
Minor equipment
MaintenanceLease payments
Research and development costs
Other industrial costs
Total industrial costs

1.546.866
1.663.341
599.667
839.278119.741
1.317.141
1.314.878
7.400.912

2020/211.447.793
1.633.289
666.216774.002128.345902.968
1.029.866
6.582.481

Change99.07330.052(66.549)
65.275(8.604)414.172
285.012818.431

19. COMMERCIAL AND PROMOTION COSTS
The balance of the item “sales and promotion costs”, which is composed of costs directly related tosales activities, is shown below.
2021/22
Sales and advertising costs
Transports on sales
Commissions
Royalties
Gifts
Other sales and promotion costs
Total sales and promotion costs

5.444.264
5.381.984
2.278.716
534.709973.316
14.612.990

2020/215.096.298
5.295.475
2.657.573
13.360397.413311.447
13.771.565

Change347.966
86.510(378.857)(13.360)
137.297661.869
841.425

20. COSTS of the MANAGEMENT STRUCTURE
This item, which amounts to € 18,404,093 for the year in question, includes the cost of the clerical andmanagerial structures of the various Group companies.

5821. GENERAL and ADMINISTRATIVE COSTS
The item in question is detailed below, mainly consisting of services purchased by the various Group
companies.
2021/22
Consulting
Travel expenses
Board of Directors' fees
Board of Statutory Auditors' fees
Utilities
Entertainment and hospitality expenses
Motor vehicles
Fees and IT support
Insurance
Lease payments
Bank charges
Other general and administrative costs
Total general and administrative costs

6.212.473
1.090.762
1.780.974
47.792337.546258.479
470.453
1.323.153
1.186.438
321.304
598.082
2.691.799
16.319.256

2020/21

Change5.842.995
261.955
2.056.615
48.308322.094166.058
431.054
1.113.562
945.230306.307565.9162.474.586
14.534.680

369.478828.807(275.641)(516)
15.45292.42139.399209.591241.208
14.99732.166217.213
1.784.576

22. OTHER OPERATING INCOME and EXPENSES
The table below provides details of other operating income and expenses that cannot be classified inother items of the income statement, including extraordinary positive and negative income
components.
2021/222020/21

ChangeOperating income:Minor independent works
Repayments and sundry income
Capital gains
Contingent assets and other income
Royalty income
Research & development
Total operating income

219.709652.630
5.096
713.458
3.193
382.192
1.976.277

186.043836.155
11.935479.28938
261.3431.774.804

33.666(183.524)(6.839)234.168
3.154
120.849201.474

Operating expenses:
Allocation to provision for obsolescence
Allocation to provision for credit risks
Losses on receivables
Capital losses
Contingent liabilities and other charges
Total operating expenses(137.967)(175.376)
1.285(41.347)(262.328)(615.732)(251.980)(271.269)(6.196)(21.536)(227.289)(778.270)

114.01495.8937.481(19.811)(35.039)
162.537

TOTAL OPERATING INCOME / (EXPENSES)

1.360.545

996.534

364.011

The net balance of this item is positive for € 1,360,545.
The item “repayments and sundry income” is mainly attributable to the results achieved in themarketing of the product lines of some premium brands in the cycle sector, for which the joint venture
Highway 2 Llc. operates as a distributor in the North American market. This business is59

complementary and in support of the relevance of the brands of the Selle Royal Group and theContinental Group, equal partners in Highway 2 LLC.
The greater balance of the item “contingent assets and other income” is mainly attributable to thereimbursement deriving from winning the tax dispute by Royal Ciclo Industria de Componentes Ltda.
23. OTHER FINANCIAL INCOME and CHARGESThe breakdown of interest and other financial charges is provided in the table below:
2021/22
Financial income:Bank and postal interest
Dividends
Other financial income
Total financial income

143.4851.510
82.446227.441

2020/21

Change115.38128.1034.684(3.174)250.866 (168.420)
370.932 (143.491)

Financial charges:
Interest on bonds
Interest expense
Interest cost provision for employee severance indemnity
Discounts
Fees on loans
Other financial charges
Total financial charges(443.137)(1.271.706)(9.915)(888.732)(212.943)(299.016)(3.125.448)(569.715)(1.307.210)(2.525)(859.168)(302.253)(238.081)(3.278.951)

Net exchange rate differences

1.268.965(962.095) 2.231.060(1.629.042)(3.870.114) 2.241.072

TOTAL FINANCIAL INCOME / (CHARGES)

126.57835.504(7.389)(29.564)89.309(60.935)
153.503

This item, negative for € 1,629,042, was positively affected by the decrease in interest expense toservice the debt subscribed by some Group companies, as well as lower interest on the bond loan
issued by Selle Royal Group S.p.A..
The item “other financial charges” includes primarily the recognition of financial charges related to theadoption of IFRS 16.
Lastly, the impact of net exchange rate differences, which were overall positive by € 1.268.965(compared to a negative balance of € -962,095 of the same period of the last financial year). This item
includes both exchange gains and losses realised as at 30 June 2022 (which show a positive netbalance of € 492,140), and unrealised exchange gains and losses at the same date deriving from thealignment of foreign currency balances with the current exchange rates at the end of the year, in
addition to exchange differences resulting from the elimination of intragroup items (which
cumulatively show a positive net balance of € +776,825).
24. TAXES FOR THE YEAR
The following table details the tax burden emerging at the level of the individual companies belonging
to the Group scope and any income adjustment items related to the consolidation.
60

Current taxes
Deferred tax (assets) / liabilities
TOTAL TAXES FOR THE YEAR

2021/222020/21

Change8.139.183(900.610)
7.238.573

6.669.049 1.470.133
162.327 (1.062.938)
6.831.377
407.196

The increase in current taxes is attributable to the better results achieved by the Group companies
compared to the comparative period.
The increase of the balance related to deferred tax assets is mainly due to higher deferred tax assets
recognised during the period, and in particular to the increase of the provision related to elimination of
unrealised intercompany profit.

61

ANALYSIS and COMPOSITION of the BALANCE SHEETCURRENT ASSETS
25. CASH AND CASH EQUIVALENTS
This item refers to the positive balances in the bank current accounts and postal deposits of theGroup Companies, together with a limited amount of cash held by each Company to meet current
needs.
The balance as at 30 June 2022, amounting to € 26,283,940 (of which € 6,076,020 in Selle RoyalGroup S.p.A. and € 16,382,069 in Selle Royal China, the latter with a positive net financial position), is
growing compared to the previous year thanks to the cash flows generated during the period.
As at 30 giugno 2022 (similar to 30 June 2021) there are no restrictions or limitations on the use of theGroup's cash and cash equivalents.
26. TRADE RECEIVABLES
The breakdown of this item, expressed in the financial statements net of allocations to the bad debt
provision carried out prudentially on the portion of receivables not covered by insurance, is as follows:
30/06/2022 30/06/2021
Trade receivables
Bad debt provision
TRADE RECEIVABLES, net

34.080.290(1.115.429)
32.964.861

29.365.523(912.207)
28.453.316

Change4.714.767(203.223)
4.511.545

Receivables insured at the date of 30 June 2022 amounted to € 21,0 million, compared to € 18,8
million at 30 June 2021.
For receivables of uncertain collectability, for which legal procedures for collection have been
initiated, and for some receivables from customers with a potential lower degree of collectability,
specific provisions for write-downs have been allocated up to the presumed realisable value.
It should be noted that the parent company Selle Royal Group S.p.A. transferred receivables fromcertain foreign and domestic customers, through a non-recourse factoring transaction, to a leadingbank for € 3,060,047; the Chinese subsidiary Selle Royal Vehicle (China) Co., Ltd. completed a similartransaction for a value of € 1,132,842. During the previous year, the cumulative value of theassignments of receivables without recourse made by the same companies was equal to € 4,014,502.

62

Finally, the change in the bad debt provision during the year in question is shown below:
Balance as at
30 June 2021

Provisions (+)

912.207184.305(487)

TOTAL BAD DEBT PROVISION 912.207

184.305(487)

Bad debt provision

Releases (-)

Translation
diff.

Balance as at
30 June 2022

(30.868)

50.272

1.115.429(30.868)

50.272

1.115.429

Uses (-)

27. INVENTORIESThe breakdown of this item, broken down by type of stock and with details of the provisions recorded
against the risk of potential obsolescence, is shown in the table below:
30/06/2022 30/06/2021

ChangeRaw materials, supplies and consumables
Work in progress and semi-finished products
Finished products and goods
Goods in transit
Gross inventories

13.162.572
5.812.351
27.918.922
2.725.444
49.619.289

9.767.182 3.395.390
4.631.511
1.180.840
12.649.871 15.269.051
2.378.635
346.81029.427.199 20.192.090

Provision for obsolescence
Provision for unrealised intra-Group margin(2.391.811)(3.578.457)(2.210.367)(181.444)(898.287) (2.680.170)

INVENTORIES

43.649.021

26.318.546 17.330.475

The growth of this item can be seen in each inventory category and is conducive to the higher
business volumes. Moreover, the inflactionary impact recorded during the period has contributed to
the growth.
In addition, the congestion of the global logistic, before mentioned, has involved in an extension oftransit time expecially for product coming from Asia and destinated to the North-American market,
with a consequently increase both the balance of the finished products and the goods in transit.
Lastly, the change in provisions for adjusting the value of stocks during the year in question is shown
below:
Balance as at
30 June 2021

Provisions (+)

Provisions for obsolescence
2.210.367
Provision for unrealised intra-Group margin
898.287
TOTAL ADJUSTMENT PROVISIONS of INVENTORIES3.108.654

144.1662.550.707
2.694.873

Releases (-)-

Uses (-)(91.683)(91.683)

Translation
diff.
128.961129.463258.424

Balance as at
30 June 2022
2.391.811
3.578.457
5.970.269

63

28. TAX RECEIVABLES
Tax receivables increased compared to the balance as at 30 June 2021, as detailed below:
30/06/2022 30/06/2021

ChangeCurrent tax receivables:
For direct taxes
For indirect taxes
For other withholdings
Subtotal current taxes

2.772.305
378.434
431.374
3.582.114

1.555.585
137.865
149.963
1.843.413

1.216.720
240.569
281.4121.738.701

Current deferred tax assets

1.144.713

423.494

721.219

TOTAL TAX RECEIVABLES

4.726.827

2.266.907 2.459.920

Compared to 30 June 2021, the increase in receivables for direct tax is linked to the combinatedeffect, on the one side, of the increase of tax receivables related to parent company Selle Royal Group
S.p.A. and, in the other side, of the decrease of them related to the subsidiary Royal Ciclo Industria deComponentes Ltda.
Infact, during the financial year, the subsidiary Royal Ciclo Industria de Componentes was able to use
the tax credit, which arose in previous years, to offset other taxes, specifically during the months ofJuly 2021 and May 2022; the subsidiary Selle Royal Group S.p.A., on the other hand, was able toaccess the benefits provided by Italian Law 178/2020 on tax credits related to investments in capital
goods falling under the facilities collectively known as "Industry 4.0".
The increase on the tax receivables for direct tax is principally referred to the higher VAT credit ofSelle Royal Group S.p.A. and of Crank Brothers Inc. taiwanese branch.
Lastly, for an analysis of the current deferred tax assets, please refer to the relevant section of thesenotes.
29. OTHER CURRENT ASSETS
The breakdown of this item and the comparison with the previous year are as follows:
30/06/2022 30/06/2021 Change
Advance costs
Accrued income and prepaid expenses
Sundry receivables
TOTAL CURRENT ASSETS

220.406
787.965308.725
1.317.096

154.547
65.859598.724 189.241
727.126 (418.402)
1.480.397 (163.301)

The higher advanced costs compared to 30 June 2021 come from the seasonality of the sector andfrom incurring, at the end of the fiscal year, costs related to new products launch and partecipations in64events in following fiscal year, which are therefore suspended under this item as at the 30 June ofeach year to comply with the accrual principle it is entirely referrable to the parent company Selle
Royal Group S.p.A.. The decrease of the sundry receivables is related to the closing of the operation offinancial leasing linked to the installation of a new productive plant in Selle Royal Group S..p.A.; thisplant has been entered in activity during the first quarter 2022.
NON-CURRENT ASSETS
30. INTANGIBLE ASSETS
Details of the item and the changes that have taken place since the previous year are shown in thetable below:
Balance as at Increases Decreases
Amortisation Translation
Reclassification
30 June 2021
(+)
(-)
(-)
diff.

Balance as at
30 June 2022

Industrial patent rights andintellectual property rights

1.588.355

248.437--(690.701)

82.1801.228.271

Concessions, licences, trademarks and similar rights

19.477.822

451.797--(449.603)

57.41819.537.435

Other

25.552---(14.206)

1.952

13.297

Fixed assets in progress and payments on account50.964108.071---17.068176.10321.142.693

808.305--(1.154.510)

158.618

20.955.107

Total intangible assets

The item “Industrial patent rights” mainly includes the corresponding item recorded in the financial
statements of the subsidiary Crank Brothers, Inc. at the time of the acquisition of the same company
by Selle Royal Group S.p.A.; the value was also tested on the basis of valuations issued by independent
experts who also indicated the useful life on which to calculate the depreciation; higher values arerecorded in the financial statements of Crank Brothers Inc. for a total of USD 7,694,000, allocated for
USD 4,780,500 to the item “Industrial patent rights”, amortised over 15 years. The residual portion wasrecorded under “Goodwill”, as shown below.
The item “Concessions, licenses, trademarks and similar rights” refers to the value of the trademark
portfolio held by the Group companies, for a value of € 18,351,322; the remainder relates to theconcession rights of the land on which the Selle Royal China plant stands and to licenses and costs forthe implementation of non-proprietary management software.
Trademarks are considered “with an indefinite useful life” and are therefore subject to annual
impairment tests. The analyses carried out confirm the recoverability of the book value at which they
are recorded in the financial statements through the analysis and estimate of the cash flows that are
estimated will be generated in the future.

65

The item “Other” refers to the recognition of intangible assets that meet the requirements of IAS 38
for their recognition in the financial statements.
Intangible assets in progress and advances mainly relate to expenses incurred by the Group in relation
to projects for the development of new products and product lines not yet operational at the end of
the year.
31. TANGIBLE FIXED ASSETS
Details of the item and the changes that have taken place since the previous financial statements areshown in the following table:
Balance as at
30 June 2021

Increases(+)

Land and buildings

7.564.390

361.676--(596.619)(97.973)7.231.474

Right of use of leased assets

6.853.524

5.243.385--(1.702.942)

127.278

10.521.245

Plant and machinery

8.537.565

2.946.039(3.290)59.656(1.510.602)

551.603

10.580.971

Industrial and commercial equipment

4.824.429

2.170.146-

529.647(2.583.746)

147.370

5.087.847

Other assets

1.457.009

584.654(18.931)(8.535)(530.106)125.567

1.609.657

Fixed assets in progress and payments on account

1.292.697

1.666.475(126.065)(580.768)-

40.5522.292.890

30.529.614

12.972.375(148.287)-(6.924.016)

894.39737.324.083

Total tangible assets

Decreases
Depreciation Translation Balance as at
Reclassification
(-)
(-)
diff.
30 June 2022

The increases in the item “land and buildings” relate to improvements made by Selle Royal Group
S.p.A. and by some of its subsidiaries on properties used for production and commercial activities.
The item “rights of use of leased assets” represents the discounted value recorded in the financial
statements following the adoption of IFRS 16, and relates to the premises leased by Selle Royal Group
S.p.A. and the offices of Crank Brothers Inc..
The increase of this item is related to the redetermination of future lease fees owed for the leasing of
the building of Selle Royal Group S.p.A. after the signing of a new lease contract, to the recording of theright of use related to the new plant before mentioned, to the leasing of a building in San Clemente(California) where have been transferred the employees and the equipments before located on thesecondary office of Crank Brothers Inc. in Ogden, Utah as well as, finally, to the new multi-annual
leasing contracts that respect the criteria for the recording in the financial statement under the IFRS
16 accounting standard.
The increases in other items, and in particular “plant and machinery”, “industrial and commercial
equipment” and “work in progress and advances” mainly refer to investments of an industrial nature,
made mainly by the parent company and the production subsidiaries.

6632. EQUITY INVESTMENTS
The balance reflects the cost incurred for the acquisition of equity investments in companies notconsolidated on a line-by-line basis and relates, for € 2,463,609, to the equity investment in Highway
Two Llc., with registered office in Olney (USA) and share capital of US$ 241,648, over which indirect
joint control of 50% is exercised. This equity investment is measured using the equity method. The
residual amount, equal to € 18,398, relates to minority interests held by Selle Royal Group S.p.A. (€723) and the subsidiary Royal Ciclo (€ 17,675).
Some economic indicators of Highway Two LLC, relating to 2022, are listed below, as well as thebalance sheet balances as at 30 June 2022, and related comparative data. For the sake ofcompleteness, the fiscal year of the joint venture coincides with the calendar year.
30/06/2022
Highway 2 Llc:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Shareholders’ equity

$
$
$
$
$

27.825.001
725.028(23.424.925)(44.673)
5.080.432

Group interest (50%)$

2.540.216

30/06/2021

Change$$$$$23.813.171
1.043.037(19.918.573)(63.444)4.874.191$ 4.011.830$ (318.009)$ (3.506.352)$
18.771$ 206.241$

2.437.095 $103.120

Carrying amount of the investment
in Highway 2 Llc. (in €)2.463.609

2.045.238

418.371

Other equity investments (in €)Total equity investments

18.3982.482.007

15.4002.060.638

2.998
421.369

Financial year 2022 Financial year 2021

ChangeHighway 2 Llc:
Revenues
Cost of sales
Operating and financial costs
Net profit

$
$
$
$

8.311.579(7.565.946)(681.629)
64.004$$$$

Group interest (50%)$

32.002$

7.367.470(7.566.926)
335.419135.964$ 944.109$
980$ (1.017.048)$(71.960)

67.982 $(35.980)

33. GOODWILLThis item had a balance as at 30 June 2022 of € 10.673.404.
This item includes the goodwill recorded in the financial statements of the subsidiary Crank Brothers
Inc., as well as the higher value recognised at the time of acquisition of the shares in the same
American subsidiary, in the Chinese subsidiary Selle Royal Vehicle (China) Co. Ltd. and the Brazilian
subsidiary Royal Ciclo Industria de Componentes Ltda.
In line with the provisions of IAS 36, goodwill is not subject to amortisation but to impairment testing.
The analysis carried out by comparing the value of the goodwill recorded in the financial statements

67

and the present value of the cash flows that it is reasonably expected will be generated by the threecompanies justifies the values represented.
34. DEFERRED TAX ASSETS
Details of the item in question is shown in the following table:
30/06/2022

30/06/2021

TEMPORARY DIFFERENCES TAX EFFECTTEMPORARY DIFFERENCES TAX EFFECT

Current deferred tax assets:
Estimate of customer bonuses
Accrued leave for employees
Bad debt provision
Unrealised margin on intra-Group sales
Tangible assets
Other temporary differences
Subtotal current deferred tax assets

29.507277.171362.9653.669.942
131.908
189.108
4.660.602

8.233
65.19777.029920.139
22.42451.6911.144.713

18.818133.686247.858989.788
243.538
106.959
1.740.647

5.250
40.48152.857250.100
41.40133.403423.494

Provision for supplementary customer indemnities
Inventory write-down provision
Intangible assets
Tangible assets
Prior tax losses - Federal taxes
Prior tax losses - State taxes
Subtotal non-current deferred tax assets

188.8171.995.869
522.773527.407498.454376.598
4.109.917

52.680462.835
145.85444.175104.675
33.290843.510144.961
1.685.361
580.859227.614566.552
1.296.687
4.502.033

40.444394.650
162.060
30.652118.976124.926
871.708

TOTAL DEFERRED TAX ASSETS

8.770.519

1.988.222

6.242.681

1.295.202

Non-current deferred tax assets:

The change in the current portion of deferred tax assets is mainly related to the deferred tax effect on
the higher value of the provision for unrealised intercompany profit.
The non-current deferred tax assets, overall, not have been recorded significant variation.
35. FINANCIAL ASSETS AT FAIR VALUEThis item includes, for an amount of € 640,153, the value of a financial asset recognised in the financial
statements of the subsidiary Royal Ciclo and refers to the amounts paid by the latter to a financing
consortium in which it participates. The increase of the value compared to 30 June 2021 is significally
influenced by the appreciation, during the period, of the Brazilian Reais, that is the currency used forthe recording in the financial statement of the subsidiary compared to the reference Group currency.
Furthermore, this item includes the market value of two hedging derivative instruments with respect tothe risk of fluctuations in interest rates (“IRS”), for an amount of € 964,394; these derivatives weresubscribed by Selle Royal Group S.p.A. in October 2021 as collateral for the opening of the same
number of long-term floating rate loans maturing in September 2027, previously recognised underfinancial liabilities at fair value.

68

These derivatives, maturing at the same time, have the following characteristics:
Interest Rate Swap;
Purpose: hedging;
Underlying financial risk: interest rate risk;
Date of trading: 29/10/2021;
Notional value: € 10,000,000, the first; € 9,500,000, the second;
Liability hedged: medium-term loan;
Initial date: 31/10/2021;
End date: 30/09/2027;
Debtor Selle Royal Group S.p.A.: basic contractual fixed rate 30E/360 paid at the end of the quarter contractual fixed rate 0.10%;
Debtor Bank: basic product index rate 30E/360 paid at the end of the quarter - 3-month Euribor at the
beginning of the period, with a minimum rate (floor) of -0.90%;
Periodic expiry date: quarterly.
Since the hedge is effective, the initial recognition and subsequent change in the fair value of thesederivative instruments during the period in question were recognised in a special restricted equity
reserve (“cash flow hedge reserve”), net of the related deferred tax effect.
36. OTHER NON-CURRENT ASSETSThis item, amounting to € 685,847, mainly refers to security deposits relating to lease contracts
pertaining to Selle Royal Group S.p.A. and Crank Brothers, Inc. The final balance is aligned to thebalance of last financial period.
CURRENT LIABILITIES
37. TRADE PAYABLES“Trade payables” are recognised net of trade discounts and any advances paid to suppliers; cash
discounts are instead recognised at the time of payment. The nominal value of these payables was
adjusted, in relation to returns or allowances (invoicing adjustments), to the extent corresponding to
the amount defined with the counterparty.
The balance is € 20,179,920, in decreasing compared to the previous period, even if there is asignificant increase of the inventories, that confirm the financial strenght of the Group.

6938. TAX PAYBLESThe item in question is detailed below:
30/06/2022 30/06/2021
Direct taxes
Indirect taxes
Local taxes
Withholding taxes on employees and others
Payables due to tax disputes
TOTAL TAX PAYABLES

2.321.907
897.792
58.449844.655
2.166.486
6.289.289

Change1.175.186
1.146.721
931.773(33.981)54.3274.122
1.485.159 (640.504)
2.616.446 (449.960)
6.262.892
26.398The higher payables for direct taxes are attributable to the significant profits recorded by the Group
companies; the decrease of the payables for with-holding taxes, almost entirely referred to the parent
company Selle Royal Group S.p.A., reflects the portion withheld by the employer as withholding agent
for the higher performance bonuses recognised by virtue of the extremely positive results achieved in
the previous fiscal year.
Payables for tax disputes refer to amounts provisionally due pending judgement and subject toexisting instalment plans in place with the Italian Revenue Agency.
39. MEASUREMENTS AT FAIR VALUEIFRS 13 establishes a three-level hierarchy useful for categorising assets/liabilities measured at fairvalue on the basis of increasingly less certain inputs; these levels, shown in descending order ofpriority, can be described as follows:
Level 1: Level 1 inputs are quoted prices (not adjusted) in active markets for identical assets or
liabilities, which the entity can access at the measurement date. A price quoted in an active market
provides the most reliable proof of fair value and, when available, must be used without any
adjustment to measure the fair value. A Level 1 input will be available for many financial assets andliabilities, some of which may be traded in different active markets (for example, on different stock
exchanges). Therefore, in Level 1 the focus is on the determination of the following elements:-

the main market for the asset or liability or, in the absence of a main market, the mostadvantageous market for the asset or liability; and-the possibility for the entity to carry out a transaction with the asset or liability at the price ofthat market at the measurement date.

Level 2: Level 2 inputs are inputs other than the listed prices included in Level 1 observable directly
or indirectly for the asset or liability. If the asset or liability has a certain (contractual) duration, a Level
2 input must be observable for substantially the entire duration of the asset or liability. Level 2 inputs
include:70-quoted prices for similar assets or liabilities in active markets;-

quoted prices for identical or similar assets or liabilities in non-active markets;-data other than the quoted prices observable for the asset or liability, for example:
o interest rates and yield curves observable at commonly quoted intervals;
o implied volatility;o credit spreads;-

inputs corroborated by the market.
Level 3 : Level 3 inputs are unobservable inputs for the asset or liability. The non-observable

inputs must be used to measure the fair value to the extent that the relevant observable inputs are notavailable, therefore allowing situations of low market activity for the asset or liability at themeasurement date. However, the purpose of the fair value measurement remains the same, i.e. aclosing price at the measurement date from the perspective of a market operator who owns the asset
or liability. Therefore, unobservable inputs must reflect the assumptions that market participants
would use in determining the price of the asset or liability, including assumptions about risk.
The following table summarises the financial assets and liabilities measured at fair value shown in thefinancial statements and the related measurement criteria adopted:
As at 30 June 2022
Notes
Cash and cash equivalents
Equity investments
Financial assets at fair value
Derivative financial instruments
TOTAL ASSETS
Loans
Bonds
TOTAL LIABILITIES

Total

fair value measurements
Level 1
Level 2

Level 325, 3932
35, 3935, 3926.283.940
2.482.007
640.153964.39430.370.495

26.283.940
26.283.940

964.394
964.394

2.482.007
640.153
3.122.160

39, 40, 48
39, 4455.323.589
5.875.596
61.199.185-

55.323.589
5.875.596
61.199.185

-

Notes

Total

fair value measurements
Level 1
Level 225, 3932
35, 3919.846.067
2.060.638
509.81322.416.519
47.362.266
7.778.960
1.452
55.142.678

As at 30 June 2021
Cash and cash equivalents
Equity investments
Financial assets at fair value
TOTAL ASSETS
Loans
Bonds
Derivative financial instruments
TOTAL LIABILITIES

39, 40, 48
39, 44
39

Level 319.846.067-

19.846.067-

2.060.638
509.8132.570.452-

47.362.266
7.778.960
1.452
55.142.678

-

-

71

40. SHORT-TERM LOANS
The balance of this item, as at 30 June 2022, amounting to € 23,421,806, reflects the actual payablefor principal, interest and accessory charges accrued and payable and includes both credit lines
whose duration does not exceed 12 months and the current portion of medium/long-term loans.
41. CURRENT LIABILITIES FOR LEASED ASSETS
The balance of this item expresses the discounted value of the lease payments subject to recognitionin accordance with IFRS 16 and falling due by 30 June 2023.
42. OTHER CURRENT LIABILITIESThe item in question, compared with the balance as at the reporting date of the previous year, isdetailed as follows:
30/06/2022 30/06/2021
Payables to employees
Payables to social security institutions
Payables to sales agents
Payables for tax consolidation
Accrued expenses and deferred income
Sundry payables
TOTAL CURRENT LIABILITIES

6.919.323
868.326
236.627
1.968.311
2.561.951
743.414
13.297.952

Change6.099.043
820.280825.33142.995305.035 (68.408)
1.339.644
628.667168.747 2.393.204
952.253 (208.839)
9.690.052 3.607.900

The increase of this item is substantially linked to the higher value of the payables to employees, of thepayables for tax consolidation, corresponding to the accrual of IRES balance on fiscal profit of Selle
Royal Group S.p.A. for the current fiscal year, as well as to the increase of item related to accrued
expenses that, also in this is case, is interely attributable to the parent company Selle Royal Group
S.p.A..
The above mentioned increase is related to what is stated concerning the tax receivables for directtax. In fact, with a view to compliance with the accrual principle and in accordance with the provisionsof IAS 20, contributions related to tax credits related to investments in capital goods pertaining to thecollectively known "Industry 4.0" subsidies are recognised as deferred revenue on a systematic basis
over the useful life of the assets to which they refer.

72

NON CURRENT LIABILITIES
43. EMPLOYEE BENEFITSThis item mainly includes the employee severance indemnity provision of the Italian companies of theGroup.
The value of the employee severance indemnity provision was correctly determined by the Group by
applying actuarial methods. The valuation of the liability was carried out by independent actuaries
using the projected unit credit method, which determined the value on the basis of the following
fundamental assumptions:- mortality rate: these data were taken from the actuary technician on the basis of the RG48 mortality
tables published by the State General Accounting Office;- disability rate: the annual probabilities of elimination from the service due to incapacity were inferredon the basis of what was published by INPS in 2000;- annual probability of elimination from the service for other reasons: this was assumed to be 0.5%,
determined on the basis of the historical trend of this parameter within the company;- annual probability of request for employee severance indemnity advances: this was assumed to be
3.0%, based on the historical trend of this parameter within the company;- annual discount rate: this was assumed to be 2.74% based on the average financial duration of theliabilities to employees;- annual rate of increase in employee severance indemnity: as envisaged by art. 2120 of the Italian Civil
Code, is determined as 75% of the inflation rate plus 1.5% and equal to 3.075%;- annual inflation rate: estimated at 2.1% over the time horizon considered.
The relative changes are shown in the following table:
Balance as at
30 June 2021

Provisions (+)

Provisions for employees

1.874.444

76.456(175.748)

9.915(259.986)

6.664

1.531.744

TOTAL

1.874.444

76.456(175.748)

9.915(259.986)

6.664

1.531.744

Uses (-)

Interest cost

Actuarial (gains) Translation Balance as at/ lossesdiff.
30 June 2022

In compliance with the provisions of IAS 19 revised, the possible effects on the employee severance
indemnity provision deriving from fluctuations in the main parameters used in the actuarial estimate
are given below:
Variable+1% on the turnover rate
-1% on the turnover rate
+1/4% on the annual inflation rate
-1/4% on the annual inflation rate
+1/4% on the annual discount rate
-1/4% on the annual discount rate

Value
1,460,878
1,456,853
1,479,421
1,438,928
1,427,250
1,491,893
73

The above-mentioned sensitivity analysis on employee severance indemnity is based on reasonablechanges in the key assumptions that occur at the end of the year, while maintaining all otherassumptions constant.
This analysis may not be representative of an actual change in the provision for employee benefits, as
it is unlikely that the changes in the assumptions will occur independently of each other.
Lastly, the expected future disbursements are shown below, based on the assumptions presented
above:
Years
1
2
3
4
5

Expected
disbursements
123,42978,58159,023
102,530
49,927

44. BONDS
The amount due for bonds is shown under current liabilities, in relation to the portion maturing withintwelve months from the consolidated annual financial report's date, and under non-current liabilities
for the residual portion.
These items refer to the value of the liability in the books of the subsidiary company Selle Royal Group
S.p.A. relating to the bond loan (so-called "mini-bond") listed on the Pro3 segment of the ExtraMOT list
managed by Borsa Italiana S.p.A., and issued on 24 September 2018 for a nominal amount equal to €10,000,000.00.
The payable recorded therein, in compliance with the provisions of IAS 39, is recognised on the basisof the amounts collected, net of the transaction costs and subsequently measured at amortised cost,using the effective interest rate method.
During the first half-year of the tax current tax year, the second repayment instalment was paid,
amounting to € 2,000,000.
45. MEDIUM/LONG-TERM LOANS
This item, amounting to € 31,901,782, up by € 5,170,412 compared to 30 June 2021, relates to the
portion falling due beyond the next year of medium/long-term loans (mainly unsecured loans) takenout for the most part by the parent company Selle Royal Group S.p.A. with leading banks. The increaseof the final balance is substantially related to the subscription of two unsecured mortgages backed by74

a government guarantee, according to the methods and terms set forth in the emergency decrees
issued by the Italian government to support the liquidity of companies.
46. PROVISIONS for RISKS and CHARGESThe breakdown and changes in this item are shown below:
Balance as at
Balance as at 30
Provisions (+) Uses (-) IAS adjustment
30 June 2021
June 2022
Provision for supplementary customer indemnities
Provision for payment of foreign agents
End of mandate indemnity
TOTAL

75.164144.961406.250626.375

17.16443.85690.000151.020

-

(941)
(941)

91.388188.817496.250
776.455

The provision for severance indemnity refers to the pension fund set up by the parent company Selle
Royal Group S.p.A. in compliance with the resolutions of the Shareholders' Meeting.
47. DEFERRED TAXESThe balance and breakdown of this item are broken down as follows:
30/06/2022
TEMPORARY DIFFERENCES
Derivative financial instruments
Intangible assets
Tangible assets
Other temporary differences
TOTAL DEFERRED TAXES

30/06/2021
TAX EFFECT

964.394178.1411.998.517
83.7863.224.837

231.455
61.915583.01217.595893.978

TEMPORARY DIFFERENCES TAX EFFECT
423.877
2.379.229
65.1232.868.228

97.121
650.196
13.676760.993

The increase of this item is mainly due to the recording of deferred tax liabilities calculated on themarket value of derivative financial instruments descrived above.
48. NON-CURRENT LIABILITIES for LEASED ASSETS
The balance of this item expresses the discounted value of the lease payments subject to recognitionin accordance with IFRS 16 and falling due after 30 June 2023.
49. SHAREHOLDERS’ EQUITY
The share capital is composed as follows:
Ordinary share – 6.000.000,00 (with no par value).
For completeness, please note that the Shareholders' Meeting, which met on 18 February 2022,
resolved to dematerialise and split the shares of the parent company Selle Royal Group S.p.A., on thebasis of a ratio of 6,25 new actions for each previously existing action. This division was finalised in75during the month of September 2022.
The reconciliation between shareholders' equity and profit for the year of the parent company andconsolidated shareholders’ equity and profit for the year is shown in the following table:
30 June 2022
Shareholders’ equity Profit for the year

30 June 2021
Shareholders’ equity Profit for the year

Selle Royal Group S.p.A. as per the financial statements

30.470.661

10.532.489

21.372.116

10.144.396

Difference between book value and pro-rata value
shareholders' equity of consolidated companies

21.843.390-

5.214.939--

13.023.777-

11.415.016(2.683.842)(2.010.128)(673.714)

31.7697.380.100(160.254)

6.625.516(6.673.626)

Shareholders' equity and profit for the year pertaining to the Group

57.010.309

21.385.884

32.538.857

14.917.555

Shareholders' equity and profit for the year attributable to minority interests

12.634.727

3.117.710

8.664.645

3.622.371

Shareholders' equity and profit for the year as reported in the consolidated financial statements

69.645.036

24.503.594

41.203.502

18.539.926

Pro-rata results achieved by consolidated subsidiaries
Elimination of intercompany profits included in inventories
Other consolidation differences

This consolidated annual financial report, consisting of the Income Statement, Statement ofComprehensive Income, Balance Sheet, Statement of Changes in Shareholders' Equity, the Cash Flow
Statement and the Explanatory Notes, provide a true and fair view of the equity and financial position
as well as the economic result for the year ended 30 June 2022 and correspond to the results of theaccounting records.
* * *Pozzoleone (VI), 19 October 2022
The Chairperson of the Board of Directors(Barbara Bigolin)76Tel: +39 02 58.20.10
www.bdo.it

Viale Abruzzi, 94
20131 Milano

Independent auditor’s report pursuant to article 14 of Legislative Decree n. 39
To the shareholder of SELLE ROYAL GROUP S.P.A.
Report on the consolidated financial statements

OpinionWe have audited the consolidated financial statements of Selle Royal Group (the “Group”),
which comprise the statement of consolidated balance sheet as at 30 June 2022, thestatement of consolidated comprehensive income, the statement of changes in shareholders
equity, the statement of consolidated cash flows for the year then ended, and notes to thefinancial statements, including a summary of significant accounting policies.
In our opinion the consolidated financial statements give a true and fair view of the financial
position of the Group as at 30 June 2022 and of its financial performance and its cash flows
for the year then ended in accordance with International Financial Reporting Standards as
adopted by the European Union.

Basis of opinion
We conducted our audit in accordance with International Standards on Auditing (ISA Italia).
Our responsibilities under those standards are further described in the auditor’s
responsibilities for the audit of the consolidated financial statements section of this report.
We are independent of the company in accordance with ethical requirements and standards
applicable in Italy that are relevant to the audit of financial statements. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

Responsibilities of management and those charged with governance for the financial
statements
Management is responsible for the preparation and fair presentation of the financial
statements in accordance with International Financial Reporting Standards as adopted by theEuropean Union and, within the limits of the law, for such internal control as management
determines is necessary to enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends toliquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial
reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue anBari, Bologna, Brescia, Cagliari, Firenze, Genova, Milano, Napoli, Padova, Palermo, Roma, Torino, Verona

BDO Italia S.p.A. – Sede Legale: Viale Abruzzi, 94 – 20131 Milano – Capitale Sociale Euro 1.000.000 i.v.
Codice Fiscale, Partita IVA e Registro Imprese di Milano n. 07722780967 - R.E.A. Milano 1977842
Iscritta al Registro dei Revisori Legali al n. 167911 con D.M. del 15/03/2013 G.U. n. 26 del 02/04/2013
BDO Italia S.p.A., società per azioni italiana, è membro di BDO International Limited, società di diritto inglese (company limited by guarantee), e fa partedella rete internazionale BDO, network di società indipendenti.

auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with International Standards on
Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of the audit in accordance with International Standards on Auditing (ISA Italia), we
exercise professional judgment and maintain professional skepticism throughout the audit.
We also:·

Identify and assess the risk of material misstatement of the financial statements,
whether due to fraud or error; design and perform audit procedures in response to
those risks, and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of non detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion,forgery, intentional omissions, misrepresentations or the override of internal control;·

Obtain and understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the Company’s internal control;·

Evaluate the appropriateness of accounting principles used and the reasonableness ofaccounting estimates and related disclosures made management;·

Conclude on the appropriateness of management’s use of the going concern and,based on the audit evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the Company’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, weare required to draw attention in our auditor’s report to the related disclosures in
the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Company
to cease to continue as a going concern;·

Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent theunderlying transactions in a manner that achieves fair presentation;·

Obtained sufficent appropriate audit evidence regarding the financial information of
the entities or business activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for the direction, supervisionand performance of the group audit. We remain solely responsible for our audit
opinion on the consolidated financial statements.

We communicate with those charged with governance, identified at the appropriate level as
required by the ISA Italia, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.

Report on other legal and regulatory requirements
Opinion pursuant to article 14, paragraph 2, letter e), of Legislative Decree n. 39/10.
The directors of Selle Royal Group S.p.A. are responsible for the preparation of the report on
operations of Selle Royal Group S.p.A. as at 30 June 2022, including its consistency with thefinancial statements and the compliance with the applicable laws and regulations.

Pag. 2 di 3

We have performed the procedures required under audit standard (SA Italia) n. 720B in order
to express an opinion on the consistency of the report on operations, with the consolidated
financial statements of Selle Royal Group as at 30 June 2022and on its compliance with theapplicable laws and regulations, and in order to assess whether its contain material
misstatements.
In our opinion, the report on operations is consistent with the consolidated financial
statements of Selle Royal Group as at 30 June 2022and is compliant with applicable laws andregulations.
With reference to the assessment pursuant to article 14, paragraph. 2, letter e), of
Legislative Decree n. 39/10 based on our knowledge and understanding of the entity and its
environment obtained through our audit, we have nothing to report.
Milan, 25 October 2022
BDO Italia S.p.A.

Signed by Carlo Consonni
PartnerThis report has been translated into English from the original, which was prepared in Italian
and represents the only authentic copy, solely for the convenience of international readers.

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