BasicNet - 2017 preliminary^(*) results reviewed. Aggregate sales of the commercial and productive licensees at Euro 747.8 million (+1.1% at current exchange rates, +3.9% at like-for-like exchange rates). EBITDA at Euro 23 million (+7.2%). EBIT at Euro 16.6 million (+9.1%).

Briko^® and Sebago^® brands added to the Group portfolio.

Turin, February 19, 2018 – The Board of Directors of BasicNet S.p.A., at a meeting today chaired by Marco Boglione, reviewed the 2017 preliminary results, ahead of the definitive results which will be reviewed by the Board on March 19 next.

2017 Key Performance Indicators:

• aggregate sales of Group products by the Global licensee Network of Euro 747.8 million, up 1.1% on 2016 - as follows:

• commercial licensees of Euro 541.1 million, Euro 532.7 million in 2016, +1.6% at current exchange rates, +4.5% at like-for-like exchange rates; 

• productive licensees of Euro 206.7 million, substantially in line with Euro 207.3 million in 2016, -0.3% at current exchange rates, +2.5% at like-for-like exchange rates;

• continued American (+18.8%) and European (+5.5%) market development, while slowdowns were apparent in certain Asian countries due to political instability and reduced consumer spending, impacting respective licensee revenues;

• royalties and sourcing commissions of Euro 47.9 million, up 3.2% on Euro 46.4 million in 2016 (+3.8% at like-for-like exchange rates);

• sales of the subsidiaries BasicItalia S.p.A. and BasicRetail S.r.l. of Euro 135.6 million, substantially in line with Euro 135.2 million in 2016;

• due to these factors, consolidated revenues, including royalties, sourcing commissions and sales of the Italian licensee BasicItalia S.p.A. and its subsidiary BasicRetail S.r.l. in 2017 amounted to Euro 183.5 million (+1% on Euro 181.6 million in 2016; +1.2% at like-for-like exchange rates);

• EBITDA at Euro 23 million (Euro 21.5 million in 2016, +7.2%) and EBIT at Euro 16.6 million (Euro 15.2 million in 2016, +9.1%);

• EBT of Euro 15 million, in line with the Euro 14.9 million in the previous year, is impacted by the net currency results; 

• net debt of Euro 61.5 million, increasing on Euro 49.5 million at the end of 2016 due to the loans drawn down in the year of Euro 16.2 million, principally in support of the Sebago^® brand acquisition and retail sector investment.  In addition to investments of Euro 18 million (Euro 8.1 million in 2016), dividends of approx. Euro 3.3 million were distributed and treasury shares of approx. Euro 2.6 million acquired.

^(*) The figures and information reported herein were not audited.

Comment on the key performance indicators

Commercial licensee aggregate sales were up 1.6%, despite continued political and economic instability in certain Asian and Middle Eastern countries.  In this context:

• Kappa^® and Robe di Kappa^® brand revenues grew overall approx. 1.9%, benefitting also from the brand image boost from the launch of the new medium/high segment line “Kappa Kontroll”. Germany (+32%) - also due to the opening of new lifestyle accounts - and the Balkans (+26%) reported the best European performances. The Turkish market (+46%) also reported a strong performance. American market growth (+24.6%) principally follows the full operability of the new Chilean and Paraguayan licenses, major Brazilian and Argentinian sales growth following major communications spend, in addition to the positive reaction on the North American market to the “Authentic” label.  The Asian market, despite major Indian (+13%) and Australian (+68%) market growth, continues to experience difficulties related to slowing sales, in particular in Singapore and in Thailand. Political instability in the Middle East and contracting Israeli sales have impacted the results for the Middle East and Africa.

• the Superga^® brand saw general growth across all American countries. Specifically: Argentina (+99%), Chile (+94%), Brazil (+40%) and USA (+27%). In Europe, the significant growth on the English (+18%), Northern Europe (+39%) and German (+21%) markets, together with the Greek market recovery (+15%), partially offset the contraction on the Italian market (-20%) related to the restructuring of the customer base and continued domestic demand weakness. The Asian market however slowed on the previous year, mainly due to the South Korean, Japan and Hong Kong market performances.  However, the extension of the distribution network supported the performance on the Indonesian and Australian markets. Sales overall declined 5.9%, although order numbers for 2018 indicate a turnaround;

• the K-Way^® brand reported overall commercial growth of 12.1%. The European market performance was particularly strong (+12.6%), driven by France (+46%) and Italy (+9%) and also as a result of retail development, with 29 stores now open in Italy and 11 in France.  Commercial results in The Americas declined due to the phase out of the North American license, while a new licensee is however now operative.   Asia and Oceania reported growth on the back of the Taiwanese and South Korean markets with the opening of new “shop in shops” in Seoul and Pangyo department stores;

• Briko^® brand sales, principally distributed by the Group on the Italian market since April 2016, were up 51.4%.

Consolidated royalties of Euro 36.1 million grew 3.2% on the previous year (3.6% at like-for-like exchange rates), with sourcing commissions amounting to Euro 11.8 million, increasing 3.3% (+4.3% at like-for-like exchange rates). 

Sales of the subsidiaries BasicItalia S.p.A. and BasicRetail S.r.l. total Euro 135.6 million and are substantially in line with 2016, as is the contribution margin on sales of Euro 54.5 million and the sales margin (40.2%).  Retail plug@sell sales (mono-brand stores and outlets in Italy) were up 3% on 2016.

Other income of Euro 3.2 million includes rental income and condominium income, in addition to a gain of Euro 195 thousand from the sale of the Lanzera^® brand.

Sponsorship and media spend of Euro 24.6 million increased 1.4% (Euro 24.3 million in 2016), confirming the strong support for brand sales. Significant contributions were given to communication and endorsement operations with an international impact particularly on the overseas markets (World Wide Strategic Advertising).

Personnel costs increased from Euro 19.7 million in 2016 to Euro 21 million in 2017. The workforce expanded by 19 on the previous year in support of Group development projects, principally concerning BasicItalia logistics, retail and the integration of the Sebago^® brand business model.

Selling, general and administrative costs, royalties expenses and amortisation and depreciation totalled approx. Euro 43.7 million, entirely in line with the previous year.

On the basis of the components outlined above, EBITDA was Euro 23 million (+7.2% compared to Euro 21.5 million in 2016). 

EBIT, after amortisation and depreciation of Euro 6.4 million, totalled approx. Euro 16.6 million, compared to Euro 15.2 million in 2016 (+9.1%).

Consolidated net financial charges amounted to Euro 2.1 million, compared to income of Euro 0.8 million in the previous year; the decrease relates to the reporting of net currency losses of Euro 589 thousand, compared to net gains of Euro 1.2 million in the previous year, due to US Dollar movements.  On the other hand, financial charges in service of the debt, amounting to Euro 954 thousand, reduced Euro 632 thousand on 2016, although new loans have been undertaken, as a result of more competitive funding costs.

The pre-tax profit was Euro 15 million (Euro 14.9 million in 2016).

The consolidated net result, to be made public next March, will reflect the tax break on profits permitted under the Patent Box for the amount not subject to any ruling (concerning 2017). The regulation in fact establishes that a part of the potential tax benefit is subject to Tax Agency authorisation through a ruling for which an application was presented at the end of 2015 for the three brand-owning companies.  Although a positive response has already been received for Superga Trademark S.A, a response is still awaited from the Tax Agency regarding BasicNet S.p.A. and Basic Trademark S.A..

Consolidated net debt, including medium-term loans and finance leases (Euro 21.1 million) and property loans (Euro 8 million), increased from Euro 49.5 million at December 31, 2016 to approx. Euro 61.5 million at December 31, 2017.

The cash flow generated by operating activities totaled approx. Euro 13 million.  Medium-term loan and finance lease repayments totalled approx. Euro 7 million, dividends were paid of Euro 3.3 million, investments totaled approx. Euro 18 million and treasury shares were acquired for approx. Euro 2.6 million.

2017 OPERATIONAL OVERVIEW AND EVENTS

Briko^® Brand

In June, BasicNet S.p.A exercised early its purchase option over the Briko^® brand, as per the exclusive global distribution license for all Briko^® brand products signed on March 18, 2016 and concluding on June 30, 2019. Early exercise reduced the final payment to be calculated on conclusion of the license in 2019 based on revenue levels. The acquisition was formalised in August, with an advance payment of Euro 1 million out of an estimated final price of Euro 1.7 million.

Lanzera^® Brand

In June, the subsidiary Basic Properties America Inc. sold the Lanzera^® brand. The sale of the Brand, which no longer features within the Group’s strategic plans, generated a gain of Euro 195 thousand.

Sebago^® Brand

Last July, the Group acquired the US brand Sebago^®, for an overall price of USD 14.2 million (approx. Euro 12 million at current exchange rates), in addition to accessory acquisition charges. 

The Brand, operating since 1946, is a true style icon and well-known for its loafers and boat shoes.  The integration of the Brand into the Group business model was focused upon in these initial months, with sourcing centers selected and license agreements signed for distribution in 30 countries and designers brought on board for the first “designed by BasicNet” collection, with sales launch in 2018.

New loans

In February, the subsidiary BasicItalia S.p.A. agreed a loan with Banco BPM of four-year duration for Euro 2 million, repayable in quarterly instalments and in support of retail sector investment.

In support of the acquisition of the Sebago^® brand, MPS Capital Services Banca per le Imprese S.P.A. granted to BasicNet a loan of Euro 13 million. 

Commercial operations

The actions taken to develop the international presence of the Brands in 2017 included:

• for the Kappa^® and Robe di Kappa^® brands, commercial operations focusing on the renewal of expiring license contracts, including Singapore, Indonesia, Malaysia, Austria, Hungary, Malta, Cuba, Denmark, Finland, Norway, Sweden, the Baltic countries, Israel, the Netherlands, Australia and New Zealand.  In addition, eyewear license contracts were renewed in Turkey, in addition to safetywear and sleepwear contracts for the Italian market;

• for the Superga^® brand, new agreements for the territories of Mauritius, China and Hong Kong were signed, and for the distribution of watches in Italy and socks in the United States and Canada.  The agreements for Chile, Peru, Greece, Cuba and Benelux were renewed, in addition to the slippers and sandals, underwear and sleepwear licenses in Italy; 

• for the Briko^® brand, new licenses were signed for the territories of Austria, Germany, Norway, Sweden, Finland, the Baltic countries and South Korea.

• for the Sebago^® brand, licenses were agreed for Germany, Austria, Switzerland, Spain, Andorra, Portugal and Gibraltar, Greece, France and the Principality of Monaco, Belgium, Luxembourg, the Netherlands, Norway, Sweden, Finland, Denmark, for South Africa and the countries of North and West Africa, and for the Philippines; for the Americas - a region of great potential - the license agreements for the Dominican Republic and the Caribbean were formalised.

Group brand sales points

The development of the retail channel continued with new openings by licensees of K-Way^® and Superga^® mono-brand stores. We highlight the opening of the first K-Way^® store in London (Covent Garden) and a flagship store in the Marais district of Paris.

At December 31, Kappa^® and Robe di Kappa^® mono-brand stores and shop in shops opened by licensees globally numbered 931 (of which 107 in Italy), with Superga^® mono-brand stores and shop in shops totalling 285 (of which 63 in Italy), along with 46 K-Way^® sales points (of which 29 in Italy).

Sponsorship and communication

Kappa^® & Robe di Kappa^® Brands

For the Kappa^® brand, major sponsorship activity continued both domestically and internationally. Specifically:

-      new football sponsorships were signed with: Racing Club de Avellaneda by the Argentinian licensee, and Football Club de Lorient by the French licensee.  In Australia, the licensee signed a four-year sponsorship with the Queensland football and a five-a-side association. Finally, a four-year agreement was signed, under the Kombat™ Ball label, for the supply of footballs to the 22 Serie B teams and for the B Italia team kit, formed by Under-21 Italian footballers playing for Serie B teams;

-      for winter sports, the FISI (Italian Winter Sport Federation) and the FISG (Ice Sports) sponsorship was also renewed, in addition to the continued sponsorship of the Korea Ski Association by the South Korean licensee.  Thanks to these agreements and following Sochi 2014, the Kappa^® brand will participate at the Pyeongchang 2018 Winter Olympics, kitting out both the Italian and South Korean teams, and the Beijing 2022 Winter Olympics.

-      in South Korea, where baseball is among the most popular sports, the licensee signed a sponsorship contract for the next three years with the team Lotte Giants.

New co-branding initiatives were also undertaken, with the Argentinian Marcelo Burlon, who reinterpreted the 222 Band tracksuits and a number of denim pieces for a new Kappa^® spring-summer 2018 capsule collection, and with the Russian designer, photographer and videomaker Gosha Rubchinskiy, presenting a number of historic Kappa^® pieces in her 2017 spring-summer collection and a global preview at Pitti; with the Italian designer Danilo Paura who presented a capsule collection of tailored designs for spring-summer 2018; with major luxury brands such as Open Ceremony (USA), Faith Connexion (France) and Barneys New York. In addition, in January 2017 the new Kappa^® Kontroll streetwear label was launched, exclusively distributed by Slam Jam. Topping off these activities, at the end of December the famed fashion site Highsnobiety declared Kappa^® as the 2017 “breakthrough brand" i.e. the brand “making a difference” on the global lifestyle scene.  

Superga^® Brand

For the Superga® brand, co-branding operations continued almost uninterrupted.  The main collaborations were those with the Russian designer Gosha Rubchinskiy, with the bloggers Lizzy van der Ligt and Fahrman Sofi, with the Patternity studio of London, the German fashion blogger Caro Daur, the Argentinian designer Jessica Trosman and the champion tennis star Ivan Lendl, who presented the new Sport Lendl Superga^® sneakers: an identical model to the ones he wore in countless victories during his career. In 2017, in addition, Superga^® agreed capsule collections in collaborations with the Florentine concept store LuisaViaRoma, with the Weekend Max Mara brand and with The Blonde Salad web platform founded by Chiara Ferragni. The US model and musician Pyper America Smith was the face of the spring-summer 2017 collection campaign, joining a long list of Superga^® Ambassadors across the world. 

K-Way^® Brand

Two new co-brandings with the Dsquared2 and Jacadi brands were launched. In addition, K-Way^® will be the National Partner of the Ice Skating World Championships, to be held in Milan between March 21-25, 2018 at the Mediolanum Forum in Assago.

Briko^® Brand

The Briko^® eyewear and helmets sponsorship of the Bardiani CSF team, which recently won the right to participate at the Giro d’Italia 2018, was renewed for an additional two years. An annual sponsorship contract for 2018 was signed with the two cyclists Diego Ulissi and Filippo Ganna (Team UAE Abu Dhabi) for the eyewear category.

“2017 was a year of major investment.  After Briko, the Group acquired the well-established US brand Sebago, making it in less than six months an integral part of the business model, which once again displayed its strengths: flexibility, scalability and sustainability.  At the final seasonal meeting held in Turin, among 600 attendees from over 100 countries for the first time we presented the new Group Brand collections simultaneously in a single large showroom. The outcome has been very positive, as apparent in the solidity of our international network and the enthusiastic response for our new collections and the new Brand” stated Chief Executive Officer Gianni Crespi “with this strong outlook, we head into 2018 with great confidence”.

As communicated on February 14, the Chief Executive Officer Gianni Crespi will present to the market the preliminary 2017 results during a video conference call today at 5.30 PM. To attend the video conference call to be held in English, please click:

Join Skype Meeting

Or by telelphone: +390200624808

(ID conference: 24028484 and PIN conference: 40804)

the presentation may be downloaded from www.BasicNet.com in the section: “dati finanziari/altre informazioni e presentazioni” shortly before the video conference begins, at the following link:

www.basicnet.com/contenuti/datifinanziari/informazioniannuali.asp?menuSelectedID=3g&language=IT

In relation to the “alternative performance indicators”, as defined by the ESMA/2015/1415 guidelines, we provide below a definition of the indicators used in the present Interim Directors’ Report, as well as their reconciliation with the condensed half-year financial statement items:

The Executive Officer for Financial Reporting, 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.