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 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 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: