Aeffe S.p.A. (AEF) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Aeffe Third Quarter 2023 Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Simone Badioli, CEO of Aeffe. Please go ahead, sir.

Good afternoon to everybody. Thank you for joining us for the briefing. [indiscernible] brief introduction [indiscernible] so you can see [indiscernible] still reflect the reorganization of group. But we cannot be -- we cannot forget the underlying world economic situation at the moment and in particular the geopolitical situation that is slowing down [indiscernible]. [indiscernible] we believe that the strategy is still valid and still strong [indiscernible]. So I don't want to bore you with my [indiscernible] I will now leave the floor to our new CFO, Matteo Scarpellini.

Thank you, Simon, and good afternoon, everyone. Let's start with [indiscernible] our group results. I think everyone has gone over the presentation, we provided. So let's start with Slide #4, in which the group reached a consolidated revenues equal to EUR 252.8 million. That is a decrease equal to 8.3% at constant exchange rate. In the [indiscernible] business, the 60% of our revenues are covered by prêt-à-porter. That is a 40% from footwear and leather goods. [indiscernible] 68% of the total [indiscernible] are decreasing due to the fact that we closed and shutdown 2 main [indiscernible] . By brand, Moschino covered 75% of consolidated revenue, Pollini 10% and Alberta Ferretti and Philosophy respectively 8% and 6% and more or less at the same [indiscernible] showed in the last quarter. By region, there is another transformation happening from Italy and Europe. In Italy 43% and Europe 31%. And little increase of Asia and rest of the world of 21%. There is a decrease in U.S. At Page 5, there is [indiscernible] prêt-à-porter and leather boots. The prêt-à-porter decreased in 2023 compared to 2022 equal to 6.6%. There was a strong decrease of leather goods of around 13%. Looking at Slide 7, there [indiscernible] decrease of 13.5% versus an increase in retail of 11.5%. Business which followed the new strategy that group we are implementing and follow, of course, increasing retail the change of the distribution in the Chinese market. Some additional work with China in order to underline the performance of China. [indiscernible] so improving the performance, but we are not yet at breakeven. So this is not, of course, good news. But as the CEO said, we confirmed the strategy implemented. And so we hope that by 2024 we think we can improve our performance in a good way. There was a decrease [indiscernible] of course for the switch from [indiscernible] performing quite well considering, of course, as already said, the general macroeconomic condition. And finally, you can see as already commented the decrease in royalties that are predicted in the [indiscernible] 2022. At Page 9, let's have a look to the -- our brand performance. Moschino is decreasing of 11.5% due again to the [indiscernible] from wholesale to retail in China and [indiscernible] of collection. Alberta Ferretti improving plus 9% and the same improvement of Philosophy, 11.5%. Differently, finally, from what we reported in the semester, so in the half 1 of 2023, Pollini is decreasing the performance of 9 months versus 9 months of the previous year of around 4.3%. -- but we are fighting with the market to try to move this [indiscernible] to a positive one. At Page 11, at Slide 11, the 9 months revenue by region. Italy showed a 7%, Europe minus 15%, with a strong decrease comes from U.K. and German market. As already said during the first semester of the year, Asia and rest of the world showed a plus 10.4% versus 2022. And finally, for the American and U.S.A. performance. Unfortunately, we reached a decrease of 30%, which is the hugest percentage rate. The performance in the United States are going up and down in the last 3 years, even though the performance of the 9 months of 2023 are better than the pre-COVID situation. We are not able to maintain the 2022 performance. after we are implementing also over there a new, let me say, positioning, in particular, for Moschino. So again, we hope that the new strategy and the new demand, let me say, of Moschino could recover the situation also in the United States. At Page 13, you can see our EBITDA. This is the reported EBITDA because our adjusted EBITDA is equal to EUR 15.3 million. That is reported EBITDA of EUR 12.2 million. The difference is the extraordinary costs we are recording due to the extraordinary situation and the projects that we are developing, sorry, in 2023. In terms of total operating expenses, you can see an increase in the personnel and the services cost due to the fact that in the previous 6 months of 2022, the Chinese market was not included in the figures. So we have not a full comparable and comparison between the 2 9-month performance. And finally, due to the fact that we are starting from the 1st of January, fully opened with the 33 stores in China, we registered an increase in again, service cost and the personnel one. As already said that the Chinese performance are not yet, let me say, at a breakdown. And so this will generate a not a positive impact of EBITDA. In terms of depreciation and amortization, we are more or less flat with the previous year, but we are not in the same position for financial [indiscernible] due to our net financial position. And as said, our indebtedness is [indiscernible] variable interest rates. So we have some increase in interest rate. Finally, let's have a look at Page 14 to our balance sheet to our consolidated balance sheet. The operating and net working capital is the same in value with the 9 months of 2022 with a different mix. The accounts receivable decreased for decreasing volumes. So we have less revenues. The accounts payable more or less follow the same direction. And we have a bit of concept for inventory that is decreasing. And we think we have to work a lot on inventory to reach at the end of our -- at the end of December or the end of the year, a better number and the better operating net working capital. At Page 15, only one word to the capital expenditures that are absolutely in line with the expectation and notwithstanding the performance of the group that we have already commented. No project has been blocked. So all the investments expected are in process and the same for the old reorganization in terms of organizational chart in terms of merger, we have already finalized [indiscernible] . We will finalized also the [indiscernible] the end of the year. So the project is continuing at 100%. And we hope, again, that all this revamp phase will be concluded at the end of the year. And so to be -- to have the chance to show better performance starting from 2024. I think that the presentation has finished. So I leave the word for -- to anyone who has questions.

[Operator Instructions] The first question is from Oriana Cardani of Intesa Sanpaolo.

Yes. Good afternoon, I have a question on the outlook. So I would appreciate an elaboration on the outlook you see. I [indiscernible] at [ EUR 327 ] million revenue and around EUR 20 million of EBITDA of the full year 2023, which looks challenging considering the 9-month results. So could you give us some color on your expectation if you have some targets for the last quarter and also for 2024, if possible, thank you.