Esprinet S p A : Annual Financial Report 2020

Esprinet Group

Draft Annual Report 2020

Parent Company:

Esprinet S.p.A.

VAT Number: IT 02999990969

Companies' Register of Milan, Monza e Brianza, Lodi and Tax Number: 05091320159 R.E.A. (economic and administrative index) 1158694

Registered Office and Administrative HQ: Via Energy Park, 20 - 20871 Vimercate (MB)

Subscribed and paid-in share capital as at 31/12/2020: 7,860,651 euro

www.esprinet.com - [e-mail]

2020 Esprinet Directors' Report on Operations

CONTENTS

Consolidated results overview

page 4

1. Letter from the Chairman
2. Summary of the Group's economic and financial results
3. Share performance

Corporate Governance

page 11

1. Company Officers
2. Waiver of obligation to provide information on extraordinary transactions
3. Corporate Governance

Activities and structure of the Esprinet Group	page 12
1	Description of the activities
2	Group Structure
Structure and target market trends	page 16
	B2B distribution of IT and consumer electronics
Group and Esprinet S.p.A. economic and financial results	page 20
1	Income trend
2	Operating net working capital
3	Sales by product family and customer type
Significant events occurring in the period	page 33
Subsequent events	page 35
Business outlook	page 36
Human Resources	page 36
Health, safety and environment	page 40
Main risks and uncertainties facing the Group and Esprinet S.p.A.	page 42
Other significant information	page 51

1. Research and development activities
2. Number and value of own shares
3. Relationships with related parties
4. Relationships with subsidiaries subject to management and coordination
5. Shares of the parent company Esprinet S.p.A held by board members, statutory auditors and key managers
6. Atypical and/or unusual operations
7. Additional information required by Bank of Italy and CONSOB
8. Share incentive plans
9. Reconciliation of equity and Group result and corresponding values of the parent company
10. Consolidated Non-Financial Statement (NFS)
11. Other information

Proposal of approval of the Financial Statement and allocation of the 2020 profits	page 56
* Consolidated Financial Statements1	page 58
Esprinet Group financial statements
Notes to the consolidated financial statements
* ESPRINET S.P.A. financial statements1 (Separate Financial Statements2)	page 147
Esprinet S.p.A. financial statements
Notes to the Esprinet S.p.A. Financial Statements
Statement on the Consolidated Financial Statements, pursuant to Art. 81-ter of CONSOB Regulation
Statement on the Financial Statements, pursuant to Art. 81-ter of CONSOB Regulation
Board of Statutory Auditors' Report
Independent Auditors' Report

1Each section has a separate table of contents for easy reference by the reader

2 Esprinet S.p.A. Separate Financial Statements, as defined by the IFRS international accounting standards

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2020 Esprinet Directors' Report on Operations

Directors' Report

on Operations

2020

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2020 Esprinet Directors' Report on Operations

Consolidated results overview

1. Letter from the Chairman

To our Shareholders,

The Esprinet Group ended 2020 with a consolidated net income, including the share attributable to minority interests, of 31.8 million euro, an increase of +35% compared to 23.6 million euro in 2019, thanks to an increase in sales of +14% to a record level of almost 4.5 billion euro.

All the main economic and financial indicators were largely positive and strongly improved compared to the previous year, to the extent that the year 2020, as a whole, can be described as our best year ever.

The year of the pandemic

While 2020 was a very successful year for our Group, for humanity as a whole it will be remembered as one of the most difficult years in recent history due to the worldwide outbreak of the Covid-19 epidemic.

The health impact of the pandemic and the measures adopted by governments to deal with it have all combined to create an explosive cocktail of social unrest and financial crisis.

The more or less strict lock-downs that followed one another in different countries, often communicated late in the evening and with ordinances of difficult legal interpretation, and the consequent impacts on supply chains, demand for products and services, access to credit and mobility of people merged into an extremely uncertain and unpredictable reference environment.

Companies and governments have been often required to make extremely complex decisions, also concerning ethical and human issues, with little information and time for decision-making.

The organisational models of our Group have always been based on the utmost attention to business continuity by means of procedures, redundancy of critical systems and staff training, and in this chaotic and unpredictable scenario they have proved adequate to the situation, allowing us to react to the crisis in a way that I would describe as exceptional.

On 8 March 2020, the totality of Italian businesses, with the exclusion of local logistic facilities, were put into compulsory smart working 5 days out of 5.

A week later, activities on Iberian territory followed the same path.

This was made possible thanks to the adequacy of our systems and expertise of our human resources, who had already been working in remote mode one or two days a week for years.

While other smaller competitors had to cope with a sudden adaptation to a new operating mode, our Group continued to work seamlessly, guaranteeing the supply of products to all our customers, including those engaged in critical activities for the countries in which we operate.

I particularly remember the darkest moments of the pandemic at the end of March in the Bergamo and Brescia areas in Italy, when our staff ensured the delivery of essential IT equipment to the hospitals in the area.

The Group's ability to continue to operate in such complicated conditions, together with its great financial soundness, turned soon into a competitive advantage, as measured by the continuous growth of our market share in the reference territories.

Therefore, I wish to send a special thanks to our entire team for their professionalism and self- sacrifice in dealing with a period that will certainly remain in the memory of those who lived through it.

The macroeconomic climate

The global economy is still facing a deep recession resulting from the continuing impact of Covid-19 and uncertainty about the future scenario remains high.

Although recent vaccine approvals have raised hopes of a pandemic reversal by the end of the year, new waves and new, more contagious variants of the virus, as well as logistical difficulties in

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2020 Esprinet Directors' Report on Operations

distributing the vaccines themselves, cast doubt on the outlook. In this highly uncertain context, the global economy should grow by 5.5% in 2021 and 4.2% in 2022, as envisaged by the International Monetary Fund estimates (January 2021).

The expected resumption of growth this year follows a heavy slump in 2020 that had serious negative repercussions in particular on women, young people, the most disadvantaged, temporary workers and in general all those working in sectors with high human contact.

Despite the fact that national governments have taken bold steps to save lives and support the world economy, with almost 12,000 billion dollar of fiscal policies and about 7,500 billion dollar of monetary policies, the growth contraction for 2020 is estimated by the International Monetary Fund (January 2021) at -3.5%.

Following a sharp contraction in the first half of last year, the global economy rebounded strongly in the third quarter, when the virus containment measures were eased, and when an aggressive and far-reaching monetary policy mitigated the impact of the crisis on incomes, while keeping credit channels open. Global PMI in the fourth quarter of 2020 rose to around 53 points, signalling an expansion of industrial production in the US and most emerging market economies.

Also looking at Europe, after an unprecedented downtrend in the first half of the year, the economy recovered strongly in the third quarter of 2020 (+11.5% q-o-q in the EU and +12.4% q-o-q in the euro area), but failed to recover fully.

The brisk rebound, largely driven by private consumption, sustained by reduced savings (+13.2% q- o-q), gross fixed investments (+11.9% q-o-q), as well as public spending (+4.3% q-o-q), helped to offset only two-thirds of the GDP loss incurred in the first half of the year.

In the fourth quarter of 2020, according to Eurostat's preliminary estimates, GDP decreased by 0.5% (q-o-q) in the EU and by 0.7% (q-o-q) in the euro area. In most of the 11 Member States, GDP growth slowed down significantly compared to the third quarter. Among the larger euro area countries, output declined in Italy (-2.0%q-o-q) and France (-1.3%q-o-q) but remained substantially stable in Germany (+0.1% q-o-q) and grew slightly in Spain (+0.4% q-o-q).

A slightly improved result, which, despite the resurgence of the pandemic, almost contrasts with the sharp contraction in the second quarter, when the first wave hit the European economy.

This is due to the fact that virus containment measures have been more targeted and relatively less severe

than those adopted in the spring. Second, households and companies seem to have gradually learned to live with the pandemic, weakening the link between austerity and mobility restrictions on the one hand, and economic performance on the other.

After a decrease, estimated by the European Commission at 6.3% and 6.8% in 2020 (in the EU and euro area respectively), the GDP growth rate is expected to pick up to 3.7% and 3.8% in 2021 (in the EU and euro area respectively), in 2022 it is forecast at 3.9% (3.8% in the euro area), marking a considerable improvement compared to the autumn.

According to European Commission forecasts, GDP is expected to reach pre-crisis levels by mid- 2022 on average, in both the EU and the euro area. While some Member States are expected to see a reduced distance from pre-pandemic production levels by the end of 2021, others are expected to take longer.

Significant divergences are expected to persist in the recovery, due to the different seriousness of the pandemic and the consequent severity and duration of the containment measures, as well as differences in the structure of each economy, particularly related to the relevant importance of tourism and recreational activities, and the extent of policy responses. This is particularly true for Spain and Italy.

Brightening the short-term outlook, however, is the agreement reached between the EU and the UK on the terms of their future cooperation, as well as the ambitious Next Generation EU programme, which is expected to provide a strong and faster boost to the European economy towards sustainable recovery.

Lastly, in November 2020, Democratic candidate Joe Biden won the US presidential election, eliminating the risk of a trade war scenario between the US and its European allies and significantly reducing the likelihood of an escalation of the US-China trade war.

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