annual report 2014 - alfaparf · pdf filealfaparf is the n° 1 italian multi-national...

Annual Report

2014

The profile

35 years of growth

Business sectors and brands

Business model and principles

Research and innovation

Production

Distribution

Training of professionals

Environmental sustainability, quality, safety

Shareholders and governance

Corporate structure

234789

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The Alfaparf Group

ALFAPARF is the n° 1 Italian multi-national company in the world of the professional cosmetics industry working in haircare, facial care, and bodycare; integrating research, pro-duction and distribution.

Its mission is to raise the quality of the service offered to professional workers (hair-stylists and beauti-cians) through products and ser-vices which express Italian taste and creativity and modern international trends.

The Group is the owner of the brands ALFAPARF Milano, DIBI Milano, Olos, Becos, TeN, il Salone Milano, Yellow and Decoderm.

Products and services are the result of research, collaboration with inter-national level professionals, techno-logical know-how, direct knowledge of professional workers and their re-quirements.

The Group numbers six production plants (Italy, Brazil, Mexico, Vene-zuela and Argentina) and over 1,300 employees, of which 400 are based in Italy. Products and services are dis-tributed in approximately 100 coun-tries through a network of 20 branch-es and over 100 distributors.

ALFAPARF Milano is the most wide-spread made in Italy brand in the world in the professional hair-stylist channel and Alfaparf Group is the un-disputed leader in Italy in the profes-sional beauty channel.

The Group’s founder is Roberto Franchina, the President is Attilio Brambilla and the Chief Executive Of-ficer is Davide Cortinovis.

Alfaparf Group Alfaparf Group2 3

1980. The year the company was set up. Headquarters: Vaprio d’Adda, in the province of Milan. Employees: just over ten. Roberto Franchina, founder, begins to develop the business in north Italy with products for the hair-stylist channel.

1989. Launch of the Semi di Lino line.

1990. Evolution of the Color is cre-ated, permanent dye.

1995. The first exports to Spain. Fol-lowed by arrival in Latin America and the establishment of the first branch-es in Brazil, Mexico and Argentina.

1997-98. The first production plants are built in Brazil and Mexico.

2000. The Italian production moves to Osio Sotto (Bergamo).

2002. A group of companies leads to the formation of ALFAPARF Group multi-national Italian cosmetics com-pany with a business volume of approx-imately 60 million Euros: more than 90% of which is generated abroad.

2003. The start of business in China.

2004. Launch of the TeN (skincare) brand for the beauty channel.

2008. Work starts on expanding the plants in Italy, Mexico and Brazil. The start of the Private Label pro-ject : aimed at developing produc-tion through sub-contractors taking advantage of the Group’s in-depth know-how, above all regarding hair dye products.

2009. ALFAPARF acquires GTS Group, set up at the end of the 70s, which produces and distributes profes-sional cosmetics and equipment for beauticians for beauty institutes.

2010. ALFAPARF integrates the op-erational business of GTS: production is moved to the ALFAPARF plant. The ALFAPARF Group becomes the n°1 Ital-ian company in the world in the profes-sional sector and one of the leading groups funded entirely by Italian capi-tal in the beauty sector.

2011. ALFAPARF makes its début in the consumer channel in Brazil with the brand Altamoda è… (haircare), distributed in shops specialized in haircare products, drug stores, per-fume shops.

2012. Relaunch of business in China with a new distribution network. Intensification of export to Russia. Start of business in India, Morocco, Baltic and Balkan Countries, Azer-baijan. The new plant in Venezuela becomes operative, the project for a plant in Argentina starts.

2014. ALFAPARF Group revises its organization, in view of the inter-national dimension of its revenues. Under the management of the presi-dent and CEO two regional entities (Americas and Eurasia/Africa/Aus-tralasia) are created with the aim of further accelerating global growth. In 2014, the Italian branch (B&B), in a stagnant market, records a growth of 10%, winning market shares both in the beauty channel (strengthen-ing the leadership), and in the hair-stylist channel, joining the circle of top market players.

35 years of growth

The profile

ALFAPARF Group has based its growth on haircare. Solid basic skills, research and collaboration con international level hair stylists have allowed the AL-FAPARF Milano brand to be affirmed in Italy and abroad, and more recently Yellow, a simpler and more affordable brand for emerging markets has also been affirmed.The business in the professional beau-ty sector (skin & bodycare), which started in 2004 with the launch of the brand TeN, received a strong boost in 2009 with the acquisition of GTS Group, owner of brands with a con-solidated market position. Today AL-FAPARF is among the leading players in the Italian professional beauty sec-tor and has a five year plan for strong expansion in the main foreign mar-kets, as well.The strategy of diversification has led to building a range of solutions which cover all professional requirements in haircare, facial care and bodycare, satisfying the needs of the different market sectors.


Eleven brands: some are by now long established benchmarks for haircare and professional beauty profession-als; others are the answer to new visions of wellness and beauty. All of them express the pursuit of excel-lence and contribute to creating a portfolio of products which has few equals.

Alfaparf Milano. It is the Group’s main brand (50% of the turnover), supported by a strong character of innovation and oriented towards for-eign markets. The product portfolio, which covers all professional require-ments (color, shape, care, styling), is composed of twenty lines for a total of over 300 references. Semi di Lino and Evolution of the Color are the flagship products of the brand.

Yellow. Born in Brazil to meet the requirements of the national popu-lation (hair straightening products). Today it is commercialized all over the world and is aimed at a young target with seven lines, 150 refer-ences and a competitive value for money ratio, also suitable for con-sumers in emerging Countries with lower spending power.

Altamoda è... Launched in Brazil. A new target audience: for the first time an ALFAPARF Group product line is aimed at retail. (haircare, hair-color e nails).

Il Salone Milano. A new ALFAPARF Group professional line of haircare products, for specialized retail or to be offered, with an excellent value for money ratio, to the end user in the salons.

Business Sectors

The brands: focus on haircare


DIBI Milano. With a 40 year history in professional beauty and distributed in over thirty Countries, the brand is by now synonymous with beauty in-stitutes. Attention to technology ap-plied to beauty is the distinctive quali-ty of this offer, made possible through collaboration with prestigious univer-sities. The DIBI Milano beauty centres provide a diagnostic system and top quality lines of cosmetics with guar-anteed and certified results.

Becos. Identifies a complete range of products, equipment and services for beauty professionals. The Becos Club are oriented to a young target audience.

Olos, La Bellezza è Natura. It’s the cutting edge brand in research and natural beauty treatments.

TeN. The acronym stands for Tech-nology and (e) Nature, but also for “10” meaning the quality of the per-formance. It identifies a wide range of products for advanced profession-al cosmetics.

APG Tech. With 40 years of expe-rience in the professional beauty channel, ALFAPARF Group devel-ops and markets state-of-the-art technologies and equipment for all the requirements of a modern beauty centre.Design, development and final as-sembly: all rigorously made in Italy to ensure our business partners the best certification and quality guarantees.

Solarium. It’s synonymous with tanning: a line of sun care products for face, body and hair produced with advanced photo protective technology.

Decoderm Make Up I Care. Make Up I Care. Make Up Care line, paraben free and perfume free, it knows your skin, takes care of it and brings out the beauty of every woman.

The business model and principles

ALFAPARF Group works according to a model which integrates research, production and distribution, guar-anteeing direct control of the whole value chain.

The operating activities are organ-ized by business and geographical areas according to a matrix defined model typical of multinational groups, which implies close func-tional collaboration among the op-erating areas (haircare, skin & body-care, sub-contractor production) and organization by macro-region. The model enables the Group, amongst other things, to effectively satisfy the evolution of requirements in the various markets in which the Group operates.

The principles:

1. Assisting professionals according to their respective characteristics.

2. Continuous research for products and services able to improve the ser-vices provided by professionals.

3. Ensuring the ability to satisfy the evo-lution of market needs at all times.

4. Trend towards continual improvement.

5. Circulating ideas and knowledge ac-quired from operating all over the world.

6. Basing products and services on di-rect knowledge of professionals and on the verification of their require-ments.

The brands: focus on skincare

Promoting research and innovation has always been one of ALFAPARF Group’s core strategies, translated into numerous products which have made a name for themselves in Italy and abroad. A strong impulse to-wards innovation derives from the collaboration with the best beauty professionals and from the interna-tional distribution network which picks up on market trends and gears research towards satisfying them.

In recent years the commitment to research has been intensified: the activity has been expanded into new sectors and developed abroad, as well; the research team has reached more than fifty employees; it has been enhanced by staff training.

In the haircare sector the biggest ef-forts have been made, as well as hair color, in technical products like decol-orants and straighteners; the latter to reduce the volume of frizzy and wavy hair.

In the skin & bodycare sector the research work has been focused on moisturizing products, anti-age, anti-cellulite and on matching par-ticular products to equipment for beauty treatments given that their effectiveness is closely connected to the method of application.

The Group’s research activity is main-ly carried out in the central Italian laboratory integrated with a Techni-cal Centre and a Pilot Centre where products for haircare and beauty are tested on volunteers.

In Osio Sotto raw materials are eval-uated and selected (used also in for-eign production and rigorously test-ed), product formulas are studied, some effectiveness tests are carried out. Safety and clinical effectiveness of the products are certified by inde-pendent bodies.

Other research laboratories are situ-ated in Brazil and Mexico.

Research and innovation

Production

100,000 of production surface area

100 million pieces produced

approximately

more than

m2


The production structure meets the needs of global distribution with five plants in Italy, Brazil, Mexico, Venezuela and Argentina. The pro-duction surface area has almost doubled in the last five years, reach-ing 100,000 square meters: 35,000 in Brazil, 35,000 in Mexico, 15,000 in Italy, 3,500 in Venezuela, 10,000 in Argentina.

The expansion of the plants took place, since the early years of 2000, alongside the adoption of a manage-ment system which has enabled the company to reach high standards of quality. The Italian plant received ISO 9001 certification and will soon be operating according to the Good Manufacturing Practice (GMP) which sets out methods, equipment, means and regulations for production man-agement to ensure appropriate qual-ity standards.

The plants in Mexico, Brazil and Ven-ezuela already operate according to GMP. The compliance with quality standards for Italy and abroad is the responsibility of a function of the group (Total Quality Management). Every plant has a quality control labo-ratory for individual components, semi-worked, raw materials, packag-ing and finished products.

Know-how, presence in strategic geographical areas and operating flexibility have made ALFAPARF an interesting industrial partner for multinational cosmetics companies and those operating in great distribu-tion. Therefore, production as a sub-contractor has been added to pro-duction of the Group’s own brands. The first agreement, signed with one of the main global distributors of cos-metics for professional use, was fol-lowed by important agreements with other multinationals.

The Italian plant (Osio Sotto), to-gether with the plant in Mexico, represents the main one in terms of production. As well as supplying the Europe and Asia business divisions, production of the most sophisti-cated products for the worldwide framework is concentrated there.


As well as its capillary geographical nature, ALFAPARF has geared the sales network towards the quality of the relationship with profession-als. The target : to integrate the sale of products with services which enable hair stylists and beauty pro-fessionals to manage their business activities in the best possible way and provide prompt responses to new trends and requirements com-ing from the market. The ability to pass from product supply to offering a broad range of services has, after all, acquired strategic importance in professional cosmetics: speed of re-sponse and quality of solutions are crucial weapons for competing.

Starting from this vision, the Group has built a wide ranging offer of training on technical professional as-pects and on management. Hair styl-ists and beauticians, based on their own level of experience and skill, can today find the most suitable so-lution for their own needs regarding professional and entrepreneurial growth in the courses organized by the Group.

The solid international distribu-tion network is one of the Group’s strengths, supplying 300,000 custom-ers in approximately 100 Countries.

The sales activity has been developed according to two operating models: branches (present in 20 countries other than Italy) and distributors (with an exclusive agreement with ALFAPARF). The preference for one model or the other varies based on the market (characteristics of requirements, positioning of AL-FAPARF, objectives for growth).

The branches, run by the ALFAPARF management can count on over 500 agents who liaise with more than 50,000 professionals, increasing the wealth of knowledge and experience which is vital for picking up on new needs and promoting innovation.

The activity of distributors (over 100 around the world) is supported by marketing services, training and sales assistance.

Distribution

Training for professionals

300,000 customers in the world

Environmental sustainability, quality, safety The shareholders

and governance


The management of the business in a way coherent with the values of environmental sustainability rep-resents not only an ethical commit-ment, but also a strategic factor for competitiveness.

Particular attention has been paid to quality, meaning not only the prod-uct’s performance or the compat-ibility of the industrial processes, but also regarding a policy of devel-opment and protection of human resources.

Over the years the Group has built an effective system of organizational procedures, analyses and data collec-tion in order to comply with current norms as far as health and safety in the workplace is concerned.

Spreading and consolidating the cul-ture of safety is an objective which is translated in action beyond mere compliance with norms. Much atten-tion is systematically paid to inform-ing and training staff and managers as regards systems of prevention and intervention, to providing work-ers with individual protection de-vices and training them to use these correctly, and to constant monitor-ing of compliance with safety norms.

The businesses of the Alfaparf Group are administered by Beauty & Busi-ness Spa and Alfa Parf Group Spa, held by Beauty Business Holding Spa, company with a subscribed and paid up share capital of 71 million Euros.

The shareholders of Beauty Business Holding Spa are: - Roberto Franchina (60.96%), found-

er of the company, President of the board of directors;

- La Compagnia Immobiliare S.r.l. (23.80%);

- Attilio Brambilla (15,24%), Vice Pres-ident of the board of directors.

The Board of directors is composed of Roberto Franchina and Attilio Brambilla.

The board of statutory auditors is composed of:- Andrea Casarotti, President;- Alessandro Ricci;- Giuseppe Caldesi Valeri.

The auditing company is Grant Thorton.

Beauty & Business S.p.A.

(Italy)

Prod./Comm.

100%

RobertoFranchina

60.96%

AttilioBrambilla

15.24%

La CompagniaImmobiliare srl

(Italy)

23.80%

Beauty Business Holding S.p.A.(Italy)

Holding company

Alfa Parf Espana

(Spain)

Comm.

100%

Delly

Distribuidora Ltda

(Brazil)

Comm.

1.07%

Dobos

S.A. de C.V.

(Mexico)

Prod./Comm.

0.01%

Industrial Chemical

Cosmetics Holding

(Malta)

0.01%

Porta Nuova S.A.

(S. Domingo)

Comm.

0.1%

Cosmetica

Chi.Cosm. Ltd

(Chile)

Comm.

0.01%

Sabama Ltda

(Colombia)

Comm.

0.15%

Cosmeticos E. Cos

S.A.

(Ecuador)

Comm.

1%

P.T. ENIMLAD(Indonesia)

Comm.

1%

Percosm S.A.C.(Peru)Comm.

0.58%

Alfa Parf Group S.p.A.(Italy)

Sub-holding Operativa

100%

Prodicos S.A.(Argentine)

Prod./Comm.

5.25%

Calan Cosmetics Co. Ltd(China)Prod.

100%

0.45%

Pol.Cosm

Sp. Z.o.o.

(Poland)

Comm.

100%

Maresana

Lda

(Portugal)

Comm.

100%

Costa Rica Cosmeticos

CostDist SRL

(Costa Rica)

Comm.

100%

Alfa Parf Shangai

Trading CO. Ltd

(China)

Comm.

100%

Alfhair Ltd

(Australia)

Comm.

100%

Porta Nuova S.A.

(S.Domingo)

Comm.

99.90%

Industrial Chemical

Cosmetics Holding Ltd

(Malta)

99.99%

Delly

Distribuidora Ltda

(Brazil)

Comm.

98.30%

Prodicos S.A.

(Argentine)

Prod./Comm.

94.75%

Clio Cosmeticos

S.A. de C.V.

(El Salvador)

Comm.

99%

Percosm

S.A.C.

(Peru)

Comm.

99.4%

E.Cos S.A.

(Ecuador)

Comm.

99%

Guatemala

Cosmeticos S.A.

(Guatemala)

Comm.

80%

Cosmetica

Chi.Cosm. Ltd

(Chile)

Comm.

99.99%

DIS. MAR.

Cosmetics C.A.

(Venezuela)

Comm.

99.99%

Alfa Parf

Russia S.r.l.

(Russia)

Comm.

100%

Dobos

S.A. de C.V.

(Mexico)

Prod./Comm.

99.99%

Alfaparf American

Division Distribution

S.A.

(Uruguay)

99%

Hel Cosm

S.P.L.C.

(Greece)

Comm.

100%

B.I.P. Inc.

(U.S.A.)

Comm.

100%

Sabama Ltda

(Colombia)

Comm.

99.85%

Industria Veprocosm

C.A.

(Venezuela)

Prod.

99.55%

Prodob de Mexico

S.A. de C.V.

(Mexico)

Prod./Comm.

99.80%

Delly

Kosmetic Ltda

(Brazil)

Prod.

99.88%

Corporate structure


P.T. ENIMLAD

(Indonesia)

Comm.

99%

Delly

Kosmetic Ltda

(Brazil)

Prod.

0.12%

Alfaparf American

Division Distribution

S.A.

(Uruguay)

1%

Prodob de Mexico

S.A. de C.V.

(Mexico)

Prod./Comm.

0.20%

DIS. MAR.

Cosmetics C.A.

(Venezuela)

Comm.

0.01%

Sampacosm Ltda

(Brazil)

Comm.

99.99%

Clio Cosmetics

S.A. de C.V.

(El Salvador)

Comm.

1%

Guatemala

Cosmetics S.A.

(Guatemala)

Comm.

20%

Letter from the President

Management report

Main business drivers

182022

Financial year 2014

Dear Partners,

in the financial year 2014 ALFAPARF Group returned to achieving brilliant budgetary outcomes showing the quality of the strategic and manage-rial choices made in recent years. De-spite the market stagnation in some of the most important countries where we operate (Brazil in particu-lar), and the continuing unfavorable currency trends in some countries relevant to the income statement (Venezuela in particular), the year’s result has been a very positive one overall and this has strengthened the Group’s financial position. Three factors contributed positively to the budgetary outcome. First of all, the strengthening of the inter-nationalization strategy. It is well known that our history, which began in 1980, although strongly rooted in Italy, has also been a great interna-tional venture composed of exports, branches and even production abroad. Now we are determinedly heading beyond our usual reference markets (Latin America).2014 was an important year for the development of our presence in Asia, having already begun operations there several years ago. In China for example, where, also thanks to the reorganization of our distribution ac-tivity, revenues doubled in 2014 com-pared to the previous year. Equally, over the last year, the pres-ence of ALFAPARF Group in eastern Europe has grown, having already laid down an important basis there over the last few years, for example through the establishment of a branch in Russia. Furthermore, distribution of our professional beauty brands began in our branches in Poland and Austral-ia where, up until 2013, the focus had

been exclusively on the professional market of hair salons. 2014 also saw us strengthening trade relations with exclusive distributors in several African countries (Tuni-sia, Morocco, Senegal, Mozambique, South Africa, Nigeria), where new lifestyles and consumption habits combined with positive dynamics in individual incomes have by now created the conditions for a wide-spread penetration of cosmetics. We worked towards rapid development in the Middle-Eastern area.All of the above without neglecting Latin America, of course, where in 2014 the Argentinian plant being up and running enabled us to strengthen capacity to respond to demand and consolidate our leading role as produc-ers on behalf of third parties, as well. The streamlining of the commercial organization was the second key fac-tor of the year. The globalization process is taking place, selecting dis-tributors able to guarantee strong penetration into the professional sector, which remains our primary dis-tribution channel. We are convinced that the combination of selection of importers and quality of our prod-ucts (competitive with that of the big international brands) will enable us to create a solid basis upon which, in some countries, our branch and sales network structure can be built. In 2014 the focus on selecting and liaising with distributors also con-cerned some countries where we have traditionally been present, with the aim of increasing our mar-ket penetration. Orientation towards globalization and the evolution of the commercial organization have translated into a growth in exported volumes, in-creased in all geographical areas.


Letter from the President

The greater diversification of the ori-gin of revenues has also induced us to change the organization according to a model which we consider able to accelerate international growth. In particular, two distinct Regional Man-agements have been set up (Ameri-cas and Eurasia/Africa/Australasia); operationally independent, they re-port to the president and CEO. The third factor which made a signifi-cant contribution to the good out-comes of 2014 was the general atten-tion paid to efficiency which already characterized the last two financial years. During the year, in addition to interventions on cost structures, the rationalization of the product lines went ahead, with a growing focus on the lines with the highest margins. The final point is undoubtedly re-served for the national market. Before being a multi-national, AL-FAPARF Group is an Italian company: our country is home to the Manage-ment, research laboratories and one of the five plants, in Osio Sotto (Ber-gamo), where the most sophisticated products and those destined for Eu-ropean and Asian markets are made. We have continued investing in Italy over the years despite the difficult conditions of the economy. In 2014 this commitment reaped the reward

of results well beyond the average for the sector, with a growth of reve-nue which enabled us to gain market shares both in professional beauty (where our brands consolidated their leadership), and in the hair stylist channel, where we joined the group of top market players. To be, as AL-FAPARF Group wants to be, a player on the global cosmetics market, our Italian origins and deep roots in the country may be a key factor.

Roberto FranchinaChairman ALFAPARF Group

After a 2013 characterized by an un-favorable economic scenario and by exceptional circumstances which weighed on the Group’s accounts, the financial statement for the year ended 31 December 2014 recorded an excellent improvement in income, despite the presence of financial/exchange situations which were not particularly favorable.

The revenues generated by the core business decreased, being recorded at 209.2 million Euros, compared to the 217.2 of the previous year.The reason for this shrinkage is merely of an accounting nature. In fact, for the Venezuelan branch, the Group decided to apply a Bolivares/Euros exchange rate determined on the basis of the Sicad II mechanism, decidedly negative compared to the one indicated by the Italian Foreign Exchange Office as of 31 December 2014 (so-called Cadivi). This choice led to a significant de-valuation of the turnover of the Latin American branch, estimable at about 23 million Euros. In terms of volumes, on the other hand, 2014 was a positive year in al-most all the countries where the Group operates. Asian and African countries have been added to Europe-an countries, the American continent and Australasia, in addition to which an almost “unforeseen” growth oc-curred on the Italian market. The growth in revenues was general-ized across the board and regarded all four divisions: skincare, hair, retail/mass market and private label.As already stressed, the effects of this expansion on the financial state-ment was partially reduced by the negative currency performance in some Latin American countries.

A more detailed breakdown shows revenues from core business origi-nated from: - haircare (approximately 114 million

Euros, 54.5% of the total);- skincare (approximately 32 million

Euros, 15.3% of the total);- private label, sub-contractor pro-

duction (approximately 35.5 million Euros, 17% of the total);

- retail/mass market distribution (approximately 27.7 million Euros, 13.2% of the total).

Analyzing the revenue breakdown by geographical area records an increase in Europe (64.3 million Euros, +5.9%), a relatively stable performance in North and Central America, a slight decrease in Latin America due to the effect of the negative exchange rate mentioned above, and a marked im-provement in Asia/Australia (6.3 mil-lion Euros, +36.9%).

The efficient running of the business together with the continuation of the cost optimization policy (which the Group has now been constantly following for several years) produced an excellent management result with the EBITDA going from the 19.6 mil-lion Euros of 2013 to the 32.7 of 2014.

The results achieved by the Group were above the average for the sec-tor. According to Unipro, the national


Management report

association of cosmetic industries, in 2014 the companies in the sector recorded a positive change in pro-duction (+1%), for an overall revenue of 9,370 million Euros. The revenues were driven by the foreign compo-nent of demand: Italian exports re-corded a growth of 5.5% in 2014.

The first-half report 2015

In the first six months of 2015, Al-faparf Group has continued the posi-tive growth trend which characterized the same period in 2014, even manag-ing to improve its performance. The main figures of the financial state-ment, despite being conditioned by unfavorable exchange rates, have highlighted values which, if confirmed in the second-half, could make the fi-nancial year 2015 one of the best in the history of the Group.

The consolidated financial statement (for the first-half ended 30 June 2015), of Beauty Business Holding re-corded net earnings of 118.8 million, an increase of 10.5% compared to the 107.5 of 2014. Specifically, the Ameri-can continent generated a turnover of 73.1 million Euros; Europe, Asia, Australia and Africa generated an overall figure of 45.7 million Euros.

In terms of business units, haircare achieved earnings of 63.4 million Euros, skincare reached 18.6 mil-lion, Private label 25.3 million, and retail/mass market approximately 11.5 million.

The EBITDA increased by almost 50%, going from the 19.2 million Eu-ros of June 2014 to the 26.8 of June 2015, confirming in an increasingly market manner how the Group has definitively and resolutely embarked on the road of income performance in addition to business performance.

The period in question was character-ized by important launches in terms of new products and new lines, both in the hair and skin divisions.

On a commercial level work is going ahead with the consolidation of the areas where the Group has long been present and rooted, while those markets both on the Asian and Af-rican continent (in particular, North and South Africa, Nigeria, Senegal and Mozambique) which can give a new boost to business growth are being developed.

Products and innovation

In 2014 the Group completed, in all its production and commercial units, a catalog rationalization plan which began at the end of 2013 and has regarded over one thousand Stock Keeping Units (finished product iden-tification codes, SKU), in haircare and skin & bodycare. Aim: to simplify and increase the efficiency of industrial processes, reduce stock (both of fin-ished products and of production components), improve the cost of sales for the faster-moving products and those which have the greatest im-pact on turnover.

The completion of the plan translated into a reduction of SKU by 15% (in par-ticular, lower end-of-life references and therefore low impact on earnings and margins), and a reduction of 10% in overall stock compared to 2013. Moreover, he rationalization has al-lowed for a reduction in industrial costs resulting in an improvement in the gross margin, one of the factors which contributed to the marked im-provement in the EBITDA compared to the previous financial year.

From an innovation point of view 2014 was a year of transition for the hair-care division, which focused on the optimization of the ALFAPARF Milano and Yellow brands, primarily on hair coloring products. In this segment the Group has highly competitive for-mulations at its disposal: ALFAPARF Milano is the leading Italian brand at global level in the marketing of hair colorant destined for the professional market. For the ALFAPARF Milano there are two innovations to report: the extension of the Liss Design line (specific professional line for straight-

ening curly or wavy hair), with the new flexible, progressive action module; the launch for ALFAPARF Milano Semi di Lino, of the new haircare range spe-cifically dedicated to scalp and hair loss problems (Semi di Lino Scalp). For the Yellow brand, destined for emerging countries and character-ized by a more affordable cost, we can report the relaunch of the Care line, complementary to the Haircolor line, which took place in the second half of 2014. Despite it being a relatively tran-sitional year in the haircare area this has not, of course, interrupted the re-search work fundamental for driving the innovation plan foreseen for the next three years.

In the skin & bodycare division prod-uct innovation is important seasonal-ly, too, in support of gaining addition-al market share. Due to a thorough simplification of the catalogue which led to the suppression of references with a low contribution to earnings and margin, the innovative intensity remained high. Compared to the pre-vious year, the total number of refer-ences was reduced, but average sales for the existing SKUs grew by a signifi-cant amount.

Thanks to Epildream, the laser hair re-moval equipment, the skin & bodycare equipment segment recorded great success. In September the revolution-ary Lift Creator – destined to change the rules of cosmetic facelifts – was launched for the Dibi brand. Becos, with a unique image and dedicated products project, celebrated 30 years of success in professional beauty. It was a year of celebration for the TeN line, too, as it celebrated its first ten years of life with a series of activities for customers.


The main business drivers

Production, distribution, commu-nication

2014 recorded the return to growth for the Italian branch of Beauty & Business (the main one in the Group with 30% of total revenues), and an increase originating from the domes-tic market in Italy, both in the haircare and the skin & bodycare divisions. In particular, skin & bodycare recorded a growth of 15% in Italy, further strengthening its position as leader. The increase in sales was driven both by products and by equipment for beauty centres.

In the haircare division, which repre-sents more than 50% of revenues, 2014 recorded a growth in the major-ity of countries where the Group is present. 90% of this turnover is gen-erated outside the national territory. The growth in 2014 was recorded both where command of the market is assured by the presence of a com-mercial branch, and where the Group operates through exclusive distribu-tors. As far as the retail division is concerned, Brazil was the country chosen for the launch of a Nails line to complement the Alta Moda brand, with which the Group is present in retail distribution with a complete range of haircolor, haircare and hair straightening products.

We also note the positive perfor-mance of the private label (sub-con-tractor production) both for the part managed by the Italian branch, and for that produced by the Mexican plant which targets North American customers. In Asia, the tenth year of the Chinese (Shanghai) branch coin-cided with a marked acceleration in revenues (increasing by 50% com-pared to 2013) and the prospects of similar expansion are there for the next 5 years.

For the skin & bodycare division, as well as the excellent increase in reve-nues in Italy, it is worth noting the con-solidation of the Russian branch (Mos-cow), created in 2013. Despite being in a difficult economic scenario, the results are encouraging: by the end of 2015 the branch should reach the break-even point. In the Polish branch (Warsaw), which until 2013 was exclu-sively dedicated to the haircare busi-ness, a division for the development of the professional skin & bodycare brands has been established. The ex-tension of the activity in Poland is part of a strategy of progressive interna-tionalization of the skin & bodycare division (which still generates 85% of revenues in Italy), in line with the DNA of the Alfaparf Group.

Consolidated Financial Statement for the year ended 31 December

2014

Financial Statements

Assets 31 december 2014 31 december 2013

A) Subscribed capital unpaid 0 0

B) Fixed assets

I) Intangible fixed assets:

1) Start-up and expansion costs 76,730 102,307

2) Research, development and advertising costs 449,570 697,122

3) Patents and know-how 88,111 76,733

4) Franchise, licenses, trademarks and similar rights 7,442,439 8,058,820

5) Work in progress and prepayments on account 275,954 316,214

7) Other intangible fixed assets 4,440,475 4,439,494

8) Consolidation difference 14,020,021 16,876,878

Total intangible fixed assets 26,793,300 30,567,568

II) Tangible fixed assets:

1) Land and buildings 8,651,778 8,960,210

2) Plant and equipment 14,038,617 15,243,782

3) Fixtures and fittings, tools and other equipment 934,092 923,826

4) Other assets 1,243,436 1,515,107

5) Work in progress and prepayments on account 172,891 824,868

Total tangible fixed assets 25,040,814 27,467,793

III) Long-term investments:

1) Equity investments in:

a) Subsidiaries 0 0

b) Associates 102,000 102,000

2) Due from:

d) Others:

- due within one year 0 0

- due beyond one year 1,427,343 1,640,167

3) Other securities 0 0

Total long-term investments 1,529,343 1,742,167

Total fixed assets (B) 53,363,457 59,777,528

C) Working Capital

I) Inventories:

1) Raw materials and consumables 10,518,756 11,673,502

2) Work in progress and semi-finished goods 1,886,269 1,707,419

3) Long-term contracts 0 0

4) Finished goods and goods for resale 15,837,475 20,317,188

5) Advances 74,003 122,813

Total inventories 28,316,503 33,820,922

Assets 31 december 2014 31 december 2013

II) Receivables:

1) From customers:

- due within one year 64,120,858 66,677,484


3) From associates:


- due beyond one year 0 0

4bis) Tax credits:



4ter) Deferred tax assets:


- due beyond one year 1,868,793 333,663

5) From others:



Total receivables 101,259,683 99,230,000

III) Short-term investments:

3) Other equity investments 3,467 3,467

6) Other securities 0 0

Total short-term investments 3,467 3,467

IV) Cash and cash equivalents:

1) Bank and postal deposits 14,261,415 10,410,977

2) Cheques 0 0

3) Money and cash securities 181,351 76,732

Total cash and cash equivalents 14,442,766 10,487,709

TOTAL WORKING CAPITAL (C) 144,022,419 143,542,098

D) Accrued income and prepayments 2,405,632 2,034,755

TOTAL ASSETS (A+B+C+D) 199,791,508 205,354,381

Balance Sheet Balance Sheet

Alfaparf Group26 Alfaparf Group27

Balance Sheet Balance Sheet


Liabilities 31 december 2014 31 december 2013

A) Shareholders´ equity

Group shareholders’ equity:

I) Share capital 71,000,000 71,000,000

II) Share premium reserve 0 0

III) Revaluation reserve 0 0

IV) Legal reserve 2,035,097 2,035,097

V) Statutory reserves

VI) Reserve for own shares in portfolio

VII) Other reserves: (30,035,407) (12,156,226)

- Undivided profits (42,988,705) (31,283,884)

- Translation reserve (9,381,067) (3,206,707)

- Extraordinary reserve 15,211,997 15,211,997

- Other reserves 7,122,368 7,122,368

VIII) Profit (loss) carried forward 0 0

IX) Profit (loss) for the year 5,871,002 (11,704,821)

Total Group shareholders’ equity 48,870,692 49,174,050

X) Minority interest share of capital and reserves 5,243 4,974

XI) Minority profit (loss) for the year 0 0

Total minority interest share of shareholders’ equity 5,243 4,974

Total shareholders’ equity (A) 48,875,935 49,179,024

B) Provisions for risks and charges:

1) for pension and other similar costs 678,566 495,590

2) taxes, deferred or current 7,954,068 7,479,696

3) other 2,636,203 3,028,998

Total provisions for risks and charges (B) 11,268,837 11,004,284

C) Employee severance indemnity 1,138,499 1,451,446

Liabilities 31 december 2014 31 december 2013

D) Payables:

3) Due to shareholders for financing:



4) Due to banks:



5) Other loans:



6) Advances:

- due within one year 248,426 406,653


7) Due to suppliers:


- due beyond one year 600,000 600,000

12) Taxes payable:


- due beyond one year 1,101,075 865,834

13) Due to social security:


14) Other:


- due beyond one year 260,000 390,000

15) Due to other Group companies:


Total payables (D) 136,444,232 142,420,487

E) Accrued liabilities and deferred income 2,064,005 1,299,140

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 199,791,508 205,354,381

MEMORANDUM ACCOUNTS

2) collateral

on behalf of third parties 0 0

Total memorandum accounts 0 0

Income Statement Income Statement


31 december 2014 31 december 2013

A) Value of production

1) Revenues from sales and services 206,787,120 217,286,776

2) Change in inventories, work in progress

semi-finished and finished goods (4,095,780) 4,270,760

3) Change in long-term contracts 0 0

4) Own work capitalised 349,404 602,114

5) Other revenues and income:

- contributions for operating expenses 0 0

- other revenues and income 3,435,000 3,611,736

Total value of production (A) 206,475,744 225,771,386

B) Production costs

6) For raw materials, consumables and goods for resale 58,276,345 68,644,724

7) For services 56,549,319 65,016,478

8) For use of third party assets 5,431,995 6,784,043

9) For personnel:

a) Wages and salaries 35,945,064 39,015,939

b) Social security charges 8,247,587 9,046,083

c) Employee severance indemnity 956,341 2,317,192

d) Pensions and similar benefits

e) Other costs 3,232,639 2,344,708

10) Amortisation, depreciation and write-downs:

a) Amortisation of intangible assets 5,327,788 5,469,587

b) Depreciation of tangible assets 3,732,900 3,849,660

c) Other write-downs of fixed assets 13,274 2,032,116

d) Write-downs of working capital:

- write-downs of receivables 2,764,414 3,055,751

11) Change in inventories of raw materials,

consumables, and goods for resale 458,697 129,063

12) Provisions for risks and charges 1,227,623 597,386

13) Other provisions 0 0

14) Other operating expenses 5,112,144 9,067,427

Total production costs (B) 187,276,130 217,370,157

DIFF. BETWEEN VALUE OF PRODUCTION AND PRODUCTION COSTS (A-B)

19,199,614 8,401,229


C) Financial income and charges

15) Income from equity investments in:

- other companies 0 0

16) Other financial income:

a) long-term loans:

- from others 0 0

b) long-term investments 0 0

c) short-term investments 0 0

d) Other income:

- other financial income 1,302,599 2,250,033

- from other Group companies 0 0

17) interest and other financial charges:

- interest expenses for bonds 0 0

- other interest and financial charges 7,040,042 7,840,390

17bis) Foreign exchange gains (losses) (4,583,095) (10,698,808)

TOTAL FINANCIAL INCOME AND CHARGES (15+16-17+/-17BIS) (C)

(10,320,538) (16,289,165)



D) Value adjustments to investments

18) revaluations:

a) equity investments 0 0

b) long-term

investments 0 0

19) write-downs:

a) equity investments 0 520,346

b) long-term

investments 0 0

c) short-term

investments 0 0

Total value adjustments to investments (18-19) 0 (520,346)

E) Extraordinary income and charges

20) Income:

- gains on disposal of assets the revenue from which may not be stated under A5

0 0

- other extraordinary income 2,111,880 2,210,294

21) Expenses:

- losses on disposal of assets the effect

of which may not be stated under no. 14 0 0

- taxes from previous years 75,478 346,442

- other extraordinary charges 817,626 2,195,108

Total extraordinary items (20-21) (E) 1,218,776 (331,256)

PRE-TAX PROFIT (A-B+/-C+/-D+/-E) 10,097,852 (8,739,538)

22) Income taxes for the year:

- current taxes 5,900,502 8,167,487

- deferred and prepaid taxes (1,673,652) (5,202,204)

23) PROFIT (LOSS) FOR THE YEAR 5,871,002 (11,704,821)

- Group share 5,871,002 (11,704,821)

- minority interest share 0 0

Income Statement

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