Basic Net SpA

Earnings Release • Apr 27, 2015

Informazione Regolamentata n. 0322-37-2015		Data/Ora Ricezione 27 Aprile 2015 11:04:16	MTA
Societa'	:	BASIC NET
Identificativo Informazione Regolamentata	:	57036
Nome utilizzatore	:	BASICNETN01 - MEZZALIRA
Tipologia	:	IRAG 03
Data/Ora Ricezione	:	27 Aprile 2015 11:04:16
Data/Ora Inizio Diffusione presunta	:	27 Aprile 2015 11:19:17
Oggetto	:	growth in Q1 2015	BASICNET: strong commercial and margin
Testo del comunicato

Vedi allegato.

PRESS RELEASE

BASICNET: strong commercial and margin growth in Q1 2015.

Turin, April 27, 2015. The Board of Directors of BasicNet S.p.A., in a meeting today chaired by Marco Boglione, approved the 2015 First Quarter Report.

Q1 2015 Key Financial Highlights:

• aggregate sales of Group products (Kappa®, Robe di Kappa®, Superga®, K-Way®, Lanzera®, AnziBesson®, Jesus®Jeans and Sabelt®) by licensees globally of Euro 145.4 million, up 24.8% on 2014;
• all regions report improved sales: Americas (+53.3%), Middle East and Africa (+46.6%), Asia and Oceania (+42.5%), Europe (+15.7%);
• significant development of Superga® and K-Way® sales respectively up 67% and 33%; Kappa® and Robe di Kappa® sales up 10%;
• royalties and sourcing commissions of the Parent Company and the brand owning companies of Euro 16.2 million compared to Euro 13.2 million in Q1 2014 (+22%);
• sales of the BasicItalia S.p.A. Italian licensee company and its subsidiaries total Euro 38.8 million, up 11% on Q1 2014, with a contribution margin on sales of Euro 15.8 million, in line with Q1 2014, principally due to the level of purchases in US Dollars;
• consolidated EBIT of Euro 10.6 million (Euro 8.7 million in Q1 2014), up 21.5%;
• very strong currency management result (exchange gains of Euro 1.6 million in Q1 2015, compared to substantial breakeven in Q1 2014);
• consolidated pre-tax profit of Euro 11.5 million (Euro 8 million in Q1 2014), +43.2%;
• consolidated net profit of Euro 7.6 million (Euro 5.4 million in Q1 2014), +39.5%;
• net debt further reduces to Euro 42.9 million, from Euro 45.6 million at December 31, 2014 and Euro 52 million at March 31, 2014, with a debt/equity ratio, including property mortgages of Euro 12.4 million, of 0.48 (0.56 at December 31, 2014);
• strong Stock Market performance, with gains of 65% since the beginning of the year.

Licensee aggregate sales of Euro 145 million increased 24.78% at current exchange rates, from Euro 116.5 million in Q1 2014. Sales benefitted from the appreciation of the US Dollar against the Euro in the final months of the year, although significant commercial development of 13.3% is reported at like-for-like exchange rates. The ongoing and intense international expansion of the Brands has delivered significant results on all non-European markets, with growth exceeding 45%. The European market, although a number of countries have particularly fragile economies, reported overall growth of 15.7%.

The Superga® brand grew significantly (+67%) compared to Q1 2014. K-Way® has also continued to expand, growing sales 33%. The Kappa® and Robe di Kappa® brands, which overall represent 60% of aggregate sales, reported a 9.6% improvement on the same period of 2014.

As a result of increased revenues, consolidated royalties and souring commissions, and therefore not including the royalties of the directly-held Italian licensees, increased to Euro 12.6 million, compared to Euro 10 million in the previous year (+27%).

Total sales of the investee BasicItalia S.p.A. and its subsidiaries amounted to Euro 38.8 million, improving 11% on Euro 35 million in Q1 2014.

The contribution margin on sales of Euro 15.8 million is in line with Q1 2014. The margin of 41% is reflective of the impact of the significant appreciation of the US Dollar against the Euro on the cost of product imports, in the absence of which the margin would have maintained at around 43%.

As outlined below, the effects of the strengthening of the US Dollar on the cost of imports by the subsidiary BasicItalia are adequately hedged through the currency hedging (flexi term) operations executed in 2014, covering the forecast currency needs for the current year and by royalties and sourcing commissions in US Dollars.

Other income of Euro 1.4 million includes indemnities and royalties concerning sales of promotional products.

Sponsorship and media costs of Euro 3.8 million accounted for 9.9% of revenues (substantially in line with the previous year).

Personnel costs of Euro 4.7 million reduced as a percentage of revenues from 12.8% in Q1 2014 to 12.1% in 2015.

Overhead costs, i.e. Selling and general and administrative costs and royalties expenses amounted to Euro 9.3 million, accounting for a similar percentage of revenues as Q1 2014. The account includes the doubtful debt provision of approx. Euro 0.7 million, which is in line with the previous year, and therefore proportionally lower than business volume development.

EBITDA of Euro 12 million increased 18.7% (Euro 10.1 million in Q1 2014).

EBIT, after amortisation and depreciation of Euro 1.4 million, totalled Euro 10.6 million compared to Euro 8.7 million in Q1 2014 (+21.5%).

Consolidated net financial charges/income, including exchange gains and losses improved 242% on Q1 2014, due to exchange gains (Euro 1.6 million in Q1 2015, compared to substantial breakeven in Q1 2014), thanks to the currency hedges undertaken in 2014, in addition to the reduction of financial debt charges, following the reduction in the debt, together with more competitive procurement costs.

The Consolidated pre-tax profit of Euro 11.5 million compared to Euro 8 million in 2014.

The Consolidated net profit, after current and deferred taxes of approx. Euro 4 million, amounted to approx. Euro 7.6 million compared to Euro 5.4 million in Q1 2014 (+39.5%).

In Q1 2015 capital expenditure totalled Euro 1.5 million, of which Euro 0.4 million concerning EDP and furniture and fittings and Euro 1.1 million the development of IT programmes and leasehold improvements.

Working capital management saw an increase in inventories and trade receivables, although to a lesser degree than business volume development in the period, highlighting the increasing efficiency of the working capital ratios.

Consolidated net debt, including medium-term loans and finance leases (Euro 1.6 million), reduced to Euro 42.9 million (of which Euro 12.4 million property loans), compared to Euro 52 million at March 31, 2014 (-17.5%). The debt/equity ratio at March 31, 2015 was 0.48 compared to 0.56 at December 31, 2014 and 0.71 at March 31, 2014.

The medium/long-term loan undertaken with Banca Intesa Sanpaolo, highlighted in the Subsequent events section of the 2014 Annual Accounts, was completed in the current month of April and with the issue of Euro 15 million. The four year agreement, with quarterly repayments, is without covenants and has an option for advance repayment. The proceeds will support developmental investments, in addition to optimising the duration of loans undertaken.

Q1 2015 OPERATIONAL OVERVIEW AND EVENTS

Commercial activities

The actions taken to develop the international presence of the Brands in Q1 2015 included:

• for the Kappa® and Robe di Kappa® brands, present in 118 countries across the world, new agreements for Chile, Paraguay and Hungary. Commercial operations also focused on the renewal of expiring contracts, such as those for the major markets in the Middle East, South-East Asia and Eastern Europe and for Belgium;
• for the Superga® brand, present in 98 countries, a focus was placed on the review of new proposals for new territories and on expiring territorial contracts;
• for the K-Way® brand, available on 18 markets, in February a major collaboration agreement was signed with FCA (Fiat Chrysler Automobiles), for the creation of a product (VISIBAG®) from the coming together of two long standing brands: Fiat Panda and K-Way®, as further detailed below.

Group brand sales points

The development of the retail channel continued with new openings by licensees of K-Way® and Superga® mono-brand stores.

Following the recent openings, mono-brand Superga® stores opened by licensees globally number 132 (of which 87 in Italy), with 26 mono-brand K-Way® stores (of which 15 in Italy).

At March 31, 2015, Group Brand stores in Italy numbered 257.

At the beginning of the year, an optimisation process of the investee BasicItalia was undertaken, to concentrate all retail operations within a single company called BasicRetail (brand stores, brand outlets and "Allo Spaccio" discount stores), which on conclusion will be the only Group entity managing franchising operations.

Sponsorship and communication

Kappa® Brand

The Kappa® brand is historically associated with high profile sponsorships. The brand sponsors over 120 teams, of which 60 football teams, in over 30 countries and on 5 continents.

In the initial months of 2015, the sponsorship of the Korean Ski Association was agreed, which will boost the visibility to the Brand in view of the next Winter Olympic Games, to be held in South Korea in 2018.

Kappa® will again in 2015 sponsor in Italy the Kappa FuturFestival, which has a growing appeal in the electronic music world, welcoming thousands of young people from across the globe to Turin.

Following period-end, a new sponsorship was signed in Italy for the coming season with SSC Napoli. In addition to the usual sponsorship and merchandising development, collaborations focusing on the development of the Napoli brand are established, leveraging on the extensive commercial partner Network developed under the Kappa® brand by the BasicNet Group throughout the World.

Superga® Brand

For Superga®, in addition to the numerous co-branding initiatives with well-known stylists and prestigious international clothing and footwear brands, previously in place, we add also that with Pinko for the new Pinko Uniqueness sneakers collection. In February 2015, the US licensee Steven Madden presented a new "Superga® x Rodarte" co-branding, with a new collection of sneakers created in collaboration with the founders and stylists of the well-known Rodarte brand.

For the English market, the American model Binx (Leona Walton) was chosen to showcase the 2015 collection, succeeding the previous brand ambassadors Alexa Chung, Rita Ora and Suki Waterhouse.

K-Way® Brand

As stated, during the first quarter at the 85th International Motor Show of Geneva, the new Fiat Panda K-Way® was presented, a project created in collaboration with FCA, which from May will be available at the Italian Fiat showrooms and thereafter on all European markets. The project is behind the launching of an innovative, colourful and functional product - the core features of the K-Way® brand DNA. The new Panda K-Way® marks also a major development: it is the first car in the world featuring the VISIBAG® foldaway safety device: a high visibility K-Way® sleeveless jacket contained in a pouch located in the car's seats. The initiative is further to the numerous co-branding initiatives for the development of capsule collections in previous quarters.

OUTLOOK FOR THE CURRENT YEAR

Operating results are expected to be strong in the first half of 2015 based on the order book and the forecast royalties and sourcing commissions. This outlook 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 may have on procurement prices.

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.

The performance indicators utilised in the current press release are as follows:

 Licensee Aggregate Sales:	Sales by Group Brand licensees, including sales of third party brands, for which BasicNet S.p.A. offers the "operated by BasicNet" service.
 EBITDA:	"operating result before amortisation, depreciation and write‐downs".
 EBIT:	"operating result before financial charges and taxes".
 Contribution margin on sales:	"gross margin from commercial management".
Consolidated net profit:	"Group result after taxes";
 Net financial debt:	Total of consolidated current and medium/long‐term financial payables, less cash and cash equivalents and other current financial assets.

Contact:

BasicNet

Paolo Cafasso 0112617787

_______________________

FINANCIAL STATEMENTS

BASICNET GROUP Q1 2015 INCOME STATEMENT

(In Euro thousands)

Q1 2015		Q1 2014		Changes
	%				%
145,366		116,499		28,867	24.78
38,832	100.00	34,993	100.00	3,839	10.97
(23,033)	(59.31)	(19,242)	(54.99)	(3,791)	(19.70)
15,799	40.69	15,751	45.01	48	0.30
					26.91
1,429	3.68	460	1.31	968	210.49
(3,838)	(9.88)	(3,384)	(9.67)	(454)	(13.42)
(4,701)	(12.11)	(4,468)	(12.77)	(233)	(5.21)
(9,294)	(23.93)	(8,178)	(23.37)	(1,116)	(13.65)
(1,448)	(3.73)	(1,423)	(4.07)	(24)	(1.72)
10,604	27.31	8,730	24.95	1,874	21.47
972	2.50	(684)	(1.96)	1,656	242.11
(69)	(0.18)	(8)	(0.02)	(61)	N.A.
11,507	29.63	8,038	22.97	3,469	43.16
(3,946)	(10.16)	(2,619)	(7.48)	(1,327)	(50.67)
7,561	19.47	5,419	15.49	2,142	39.53
					40.97
	12,657 0.1329	32.60	9,973 0.0943	% 28.50	2,684 0.039

CONSOLIDATED BALANCE SHEET AT MARCH 31, 2015

(In Euro thousands)

ASSETS	March 31, 2015	December 31, 2014	March 31, 2014
Intangible assets	41,802	41,184	40,909
Goodwill	10,444	10,516	10,604
Property, plant and equipment	29,730	30,183	31,243
Equity invest. & other financial assets	240	297	354
Investments in joint ventures	399	399	401
Deferred tax assets	-	26	673
Total non-current assets	82,615	82,605	84,182
Net inventories	52,849	46,297	50,553
Trade receivables	56,792	43,928	53,175
Other current assets	12,979	13,505	12,578
Prepayments	6,764	6,844	6,196
Cash and cash equivalents	4,477	4,014	4,531
Derivative financial instruments	2,752	1,182	-
Total current assets	136,613	115,770	127,032
TOTAL ASSETS	219,228	198,375	211,215

LIABILITIES	March 31, 2015	December 31, 2014	March 31, 2014
Share capital	31,717	31,717	31,717
Reserve for treasury shares in portfolio	(7,306)	(6,875)	(5,907)
Other reserves	57,364	43,432	41,585
Net Profit	7,561	12,437	5,419
Minority interests	-	-	-
TOTAL SHAREHOLDERS' EQUITY	89,336	80,711	72,813
Provisions for risks and charges	20	43	4.398
Loans	14,632	15,692	20,104
Employee benefits	3,727	3,573	2,997
Deferred tax liabilities	1,101	-	-
Other non-current liabilities	1,254	1,187	1,016
Total non-current liabilities	20,734	20,495	28.516
Bank payables	32,763	33,894	36,466
Trade payables	41,268	30,142	39,029
Tax payables	24,719	22,165	23,523
Other current liabilities	7,765	7,475	8,096
Accrued liabilities	987	1,848	671
Derivative financial instruments	1,656	1,645	2,101
Total current liabilities	109,158	97,169	109,886
TOTAL LIABILITIES	129,892	117,664	138,402
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	219,228	198,375	211,215

CONSOLIDATED NET FINANCIAL POSITION

(In Euro thousands)	March 31, 2015	December 31, 2014	March 31, 2014
Cash and cash equivalents	4,477	4,014	4,531
Bank overdrafts and bills	(8,002)	(12,277)	(17,675)
Import advances	(19,824)	(16,086)	(12,666)
Sub-total net liquidity available	(23,349)	(24,349)	(25,810)
Short-term portion of medium/long-term loans	(4,937)	(5,531)	(6,125)
Net financial position – Short-term	(28,286)	(29,880)	(31,935)
Superga medium/long term loan	-	-	(1,188)
Basic Village property loan	(7,800)	(8,100)	(9,000)
BasicItalia property loan	(3,051)	(3,153)	(3,458)
UBI loan	(2,143)	(2,679)	(4,286)
Leasing payables	(1,638)	(1,761)	(2,173)
Sub-total loans	(14,632)	(15,693)	(20.104)
Consolidated Net Financial Position	(42,917)	(45,573)	(52,040)

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