CONTENTSREPORT ON OPERATIONS

4SIGNIFICANT EVENTS DURING THE YEAR

4

THE SELLE ROYAL GROUP and the WAR EVENTS in UKRAINE10ECONOMIC PERFORMANCE

11

FINANCIAL POSITION

13DERIVATIVE FINANCIAL INSTRUMENTS

15

INVESTMENTS

15

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

15RISK ANALYSIS

16

ENVIRONMENT, PERSONNEL and SECTOR REGULATIONS

18

TRANSACTIONS WITH PARENT COMPANIES, AFFILIATES AND RELATED PARTIES19

SIGNIFICANT EVENTS AFTER THE END OF THE YEAR

19

BUSINESS OUTLOOK20

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

24

CONSOLIDATED CASH FLOW STATEMENT PREPARED USING THE INDIRECT METHOD

25

EXPLANATORY NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL REPORT AS AT 30 JUNE 2023
1.

INTRODUCTION

26
26

2.
MANDATORY ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED BY THE
GROUP

27

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

30

5.

2018-2020 ANNUAL IMPROVEMENTS

32

6.

FINANCIAL STATEMENT FORMATS AND CLASSIFICATION CRITERIA

327.

ACTIVITIES OF GROUP COMPANIES

34

8.

GENERAL PREPARATION CRITERIA AND CONSOLIDATION PRINCIPLES

35

9.

MEASUREMENT CRITERIA

38

10.

ESTIMATES AND ASSUMPTIONS

50

11.

SEGMENT REPORTING

52

12.

DERIVATIVE FINANCIAL INSTRUMENTS

54

13.

RISK MANAGEMENT

55

14.

TRANSACTIONS with RELATED PARTIES55

ANALYSIS and COMPOSITION of the INCOME STATEMENT

56

ANALYSIS and COMPOSITION of the BALANCE SHEET61

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 2023 reported a consolidated profit of € 8,215,282, of which € 5,287,935
pertaining to the Group.

SIGNIFICANT EVENTS DURING THE YEAR“The times, they are a-changin'”-Bob Dylan, singer-songwriter and winner of the Nobel Prize for Literature (2016)

From an economic point of view, the fiscal year was characterised by phenomena strongly adverse to
growth, especially for manufacturing companies. The rapid increase in energy costs following the
sanctions imposed by the international community against Russia, the main gas supplier for Europe (inthis regard, ISTAT calculated the increase in the price of electricity to be + 131.5% and natural gas +776% between 2019 and 2022; source: La Repubblica - 11 October 2022); the materialisation of fears,
the latter already present since the end of 2021, relating to the growth of the inflation rate to levels now
forgotten in many Western countries; the consequent generalised increase in interest rates by themain global Central Banks (Federal Reserve, European Central Bank and Bank of England inparticular) according to a trajectory that is unparalleled in recent history in terms of magnitude andrapidity, have on the whole strongly deteriorated the expectations of economic operators, withevident recessive effects in the Old Continent.
This has been compounded by lingering geopolitical crises: the war in Ukraine, still not close to a
resolution, and the deterioration of diplomatic relations between the United States and China, bothconsequent to tensions over the fate of Taiwan and the Dragon's more assertive stance in the entire
Indo-Pacific region, aimed at undermining the dominance of the United States and its allies, just to
name the main ones.
In this context of extreme turbulence, the cycle sector experienced equally “extreme” dynamics. As
described in previous financial reports, 2021 and 2022 were characterised by global logistics
congestion and an unprecedented increase in demand. Both of these phenomena led to an evident
imbalance between supply and demand, also due to the limited possibility of adapting production
capacity quickly; moreover, as previously commented on several times, there has been astrengthening of some long-term trends, such as the increasing adoption of pedal assisted bicycles.

4Lastly, future inflation expectations in a sector generally characterised by low profit margins played arole in the excess of orders found throughout the supply chain.
In the space of a few months, an opposite imbalance scenario then materialised, namely an excess of
supply over market demand, which in turn normalised after the abnormal spike following the onset of
the SARS-CoV-2 pandemic.

Inventory levels in the warehouses of retailers, distributors andmanufacturers have therefore progressively increased, ultimately causing a sharp decline in businessto-business sales, first in the aftermarket channel and, subsequently, also in the OEM channel. In the
Netherlands, for example, the H&L Benchmark Group reported an increase in stocks of + 30% in June
2023 compared to a year earlier among the hundreds of retailers affiliated to it; even more significant
is that half of the members of this Group reported an increase in inventory of + 50% (source: H&L
Accountants, as mentioned in BikeEurope: “High inventories threat to Dutch market stability”).
On the other hand, the cycle sector is demonstrating its ability to adapt to changed conditions and to
an increasingly dynamic context. A more favourable regulatory environment and the attention to thesector shown by many transnational institutions (United Nations, European Parliament to name a few)
in promoting its development as a key element for the effective implementation of the green strategy
and micro-mobility as a long-term trend are elements of optimism for the future, once the current
imbalances are resolved.
Some comments on the main markets in which the Group operates are provided below:
EUROPE“The energy crisis and a challenging geopolitical situation will make 2023 a difficult year for thebicycle industry…”“… (but we remain) very optimistic about the prospect of the bicycle industry”-

World Bicycle Industry Alliance (WBIA)In Europe, the contraction took shape starting in the summer of 2022, coinciding with the first few
months of the fiscal year under review for the Selle Royal Group, beginning with the aftermarket
channel (continental and national distributors and retailers) and persisted for the entire fiscal year
under review.
As regards the OEM channel (i.e. sales to bicycle assemblers), the trend was steady until the end of
autumn 2022 and then underwent a sharp contraction starting in the winter months. This lag
compared to the channel of the so-called "spare parts dealers" is due to the lesser responsiveness ofcycle manufacturers who, on the one hand, are generally upstream in the value chain and therefore
5less exposed to the first signs of market contraction. On the other hand, they have a production
structure that tends to be inelastic in the short term, having to plan production at least 9 months inadvance in "normal" periods, which have definitely lengthened as a result of the critical issues thathave emerged since spring 2020 and already described above. This has meant that many players
have been forced to produce even though they were aware that they would be overstocked; thisphenomenon clearly has affected and will continue to affect channel performance in the short term.
When examining the main consumer markets of the Old Continent, an interesting trend can beobserved: the decline in total volumes in 2022 compared to the previous year (from 4.7 million units to
4.6 million in Germany, -2%; source: ZIV. In the Netherlands, 855 thousand units, equal to -7%
compared to 2021; source: RAI. 2.6 million units in France, down -7%: source: French Bicycle
Observatory) was offset by an increase in the value of the sector. In the Netherlands, for example,
there was a growth of +2 % to around € 1.5 billion (source: RAI); in Germany, the sector is worth around€ 7.4 billion (up from around € 6.5 billion in the previous year and just over € 4 billion in 2019; source:
ZIV). Similar considerations also apply to France, where the cycle sector reached € 3.6 billion (+ 5.2%
compared to 2021; source: Union Sport & Cycle).
The main cause for this increase in value (calculated by considering bicycles together with parts andaccessories) against a decrease in the volume of bicycle sales lies in the persistent positive trend in
the sales of pedal assisted bicycles. In the Netherlands, for example, they are estimated to havereached a market share of 57% in terms of volume and 80% in terms of value (source: RAI); in
Germany 48% in volume (source: ZIV), exceeding 50% in value. In France and Italy, which are
traditionally less mature markets than the previous ones, they account for 28% (but 61% in value;source: Union Sport & Cycle) and 19% (compared to 15% the previous year; source: ANCMA) of total
bicycle sales, respectively.
As is well known, the imbalances that followed the outbreak of the pandemic in the early 2020s also
accelerated assessments of whether some of the production previously relocated to the Far East
should be brought back to the West. In the cycle sector, this phenomenon is more evident in Europe,
where over the years a significant portion of production destined for local consumption has remained;
according to Eurostat, 13.5 million bicycles were produced in Europe in 2022, up + 11% compared tothe previous year (source: Eurostat, as mentioned in Il Sole 24 Ore of 17 February 2023).
Finally, of considerable interest for the future of the sector is the increasing centrality of the “bicycle asa means of transport” in the European political agenda. Also in February 2023, the European
Parliament approved a “Cycling Strategy”, inviting the Member States and the European Commission
to develop the sector by supporting “Made in Europe” products and aiming to double the number of6

kilometres traveled by 2030, thanks to 18 levers including, for example, the development of
infrastructure in urban and extra-urban centres ( so-called “cycle highways”), investments to favour
multi-modality (i.e. creating synergies between cycles and other means of transport) and also throughtax leverage (for example, ahead of the curve was Portugal, a country that has been very active indeveloping a manufacturing district for years, reducing VAT on bicycles from 23% to 6%).
Therefore, beyond the contingent critical issues, the cycle sector in Europe is believed to be able tocount on a number of structural factors in the future that will foster its organic growth and, with it, thatof local economic agents and the labour market.
AMERICA“The financial wrecking ball has been released among IBDs and brands”-

Jay Townley - Columnist and industry specialist

America, and in particular the United States, were forerunners of the crisis in the business-to-businessmarket in the cycle sector, highlighting the first signs of it as early as spring 2022. On the other hand,
having not experienced the widespread lockdowns implemented in the rest of the world and having
been able to benefit from economic stimuli in the order of trillions of dollars such as those provided by
the Trump Administration first and by the Biden Administration subsequently, the US economy (andthe cycle sector in particular) has experienced a period of sustained growth in recent years.
Since the early 1990s, significant volumes of bicycles are no longer produced in America, having
relocated production to the East (a phenomenon actually started by Schwinn as early as the late1970s), especially in China (95% of the total up to early 2020; source: Bike Europe of 29 November2022) and partly in Taiwan for the high-end products.
Thus, the sector had already been put to the test in recent years by the foreign policy introversion
undertaken by the Trump Administration, with the introduction of strict anti-dumping protectionist
measures in an anti-Chinese vein and the beginning of the end of globalisation or, more prosaically, theso-called "McDonald Theory" (in short, wherever there is a McDonald's, wherever there is room for
mutual investment and trade, geopolitical tensions and the risk of war are limited).
Subsequently, the logistical congestion that particularly affected American ports (primarily those on
the west coast) during 2021, and the normalisation of market demand had particularly significant
effects here. A People for Bikes report (as cited in an editorial published in Bicycle Retailer of 10 June2023) shows how the peak of monthly sell-in sales (therefore, sales to retailers) reached in March2022 (about USD 200 million, second only to the peak of May 2020, in the middle of the pandemic,

7

when this threshold was exceeded; source: ibidem) was followed by a drop in sales in the subsequentmonths (statistics available until April 2023 but, from experience, we believe that the trend continued
afterwards). At the same time, the value of stocks at retailers (which had reached its lowest point in
the summer months of 2021, at less than USD 50 million) literally jumped to USD 765 million as at 31
March, further growing to almost USD 800 million as at 30 April 2023 (source: Bicycle Retailer of 10
June 2023). These few figures clearly show the extent of the challenge that American retailers arefacing, many of whom have ended up closing their business or selling it to one of the major bicycle
brands that dominate the US market.
At the same time, a note of optimism comes from the bicycle use rate, which has reached the peak of
the last 20 years. with the exception of the indoor use rate, which fell by -33% for group use and -11%
for individual use, “ridership” grew by approximately +11% compared to the pre-pandemic (source:
ibidem). Similar data is also found in the analyses of the National Sporting Goods Association (ibidem),
which shows a significant increase in use in the youth bracket (7-17 years) in the last two years (after aconstant decline since 2000, the year in which this statistic began to be recorded) and a strong
growth by adults in 2020 (only partially reduced in 2021 to then remain stationary in 2022). Thismeans that a part of the market that had "materialised" with the pandemic has not disappeared; this isalready excellent news, in a market that is on average poorer (the clear majority of bicycles are forchildren and/or sold in large-scale distribution, at very low prices) and much less mature than theEuropean market.
The sales boom recorded in 2020 and 2021 can probably also be interpreted as a sort of "advance" ofsales that would have materialised organically in the following years. Fears of recession, inflation andrising interest rates have certainly reduced the consumption propensity for this particular category of“discretionary” products, despite a very aggressive market in commercial policies aimed at reducing
inventories as quickly as possible.
In conclusion, in the knowledge that North America (and the United States in particular) has an
economy that is very responsive to the economic cycle and that the current market phase stillpresents the critical issues described above, the increase in the rate of cycle adoption and,
consequently, the outlook for the industry in this part of the world is viewed in a thoroughly positive
light.

8

ASIA"Chinese bicycle companies should eye greater exports to emerging markets amid a downtrend inbicycle shipments globally"-

China Bicycle Association

As is well known, Asia is first and foremost a source of supply to meet the demand of Westernmarkets; historically, as described above, the largest production volumes are in China, also throughinvestments from abroad (in this case, Taiwan).
On the other hand, during the year in question, there continued to be a gradual shift of volumes from
the Middle Kingdom to other competitive countries from a labour cost point of view and, at the sametime, not subject to the protectionist measures imposed first by the European Union and, more
recently, also by the United States; with reference to the latter, the geopolitical tensions alreadymentioned also weigh heavily.
In the period January-June 2023, Chinese exports fell by -42.4% (source: Bike Europe of 7 November2023) compared to the same period of the previous year. Moreover, 2022 overall had already been ayear of significant contraction in exports, down by -39.7% in volume and -27% in value (ibidem), in ayear in which Europe, for example, on the contrary, had increased bicycle imports by 30% in volume
and even more in value (source: Bike Europe of 3 November 2023).
Benefitting from this in 2022 were other countries in the region, such as Taiwan (whose e-bike exports
surpassed the 1.0 million-unit mark that year, marking growth of +4.9 percent in volume and +18.1
percent in value; source: BOFT Information Center, as reported by Bike Europe in an article of 23
February 2023).
However, the scenario is significantly changed when considering the first seven months of 2023
compared to the same period of 2022, having weighed the excess stock present in Europe and North
America described in the previous sections. For example, the European Union imported a total of 23% of bicycles (2.3 million units compared to 3.0 million in January-July 2022; source: Bike Europe of
3 November 2023), which become a +1% in value thanks to a spectacular growth in the average price(almost +31%; source: ibidem). When analysing the data by country of origin in order of importance,
after China already commented on above, imports from Bangladesh (-17% to just over 300,000 units),
Taiwan (only -2%, thanks to specialisation in pedal assisted bicycles and high-end bicycles), Turkey (26%) and India (-35%) to name the main ones, have dropped. The only exception among the top 10
countries exporting to Europe was Cambodia, which recorded an increase of +8%, clearly bucking thetrend and confirming itself as the leading EU supplier country (source: ibidem).

9In the face of this data, of a phenomenon that would seem to have structural characteristics such as
the move of American brands in particular away from Chinese factories, and of the "attention" that
China has in recent years been devoting more and more to developing countries (in the wake of theBelt and Road Initiative), one can well understand the sense of the guidance expressed by the industry
association mentioned in the opening.
At the same time, countries such as India and China are slowly becoming, in the case of India, or more
dynamically becoming, in the case of China, attractive outlet markets. In the case of China, inparticular, we are seeing an increase in the quality and average selling price of bicycles, making it anincreasingly attractive market for both Western brands of bicycles and parts and accessories, thus
constituting a great opportunity for those, like the Selle Royal Group, who have an establishedpresence there.
Lastly, with reference to the Selle Royal Group, 26 June 2023 saw the finalised establishment of Selle
Royal Romania S.r.l. with registered office in Sacueni (in the province of Bihor) and share capital of
approximately € 1,000,000. At the reporting date, the Selle Royal Group subscribed 80%, while theremaining 20% is owned by two local shareholders. The company is currently in the production startup phase and is expected to be fully operational from 1 July 2024.

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 2022/23 income statement, compared with the figures for the previous
year:2022/232021/22% of revenues% of revenues% Change

Revenues

176.477.279

100,0%

223.762.787

100,0%-21,1%

Cost of sales

96.959.466

54,9%

126.936.347

56,7%-23,6%GROSS MARGIN

79.517.813

45,1%

96.826.440

43,3%-17,9%

Operating costs

58.436.871

33,1%

55.376.706

24,7%

5,5%

EBITDA

21.080.941

11,9%

41.449.734

18,5%-49,1%

Amortisation / depreciation and write-downs of fixed assets

8.923.159

5,1%

8.078.526

3,6%

10,5%

EBIT

12.157.782

6,9%

33.371.208

14,9%-63,6%

Financial income / (charges) and other financial components(3.456.685)-2,0%(1.629.042)-0,7%

PRE-TAX RESULT

8.701.097

4,9%

31.742.167

14,2%-72,6%

Taxes for the year

485.8150,3%7.238.573

3,2%-93,3%NET PROFIT FOR THE YEAR

8.215.282

4,7%

24.503.594

11,0%-66,5%

Minority interests

2.927.347

1,7%

3.117.710

1,4%

-6,1%

NET PROFIT FOR THE YEAR PERTAINING TO THE GROUP

5.287.935

3,0%21.385.884

9,6%-75,3%n.s.

The year in question, which ended on 30 June 2023, reported sales of € 176.5 million, down comparedto turnover in the same period of the previous year (-21.1%); on the other hand, during the period theGroup recorded a further and significant increase in margins (from 43.3% to 45.1%), despite theinflationary tensions that characterised the twelve months in question.
Operating costs, excluding the item “other income and charges”, did not record any significant
changes compared to the previous year, with considerable savings obtained on industrial, general andadministrative costs, as well as in the cost for the management structure.
There was a sharp increase in other net operating expenses (equal to € 3.1 million in 2022/23
compared to net income of € 1.4 million in the previous year) due to the significant prudential
provisions made to the inventory adjustment provisions in the financial statements of Group
companies. These prudential provisions were determined precisely in consideration of the increase instock rotation days and derive for the most part from an excess of stock against lower sales volumes
recorded during the year rather than from an actual state of obsolescence of the same. This trend,
which as previously described concerns the entire cycle sector, is primarily attributable to the longsupply periods (lead times) of most of the products marketed by the Group, which are of Asian origin;these lead times, as already extensively described in the past, had extended from about 3-4 months
to more than 12 months in the period following the onset of the Covid-19 pandemic, also due to the11effects of the resulting worldwide logistical congestion. As a result, the ability of downstream
operators in the production-logistics chain, namely retailers and distributors, to react promptly andeffectively to the normalisation of demand has been greatly impaired.
Due to the worsening of the operating leverage effect deriving from the above, the EBITDA margin forthe year stood at 11.9% of revenues (compared to 18.5% in the comparison period). In absolute terms,
this item reached € 21.1 million compared to € 41.4 million in the comparison period.
The increase in amortisation and depreciation compared to the comparative figure, up due to thesignificant investments made in the current year and in the previous two years, has an impact on theoperating result, which decreased by -63.6% compared to the year ended 30 June 2022.
Financial charges increased, amounting to € 3.7 million compared to € 2.9 million in the previous year,
mainly due to the increase in interest rates in both the Euro and the US Dollar area. The overall figure,including exchange rate differences, increased by approximately € +1.8 million, with the effect of thelatter contributing a positive value of € 0.3 million compared to € 1.3 million in the previous year.
As anticipated, the year in question closed with a net profit of € 8.2 million and an incidence of 4.7% on
the turnover (3.0% considering only the profit pertaining to the Group).

12

FINANCIAL POSITION
The financial position of the Group as at 30 June 2023, compared with the situation emerging fromthe consolidated financial statements for the year ended 30 June 2022, is as follows:
Var.

30/06/2023

30/06/2022

Trade receivables
Inventories
Tax receivables
Other current assets

21.355.698
40.966.066
5.018.310
1.438.877

32.964.861
43.649.021
4.726.827
1.317.096(11.609.162)(2.682.955)
291.483
121.781

CURRENT ASSETS

68.778.952

82.657.804(13.878.853)

Trade payables
Tax payables
Other current liabilities

11.937.682
3.500.928
8.773.315

20.179.920
6.289.289
13.297.952(8.242.238)(2.788.361)(4.524.637)

CURRENT LIABILITIES

24.211.926

39.767.162(15.555.236)

NET WORKING CAPITAL

44.567.026

42.890.643

1.676.383

Tangible assets
Intangible assets
Equity investments
Goodwill
Other non-current assets

42.359.667
21.762.251
1.137.206
10.549.755
5.551.210

37.324.083
20.955.107
2.482.007
10.673.404
3.133.904

5.035.584
807.144(1.344.801)(123.649)
2.417.306

NON-CURRENT ASSETS

81.360.088

74.568.504

6.791.584

2.271.947
788.757

2.308.198
893.978(36.251)(105.221)

NON-CURRENT LIABILITIES

3.060.704

3.202.177(141.472)

NET INVESTED CAPITAL

122.866.410

114.256.970

8.609.439

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

2.164.871
49.607.480
51.772.351

1.520.247
43.091.687
44.611.935

644.624
6.515.793
7.160.417

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

50.552.428
5.287.935
55.840.364

35.624.425
21.385.884
57.010.309

14.928.004(16.097.949)(1.169.945)

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

12.326.348
2.927.347
15.253.694

9.517.017
3.117.710
12.634.727

2.809.331(190.363)
2.618.967

Employee severance indemnity and other provisions
Deferred taxes

The growth in net working capital (€ +1.7 million) is essentially driven by the greater decrease incurrent liabilities compared to the corresponding asset item. The changes recorded in the items thatmake up current assets and liabilities reflect the trend for the year with lower turnover volumes, andconsequently production volumes, compared to the year of comparison. An exception is the value of13

inventories where the decrease of € -2.7 million is attributable to the provisions described above(equal to € 3.0 million).
The operating investments ("capital expenditure") made by the various Group companies, for a total
amount of € 15.2 million (of which € 0.7 million pertaining to the increase in the item “rights of use”
recognised in accordance with the IFRS 16 accounting standard) are 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 rose by € 8.6 million to € 122.9 million, mainly driven byincreased investment.
Net financial debt increased by around € 7.2 million to € 51.8 million; with an increase entirely
concentrated in the medium/long-term portion, as shown in the table below:
30/06/2023

30/06/2022

Var.

A
B
C
D

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

27.511.313
27.511.313

26.283.940
26.283.940

1.227.373
1.227.373

E
F
G

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

8.084.439
21.591.745
29.676.184

9.978.258
17.825.929
27.804.187(1.893.819)
3.765.816
1.871.997

H

Net current financial debt (G-D)

2.164.871

1.520.247

644.624

I.
J
K
L

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

47.621.383
1.986.098
49.607.480

39.147.032
3.944.655
43.091.687

8.474.350(1.958.557)
6.515.793

M
Net financial debt (H + L)
51.772.351
44.611.935* 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

7.160.417

14

DERIVATIVE FINANCIAL INSTRUMENTS
The parent company Selle Royal Group S.p.A. subscribed three derivative financial instruments, withthe aim of hedging the risk of fluctuations in interest rates on as many medium/long-term loans, ofwhich one opened in the period under examination. Their market value is recorded in the specific noncurrent asset item, as their maturity is consistent with the underlying loans.
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 current year the Group incurred operating investments (capital
expenditure) of approximately € 15.2 million, as shown in the following detail:30/06/2023
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

553.276730.928
2.497.321
1.572.793
488.7177.703.988
13.547.023

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

258.391
1.369.852
3.960
1.632.203

TOTAL OPERATING INVESTMENTS

15.179.226

DATA on TREASURY SHARES and 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.

15

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 reporting date, approximately 59% 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 2023, approximately 94% of the Group’s consolidated gross financial indebtedness
was floating rate, equal to € 67.4 million. In relation to a portion of this debt (approximately 33,5% of
the total), the parent company Selle Royal Group S.p.A. made use of derivative financial instruments(known as IRS, interest rate swap) to hedge the risk of fluctuations in interest rates on three
medium/long-term loans. The aggregate mark-to-market of these derivatives as at 30 June 2023 ispositive in the amount of € 1,550,372. The remaining part of the consolidated gross financial debt atfloating rate, equal to approximately 60.6% 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 thatany 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 Group companies, originally expressed in currencies other than theEuro, could affect the economic, equity and financial situation of the Group, which prepares theconsolidated financial statements in Euro.
16

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
During the twelve months in question, tensions arose on the purchase prices of raw materials and on
the cost of electricity. These phenomena have been monitored and managed by the Group, also
through a policy of increasing sales prices made possible not only by the strength of the owned
trademarks but also by market conditions. Any continuation of these inflationary tensions,accompanied by a drop in demand in the sector, could result in a lower capacity for full and timely
reaction and could therefore have negative effects on the Group's economic, equity and financial
situation.
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
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.

17

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
If the Covid-19 pandemic were to persist or worsen, leading to the adoption of new restrictive
measures by the competent national authorities, 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.

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.
The average number of employees in the current year was 1,094, a slight decrease compared to the
1,127 employees in the previous year. The net decrease of approximately 33 units is entirely
attributable to production employees due to the reduction in volumes. In this regard, it should be notedthat the parent company Selle Royal Group S.p.A., starting from May 2023, requested and obtained
access to the temporary lay-off scheme, which is used on an as-needed basis in a logic of efficient useof production resources. For further details, please refer to the information provided in the individual
financial statements of the Company.

18

The following tables show, detailed by category, the average workforce and the total workforce for theyear 2023.
Financial Year
2022/23

Financial Year
2021/22

ChangeExecutives
Employees
Workers
Others
Total

25,0
270,8
784,1
4,0
1.083,9

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

0,2
28,3(73,7)
2,5(42,7)

Workforce(in units)

30/06/2023

30/06/2022

ChangeExecutives
Employees
Workers
Others
Total

25
266
760
4
1.055

25
254
841
4
1.124

Average workforce

12
(81)
(69)

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

SIGNIFICANT EVENTS AFTER THE END OF THE YEAR
On 29 September 2023, the subsidiary Selle Royal USA, Inc. acquired the 50% interest previously heldby the equal partners Continental The Americas Llc. in the joint venture Highway 2 Llc. Thisacquisition confirms the importance of the North American market for the Group and its
determination to support its growth in a period of significant changes such as the current one.
On 3 November 2023, the parent company Selle Royal Group S.p.A. sold a stake equal to 20% of theshare capital of Selle Royal Romania S.r.l., therefore holding, at the date of approval of these financial
statements, a stake equal to 60%.
Given the continuing weakness of the market and the consequent drops in production recorded also
during the first months of the fiscal year that will end on 30 June 2024, the parent company Selle
Royal Group S.p.A. continued to use the flexibility provided by access to the temporary lay-off
scheme, extending its application to clerical staff.
19

Lastly, the parent company Selle Royal Group S.p.A. settled the disputes pending with the Italian
Revenue Agency as part of the initiatives aimed at deflation of the tax dispute in Italy. The settlementof this dispute did not result in additional costs for taxes for the year.

BUSINESS OUTLOOKThe current context is significantly affected by numerous factors of uncertainty and disruption of
economic activities. Of particular relevance are the continuation of the Russian-Ukrainian conflict; thedramatic resurgence of tensions in the Middle East starting from 7 October following the attack
perpetrated against Israel; the sudden increase in interest rates in the last 15 months; the inflationary
tensions still present, albeit to a lesser extent than in the recent past; and the continuing backgroundgeopolitical tensions between China and the United States on the “Taiwan issue”. These global
phenomena, which reduce the propensity to consume, especially with reference to non-primaryconsumer goods, are accompanied by a decisive and persistent slowdown in business-to-businesssales in the cycle sector due to the oversupply, as described above.

CONCLUSIONS and PROPOSALS
We remain at your full disposal to provide any clarifications and information needed during theShareholders' Meeting.
* * *Pozzoleone (VI), 30 November 2023
The Chairperson of the Board of Directors(Barbara Bigolin)

20

FINANCIAL STATEMENTSCONSOLIDATED INCOME STATEMENT (*)

Revenues

2021/22Var.%

223.762.787-21,1%

96.959.466

126.936.347-23,6%

79.517.813

96.826.440-17,9%

2022/23NOTE
15
176.477.279

Cost of sales

16

GROSS MARGIN
Industrial costs

17

6.773.375

7.400.912-8,5%

Sales and promotion costs

18

15.542.103

14.612.990

6,4%

Costs of the management structure

1917.425.656

18.404.093-5,3%

General and administrative costs

20

15.564.917

16.319.256-4,6%

Other operating income and (expenses)

21(3.130.820)

1.360.545

n.s.

EBITDA

21.080.941

41.449.734-49,1%

Amortisation / depreciation and write-downs of fixed assets

8.923.159

8.078.526

10,5%

EBIT

12.157.782

33.371.208-63,6%(3.456.685)(1.629.042)

n.s.

8.701.097

31.742.167-72,6%

485.815

7.238.573-93,3%NET PROFIT FOR THE YEAR

8.215.282

24.503.594-66,5%

Minority interests

2.927.347

3.117.710-6,1%

NET PROFIT FOR THE YEAR PERTAINING TO THE GROUP

5.287.935

21.385.884-75,3%

Financial income / (charges)

22

PRE-TAX RESULTTaxes for the year

23

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

21

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2022/232021/228.215.282

24.503.594

Change in fair value of hedging derivatives
net of the tax effect445.343734.392

Actuarial gains / (losses)

150.269259.986-(689.454)

Translation differences of foreign financial statements(2.446.572)

2.780.644

Total comprehensive profit / (loss) after tax

6.364.323

27.589.162

Net profit

Acquisition of shares in companies already subject to control

22

CONSOLIDATED BALANCE SHEET (*)
30/06/2023

30/06/2022

Var.

24, 382526
27
2827.511.313
21.355.698
40.966.066
5.018.310
1.438.877
96.290.265

26.283.940
32.964.861
43.649.021
4.726.827
1.317.096
108.941.745

1.227.373(11.609.162)(2.682.955)
291.483
121.781(12.651.480)

29
30
31
32
33
34, 3835

21.762.251
42.359.667
1.137.206
10.549.755
2.562.740
2.305.376
683.09481.360.088

20.955.107
37.324.083
2.482.007
10.673.404
843.5101.604.547
685.847
74.568.504

807.1445.035.584(1.344.801)(123.649)
1.719.230
700.829(2.753)6.791.584

177.650.353

183.510.249(5.859.896)

30/06/2023

30/06/2022

Var.

ASSETSNOTE

Cash 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 ASSETSLIABILITIESNOTETrade payables
Tax payables
Bonds - Portion maturing within 12 months
Short-term loans
Current liabilities for leased assets
Other current liabilities
TOTAL CURRENT LIABILITIES36
37
38, 4338, 3940
41

11.937.682
3.500.928
1.958.557
25.133.411
2.584.216
8.773.315
53.888.110

20.179.920
6.289.289
1.930.941
23.421.806
2.451.440
13.297.952
67.571.349(8.242.238)(2.788.361)
27.616
1.711.605
132.776(4.524.637)(13.683.239)

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

42
38, 4338, 4445
46
47

1.373.602
1.986.098
42.468.789
898.345788.757
5.152.594
52.668.185

1.531.744
3.944.655
31.901.782
776.455
893.9787.245.250
46.293.864(158.142)(1.958.557)
10.567.007
121.891(105.221)(2.092.656)
6.374.321

106.556.294

113.865.213(7.308.919)

TOTAL LIABILITIES23SHAREHOLDERS’ EQUITY

30/06/2023

30/06/2022

Var.

48

6.000.000
1.244.082
1.141.462
10.716.446
31.450.439
5.287.935
55.840.364

6.000.000
1.244.082
3.588.034
10.716.446
14.075.864
21.385.884
57.010.309(2.446.572)
17.374.575(16.097.949)(1.169.945)

48

12.326.348
2.927.347
15.253.694

9.517.017
3.117.710
12.634.727

2.809.331(190.363)
2.618.967

177.650.353

183.510.249(5.859.896)

NOTE

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

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

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Transfer ofEffect of discounting
Balance as at
previous year Fair value IRS
of employee
30 June 2021
resultseverance indemnity

Dividend
distribution

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
32.538.856

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

41.203.501-

734.392259.986(76.826)

3.020.388

24.503.594

69.645.036

Effect of discounting
Transfer ofBalance as atof employee
previous year Fair value IRS
30 June 2022
severance indemnity
resultIncrease inGroupinterests

Other
Profit / (loss) Balance as atconsolidation
for the year 30 June 2023
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
3.588.034
10.716.446
14.075.864
21.385.884
57.010.309

21.385.884(21.385.884)-

445.343445.343150.269
150.269-(2.446.572)(4.606.921)(7.053.492)

5.287.935
5.287.935

6.000.000
1.244.082
1.141.462
10.716.446
31.450.439
5.287.935
55.840.364

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

9.517.017
3.117.710
12.634.727

3.117.710(3.117.710)
-

-

-

-

(308.379)(308.379)

2.927.347
2.927.347

12.326.348
2.927.347
15.253.694

TOTAL SHAREHOLDERS' EQUITY

69.645.036-

445.343150.269-(7.361.872)

8.215.282

71.094.058

24

CONSOLIDATED CASH FLOW STATEMENT PREPARED USING THE INDIRECT METHOD
2022/23
STATEMENT OF CASH FLOWS FROM OPERATIONS
Pre-tax result

2021/228.701.097

31.742.167

7.986.261
936.898
3.456.685(151.614)(21.433)
34.7942.333.384

6.924.016
1.154.510
1.629.042(219.709)
36.251203.2232.915.708

Cash and cash equivalents generated by transactions before working capital

23.276.072

44.385.207+/+/+/+/+/+/-

355.766 (20.192.090)
10.197.966(4.161.725)(9.839.802)
525.8441.317.352(1.314.723)(3.051.816)
1.984.862

Adjustments for+/-non-monetary elements
Depreciation of tangible assets
Amortisation of intangible assets
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 benefitschange 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

22.255.537

21.227.375++/-

538.278(3.615.637)
1.518.109(8.854.193)

234.415(1.793.765)
492.140(7.727.716)

Net cash and cash equivalents from operating activities (A)11.842.094

12.432.449

STATEMENT OF CASH FLOWS FROM INVESTMENT ACTIVITIESPayments for acquisitions of property, plant, machinery and other tangible assets+
Recepits from the sale of property, plant, and equipment and other tangible assets
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(10.817.915)
32.248(1.632.203)(1.342.004)
270.934-(5.881.184)
4.882(808.305)(2.847.447)(83.102)(750.000)Interest collectedInterest paid
Net realized exchange differences
Taxes paid

Net cash and cash equivalents from / used in investing activities (B)(13.488.940) (10.365.158)

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

58.313.420 41.757.999(2.805.044)(2.853.154)(2.000.000) (2.000.000)(46.034.809) (33.796.677)(2.529.316)-

Net cash from / used in financing activities (C)4.944.251

3.108.169

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

3.297.405

5.175.461

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)26.283.940(2.070.033)

19.846.067
1.262.412

27.511.313

26.283.940

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

25

EXPLANATORY NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL REPORT AS AT 30 JUNE 2023
1.

INTRODUCTION

The consolidated annual financial report as at 30 June 2023 of the Selle Royal Group S.p.A. Groupwas prepared in compliance with the International Financial Reporting Standards (also “IFRS”) issued
by the IASB (International Accounting Standards Board) and approved by the European Commissionin accordance with the procedure pursuant to Article 6 of EC Regulation no. 1606/2002 of theEuropean Parliament and Council of 19 July 2002 on the date of preparation of this report as well as
the provisions 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 2023, 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 2023 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 to the Financial Statements that follow.
This consolidated annual financial report was prepared on the basis of the best knowledge of IFRS
and taking into account the best practice on the subject; any future guidelines and interpretative
updates will be reflected in subsequent years, according to the methods envisaged from time to timeby the reference accounting standards.
All amounts included in this report are presented in Euro, which is the currency of the main economic
environment in which the Group operates, unless otherwise indicated.
The consolidated annual financial report was prepared on a going concern basis, as the directors
verified that there were no financial, operational or other indicators that could indicate critical issues
regarding the Group’s ability to meet its obligations in the foreseeable future and in particular in thenext 12 months.
The consolidated annual financial report was prepared using as a basis the financial statements of theGroup companies approved by their respective Boards of Directors.
The reference date of the consolidated annual financial report coincides with the closing date of thefinancial year of the parent company Selle Royal Group S.p.A. and the other companies included in the
consolidation area.
26

Lastly, it should be noted that the financial statements of the foreign companies included in the scopeof consolidation prepared according to local standards have been amended in accordance with
IAS/IFRS for the sole purpose of preparing the consolidated annual financial report.

2. MANDATORY ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED BY
THE GROUP
The accounting standards adopted by the Group for the preparation of the consolidated annual
financial report as at 30 June 2023 are the same as those adopted for the preparation of theconsolidated annual financial report as at 30 June 2022, with the exception of the following
accounting standards, amendments and interpretations.
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 are
effective for financial years beginning on or after 1 January 2022. No material impacts wererecognised for the Group with reference to these amendments.
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 amendments are effective forfinancial years beginning on or after 1 January 2022. No material impacts were recognised 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 were27

approved 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 andadministrative 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 are effective
for financial years beginning on or after 1 January 2022. No material impacts were recognised for theGroup with reference to these amendments.

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 IAS 12 Income taxes: International Tax Reform - Pillar Two Model Rules
Issued on 23 May 2023, the document introduces a temporary exception to the obligations ofrecognition and disclosure of deferred tax assets and liabilities relating to the Pillar Two Model Rules
and provides for specific disclosure obligations for the entities concerned by the related International
Tax Reform.
The document provides for the immediate application of the temporary exception, while thedisclosure obligations will only apply to annual financial statements starting on 1 January 2023 (or at alater date). No material impacts are expected for the Group with reference to this amendment.
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 more
useful. The scope of application includes financial assets linked to insurance liabilities, which until now

28

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 these amendments.
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 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.
29

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 these amendments.
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)•

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.

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.

30

Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability
Issued on 15 August 2023, the document adds requirements to help entities determine whether acurrency is convertible into another currency and the spot exchange rate to be used when it is not.
These amendments will be applicable from 1 January 2025, with the possibility of early application. No
material impacts are expected for the Group with reference to these amendments.
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures:Supplier Finance Arrangements
Issued on 25 May 2023, the document requires an entity to provide additional information on reverse
factoring agreements that allow users of the financial statements to assess how financial agreementswith suppliers may affect the entity's liabilities and cash flows and to understand the effect of these
agreements on the entity's exposure to liquidity risk.
These amendments will be applicable from 1 January 2024. No material impacts are expected for theGroup with reference to these amendments.
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or
Non-current, Classification of Liabilities as Current or Non-current - Deferral of Effective Date andNon-current Liabilities with Covenants
With regard to the three amendments issued respectively in January 2020, July 2020 and October
2022, the IASB published a new draft disclosure in this regard. The purpose of the documents is toclarify how to classify payables and other short or long-term liabilities. These amendments will beapplicable from 1 January 2024. No material impacts are expected for the Group with reference tothese amendments.
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback
Issued on 22 September 2022, the document requires the seller-lessee to assess the liability for thelease deriving from a sale and leaseback transaction so as not to recognise an income or a loss thatrefers to the right of use withheld.
These amendments will be applicable from 1 January 2024. No material impacts are expected for theGroup with reference to these amendments.

31

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 iseffective for years beginning on or after 1 January 2022. No material impacts were recognised for theGroup 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
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 is effective for financial years starting from 1 January 2022. The Group applied thisamendment to financial liabilities that are amended or exchanged subsequently or at the date of thefinancial year in which the Group applied this amendment for the first time. No material impacts wererecognised 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.
32

- 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;(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.

33

7. ACTIVITIES OF GROUP COMPANIESThe 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 this consolidated annual financial report is shown below,
with an indication of the equity investment percentages.

** Consolidated according to the equity method; wholly-owned subsidiary at the date of approval of this annual financial
report.

This structure has changed with respect to the composition of the Group as at 30 June 2022 due tothe establishment, on 26 June 2023, of Selle Royal Romania S.r.l., a Romanian company 80% ownedby the Group through the parent company Selle Royal Group S.p.A. and, for the remainder, by two
local shareholders holding the minority interest in equal parts. For further details, please refer to thesection “Significant events during the period”.
The consolidated financial annual report as at 30 June 2023 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), share capital
resolved of € 6,315,200.00, subscribed and paid in for € 6,000,000.
 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 in Chicago(Illinois), share capital of US$ 1,000, equal to approximately € 901. The company is wholly-owned
by Selle Royal Group S.p.A. Also in 2006, a joint venture was established with a leading German
34operator for the direct distribution of products on the US market. To this end, Highway Two Llc. wasestablished, 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 thereporting date was € 1,117,689.
 Crank Brothers Inc., with share capital of US$ 2,000, equal to approximately € 1,802, whollyowned 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 from51.86% 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 State ofSanta Catarina, Brazil. The share capital of R$ 11,601,802 is 51% owned by Selle Royal Group S.p.A.
 Selle Royal Romania S.r.l., with registered office in Sacueni, Romania. Selle Royal Group S.p.A.
holds 80% of the share capital of 4,956,000 Romanian LEUs (equal to approximately € 1,000,000).

8. 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;35-

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
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;36-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;-

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.

37

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)
New Romanian Leu (RON)

Exact exchange rate as at
30 June30 June Appreciation /(deprec.)
2023
2022
0,8583
1,0866
7,8983
5,2788
4,96350,8582
1,0387
6,9624
5,42294,9464-0,01%-4,41%-11,85%2,73%-0,34%

Average exchange rate of the year
Appreciation /2022/23 2021/22(deprec.)
0,8696
1,04687,28005,40344,9256

0,8471
1,12797,27895,9205
4,9430-2,58%
7,76%-0,02%
9,57%
0,35%

9. 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 manner38

of 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,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.

39

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 thefinancial 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 an40

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 ofcredit 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.

41

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
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.

42

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

0%



Buildings

3%

Generic plants

10% -12.50%

Machinery

10%-12.50%

Equipment

10%-35%



Office furniture and equipment

12%Electronic office equipment

18% -20%Motor vehicles and internal transport vehicles 20% -25%

Light constructions

10%



Leasehold improvements

Duration of the contract on the underlying assetRights of use

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 thehigher of the fair value, less costs to sell, and the related value in use, intended as the present value of43

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;

44

-

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 to45

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)46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 thecontrol of the company; or47

-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 a special explanatory note to the financial statements.
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 to48

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.

49

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.

10. 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.

50

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.

51

-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.

11. SEGMENT REPORTING
The segment reporting of the Selle Royal Group, in application of IFRS 8, is provided with reference tothe geographical areas in which the Group operates based on the availability of financial statement52

information and in line with the main method with which the results are periodically reviewed bymanagement for performance assessment purposes. More specifically, the Group’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 whose operating activities
are mainly concentrated in the territory of 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), of Brooks England Ltd. in Smethwick (GB) andwhich will take place at the Selle Royal Romania S.r.l. plant in Sacueni in the Bihor district, as well as
purely commercial activities. The latter consist of the sale and distribution of own-brand products, theresult of both internal production and pure marketing, and the distribution of third-party brandproducts. With specific reference to this latter aspect, please note that the parent company Selle
Royal Group S.p.A. has, for years now, supported the 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.

53

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 direct
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 2022-23 and 2021-22.
2022/232021/22EUROPAAMERICAASIAEUROPAAMERICA

ASIA

Revenues

86.645.148

56.780.677

33.051.454

121.212.914

67.375.483

35.174.389

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

39.216.334
52.736.190
34.758.007
49.347.743

34.470.482
21.384.765
16.818.513
3.262.590

22.603.449
7.239.133
2.311.589
57.85243.984.428
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
65.62912. DERIVATIVE FINANCIAL INSTRUMENTS
As at 30 June 2023, the parent company Selle Royal Group S.p.A. held three derivative financial
instruments, subscribed with leading Italian banks, for the purpose of hedging against interest rate
volatility (“IRS”).
Two of the three derivative financial instruments were subscribed on 29 October 2021, at the sametime as the opening of two multi-year unsecured loans at variable rates. A third, on the other hand, wassigned on 30 November 2022 at the same time of a similar loan transaction.
These derivative financial instruments are found to be hedges from the effectiveness tests carried out
and, as a result, the effects relating to the change in their value were reflected in a specific equity
reserve (“cash flow hedge reserve”), net of the related tax effect.
For further information, please refer to the section on financial liabilities measured at fair value in these
Explanatory Notes.
5413. RISK MANAGEMENT
In relation to financial and other risks, please refer to the Report on Operations.

14. 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 it holds
66.6% of the share capital. During the year, transactions were carried out concerning theimplementation of the last year of the tax consolidation contract expired on 30 June 2022.

-

Dec. 28, 1928 Real Estate S.r.l.: the parent company Selle Royal Group S.p.A., by virtue of a leasesigned on 1 July 2021, which renewed the agreement previously signed in June 2013, and with aduration 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. are carried out.

-

Wise Equity SGR S.p.A.: some shareholders of Wise Equity SGR S.p.A. (which holds 33.3% of theshare capital of the parent company Selle Royal Group S.p.A.) are members of the latter's Boardof 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 parent company’s secondary headquarters where the offices of the
A4Selection division are located, and recorded in accordance with the provisions of IFRS 16.
The parent company Selle Royal Group S.p.A. terminated this contract, originally for theduration of 6 years, early in January 2023, with effect from the end of July 2023.

The economic and financial relations entertained during the 2022-23 financial year are summarised in
the following table:
COUNTERPARTY
Wise Equity SGR
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 COSTSCURRENT ASSETSOTHER NONCURRENT ASSETS

210.000
218.6221.561.932
1.990.554

139.780
139.780600.000
25.200625.200

CURRENT
LIABILITIES
1.207.702
19.7854.013
1.231.500

NON-CURRENT
LIABILITIES
3.851.324
3.851.324

55

ANALYSIS and COMPOSITION of the INCOME STATEMENT
15. REVENUES
Revenues for the current year deriving from the Group’s ordinary operations amounted to €176,477,279 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

Var.

2022/232021/2298.321.371
75.705.830
2.700.156
234.869
176.962.227

118.562.408 (20.241.037)
100.919.221 (25.213.390)
4.636.360(1.936.203)
198.538
36.331224.316.527 (47.354.300)

Price changes and others
Year-end bonus
Revenue adjustments(176.085)(308.864)(484.948)(56.405)(497.335)(553.740)(119.679)
188.471
68.792

Total revenue from sales

176.477.279

223.762.787 (47.285.508)

176.477.279
176.477.279

223.762.787 (47.285.508)
223.762.787 (47.285.508)

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:
2022/23

SELLE ROYALFIZIKBROOKSCRANK
BROTHERS

PEdALEDOTHER/NOT
ALLOCATED (*) CONSOLIDATEDRevenues

55.346.133

35.102.524

15.256.854

34.451.340

3.059.470

33.260.957

176.477.279

Gross margin

25.742.515
46,5%

16.252.919
46,3%

7.097.241
46,5%

12.251.856
35,6%

1.602.348
52,4%

16.570.934
n.s.

79.517.813
45,1%2021/22

SELLE ROYAL
Revenues

74.665.210

FIZIK

BROOKSCRANK
BROTHERS

46.198.761

20.245.987

41.774.578

PEdALED

38.068.927

223.762.787

34.652.228
21.575.469
9.223.544
13.937.488
1.544.003
15.893.709
46,4%
46,7%
45,6%
33,4%
55,0%
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.

96.826.440
43,3%

Gross margin

2.809.323

OTHER/NOT
ALLOCATED (*) CONSOLIDATED

56

16. COST OF SALES
The components of the cost of sales are shown below, compared with the same period of the previous
year:2022/23
Purchase of raw materials
Ancillary charges on RM purchases
Outsourcing
LabourChange in inventories
Total cost of sales

76.697.283
3.385.545
3.661.069
17.547.699(4.332.130)
96.959.466

Var.

2021/22104.006.031 (27.308.748)
6.081.354 (2.695.809)
6.850.385 (3.189.316)
23.555.313 (6.007.614)(13.556.737)
9.224.607
126.936.347 (29.976.881)

17. 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”.
2022/23
Electricity
Consumables
Minor equipment
MaintenanceLease payments
Research and development costs
Other industrial costs
Total industrial costs

1.628.860
962.171394.135
1.167.530
124.604
1.102.710
1.393.364
6.773.375

2021/221.546.866
1.085.543
599.667
1.121.024
119.741
1.317.141
1.610.930
7.400.912

Var.
81.994(123.372)(205.532)
46.5064.863(214.430)(217.565)(627.536)

18. SALES AND PROMOTION COSTS
The balance of the item “sales and promotion costs”, which is composed of costs directly related tosales activities, is shown below.
2022/23
Sales and advertising costs
Transports on sales
Commissions
Gifts
Other sales and promotion costs
Total sales and promotion costs

6.402.947
4.812.005
2.101.570
735.247
1.490.334
15.542.1032021/225.444.264
5.381.984
2.278.716
534.709973.316
14.612.990

Var.
958.683(569.980)(177.146)
200.537517.018
929.113

19. COSTS of the MANAGEMENT STRUCTURE
This item, which amounts to €17,425,656 for the period in question, includes the cost of the clericaland managerial structures of the various Group companies.
57

20. GENERAL and ADMINISTRATIVE COSTS
The item in question is detailed below, mainly consisting of services purchased by the various Group
companies.
2022/23
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

4.702.634
1.388.588
1.771.932
44.720376.820331.603
485.561
1.736.321
1.146.148
346.144689.3642.545.082
15.564.917

2021/22Var.

6.212.473 (1.509.839)
1.090.762
297.826
1.780.974(9.042)47.792(3.072)337.546
39.274258.47973.123470.453
15.1081.323.153
413.168
1.186.438 (40.290)
321.304
24.840598.082
91.2822.691.799(146.718)
16.319.256 (754.339)

21. 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.
2022/232021/22

Var.

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

151.614310.31433.206463.56762.459391.9131.413.072

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(3.028.107)(239.678)(28.556)(11.773)(1.235.778)(4.543.892)(137.967) (2.890.141)(175.376)(64.303)
1.285(29.841)(41.347)
29.574(262.328) (973.449)(615.732) (3.928.160)

TOTAL OPERATING INCOME / (EXPENSES)(3.130.820)

1.360.545 (4.491.365)

219.709652.630
5.096
713.458
3.193
382.192
1.976.277(68.095)(342.316)
28.110(249.891)
59.2669.721(563.205)

As already mentioned above, the main cause of the increase in net operating expenses is related tothe higher allocations to the provisions for obsolescence against the increase in inventories compared
to 30 June 2022, concurrent and partially linked to the reduction in sales volumes. If, on the one hand,
the lengthening of the production-logistics lead times recorded in 2022 (especially for products from58

the Far East) led to a lower capacity to react in the face of the sudden reversal of the trend in demand
recorded starting from the late spring of last year and therefore an increase in volumes in stock, thesame reduction in sales also corresponded to a significant reduction in the rate of stock rotation.
The combined effect of these two phenomena led the Group's management to allocate prudential
provisions for the possible increase in the risk of full realisation of their value. This choice is also
motivated by expectations regarding the performance of the cycle sector as a whole for 2023 and at
least the first few months of 2024: an excess of stocks along the production-logistics chain(manufacturers of parts and components; assemblers of bicycles; national/international distributors;
online and offline retailers) in the face of stable market demand and the consequent triggering of
bearish tensions on sales prices in order to liquidate the aforementioned excess inventory.
At the same time, there was no significant increase in obsolete stocks at Group level.
22. OTHER FINANCIAL INCOME and CHARGESThe breakdown of interest and other financial charges is provided in the table below:
2022/23
Financial income:Bank and postal interest
Dividends
Other financial income
Total financial income
Financial charges:
Interest on bonds
Interest expense
Interest cost provision for employee severance indemnity
Discounts
Fees on loans
Other financial charges
Total financial charges
Net exchange rate differences
TOTAL FINANCIAL INCOME / (CHARGES)

402.159
1.019
118.508521.6862021/22143.4851.510
82.446227.441

Var.
258.675(492)
36.063294.245(316.559)(2.741.612)(43.944)(446.316)(350.838)(339.781)(4.239.049)(443.137)
126.578(1.271.706) (1.469.907)(9.915)(34.029)(888.732)
442.416(212.943)(137.895)(299.016)(40.765)(3.125.448) (1.113.602)

260.679

1.268.965 (1.008.286)(3.456.685)(1.629.042) (1.827.643)

This item, negative for € 3,456,685, was affected by the increase in interest expense to service thedebt subscribed by some Group companies. At the end of the year, they amounted to € 2,741,612.
The item “other financial charges” includes primarily the recognition of financial charges related to theadoption of the accounting standard IFRS 16.
Lastly, the impact of net exchange rate differences was favourable, albeit to a lesser extent than theprevious year, which, overall, were positive for € 260,679 (compared to a positive balance of €1,268,965 recorded in 2021/22). This item includes both exchange gains and losses realised as at 30
June 2023 (which show a positive net balance of € 1,518,109), and unrealised exchange gains and59

losses at the same date deriving from the alignment of foreign currency balances with the current
exchange rates at the end of the year, in addition to exchange differences resulting from theelimination of intragroup items (which cumulatively show a negative net balance of € -1,257,431).
23. 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.
2022/23
Current taxes
Deferred tax (assets) / liabilities
TOTAL TAXES FOR THE YEAR

1.437.983(952.168)
485.8152021/22Var.

8.139.183 (6.701.199)(900.610)(51.558)
7.238.573 (6.752.757)

The decrease in current taxes is attributable to the lower profits recorded by some Group companies
with respect to the comparison period.

60

ANALYSIS and COMPOSITION of the BALANCE SHEETCURRENT ASSETS
24. 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 2023 was € 27,511,313 (of which € 6,879,849 in Selle Royal Group S.p.A.
and € 16,454,654 in Selle Royal China, the latter with a positive net financial position), and was upcompared to the previous year thanks to the liquidity generated during period.
As at 30 June 2023 (as well as at 30 June 2022) there were no restrictions or limitations on the use of
the Group's cash and cash equivalents.
25. 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:

30/06/2023 30/06/2022
Trade receivables
Bad debt provision
TRADE RECEIVABLES, net

22.505.921(1.150.223)
21.355.698

Var.

34.080.290 (11.574.369)(1.115.429)(34.794)32.964.861 (11.609.162)

The receivables insured as at 30 June 2023 amounted to € 13.4 million, equal to approximately 59%
of the total receivables gross of the related adjustment provision.
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 € 1,917,009; the Chinese subsidiary Selle Royal Vehicle (China) Co., Ltd. completed a similartransaction for a value of € 3,037,046. During the previous year, the cumulative value of theassignments of receivables without recourse was € 4,192,889.

61

Finally, the change in the bad debt provision during the year in question is shown below:
Balance as at
30 June 2022

Provisions (+)

Bad debt provision

1.115.429

246.253(114.182)

TOTAL BAD DEBT PROVISION

1.115.429

246.253(114.182)

Translation
diff.

Balance as at
30 June 2023

(76.833)(20.443)

1.150.223(76.833)(20.443)

1.150.223

Uses (-)

Releases (-)

26. INVENTORIESThe breakdown of this item by type of stock and with details of the provisions recorded against therisk of potential obsolescence is shown in the table below:
30/06/2023 30/06/2022

Var.

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

7.684.413
4.485.276
36.395.822
698.01349.263.523

7.884.917 (200.505)
5.812.351 (1.327.075)
33.196.577
3.199.245
2.725.444 (2.027.431)
49.619.289 (355.766)

Provision for obsolescence
Provision for unrealised intra-Group margin(5.267.673)(3.029.785)(2.391.811)(3.578.457)

INVENTORIES

40.966.066

43.649.021 (2.682.955)(2.875.861)
548.672

Gross inventories recorded an increase in finished products and goods, more than offset by adecrease in other types of stocks.
The slowdown in the stock rotation rate, following the drop in turnover, led management to prudently
increase the provision for adjustment of the gross value of inventories up to a value of € 5,267,673,
despite the absence of significant levels of obsolete stocks. On the other hand, the provision that
adjusts the unrealised margin recorded a decrease of € 548,672.
Lastly, the change in provisions for adjusting the value of stocks during the year in question is shown
below:

Provisions for obsolescence
Provision for unrealised intra-Group margin
TOTAL ADJUSTMENT PROVISIONS of INVENTORIES

Balance as at
30 June 2022

Provisions (+)

2.391.811
3.578.457
5.970.269

3.039.073(390.925)
2.648.148

Releases (-)-

Uses (-)-

Translation
diff.
(163.212)(157.747)(320.959)

Balance as at
30 June 2023
5.267.672
3.029.785
8.297.458

62

27. TAX RECEIVABLES
Tax receivables increased compared to the balance as at 30 June 2022, as detailed below:

30/06/2023 30/06/2022

Var.

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

3.223.041
190.442431.429
3.844.912

2.772.305
378.434
431.374
3.582.114

450.735(187.992)54
262.798

Current deferred tax assets

1.173.399

1.144.713

28.685TOTAL TAX RECEIVABLES

5.018.310

4.726.827

291.483

Compared to 30 June 2022, the increase in direct tax receivables is mainly due to the increase in thesame relating to the subsidiary Crank Brothers Inc. The drop in receivables for indirect taxes is mainly
due to the lower VAT credit of Selle Royal Group S.p.A. and of the Taiwanese branch of CrankBrothers Inc.
Lastly, for an examination of the change in current deferred tax assets, please refer to the relevant
section of these notes.
28. OTHER CURRENT ASSETS
The breakdown of this item and the comparison with the previous year are as follows:
30/06/2023 30/06/2022
Advance costs
Accrued income and prepaid expenses
Sundry receivables
TOTAL CURRENT ASSETS

185.084
940.393313.401
1.438.877

220.406
787.965308.725
1.317.096

Var.
(35.323)152.4284.676
121.781

The prepaid costs relate to the expenses connected to the seasonality of the sector and fromincurring, at the end of the fiscal year, costs related to the launch of new products and participations inevents in the following fiscal year, which are therefore suspended under this item as at 30 June ofeach year to comply with the accrual principle and is entirely referable to the parent company Selle
Royal Group S.p.A.
Sundry receivables include € 139,780 relating to the subscription of share capital not yet paid by theminority shareholders of Selle Royal Romania S.r.l.

63

NON-CURRENT ASSETS
29. 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
30 June 2022
Industrial patent rights andintellectual property rights
Concessions, licences, trademarks and similar rights

Increases Decreases
Amortisation Translation
Reclassification
(+)
(-)
(-)
diff.

Balance as at
30 June 2023

1.228.271

258.391--(487.969)(18.732)

979.960

19.537.435

1.369.852-

335.290(436.212)(39.421)20.766.943

Other

13.297---(12.717)(580)-

Fixed assets in progress and payments on account176.1033.960(44.368)(83.933)-(36.417)15.34720.955.107

1.632.203(44.368)251.357(936.898)(95.150)

21.762.250

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 amortisation; higher values for a
total of US$ 7,694,000 are recognised in the financial statements of Crank Brothers Inc., allocated for
US$ 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, licences, trademarks and similar rights” refers to the value of the trademark
portfolio held by the Group companies, for a value of € 18,391,470; the remainder relates to theconcession rights of the land on which the Selle Royal China plant stands and to licences 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.
The item “Other” refers to the recognition of intangible assets that meet the requirements of IAS 38
for their recognition in the financial statements.

6430. TANGIBLE 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 2022

Increases(+)

Land and buildings

7.231.474

553.276-(555)(677.329)

299.0317.405.897

Right of use of leased assets

10.521.244

730.928(1.876)-(2.286.905)(42.405)

8.920.986

Plant and machinery

10.580.972

2.497.321(17.347)384(1.789.601)(193.360)

11.078.369

Industrial and commercial equipment

5.087.844

1.572.793(5.231)

874.398(2.702.894)(6.804)4.820.106

Other assets

1.609.658

488.717(36.826)3.361(529.532)(140.844)

1.394.534

Fixed assets in progress and payments on account

2.292.890

7.703.988(90.747)(1.128.944)-(37.412)8.739.775

37.324.083 13.547.023(152.026)(251.357)(7.986.261)(121.794)

42.359.667

Total tangible assets

Decreases
Depreciation Translation Balance as at
Reclassification
(-)
(-)
diff.
30 June 2023

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 aswell as to the increase attributable to the first-time consolidation of the subsidiary Selle Royal
Romania S.r.l.
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., as well as to other leases and multi-year leases of bothproduction facilities and equipment and other assets. The increase in this item is mainly related to therecalculation of future fees due for the lease of the Selle Royal Group S.p.A. offices, as well as to new
multi-year rental contracts that meet the criteria for recognition in the financial statements according
to the provisions of the accounting standard IFRS 16.
The increases in other items, and in particular “plant and machinery”, “industrial and commercial
equipment” and “fixed assets in progress and payments on account” mainly refer to investments of anindustrial nature, made mainly by the parent company and the production subsidiaries.
Tangible assets in progress and payments on account mainly relate to expenses incurred by theGroup in relation to new products development projects not yet completed at the end of the year.
31. 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 € 1,117,689, to the equity investment in Highway
Two Llc., with registered office in Olney (USA) and share capital of US$ 241,648, over which indirect65

joint control of 50% is exercised. This equity investment is measured using the equity method. The
residual amount, equal to € 19,517, relates to minority interests held by Selle Royal Group S.p.A. (€723) and the subsidiary Royal Ciclo (€ 18,794).
Some economic indicators of Highway Two LLC, relating to 2023, are listed below, as well as thebalance sheet balances as at 30 June 2023, and related comparative data. For the sake ofcompleteness, the fiscal year of the joint venture coincides with the calendar year.
30/06/2023
Highway 2 Llc:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Shareholders’ equity

$
$
$
$
$

Group interest (50%)$

16.297.053
277.614(14.122.356)(9.728)2.442.583

$
$
$
$
$

30/06/2022

Var.

27.825.001
725.028(23.424.925)(44.673)
5.080.432$ (11.527.948)$ (447.414)$ 9.302.569$
34.945$ (2.637.848)

1.221.292 $2.540.216 $ (1.318.924)

Carrying amount of the investment
in Highway 2 Llc. (in €)1.117.689

2.463.609(1.345.921)

Other equity investments (in €)Total equity investments

19.5171.137.206

18.3982.482.007

1.120(1.344.801)

1st half 2023

Var.

1st half 2022

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

$
$
$
$

2.807.411(2.081.609)(584.361)
141.442$$$$

Group interest (50%)$

70.721$

8.311.579(7.565.946)(681.629)
64.004$ (5.504.168)$ 5.484.337$
97.268$77.43832.002 $38.719Lastly, it should be noted that, as already indicated above, on 29 September 2023 the US subsidiary
Selle Royal USA Inc. completed the purchase of the remaining portion of Highway 2 Llc. by the equalshareholder Continental Tires The Americas Llc.
32. GOODWILLThis item had a balance as at 30 June 2023 of € 10,549,755.
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
and the present value of the cash flows that it is reasonably expected will be generated by the threecompanies justifies the values represented.
6633. DEFERRED TAX ASSETS
Details of the item in question is shown in the following table:
30/06/2023

30/06/2022

TEMPORARYTAX EFFECTDIFFERENCESTEMPORARYTAX EFFECTDIFFERENCES

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

806
436.366
451.245
3.121.261
204.026594.9564.808.660

225
101.682
98.912782.968
34.684154.926
1.173.398

29.507277.171362.9653.669.942
131.908
189.108
4.660.602

8.233
65.19777.029920.139
22.42451.6911.144.713

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

209.7544.838.554
464.649347.378
4.126.438
334.428
10.321.200

58.5211.343.382
129.63759.054942.582
29.5632.562.740

188.8171.995.869
522.773527.407498.454376.598
4.109.917

52.680462.835
145.85444.175104.675
33.290843.510TOTAL DEFERRED TAX ASSETS

15.129.860

3.736.138

8.770.519

1.988.222

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 margin on intra-Group sales.
On the other hand, non-current deferred tax assets increased due to higher provisions for inventory
write-downs commented on above, as well as following the recognition of deferred tax assets against
tax losses recorded by some Group companies.
34. FINANCIAL ASSETS AT FAIR VALUEThis item includes, for an amount of € 755,004, the value of a financial asset recognised in thefinancial statements of the subsidiary Royal Ciclo and refers to the amounts paid by the latter to afinancing consortium in which it participates.
In addition, this item includes the market value of three derivative instruments hedging against the riskof fluctuations in interest rates (“IRS”) for an amount of € 1,550,372; two of the three derivative
financial instruments were subscribed on 29 October 2021 and the third on 30 November 2022, at thesame time multi-year unsecured loans at variable rates were taken out.
The two derivatives subscribed on 29 October 2021, maturing at the same time, have the following
characteristics:
Interest Rate Swap;
Purpose: hedging;
Underlying financial risk: interest rate risk;
67

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.
The third instrument, signed on 30 November 2022, has the following characteristics:
Interest Rate Swap;
Purpose: hedging;
Underlying financial risk: interest rate risk;
Date of trading: 01/12/2022;
Notional value: € 5,000,000;
Liability hedged: medium-term loan;
Initial date: 30/11/2022;
End date: 30/11/2027;
Debtor Selle Royal Group S.p.A.: basic contractual fixed rate 30E/360 paid at the end of the quarter contractual fixed rate 2.81%;
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 -1.50%;
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.
35. OTHER NON-CURRENT ASSETSThis item, amounting to € 683,094, mainly refers to security deposits relating to lease contracts
pertaining to Selle Royal Group S.p.A. and Crank Brothers, Inc. The balance is in line with that as at 30
June.

68

CURRENT LIABILITIES
36. 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 equal to € 11,937,682, down compared to the previous year in line with the decrease involumes recorded during the period compared to the previous year and reflects, in particular, thetrend of the contraction that was accentuated during the first few months of 2023, during which the
sharp slowdown in sales to bicycle assemblers (the so-called OEM channel - Original Equipment
Manufacturer) was added to the permanent weakness of the aftermarket channel, the latter alreadyemerging during the second half of 2022.
37. TAX PAYABLES
The item in question is detailed below:
30/06/2023 30/06/2022
Direct taxes
Indirect taxes
Local taxes
Withholding taxes on employees and others
Payables due to tax disputes
TOTAL TAX PAYABLES

434.659
887.133
55.568523.778
1.599.791
3.500.928

Var.

2.321.907 (1.887.248)
897.792(10.659)
58.449(2.881)
844.655 (320.878)
2.166.486 (566.695)
6.289.289 (2.788.361)

The lower payables for direct taxes are attributable to the lower profits recorded by the Group
companies; the decrease in payables for withholdings, almost entirely pertaining to the parent
company Selle Royal Group S.p.A., is due to the payment of the amount withheld as at 30 June 2022
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 already subject to existing instalment plans in place with the Italian Revenue Agency.
As already indicated in the paragraph relating to significant events after the closing date of thefinancial year, the disputes outstanding with the same were subsequently settled as part of theinitiatives aimed at deflation of the tax dispute in Italy. The settlement of the dispute did not result in
additional costs for taxes for the year.

6938. 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 most-the possibility for the entity to carry out a transaction with the asset or liability at the price ofadvantageous market for the asset or liability; andthat 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:-quoted prices for similar assets or liabilities in active markets;-data other than the quoted prices observable for the asset or liability, for example:-

quoted prices for identical or similar assets or liabilities in non-active markets;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.

70

The following tables summarise the financial assets and liabilities measured at fair value shown in thefinancial statements and the related measurement criteria adopted:
As at 30 June 2023
Note
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 324, 3831
34, 3834, 3827.511.313
1.137.206
755.0041.550.372
30.953.895

27.511.313
27.511.313

1.550.372
1.550.372

1.137.206
755.004
1.892.210

38, 39, 47
38, 4367.602.200
3.944.655
71.546.855-

67.602.200
3.944.655
71.546.855

-

Total

fair value measurements
Level 1
Level 2As at 30 June 2022
Note
Cash and cash equivalents
Equity investments
Financial assets at fair value
TOTAL ASSETS
Loans
Bonds
TOTAL LIABILITIESLevel 324, 3831
34, 3826.283.940
2.482.007
1.604.547
30.370.495

26.283.940
26.283.940-

2.482.007
1.604.547
4.086.554

38, 39, 47
38, 4355.323.589
5.875.596
61.199.185-

55.323.589
5.875.596
61.199.185-

39. SHORT-TERM LOANS
The balance of this item, as at 30 June 2023, amounting to € 25,133,411, up compared to 30 June
2022, reflects the actual payable for 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.
40. 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.

7141. OTHER CURRENT LIABILITIESThe item in question, compared with the balance as at the reporting date of the previous year, isdetailed as follows:
30/06/2023 30/06/2022
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

5.186.672
525.689210.774
1.766.905
1.083.275
8.773.315

Var.

6.919.323 (1.732.651)
868.326(342.637)
236.627(25.853)
1.968.311 (1.968.311)
2.561.951 (795.045)
743.414339.861
13.297.952 (4.524.637)

The decrease in this item is essentially attributable to the lower value of payables to employees andthe elimination of payables for tax consolidation following the natural expiry of the related contract
signed between the parent company Selle Royal Group S.p.A. and its parent company. The decreasein the item relating to deferred income is mainly attributable to the parent company Selle Royal Group
S.p.A..
The aforementioned decrease is attributable to the recognition during the period, with a view tocompliance with the accrual principle and according to the provisions of IAS 20, of the portion
pertaining to the year of tax credits related to investments in capital goods subsidised according to
the regulations commonly defined as “Industry 4.0”; these receivables are initially recognised asdeferred revenues to the extent of future accruals and subsequently reversed to the income
statement on a straight-line basis.
NON-CURRENT LIABILITIES
42. 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;
72

- 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 3.67% 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 3.225% at the balance sheet
date;- annual inflation rate: estimated at 2.3% over the time horizon considered.
The relative changes are shown in the following table:
Balance as at
30 June 2022

Provisions (+)

Provisions for employees

1.531.744

13.717(57.782)

43.943(150.269)(7.751)1.373.602

TOTAL

1.531.744

13.717(57.782)

43.943(150.269)(7.751)1.373.602

Uses (-)

Interest cost

Actuarial (gains) Translation Balance as at/ lossesdiff.
30 June 2023

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
1,328,847
1,312,077
1,338,297
1,303,858
1,294,123
1,348,663

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
109,489
65,757
93,48250,676
179,16373

43. 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 parent 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 third repayment instalment was paid,
amounting to € 2,000,000.
44. MEDIUM/LONG-TERM LOANS
This item, amounting to € 42,468,789, up by € 10,567,007 compared to 30 June 2022, 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 credit institutions.
45. PROVISIONS for RISKS and CHARGESThe breakdown and changes in this item are shown below:
Balance as at
Provisions (+)
30 June 2022
Provision for supplementary customer indemnities
Provision for payment of foreign agents
End of mandate indemnity
TOTAL

91.388188.817496.250
776.455

12.92920.93790.000123.865

Uses (-)-

IAS adjustment

Balance as at 30
June 2023(1.974)(1.974)102.342209.754586.250898.345

The end of mandate indemnity provision 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.

7446. DEFERRED TAXESThe balance and breakdown of this item are broken down as follows:
30/06/2023
TEMPORARY DIFFERENCES
Derivative financial instruments
Intangible assets
Tangible assets
Other temporary differences
TOTAL DEFERRED TAXES

30/06/2022
TAX EFFECT

1.550.372
1.383.023
46.4852.979.881

TEMPORARY DIFFERENCES

372.089406.9649.704
788.757

TAX EFFECT

964.394178.1411.998.517
83.7863.224.837

231.455
61.915583.01217.595893.978

The decrease in this item is mainly attributable to the net balance of lower deferred taxes relating totime differences in amortisation recognised for tax purposes compared to the same for statutory
purposes and to the recognition of higher deferred taxes resulting from the increase in fair value of thederivatives described previously.
47. 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.
48. SHAREHOLDERS’ EQUITY
The share capital is composed as follows:
Ordinary shares – 6,000,000.00 (with no par value). For the sake of completeness, please note that
the Shareholders' Meeting, which met on 18 February 2022, resolved the spin-off and split of theshares of the parent company Selle Royal Group S.p.A., on the basis of a ratio of 6.25 new shares foreach previously outstanding share. This split was completed in 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 2023
Shareholders’ equity Profit for the year

30 June 2022
Shareholders’ equity Profit for the year

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

34.890.629

3.824.356

30.470.661

10.532.489

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

15.867.509(15.555)

21.843.390--

6.323.972-

13.023.777

Elimination of intercompany profits included in inventories(2.272.339)

411.504(2.683.842)(2.010.128)

Other consolidation differences

7.354.566(5.256.342)

7.380.100(160.254)

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

55.840.364

5.287.935

57.010.309

21.385.884

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

15.253.694

2.927.347

12.634.727

3.117.710

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

71.094.058

8.215.282

69.645.036

24.503.594

Pro-rata results achieved by consolidated subsidiaries

75This consolidated annual financial report, consisting of the Income Statement, Statement ofComprehensive Income, Balance Sheet, Statement of Changes in Shareholders' Equity, Cash Flow
Statement and Explanatory Notes to the Financial Statements, gives a true and fair view of thefinancial position and results of operations for the year ended 30 June 2023 and is consistent with theaccounting records.
* * *Pozzoleone (VI), 30 November 2023
The Chairperson of the Board of Directors(Barbara Bigolin)76Selle Royal Group S.p.A.
Independent auditor’s report pursuant to article 14 of Legislative Decree n. 39
Consolidated Financial Statements as at 30 June 2023
This 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.

CCN/AZN/cpt - RC015932023BD0528

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 2023, the statement 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 the financial statements, including a summary ofsignificant 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 2023 and of its financial performance and its cash flows for the year then endedin 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 auditof the consolidated financial statements section of this report. We are independent of the company inaccordance with ethical requirements and standards applicable in Italy that are relevant to the audit offinancial statements. We believe that the audit 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 inaccordance with International Financial Reporting Standards as adopted by the European 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 from material misstatement, whether due to fraud or
error.
In preparing the financial statements, management is responsible for assessing the Company’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
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 arefree from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect amaterial misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
As part of the audit in accordance with International Standards on Auditing (ISA Italia), we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Bari, Bergamo, Bologna, Brescia, Cagliari, Firenze, Genova, Milano, Napoli, Padova, Palermo, Pescara, Roma, Torino, Treviso, Trieste, Verona, Vicenza

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.

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•

Identify and assess the risk of material misstatement of the financial statements, whether due tofraud or error; design and perform audit procedures in response to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of nondetecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or theoverride 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 purpose of expressing an
opinion on the effectiveness of the Company’s internal control;•

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

Conclude on the appropriateness of management’s use of the going concern and, based on theaudit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Company’s ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport 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 the underlying transactions in amanner 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, supervision and performance of the groupaudit. 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 2023, including its consistency with the financial statements andthe compliance with the applicable laws and regulations.
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 2023and on its compliance with the applicable laws and regulations, and inorder 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 2023 and is compliant with applicable laws and regulations.
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, 6 December 2023
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.
Selle Royal Group S.p.A. | Relazione della società di revisione indipendente

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