Aeffe

Interim / Quarterly Report • Nov 9, 2017

INTERIM FINANCIAL STATEMENT AT 30 SEPTEMBER 2017

Disclaimer

This Interim financial statement has been translated into English solely for the convenience of the International reader. In the event of conflict or inconsistency between the terms used in the Italian Version of the report and the English version, the Italian version shall prevail, as the Italian version constitutes the official document.

SUMMARY

INTERIM FINANCIAL STATEMENT AT 30 SEPTEMBER 2017	1
CORPORATE BOARDS OF THE PARENT COMPANY	3
ORGANISATION CHART	4
BRANDS PORTFOLIO	5
HEADQUARTERS	6
SHOWROOMS	7
MAIN FLAGSHIPSTORE LOCATIONS UNDER DIRECT MANAGEMENT	8
MAIN ECONOMIC-FINANCIAL DATA	9
FINANCIAL STATEMENTS	10
INTERIM MANAGEMENT REPORT	15
EXPLANATORY NOTES	16

Corporate Boards of the Parent Company

Chairman

Massimo Ferretti

Deputy Chairman

Alberta Ferretti

Board of Directors

Chief Executive Officer

Simone Badioli

Directors Marcello Tassinari – Managing Director Roberto Lugano Daniela Saitta Sabrina Borocci Alessandro Bonfiglioli

Board of Statutory Auditors

President

Angelo Miglietta

Statutory Auditors

Fernando Ciotti Carla Trotti

Alternate Auditors Nevio Dalla Valle Daniela Elvira Bruno

Board of Compensation Committee

President Daniela Saitta

Members Roberto Lugano Sabrina Borocci

Board of Internal Control Committee

President Roberto Lugano

Members

Daniela Saitta Alessandro Bonfiglioli

Organisation chart

Brands portfolio

Headquarters

AEFFE

Via Delle Querce, 51 47842 - San Giovanni in Marignano (RN) Italy

MOSCHINO

Via San Gregorio, 28 20124 - Milan Italy

POLLINI

Via Erbosa I° tratto, 92 47030 - Gatteo (FC) Italy

VELMAR

Via Delle Querce, 51 47842 - San Giovanni in Marignano (RN) Italy

Showrooms

MILAN (FERRETTI – PHILOSOPHY – POLLINI – CEDRIC CHARLIER) Via Donizetti, 48 20122 - Milan Italy

LONDON

(FERRETTI – PHILOSOPHY – MOSCHINO) 28-29, Conduit Street W1S 2YB - London UK

PARIS

(FERRETTI - MOSCHINO – PHILOSOPHY) 43, Rue due Faubourg Saint Honoré 75008 - Paris France

NEW YORK

(GROUP) 30, West 56th Street 10019 - New York USA

MILAN

(MOSCHINO) Via San Gregorio, 28 20124 - Milan Italy

MILAN

(LOVE MOSCHINO) Via Settembrini, 1 20124 - Milan Italy

PARIS

(CEDRIC CHARLIER) 28, Rue de Sevigne 75004 - Paris France

Main flagshipstore locations under direct management

ALBERTA FERRETTI

Milan Rome Capri Paris London Los Angeles

POLLINI

Milan Venice Bolzano Varese Verona

SPAZIO A

Florence Venice

MOSCHINO

Milan Rome Capri Paris London Los Angeles New York Seoul Pusan Daegu

Main economic-financial data

		9 M	9 M
		2016	2017
Total revenues	(Values in millions of EUR)	219.1	237.5
Gross operating margin (EBITDA)	(Values in millions of EUR)	21.3	30.4
Net operating profit (EBIT)	(Values in millions of EUR)	12.2	21.6
Profit before taxes	(Values in millions of EUR)	10.5	18.6
Net profit for the Group	(Values in millions of EUR)	4.9	11.9
Basic earnings per share	(Values in units of EUR)	0.048	0.117
Cash Flow (net profit + depreciation)	(Values in millions of EUR)	14.3	20.7
Cash Flow/Total revenues	Ratio	6.5	8.7

		31 December	30 September	31 December	30 September
		2015	2016	2016	2017
Net capital invested	(Values in millions of EUR)	230.2	246.3	227.6	245.4
Net financial indebtedness	(Values in millions of EUR)	80.5	77.7	59.5	66.1
Group net equity	(Values in millions of EUR)	131.7	136.2	135.8	146.9
Group net equity per share	(Values in units of EUR)	1.2	1.3	1.3	1.4
Current assets/Current liabilities	Ratio	2.0	2.3	1.8	2.3
Current assets less invent./Current liabilities (ACID Test)	Ratio	0.9	1.0	0.8	1.1
Net financial indebtedness/Net equity	Ratio	0.5	0.5	0.4	0.4

Financial statements

Income statement at 30 September

(Values in units of EUR)	Notes	9 M	% on	9 M	% on	Change	%
		2017	revenues	2016	revenues
REVENUES FROM SALES AND SERVICES	(1)	234,973,494	100.0%	213,760,278	100.0%	21,213,216	9.9%
Other revenues and income		2,572,852	1.1%	5,351,329	2.5%	( 2,778,477)	(51.9%)
TOTAL REVENUES		237,546,346	101.1%	219,111,607	102.5%	18,434,739	8.4%
Changes in inventory		1,872,757	0.8%	( 1,275,361)	(0.6%)	3,148,118	(246.8%)
Costs of raw materials, cons. and goods for resale		( 74,940,985)	(31.9%)	( 67,514,447)	(31.6%)	( 7,426,538)	11.0%
Costs of services		( 65,236,028)	(27.8%)	( 61,599,605)	(28.8%)	( 3,636,423)	5.9%
Costs for use of third parties assets		( 17,682,410)	(7.5%)	( 17,396,075)	(8.1%)	( 286,335)	1.6%
Labour costs		( 47,770,281)	(20.3%)	( 47,014,323)	(22.0%)	( 755,958)	1.6%
Other operating expenses		( 3,354,932)	(1.4%)	( 3,016,646)	(1.4%)	( 338,286)	11.2%
Total Operating Costs		( 207,111,879)	(88.1%)	( 197,816,457)	(92.5%)	( 9,295,422)	4.7%
GROSS OPERATING MARGIN (EBITDA)	(2)	30,434,467	13.0%	21,295,150	10.0%	9,139,317	42.9%
Amortisation of intangible fixed assets		( 4,934,753)	(2.1%)	( 5,099,837)	(2.4%)	165,084	(3.2%)
Depreciation of tangible fixed assets		( 3,730,465)	(1.6%)	( 3,829,411)	(1.8%)	98,946	(2.6%)
Revaluations/(write-downs) and provisions		( 167,140)	(0.1%)	( 152,948)	(0.1%)	( 14,192)	9.3%
Total Amortisation, write-downs and provisions		( 8,832,358)	(3.8%)	( 9,082,196)	(4.2%)	249,838	(2.8%)
NET OPERATING PROFIT/LOSS (EBIT)		21,602,109	9.2%	12,212,954	5.7%	9,389,155	76.9%
Financial income		1,295,261	0.6%	398,794	0.2%	896,467	224.8%
Financial expenses		( 4,326,874)	(1.8%)	( 2,143,845)	(1.0%)	( 2,183,029)	101.8%
Total Financial Income/(expenses)		( 3,031,613)	(1.3%)	( 1,745,051)	(0.8%)	( 1,286,562)	73.7%
PROFIT/LOSS BEFORE TAXES		18,570,496	7.9%	10,467,903	4.9%	8,102,593	77.4%
Taxes		( 6,530,268)	(2.8%)	( 5,056,224)	(2.4%)	( 1,474,044)	29.2%
NET PROFIT/LOSS		12,040,228	5.1%	5,411,679	2.5%	6,628,549	122.5%
(Profit)/loss attributable to minority shareholders		( 131,337)	(0.1%)	( 522,113)	(0.2%)	390,776	(74.8%)
NET PROFIT/LOSS FOR THE GROUP	(3)	11,908,891	5.1%	4,889,566	2.3%	7,019,325	143.6%
Basic earnings per share	(4)	0.117		0.048
Dilutive earnings per share	(4)	0.117		0.048

Income statement for the third quarter

(Values in units of EUR)	Notes	III Q	% on	III Q	% on	Change	%
		2017	revenues	2016	revenues
REVENUES FROM SALES AND SERVICES	(1)	85,020,528	100.0%	75,977,610	100.0%	9,042,918	11.9%
Other revenues and income		1,183,367	1.4%	( 435,253)	(0.6%)	1,618,620	(371.9%)
TOTAL REVENUES		86,203,895	101.4%	75,542,357	99.4%	10,661,538	14.1%
Changes in inventory		( 446,839)	(0.5%)	( 1,332,445)	(1.8%)	885,606	(66.5%)
Costs of raw materials, cons. and goods for resale		( 25,289,616)	(29.7%)	( 22,318,093)	(29.4%)	( 2,971,523)	13.3%
Costs of services		( 22,677,060)	(26.7%)	( 21,047,808)	(27.7%)	( 1,629,252)	7.7%
Costs for use of third parties assets		( 6,145,936)	(7.2%)	( 5,878,684)	(7.7%)	( 267,252)	4.5%
Labour costs		( 15,329,010)	(18.0%)	( 15,178,969)	(20.0%)	( 150,041)	1.0%
Other operating expenses		( 1,375,354)	(1.6%)	( 717,026)	(0.9%)	( 658,328)	91.8%
Total Operating Costs		( 71,263,815)	(83.8%)	( 66,473,025)	(87.5%)	( 4,790,790)	7.2%
GROSS OPERATING MARGIN (EBITDA)	(2)	14,940,080	17.6%	9,069,332	11.9%	5,870,748	64.7%
Amortisation of intangible fixed assets		( 1,613,619)	(1.9%)	( 1,653,363)	(2.2%)	39,744	(2.4%)
Depreciation of tangible fixed assets		( 1,243,886)	(1.5%)	( 1,284,052)	(1.7%)	40,166	(3.1%)
Revaluations/(write-downs) and provisions		( 73,299)	(0.1%)	( 68,224)	(0.1%)	( 5,075)	7.4%
Total Amortisation, write-downs and provisions		( 2,930,804)	(3.4%)	( 3,005,639)	(4.0%)	74,835	(2.5%)
NET OPERATING PROFIT/LOSS (EBIT)		12,009,276	14.1%	6,063,693	8.0%	5,945,583	98.1%
Financial income		276,741	0.3%	192,341	0.3%	84,400	43.9%
Financial expenses		( 1,110,399)	(1.3%)	( 561,946)	(0.7%)	( 548,453)	97.6%
Total Financial Income/(expenses)		( 833,658)	(1.0%)	( 369,605)	(0.5%)	( 464,053)	125.6%
PROFIT/LOSS BEFORE TAXES		11,175,618	13.1%	5,694,088	7.5%	5,481,530	96.3%
Taxes		( 3,691,193)	(4.3%)	( 2,106,844)	(2.8%)	( 1,584,349)	75.2%
NET PROFIT/LOSS		7,484,425	8.8%	3,587,244	4.7%	3,897,181	108.6%
(Profit)/loss attributable to minority shareholders		( 193,403)	(0.2%)	( 166,626)	(0.2%)	( 26,777)	16.1%
NET PROFIT/LOSS FOR THE GROUP	(3)	7,291,022	8.6%	3,420,618	4.5%	3,870,404	113.1%

Reclassified balance sheet

(Values in units of EUR)	Notes	30 September	31 December	30 September
		2017	2016	2016
Trade receivables		50,627,137	40,711,059	45,625,559
Stocks and inventories		91,884,436	89,389,833	88,774,058
Trade payables		( 53,553,114)	( 61,880,670)	( 47,563,789)
Operating net working capital	(5)	88,958,459	68,220,222	86,835,828
Other short term receivables		26,626,430	25,082,908	24,029,761
Tax receivables		2,940,427	4,094,261	3,044,394
Other short term liabilities		( 16,939,190)	( 16,958,605)	( 16,324,049)
Tax payables		( 5,759,411)	( 7,376,339)	( 5,867,897)
Net working capital		95,826,715	73,062,447	91,718,037
Tangible fixed assets		60,086,705	61,376,021	61,526,689
Intangible fixed assets		111,179,468	115,131,885	116,429,921
Equity investments		131,558	131,558	131,666
Other fixed assets		3,324,621	3,961,836	3,800,742
Fixed assets	(6)	174,722,352	180,601,300	181,889,018
Post employment benefits		( 6,047,103)	( 6,366,872)	( 6,422,600)
Provisions		( 2,436,095)	( 2,558,786)	( 796,149)
Assets available for sale		436,885	436,885	436,885
Long term not financial liabilities		( 471,152)	( 469,000)	( 285,000)
Deferred tax assets		13,944,734	13,856,302	11,068,217
Deferred tax liabilities		( 30,603,337)	( 30,985,927)	( 31,328,334)
NET CAPITAL INVESTED		245,372,999	227,576,349	246,280,074
Share capital		25,371,407	25,371,407	25,371,407
Other reserves		116,529,898	115,641,684	114,796,600
Profits/(Losses) carried-forward		( 6,956,308)	( 8,883,005)	( 8,883,005)
Profit/(Loss) of the period		11,908,891	3,641,244	4,889,566
Group interest in shareholders' equity		146,853,888	135,771,330	136,174,568
Minority interests in shareholders' equity		32,429,531	32,298,194	32,451,394
Total shareholders' equity	(7)	179,283,419	168,069,524	168,625,962
Short term financial receivables		( 2,236,173)	( 2,235,854)	( 2,235,854)
Cash		( 14,937,148)	( 14,521,334)	( 8,593,992)
Long term financial liabilities		24,964,974	23,840,201	20,531,492
Long term financial receivables		( 2,635,189)	( 3,390,633)	( 3,216,724)
Short term financial liabilities		60,933,116	55,814,445	71,169,190
NET FINANCIAL POSITION	(8)	66,089,580	59,506,825	77,654,112
SHAREHOLDERS' EQUITY AND NET FINANCIAL INDEBTEDNESS

Cash flow

(Values in thousands of EUR)	Notes	9 M	9 M
		2017	2016
OPENING BALANCE		14,521	9,993
Profit / loss before taxes		18,570	10,468
Amortisation / write-downs		8,665	8,929
Accrual (+) / availment (-) of long term provisions and post employment benefits		( 442)	( 402)
Paid income taxes		( 8,618)	( 3,062)
Financial income (-) and financial charges (+)		3,032	1,745
Change in operating assets and liabilities		( 21,145)	( 26,295)
CASH FLOW (ABSORBED) / GENERATED BY OPERATING ACTIVITY		62	( 8,617)
Increase (-) / decrease (+) in intangible fixed assets		( 982)	1,291
Increase (-) / decrease (+) in tangible fixed assets		( 2,441)	( 2,095)
Investments and write-downs (-)/ Disinvestments and revaluations (+)		-	-
CASH FLOW (ABSORBED) / GENERATED BY INVESTING ACTIVITY		( 3,423)	( 804)
Other variations in reserves and profits carried-forward of shareholders'equity		( 826)	13,586
Dividends paid		-	-
Increase (+) / decrease (-) of financial liabilities		6,243	( 2,678)
Increase (-) / decrease (+) of financial receivables		1,392	( 1,141)
Financial income (+) and financial charges (-)		( 3,032)	( 1,745)
CASH FLOW (ABSORBED) / GENERATED BY FINANCING ACTIVITY		3,777	8,022
CLOSING BALANCE		14,937	8,594

Changes in shareholders' equity

(Values in thousands of EUR)	Share capital	Share premium reserve	Other reserves	Fair Value reserve	IAS reserve	Profits/(Losses) carried forward	Reamisurement of defined benefit plans reserve	Net profit / loss for the Group	Translation reserve	shareholders' equity Group interest in	Minority interests in shareholders' equity	Total shareholders' equity
BALANCES AT 1 January 2016	25,371	71,240	26,516	7,901	11,459	( 9,486)	( 1,017)	1,522	( 1,762)	131,744	17,884	149,628
Allocation of 31/12/15 profit/(loss)	-	-	919	-	-	603	-	( 1,522)	-	-	-	-
Dividends paid	-	-	-	-	-	-	-	-	-	-	-	-
Treasury stock (buy-back)/ sale	-	-	-	-	-	-	-	-	-	-	-	-
Total comprehensive income/(loss) at 30/09/16	-	-	-	-	-	-	-	4,890	( 459)	4,431	522	4,953
Other changes	-	-	-	-	-	-	-	-	-	-	14,045	14,045
BALANCES AT 30 September 2016	25,371	71,240	27,435	7,901	11,459	( 8,883)	( 1,017)	4,890	( 2,221)	136,175	32,451	168,626

(Values in thousands of EUR)	Share capital	Share premium reserve	Other reserves	Fair Value reserve	IAS reserve	Profits/(Losses) carried forward	Reamisurement of defined benefit plans reserve	Net profit / loss for the Group	Translation reserve	shareholders' equity Group interest in	Minority interests in shareholders' equity	Total shareholders' equity
BALANCES AT 1 January 2017	25,371	71,240	27,435	7,901	11,459		( 8,883) ( 1,130)	3,641	( 1,262)	135,772	32,298	168,070
Allocation of 31/12/16 profit/(loss)	-	-	1,715	-		1,926	-	( 3,641)	-	-	-	-
Dividends paid	-	-	-	-	-	-	-	-	-	-	-	-
Treasury stock (buy-back)/ sale	-	-	-	-	-	-	-	-	-	-	-	-
Total comprehensive income/(loss) at 30/09/17	-	-	-	-	-	-	-	11,909	( 827)	11,082	131	11,213
Other changes	-	-	-	-	-	-	-	-	-	-	-	-
BALANCES AT 30 September 2017	25,371	71,240	29,150	7,901	11,459		( 6,957) ( 1,130) 11,909 ( 2,089)			146,854	32,429	179,283

Interim management report

In the first nine months of 2017, revenues from sales and services are equal to EUR 234,973 thousand with an increase of 9.9%, at current exchange rates and +10.0% at constant exchange rates, compared to EUR 213,760 thousand in the first nine months of 2016.

In the first nine months of 2017, revenues of the prêt-à-porter division increase by 9.8% (same percentage at constant exchange rates) to EUR 179,928 thousand, while revenues of the footwear and leather goods division increase by 12.8%, before inter-divisional eliminations, to EUR 80,111 thousand.

In the first nine months of 2017 consolidated EBITDA is equal to EUR 30,434 thousand (with an incidence of 13.0% of consolidated sales), compared to EUR 21,295 thousand in the first nine months of 2016 (10.0% of total sales).

The improvement in profitability is mainly driven by sales growth of both divisions.

In particular, EBITDA of the prêt-à-porter division is equal to EUR 21,657 thousand (representing the 12.0% of sales) compared to EUR 14,346 thousand in the first nine months of 2016 (representing the 8.8% of sales).

EBITDA of the Footwear and leather goods division amounts to EUR 8,777 thousand (11.0% of sales) compared to EUR 6,949 thousand in the first nine months of 2016 (9.8% of sales), with a EUR 1,828 thousand increase.

Consolidated EBIT amounts to EUR 21,602 thousand, showing an increase of EUR 9,389 thousand compared to an EBIT of EUR 12,213 thousand in the first nine months of 2016. The increase reflects the growth in EBITDA.

As far the increase in financial expenses in the first nine months of 2017 compared with the first nine months of 2016 is concerned, the positive effect of minor charges on lower financial debt is offset by the valuation at fair value of the contracts entered to cover currency risk for business transactions in foreign currencies. The effect is posted in the P&L statement because the forward-exchange contracts mentioned above, also in the view provided by IAS 39, are accounted as not "Cash flow hedge".

The Group post a Net Profit of EUR 11,909 thousand, compared to a net profit of EUR 4,890 thousand in the first nine months of 2016, with an increase of 7,019 thousand.

Compared to 31 December 2016, the balance sheet at 30 September 2017 shows an increase in shareholders' equity from EUR 168,070 thousand to EUR 179,283 thousand. The main variation is due to the economic result of the period.

At 30 September 2017, operating net working capital amounts to EUR 88,958 thousand (29.5% of LTM sales) compared to EUR 68,220 thousandat 31 December 2016 (24.3% of LTM sales) and to EUR 86,836 thousand at 30 September 2016 (31.4% of LTM sales).

Fixed assets decrease by EUR 5,879 thousand from December 31, 2016 to September 30, 2017.

Explanatory notes

Income statement

1. Revenues from sales and services

Nine months 2017 vs 2016

In the first nine months of 2017, revenues from sales and services are equal to EUR 234,973 thousand with an increase of 9.9%, at current exchange rates and +10.0% at constant exchange rates, compared to EUR 213,760 thousand in the first nine months of 2016.

Sales by brand
(Values in thousands of EUR)	9 M		9 M			Change
	2017	%	2016	%	Δ	%
Alberta Ferretti	23,566	10.0%	19,203	9.0%	4,363	22.7%
Philosophy	12,987	5.5%	11,516	5.4%	1,471	12.8%
Moschino	163,405	69.5%	147,466	69.0%	15,939	10.8%
Pollini	26,439	11.3%	22,869	10.7%	3,570	15.6%
Other	8,576	3.7%	12,706	5.9%	( 4,130)	(32.5%)
Total	234,973	100.0%	213,760	100.0%	21,213	9.9%

In the first nine months of 2017, Alberta Ferretti brand increases by 22.7% (+23.3% at constant exchange rates), generating 10.0% of consolidated sales, while Philosophy brand increases by 12.8% (+13.0% at constant exchange rates), generating 5.5% of consolidated sales.

In the same period, Moschino brand sales increase by 10.8% (+10.8% at constant exchange rates) contributing to 69.5% of consolidated sales.

Pollini brand increases by 15.6% (+15.6% at constant exchange rates), generating 11.3% of consolidated sales, while the other brands sales decrease by 32.5% (same percentage at constant exchange rates) contributing to 3.7% of consolidated sales.

(Values in thousands of EUR)	9 M		9 M			Change
	2017	%	2016	%	Δ	%
Italy	115,958	49.3%	96,509	45.1%	19,449	20.2%
Europe (Italy and Russia excluded)	48,849	20.8%	46,447	21.7%	2,402	5.2%
Russia	7,161	3.0%	7,382	3.5%	( 221)	(3.0%)
United States	14,794	6.3%	17,061	8.0%	( 2,267)	(13.3%)
Rest of the World	48,211	20.6%	46,361	21.7%	1,850	4.0%
Total	234,973	100.0%	213,760	100.0%	21,213	9.9%

Sales by geographical area

In the first nine months of 2017 sales in Italy, amounting to 49.3% of consolidated sales, register a very positive trend increasing by 20.2% to EUR 115,958 thousand, thanks to organic growth both of wholesale and retail channel.

Sales in Europe, that amount to EUR 48,849 thousand, increase by 5.2% (+5.8% at constant exchange rates), contributing to 20.8% of consolidated sales, while the Russian market records sales equal to EUR 7,161

thousand, contributing to 3.0% of consolidated sales, with a decrease of 3.0% compared to the corresponding period of 2016.

Sales in the United States are equal to EUR 14,794 thousand, contributing to 6.3% of consolidated sales, posting in the period a decrease of 13.3% (-13.4% at constant exchange rates). This change is mainly due to the slowdown in sales in the department stores.

In the Rest of the World, sales are equal to EUR 48,211 thousand, contributing to 20.6% of consolidated sales, with an increase of 4.0% (+3.8% at constant exchange rates) compared to the corresponding period of 2016, mainly thanks to the excellent trend in Greater China, that increased by 16%.

(Values in thousands of EUR)	9 M		9 M			Change
	2017	%	2016	%	Δ	%
Wholesale	164,429	70.0%	152,837	71.5%	11,592	7.6%
Retail	63,234	26.9%	53,581	25.1%	9,653	18.0%
Royalties	7,310	3.1%	7,342	3.4%	( 32)	(0.4%)
Total	234,973	100.0%	213,760	100.0%	21,213	9.9%

Sales by distribution channel

By distribution channel in the first nine months of 2017, wholesale sales increase by 7.6% (+7.5% at constant exchange rates) contributing to 70.0% of consolidated sales.

Sales of our directly-operated stores (retail channel) amount to EUR 63,234 thousand with an increase of 18.0% (+18.4% at constant exchange rates) contributing to 26.9% of consolidated sales.

Royalty income is 0.4% lower than in the corresponding period of the previous year, representing 3.1% of consolidated sales.

Third quarter 2017 vs 2016

In the third quarter of 2017, revenues from sales and services are equal to EUR 85,020 thousand with an increase of 11.9% compared with EUR 75,977 thousand in the third quarter of 2016.

(Values in thousands of EUR)	III Q		III Q			Change
	2017	%	2016	%	Δ	%
Alberta Ferretti	7,791	9.2%	6,217	8.2%	1,574	25.3%
Philosophy	4,493	5.3%	4,313	5.7%	180	4.2%
Moschino	58,618	68.9%	52,059	68.5%	6,559	12.6%
Pollini	10,766	12.7%	9,276	12.2%	1,490	16.1%
Other	3,352	3.9%	4,112	5.4%	( 760)	(18.5%)
Total	85,020	100.0%	75,977	100.0%	9,043	11.9%

Sales by brand

In the third quarter of 2017, Alberta Ferretti brand increases by 25.3% generating 9.2% of consolidated sales, while Philosophy brand increases by 4.2% generating 5.3% of consolidated sales.

In the same period, Moschino brand sales increase by 12.6% contributing to 68.9% of consolidated sales.

Pollini brand increases by 16.1% generating 12.7% of consolidated sales, while the other brands sales decrease by 18.5% contributing to 3.9% of consolidated sales.

Sales by geographical area

(Values in thousands of EUR)	III Q		III Q			Change
	2017	%	2016	%	Δ	%
Italy	43,907	51.6%	35,941	47.3%	7,966	22.2%
Europe (Italy and Russia excluded)	16,921	19.9%	16,286	21.4%	635	3.9%
Russia	2,610	3.1%	2,545	3.4%	65	2.6%
United States	5,059	6.0%	5,940	7.8%	( 881)	(14.8%)
Rest of the World	16,523	19.4%	15,265	20.1%	1,258	8.2%
Total	85,020	100.0%	75,977	100.0%	9,043	11.9%

In the third quarter of 2017 sales in Italy increase by 22.2% to EUR 43,907 thousand, contributing to 51.6% of consolidated sales.

Sales in Europe increase by 3.9% contributing to 19.9% of consolidated sales, while the Russian market records sales equal to EUR 2,610 thousand, contributing to 3.1% of consolidated sales, with an increase of 2.6%. Sales in the United States are equal to EUR 5,059 thousand, contributing to 6.0% of consolidated sales, with a decrease of 14.8%.

In the Rest of the World, sales are equal to EUR 16,523 thousand with an increase of 8.2% and a contribution of 19.4% of consolidated sales.

Sales by distribution channel

(Values in thousands of EUR)	III Q	III Q			Change
	2017	%	2016	%	Δ	%
Wholesale	59,187	69.6%	53,649	70.6%	5,538	10.3%
Retail	23,216	27.3%	19,651	25.9%	3,565	18.1%
Royalties	2,617	3.1%	2,677	3.5%	( 60)	(2.2%)
Total	85,020	100.0%	75,977	100.0%	9,043	11.9%

By distribution channel in the third quarter of 2017, wholesale sales increase by 10.3% contributing to 69.6% of consolidated sales.

Sales of our directly-operated stores (retail channel) amount to EUR 23,216 thousand with an increase of 18.1% contributing to 27.3% of consolidated sales.

Royalty income is 2.2% lower than in the corresponding period of the previous year, representing 3.1% of consolidated sales.

2. Gross Operating Margin (EBITDA)

Nine months 2017 vs 2016

In the first nine months of 2017 consolidated EBITDA is equal to EUR 30,434 thousand (with an incidence of 13.0% of consolidated sales), compared to EUR 21,295 thousand in the first nine months of 2016 (10.0% of total sales).

The improvement in profitability is mainly driven by sales growth of both divisions.

EBITDA of the prêt-à-porter division is equal to EUR 21,657 thousand (representing the 12.0% of sales) compared to EUR 14,346 thousand in the first nine months of 2016 (representing the 8.8% of sales).

EBITDA of the Footwear and leather goods division amounts to EUR 8,777 thousand (11.0% of sales) compared to EUR 6,949 thousand in the first nine months of 2016 (9.8% of sales), with a EUR 1,828 thousand increase.

Third quarter 2017 vs 2016

In the third quarter of 2017 consolidated EBITDA is EUR 14,940 thousand (with an incidence of 17.6% of consolidated sales), showing an increase of profitability compared to EUR 9,069 thousand in the third quarter of 2016, (with an incidence of 11.9% of consolidated sales).

3. Net profit for the Group

Nine months 2017 vs 2016

The Group posts a Net Profit of EUR 11,909 thousand, compared to the net profit of EUR 4,890 thousand in the first nine months of 2016, with a EUR 7,019 thousand increase.

As far the increase in financial expenses in the first nine months of 2017 compared with the first nine months of 2016 is concerned, the positive effect of minor charges on lower financial debt is offset by the valuation at fair value of the contracts entered to cover currency risk for business transactions in foreign currencies. The effect is posted in the P&L statement because the forward-exchange contracts mentioned above are accounted as not "Cash flow hedge".

Third quarter 2017 vs 2016

In the third quarter of 2017 Group records a net profit of EUR 7,291 thousand showing an increase compared to a net profit of EUR 3,421 thousand in the third quarter of 2016.

4. Earnings per share

Reference earnings

The calculation of basic and dilutive earnings per share is based on the following elements:

(Values in thousands of EUR)	30 September	30 September
From continuing and discontinued activities	2017	2016
Earnings for determining basic earnings per share	11,909	4,890
Dilutive effects	-	-
Earnings for determing dilutive earnings per share	11,909	4,890
(Values in thousands of EUR)	30 September	30 September
From continuing activities	2017	2016
Earnings for the period	11,909	4,890
Earnings from discontinued operations	-	-
Earnings for determining basic earnings per share	11,909	4,890
Dilutive effects	-	-
Earnings for determing dilutive earnings per share	11,909	4,890

In both periods, September 2017 and September 2016, there is no evidence of dilution of consolidated net earnings.

Number of reference share

	30 September	30 September
	2017	2016
Average number of shares for determing earnings per share	101,486	101,486
Share options	-	-
Average number of shares for determing diluted earnings per share	101,486	101,486

Basic earnings per share

Group net earnings attributable to holders of ordinary shares of parent company AEFFE S.p.A., amounts to EUR 11,909 thousand (September 2016: EUR 4,890 thousand).

Dilutive earnings per share

The calculation of diluted earnings per share for the period January - September 2017, matches with the calculation of basic earnings per share, as there are no tools with potential dilutive effects.

Segment information

Economic performance by Divisions

At international level, the Group is divided into two main business sectors:

• (i) Prêt-à porter Division;
• (ii) Footwear and leather goods Division.

Nine months 2017 vs 2016

The following tables indicate the main economic data for the first nine months of 2017 and 2016 of the Prêtà porter and Footwear and leather goods Divisions.

(Values in thousand of EUR)		Prêt-à porter Division Footwear and leather	Elimination of	Total
9M 2017		goods Division	intercompany
			transactions
SECTOR REVENUES	179,928	80,111	( 25,066)	234,973
Intercompany revenues	( 5,828)	( 19,238)	25,066	-
Revenues with third parties	174,100	60,873	-	234,973
Gross operating margin (EBITDA)	21,657	8,777	-	30,434
Amortisation	( 6,536)	( 2,129)	-	( 8,665)
Other non monetary items:
Revaluations / write-downs		( 167)		( 167)
Net operating profit / loss (EBIT)	15,121	6,481	-	21,602
Financial income	698	911	( 314)	1,295
Financial expenses	( 1,326)	( 3,315)	314	( 4,327)
Profit / loss before taxes	14,493	4,077	-	18,570
Income taxes	( 5,106)	( 1,424)	-	( 6,530)
Net profit / loss	9,387	2,653	-	12,040

(Values in thousand of EUR)		Prêt-à porter Division Footwear and leather	Elimination of	Total
		goods Division	intercompany
9M 2016			transactions
SECTOR REVENUES	163,934	71,000	( 21,174)	213,760
Intercompany revenues	( 5,829)	( 15,345)	21,174	-
Revenues with third parties	158,105	55,655	-	213,760
Gross operating margin (EBITDA)	14,346	6,949	-	21,295
Amortisation	( 6,809)	( 2,120)	-	( 8,929)
Other non monetary items:
Revaluations / write-downs	-	( 153)		( 153)
Net operating profit / loss (EBIT)	7,537	4,676	-	12,213
Financial income	490	228	( 319)	399
Financial expenses	( 1,679)	( 784)	319	( 2,144)
Profit / loss before taxes	6,348	4,120	-	10,468
Income taxes	( 3,539)	( 1,517)	-	( 5,056)
Net profit / loss	2,809	2,603	-	5,412

Prêt-à porter Division

In the first nine months of 2017, revenues of the prêt-à-porter division increase by 9.8% (same percentage at constant exchange rates) to EUR 179,928 thousand. This division contributes to 69.8% of consolidated revenues in the first nine months of 2016 and 69.2% in the first nine months of 2017, before inter-divisional eliminations.

EBITDA of the prêt-à-porter division is equal to EUR 21,657 thousand in the first nine months of 2017 (representing 12.0% of consolidated sales) compared to an EBITDA of EUR 14,346 thousand in the first nine months of 2016 (representing 8.8% of consolidated sales), showing an increase of EUR 7,311 thousand mainly driven by sales growth.

Footwear and leather goods Division

Revenues of the footwear and leather goods division increase by 12.8% from EUR 71,000 thousand in the first nine months of 2016 to EUR 80,111 thousand in the first nine months of 2017.

EBITDA of the Footwear and leather goods division amounts to EUR 8,777 thousand (11.0% of sales) compared to EUR 6,949 thousand in the first nine months of 2016 (9.8% of sales), with a EUR 1,828 thousand increase, mainly driven by sales growth.

Third Quarter 2017 vs 2016

The following tables indicate the main economic data for the third quarter of 2017 and 2016 of the Prêt-à porter and Footwear and leather goods Divisions.

(Values in thousand of EUR)		Prêt-à porter Division Footwear and leather	Elimination of	Total
III Q 2017		goods Division	intercompany
			transactions
SECTOR REVENUES	63,597	29,710	( 8,287)	85,020
Intercompany revenues	( 1,901)	( 6,386)	8,287	-
Revenues with third parties	61,696	23,324		85,020
Gross operating margin (EBITDA)	10,247	4,693		14,940
Amortisation	( 2,147)	( 710)		( 2,857)
Other non monetary items:
Revaluations / write-downs		( 73)		( 73)
Net operating profit / loss (EBIT)	8,100	3,910		12,010
Financial income	400	( 22)	( 102)	276
Financial expenses	( 343)	( 870)	102	( 1,111)
Profit / loss before taxes	8,157	3,018		11,175
Income taxes	( 2,723)	( 968)		( 3,691)
Net profit / loss	5,434	2,050		7,484

(Values in thousand of EUR)		Prêt-à porter Division Footwear and leather	Elimination of	Total
		goods Division	intercompany
III Q 2016			transactions
SECTOR REVENUES	56,980	26,181	( 7,184)	75,977
Intercompany revenues	( 2,294)	( 4,890)	7,184	-
Revenues with third parties	54,686	21,291		75,977
Gross operating margin (EBITDA)	5,812	3,257		9,069
Amortisation	( 2,219)	( 718)		( 2,937)
Other non monetary items:
Revaluations / write-downs	-	( 68)		( 68)
Net operating profit / loss (EBIT)	3,593	2,471		6,064
Financial income	191	105	( 103)	193
Financial expenses	( 469)	( 196)	103	( 562)
Profit / loss before taxes	3,315	2,380		5,695
Income taxes	( 1,301)	( 806)		( 2,107)
Net profit / loss	2,014	1,574		3,588

Balance sheet

Compared to 31 December 2016, the balance sheet at 30 September 2017 shows an increase in shareholders' equity from EUR 168,070 thousand to EUR 179,283 thousand. The main variation is due to the economic result of the period.

5. Operating net working capital

At 30 September 2017, operating net working capital amounts to EUR 88,958 thousand (29.5% of LTM sales) compared to EUR 68,220 thousand at 31 December 2016 (24.3% of sales) and to EUR 86,836 thousand (31.4% of LTM sales) at 30 September 2016.

The reduction of incidence on sales is mainly related to better management of the operating net working capital.

6. Fixed assets

Fixed assets decrease by EUR 5,879 thousand from December 31, 2016 to September 30, 2017.

7. Shareholders' equity

Changes in shareholders' equity are presented in tables at page 14.

8. Net financial position

The net financial indebtedness amounts to EUR 66,090 thousand in improvement compared to EUR 77,654 thousand at 30 September 2016. The financial debt decrease mainly refers to cash flow increase.

Other information

Accounting policies

The main accounting policies and measurement basis adopted in preparing the consolidated financial statements at 30 September 2017, except for the interpretations and amendments to the accounting principles that have been mandatory since 1 January 2017 and illustrated in the half yearly financial statement at 30 June 2017, are the same used in preparing the consolidated financial statements at 31 December 2016.

Significant events subsequent to the balance sheet date

After the 30 September 2017 no significant events regarding the Group's activities have to be reported.

Outlook

We positively look forward in the light of the results of the first nine months of the year, both in terms of revenue growth and more than proportional increase of profitability, also thanks to a 15% increase of the Spring/Summer 2018 orders' backlog. These results are very encouraging and, especially, confirm the goodness of our long-term strategy milestones aimed to strengthen the brands' distinctiveness, with strong focus on the quality of our collections and post-sales service and on market dynamics with attention on ecommerce and retail development.

The executive responsible for preparing the company's accounting documentation Marcello Tassinari declares, pursuant to paragraph 2 of art. 154b of the Consolidated Finance Law, that the accounting information contained in this document agrees with the underlying documentation, records and accounting entries.