XML 63 R52.htm IDEA: XBRL DOCUMENT v3.22.2.2
Qualitative and Quantitative Information on Financial Risks
 12 Months Ended
Dec. 31, 2021
Text Block [Abstract]  
Qualitative and Quantitative Information on Financial Risks Qualitative and quantitative information on financial risks
The Group is exposed to several financial risks connected with its operations:
•financial market risk (principally relating to foreign currency exchange rates, interest rates and commodity prices;
•liquidity risk relating to the availability of funds and access to credit, if required, and to financial instruments in general;
•credit risk relating to counterparties failing to repay amounts owed or meet contractual obligations.
These risks could significantly affect the Group’s financial position, results of operations and cash flows, and for this reason the Group identifies and monitors these risks, in order to detect potential negative effects in advance and take the necessary action to mitigate them, primarily through the Group’s operating and financing activities and if required, through the use of derivative financial instruments.
A summary of qualitative and quantitative factors relating to these risks is provided below. The quantitative data reported in the following section does not have any predictive value. In particular, the sensitivity analysis on finance market risks does not reflect the complexity of the market or the reaction which may result from any changes that are assumed to take place.
Credit risk
Credit risk is defined as the risk of financial loss caused by the failure of a counterparty to repay amounts owed or meet its contractual obligations. The maximum risk to which an entity is exposed is represented by all the financial assets recognized in the financial statements. Management considers its credit risk to relate primarily to trade receivables generated from the wholesale channel and mitigates the related effects through specific commercial and financial strategies.
With regards to trade receivables, credit risk management is carried out by monitoring the reliability and solvency of customers, as well as through insurance agreements. The following table provides the aging of trade receivables:
(Euro thousands)Not yet due 0-90 days
overdue 		90-180 days
overdue 		>180 days
 overdue 		Total
Trade receivables, gross136,648 21,957 5,018 3,380 167,003 
Loss allowance(1,575)(696)(992)(3,380)(6,643)
Total trade receivables at December 31, 2021
135,073 21,261 4,026 — 160,360 
Trade receivables, gross106,659 23,172 2,509 15,206 147,546 
Loss allowance(549)(1,876)(480)(5,812)(8,717)
Total trade receivables at December 31, 2020
106,110 21,296 2,029 9,394 138,829 
At December 31, 2020 trade receivables overdue by more than 180 days relates to the related party Tom Ford International LLC, mainly due to the financial impact caused by the COVID-19 pandemic.
Liquidity risk
Liquidity risk represents the risk that the Group cannot meet its financial obligations due to problems in obtaining funds at current market price conditions (funding liquidity risk) or in liquidating assets on the market to find the necessary financial resources (asset liquidity risk), which could negatively impact the Group’s results if the Group is forced to incur additional costs to obtain liquidity or meet its commitments.
The following tables summarize the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities:
(Euro thousands)Contractual cash flows
Carrying
amount at
December 31,
2021		Within
1 year		Within
2 Years		Within
3 years		Beyond
Derivative financial instruments14,138 14,138 — — — 
Trade payables and customer advances223,037 223,037 — — — 
Borrowings628,938 161,550 283,736 135,541 56,414 
Lease liabilities438,052 112,713 98,101 69,827 186,951 
Other current and non-current financial liabilities201,371 33,984 29,816 — 137,571 
Total
1,505,536 545,422 411,653 205,368 380,936 
(Euro thousands)Contractual cash flows
Carrying
amount at
December 31,
2020		Within
1 year		Within
2 Years		Within
3 years		Beyond
Derivative financial instruments13,192 13,192 — — — 
Trade payables and customer advances188,342 188,342 — — — 
Borrowings664,751 106,029 107,500 281,250 169,972 
Lease liabilities407,687 102,092 82,489 67,137 187,771 
Other non-current financial liabilities220,968 — 25,976 71,924 123,068 
Total
1,494,940 409,655 215,965 420,311 480,811 
The factors which mainly influence the Group’s liquidity are the resources generated or absorbed by current operating and investing activities, the possible distribution of dividends, the maturity or refinancing of debt and the management of surplus cash. Liquidity needs or surpluses are monitored on a daily basis by the Parent Company in order to guarantee effective sourcing of financial resources or adequate investment of excess liquidity.
The negotiation and management of credit lines is coordinated by the Parent Company with the aim of satisfying the short and medium-term financing needs of the individual companies within the Group according to efficiency and cost-effectiveness criteria. It has always been the Group’s policy to sign and constantly maintain with various and diversified banks a total amount of committed credit lines that is considered consistent with the needs of the individual companies and
suitable to ensure at any time the liquidity needed to satisfy and comply with all the Group’s financial commitments, at the established economic conditions, as well as guaranteeing the availability of an adequate level of operational flexibility for any expansion programs.
Foreign currency risk
Foreign currency exchange rate transaction risks originate mainly from exports of the Group in US Dollars, Chinese Renminbi, Japanese Yen, British Pound and Mexican Peso. Risk management is mainly centralized at the distributing companies. Goods transferred for consideration to associates are settled directly in the currency of the country where they operate and sell (with the exception of countries where local currency cannot be delivered outside the country). This implies the risk that the corresponding value in Euro of revenues determined at the moment of collection is insufficient to cover production costs or to achieve the desired profit margin. This risk is heightened during the significant period between the moment when the sale prices of a collection are set and the moment when revenues are converted into Euro, which extends up to 18 months. The distributing companies enter into currency forward contracts or options, to establish the conversion rate in advance, or a predefined range of conversion rates at future dates. For the years ended December 31, 2021, 2020 and 2019 the Group covered its exchange rate risk almost exclusively with currency forward exchange contracts. To this end, before the preparation of the price list and based on market expectations and conditions, the Group arranges hedges that cannot exceed 50% - 60% of forecast sales in foreign currencies. In the period following the preparation of the price list, the total outstanding hedge is adjusted on the basis of market conditions and of the orders effectively managed and entered into production.
In addition, the Group controls and hedges exposure deriving from changes due to exchange rate changes in the value of assets or liabilities denominated in currencies other than the accounting currency of the individual company (typically intercompany financial receivables/payables), which may affect the Group’s net results, through financial instruments, whose recognition in accordance with IFRS follows the rules of fair value hedge: the profit or loss arising from subsequent remeasurements of the fair value of the hedging instrument and the hedged item are recorded within profit and loss. The hedges of the Parent Company’s future transactions in foreign currencies (which can be classified as cash flow hedges pursuant to IFRS) are accounted for in accordance with hedge accounting rules.
The Group has estimated the potential effects of a shock change of +/-5% on the main currencies to which the Group is exposed at each reporting date, by using internal assessment models based on generally accepted principles.
The following table presents the potential effects on profit before tax of a hypothetical change of +/- 500 bps in year-end exchange-rates, applied to the Group’s net balances of trade receivables and trade payables in foreign currencies.
(Euro thousands)At December 31, 2021 At December 31, 2020
Trade receivables and
trade payables in
functional currency 		 +500 bps -500 bps Trade receivables and
trade payables in
functional currency 		+500 bps -500 bps
CurrencyImpact on profit before tax Impact on profit before tax
USD96,885 (4,614)5,099 112,850 (5,374)5,939 
JPY20,481 (975)1,078 41,757 (1,988)2,198 
CNY21,084 (1,004)1,110 35,083 (1,671)1,846 
HKD27,452 (1,307)1,445 11,235 (535)591 
GBP(5,974)284 (314)4,923 (234)259 
SGD8,220 (391)433 3,120 (149)164 
CHF(18,158)865 (956)(16,552)788 (871)
Total
149,990 (7,142)7,895 192,416 (9,163)10,126 
The following table presents the potential impact on profit before tax of a hypothetical change of +/- 500 bps in year-end exchange-rates, applied to the Group’s hedged positions on the main currencies to which the Group is exposed.
(Euro thousands)At December 31, 2021 At December 31, 2020
 +500 bps -500 bps +500 bps -500 bps
CurrencyNotional amount Impact on profit before taxNotional amountImpact on profit before tax
USD81,725 3,892 (4,301)119,214 5,677 (6,274)
JPY20,692 985 (1,089)45,658 2,174 (2,403)
CNY11,464 546 (603)20,318 968 (1,069)
GBP(12,660)(603)666 16,464 784 (867)
HKD28,054 1,336 (1,477)9,460 450 (498)
CHF— — — 6,295 (300)331 
SGD8,158 388 (429)3,083 147 (162)
Total
137,433 6,544 (7,233)220,492 9,900 (10,942)
The following table presents the potential change in equity gross of tax of a hypothetical change of +/- 500 bps in year-end exchange-rates, applied to the Group’s foreign currency hedging instruments on highly probable transactions.
(Euro thousands)At December 31, 2021 At December 31, 2020
CurrencyNotional amount  +500 bps-500 bps Notional amount+500 bps -500 bps
Impact on hedge reserveImpact on hedge reserve
USD80,155 3,817 (4,219)25,355 1,207 (1,334)
CHF(4,792)(228)252 18,515 (882)974 
JPY10,360 493 (545)6,749 321 (355)
HKD16,097 767 (847)3,153 150 (166)
GBP12,659 603 (666)2,762 132 (145)
CNY178,537 8,502 (9,397)— — — 
SGD1,947 93 (102)— — — 
Total
294,963 14,047 (15,524)56,534 928 (1,026)
The following table presents the potential impact on profit before tax of a hypothetical change of +/- 500 bps in the USD/EUR year-end exchange-rate, applied to the Thom Browne put option in USD on non-controlling interests (recorded within other non-current financial liabilities).
(Euro thousands)At December 31, 2021At December 31, 2020
Notional amount +500 bps-500 bpsNotional amount+500 bps -500 bps
CurrencyImpact on profit before tax Impact on profit before tax
USD(135,726)(7,143)6,463 (169,055)(8,897)8,050 
Total
(135,726)(7,143)6,463 (169,055)(8,897)8,050 
Interest rate risk
Overall exposure to interest rate risk is monitored at the Group level through coordinated management of debt and available liquidity and of the relevant due dates. The Group’s principal sources of exposure to interest rate risk derive from loans at variable rates. At December 31, 2021, the notional value of interest rate swap derivatives to hedge the risk of a potential increase in the cost of servicing of financial debt due to fluctuations in market rates was Euro 323,816 thousand (Euro 274,336 thousand at December 31, 2020) with a negative fair value of Euro 2,412 thousand (Euro 5,515 thousand at December 31, 2020). The short-term portion of bank debt, used mainly to finance working capital needs, is not covered by interest rate hedges. The cost of bank debt is equal to Euribor for the period plus a spread that depends on the type of credit facility used.
For the year ended December 31, 2021 a hypothetical 20% increase in short-term interest rates on such floating rate non-current financial liabilities, with all other variables held constant, would have resulted in financial expenses, on an annual basis, of approximately Euro 332 thousand (Euro 742 thousand for the year ended December 31, 2020). For the year ended December 31, 2021 a hypothetical 20% decrease in short-term interest rates on such floating rate non-current financial
liabilities, with all other variables held constant, would have resulted in financial expenses, on an annual basis, of approximately Euro 69 thousand (Euro 359 thousand for the year ended December 31, 2020).
The following table presents the sensitivity on floating rate borrowings not covered by interest rate swaps.
(Euro thousands, except percentages)
At December 31, 2021
AmountTotal
interest rate
(*) 		Interest
expense		-20%Impact on
profit before
tax		 +20%Impact on
profit before
tax
10,0000.115 %12 0.006 %1 0.224 %22 
15,0000.112 %17 0.004 %1 0.220 %33 
18,7500.284 %53 0.175 %33 0.393 %74 
50,0000.000 %— 0.000 %— 0.100 %50 
10,0000.186 %19 0.077 %8 0.295 %30 
45,0000.167 %75 0.060 %27 0.274 %123 
148,750175 69 332 
_________________
*The overall rate indicated is compounded of the fixed spread plus the variable rate (+-20% is on the variable rate).
(Euro thousands, except percentages)
At December 31, 2020
AmountTotal
 interest rate
 (*) 		Interest
expense		-20%Impact on
 profit before
tax		+20%Impact on
profit before
tax
Non-current
80,0000.349 %279 0.259 %207 0.439 %351 
10,0000.195 %20 0.097 %10 0.293 %30 
45,0000.238 %107 0.136 %61 0.340 %153 
31,2500.300 %94 0.194 %61 0.406 %127 
10,0000.184 %18 0.069 %7 0.299 %30 
176,250518 346 691 
Current   
17,5000.183 %32 0.074 %13 0.292 %51 
17,50032 13 51 
_________________
*The overall rate indicated is compounded of the fixed spread plus the variable rate (+-20% is on the variable rate).