Turin, 29.07.15. The Board of Directors of BasicNet S.p.A., in a meeting today chaired by Marco Boglione, approved the 2015 Half-Year Report.

The Group saw commercial and profit growth consolidate further in the period:

• aggregate sales of Group branded products (Kappa^®, Robe di Kappa^®, Superga^®, K-Way^®, Lanzera^®, AnziBesson^®, Jesus^® Jeans and Sabelt^®) by licensees globally of Euro 260.6 million, up 17.7% on 2014. Significant commercial development also at like-for-like exchange rates: +8.2%;

• all regions report improved sales: Middle East and Africa (+31.8%), The Americas (+37%), Asia and Oceania (+22.6%), Europe (+12.6%);

• significant boost for Superga^® and K-Way^® sales - respectively up 42.1% and 25.2%; Kappa^® and Robe di Kappa^® sales up 8.5%;

• consolidated royalties and sourcing commissions of Euro 23.8 million (Euro 19.6 million in H1 2014, +21.5%);

• sales of the BasicItalia S.p.A. Italian licensee company and its subsidiaries total Euro 63.9 million, up 7% on H1 2014, with a contribution margin on sales of Euro 26.6 million - substantially in line with H1 2014, although impacted by the percentage of purchases in US Dollars;

• EBITDA of Euro 17 million, compared to Euro 14.3 million in H1 2014 (+18.9%);

• consolidated EBIT of approx. Euro 14 million (Euro 11.4 million in H1 2014), + 22.5%;

• consolidated pre-tax profit of Euro 14.2 million (Euro 10 million in H1 2014), +41.4%;

• consolidated net profit of Euro 9.1 million (Euro 6 million in H1 2014), +51.1%;

• net debt further reduces to Euro 43.7 million from Euro 48 million at June 30, 2014, with a debt/equity ratio of 0.51 and including the distribution of dividends in 2015 of approx. Euro 4 million and the acquisition of further treasury shares for approx. Euro 1 million;

• strong stock market performance, with gains of 83% since beginning of year.

Comment on the key performance indicators

Licensee aggregate sales of Euro 260.6 million increased 17.7% at current exchange rates, from Euro 221.4 million in H1 2014. The ongoing international development of the Brands has delivered significant results on all non-European markets, with growth exceeding 27%. The European market, although a number of countries currently have particularly fragile economies, reported overall growth of 12.5%. Sales overall benefitted from the appreciation of the US Dollar against the Euro in the final months of the year; significant commercial development of 8.2% is however reported at like-for-like exchange rates. 

The Superga^® and K-Way^® brands grew significantly on H1 2014, respectively up 42% and 25%.  The Kappa^® and Robe di Kappa^® brands, which overall represent more than 60% of aggregate sales, reported an 8.5% improvement.

As a result of increased revenues, consolidated royalties and sourcing commissions, and therefore not including the royalties of the directly-held Italian licensees, increased to Euro 23.8 million, compared to Euro 19.6 million in the previous year (+21.5%).

Sales of the investee BasicItalia S.p.A. and its subsidiaries amounted to Euro 63.9 million, improving 7% on Euro 59.7 million in H1 2014. The contribution margin on sales of Euro 26.6 million is substantially in line with the previous year. The margin of 41.6% reflects the impact of the significant appreciation of the US Dollar against the Euro on the cost of product imports, while total revenues grew on the back of higher sales volumes.

Sponsorship and media costs of Euro 7.8 million accounted for 12.2% of revenues, in line with the previous year and confirming the major investment focus on brand development.

Personnel costs of Euro 9.4 million reduced as a percentage of revenues from 15.1% in H1 2014 to 14.7% in H1 2015.

Overhead costs, i.e. Selling and general and administrative costs and royalties expenses amounted to Euro 18.3 million, accounting for a similar percentage of revenues as H1 2014. The account includes the doubtful debt provision of approx. Euro 1.6 million.

EBITDA of Euro 17 million increased 18.9% (Euro 14.3 million in H1 2014).

EBIT, after amortisation and depreciation of Euro 3 million, totalled approx. Euro 14 million, improving 22.5% on Euro 11.4 million in H1 2014.

Consolidated net financial charges/income, including exchange gains and losses improved significantly on H1 2014, due to exchange gains (Euro 1.5 million in H1 2015, compared to Euro 96 thousand in H1 2014), thanks to the currency hedges undertaken in 2014 (flexi term), 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 14.2 million compared to Euro 10 million in H1 2014.

The Consolidated net profit, after current and deferred taxes of approx. Euro 5.1 million, amounted to Euro 9.1 million compared to Euro 6.0 million in H1 2014 (+51.1%).

Capital expenditure in H1 2015 amounted to Euro 2.8 million, following IT programme investment (Euro 1.2 million), EDP and furniture and fitting spending (Euro 0.9 million) and leasehold improvements and expenses incurred for the management of own brands (Euro 0.7 million).

Consolidated total net debt, including medium-term loans and finance leases (Euro 1.7 million) and mortgages (Euro 12.1 million), reduced from Euro 45.6 million at December 31, 2014 to Euro 43.7 million at June 30, 2015. The debt at June 30, 2014 was Euro 48 million (down 9%).

Operating cash flow totalled Euro 9.6 million compared to Euro 7.3 million in H1 2014; medium-term loan and finance lease repayments totalled Euro 3.2 million, dividends were paid of Euro 3.9 million and treasury shares acquired of Euro 0.9 million.

The Parent Company BasicNet S.p.A. reported a net cash position at June 30 of Euro 39.5 million.

The contractual covenants in place on some medium/long term loans have been fully complied with.

In April, Banca Intesa Sanpaolo issued a medium-term loan of Euro 15 million. The four-year loan, amortising quarterly, without covenants and with an optional advanced repayment facility, will support developmental investment, in addition to optimising the overall debt duration, establishing the medium-term debt at 57% of the total.  Also in terms of financing, in July a swap on the variable interest rate of quarterly Euribor to a fixed rate of 0.23% was completed for the duration of the loan. 

In July, the last instalment of the medium-term Loan undertaken for the acquisition of the Superga^® brand was paid.

H1 2015 COMMERCIAL HIGHLIGHTS

Commercial activities

The actions taken to develop the international presence of the Brands in H1 2015 centred on:

• 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, Eastern Europe, Belgium and Russia;

• for the Superga^® brand, present in 100 countries, a new agreement was signed for Bulgaria and expiring territorial contracts were renewed, including those for Israel and the main South-East Asian countries;

• for the K-Way^® brand, available on 18 markets, a major collaboration agreement was signed with FCA (Fiat Chrysler Automobiles) for the creation of the new Panda K-Way^®, as outlined below.

Group brand sales points

The development of the retail channel continued with new openings in numerous countries by licensees of K-Way^® and of Superga^® mono-brand stores. Following the recent openings in South Africa, China and England, mono-brand Superga^® stores globally numbered 131 (of which 83 in Italy). Mono-brand K-Way^® stores totalled 24 (of which 16 in Italy). 

A significant number of Kappa^® brand stores are operational globally. Mono-brand stores are a particular feature in Asia, as are Kappa^® corners in Russia. In Europe and the United States Brand distribution was principally through the wholesale channel and the major specialised distribution chains. In Italy, 126 Robe di Kappa^® and 7 Kappa Outlet^® stores are operational at the major outlet centers across the country.

At June 30, 2015, 255 Group Brand stores were open in Italy, with plug@sell sales up 12% and 6% at like-for-like consolidation scope.

From July 1, following the optimisation of the operations of BasicItalia S.p.A. and its subsidiaries, the group’s retail activities (brand stores, brand outlets and “Allo Spaccio� discount stores) came together under BasicRetail S.r.l. (formerly BasicOutlet S.r.l.) for their management as franchises.

Sponsorship and communication

Kappa^® Brand

The Kappa^® brand is historically associated with high profile sponsorships. The brand sponsors over 125 teams and federations, of which 76 football teams, in over 30 countries and on 5 continents.

In this regard, new sponsorship agreements were signed in Italy with Benetton Treviso Rugby and, for football, with US Sassuolo Calcio and SSC Napoli in the period; the new blue jersey was recently presented on the retirement of Dimaro. For this latter contract, 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.

The English market licensee signed a new five-year sponsorship deal with the football team Leeds United, with the new jersey presented on July 5 at an exclusive event at the Elland Road stadium.

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^® again in 2015 was the sponsor of the Kappa FuturFestival of Turin, which has a growing appeal in the international electronic music world, welcoming approx. 40,000 young people from across the globe.

Superga^® Brand

For Superga^®, in addition to the many co-branding initiatives in place with well-known stylists and prestigious international clothing and footwear brands, we note those with Pinko, for the new sneakers of the Pinko Uniqueness collection, and with AW LAB.

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.

For the Spanish market, three new models were presented in collaboration with the fashion blogger Gala Gonzales. Finally, the Superga^® licensee for Taiwan renewed its partnership with the celebrated actor Joseph Chang for the Q1Q2 2015 (spring-summer) Superga^® campaign.

The new spring/summer 2016 collection was presented at the Pitti Immagine Uomo show in Florence; a classic Superga^® 2750 was personalised for the occasion and worn by the event staff. 

K-Way^® Brand

As stated, at the 85^th International Motor Show of Geneva, the new Fiat Panda K-Way^® was presented, a project created in collaboration with FCA, which from May has been 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 first model of the new Panda was delivered to Mr. Léon-Claude Duhamel, the “K-Way� inventor, on the 50^th anniversary of the creation of the Brand celebrated last May at the BasicVillage in Turin.

In addition to the numerous co-branding initiatives for the creation of capsule collections over preceding quarters, partnerships were developed with Petit Bateau for the creation of a classic blue and white stripes K-Way^® Claude and with PRO DYNAMO, for which K-Way^® created the items presented at the Pitti of Florence for the upcoming winter season.

“Operated by BasicNet� brands

For the “operated by BasicNet� brands an agreement for the development of the “PRO DYNAMO� brand collections was signed through the BasicNet Business System. “PRO DYNAMO� is a non-profit start-up which markets clothing and accessories, donating the entirety of its profits to the Dynamo Camp Foundation, which hosts in Tuscany kids and teenagers affected by serious and chronic illnesses for recreational breaks.

The collaboration with the Russian Group “Bosco dei Ciliegi� for the development and creation of Bosco brand collections continued.

Treasury shares

At the present date, 4,300,553, treasury shares are held, comprising 7.051% of the share capital, for a total investment of Euro 8 million and a value, at current stock market prices, of over Euro 17.7 million.

Outlook for the current year

The operating performance for the first half year was very satisfying - both in terms of commercial development and the main profitability indicators and with a further optimisation of the debt.

The current forecast indicators, although considering as in previous years the uneven performance between the first and second half year periods, confirm a strong operating performance also in the latter half.

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 - only for the Italian commercial companies - on procurement prices, which may only be partially transferred onto end sales prices.

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

• Licensee aggregate sales: sales by licensees, recognised by the BasicNet Group to the “royalties and sourcing commissionsâ€� account of the income statement;

• EBITDA: “operating resultâ€� before “amortisation and depreciationâ€� and “write-downs and other provisionsâ€�;

• EBIT: "operating resultâ€�;

• Overhead costs: total of the following income statement accounts “sponsorship and media costsâ€�, “personnel costsâ€�, “selling, general and administrative expenses, royalties expensesâ€�;

• Contribution margin on direct sales: "gross profitâ€�;

• Consolidated net result: "Group resultâ€�;

• Earnings per ordinary share: “result for the period divided by the weighted average number of shares in circulationâ€�;

• 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.