Basic Net SpA

Earnings Release • Oct 23, 2015

Informazione Regolamentata n. 0322-108-2015		Data/Ora Ricezione 23 Ottobre 2015 11:55:06	MTA
Societa'	:	BASIC NET
Identificativo Informazione Regolamentata	:	64510
Nome utilizzatore	:	BASICNETN01 - MEZZALIRA
Tipologia	:	IRAG 03; IRCG 02
Data/Ora Ricezione	:	23 Ottobre 2015 11:55:06
Data/Ora Inizio Diffusione presunta	:	23 Ottobre 2015 12:10:07
Oggetto	:	co-opted new Director of the Board	Group sales and earnings rise further in Q3 2015. Appointed new Vice President and
Testo del comunicato

Vedi allegato.

PRESS RELEASE

BASICNET - Group sales and earnings rise further in Q3 2015.

Gianni Crespi appointed non-executive Vice Chairman. Independent Director Renate Hendlmeier co-opted to the Board.

Turin, October 23, 2015 – The Board of Directors of BasicNet S.p.A., in a meeting today chaired by Marco Boglione, among other matters approved the 2015 Third Quarter Report.

Continued growth reported in Q3 2015:

• aggregate sales of Group products Kappa®, Robe di Kappa®, Superga®, K-Way®, Lanzera®, AnziBesson®, Jesus®Jeans and Sabelt® by licensees globally of Euro 405.6 million, up 14.1% on 9M 2014; Significant commercial development at like-for-like exchange rates: +8.6%;
• sales up across all regions: Americas (+30.8%), Middle East and Africa (+27.4%), Asia and Oceania (+21.6%) and Europe (+8.9%);
• significant advancement made by Superga® and K-Way® respectively up 31.8% and 18.6%; Kappa® and Robe di Kappa® sales up approx. 9%;
• royalties and sourcing commissions of Euro 44.7 million compared to Euro 39.3 million in 9M 2014 (+13.7%, +15.1% at consolidated level);
• sales of the BasicItalia Italian licensee company total Euro 102.5 million, up 8.3% on 2014. Contribution margin on sales of Euro 42.3 million compared to Euro 41.9 million in 9M 2014. Margin significantly improves in Q3 (+3.2%), thanks to commercial development, which together with prudent procurement management absorbed the impacts incurred from purchases made in US Dollars;
• EBITDA of Euro 26.5 million, compared to Euro 24 million in 9M 2014 (+10.3%);
• consolidated EBIT of Euro 21.8 million, from Euro 19.4 million in 9M 2014 (+12.3%);
• consolidated pre-tax profit of Euro 22.4 million (Euro 17.6 million in 9M 2014), +27.6%;
• consolidated net profit of Euro 14.3 million (Euro 10.8 million in 9M 2014), +32.8%;
• net debt further reduces to Euro 46.3 million, from Euro 47.6 million at September 30, 2014, with a debt/equity ratio of 0.52 (compared to 0.60 last year), including the distribution of dividends in 2015 of approx. Euro 4 million, the buy-back of treasury shares for a further Euro 1.6 million and major capex of Euro 3.9 million;
• strong stock market performance, with gains over the past 12 months of 79%.

Comment on the key performance indicators

Licensee aggregate sales of Euro 405,6 million increased 14.1% at current exchange rates, from Euro 355 million in 9M 2014. The ongoing international development of the Brands has delivered significant results on all non-European markets, with growth of 25%. The European market overall grew 8.9%, despite the challenging economic environment. Sales at like-for-like exchange rates were also very strong (+8.6%).

The Superga® and K-Way® brands grew significantly on 9M 2014, respectively up 31.8% and 18.6%. The Kappa® and Robe di Kappa® brands, which overall represent approx. 66% of aggregate sales, reported 9% growth.

Due to the increased revenues, parent company and licensee royalties and sourcing commissions totalled Euro 44.7 million, compared to Euro 39.3 million in 9M 2014 (+13.8%); at consolidated level, royalties and sourcing commissions amounted to Euro 35.4 million, up 15.1% on Euro 30.8 million in the previous year.

Sourcing commissions concern finished product purchase management by commercial licensees, with managed sales in the first nine months totalling approx. Euro 165 million, up 25.4% on the first nine months of 2014.

Sales of the investee BasicItalia S.p.A. and its subsidiary amounted to Euro 102.5 million, improving 8% on Euro 94.7 million in 9M 2014. The contribution margin on sales of Euro 42.3 million compares to Euro 41.9 million in the previous year. The improved margin in the third quarter (+3.2%) follows joint operations focused on optimising the collections, ensuring greater competitivity on purchase prices and a review of sales prices which, amid considerable commercial growth, absorbed charges arising from the strengthening of the US Dollar - the currency in which finished product purchases are principally denominated.

Other income of Euro 3.2 million includes indemnities and royalties concerning sales of promotional products.

Sponsorship and media costs of Euro 13.3 million rose on the previous year following the agreement of new sponsorships, in particular with SSC Napoli, US Sassuolo and Leeds United FC in the second half of the year, confirming the major investment focused on brand development. Higher costs on the previous period temporarily impacted the result as not offset by merchandising sales which reach their peak once the league championships and European competitions are well underway.

Personnel costs of Euro 14.5 million reduced as a percentage of revenues from 14.4% in 9M 2014 to 14.1% in 9M 2015. Employees at September 30 numbered 483.

Selling and general and administrative costs and royalties expenses amounted to Euro 26.7 million - 26% of revenues. The account includes the doubtful debt provision of approx. Euro 2.3 million which includes the general allocations made in line with increased revenues.

EBITDA in the period amounted to Euro 26.5 million, with significant growth of 10.3% (Euro 24 million in 9M 2014).

EBIT, after amortisation and depreciation of Euro 4.7 million, totalled approx. Euro 21.8 million, up 12.3% on Euro 19.4 million in 9M 2014.

Consolidated net financial charges/income, including exchange gains and losses, improved significantly on 9M 2014, due to exchange gains (Euro 2.5 million in 9M 2015 compared to Euro 0.4 million in 9M 2014), thanks to the currency hedges undertaken in 2014 (flexi term), in addition to the reduction of financial debt charges, following both the reduction in the debt and more competitive debt servicing costs (Euro 1.7 million in 2015 compared to Euro 2.2 million in 2014).

The consolidated pre-tax profit of Euro 22.4 million increased 27.6% on Euro 17.6 million in 2014.

The consolidated net profit, after current and deferred taxes of approx. Euro 8.1 million, amounted to Euro 14.3 million compared to Euro 10.8 million in 9M 2014 (+32.8%).

Balance sheet overview

Working capital management saw an increase in inventories, mainly related to the increased quantities of stock already covered by orders, in particular team-related merchandising with delivery by year-end. Trade receivables decreased on the previous year, despite increased levels of business, confirming the stronger focus on the working capital ratios.

Operating cash flow generated in the period totalled Euro 18.9 million, compared to Euro 15.3 million in the previous year.

Consolidated net debt, including medium-term loans of finance leases (Euro 1.7 million) and mortgages (Euro 11.6 million), reduced from Euro 47.6 million at September 30, 2014 to Euro 46.3 million at September 30, 2015.

Q3 OPERATIONAL OVERVIEW AND EVENTS

Commercial activities

The actions taken to develop the international presence of the Brands in Q3 2015 concerned:

• for the Kappa® and Robe di Kappa® brands, commercial operations mainly focused on the renewal of expiring contracts, including Brazil and Hong Kong;
• for the Superga® brand, new agreements were signed for Panama, Columbia and Russia;
• for the K-Way® brand, operations focused on reaching agreements for the Chilean market.

Group brand sales points

The development of the retail channel continued with new openings by licensees of K-Way® and Superga® mono-brand stores. In particular, the Superga® brand opened a new store in San Francisco, at Fillmore Street in the heart of the Californian city's shopping district.

Following the new openings, Kappa® and Robe di Kappa® mono-brand stores and shop in shops opened by licensees globally number 392 (of which 131 in Italy), with Superga® mono-brand stores and shop in shops totalling 184 (of which 84 in Italy), along with 34 K-Way® stores (of which 23 in Italy).

Sponsorship and communication

Kappa® Brand

For the Kappa® brand, the Belgian market licensee in July concluded a sponsorship agreement with the Standard Liège Football Team. In July and August, the new kits for the 2015-2016 seasons for SSC Napoli, US Sassuolo and Leeds United FC were presented.

Superga® Brand

For the Superga® brand, the model, actor and DJ Jack Guinness became the first male brand promoter, following on from the female icons who have also been brand ambassadors, Alexa Chung, Rita Ora, Suki Waterhouse and Binx (Leona Walton). The model and actress Esom is the new South Korean market brand promoter.

K-Way® Brand

In the quarter, three new co-brandings were presented with Petit Bateau and Swarovski and the renewed agreement with Hydrogen, following on from the development of numerous initiatives in the preceding quarters for the creation of capsule collections.

Treasury shares

Within the treasury share buy-back and utilisation programme, authorised by the Shareholders' AGM of April 28, 2014, in the third quarter 176,153 treasury shares were purchased for a total of approx. Euro 671 thousand.

BasicNet today holds a total of 4,440,153 treasury shares (7.28% of the Share Capital), for a total investment of Euro 8.6 million. At present market values, the directly held securities portfolio totals Euro 17 million.

OUTLOOK FOR THE CURRENT YEAR

The available indicators confirm the general recovery in train which remains subject to the variable economic conditions of the individual countries, in addition to exchange rate movements, both in terms of fluctuations to some of the major currencies and the impact that such changes (with regard only to the Italian commercial companies) may have on finished product procurement prices.

OTHER BOARD MOTIONS

The Board of Directors, on the proposal of the Chairman, appointed the Director Gianni Crespi as the non-executive Vice Chairman. The Director Gianni Crespi was declared non-independent as per Article 148, paragraph 3, of the Consolidated Finance Act and Article 3 of the Self-Governance Code for Listed Companies, with which BasicNet complies.

Following this declaration, the Director Paola Bruschi resigned her position in order to allow for the entry to the Board of a new independent director. The Board, after thanking the departing Director Paola Bruschi for the contribution made during her mandate and, in particular for her availability, coopted in accordance with Article 2386 of the Civil Code, Ms. Renate Hendlmeier, who will remain in office, along with the entire Board of Directors, until the next Shareholders' Meeting for the approval of the 2015 Annual Accounts.

The Director Renate Hendlemeier, whose curriculum vitae is available in the Corporate Governance section of the website www.basicnet.com, declared her independence in accordance with Article 148, paragraph 3 of the Consolidated Finance Act and Article 3 of the Self-Governance Code for listed companies, which have been established, on the basis of the declarations received, by the Board of Directors. Director Renate Hendlmeier declared to hold 2,000 BasicNet shares.

The Board finally supplemented the Control and Risks Committee, appointing the Director Renate Hendlmeier as a member and the Director Adriano Marconetto as Chairman, in replacement of the Director Gianni Crespi.

In relation to the "alternative performance indicators", as defined by CESR/05‐178b recommendation and Consob Communication DEM/6064293 of July 28, 2006, we provide below a definition of the indicators used in the present Directors' Report, as well as their reconciliation with the financial statement items:

 Licensee aggregate sales:	sales by licensees, recognised by the BasicNet Group to the "royalties and sourcing commissions" account of the income statement;
 EBITDA:	"operating result" before "amortisation and depreciation" and "write‐downs and other provisions";
 EBIT:	"operating result";
 Contribution margin on direct sales:	"gross profit"
 Net financial debt:	total of current and medium/long‐term financial payables, less cash and cash equivalents and other current financial assets.

The Executive Officer Responsible for the preparation of the corporate accounting documents Mr. Paolo Cafasso declares in accordance with Article 154-bis, paragraph 2, of the Consolidated Finance Act that the accounting information contained in the present press release corresponds to the underlying accounting documents, records and accounting entries.

The financial statements are attached.

BASICNET GROUP

Financial Statements

BASICNET GROUP - IFRS INCOME STATEMENT COMPARED WITH 9M 2014

(In Euro thousands)

	9M 2015 9M 2014			Changes
		%		%		%
Licensee aggregate sales	405,580		355,430		50,150	14.11
Consolidated sales	102,503	100.00	94,680	100.00	7,823	8.26
Cost of sales	(60,165)	(58.70)	(52,719)	(55.68)	(7,446)	(14.12)
GROSS MARGIN	42,338	41.30	41,961	44.32	377	0.90
Royalties and sourcing commissions	35,425	34.56	30,774	32.50	4,651	15.11
Other income	3,189	3.11	1,246	1.32	1,943	155.93
Sponsorship and media costs	(13,266)	(12.94)	(10,999)	(11.62)	(2,267)	(20.61)
Personnel costs	(14,474)	(14.12)	(13,598)	(14.36)	(876)	(6.44)
Selling, general and administrative costs, royalties expenses	(26,729)	(26.08)	(25,367)	(26.79)	(1,362)	(5.37)
Amortisation & Depreciation	(4,665)	(4.55)	(4,590)	(4.85)	(75)	(1.62)
Write-downs and other provisions	-	-	-	-	-	-
EBIT	21,818	21.29	19,427	20.52	2,391	12.31
Net financial income (charges)	765	0.75	(1,795)	(1.90)	2,560	142.61
Income/(charges) from investments	(151)	0.15	(48)	(0.05)	(103)	(215.55)
PROFIT BEFORE TAXES	22,432	21.88	17,584	18.57	4,848	27.57
Income taxes	(8,135)	(7.94)	(6,816)	(7.20)	(1,319)	(19.35)
Group Net Profit	14,297	13.95	10,768	11.37	3,529	32.77
Cash flow (net result and amortisation and depreciation)	18,962		15,358		3,604	23.46

BASICNET GROUP – IFRS INCOME STATEMENT COMPARED WITH Q3 2014

(In Euro thousands)

		Q3 2015		Q3 2014		Changes
		%
Licensee aggregate sales	144,989		133,995		10,994	8.20
Consolidated sales	38,579	100.00	34,942	100.00	3,637	10.41
Cost of sales	(22,839)	(58.20)	(19,688)	(56.34)	(3,151)	(16.00)
GROSS MARGIN	15,740	40.80	15,254	43.66	486	3.19
Royalties and sourcing commissions	11,624	30.13	11,191	32.03	433	3.86
Other income	1,057	2.74	350	1.00	707	201.93
Sponsorship and media costs	(5,441)	(14.10)	(3,714)	(10.63)	(1,727)	(46.49)
Personnel costs	(5,073)	(13.15)	(4,578)	(13.10)	(495)	(10.83)
Selling, general and administrative costs, royalties expenses	(8,464)	(21.94)	(8,823)	(25.25)	359	4.06
Amortisation & Depreciation	(1,610)	(4.17)	(1,673)	(4.79)	63	3.78
EBIT	7,833	20.30	8,007	22.92	(174)	(2.19)
Net financial income (charges)	420	1.09	(430)	(1.23)	849	197.64
Income/(charges) from investments	(13)	(0.03)	(28)	(0.08)	15	55.10
PROFIT BEFORE TAXES	8,240	21.36	7,549	21.61	690	9.13
Income taxes	(3,033)	(7.86)	(2,798)	(8.01)	(234)	(8.37)
Group Net Profit	5,207	13.50	4,751	13.60	456	9.57
Cash flow (net result and amortisation and depreciation)	6,817		6,424		393	6.10

CONSOLIDATED IFRS BALANCE SHEET AT SEPTEMBER 30, 2015 COMPARED WITH SEPTEMBER 30, 2014

(In Euro thousands)

ASSETS	September 30, 2015	December 31, 2014	September 30, 2014
Intangible assets	41,505	41,184	41,135
Goodwill	10,293	10,516	10,355
Property, plant and equipment	29,237	30,183	30,308
Equity invest. & other financial assets	203	297	308
Interests in joint ventures	260	399	416
Deferred tax assets	-	26	766
Total non-current assets	81,498	82,605	83,288
Net inventories	61,108	46,297	52,685
Trade receivables	53,016	43,928	54,111
Other current assets	15,852	13,505	16,084
Prepayments	7,948	6,844	6,479
Cash and cash equivalents	4,583	4,014	3,483
Derivative financial instruments	920	1,182	1,758
Total current assets	143,427	115,770	134,600
TOTAL ASSETS	224,925	198,375	217,888

LIABILITIES	September 30, 2015	December 31, 2014	September 30, 2014
Share capital	31,717	31,717	31,717
Reserve for treasury shares in portfolio	(8,447)	(6,875)	(6,486)
Other reserves	52,263	43,432	43,553
Net Profit	14,297	12,437	10,768
Minority interests	-	-	-
TOTAL SHAREHOLDERS' EQUITY	89,830	80,711	79,552
Provisions for risks and charges	37	43	50
Loans	23,175	15,692	16,616
Employee benefits	3,848	3,573	3,445
Deferred tax liabilities	378	-	-
Other non-current liabilities	1,058	1,187	1,075
Total non-current liabilities	28,496	20,495	21,186
Bank payables	27,707	33,894	34,432
Trade payables	47,207	30,142	41,534
Tax payables	20,502	22,165	29,857
Other current liabilities	8,023	7,475	7,343
Accrued liabilities	1,509	1,848	2,269
Derivative financial instruments	1,651	1,645	1,715
Total current liabilities	106,599	97,169	117,150
TOTAL LIABILITIES	135,095	117,664	138,336
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	224,925	198,375	217,888

BasicNet Group Net Financial Position

(In Euro thousands)	September 30, 2015	December 31, 2014	September 30, 2014
Cash and cash equivalents	4,583	4,014	3,483
Bank overdrafts and bills	(6,279)	(12,277)	(14,021)
Import advances	(13,928)	(16,086)	(14,286)
Sub-total net liquidity available	(15,624)	(24,349)	(24,824)
Short-term portion of medium/long-term loans	(7,500)	(5,531)	(6,125)
Short-term net financial position	(23,124)	(29,880)	(30,949)
Intesa Sanpaolo loan	(10,313)	-	-
Basic Village property loan	(7,200)	(8,100)	(8,400)
BasicItalia property loan	(2,847)	(3,153)	(3,254)
UBI loan	(1,071)	(2,679)	(3,214)
Leasing payables	(1,744)	(1,761)	(1,748)
Sub-total loans	(23,175)	(15,693)	(16,616)
Consolidated Net Financial Position	(46,299)	(45,573)	(47,565)

The net financial position reported in the table above is in line with that established by Consob Communication No. 6064293 of July 28, 2006.

BasicNet S.p.A. Summary Net Financial Position

(In Euro thousands)	September 30, 2015	December 31, 2014	September 30, 2014
Net financial position – Short-term	(7,617)	(4,663)	(5,865)
Financial payables – Medium-term	(11,384)	(2,679)	(3,214)
Finance leases	(54)	(28)	(32)
Financial position with third parties	(19,055)	(7,370)	(9,111)
Group financial receivables / (payables)	58,722	48,162	48,307
Total net financial position	39,716	40,792	39,196