Good afternoon, this is the Chorus Call conference operator. Welcome, and thank you for joining the FILA Full Year 2023 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, please signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Massimo Candela, Chief Executive Officer of FILA. Please go ahead, sir. Good afternoon and welcome everybody to our conference call for Results 2023. I think we are here to celebrate an extremely positive year. The, as you could read from our press release, we have experienced an interesting growth in the top line, of course, mainly focused on India, North America, and Mexico, so North and Central America. Also, the profitability has been significantly good. In fact, we had an adjusted EBITDA that has grown roughly 10% versus 2022, but that has been influenced by a negative extraordinary effect. I'm referring particularly to the devaluation of Argentine pesos that has accounted for more than EUR 2 million negative EBITDA. And also, we had another EUR 3 million negative EBITDA coming from the exchange rate. In particular, we have experienced a strong decrease of the US dollar versus the euro during all the year 2023. So, in fact, at the comparable exchange rate and without the Argentine effect after the election, we would have reached almost EUR 126 million EBITDA from the operative activity. I would also like to highlight the extremely high cash generation. So we have touched more than EUR 60 million free cash flow, which I think has been a record result for the recent history of the group, not mentioning the EUR 69 million of cash that we have generated after the IPO of our controlled Indian subsidiary. So all in all, an extremely positive year thanks to positive management of working capital. The reorganization of North America has brought back the company to the profitability we were expecting when we acquired Pacon in 2019. As I am mentioning, Pacon, I would like to take the opportunity to remember that the company, including year 2023, has generated free cash flow in the last five years of EUR 250 million, plus almost EUR 17 million coming from the disposal of the shares of DOMS during the IPO. So we are talking of EUR 320 million that has allowed us to bring down the ratio EBITDA/NFP to 1.7 times, which I think it is the target that, at least in the last four years, we were targeting we were expecting as absolutely necessary, in order to support the future strategy of external growth. For what is 2024 concerned, clearly the most important the most relevant thing is that we are going to deconsolidate Indian operation, Indian asset. Despite the integration with this company with DOMS, we'll grow substantially in the coming months. In fact, FILA Group, considering the problems we are seeing in Europe due to the reduction of rate of birth, have decided for a three-year plan of reorganization of European operations, enjoying the extreme competitiveness of India from one side. And from the other side, our 40+ subsidiaries around the world will start to distribute the Indian made in India product to allow our range to allow us to be more and more competitive in our environment that is going to become more and more challenging. The situation of the market is characterized not only by especially in Europe by a low rate of birth but a decreasing rate of birth but also by a wide population of competition still struggling to survive but still there. So the business is still very much fragmented, which in short term could be a problem. In medium-long term, definitely can become an opportunity. So I think that, as of now, I prefer to go to discuss in detail the results of 2023, and then with the session of Q&A, we can enter into more details. Thanks. Okay. Welcome, and good afternoon to everyone. You should have received the presentation, and please go to the first page. Revenue: adjusted core business sales were EUR 779.2 million, +1.9% on financial year 2022, +6.3% at comparable CER. North America confirmed the expectation, registering an organic growth of 1.80%. Central and South America was +29.6%, and in particular, Mexico outperformed. In Asia in particular, the group posted +30.9% performance led by group in India, contributing significantly to group results growth thanks to the strong performance, particularly in the school office segment, more than offsetting the European performance characterized by weak market, strongly influenced by the high cost of the money, which was generating an important destocking effect in 2023. The contribution of the India market in 2023, in particular, was EUR 134.3 million. EBITDA: adjusted EBITDA in 2023, excluding IFRS 16 assets, was EUR 121.1 million, +9.8% on financial year 2022, +10.4% at like-for-like exchange rate thanks to the improvement in North America, Asia, and Central and South America, despite the contraction in Europe. The adjusted EBITDA will be at approximately 1.0 sorry, EUR 125 million at comparable FY 2023 budget FY, adding also the EUR 2.0 million related devaluation in Argentina. Adjusted EBITDA was 50.5% with an overall improvement of 110 basis points on financial year 2022. The increase is mainly due to the positive effect generated by price increase in the School business in North America and to the results obtained for the value actions actually in place, implemented in our structural costs as well as working capital management. The contribution of India market in 2023 in terms of EBITDA was EUR 25 million. The EBITDA in 2023 in Argentina repeatedly indeed is negative for more or less EUR 2.0 million impacted by currency devaluation. The net profit: the total adjusted net profit, excluding IFRS 16, impacted was EUR 40.46 million. This value was significantly impacted by higher net financial expenses at EUR 31.2 million compared to those of the same period of the previous year, of which EUR 29.2 million mainly related to the increase of variable interest rates and to the increase in taxation. The reported net income was EUR 180.5 million at December 2023. The adjustments of net profit in 2023 for EUR 140 million mainly related to IPO DOMS and related deconsolidation for EUR 164 million. The net bank debt: the net bank debt was EUR 229.5 million versus EUR 351.6 million in 2022, with a decrease in the last 12 months of EUR 51.2 million for operating activity plus EUR 69 million for IPO financial receivable from DOMS. Looking at the adjusted free cash flow to equity, the proceeds from transaction in India for free cash flow to equity at EUR 60.3 million, EUR 29.8 million in 2022, enabled the further reduction of leverage ratio to approximately 1.7 at the end of 2023, with a net financial position excluding IFRS 16 and mark-to-market at EUR 226.7 million. The increase was mainly to the higher operating cash flow generation and the lower capital absorption of EUR 46.3 million, partially mitigated by higher capex for EUR 30.6 million mainly related to Indian investments. We highlighted that the group, registered EUR 29.8 million in interest in 2023, highlighting that the group maintained the target that is more or less EUR 30 million, considering the significant increase of variable interest rates. We highlighted that at the end of 2023, we have used part of the proceeds from the IPO of DOMS to close a EUR 20 million tranche of Senior Facility Agreement, and in 2024, we'll reduce another EUR 20 million of not efficient external credit line, in particular in Mexico, considering that in Mexico we have more or less 50% interest rates. Also, in 2023-24, we have completed the cash pooling project. The whole activity has been targeted to reduce the bank cost of bank at total interest rates, particularly for the reduction of the total amount of credit line, external credit line. Thanks a lot. Now we are ready for the Q&A session. Thank you. This is the Chorus Call conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. We will pause for a moment as participants are joining the queue. The first question is from Nicolas Storer with Kepler. Please go ahead. Ciao, good afternoon. I have a couple of questions. The first one is on EBITDA. You mentioned this FX effect. You mentioned Argentine pesos, and I was wondering how much of this effect is fourth quarter effect and how much is something that we have already had in the previous quarter to understand a bit the dynamics of fourth quarter profitability, which has been weaker than fourth quarter last year, which in turn was extremely weak compared to previous years. So basically, I want to understand if the EUR 4 million of FX are all condensed in fourth quarter or if not, what has impacted adversely profitability in fourth quarter. The second question is on your cash generation guidance for 2024. If you can guide us through the main drivers of this cash generation you expect, in particular, what should we expect on working capital and Capex. And the last one on Europe and profitability Europe. 2023, you lost, if my calculations are right, some 4-4.5% EBITDA points. In EBITDA, you lost also more than EUR 10 million in turnover. You mentioned the plan of restructuring European operations. If you can tell us something more on that. Thank you. Thanks, Nicolas. Sorry for the second part of the question. Maybe I will ask you to repeat it. So concerning the EBITDA, the answer is very simple. The fourth quarter has been substantially better than last year, so I don't understand how you can say the quarter has been worse. Last year, we had a quarter of EUR 14 million EBITDA. This year, we had until September, Argentina was positive for EUR 800,000, and at the end, after the election of President Milei and the devaluation, Argentina lost EUR 2 million. So we have EUR 3 million negative effect. So altogether, this quarter has been plus double-digit versus last year. These are numbers, not opinions. Concerning 2024, I started mentioning that we are now talking of the perimeter ex India. So the situation we can summarize in a few words. The growth will come back to a single-digit growth, so a moderate growth. The EBITDA in percentage will be higher, and this year, we are going to enjoy, of course, the advantage of the recovery that we do expect in Europe. Last year, we have suffered from an unusual level of the stocking. I have spoken with many customers, and many of them were heavily understocked. Why? Of course, because of the high cost of the interest rate. In this moment, the expectations we have for 2024 are confirmed by the trend of turnover we have had until February and by the level of orders that is in line, if not better, than our expectation. For the United States and Mexico, the situation is definitely easier than Europe. First of all, in the United States, it is difficult to have the stocking process because customers are mainly big retailers, and usually, they don't stock too much. There is not a problem of negative birth rate. We still see a very strong and very demanding market in Mexico, and not only Mexico, but also in South America. So the expectations for 2024 are, as I said, for EBITDA, a slight advantage from the operating leverage, a recovery in Europe, a stable growth in the United States and Mexico, and we have started talking of a strategy of reorganization that will regard mainly European assets. And with this reorganization, we are going to enjoy our investment in India. So, we will enjoy the extremely strong competitiveness, the fact that in India, the learning curve now is almost flat. They are ready to support us with our so-called European quality with Indian cost, and this will be so you will start to see some first effect in 2024, but more important in 2025 and 2026, in which we will reduce the break-even point in Europe. As we said in many other meetings, cash generation in India will not change because 100% of our cash generation is made in Europe and in the Americas. So, we do expect cash generation is in line with what we had in the last five years on average. Okay, okay. Thank you. Thank you. The next question is from Alessandro Cecchini with Equita. Please go ahead. Hello, everybody, and thank you for taking my questions. The first one is about organic growth that was only in the fourth quarter was -14% in Europe, so worse than third quarter. I can understand. North America, if I am not wrong, -5% in the last single quarter, and Central and South America +more than 50%. So, if you could better explain the weak trend in North America, -5% in the fourth quarter, while if you could explain the very strong performance in the South America. This is my first question, then I go on, but I leave time now to answer to this. Thank you. Thank you, Alessandro. So from the performance of Central and South America, it's easy to explain. Remember that the season, the Back-to-School, is in the opposite season. So the Back-to-School in South America is generally the peak season starts in November and in January. In South America, the demand for our product is positive. All the three subsidiaries, by the way, were doing extremely well until September, and then we faced problems only in Argentina but for macroeconomic reasons. So generally speaking, South America has had a very positive 2023 for school product in general, not only for FILA because I read some comments of our competitors, and all of them have experienced a very good 2023 in South America. In Mexico, I think I said many times we did a great job during COVID, and now the company is really outperforming. It's a strong leader. It's generating cash, as you have seen from the figures. There is a very strong demand of our product. We produce in Mexico. We have wood in Mexico. We are extremely efficient. We have the most important brand in the school business in Mexico, so clearly, the company is performing extremely well. For what USA and Europe is concerned, I think I have to repeat what I said. So just imagine that we come from 2022 in which there was an unprecedented inflation. Then you land in 2023 in which you had to run behind the different price increases. You remember FILA has increased prices in February and then again in June 2023. Once the Back-to-School was over, I think many customers, to reduce their cost of inventory, have aggressively reduced their orders. And frankly speaking, FILA has decided not to perform any kind of promotion. It would not make sense because we were sure to make our year anyway. It didn't make sense to push the year too much. Don't forget the last point that everybody was aware, towards October, November, that we would have not increased prices in 2024. So, there was really no reason to bring home products in a market in which in Europe there was a structural weakness. In the United States, the customer has decided to reduce as much as possible their level of stock. In fact, what we see now in 2024 is kind of regular first quarter, but we see a very good level of orders for back-to-school, unusually high because clearly, customers are understocked. Okay. Many thanks for being clear on this. My second question, so starting point now is EUR 96 million, roughly speaking, of EBITDA with 15% EBITDA margin. So just to understand, on the top line, you were very precise, low single digits. So, what kind of I mean, if you can provide a range, of course, of margin expansion that you could expect in 2024, so a sort of range, it could be very nice. Thank you. Yes. I think that, as I said, we have the advantage of the operational leverage because last year, Europe, due to the extremely low level of turnover, we had a problem of fixed overhead. So in a situation in which the top line will grow a couple of percentage points, EBITDA will grow more, so in the area of 5% to 6% versus this year because, again, for this operational leverage. Then starting from 2024, as I said, we are going to announce a 30-month reorganization process that will further improve our profitability with a target at 2026 to go back to our 17% to 17.5% EBITDA, but we are not going to reach this in one year. We are going to reach this in a period of two years and a half. Okay. Thank you. This is a clarification. In your reported numbers, you included exactly 12 months of India, if you can say yes or not, and in terms of minorities, so you had EUR 8 million of minorities. I would like to understand how much was India, so just to understand the 49% of India that you had, how much was the income of this? Thank you. Okay. So, Ali, I confirm that the consolidation report includes 12-month P&L results for India. To be easy, the net results for India is EUR 40 million. Consequently, EUR 7.5 million are the minority. 7.5 million minorities. Okay. Thank you. Welcome. The next question is from Isacco Brambilla with Mediobanca. Please go ahead. Hi. Good afternoon, everybody. Three quick questions from my side. The first one is on trade working capital. I saw from the presentation, you indicated 40% trade working capital on trade on a pro forma basis. Is this a level we should see as a sort of benchmark also for 2024, or is somehow the reorganization process you will deliver impacting potentially trade working capital? Second question is on leverage, if you have any internal target for leverage for 2024 based on the free cash flow generation assumption you were discussing? Last question is on financial charges, starting from the EUR 38 million posted in 2023, if you can share the benefits you expect to enjoy from either normalization of interest rates and, say, lower financial exposure following the partial disposal of DOMS's stake? Thanks, Isacco. So, for what the working capital is concerned, 40%, we think it's a good level, but for 2024, we are targeting further improvement, another one or two percentage points. But as I have to repeat, the working capital will improve accordingly to the reorganization we are going to put in place in Europe because the moment in which you close, we have in mind to close between three and four production plants, the working capital will enjoy also will improve subsequently. So, in 2024, we do expect another improvement. For the second question. Sorry. Sorry. Related to interest, it's important to highlight that in 2023, we have obtained we used the portion of the profit for India to reduce EUR 40 million of our liability. Bank liability, sorry. 2023, we have closed EUR 20 million of Senior Facility Agreements for the part of variable interest in total loan, and the other EUR 20 million, we reduce the inefficiency credit line in particular in Mexico. This is an agreement with our bank that confirms and we have to look at to proceed with this. In 2024, we have not considered at the moment a general decrease of interest rates because, to date, the Central Bank of Europe is they take not a clear decision about this. We highlight that in 2023, we are more or less on the soft that the total amount is between 6% to 7%, and the Euribor is 5%, and in Mexico, it's 50%. Otherwise, we have a target to reduce between a range of EUR 6 to 8 million of interest for our target in 2024. The group continues to monitor the credit line efficiency and working on the facility that we have at the group level because we have a good agreement with the bank. As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from Michele Baldelli with BNP Paribas Exane. Please go ahead. Yes. Good afternoon to everybody. I have a couple of questions on the accounting and then also another question on this, let's say, efficiency plan for Europe. I start from this. Just to understand this efficiency plan for Europe, at what cost will it come? So, are we expecting, let's say, EUR double-digit millions to be spent anyway to restructure all these operations? And if you can provide more colors on this. Other question on the accounting relates to the calculation of EBITDA because I see on the adjusted number, there are the EUR 30 million of EBITDA. Then what should I add after the consolidation of DOMS in terms of right of use, depreciation, and P PA? Thank you. Okay. Thanks, Michele. While Cristian prepares the second question. Yeah, the efficiency plan is considering to reduce the number of we have. First of all, we start from a large number of plants around the world. We are talking of more than 20 plants if we consider location. If we consider number of plants, it's much more. So, we are going to close four plants in Europe. Really, the cost-related is not very significant. The reason I prefer to give some details later, if not, it's easy to understand the geographical location. So, the cost of shutting down this plant is something that we can amortize in one year of savings, let's put it this way. Related to depreciation, the total amount tangible and intangible, the right of use, and the end of 2023 is EUR 42 million, of which EUR 12 million is related to right of use. Without DOMS, in other words, the former, depreciation and amortization will be EUR 36 million, where the depreciation for right of use is EUR 11 million. In other words, for rights, it will be another decrease of EUR 46 million expected. Okay. Thank you very much. Welcome. The next question is from Pietro Nardi with Intermonte. Please go ahead. Good afternoon and thanks for taking my questions. Basically, I have two questions. The first one is on CapEx. So, what is your expectation for CapEx in 2024 following the consolidation of the Indian subsidiary? And the second question is more about your strategy, always on DOMS. So, if you may consider a further disposal, a further sale of your current stake in DOMS. Thanks. Alright, and we'll answer the first question. Thanks for your question. Relating to results of 2023, roughly, we have EUR 30 million of CapEx, of which EUR 90 million are related to DOMS. This indication for the 2024 and for the other years, this indication of the investments for the company is more or less EUR 18 million. With a particular attention to ESG projects, in particular, in 2024, the group has in plan to get the investment in biomass in France and solar panels in part in USA and in Italy. The other one, CapEx are related to improvement or revamping of the plant in Mexico and the increase of the area in Italy. It's important to highlight that we have, all in all, a reduction roughly of EUR 13 million, but the group CapEx are more than 2023 without DOMS. Yeah. Concerning DOMS's share strategy today, we have 30.6% of the company, so we are going to consolidate the net income starting from year 2024. We have negotiated a shareholder agreement down to 25.1%. So theoretically, we have the same rights disposing 5.5% of what we have today. My view of DOMS is that the company has an extremely interesting project of expansion. The company will continue to outperform the market in its actual business, but also in correlated businesses that we are considering to invest. So, my personal opinion is that, as of now, it would be a mistake to dispose shares as we see this company in three, four years performing extremely well. Anyway, this is only a personal opinion. In terms of facts, the governance is guaranteed until 25.1%, so we can dispose 5.5%, which means, for today's evaluation, more or less EUR 55 million. Thank you. The next question is from Sébastien Lemonnier with Inocap. Please go ahead. Yeah. Hi. Good afternoon, Massimo. Two questions on my side. Just the first one, I'm not sure I get everything. So, regarding the organization in Europe, can you tell us how much annual free cash flow benefit we should get? Because if I understand well, we should have both a margin increase and a working capital optimization. So, can you try to help us, Holdings stakeholder, how much free cash flow addition we should get every year? That's the first question. And the second one, which is going to be a super naive one, given both valuation of DOMS but also the one of Fila Group, which probably have more like a cash core profile, if you start to implement some industrial synergies between the Indian assets and the group, what's the rationale to keep the group being listed, basically? Yeah. Hello, Sébastien. So the first question is that, again, let me repeat, we cannot reorganize everything all at once, but this will be made in a period of 24, 30 months starting from this June in which we will announce the first shutdown of the first plant. So at the end, let's say at the constant perimeter, so as of today, we do estimate a cost reduction on a yearly basis. So, every year, we have less cost on a base of between EUR 5 million and EUR 6 million, which will be translated into cash, of course, and reduction of working capital of more or less the same amount. So, in terms of cash generation, we do expect roughly EUR 10 million per year. For what DOMS is concerned, but here, you open an interesting point because I did not touch because I didn't want to go too far in discussions. But I think that if you analyze the business today, we have a lot of competitors that are extremely exposed to China, which for me today is an unbelievable risk. Just imagine you wake up in the morning and you read that China has invaded Taiwan. You completely lose your supplier, your commercial relationship with China. So I think that Fila made a brilliant decision two, three years ago moving to India and Mexico, and I hope you will recognize. India is giving us an unbelievable strategic advantage because India is competitive, is definitely more stable than China, has a macroeconomic situation definitely much better. So I would say that FILA has significant competitive advantage versus competitors that, in this moment, have so many eggs in their basket. Just imagine all the private label of the big retailers are almost all concentrated into China. So the fact that we are going to move to India will give us better cost. We consider absolutely a comparable quality as of now because they enjoy our know-how. And of course, DOMS value will probably enjoy this extra turnover and extra EBITDA, but for us, it makes all the sense of the world because we are moving added value from depressed Europe to super-evaluated Indian company. To take private, the company, it depends a lot on the M&A strategy because if you need financial sources to delist a company, you do not have sources for M&A. It depends also on how quick the M&A season will start, and I have the feeling that in the next 2-3 years, it will start because all the European-centric companies are going to struggle a lot. Yeah. That's my point if I can just add, given the free cash flow profile of the group, which is basically Europe, South America, and the US, and especially if you are, let's say, EUR 10 million free cash flow per add-on going forward, and given the valuation of the Indian asset, it will make probably more sense to lead consolidations through the Indian asset where, basically, you may have bigger firepower also considering the valuation than the one of the group listed today in Italy. That's why I'm simply asking. It looks like to me there is no rationale to keep the group being stock-listed as of today, and you can potentially - that's my own speculation - use the Indian asset to consolidate and then basically accelerate on the top-line growth, both organic and external growth. That's why I was just asking this naive question. Definitely, there are strategic thinking because, I mean, just two years ago, if you probably recall, there was many, let's say, professional analysts or investors that were claiming that India was our weakness. So as of now, clearly, India is not a weakness, and we are making a lot of strategic thinking. That goes beyond the financial situation, but it touches a lot the industrial and operational organization. Today, to be in India is an unbelievable advantage. I give you a number. A worker costs us EUR 1,200 per year versus EUR 8,000 in China and in Mexico, for example. And I can guarantee you there are no competitors of FILA well organized in India like we are. So, I think that we are in a very good position to take the best decision. Do not forget that if we continue generating EUR 50 million free cash flow, we are going to be debt-free in four years. I know. Okay. Thanks a lot. All the best. For any further questions, please press star and one on your telephone. The next question is a follow-up from Alessandro Cecchini with Equita. Please go ahead. Hello. Just a couple of questions. The first one is, actually, the adjusted tax rate seems to me quite higher than usual at 31%, so if you could explain if this can revert into traditional 27% next year. My second question is more, I would say, some thinking about the so you are asking the shareholder meeting for another EUR 6 million of dividends. Should it be better to buy back at this level than to pay an additional dividend after the already EUR 30 million dividend that you extraordinary dividend that you pay? Just some thinking about this. Thank you. Thank you, Ale. For the tax rate, Cristian, we'll answer you, but I suppose it has something to do with the extraordinary income of India. For the dividend, number one, we have approved the buyback, and I think this is public information. The extraordinary dividend has nothing to do. It was It was related to India. The ordinary dividend is in our business plan, and it's regular in the last six years, so there was no reason to cancel. I mean, I'm sure if we would have canceled, you probably would have commented that we are negative in the view of 2024. So, it's better not to make any change in order to avoid any misinterpretation. So, we prefer to be very consistent with our tradition. For the adjusted tax rate, Cristian. Okay. Thanks, Ale. I confirm with Massimo Candela. We highlight also an increase in indebtedness in the USA in particular for step-up of range due to the use of credit that we have consumed in 2023. These are the two main reasons for this increase. Okay. What was the adjusted tax rate? So, in these numbers, you don't have the India? Yeah. Okay. Mr. Candela, gentlemen, there are no more questions registered at this time. So, then we take the opportunity. Thanks, everyone, and hope to see all of you in the two coming days. Thank you. Bye. Thanks a lot.