SALVATORE FERRAGAMO S.P.A. PRESSRELEASE
Salvatore Ferragamo S.p.A. The Board of Directors Approves the Consolidated Financial Statement asof 30 June 2015 Revenue and Profit Growth Continuesfor the Salvatore Ferragamo Group: First Half Revenue +10%, Gross Operating Profit (EBITDA1) +15%, Operating Profit (EBIT) +12%and Group Net Profit +13% vs. 1H 2014 Revenues: 722 million Euros(+10%vs. 659 million Eurosat 30 June 2014) Gross Operating Profit (EBITDA1): 165 million Euros (+15% vs. 143 million Euros at 30 June 2014) Operating Profit (EBIT): 136 million Euros (+12% vs. 121 million Euros at 30 June 2014) Net Profit: 90 million Euros (+10% vs. 82 million Eurosat 30 June 2014), including 2 million Eurosof Minority Interest Group Net Profit: 88 million Euros(+13%vs. 78 million Eurosat 30 June 2014)Florence, 27 August 2015 The Board of Directors of Salvatore Ferragamo S.p.A. (MTA: SFER), parent company of the Salvatore Ferragamo Group, one of the global leaders in the luxury sector, meeting under the chairmanship of Ferruccio Ferragamo, examined and approved the Consolidated Financial Statement as of 30 June 2015, drafted according to IAS/ IFRSinternational accounting principles (Limited Review).
1 EBITDA is measured by our management to evaluate operating performance. We define EBITDA as operating income plus (i) depreciation of property, plant and equipment, investment property, (ii) amortization of other intangible assets with definite useful life and (iii) write-downs of property, plant and equipment, investment property and other intangible assets with definite useful life and goodwill. We believe that EBITDA is an important indicator for measuring the Group s performance as it is not influenced by various methods of calculating taxes, amortization or depreciation. As EBITDA is not an indicator defined by the accounting principles used by our Group, our method of calculating EBITDA may not be strictly comparable to that used by other companies.
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Notes to the Income Statement for 1H 2015
Consolidated Revenue figures
As of 30 June 2015, the Group has posted Total Revenue of 722 million Euros, registering a reported 10% increase (current exchange rates including the negative hedging effect of 23 million Euros), vs. the 659 million Euros recorded in 1H 2014. Revenue growth at constant exchange rates2 was2%.
In 2Q 2015 the Total Revenue trend was similar to the one reported in 1Q 2015: Revenue reached
395 million Euros from 360 million Euros in 2Q 2014, reporting a 10% increase (current exchange rates including the negative hedging effect of 15 million Euros) and 2% at constant exchange rates2.
Revenues by geographical area3
The Asia Pacific area is confirmed as the Group's top market in terms of Revenues, increasing by
7% (-4% at constant exchange rates) vs. 1H 2014. In particular the retail channel in China
recorded a Revenue growth of 17% (+3% at constant exchange rates) in the first six months of
2015, while trends in Hong Kong and Macao further deteriorated in 2Q 2015.
Europe posted an increase in Revenues of 8% (+6% at constant exchange rates) compared to 1H
2014, with an acceleration in 2Q 2015 (+13%). The retail channel confirmed its double-digit growth (further accelerating in 2Q), while the wholesale business, negatively impacted by the geopolitical tensions in Eastern Europe and Greece, saw a stable turnover (increasing in 2Q).
North America recorded a Revenue increase of 16% (+3% at constant exchange rates) in the first six months of 2015, accelerating in 2Q 2015 (+4% at constant exchange rates), despite the challenging comparison base (+12% at constant exchange rates in 2Q 2014) and the temporary closure of the Rodeo Drive store in Los Angeles.
The Japanese market registered a 8% growth (+11% at constant exchange rates) in 1H 2015 and a
12% growth (+18% at constant exchange rates) in 2Q 2015.
Revenues in the Central and South America in 1H 2015 continued the double-digit growth, posting an increase of 18% (+12% at constant exchange rates).In 2Q 2015 Revenues grew 10% (+7% at constant exchange rates), despite the challenging comparison base (+29% at constant exchange rates in 2Q 2014).
2 Revenues at constant exchange rates are calculated by applying to the Revenue of the first three/ six months 2014, not including the hedging effect , the average exchange rate of the first three/ six months 2015.
3 The variations in Revenues are calculated at current exchange rates including the hedging effect, unless differently
indicated.
2
Revenues by distribution channel4
As of 30 June 2015, the Group's Retail network could count on 380 Directly Operated Stores (DOS), while the Wholesale and Travel Retail channel included 267 Third Party Operated Stores (TPOS), as well as the presence in Department Stores and high-level multi-brand Specialty Stores.
In 1H 2015 the Retail distribution channel posted consolidated Revenues up by over 11% (+3% at constant exchange rates), with a roughly stable growth at constant exchange rates and perimeter (like-for-like) vs. 1H 2014.
The Wholesale channel, despite the hard comparison base (+12%at constant exchange rates in 1H
2014) and the ongoing geopolitical tensions in Eastern Europe and in Greece, registered an increase in Revenues of 6%(stable at constant exchange rates) vs. 1H 2014.
Revenues by product category4
Among the product categories it is especially worth highlighting the increase of handbags and leather accessories, that posted a growth of 16% in 1H 2015, while the performance of fragrances (-5%) was penalized by the unstable situation in Eastern Europe and by a different delivery calendar vs. the same period of last year.
Gross Profit
In 1H 2015 the Gross Profit increased by 15%, reaching 475 million Euros. Its incidence on Revenues increased 300 basis points, moving to 65.8%, from 62.8% in 1H 2014, despite the negative hedging effect of 23 million Euros. In 2Q 2015 the Gross Profit reached 264 million Euros, with an incidence on Revenues increasing by 270 basis points to 66.7%, from 64.0% in 2Q
2014, despite the negative hedging effect of 15 million Euros.
Operating Costs
In 1H 2015 Operating Costs grew by 16% (+5% at constant exchange rates), reaching 340 million
Euros, with an incidence on Revenues of 47.0%, from 44.5%in 1H 2014.
4 The variations in Revenues are calculated at current exchange rates including the hedging effect, unless differently indicated.
3
Gross Operating Profit (EBITDA5)
The Gross Operating Profit (EBITDA) increased by 15% over the period, reaching 165 million Euros, from 143 million Euros of 1H 2014, with an incidence on Revenues significantly increasing to 22.8%, from 21.7% in 1H 2014. In 2Q 2015 the EBITDA reached 104 million Euros, further increasing the incidence on Revenues to 26.2%, from 25.1%in 2Q 2014.
Operating Profit (EBIT)
The Operating Profit (EBIT) increased, over the period, from 121 million Euros in 1H 2014 to 136 million Euros (+12%) in 1H 2015, with an incidence on Revenues reaching 18.8% from 18.3%. In
2Q 2015 the EBIT reached 89 million Euros, further improving the incidence on Revenues to
22.4%, from 21.9%in 2Q 2014.
Profit before taxes
The Profit before taxes in 1H 2015 increased to 130 million Euros (+10%), from 118 million Euros in 1H 2014, and its incidence on Revenues was 18.0% vs. 17.9%in 1H 2014.
Net Profit for the Period
The Net Profit for the period, including the Minority Interest of 2 million Euros, was 90 million
Euros, marking a 10%increase.
The Group Net Profit reached 88 million Euros, as compared to 78 million Euros in 1H 2014, marking an increase of 13%.
5 EBITDA is measured by our management to evaluate operating performance. We define EBITDA as operating income plus (i) depreciation of property, plant and equipment, investment property, (ii) amortization of other intangible assets with definite useful life and (iii) write-downs of property, plant and equipment, investment property and other intangible assets with definite useful life and goodwill. We believe that EBITDA is an important indicator for measuring the Group s performance as it is not influenced by various methods of calculating taxes, amortization or depreciation. As EBITDA is not an indicator defined by the accounting principles used by our Group, our method of calculating EBITDA may not be strictly comparable to that used by other companies.
4
Notes to the Balance Sheet for 1H 2015
Net Working Capital6
The Net Working Capital as of 30 June 2015 increased less than the Revenue to 323 million Euros
(+7%) from 301 million Euros as of 30 June 2014. In particular the Inventory increase by only 1%.
Investments (CAPEX)
Investments (CAPEX) reached 30 million Euros as of 30 June 2015 vs. 34 million Euros in 1H 2014; the decrease is justified by the fact that the majority of the Investments will be accomplished in the second part of the year.
Net Financial Position
The Net Financial Debt as at 30 June 2015 decreased to 98 million Euros, compared to 114 million
Euros as at 30 June 2014, also thanks to the significant operating cash generation which, in 1H
2015, reached 63 million Euros, vs. 24 million Euros in 1H 2014.
6 Net working capital is calculated (in accordance with CESR Recommendation 05-054/ b of February 10, 2005) as inventories and trade receivables net of trade payables (excluding other current assets and liabilities and other financial assets and liabilities). As net working capital is not an indicator defined by the accounting principles used by our Group, our method of calculating net working capital may not be strictly comparable to that used by other companies.
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The business trends, recorded in the first months of the current year, justify expectations for growth also throughout 2015, in the absence of severely unfavourable market conditions.
* * * *
The manager mandated to draft the corporate accounting documents, Ernesto Greco, pursuant to article 154-bis, paragraph 2, of Legislative Decree no. 58/ 1998 (Consolidated Financial Law), hereby declares that the information contained in this Press Release faithfully represents the content of documents, financial books and accounting records.
Furthermore, in addition to the conventional financial indicators required by IFRS, this Press Release includes some alternative performance indicators (such as EBITDA, for example) in order to allow for a better assessment of the performance of the economic and financial management. These indicators have been calculated according to the usual market practices.
This document may contain forecasts, relating to future events and operating results, which by their very nature are uncertain, in that they depend on future events and developments that cannot be predicted with certainty. Actual results may therefore differ with those forecast, due to a variety of factors.
* * * *
The Consolidated Financial Statement as of 30 June 2015 will be available to anyone requesting it at the headquarters of the Company, Via Tornabuoni nr. 2, and can also be consulted in the Investor Relations/ Financial Documents section of the Salvatore Ferragamo Group's website http:/ / group.ferragamo.com, from 28 August 2015.
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The Results of 1H 2015 will be illustrated today, 27 August 2015, at 6:00 PM (CET) in a conference call with the financial community. The presentation will be available on the Company's website ht t p:/ / group.ferragamo.comin the Investor Relations/ Presentations section.
Salvatore Ferragamo S.p.A.
Salvatore Ferragamo S.p.A. is the parent Company of the Salvatore Ferragamo Group, one of the world's leaders in the luxury industry and whose origins date back to 1927.
The Group is active in the creation, production and sale of shoes, leather goods, apparel, silk products and other accessories, along with women's and men's fragrances. The Group's product offer also includes eyewear and watches, manufactured by licensees.
The uniqueness and exclusivity of our creations, along with the perfect blend of style, creativity and innovation enriched by the quality and superior craftsmanship of the 'Made in Italy' tradition, have always been the hallmarks of the Group's products.
With approximately 4,000 employees and a network of over 640 mono-brand stores as of 30 June
2015, the Ferragamo Group operates in Italy and worldwide through companies that allow it to be a leader in the European, American and Asian markets.
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For further information:
Salvatore Ferragamo S.p.A.
Paola Pecciarini
Group Investor Relations
Tel. (+39) 055 3562230 investor.relat ions@ferragamo.com
Image Building
Giuliana Paoletti, Mara Baldessari, Alfredo Mele
Media Relations
Tel. (+39) 02 89011300 ferragamo@imagebuilding.it
This Press Release is also available on the website ht t p:/ / group.ferragamo.com, in the section
Investor Relations/ Financial Press Releases .
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On the following pages, a more detailed analysis of Revenues, the consolidated income statement, a summary of statement of financial position, the consolidated cash flow statement, and the net financial position of the Salvatore Ferragamo Group as of 30 June 2015.
Revenue by geographic area asof 30 June 2015
(In thousands of Euro) Half-year period ended 30 June
at constant exchange rate
2015 % on
2014 % on % %
Revenue Revenue Change Change
Europe 195,494 27.1% 181,665 27.6% 7.6% 6.2% North America 164,480 22.8% 141,657 21.5% 16.1% 3.2% Japan 62,528 8.6% 57,760 8.7% 8.3% 11.3% Asia Pacific 265,650 36.8% 248,928 37.8% 6.7% (4.1%) Central and South America 34,223 4.7% 29,009 4.4% 18.0% 12.2%
Total 722,375 100.0% 659,019 100.0% 9.6% 2.0%
Revenue by distribution channel asof 30 June 2015
(In thousands of Euro) Half-year period ended 30 June
at constant exchange rate
2015 % on
Revenue
2014 % on
Revenue
% Change
% Change
Retail 438,135 60.7% 393,361 59.7% 11.4% 3.1% Wholesale 272,554 37.7% 255,953 38.8% 6.5% 0.2% Licenses and services 5,264 0.7% 4,224 0.7% 24.6% 24.6% Rental income investment properties 6,422 0.9% 5,481 0.8% 17.2% (4.6%)
Total 722,375 100.0% 659,019 100.0% 9.6% 2.0%
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Revenue by product category as of 30 June 2015
(In thousands of Euro) Half-year period ended 30 June
at constant exchange
rate
2015 % on
2014 % on
% % Change
Revenue Revenue Change
Footwear 305,899 42.4% 281,861 42.8% 8.5% (0.3%) Leather goods 271,076 37.5% 234,558 35.6% 15.6% 7.5% Apparel 43,289 6.0% 44,169 6.7% (2.0%) (6.8%) Accessories 46,970 6.5% 43,108 6.5% 9.0% 2.4% Fragrances 43,455 6.0% 45,618 6.9% (4.7%) (5.2%) Licenses and services 5,264 0.7% 4,224 0.7% 24.6% 24.6% Rental income investment properties 6,422 0.9% 5,481 0.8% 17.2% (4.6%) Total 722,375 100.0% 659,019 100.0% 9.6% 2.0%
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Consolidated results for Salvatore Ferragamo Group
Consolidated income statement asof 30 June 2015
(In thousands of Euro) Half-year period ended 30 June
2015 % on
Revenue
2014 % on
Revenue
% Change
Revenue from sales and services 715,953 99.1% 653,538 99.2% 9.6% Rental income investment properties 6,422 0.9% 5,481 0.8% 17.2% Revenues 722,375 100.0% 659,019 100.0% 9.6%
Cost of goods sold (247,143) (34.2%) (245,278) (37.2%) 0.8%
Gross profit 475,232 65.8% 413,741 62.8% 14.9%
Style, product development and logistics costs (22,371) (3.1%) (22,723) (3.4%) (1.5%)
Sales & distribution costs (224,689) (31.1%) (184,314) (28.0%) 21.9% Marketing & communication costs (35,335) (4.9%) (34,586) (5.2%) 2.2% General and administrative costs (52,781) (7.3%) (47,671) (7.2%) 10.7% Other operating costs (9,919) (1.4%) (8,586) (1.3%) 15.5% Other income 5,414 0.7% 4,707 0.7% 15.0%
Operating profit 135,551 18.8% 120,568 18.3% 12.4% Financial charges (31,837) (4.4%) (10,851) (1.6%) 193.4% Financial income 26,150 3.6% 8,402 1.3% 211.2%
Profit before taxes 129,864 18.0% 118,119 17.9% 9.9%
Income taxes (40,025) (5.5%) (36,102) (5.5%) 10.9%
Net profit/(loss) for the period 89,839 12.4% 82,017 12.4% 9.5% Net profit/(loss) - Group 88,153 12.2% 78,078 11.8% 12.9% Net profit/(loss) - minority interests 1,686 0.2% 3,939 0.6% (57.2%)
EBITDA(*) 164,641 22.8% 143,035 21.7% 15.1%
(*) EBITDA is operating profit before amortization and depreciation and write-downs of tangible/intangible assets. EBITDA so defined is a parameter used by the management to monitor and assess the operating performance and is not identified as an accounting measurement under IFRS and, therefore, must not be considered as an alternative measurement to assess Group performance. Since the composition of EBITDA is not regulated by reference accounting standards, the determination criterion applied by the Group may differ from that adopted by others and therefore may not be comparable.
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Summary of consolidated statement of financial position asof 30 June 2015
(In thousands of Euro) 30 June 31 December
2015 2014 % change
Property, plant and equipment 221,630 212,077 4.5% Investment property 7,440 7,015 6.1% Intangible assets with definite useful life 30,946 29,220 5.9% Inventories 339,452 338,555 0.3% Trade receivables 174,069 150,895 15.4% Trade payables (190,050) (187,555) 1.3% Other non current assets/(liabilities), net 54,607 45,032 21.3% Other current assets/(liabilities), net (35,620) (37,692) (5.5%) Net invested capital 602,474 557,547 8.1% Group shareholders equity 458,783 466,190 (1.6%) Minority interests 46,058 42,004 9.7% Shareholders equity (A) 504,841 508,194 (0.7%) Net financial debt (B) (1) 97,633 49,353 97.8%
Total sources of financing (A+B) 602,474 557,547 8.1%
(1) Pursuant to the provisions of CONSOB Communication no. DEM/6064293 of 28 July 2006, it should be noted that net financial debt is calculated as the sum of cash and cash equivalents, current financial receivables including the positive fair value of financial instruments and current financial assets, current and non current financial liabilities and the negative fair value of financial instruments and has been determined in accordance with the provisions of CESR s Recommendation on alternative performance measures 05-178/b of 3 November 2005 Recommendations of Cesr on alternative performance measures .
Net financial position as of 30 June 2015
(In thousands of Euro) 30 June 31 December Change
2015 2014 2015 vs 2014
A. Cash 984 1,073 (89) B. Other cash equivalents 93,826 95,390 (1,564) C. Cash and cash equivalents (A)+(B) 94,810 96,463 (1,653) Derivatives non-hedge component 726 976 (250) Other financial assets - - - D. Current financial receivables 726 976 (250) E. Current bank payables 165,673 121,083 44,590
F. Derivatives non-hedge component 318 260 58
G. Other current financial payables 4,433 4,118 315
H. Current financial debt (E)+(F)+(G) 170,424 125,461 44,963
I. Current financial debt, net (H)-(C)-(D) 74,888 28,022 46,866
J. Non current bank payables 22,745 21,331 1,414
K. Derivatives non-hedge component - - - M. Other non current financial payables - - - N. Non-current financial debt (J)+(K)+(M) 22,745 21,331 1,414
O. Net financial debt (I)+(N) 97,633 49,353 48,280
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Consolidated statement of cash flows as of 30 June 2015
(In thousands of Euro) Half-year period ended 30 June
2015 2014 Net profit / (loss) for the period 89,839 82,017
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (31,947) 8,851
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (184) (2,097)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 96,455 70,292
Net increase / (decrease) in cash and cash equivalents | (184) | (2,097) |
Net effect of translation of foreign currencies | (1,461) | (812) |
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 94,810 67,383 |
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