CONSOLIDATED INTERIM REPORT OF THE DADA GROUP AT 30 SEPTEMBER 2016

Transcription

1 CONSOLIDATED INTERIM REPORT OF THE DADA GROUP AT 30 SEPTEMBER 2016 (PREPARED IN ACCORDANCE WITH IAS/IFRS INTERNATIONAL ACCOUNTING STANDARDS) Registered office: Viale della Giovine Italia, 17 - Florence Share capital Euro 2,835, fully paid-in Florence Company Register no. FI REA Tax ID/VAT no

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3 CONTENTS CORPORATE OFFICERS 4 DADA STOCK MARKET PERFORMANCE 5 FINANCIAL HIGHLIGHTS 7 DIRECTORS REPORT 9 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 24 ANNEXES 52 3

4 CORPORATE OFFICERS The current Officers of Dada S.p.A. were elected by the AGM held on 28 April 2015 for the three-year period. At the date of approval of this document, the Board of Directors of the Company was composed as follows: BOARD OF DIRECTORS Karim Beshara 1 Claudio Corbetta 2 Lorenzo Lepri 3 Sophie Sursock Ragy Gamaleldin Mahmoud Soliman Elfaham Philip Tohme Maurizio Mongardi 6 4, 5, 6, 7 Sofia Maroudia Director 4, 5, 6, 7, 12 Barbara Adami Lami Director Carolina Gianardi Cristiano Esclapon 7 Youssef Bassem 13 Fadi Antaki 13 4, 5, 7, 8, 11 Director Chairman CEO General Manager Director Director Director Director Director Director Director 1 Appointed Director of the Company by the AGM held on 28 April 2015 and, on the same date, Chairman of the Board of Directors. 2 Appointed Chief Executive Officer and General Manager of the Company during the meeting of the Board of Directors held on 13 May Appointed General Manager and CFO of the Company during the meeting of the Board of Directors held on 13 May Appointed member of the Control and Risk Committee during the meeting of the Board of Directors held on 13 May Appointed member of the Committee for Related Party Transactions during the meeting of the Board of Directors held on 13 May Appointed member of the Compensation and Nominations Committee during the meeting of the Board of Directors held on 13 May Independent director pursuant to art. 148, par. 3, of Legislative Decree n. 58/ Member and Chairman of the Supervisory Body pursuant to Legislative Decree 231/ Appointed Standing Auditor by the AGM held on 28 April Appointed Alternate Auditor by the AGM held on 28 April Appointed Chairman of the Control and Risk Committee and of the Committee for Related Party Transactions during the meeting of the Board of Directors held on 13 May Appointed Chairman of the Compensation and Nominations Committee during the meeting of the Board of Directors held on 13 May Directors co-opted during the meeting of the Board of Directors held on 11 November 2015, following the resignation of Khaled Bishara and Antonio Converti on 8 September 2015, and confirmed by the AGM held on 28 April BOARD OF STATUTORY AUDITORS Massimo Scarpelli 9 Maria Stefania Sala 9 Massimo Foschi 9 Elisabetta Claudia De Lorenzi 10 Manfredi Bufalini 10 EXTERNAL AUDITORS Chairman Standing Auditor Standing Auditor Alternate Auditor Alternate Auditor KPMG S.p.A. 4

5 DADA STOCK MARKET PERFORMANCE In 9M16, the Dada share s absolute performance came basically to breakeven, closing at 2.09 on 30 September 2016, largely in line with the closure on 04 January 2016, while its relative performance in the reporting period stood at +2.5% versus the FTSE STAR index and at +20% versus the FTSE All Share index. Price and Volume Trend of Dada Share from 04 January 2016 to 30 September 2016 Dada Share Vs FTSE Star and FTSE Italia All Share indexes from 04 January 2016 to 30 September 2016 STAR FTSE All Share DADA 140,0 130,0 120,0 110,0 100,0 90,0 80,0 70,0 60,0 4 gen 16 4 feb 16 4 mar 16 4 apr 16 4 mag 16 4 giu 16 4 lug 16 4 ago 16 4 set 16 FINANCIAL RESEARCH - COVERAGE: The Dada share is currently covered by Banca IMI, which also acts as Specialist. 5

6 9M16 figures 6

7 DADA GROUP FINANCIAL HIGHLIGHTS Consolidated Income Statement (9 months) ( mn) 30/09/ /09/2015 Total difference % difference Revenue % EBITDA* % Depreciation and amortization % Non-recurring charges and other impairment % EBIT % Group profit/(loss) net of non-recurring income ** % Non-recurring income ** -2.2 n.m. Group net profit/(loss) % * Gross of impairment losses and other non-recurring items **income from the transfer of the ProAdv BU to 4W MarketPlace S.r.l. 7

8 Consolidated Income Statement (3 months) ( mn) 3Q16 3Q15 Total difference % difference Revenue % EBITDA* % Depreciation and amortization % Non-recurring charges and other impairment % EBIT % Group profit/(loss) net of non-recurring income % Group net profit/(loss) % * Gross of impairment losses and other non-recurring items Consolidated Statement of Financial Position at 30 September 2016 ( mn) 30/09/ /12/2015 Total difference % difference Fixed assets % Net Working Capital % Net Capital Employed % Equity % Current Net Financial Position % Total Net Financial Position % Number of employees % 8

9 DIRECTORS REPORT INTRODUCTION The Consolidated Interim Report at 30 September 2016 has been prepared in accordance with International Accounting Standard 34 (IAS 34) on Interim Financial Reporting and, therefore, does not contain all the information required in the Full Year Financial Statements and should be read in conjunction with the annual financial statements for the year ended 31 December It satisfies the provisions of Issuer Regulations n of 14 May 1999, as subsequently amended. Mention should be made that on 23 March 2015, Dada S.p.A. sold the entire share capital of Moqu Adv S.r.l. to Italiaonline S.p.A. As a result of this agreement, the Performance Advertising segment had required the application of IFRS 5 Non-current assets held for sale and discontinued operations". Furthermore, on 30 June 2015, the Dada Group completed the transfer of the ProAdv BU to 4W MarketPlace S.r.l., acquiring 25% of the transferee s share capital. On 8 July 2015, through its subsidiary Register.it S.p.A., Dada completed the acquisition of 100% of the share capital of Etinet S.r.l., a company that provides digital communication services to SMEs. The investment is fully consolidated in the Dada Group s financial statements as from 1 July Conversely, 1H15 had no financial benefit from this company. Finally, on 6 July 2016, through its subsidiary Register.it S.p.A., Dada S.p.A. acquired 100% of Sfera Networks S.r.l., specialized in Virtual Hosting and Network & Private Cloud services. The investment is fully consolidated as from 1 July 2016; as a result, 2015 had no financial benefit from this company. All the following comments and analysis on income statement and cash flow figures in this Interim Report stem from the abovementioned new Group structure. DADA GROUP PROFILE Dada S.p.A. - listed in the STAR segment of the Milan Stock Exchange - is at the head of a Group that is a European leader in digital services for the online presence and visibility of SMEs. In the prior year, Dada successfully completed the focusing process on the core business of services for the online presence of SMEs, also redefining the corporate scope with the disposal of the Advertising BU and the acquisition of Etinet S.r.l., a company that provides web and mobile services for digital communication to SMEs. Additionally, in July 2016, Dada acquired Sfera Networks S.r.l., a leading Italian IT player specialized in managed and cloud services. Today the Dada Group is organized around a single business unit falling under the "Domain and Hosting division. As explained further below in this Interim Report, in 9M16 the Dada Group further strengthened its position among the top European players in the business of services tailored to SMEs for domain name registration, hosting, for the creation, management and visibility of web and e-commerce sites and for online brand protection. The Dada Group also continued to expand its product portfolio and broaden the customer base, strengthening its position in 9

10 all its geographies of operation: in Italy, UK, Ireland, Spain, France, Portugal and Holland, where it operates respectively through its brands Register.it, Etinet and Sfera, Namesco.uk.co and Simply Hosting & Servers (former PoundHost), Register365, Nominalia and Amen. Alternative performance indicators This Interim Report provides the following economic and financial indicators (in addition to those generally used) which are used by the management of the Dada Group to monitor and assess the Dada Group s operating performance, but as they are not recognized accounting measures under IFRS should not be considered alternative performance indicators for the Dada Group. As the composition of EBITDA and of other alternative performance indicators is not governed by the relevant accounting standards, the Dada Group s method of calculating it may differ from that used by others and may therefore make comparisons unreliable. Below is a summary of how the Dada Group calculates EBITDA. Pre-tax profit (gross of the net gains/(losses) pertaining to assets held for sale) + Financial charges - Financial income +/- Gains/losses from equity investments in associates EBIT + Restructuring costs + Amortization, depreciation and impairment losses on fixed assets +/- Atypical charges/income + Impairment losses on trade receivables EBITDA Operating profit before amortization, depreciation, impairment losses, atypical charges/income and impairment losses on receivables Net working capital: the difference between current assets and liabilities, i.e. those due within one year of the balance sheet date. Within this item, deferred tax assets are split into current and non-current portions according to the amount expected to be recovered with the following year's profit; Net capital employed: fixed assets plus net working capital, less non-financial liabilities (provision for employee termination indemnities and provision for risks and charges); Current net financial position: cash and cash equivalents, current financial assets and current financial liabilities; Total net financial position: current net financial position and all financial receivables and payables due beyond one year. PERFORMANCE REVIEW The Dada Group closed 9M16 achieving consolidated revenue of 47.7 million, up by 2% versus 46.7 million in 9M15. Net of the exchange rate effect and on a like-for-like basis, growth would amount to 6%. 10

11 The following graph shows the trend in consolidated revenue of the Dada Group over the last 5 quarters: CONSOLIDATED REVENUE Q Q Q Q Q Consolidated EBITDA (gross of impairment losses and other non-recurring items) came to a positive 8.2 million in 9M16, with a 17% margin on revenue, dropping slightly versus the figure in 9M15 ( 8.5 million and 18% margin), despite the significant operating investments made to expand the customer base and the negative impact from the devaluation of the British Pound against the Euro. The following graph shows the trend in the EBITDA of the Dada Group over the last 5 quarters: CONSOLIDATED EBITDA Q Q Q Q Q The total net consolidated financial position of the Dada Group at 30 September 2016, which includes funding to be repaid within and beyond one year, came to million, increasing by approximately 1.2 million versus million at 31 December The figure reflects the positive cash flows generated by Group operating activities and the investment of approximately 3.2 million to acquire Sfera Networks S.r.l.. The trend of the composition of 11

12 the current and non-current portion of the Group's NFP in 9M16 was also affected by the repayment of the main medium/long-term loans falling due on 30 June The following graph shows the trend in the consolidated net financial position over the last 5 quarters: TOTAL CONSOLIDATED NFP set dic mar giu set 16 Results The following tables show the Dada Group s key results in 9M16 versus 9M15: EUR/ Sept Sept.-15 DIFFERENCE 9 months 9 months Amount % of Amount % of Absolut e % Net revenue 47, % 46, % 1,055 2% Chg. in inventories, finished and semifinished products, work in progress & inc. in 1,660 3% 1,689 4% -29-2% own wk. capitalized Service costs and other operating expenses -26,575-56% -26,484-57% -92 0% Payroll costs -14,624-31% -13,407-29% -1,217 9% EBITDA 8,177 17% 8,458 18% % Depreciation and amortization -4,679-10% -5,071-11% 392-8% Non-recurring income/(charges) % % -4-2% Impairment losses and other provisions % % 71-35% EBIT 3,215 7% 3,036 7% 178 6% 12

13 Source:EuropeanCommission 2015figuresConsolidated Interim Report of the Dada Group at 30 September 2016 In 9M16, the Dada Group achieved consolidated revenue of 47.7 million, up by 2% versus 46.7 million achieved in 9M15. The revenue performance reflects the adverse trend of the appreciation of the Euro against the British Pound, which accounted for approximately 1.7 million versus 9M15, as well as the following changes in the business scope: - the disposal of the ProAdv BU as from 1 July 2015, which had contributed 1.2 million to revenue in 1H15; - the consolidation of the results of Etinet S.r.l. as from 1 July 2015, which contributed 0.7 million to revenue in 1H16; - the consolidation of the results of Sfera Networks S.r.l. as from 1 July 2016, which contributed 0.5 million to revenue in 3Q16. Net of these effects, consolidated revenue would have grown by 6% versus 3Q15. In 9M16, the Dada Group strengthened its position as one of the top European players in services dedicated to the digitization and online presence and visibility of European SMEs, and significantly increased its customer base and expanded its product portfolio with new tailormade services. Dada currently operates in 7 European countries through highly-established brands such as Register.it (Italy), Nominalia (Spain), Amen (France, Portugal and Holland), Simply Hosting & Server - former Poundhost - Namesco.uk.co and Register365 (UK and Ireland), which hold leadership positions in their markets of operation, including in Italy and the UK, where the Group ranks as second and fourth player, respectively. In the reporting period, as in 2015, the European market of services for the online presence of SMEs was marked by growing competition in customer acquisition. Industry players are merging in order to expand their market share, grow revenue, and complement their product portfolio with higher value-added services. Furthermore, it should be noted that the market of services for the online presence and visibility of SMEs in Europe, specifically in Dada s geographies of operation, offers significant leeway for growth, especially if one considers that about 30% 1 of European SMEs have no website/home page, and over 50% - up to 70% in Italy - have a website lacking advanced features such as e-commerce. Against this backdrop, Dada s positioning has achieved a strong organic growth, topping the 600,000 mark in customers served, with an 11% YoY increase in the customer base. A result accomplished thanks to the success of the strategies implemented to attract new customers, which grew by approximately 45% in the first nine months versus 9M15, and to the solid ability to retain existing customers, with a monthly churn steady at <1.2%, despite the recent expansion and diversification of the customer base. The positive trend of the customer base - a key asset to create value for the Company - was achieved through: i) effective marketing strategies based on initial offering campaigns, ii) upgrading in customer support and consulting services provided by local Customer Care desks, 113

14 FigurebasedonnewcTLD.itregistrationsin9M16,companyprocessingusingRegistro.itfiguresConsolidated Interim Report of the Dada Group at 30 September 2016 today fully internalized in all countries, and iii) ongoing innovation of the product portfolio with new added-value services. On the services front, in the reporting period the Dada Group reported an over 30% growth YoY in registered domains, with an overall stock of 1.9 million domain names managed, increasing by approximately 6% from the start of the year. The growth in domain name registrations, in most of the Group's geographies, especially in Italy, UK and Spain, outperformed the market, allowing the Dada Brands to increase their market share (calculated on new registrations), which was above 20% in Italy. 2 At 30 September 2016, the Dada Group has over 1.8 million accounts and over 650,000 websites hosted on its servers. In 9M16, Dada also strengthened its position in the web building business, offering a range of ever-increasing quality solutions for the development, management and visibility of web, mobile and e-commerce sites tailored to SMEs, thanks also to the contribution of Etinet S.r.l. acquired in July 2015 and now fully integrated in the Group s organization. In the reporting period, Dada also strengthened its position in custom services for online brand protection (OBP), as well as in virtual and dedicated server solutions. Specifically, the latter solutions, relying mainly on the proprietary datacenter, grew in 9M16 by over 30% on the Italian market; today growing strategic focus is placed on these solutions, given the high potential of the European market. On the product innovation front, all efforts are still geared on developing the portfolio of solutions to offer growing levels of performance, security and reliability. Strong growth was witnessed by tailor-made solutions, designed to provide a one-stop-shop experience to SMEs, which are assisted in the implementation of custom digital projects for online and mobile presence and business. The latest, most significant releases and development projects underway include: For Domains: the launch of generic top-level domains (new gtlds) such as:.barcelona,.promo, INSURANCE,.GAME,.CARS,.AUTOS,.BOATS,.YACHTS,.VIP,.GROUP,.PET,.SHOP; as well as the implementation of new channels for online brand protection services A noteworthy feature for services is the release of advanced WebMail in France and Portugal The ongoing developments on Website & Hosting services, which witness the launch of the "Build me a website" service in the UK, as well as a new website builder with an editor to build mobile-friendly websites 214

15 Managed Websites include, in particular, an innovative service in the UK to design logos, complementing the solutions for website creation and the development of online communication projects As for the suite of Server services, the past few months have seen the completion of the rebranding of PoundHost, the brand entirely dedicated to Server solutions, and the launch of "Simply Servers & Hosting", which complements the offering with Private Cloud solutions based on proprietary network infrastructure Regarding IT Managed services, in July Dada, through its subsidiary Register.it, acquired Sfera Networks, specialized in IT managed services dedicated to SMEs, with the aim of consolidating its position in virtual hosting, network & private cloud services. Following the integration process successfully launched in July, Sfera will become the Group's spearhead in the provision of managed services. Looking at the geographical breakdown of the Dada Group s consolidated revenue, foreign-based activities contributed 55% in 9M16, basically in line with the amount contributed in 9M15 (56%). This confirms the significant weight of international business in the overall development of the Group. In 9M16, consolidated EBITDA of the Dada Group, gross of impairment losses and other nonrecurring items, came to a positive 8.2 million (17% margin on consolidated revenue), dropping by 3% versus 8.5 million in 9M15 (18% margin). The EBITDA performance, as for consolidated revenue, reflects the adverse trend of the appreciation of the Euro against the British Pound, which accounted for approximately 0.4 million versus 9M15, as well as the following changes in the business scope: - the disposal of the ProAdv BU as from 1 July 2015, which had contributed 35 thousand to the results in 1H15; - the consolidation of the results of Etinet S.r.l. as from 1 July 2015, which contributed 0.2 million to the results in 1H16; - the consolidation of the results of Sfera Networks S.r.l. as from 1 July 2016, which contributed 0.2 million to the results in 3Q16. Looking at each line of the income statement: - service costs were in line with 9M15, representing 56% of revenue from 57%. Specifically, mention should be made of the benefits arising from the full operation of the new Datacenter in the UK and from the gradual disposal of the French datacenters (with a total reduction of 0.4 million, or 15% less than in 9M15), and the reduction in outsourcing costs of customer care and phone support services in Italy and in other countries (approximately 0.3 million, or 27% less than in 9M15). Additionally, as mentioned in the Half-Year Financial Report at 30 June 2016, product margins reflect initial offering sales strategies, which are based on promotional offers over a specific time period and tend to squeeze average revenue (ARPU) in the short term, though implying direct costs basically proportional to the increase in volumes, since the full contribution to revenue is made in the event the customer renews the service, which is generally at full price; - labour costs in 9M16 amounted to 14.6 million, up by 9% versus 13.4 million in 9M15. The trend of this aggregate is ascribable to the increase in staff (444 units at 30 September 2016 versus 376 at 30 September 2015), due partly to the consolidation of Sfera Networks S.r.l. and 15

16 partly to the insourcing of customer care and phone support services in Italy and in other countries in The increase in customer facing resources reflects both the situation of partial understaffing that had marked 9M15, and the need to ensure high quality standards in the provision of services, given the recent strong expansion of the customer base; - Change in inventories and increase in own work capitalized, amounting in 9M16 to 1.7 million, or approximately 3% of consolidated revenue (basically in line with 9M15), consists of expenses incurred for the development of the proprietary platforms needed to launch and manage the services provided by the Dada Group. In 9M16, the Dada Group achieved a positive EBIT of 3.2 million (7% of consolidated revenue), up by +6% versus 3 million achieved in 9M15 (7% margin). The improvement in EBIT is due largely to the following elements: - consolidated depreciation and amortization in 9M16 amounted to 4.7 million, accounting for 10% of revenue, down by 8% versus 9M15 ( 5.1 million). Consolidated depreciation and amortization at 30 September 2016 was composed as follows: 2.6 million for tangible assets ( 2.8 million at 30 September 2015) and 2.1 million for intangible assets ( 2.3 million in 9M15). The reduction in depreciation and amortization in the reporting period is mainly ascribable to the implementation of the investments made in prior years to support the internal development of the proprietary platforms, with the resulting reduction of this type of investment in intangible assets over the past two years. - impairment losses, provisions and other non-recurring income/charges amounted to 0.3 million in 9M16, dropping (19%) versus 0.4 million in 9M15, and mainly included the impairment of trade receivables and severance related to the efficiency of the organizational structure. In 9M16, the Dada Group s consolidated net profit came to a positive 0.2 million versus a positive 2.3 million in 9M15, benefiting last year from the revaluation gain following the transfer of the ProAdv BU to 4W. Mention should be made that overall Financial Activities (the difference between financial income and charges, and forex movements) of the Dada Group in 9M16 came to million (- 2 million from financial charges and million from the negative effect of forex) versus million in 9M15 (- 2.1 million from financial charges and million from the positive effect of forex). The trend of this aggregate was impacted by the effects of forex fluctuations, especially those regarding the Euro/British Pound exchange rate. In the reporting period, in fact, the British Pound depreciated by 17% against the Euro versus the exchange rate at 31 December 2015, while it had appreciated by 5% in 9M15. These changes also affected debit items, including intercompany ones, denominated in Euro coming from the Group s UK subsidiaries, with a negative effect felt mainly in 1Q16. Mention should be made that the financial effects of these exchange rate movements were partly mitigated, where possible, by non-speculative hedging of currency risks made by the Group in the reporting period as well. The trend in spreads and rates charged on outstanding medium-term loans improved versus 9M15. Loans and short-term transactions also saw a general decline in spreads and an improvement in conditions applied by banks to the Dada Group. Consequently, overall financial charges, net of exchange losses, improved and amounted to 2 million (including bank commissions on credit card payments of 0.8 million) in 9M16 versus 2.1 million (same commissions on credit card payments) in 9M15, down by an overall 5%. 16

17 There was no financial income worthy to report in 9M16, while 2015 had benefitted from the revaluation gain of 2.2 million following the transfer of the ProAdv BU to 4W MarketPlace. The measurement at equity of the 25% investment in 4W MarketPlace had no significant effect in 9M16. The overall tax burden of the Dada Group in 9M16 came to 0.7 million, basically in line with 9M15. Current tax amounted to 0.6 million versus 0.5 million in 9M15, while deferred tax impacted negatively in both 9M16 and 9M15 by 0.1 million and 0.2 million respectively. Specifically, current tax refers mainly to the tax burden on some foreign-based companies with positive pre-tax income, while IRAP paid by Italian companies in 9M16 amounted to 0.2 million. The reduction in deferred tax assets in the reporting period is explained partly by the use of receivables from prior-year pre-paid tax calculated on the temporary differences, and partly by the use of such receivables to cover IRES taxable income of the current period. The assessment of the recoverability of tax losses was made, with a positive outcome, in the preparation of the annual consolidated financial statements in 2015, updated in light of the figures recorded in the first half of Mention should be made that the Dada Group has accrued total tax losses of 38.9 million (on 17.4 million of which deferred tax assets were calculated), referring for the most part to the Italian companies, which may be carried forward indefinitely under the current laws for an amount equal to 80% of taxable income for each financial year. In this regard, as from the financial statements at 31 December 2015, deferred tax assets have been recalculated following the change in the IRES tax rate, which falls from 27.5% to 24% starting from 2017 as set out in the 2016 Stability Law. Accordingly, the assessment of deferred tax assets has been revised, determined on tax losses carried forward indefinitely, based on the analysis of expected future taxable income. This Interim Report does not include Profit/(loss) from discontinued operations; in the quarterly report at 30 September 2015, the figure had amounted to million and included income statement figures referring to the Performance Advertising division (as well as the costs incurred to carry out the transaction), sold to Italiaonline in March 2015, with financial effects from 28 February. The income statement at 30 September 2016, as in the prior year, does not include any noncontrolling interests. PERFORMANCE BY BUSINESS SEGMENT For operational purposes, as from 1Q15, the Dada Group has been organized in a single business segment falling under Domain & Hosting services. This is due to the fact that the current product lines related to the core business and corporate activities are completely integrated with each other; as a result, they no longer qualify as separate business segments under IFRS 8. Further information is also found in Note 3 in this Interim Report. 17

18 Financial position The following table shows the total Net Financial Position of the Dada Group at 30 September 2016 versus the position at 31 December 2015: EUR/000 NET FINANCIAL POSITION 30-Sept Dec.- 15 DIFFERENCE Absolute % Cash on hand % Bank and post office deposits 3,241 2,192 1,048 48% Liquidity 3,248 2,206 1,042 47% Escrow deposits 823 1, % Other receivables Other financial receivables 839 1, % Total financial assets 4,087 3, % Current credit lines and account overdrafts with banks % Current bank borrowings -11,254-10,181-1,073 11% Other current financial payables % Current portion of derivatives % Current debt -11,769-11, % Non-current bank borrowings -20,429-20, Other non-current financial payables -1, ,150 - Non-current portion of derivatives % Non-current debt -21,674-20,382-1,291 6% Total financial liabilities -33,443-31,596-1,846 6% Total net financial position -29,356-27,890-1,466 5% At 30 September 2016, the Dada Group s total consolidated net financial position, which includes all short and medium/long-term funding and loans, came to million versus million at 31 December The current net financial position at 30 September 2016 came to million versus million at 31 December The trend and composition of NFP in the reporting period is mainly ascribable to: - the positive cash flows from operations generated by the Dada Group in the reporting period ( 8.4 million before outlays for tax and financial items), which resulted in an increase in liquidity and a reduction in the use of short-term credit facilities; - investing outlays, which included not only the usual purchase of tangible and intangible assets, but also the payment of 3.3 million for the acquisition of Sfera in July. Information on the acquisition is found further below; 18

19 - the repayment on 30 June 2016 of the first instalment of the main medium/long-term loans held by the Group for a total of 2.4 million. Likewise, in 3Q16, the Dada Group was granted two new medium-term loans for a total of 4 million, one specifically meant to finance the acquisition of Sfera. Mention should be made that the renegotiations made in 2015 had allowed the Group to achieve the following main results: a) to improve the pricing of the loans in terms of spreads charged; b) to extend the duration of overall debt; c) to align the cash flows of the Group more to the instalment payments of principal; Information on the main features of the loans held by the Group are found in the notes to the Interim Report. Current portion of derivatives refers to the financial payable relating to the mark-tomarket measurement of the IRS hedging the outstanding mortgage loans at 30 September In 9M16, non-recurring cash flows amounted basically to zero, a result, on the one hand, of the positive financial recovery of 0.2 million for excess payments made to INPS in previous years and, on the other, of the negative impact of financial outflows for the resolution of disputes and legal settlements defined in the reporting period. For further details on the items that marked cash flows on a cash and cash equivalents level, reference should be made to the Cash Flow Statement included in this Interim Report and to the relevant notes. Finally, regarding reconciliation between cash flow of the total consolidated net financial position with cash flow shown in the consolidated financial report, reference should be made to Note 18 in this Interim Report. The following points provide detailed information on the main aggregates in the net financial position. Investing activities In 9M16, total outlays for investing activities of the Dada Group came to million versus a total cash flow of million in 9M15. The difference is explained, on the one hand, by the acquisition of Sfera Networks S.r.l. in July 2016, which had a negative impact of million on cash and cash equivalents, including the contribution of the acquiree s cash (the difference on the 3.3 million for the total cost of the transaction was charged to financial payables) and, on the other, by the disposal of the Moqu companies in 2015, which had a positive impact of 4.6 million on a cash and cash equivalents level. Regarding investments (in terms of the increase in own work capitalized, not in cash flows): - investments in intangible assets in 9M16 amounted to 1.8 million, basically in line with 9M15, referring mainly (as in 2015) to costs for the development of the proprietary processes and platforms needed to provide Domain & Hosting services. Investments in software and other intangible assets also accounted for the rest; - investments in tangible assets amounted to 2.7 million, in line with 9M15. Investments in property, plant and equipment in the period under review, as in 9M15, referred mainly to the purchase of network servers and new systems, and to other electronic equipment needed for the provision of Domain & Hosting services. Investments in furniture and fittings and in other tangible assets are to be considered non-significant. 19

20 Financing activities The consolidated cash flow statement at 30 September 2016 came to million ( 6.4 million at 30 September 2015) relating to net difference in cash flow from financing activities. The trend is basically the result of the combined effect of: a) the positive contribution of 4.2 million of new loans taken out in 9M16, 2.5 million of which granted for the acquisition of Sfera, other non-current amortizing loans of 1.5 million, and the rest for new leases concluded by the UK subsidiaries; b) the negative flow of - 4 million attributable to the reclassification from the non-current to the current portion of the instalments falling due within 12 months of the amortizing loans. In this regard, in the reporting period, the first instalments of amortizing loans amounting to 3.2 million were also paid. This last outflow has no effect on the cash flow statement, since the current portion of the loans is already included in "cash and cash equivalents ; c) end-of-period exchange adjustments of million for loans expressed in currencies other than the Euro, namely the loans taken out by the UK subsidiary Namesco Ltd. For further details on these transactions, reference should be made to Note 13 in this Interim Report. The previously mentioned IRS differential had a minor impact. The foregoing effects impact solely on cash, cash equivalents and current bank borrowings, but are clearly neutral on the total Net Financial Position. The reconciliation between cash flow of the net financial position and the change in cash and cash equivalents is shown in Note 18. Net Working Capital The Dada Group s Net Working Capital at 30 September 2016 was million versus million at 31 December 2015 and million at 30 September In this regard, the change in the scope of consolidation following the acquisition of Sfera had a negative impact of 0.2 million on NWC. It should be noted that the dynamics of net working capital over the four quarters of a year are linked to Group operations, which generally report a larger portion of revenue from services provided in the first quarter of the year versus the following quarters; part of this revenue is recognized during the entire year as deferred income on a pro-rata basis. This situation reflects on net working capital in terms of deferred income included in other payables. Looking at the single items forming the NWC, trade receivables at 30 September 2016 amounted to 4.4 million, up versus 3.5 million at 31 December 2015, including certain Domain & Hosting services that have deferred collection conditions. Trade payables amounted to 6.8 million, in line with those at 31 December Other current liabilities include deferred income of approximately 13.9 million resulting, as mentioned, from certain services that are recognized in a period different from when cash is received; these will not entail future financial outlays, but rather the recognition of future revenue in the income statement. Deferred income at 31 December 2015 amounted to 12.9 million versus 12.7 million at 30 September Other receivables and payables mostly include tax transactions (including deferred tax), INPS and dealings with authorities. The relevant information is found in the notes. 20

21 Other items included in net capital employed include other consolidated liabilities due beyond one year, which mainly comprise termination indemnities and provisions for risks and charges, amounting respectively to 0.8 million (versus 0.6 million at ) and 0.3 million (versus 0.4 million at ). The Dada Group s Equity amounted to 52.7 million at 30 September 2016 versus 59.3 million at 31 December The decrease is ascribable to the positive contribution of profit for the period of 190 thousand, to the negative effect of the translation of financial statements of consolidated companies denominated in GBP of million, and the rest to other changes. Group employees The number of Dada Group employees, split up by geographical area, at 30 September 2016 and at 31 December 2015, is shown in the table below: Italy Abroad Total 30/09/ /12/ /09/ /12/ /09/ /12/2015 Employees The Dada Group s headcount at 30 September 2016 totaled 444 employees versus 398 at 31 December The trend of this aggregate is ascribable to the increase in staff, as a result of the consolidation of Etinet S.r.l., to the insourcing of customer care and phone support services (as previously explained) in Italy and in other countries, which took place in 2015, in order to support the significant expansion of the customer base, and to the change in the scope of consolidation following the acquisition of Sfera Networks S.r.l.. SIGNIFICANT EVENTS IN 9M16 The events which had the most significant impact on the Dada Group in 9M16 are described below: On 28 April 2016, the Annual General Meeting of Shareholders of Dada S.p.A. met and resolved on: (i) the approval of the Separate Financial Statements of Dada S.p.A. for the year ended 31 December 2015, as proposed by the Board of Directors at the meeting held on 14 March The Shareholders resolved to carry forward the loss for the year of 1,575,094.94; (ii) the confirmation, as Directors of the Company, of Youssef Mohamed Salah Abdelsalam Bassem and of Fadi Zefer Boulos Antaki, previously co-opted by the Board of Directors of Dada S.p.A. on 11 November 2015, following the resignation of Khaled Bishara and Antonio Converti on 8 September 2015; (iii) the approval of the Remuneration Report in accordance with art. 123-ter of Legislative Decree 58/98; (iv) the renewal of the authorization, after revoking the previous one granted on 28 April 2015, to purchase treasury shares for up to a maximum number of shares not 21

22 exceeding one tenth of the share capital and to sell shares for a period of up to 18 months from authorization. The purpose of this authorization is to give the Company a means of strategic and operational flexibility. It will be allowed, among other things, to dispose of any treasury shares acquired and to carry out transactions such as purchases/sales, swaps and assignments. Based on the Board s proposal, treasury shares may be purchased at a price which is not less than 20% or more than 10% of the official stock price registered on the trading day prior to each purchase. The shares are to be purchased according to the laws for markets organized and operated by Borsa Italiana S.p.A., as per the procedures established by the latter which prohibit the direct matching of bid prices with predetermined ask prices. The sale of treasury shares, rather, may be done at a price or valuation which is not less than 95% of the average stock price registered for a period of ninety trading days prior to the disposal or any previous binding offers made in this regard, in accordance with the law and the applicable accounting standards. On 6 July Dada S.p.A. signed a binding agreement through its subsidiary Register.it S.p.A. for the acquisition of the business of Sfera Networks S.r.l.. The transaction is perfectly in line with the Dada Group s previously announced growth strategies, implemented also through acquisitions, which aim to complete the range of managed IT services dedicated to SMEs, which are continually growing in demand, and to expand the customer base, offering the whole suite of digital solutions. In 2015, Sfera posted revenue of approximately 2 million, split up as follows: Virtual Hosting Services 41%, Network & Private Cloud 35%, Domains and 14%, other services 10%; adjusted EBITDA came to million. The purchase price for the acquisition of the entire share capital of the Newco, based at closing date on an adjusted positive Net Financial Position (cash) of the Newco of 275 thousand, ranges from a minimum of 3.3 million to a maximum of 3.7 million, subject to the financial performance achieved by the Newco over the three years after closing date. The agreement includes the following terms of payment: 2 million settled at closing date, 0.3 million will be placed in escrow for the next 24 months to service the standard representations and warranties provided by the seller, and a final tranche ranging from a minimum of 1.0 million to a maximum of 1.4 million will be paid within 36 months from closing date, subject to the results achieved by the Newco. On 14 July 2016 Dada S.p.A., through its subsidiary Register S.p.A., completed the acquisition of 100% of the share capital of Sfera and paid the first tranche of the price amounting to 2 million. The transaction was financed through a medium-long term bank loan amounting to 2.5 million granted by ICCREA BancaImpresa. The 6-year loan has a 12-month grace period with a 3-month Euribor rate bps. For further details, reference should be made to the press releases issued on the foregoing transactions. SIGNIFICANT EVENTS AFTER 30 SEPTEMBER 2016 There are no significant facts or events to report after 30 September

23 OUTLOOK FOR THE YEAR The business outlook for the current year confirms the forecasts that point to a mid-single digit organic growth of business volumes, while operating results are expected to grow in 4Q16 versus 4Q15, driven also by the sales and technology initiatives launched over the past months. As mentioned in the Half-Year Financial Report at 30 June 2016, there is no indication at this time to suggest that the events related to Brexit may have a markedly adverse effect on the Group s operations in the UK; in the short term, the financial results may likely continue to be affected by fluctuations in the Euro/British Pound exchange rate, given that, to date, business activities denominated in British Pounds account for about 30% of consolidated business. Mention should also be made that the operating and financial results of Sfera Networks S.r.l. are consolidated as from July The company was acquired through the subsidiary Register.it S.p.A. last July, and in 3Q16 contributed 0.5 million to consolidated revenue and 0.2 million to EBITDA in 3Q16. The strategic growth lines of the Dada Group remain valid and focused on strengthening its position as a leading player at a European level in digitization and online presence and business services tailored to SMEs. Specifically, the Group s strategic priorities seek to further strengthen the market share in the various geographies of operation, expanding the range of services in "we do it for you" mode and strengthening the foothold in the cloud, and virtual & dedicated servers segment, placing growing attention on the quality of advice and consulting services for European SMEs. Organic revenue growth is expected to be achieved by acquiring a significant amount of new customers, building on the continuation of increasingly effective sales policies, and by further improving the retention rate, leveraging on upselling strategies (selling an increasing number of products to existing customers), and on the increase in ARPU (average revenue per user) of established customers. Profit-wise, strategic priorities will be centered on the continued integration of the technology platforms and full implementation of the proprietary Datacenter, as well as on constant commitment to the optimization of other operating costs and overheads. 23

24 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AT 30 SEPTEMBER

25 CONSOLIDATED FINANCIAL STATEMENTS DADA GROUP CONSOLIDATED INCOME STATEMENT AT 30 SEPTEMBER 2016 EUR/ September September 2015 Net revenue 47,716 46,660 Chg. in inventories, raw materials, work in progress & 1,660 1,689 inc. in own wk. capitalized Service costs and other operating expenses -26,509-26,397 Payroll costs -14,624-13,407 Other operating revenue and income Other operating expenses Provisions and impairment losses Depreciation and amortization -4,679-5,071 EBIT 3,215 3,036 Investment income Financial charges -2,523-2,509 Other income/charges from financial assets and -1 2,184 liabilities Share of profit/loss of companies valued at equity - 3 Comprehensive profit/(loss) before taxes 911 3,341 Income taxes Comprehensive profit/(loss) from continuing operations 191 2,624 Profit/(loss) from discontinued operations Group net profit/(loss) 191 2,279 Basic earnings/loss per share Diluted earnings/loss per share

26 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AT 30 SEPTEMBER 2016 EUR/ September September 2015 Net profit/(loss) for the period (A) 191 2,279 Other comprehensive profit/(loss) to be subsequently reclassified in profit/loss for the year (B): -6,930 3,996 Gains/(losses) on exchange rate derivatives (cash flow hedges) Tax effect on other gains/(losses) Gains/(losses) from the translation of foreign currency financial statements -6,913 3,996 Other comprehensive profit/loss not to be subsequently reclassified in profit/(loss) for the year Gains/(losses) from discounting of termination indemnities Tax effect on other gains/(losses) Total comprehensive income/(loss) (A)+(B) -6,779 6,281 Total comprehensive income/(loss) attributable to: Shareholders of the parent company -6,779 6,281 Non-controlling interests

27 DADA GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 SEPTEMBER 2016 ASSETS 30 September December 2015 Non-current assets Goodwill 79,182 82,676 Intangible assets 5,391 5,799 Property, plant and equipment 8,349 8,878 Equity investments in non-consolidated subsidiaries, associates and other companies 2,198 2,198 Financial assets and other non-current receivables Deferred tax assets 5,529 5,651 Total non-current assets 100, ,395 Current assets Inventories Trade receivables 4,407 3,504 Tax and other receivables 4,657 4,486 Current financial receivables 673 1,500 Financial assets for derivative instruments 16 - Cash on hand and banks 3,248 2,206 Total current assets 13,017 11,707 TOTAL ASSETS 114, ,103 27

28 DADA GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 SEPTEMBER 2016 EQUITY AND LIABILITIES 30 September December 2015 EQUITY AND LIABILITIES Capital and reserves Share capital 2,836 2,836 Other equity instruments Share premium reserve 33,098 33,098 Legal reserve Other reserves 10,182 17,152 Retained earnings/losses carried forward 5,030 3,696 Net profit/(loss) 191 1,333 Total equity, Group share 52,699 59,335 Non-controlling interests - - Total equity 52,699 59,335 Non-current liabilities Financial payables (due beyond one year) 21,579 20,332 Provision for risks and charges Provision for termination indemnities Non-current financial liabilities from derivatives Total non-current liabilities 22,742 21,441 Current liabilities Trade payables 6,823 6,758 Other payables 17,943 16,334 Taxes payable 2,025 2,020 Financial liabilities for derivative instruments Financial payables (due within one year) 11,682 11,128 Total current liabilities 38,559 36,327 TOTAL EQUITY AND LIABILITIES 114, ,103 28

29 DADA GROUP CONSOLIDATED CASH FLOW STATEMENT AT 30 SEPTEMBER 2016 EUR/000 Operating activities 30 September September 2015 Net profit/(loss) for the period 191 2,279 Adjustments for: Income from trading Financial charges 2,523 2,509 Income taxes Gains/losses -9 5 Gains from disposal of investments/business units 0-2,184 Valuation of associates at equity 0-3 Depreciation 2,540 2,798 Amortization 2,138 2,273 Granting of stock options Other provisions and impairment losses Increases/(decreases) in provisions Profit/(loss) from asset disposals/assets held for sale Cash flow from operating activities before changes in working capital 8,019 8,401 (Increase)/decrease in inventories (Increase)/decrease in receivables Increase/(decrease) in payables Cash flow from operating activities 8,354 8,078 Income taxes paid Interest (paid)/received -1,674-1,987 Net cash flow from operating activities 6,151 5,829 29