Interim Financial Report
September 30, 2024
F.I.L.A. GROUP
INTERIM FINANCIAL REPORT
AT SEPTEMBER 30, 2024
F.I.L.A. - Fabbrica Italiana Lapis ed Affini S.p.A.
Via XXV Aprile 5 Pero (MI)
Interim Financial Report | |
September 30, 2024 | |
CONTENTS | |
I - Interim Directors' Report | 3 |
Corporate Bodies | 3 |
Overview of the F.I.L.A. Group | 4 |
Key events of the reporting period | 6 |
Key Financial Highlights | 8 |
F.I.L.A. Group's Financial Highlights | 14 |
Operating results excluding net non-recurring charges | 14 |
Business seasonality | 16 |
Statement of Financial Position | 18 |
Financial overview | 21 |
Segment reporting | 26 |
Business Segments - Statement of financial position | 27 |
Business Segments - Income Statement | 28 |
Business Segments - Other Information | 29 |
Subsequent events | 30 |
Outlook | 30 |
Treasury shares | 30 |
Accounting standards and basis of preparation | 31 |
II - Consolidated Financial Statements of the F.I.L.A. Group at September 30, 2024 | 32 |
Consolidated Financial Statements | 32 |
Statement of Financial Position | 32 |
Statement of Comprehensive Income | 32 |
Statement of changes in Equity | 34 |
Statement of Cash Flows | 35 |
Annexes | 37 |
Attachment 1 - List of companies included in the consolidation scope and other equity investments | 37 |
Transactions relating to Atypical and/or Unusual Operations | 38 |
Statement of the Manager in Charge - Interim Financial Report | 39 |
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Interim Financial Report
September 30, 2024
DIRECTORS' REPORT
AT SEPTEMBER 30, 2024
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Interim Financial Report
September 30, 2024
I - Interim Directors' Report
Corporate Bodies
Board of Directors | |
Chairperson (*) | Giovanni Gorno Tempini |
Honorary Chairperson | Alberto Candela |
Chief Executive Officer (**) | Massimo Candela |
Executive Director (**) | Luca Pelosin |
Non-executive Director | Annalisa Matilde Barbera |
Non-executive Director (*) | Gianna Luzzati |
Non-executive Director (*) | Carlo Paris |
Non-executive Director (*) | Donatella Sciuto |
- Independent director in accordance with Article 148 of the Consolidated Finance Act and Article 3 of the Code of Conduct. (**) Executive Director
Control, Risks and Related Parties Committee
Gianna Luzzati
Carlo Paris
Donatella Sciuto
Annalisa Matilde Barbera
Remuneration Committee
Donatella Sciuto | |
Gianna Luzzati | |
Annalisa Matilde Barbera | |
Board of Statutory Auditors | |
Chairperson | Gianfranco Consorti |
Standing Auditor | Sonia Ferrero |
Standing Auditor | Pietro Michele Villa |
Alternate Auditor | Stefano Amoroso |
Alternate Auditor | Tina Marcella Amata |
Independent Auditors | Deloitte & Touche S.p.A. |
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Overview of the F.I.L.A. Group
The F.I.L.A. Group (hereafter also the "Group") operates in the creativity tools market, producing and marketing colouring, design, modelling, writing and painting objects, such as pencils, crayons, modelling clay, chalk, oil colours, acrylics, watercolours, paints and paper for the fine arts, school and leisure.
The F.I.L.A. Group at September 30, 2024 operates through 23 production facilities and 32 subsidiaries across the globe and employs approx. 3,400 people, becoming a pinnacle for creative solutions in many countries with brands such as GIOTTO, DAS, LYRA, Canson, Maimeri, Daler-Rowney Lukas, Ticonderoga, Pacon, Strathmore, Princeton and Arches.
Founded in Florence in 1920 by two noble Tuscan families, della Gherardesca and Marchesi Antinori, F.I.L.A. S.p.A. (hereafter also the "Parent") has achieved strong international growth in the past 20 years, supported by a series of strategic acquisitions. Over the years, the Parent has acquired: (i) the Italian firm Adica Pongo in 1994, a leading producer of modelling clay for children; (ii) the Spanish firm Spanish Fila Hispania S.L. (formerly Papeleria Mediterranea S.L.) in 1997, the Group's former exclusive distributor in Spain; (iii) the French firm Omyacolor S.A. in 2000, a leading manufacturer of modelling putties and clays; (iv) the U.S. Dixon Ticonderoga Group in 2005, a leading producer and distributor of pencils in North America, with subsidiaries operating on the Canadian, Mexican, Chinese and European markets; (v) the German LYRA Group in 2008, which allowed the Group to enter the German, Scandinavian and Eastern Asian markets; (vi) the business unit operated by Lapiceria Mexicana in 2010, one of the main local competitors in the budget coloured and graphite pencils market; and (vii) the business unit operated by Maimeri S.p.A. in 2014, a manufacturer and distributor of paints and accessories for fine arts. In addition to these operations, on the conclusion of an initiative which began with the acquisition of a significant influence in 2011, control of the Indian company DOMS Industries Pvt Ltd. was acquired in 2015 (viii). In 2016, the F.I.L.A. Group focused upon development through strategic Art&Craft sector acquisitions, seeking to become the leading market player. On February 3, 2016, F.I.L.A. S.p.A. acquired control of the Daler-Rowney Lukas Group, an illustrious brand producing and distributing materials and accessories on the arts and crafts market since 1783, with a direct presence in the United Kingdom, the Dominican Republic, Germany and the USA (ix). In September 2016, the F.I.L.A. Group acquired the entire share capital of St. Cuthberts Holding Limited and the operating company St. Cuthberts Mill Limited, a highly-renowned English paper mill, founded in 1907, located in the south-west of England and involved in the production of high quality artist's papers (x). In October 2016, F.I.L.A. S.p.A. acquired the Canson Group, founded in 1557 by the Montgolfier family, with headquarters in Annonay in France, production facilities in France and conversion and distribution centres in Italy, France, China, Australia and Brazil. Canson products are available in over 120 countries and the brand is the most respected globally involved in the production and distribution of high added value paper for the fine arts, design, leisure and schools, but also for artists' editions and technical and digital drawing materials (xi).
In June 2018, F.I.L.A. S.p.A., through its US subsidiary Dixon Ticonderoga Co. (U.S.A.), consolidated its role
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as a leading player on the US market with the acquisition of the US Group Pacon, which through brands such as Pacon, Riverside, Strathmore and Princeton, is a leader in the US schools and arts and crafts sector. Dixon Ticonderoga Co. (U.S.A.) was subsequently merged into Pacon Corporation (U.S.A.), which later changed its name to Dixon Ticonderoga Co. (U.S.A.) (xii).
On March 2, 2020, F.I.L.A.- Arches S.A.S., a French company wholly-owned by F.I.L.A. S.p.A., completed the purchase from the Ahlstrom-Munksjö Group of the fine art business unit specialised in fine art operating through the ARCHES® brand (xiii).
On February 8, 2022, the UK subsidiary Daler Rowney Ltd. acquired 100% of the UK company Creative Art Products Limited, located in Manchester (UK), which specialises in the schools segment and produces and distributes a wide range of art materials for children, both under the Scola brand and private label (xiv) brands. On December 20, 2023, the listing of the subsidiary DOMS Industries Limited on the National Stock Exchange of India was completed. Following the public listing, F.I.L.A. S.p.A. still remained a shareholder of the Indian company with a 30.6% interest (xv).
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Key events of the reporting period
On January 22, 2024, the Shareholders' Meeting of F.I.L.A. S.p.A. resolved: (i) the distribution of an extraordinary dividend of Euro 0.58 for each (ordinary and special) F.I.L.A. share in circulation on the coupon date (net of treasury shares in portfolio on that date); (ii) the appointment of Deloitte & Touche S.p.A. to undertake the legally-required audit for the period 2024-2032, pursuant to Legislative Decree No. 39/2010 and Regulation (EU) No. 537/2014. With regard to the distribution of the extraordinary dividend, considering the 51,058,297 F.I.L.A. shares outstanding at the date of the Shareholders' Meeting, net of the 330,766 treasury shares held by the Company, the maximum total amount of the dividend was Euro 29,421,967.98.
In March 2024, the SAP EWM logistics software was installed at the US company Dixon Ticonderoga Company.
On April 17, 2024, Steven D. Boyea was appointed as C.E.O. of Dixon Ticonderoga Company (U.S.A.) and of Dixon Ticonderoga ART ULC (Canada).
On April 23, 2024, the Shareholders' Meeting of F.I.L.A. S.p.A. appointed the Board of Directors and the Board of Statutory Auditors for the coming 2024-2026 three-year period, with a mandate to run until the approval date of the consolidated and statutory financial statements for the year ended December 31, 2026.
On June 14, 2024, the South African subsidiary FILA SA acquired the residual 0.57% minority shareholding of the third party company Lombard Vineyards Proprietary Limited for a total amount of Euro 8 thousand.
On July 1, 2024, the US company Dixon Ticonderoga Company (U.S.A.) acquired from Fedrigoni Special Papers North America Inc. the "Strathmore" brand for USD 2,250 thousand, with the brand previously utilised under license by the F.I.L.A. Group US company.
Impacts of events related to the conflict in Ukraine and Israel
The operating and financial impacts of the conflict between Russia and Ukraine on the F.I.L.A. Group are not considered significant, also in view of the fact that the revenue of the Russian subsidiary FILA Stationary O.O.O. accounts for approximately 0.05% of Group revenue. The F.I.L.A. Group does not have suppliers or production plant in the area. In relation to the Russian subsidiary, we highlight that the net assets of the company have reduced to zero. In light of these serious events, the Group is in addition monitoring the short-term situation so as to be ready to offset the impacts of all future
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decisions upon the presence in Russia.
There are no F.I.L.A. Group companies in Ukraine at September 30, 2024.
For further details, reference should be made to the "Key events in the year" section of the Annual Financial Report at December 31, 2023.
A military conflict involving Israel has been ongoing since October 7, 2023.
The operating and financial impacts of the conflict on the Israeli commercial subsidiary Fila Art and Craft Ltd are not considered significant, also in view of the fact that the revenue of the subsidiary accounts for approx. 0.6% of the Group's total.
The F.I.L.A. Group does not have suppliers or production plant in the area.
The Israeli subsidiary has a commercial exposure to third parties at September 30, 2024 of Euro 876 thousand. Group management continues to monitor the recoverability of the net exposure to third parties of the subsidiary, considering that no recoverability risks currently exist.
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Key Financial Highlights
The key highlights of the F.I.L.A. Group at September 30, 2024 are reported below.
September 30, | % | September 30, | Change | Of which DOMS | |||||||||
% revenue | Industries | ||||||||||||
2024 | revenue | 2023 | 2024 - 2023 | ||||||||||
Euro thousands | Limited | (3) | |||||||||||
Revenue | 493,422 | 100.0% | 614,153 | 100.0% | (120,731) | -19.7% | (98,917) | -16.1% | |||||
Gross operating profit | (1) | 98,525 | 20.0% | 113,998 | 18.6% | (15,473) | -13.6% | (19,558) | -17.2% | ||||
Operating profit | 68,673 | 13.9% | 82,391 | 13.4% | (13,718) | -16.7% | (15,154) | -18.4% | |||||
Net financial expense | (18,706) | -3.8% | (27,624) | -4.5% | 8,918 | 32.3% | 283 | 1.0% | |||||
Total taxes | (13,944) | -2.8% | (15,257) | -2.5% | 1,314 | 8.6% | 3,566 | 23.4% | |||||
Profit attributable to the owners of the Parent | 35,426 | 7.2% | 33,404 | 5.4% | 2,022 | 6.1% | (5,766) | -17.3% | |||||
Earnings per share (€ cents) | |||||||||||||
basic | 0.70 | 0.66 | |||||||||||
diluted | 0.68 | 0.64 | |||||||||||
September 30, | % | September 30, | Change | Of which DOMS | IFRS | Adjustements for | |||||||
% revenue | Industries | 16 | Non-recurring | ||||||||||
ADJUSTED Net of Non-recurring expense - | 2024 | revenue | 2023 | 2024 - 2023 | |||||||||
Euro thousands | Limited | (3) | effects | expense | |||||||||
Revenue | 493,422 | 100.0% | 614,153 | 100.0% | (120,731) | -19.7% | (98,917) | -16.1% | 10,200 | (5,023) | |||
Gross operating profit | (1) | 103,548 | 21.0% | 119,435 | 19.4% | (15,887) | -13.3% | (19,558) | -16.4% | ||||
Gross operating profit excluded IFRS 16 ef | 94,258 | 19.1% | 108,020 | 17.6% | (13,762) | -12.7% | (18,749) | -17.4% | 9,290 | (5,023) | |||
Operating profit | 77,670 | 15.7% | 87,828 | 14.3% | (10,158) | -11.6% | (15,154) | -17.3% | 2,424 | (8,998) | |||
Net financial expense | (18,706) | -3.8% | (27,624) | -4.5% | 8,918 | 32.3% | 283 | 1.0% | (2,742) | - | |||
Total taxes | (14,877) | -3.0% | (16,321) | -2.7% | 1,444 | 8.8% | 3,566 | 21.8% | (141) | 934 | |||
Profit attributable to the owners of the Parent | 43,465 | 8.8% | 37,774 | 6.2% | 5,691 | 15.1% | (5,766) | -15.3% | (449) | (8,038) | |||
Earnings per share (€ cents) | |||||||||||||
basic | 0.86 | 0.74 | |||||||||||
diluted | 0.84 | 0.73 | |||||||||||
September 30, 2024 | September 30, 2023 | Change | |||||||||||
2024 - 2023 | |||||||||||||
Euro thousands | |||||||||||||
Cash flows used in operating activities | 26,913 | 63,288 | (36,375) | ||||||||||
Free Cash Flow to Equity | (136) | 6,380 | (6,516) | ||||||||||
Investments | (6,258) | (25,162) | 18,904 | ||||||||||
% revenue | 1.3% | 4.1% | |||||||||||
September 30, 2024 | December 31, 2023 | Change | IFRS 16 | ||||||||||
2024 - 2023 | effects | ||||||||||||
Euro thousands | |||||||||||||
Net capital employed | 891,533 | 877,364 | 14,169 | (16,633) | |||||||||
Net Financial debt - F.I.L.A. Group | (2) | (321,607) | (303,412) | (18,195) | 17,939 | ||||||||
Net Financial debt excluded IFRS16 and MTM | (261,578) | (226,643) | (34,935) | - | |||||||||
Equity | (569,927) | (573,953) | 4,026 | (1,306) |
- The Gross Operating Profit corresponds to the "Operating Profit" before "Amortisation and Depreciation", "Net Impairment Gains (Losses) on Trade Receivables and Other Assets" and "Other Net Impairment Gains (Losses)" and derives directly from the statement of comprehensive income;
- Net financial structure indicator calculated as the aggregate of the current and non-current financial debt, net of cash and cash equivalents and current financial assets. Net financial debt as defined by CONSOB Notice DEM/6064293 of July 28, 2006 and CONSOB Attention Call No. 5/21 of April 29, 2021, excludes non-current financial assets.
- The figures refer to the associate DOMS Industries Limited at consolidated level. Following the public listing of the company on the National Stock Exchange of India on December 20, 2023, the company was deconsolidated as at December 31, 2023.
- "Net investments" corresponds to the sum of the following Statement of Cash Flow captions: "Total (Investments)/Divestments in Intangible Assets" and "Total Investments/Divestments in Property, Plant and Machinery", n et of acquisition of the Strathmore brand by the subsidiary Dixon Ticonderoga Company for Euro 2,010 thousand.
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2024 Adjustments:
The adjustments to the 9M 2024 "Gross Operating Profit" concern the net balance between non-recurring operating income and charges, which presents a net charge of approx. Euro 5.0 million and which includes charges for organisational structure and company process efficiency projects for Euro 4.2 million, extraordinary project costs and consultancy for Euro 0.8 million, the portion pertaining to the period for the "2022-2026 Performance Shares" medium/long-term incentive plan for Euro 0.7 million, and non- recurring income of Euro 0.7 million;
The adjustment of the "Operating Profit" was Euro 9.0 million, resulting from the aforementioned effects on the "Gross Operating Profit" and the adjustment to fair value of the intangible assets for Euro 4.3 million;
The adjustment to the 9M 2024 "Profit for the period of the F.I.L.A. Group" was Euro 8.0 million and principally concerns the above effects on the "Operating Profit", net of the tax effect of Euro 0.9 million.
2023 Adjustments:
The adjustments to the 9M 2023 "Gross Operating Profit" concern non-recurring operating charges of approx. Euro 5.4 million, regarding the organisational structure and company process efficiency project charges for Euro 2.7 million, extraordinary project costs and consultancy for Euro 2.3 million and the portion for the period concerning the medium/long-term "2022-2026 Performance Shares" incentive plan for Euro 0.4 million;
The adjustment of the "Operating Profit" was Euro 5.4 million, resulting from the aforementioned effects on the "Gross Operating Profit";
The adjustment to the 9M 2023 "Profit for the period of the F.I.L.A. Group" was Euro 4.4 million and principally concerns the above effects on the "Operating Profit", net of the tax effect of Euro 1.1 million.
In order to permit a more accurate assessment of the F.I.L.A. Group's financial performance and financial position, some alternative performance measures are presented alongside the conventional financial measures to the IFRS. Such alternative performance measures are not to be considered replacements for the IFRS- compliant measures. These measures are also tools used by the Directors to identify operating trends and for decision-making upon investments, the allocation of resources and other operative decisions. Alternative performance measures are not covered by IFRS and are therefore not comparable with similar performance and disclosure measures used in the financial statements of other entities.
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