Fila looks optimistically to 2024 and does not rule out new acquisitions

(Il Sole 24 Ore Radiocor) - The first-half results, which saw a 35% increase in net profit and a normalised ifrs ebitda of Euro 70.8 million (+5.6%), allow us to look to the second half of the year "with good optimism on margins and profitability". This was stated in an interview with Radiocor, the CEO of Fila, Massimo Candela, who expressed great satisfaction with the listing of the subsidiary Doms on the Mumbai stock exchange. "We were pioneers. The Indian financial market is very competent and receptive to success stories like ours'. Finally, on the M&A front, the company continues to explore opportunities to broaden its scope.

The positive first half results make us look forward to the second half of the year with healthy optimism about margins and profitability. The first half highlighted our ability to improve these last two indicators on an overall level, with growth in ebitda and free cash flow generation that exceeded analysts' expectations. In terms of individual geographies, Mexico and Europe were the main areas of revenue growth, and the recovery in the US in the second quarter was also positive. In terms of margins, the Group performed well in Europe and the Americas, thanks to continued efficiency gains as well as product mix. For the year-end, we confirm the target of stable revenues compared to 2023 (EUR 645 million excluding Doms). On ebitda, we expect mid-single digit growth compared to the €96.1m (pro-forma IFRS16 adjusted ebit excluding Doms) at the end of 2023. In addition, we expect to have a Free Cash Flow to Equity generation of between EUR 40 and 50 million in December 2024. These weeks we are working on the strategic plan that we will present to the market with a Capital Markets Day on 12 November.

F.I.L.A. (Fabbrica Italiana Lapis ed Affini) was founded in Florence in 1920 and has been managed by the Candela family since 1956. Since November 2015, F.I.L.A. has been listed on the Milan Stock Exchange, Exm - Euronext Star market. The company, with a turnover of €645m as at 31 December 2023 (pro forma excluding Doms), has experienced significant growth over the past two decades and has pursued a series of strategic acquisitions, including Italy's Adica Pongo, the US Dixon Ticonderoga Company and Pacon Group, Germany's Lyra, Mexico's Lapiceria Mexicana, England's Daler-Rowney Lukas and France's Canson founded by the Montgolfier family in 1557. F.I.L.A. is the icon of Italian creativity in the world with its products for colouring, drawing, modelling, writing and painting thanks to brands such as Giotto, Tratto, Das, Didò, Pongo, Lyra, Doms, Maimeri, Daler-Rowney, Canson, Princeton, Strathmore and Arches. Since its origins, F.I.L.A. has chosen to develop its growth on the basis of innovation. Today, F.I.L.A. is active with 23 production plants (two of them in Italy) and 32 subsidiaries worldwide and employs over 3,400 people. Massimo Candela, through Pencil, controls 53.7% of the company's voting rights. In 2023, 50% of the turnover excluding Doms was generated in North America, Europe 33%, Central and South America 14%, and the rest of the world 3%.

We are very happy to have pioneered the listing of a subsidiary on the Mumbai stock exchange. The Indian financial market is very competent and receptive to success stories like ours. The positive experience of the past few months prompts me to advise my fellow entrepreneurs to consider listing on the Indian market. The necessary condition is to see it as an additional stepping stone for their own holdings in the country and not as a tool for making cash. The listing of Doms has deep roots for us, in fact we arrived in the country about 10 years ago and in any case we remain significant shareholders in Doms. The IPO of Doms was a success: the share price to date has risen by about 200% and demand is 70 times the supply. The company is solid with exciting growth prospects. India is a country with solid growth prospects that are based on robust population growth, a young population (about 35% of Indians are under 35 years old), a growing workforce and a consistent industrial and economic policy. India is on track to become the world's third largest economy in 2027. With the listing, Fila has also achieved the advantage of being able to continue to benefit from Doms' continued industrial and strategic growth. The only regret, which does not relate to India, is that the valuations of Fila's stock do not reflect the company's excellent industrial and financial performance and the value of its stake in Doms.

The IPO of Doms, and thus the deconsolidation from the Fila Group, allowed the group to highlight its resilient revenue and ebitda characteristics and strong cash flow generation. In fact, over the last five years, excluding Doms, we have increased revenues at a CAGR of 1.5%, ebitda at a CAGR of 2.2%, and generated a total of EUR 250 million in free cash flow to equity, or an average of EUR 50 million per year, which has allowed us to pay a total of EUR 93.6 million in dividends from 2019. These well-established cash cow characteristics and medium-term forecasts underpin the content we will present to the market at Capital Markets Day, and we hope that the increased granularity and visibility on growth drivers will contribute to an appreciation of the stock. Although Doms is not included in the Fila Group's consolidation scope, we maintain a 30.6% stake and are major shareholders with an important presence on the Board of Directors.