CONSOLIDATED INTERIM REPORT AT 31 ST MARCH 2015

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1 (COURTESY TRANSLATION FOR THE CONVENIENCE OF INTERNATIONAL READERS)

2 CONTENTS CORPORATE DETAILS....2 CORPORATE GOVERNANCE BODIES...3 GROUP STRUCTURE...4 COMPOSITION OF THE GROUP....5 DISTRIBUTION...6 CONSOLIDATED INTERIM REPORT COMPANY INFORMATION...9 KEY DATA AT 31 ST MARCH THE GROUP S RESULTS...15 ANALYSIS OF REVENUES...16 ANALYSIS OF THE INCOME STATEMENT ANALYSIS OF NET WORKING CAPITAL, CAPITAL EXPENDITURE AND FINANCING ACTIVITIES PERFORMANCE OF THE COMPANY S SHARE SIGNIFICANT EVENTS DURING THE PERIOD...33 SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE BUSINESS OUTLOOK...34 BASIS OF PREPARATION OF THE CONSOLIDATED INTERIM REPORT...35 SCOPE OF CONSOLIDATION...35 ACCOUNTING STANDARDS...35 DISCRETIONAL MEASURES AND SIGNIFICANT ACCOUNTING ESTIMATES RELATED PARTY TRANSACTIONS FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION...40 CONSOLIDATED INCOME STATEMENT...42 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME...43 CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY CERTIFICATION PURSUANT TO ARTICLE 145-BIS, PARAGRAPH 2 OF THE CONSOLIDATED FINANCE LAW (TUF) 46 1

3 CORPORATE DETAILS Registered office of the Holding Company Brunello Cucinelli S.p.A. Via Dell Industria, 5, frazione Solomeo Corciano Perugia Italy Legal information of the Holding Company Approved share capital 13,600,000 Subscribed and fully paid-up share capital 13,600,000 Perugia Companies Register no Official website: 2

4 CORPORATE GOVERNANCE BODIES AT 31 ST MARCH 2015 Board of Directors Brunello Cucinelli (1) Chairman and CEO Moreno Ciarapica (1) Executive director Riccardo Stefanelli (1) Executive director Giovanna Manfredi (1) Director Camilla Cucinelli (1) Director Giuseppe Labianca (1) Director Candice Koo (1) Independent director Andrea Pontremoli (1) Independent director Matteo Marzotto (1) Independent director Lead Independent Director Andrea Pontremoli Control and Risks Committee Andrea Pontremoli Chairman Matteo Marzotto Candice Koo Remuneration Committee Matteo Marzotto Chairman Andrea Pontremoli Candice Koo Board of Statutory Auditors Gerardo Longobardi (1) Chairman Alessandra Stabilini (1) Standing auditor Lorenzo Lucio Livio Ravizza (1) Standing auditor Guglielmo Castaldo (1) Substitute auditor Francesca Morbidelli (1) Substitute auditor External Auditors Manager in charge of the corporate accounting documents Reconta Ernst &Young S.p.A. Moreno Ciarapica (1): Appointed by shareholders at the ordinary general meeting of 23 rd April 2014; will remain in office until the date of the ordinary shareholders meeting called to approve the financial statements for the year ending 31 st December

5 GROUP STRUCTURE AT 31 ST MARCH 2015 Brunello Cucinelli S.p.A. 100% 100% Brunello Cucinelli Europe S.r.l. Brunello Cucinelli Japan Co. Ltd. 75% 68,4% Brunello Cucinelli Lessin (Sichuan) Fashion Co. Ltd. Brunello Cucinelli USA Inc. Brunello Cucinelli Retail Spain SL 95% (*) 98% (*) Brunello Cucinelli Suisse S.A. Brunello Cucinelli Hong Kong, Ltd. 51% 51% Brunello Cucinelli Lessin (Macau) Fashion Co. Ltd. 70% Cucinelli Holding Co LLC Brunello Cucinelli Retail Deutschland G.m.b.H. 70% 98% (*) Brunello Cucinelli France S.a.r.l. 2% Brunello Cucinelli Brasil, LTDA 98% 70% Brunello Cucinelli Canada Limited (#) 51% Brumas Inc. Brunello Cucinelli Austria Gmbh 98% (*) 98% (*) Brunello Cucinelli G.m.b.H. Brunello Cucinelli England, Ltd. 70% 98% (*) 51% Brunello Cucinelli Netherlands B.V. Brunello Cucinelli Hellas S.A. Brunello Cucinelli Belgium S.p.r.l. 100% 51% Max Vannucci S.r.l. 98% (*) Pinturicchio S.r.l. SAM Brunello Cucinelli Monaco (#) 68,67% 70% SAS White Flannel (*) The remaining percentage is held by Brunello Cucinelli S.p.A. (#) The company had been formed at 31 st March 2015 while the relative store will be opened at a later date. 4

6 COMPOSITION OF THE GROUP AT 31 ST MARCH 2015 Company name Brunello Cucinelli S.p.A. Brunello Cucinelli USA, Inc. Cucinelli Holding Co, LLC Brunello Cucinelli Europe S.r.l. Brumas Inc. Brunello Cucinelli Suisse S.A. Brunello Cucinelli Retail Spain SL Brunello Cucinelli GmbH Brunello Cucinelli France Sarl Brunello Cucinelli Belgium S.p.r.l. Max Vannucci S.r.l. Brunello Cucinelli Japan Co., Ltd. Brunello Cucinelli Retail Deutschland GmbH Brunello Cucinelli Netherlands B.V. Brunello Cucinelli Lessin (Sichuan) Fashion Co., Ltd. Brunello Cucinelli Hellas S.A. Brunello Cucinelli Austria GmbH Brunello Cucinelli England Ltd. Brunello Cucinelli Hong Kong Ltd. Brunello Cucinelli Lessin (Macau) Fashion Co., Ltd. Pinturicchio S.r.l. Brunello Cucinelli Brasil Ltda. SAS White Flannel SAM Brunello Cucinelli Monaco Brunello Cucinelli Canada Limited Registered office Corciano, frazione Solomeo (PG) Italy New York USA New York USA Corciano, frazione Solomeo (PG) Italy New York USA Lugano Switzerland Madrid Spain Munich Germany Paris France Brussels Belgium Perugia Italy Tokyo Japan Munich Germany Amsterdam Holland Chengdu China Athens Greece Vienna Austria London United Kingdom Hong Kong Macau Carrara Italy San Paolo Brazil Cannes France Principality of Monaco Vancouver Canada 5

7 DISTRIBUTION Il Gruppo propone i suoi prodotti sul mercato attraverso diversi canali di distribuzione, From the standpoint of the end user, the Group is present on the market as follows: the retail distribution channel, namely the direct distribution (retail) channel, for which the Group uses the services of Directly Operated Stores or DOS. In certain countries local operators also have an equity interest in the Group company running the DOS, thereby bringing in their specific experience of the market. From 1 st September 2014 the retail channel also includes the sales points in the Japanese department stores which are operated under the Group s responsibility using direct staff employed there; the wholesale monobrand channel, consisting of monobrand stores operated under commercial distribution agreements. The Group uses intermediaries represented by monobrand stores for sales to end users, with the result that in this case these are the Group s customers; the wholesale multibrand channel, which consists of independent multibrand stores and dedicated spaces in department stores (shop-in-shops). In this channel the Group uses intermediaries represented by independent multibrand stores for sales to end users, i.e. department stores, with the result that in this case these are the Group s customers. The Group uses a network of agents and distributors for sales to a number of monobrand and multibrand wholesale customers. For all distribution channels the Group ensures that the brand image and the Brunello Cucinelli style are transmitted in the areas and stores dedicated to the sale of its products. A summary is provided below of the Brunello Cucinelli Group s monobrand sales network at 31 st March 2015, 31 st December 2014 and 31 st March 2014: Points of sale 31 st March st December st March 2014 RETAIL WHOLESALE MONOBRAND The following table provides an analysis of the location of points of sale by geographical area at 31 st March 2015: Points of sale Italy Europe North America Greater Rest of the China World (RoW) DOS WHOLESALE MONOBRAND TOTAL Total 6

8 The figure below sets out the DOS and wholesale monobrand points of sale at 31 st March 2015 together with their geographical location: Greater China North America 17 DOS 1 WHS MONOMARCA Europe 24 DOS 1 Austria; 2 Belgium; 4 France; 4 Germany; 1 Greece; 1 Netherlands; 5 Spain; 4 Switzerland; 2 UK 19 WHS MONOMARCA 1 Azerbaijan; 6 Russa; 1 France; 1 Germany; 1 Lithuania; 2 Switzerland; 3 Ukraine; 1 Romania; 1 Turkey; 1 Kazakhstan; 1 Denmark 16 DOS 3 WHS MONOMARCA Italy 13 DOS 4 WHS MONOMARCA Rest of World (RoW) 4 DOS 1 Latin America; 3 Asia Pacific; 8 WHS MONOMARCA 2 Latin America; 4 Asia Pacific; 2 Middle East Since 1 st September 2014 the revenues of the 13 Japanese sales points, which are located inside department stores and operated under the Group s responsibility, employing direct staff, are included in the retail channel. 7

9 CONSOLIDATED INTERIM REPORT AT 31 ST MARCH

10 COMPANY INFORMATION OUR COMPANY Brunello Cucinelli S.p.A. is a company registered as a legal entity under the laws of the Republic of Italy and has its registered office at Via dell Industria 5, Corciano Frazione Solomeo (PG), Italy. The Group s product range focuses on a single brand: Brunello Cucinelli, internationally recognized as one of the finest examples of absolute luxury, combining exclusive Made in Italy features with the ability to innovate and identify new trends. The brand s distinctive elements are quality, craftsmanship, creativity, exclusivity, and beauty, plus a remarkable ability to listen to the market and its new trends. The result is a line of casual chic prèt-à-porter products that satisfy the tastes of young and less-young customers while retaining value over time. Merging old and new, business goals and human needs: the secret of a company whose innovative capacity is looked upon with interest from all sides as well as being a case study in modern economy illustrated at prestigious universities. PRODUCT The daily alchemy between tradition and research as a trail-blazer for new creations The collections assert a new balance in the 2015 spring/summer and fall/winter seasons, where the luxury of refined materials is exalted by creativity and workmanship to dress the man and the woman for all occasions, from business dress to jet-setting elegance and above all around that casual attitude associated with knitwear that has always defined the Brunello Cucinelli character. Lifestyle from gym to dinner where the exploration of the various nuances and ways of wearing and matching clothes aims at a complete style for everyday wear. A tight bond between craftsmanship and research across all the various types from men s suits to knitwear, from informal items to elegance for the evening. Precious fibers and natural materials blend together or are reinvented by means of original processes, tested within an attentive mingling of tradition and research that moves our creations. Knitwear is once again the star of the collections and a fundamental pivot of the look with new elements, yarns and innovative techniques extending the line and multiplying the combinations. The noble fiber of cashmere becomes a meeting point of modern elegance, in a balance between identity and innovation. VISUAL MERCHANDISING In keeping with the changes in the collections, moving in the direction of modern taste, a significant development in visual merchandising criteria has been seen over the past year. A move has been made from research to the creation, design and production of unique items capable of narrating and expressing the theme of the collections, in harmony in their colors, shapes and materials. 9

11 From the tale of the world that is told in Solomeo, visual merchandising develops a new form of setting that is directly connected with the product. Presentation becomes a harmonic sounding board where the constant exchange of materials, ideas and creations produces new and unique articles, which renew themselves spontaneously with the evolution of taste and the collections. The display and settings define a line of continuity that makes every display window, boutique and environment a unique item, a place where the creative spirit can be recognized, perfectly placed within the brand s philosophy and traditions. A young and qualified team structured on a geographical basis looks after the features and needs of every single boutique as it does those of the multibrand stores. From the sales campaign to displaying the collections it responds reactively and consistently to creative stimuli and the specific requirements of spaces, cultures and tastes. The organization is responsible for: development of store design and display systems in harmony with the brand s image; coordinated management of merchandising and assortments consistent with the reference market; harmonization of communication and of visual elements in each store. COMMUNICATION The attention placed by the Italian and international media on the elements making up the identity of the Solomeo company is once again proven, a young identity but one solidly rooted in the traditional values for which we want to be the guardian for future generations. The brand image arises directly from the philosophy underlying the Humanistic Enterprise project, based on the timeless values of the dignity of man and work, and demonstrates the commitment that actively links the Company to the culture of craftsmanship, landscape and art to be found in Umbria. The specific attention given to all the various operations that accompany the presentation of the collections responds to the idea of the brand s own elegance, which renews itself thanks to a skillful balance of tradition and innovation. An agile, young and reactive communications office has grown at the Solomeo headquarters over the seasons to the point of achieving a high level of specialization that organically covers all the stages involved in presenting the collections, talking in a direct and immediate manner about the environment and the philosophy of which it represents the cradle. DISTRIBUTION The brand reached an important symbolical goal in 2014: over 100 monobrand boutiques located in key points throughout the world spread the products and values that grow in Solomeo, while constantly maintaining the character of exclusivity and rarity for the diffusion of a product that is increasingly unique in being associated with savoir-faire and Italian and Umbrian artisan tradition. 10

12 Expansion The Company continues to spread its presence throughout the world in a balanced and attentive manner, with new boutiques strategically placed in the heart of Europe in the thinking capitals of Vienna and Frankfurt, in the large oriental metropolises of Seoul, Singapore, Hanoi and Shanghai and in the symbolic cities of America, Aspen, Atlanta and San Francisco. At the same time we continue to address a careful and painstaking invitation to our customers in Italy, with two new openings having taken place in Bari and Palermo, cultural and harbor cities that have created the history of the Mediterranean. Consolidation and enlargement Directly operated stores (DOS), partnerships and joint ventures contribute to defining the variety of operations taking place on a global scale, enabling the Company to closely follow its diffusion and presence at that level and responding with key operations for consolidating and enlarging on the central fashion markets such as Paris, Beverly Hills, Rome and London, to name but a few of the most significant locations Total monobrand points of sale WHS monobrand Retail DOS 31 st March st December st March 2014 The retail channel consists of the monobrand stores and DOS (directly operated stores), some of which are operated in partnership with experts at the location; From 1 st September 2014 the retail channel also includes the sales points in the Japanese department stores which are operated under the Group s responsibility using direct staff employed there; The wholesale monobrand channel refers to monobrand boutiques which for strategic reasons are operated through consolidated commercial relationships with local operators; The wholesale multibrand channel consists of approximately 650 selected multibrand customers. The world s most prestigious department stores form part of the multibrand network, with increasingly important dedicated spaces. 11

13 PRODUCTION Responding to the gracious and constant growth in the diffusion of the product throughout the world is a constant emphasis on the quality of the work, in line with the brand s Humanistic Enterprise philosophy, which has always sought the first real source of creativity in the dignity of work. The enlargement of the Company s business complex has enabled it to unite all the different departments in the green area lying at the foot of the Solomeo hill, thus enhancing the value of the cohesion and harmony to be found in the process of creating the collections. The close relationship that binds the Company to over 300 small and tiny Italian manufacturing craftwork firms has enabled a perfect matching of intent to be created in terms of the quality of the workmanship, a quality that has grown over time into strong loyalty and mutual trust. The extremely high proportion of façonisti situated in Umbria, around 80%, enables the management of production to be perfectly coordinated and above all allows the Company to keep complete control of all the stages of production with an attention to detail, always one of the brand s winning elements. The new balance and interpenetration between creations of a casual nature and sartorial elements enables the Cucinelli brand to spread its artisan and innovative character across all its products, from clothing to accessories, blending the features of every type into a unique image. THE SOLOMEO SCHOOL The Crafts School opened in September 2013 provides a series of courses on the crafts inherent in the Company s activities, such as the techniques of knitting or cutting and assembling organized and supported by the Company. A new course on tailoring began in July 2014, another symbolic discipline of that Italian excellence and handicraft renowned throughout the world. The School then provides a series of courses dedicated to the craft-based and traditional arts and disciplines such as horticulture, gardening and the masonry arts, fostered and supported by the Brunello e Federica Cucinelli Foundation. All the School s courses take place in the ancient hamlet, inside or close to the castle which is now discovering a new life. After its first existence in olden days, linked to an important past, and its reconstruction as the headquarters of a modern Italian business, the Hamlet of Solomeo is now looking towards the future as a place for teaching young people. 12

14 SUMMARY DATA AT 31 ST MARCH 2015 The following tables provide: (i) a summarized consolidated income statement for the three months ended 31 st March 2015 with comparative figures for the three months ended 31 st March 2014, (ii) a consolidated balance sheet reclassified by sources and applications at 31 st March 2015 with comparative figures at 31 st December 2014 (iii) figures for capital expenditure and operating cash flows for the three months ended 31 st March with comparative figures for the first period ended 31 st December 2014 and 31 st March Summarized consolidated income statement (In thousands of Euro) Three months ended 31 st March Change in the period 2015 % of revenues 2014 % of revenues 2015 vs vs % Revenues 111, % 100, % 11, % EBITDA (1) 19, % 18, % % Operating income 14, % 15, % (211) -1.4% Net income for the period 9, % 9, % (222) -2.3% Normalized revenues (2) 111, % 100, % 11, % Normalized EBITDA (2) 19, % 17, % 1, % Normalized operating income (2) 14, % 14, % % Normalized net income for the period (2) 9, % 9, % % (1) We define EBITDA as operating income before depreciation and amortization. EBITDA defined in this way is a measure used by our management to monitor and assess our operating performance. EBITDA is not an accounting measure in the context of IFRS and accordingly should not be considered as an alternative for assessing trends in the Group s operating income. Since the composition of EBITDA is not regulated by the accounting principles adopted, the means of calculating this figure used by us might not be consistent with that used by others and might therefore not be comparable. (2) The normalized figures for revenues, EBITDA, operating income and net income for the period exclude the capital gain of 755 thousand recognized on the sale of a property from the results for the period ended 31 st March

15 Consolidated balance sheet reclassified by sources and applications: (In thousands of Euro) At Change 31 st March st December vs vs % Net working capital 114,187 97,507 16, % Fixed assets 127, ,592 12, % Other non-current assets/(liabilities) 2, ,385 >+100.0% Net invested capital 243, ,961 30, % Net debt (3) 68,229 42,636 25, % Shareholders equity 175, ,325 4, % Sources of funding 243, ,961 30, % (3) Net debt is calculated as the sum of cash and cash equivalents, current financial assets, non-current financial liabilities, the fair value of hedging instruments and other non-current financial assets. Other summary data: (In thousands of Euro) 31 st March st December st March 2014 Capex (4) 13,567 39,661 12,964 Cash flows from (used by) operating activities (11,938) 13,771 (7,170) (4) Capex refers to gross investments in intangible, tangible and financial fixed assets. 14

16 THE GROUP S RESULTS AT 31 ST MARCH 2015 The year 2015 has begun with a first quarter confirming the path of gracious growth and long-term sustainability, as part of the business project that has always been founded on the solid principles and unique direction of the Company s strategy that is based on a consolidated exclusive prêt-à-porter proposal and a sophisticated concept of contemporary lifestyle. The excellent quality of the fibers and materials used, the skillful Italian craftsmanship that produces the articles, creativity in design and an exclusive presence in the world s main luxury streets and most prestigious Luxury Department Stores: these elements have always been a feature of the Company s DNA, enabling it to achieve solid results in growth and revenues. The dynamics of the quarter confirm the soundness of the purchasing habits of the top-end customer, limiting the effect of changes of a macroeconomic, political and monetary nature in purchasing decisions taken by both local customers and top-end tourist flow. The Group posted net revenues of 111,889 thousand for the quarter ended 31 st March 2015, a rise of 11.0% over the corresponding period of the previous year. Revenues for the first quarter of 2014 were affected by the income arising from the sale of a property to the parent Fedone S.r.l. (in turn controlled by Cav. Lav. Brunello Cucinelli), not situated close the Company s manufacturing and logistical facilities, which led to a capital gain of 755 thousand, recognized as other income. Excluding the effect of this transaction revenues rose by 11.8%. The Group posted net revenues of 111,701 thousand for the quarter ended 31 st March 2015, a rise of 12.1% over the figure of 99,643 thousand at 31 st March EBITDA reached 19,167 thousand (17.1% of revenues), an increase of 9.5% compared to normalized EBITDA of 17,500 thousand for the quarter ended 31 st March 2014 (17.5% of revenues). The first quarter of 2015 was characterized by a reduction of costs for raw materials and outsourced manufacturing costs as a percentage of revenues, essentially due to changes between quarters and the higher proportion of revenues earned in the retail distribution channel. On the other hand the development and expansion of directly operated sales points in this channel led to an increase in rental expense and payroll costs as a percentage of revenues compared to the first quarter of the previous year, thereby offsetting the effect. Net income of 9,349 thousand for the three months ended 31 st March 2015, corresponding to 8.4% of revenues, represents an increase of 296 thousand or 3.3% over the normalized figure for the first quarter of Si segnala la maggiore incidenza percentuale della voce Ammortamenti rispetto al primo trimestre del passato esercizio, a seguito degli importanti investimenti effettuati dalla Società. While not showing sharp seasonal or cyclical variations in total annual sales, the Group s business is affected in the course of the various quarters of the year by revenues and costs arising mainly from industrial operations that are not perfectly homogeneous. Consequently, any analysis of interim results and financial and profitability indicators cannot be considered as fully representative, and it is therefore not advisable to consider the period indicators as a proportional share of the full year. 15

17 ANALYSIS OF REVENUES The Group s consolidated turnover for the first quarter amounted to 111,701 thousand, a rise of 12.1% over the same period in There was solid double-digit growth in revenues in the period. At constant exchange rates, meaning the same average rates as those used for the first three months of 2014, revenues would have been 108,206 thousand, an increase of 8.6% % +12.1% 31 st March 2015 constant exchange rates 31 st March st March

18 The overall increase in net revenues amounted to 12,058 thousand at current exchange rates (+12.1%), mainly due to organic growth in the retail channel arising from the development of existing points of sale, the opening of new direct points of sale (DOS) in all geographical areas and the growth of the wholesale multibrand channel compared to the corresponding quarter of the previous year. REVENUES BY DISTRIBUTION CHANNEL Considerable growth rates were posted in all channels in the first three months of 2015, arising to a significant extent in the retail channel but with the wholesale monobrand and multibrand channels being equally positive. The following table provides details of the net revenues earned by the Group in the three months ended 31 st March 2015 and 2014, analyzed by distribution channel. (In thousands of Euro) Three months ended 31 st March Change 2015 % 2014 % 2015 vs vs % Retail 43, % 32, % 10, % Wholesale monobrand 12, % 12, % % Wholesale multibrand 55, % 54, % % Total 111, % 99, % 12, % % 39.2% Total WHS Multibrand WHS Monobrand Retail DOS 11.4% 31 st March st March st March

19 RETAIL Net revenues of 43,828 thousand were generated by the retail channel, representing an increase of 10,898 thousand or 33.1% over the corresponding previous period. In the quarter ended 31 st March 2015 the retail channel represented 39.2% of the Group s net revenues, an increase over the figure of 33.1% in the first quarter of Direct points of sale, of which there were sixty three at 31 st March 2014, rose to seventy five at 31 st March 2015, an increase of twelve consisting of nine openings and three conversions of sales points previously operated as wholesale monobrand, to which should be added the effect of the conversion of the thirteen Japanese sales points to direct operations on 1 st September The number of direct sales points increased by four units in the first three months of 2015 compared to 31 st December Like-for-like (comparable store sales), calculated as the increase in revenues at constant exchange rates in the DOS existing at 1 st January 2014, amounted to XX% in the first 18 weeks of the year (the period between 1 st January and 3 rd May 2015). WHOLESALE MONOBRAND Net revenues earned through the wholesale monobrand channel amounted to 12,738 thousand (an increase of 168 thousand over the quarter ended 31 st March 2014), corresponding to a rise of 1.3% over the same period in the previous year. In the quarter ended 31 st March 2015 revenues in the wholesale monobrand channel represented 11.4% of the Group s revenues, a fall of 12.6% compared to the first quarter of Direct points of sale, of which there were thirty five at 31 st March 2014, were unchanged in number at 31 st March Compared to 31 st March 2014 there were three openings and three conversions to DOSs of points of sale previously operated as wholesale monobrand. During the three months ended 31 st March 2015 there was an increase of one in the number of wholesale monobrand stores compared to the situation at 31 st December

20 WHOLESALE MULTIBRAND Net revenues earned through the wholesale multibrand channel amounted to 55,135 thousand (an increase of 992 thousand over the quarter ended 31 st March 2014), corresponding to a rise of 1.4% over the same period in the previous year. Revenues in this channel fell from 54.3% of the total in the quarter ended 31 st March 2014 to 49.4% in the first quarter of Performance compared to the three months ended 31 st March 2014 was affected by the development in the way in which the business in Japan is operated. On 1 st September 2014 the 13 points of sale situated in the most important Luxury Department Stores were converted from the wholesale multibrand to retail channel. REVENUES BY GEOGRAPHICAL AREA The Brunello Cucinelli Group achieved considerable growth in all international markets in the first three months of 2015, which represented 79.1% of net revenues for the period, with a total increase of 15.2% over the figures for the corresponding period of the previous year; the Italian market too posted an interesting and significant rise in revenues, with healthy and sustainable results. The following table provides details of revenues for the three months ended 31 st March 2015 analyzed by geographical area, with comparative figures for the corresponding period of the previous year. (In thousands of Euro) Three months ended 31 st March Change 2015 % 2014 % 2015 vs vs % Italy 23, % 22, % % Europe 35, % 33, % 1, % North America 34, % 25, % 8, % Greater China 6, % 6, % % Rest of the World (RoW) 11, % 11, % % Total 111, % 99, % 12, % 19

21 % Total 6.2% 20.9% RoW Greater China North America Europe Italy 30.9% 31.5% 31 st March st March st March 2015 The following is an analysis of the increase in net revenues by geographical area. Italy Net revenues for Italy represented 20.9% of total revenues (23.0% in the same period of the previous year), posting an interesting increase of 387 thousand in absolute terms, or 1.7%, over the period ended 31 st March 2014 ( 23,360 thousand in 2015 and 22,973 thousand in 2014). This result was driven by the performance achieved by the direct monobrand and multibrand boutiques in the main cities and resorts which benefit from a constant flow of top-end tourists and purchases made by the more select local customers. There were thirteen boutiques in the direct monobrand network at 31 st March 2015, with openings only taking place at Bari, in November 2014, and Palermo, at the end of March 2015, while the number of boutiques in the wholesale monobrand channel remained unchanged at four. Europe Net revenues for Europe represented 31.5% of total revenues (33.5% in the same period of the previous year), rising by 1,831 thousand in absolute terms, or 5.5%, from 33,357 thousand to 35,188 thousand. Results which were supported by the rise in revenues in existing spaces, in particular in the continent s leading cities and most prestigious resorts, with the contribution of new floor spaces being limited to the opening of three boutiques (Vienna in April 2014, Frankfurt in January 2015 and Paris in the second half of March 2015). Flows of top-end foreign tourists were stable (increasingly less affected by the volatility arising from macroeconomic and currency changes), while in the same way sales results in Russia remain solid in terms of the performance achieved by the multibrand boutiques and orders collected for the 2015 fall/winter collection. 20

22 There were twenty four boutiques in the direct monobrand network at 31 st March 2015 and nineteen in the wholesale monobrand channel network. North America Net revenues for North America represented 30.9% of total revenues (25.9% in the same period of the previous year), rising by 8,767 thousand, or 34.0%, from 25,776 thousand to 34,543 thousand. There was considerable revenue growth in the direct channel thanks to the significant results achieved by existing boutiques and the contribution made by the three openings taking place over the past twelve months (Atlanta and San Francisco, both in September 2014, and New York Soho at the end of March 2015), while there was also a notable increase in wholesale monobrand channel revenues, driven by the sell-out in the spaces in the most important Luxury Department Stores. These stores, whose aim is to meet the needs of top-end, sophisticated customers, have continued with their decision to grant the most prestigious spaces to brands they consider modern and contemporary and characterized by an offer of exclusive and unique products, and at the same time have increased their selling spaces. The results are supported by purchases made by local customers and top-end tourist flows, constantly sustained in the most prestigious localities. There were nineteen boutiques in the monobrand network at 31 st March Greater China Net revenues for Greater China represented 6.2% of total revenues (6.3% in the same period of the previous year), rising by 643 thousand (+10.2%) from 6,280 thousand to 6,923 thousand. This effect is partially due to the conversion of sales points from wholesale monobrand to DOS. The increase in sales was driven by the performance of the existing network; the normalized trend in growth in the first quarter of 2015 differs from the previous quarters, which were affected by the conversion of boutiques from the wholesale monobrand channel to the direct channel. Exclusivity of distribution in mainland China is ensured by a presence limited to ten or so boutiques, selected shop windows for top-end customers, both for the purchases they make on the domestic market and those they make in the main luxury capitals of the world as always representative of a prestigious and unique purchasing experience. Tourist flows of the most exclusive Asian customers, constantly directed towards the top luxury locations, remain in line with the trend seen in previous quarters, with a well-balanced pricing policy as always in the various geographical areas. The number of boutiques and selling spaces remained unchanged over the first quarter of 2015, consisting of sixteen direct monobrand boutiques and three wholesale monobrand boutiques. Rest of the World Net revenues for the Rest of the World in the first three months of 2015 increased by 3.8% over the corresponding period of the previous year, rising from 11,257 thousand to 11,687 thousand. Performance compared to the first quarter of 2014 was affected by the development of the way the business is operated in Japan and the conversions that have taken place there. Japan is still the leading country in the Rest of the World and on 1 st September 2014 the three wholesale monobrand boutiques were converted to direct 21

23 stores, and the thirteen dedicated spaces situated in the country s leading Luxury Department Stores passed from wholesale multibrand to the retail channel. These transfers and conversions affected the results for the first three months of 2015; the first quarter of 2014 was in fact characterized by deliveries of the spring-summer collection to wholesale monobrand and multibrand customers (sell-in revenues), while the same deliveries to the sales points in the first quarter of this year contribute to revenues for both the first and second quarters. There were twelve monobrand stores at 31 st March 2015, with three openings taking place over the past 12 months (San Paolo and Seoul in 2014, while the only opening in 2015 took place in Singapore). REVENUES BY PRODUCT LINE AND TYPE OF END CUSTOMER The following is a graphical representation of the Brunello Cucinelli Group s revenues for the three months ended 31 st March, analyzed by product line and type of end customer: 15.7% 32.2% 84.3% 67.8% Clothing Accessories Women Men 31 st March st March

24 ANALYSIS OF THE INCOME STATEMENT Set out below is a graphical representation of the income statement for the three months ended 31 st March 2015, representing the Group s performance for this period: (21.0%) (44.7%) (16.4%) (0.8%) 17.1% (3.8%) 13.4% (1.1%) 12.3% (3.9%) 8.4% (23.5) (50.0) (18.3) (0.9) 19.2 (4.2) 15.0 (1.2) 13.7 (4.4) 9.3 Revenues Materials Services Payroll Other costs EBITDA Depreciation and amortization Operating income Net financial expense Income before taxation Taxation Net income OPERATING RESULTS As discussed above, the first quarter of 2014 was positively affected by the sale of a property to the parent Fedone S.r.l. (in turn controlled by Cav. Lav. Brunello Cucinelli), not situated close to the Company s manufacturing and logistical facilities, which led to a capital gain of 755 thousand, recognized as other income. In order to enable a homogenous and consistent comparison to be made with the current quarter the figures for the first quarter of 2014 have been normalized in this consolidated interim report by excluding this transaction. 23

25 The following table provides a summary of operating income and operating profitability (EBITDA): (In thousands of Euro) Three months ended 31 st March Change 2015 % 2014 normalized % 2015 vs vs % Operating income (2) 14, % 14, % % + Depreciation and amortization 4, % 3, % 1, % EBITDA (1) (2) 19, % 17, % 1, % (1) EBITDA is calculated as operating income before depreciation and amortization. EBITDA defined in this way is a measure used by Company management to monitor and assess operating performance. EBITDA is not an IFRS accounting measure and accordingly should not be considered as an alternative for assessing trends in the Group s operating income. Since the composition of EBITDA is not regulated by the Group s accounting principles, the way in which the Group calculates this figure may not be consistent with that used by others and may therefore not be comparable. (2) The normalized figures for operating income and EBITDA for the three months ended 31 st March 2014 exclude the capital gain of 755 thousand recognized in the first quarter of 2014 to enable a homogenous and consistent comparison to be made with the figures for the current quarter. EBITDA for the quarter ended 31 st March 2015 amounted to 19,167 thousand representing 17.1% of revenues, an increase of 9.5% over the normalized figure for the corresponding quarter in As discussed above, the first quarter of 2014 was affected by the sale of a property to the parent Fedone S.r.l. (in turn controlled by Cav. Lav. Brunello Cucinelli), not situated close to the Company s manufacturing and logistical facilities, which led to a capital gain of 755 thousand, recognized as other income. Operating income for the first three months of 2015 amounted to 14,970 thousand representing 13.4% of revenues, an increase of 3.8% over the normalized figure for the corresponding quarter in Depreciation had a considerable effect on this result, being a consequence of the investments being made; this represented 3.8% of revenues in the first quarter of 2015 compared to 3.1% in the first three months of 2014 (an increase of 1,123 thousand in absolute terms). The following table sets out in graphical form trends in the Group s EBITDA and operating income for the three months ended 31 st March 2015 and 31 st March 2014: EBITDA ( m) EBITDA (%) Operating income ( m) Operating income (%) % 17.5% 13.4% 14.4% 31 st March st March 2014 normalized 31 st March st March 2014 normalized 24

26 As shown above, EBITDA fell from 17.5% in the first quarter of 2014 as normalized to 17.1% in the first quarter of 2015, increasing by 1,667 thousand in absolute terms. The economic changes characterizing the first quarter of 2015 are above all represented by the fact that the net revenues posted by the retail distribution channel increased as a percentage of the total for the period (39.2% in the first quarter of 2015 compared to 33.1% in the first quarter of 2014). The increased proportion of revenues in the retail channel is due to organic growth in the existing sales points (a like-for-like increase of 4.8%) and the development of the network of stores, whose number rose by twenty five compared to the first quarter of 2014 (nine openings, together the new way in which business is being conducted in Japan which led to the conversion of three wholesale monobrand boutiques to direct stores and to thirteen dedicated spaces situated in the country s most important Luxury Department Stores being run as direct operations). This commercial expansion consequently led to an increase in certain operating costs as a percentage of revenues in the first quarter of 2015, in particular rental expense (which in addition to the nine openings and boutique conversions was also affected by the increase caused by the repositioning and enlargement of some of the more important boutiques, the renegotiation of expiring agreements, the opening of the new showroom in Tokyo and the repositioning of the important showroom in New York) and the payroll costs arising from the increase in the workforce, essentially due to an increase in sales staff. The above changes led to the following: 1. a reduction in costs for raw materials and outsourced manufacturing costs as a percentage of revenues (40.2% in the quarter ended 31 st March 2015 compared to 44.0% in the quarter ended 31 st March 2014 as normalized); this fall is due to the fact that the flow of revenues and costs is not homogeneous throughout the various quarters of the year, and at 31 st December 2014 costs for raw materials and outsourced manufacturing costs represented 37.1% of revenues. (In thousands of Euro) Three months ended 31 st March Change 2015 % 2014 % 2015 vs vs % Costs for raw materials and consumables 20, % 19, % % Change in inventories 3, % 3, % (548) -15.2% Outsourced manufacturing costs 21, % 20, % % Total 44, % 44, % % 2. an increase in rental expense as a percentage of revenues (9.3% in the quarter ended 31 st March 2015 compared to 6.2% in the quarter ended 31 st March 2014 as normalized), which in absolute terms was equivalent to a rise of 4,211 thousand over the corresponding quarter in The equivalent figure at 31 st December 2014 was 8.1%; (In thousands of Euro) Three months ended 31 st March Change 2015 % 2014 % 2015 vs vs % Rental expense 10, % 6, % 4, % 3. an increase in payroll costs as a percentage of revenues (16.4% in the quarter ended 31 st March 2015 compared to 15.1% in the quarter ended 31 st March 2014 as normalized). These costs amounted to 18,315 thousand in the first quarter of 2015 compared to 15,083 thousand in the corresponding quarter of 2014, representing a rise of 3,232 thousand in absolute terms. There were 1,361.6 full time equivalent workers at 31 st March 2015 compared to 1,168.7 at 31 st March 2014 (+192.9), essentially due to the increase in the 25

27 number of sales staff caused by the expansion of the directly operated sales point network. The equivalent figure at 31 st December 2014 was 17.4% , ,168.7 Total Payroll costs ( m) Payroll costs (%) 16.4% 15.1% st March st March st March 2015 normalizzato st March 2014 Office and sales staff Managers and middle management Factory workers After reviewing the main changes that have taken place in manufacturing costs, rental expense and payroll costs, brief comments are provided below on the other main items in operating costs: commissions and accessory costs, being the commissions payable to the network of agents, which were essentially in line with the first quarter of 2014 (3.1% in 2015, 2.9% in 2014); advertising and other marketing expenses, which rose by 241 thousand, or 4.2%, and represented 5.3% of revenues in the quarter ended 31 st March 2015 compared to 5.7% in the corresponding period of These costs relate to the promotional activities carried out by the Group to disseminate its image and philosophy throughout the world (more specifically, these are costs incurred for the production of catalogues, advertising campaigns and fairs and exhibitions organized in Italy and abroad). Communication and image expenses (Advertising and other marketing expenses?) represented 5.7% of revenues at 31 st December 2014; transport and duties, which amounted to 3.0% of revenues in 2015, a decrease over the figure of 3.4% in 2014; credit card charges, which rose by 22.0% over the first quarter of 2014, an increase closely connected with the growth in the retail channel. The following table provides a summary of these items for the first three months of 2015 and 2014 together with their percentage as a proportion of revenues. (In thousands of Euro) Three months ended 31 st March Change 2015 % 2014 % 2015 vs vs % Commissions and accessory costs 3, % 2, % % Advertising and other marketing expenses 5, % 5, % % Transport and duties 3, % 3, % (48) -1.4% Credit card charges % % % 26

28 ANALYSIS OF NET WORKING CAPITAL, CAPITAL EXPENDITURE AND FINANCING ACTIVITIES The following table sets out the balance sheet at 31 st March 2015 reclassified into sources and applications together with comparative figures at 31 st December 2014 and 31 st March (In thousands of Euro) 31 st March st December st March 2014 Trade receivables 64,234 45,051 59,793 Inventories 127, ,114 91,527 Trade payables (57,258) (62,185) (56,569) Other current assets/(liabilities), net (20,404) (10,473) (5,353) Net working capital 114,187 97,507 89,398 Intangible assets 32,759 29,649 30,269 Property, plant and equipment 88,464 80,157 63,427 Financial fixed assets 5,891 4,786 3,992 Fixed assets 127, ,592 97,688 Other non-current assets/(liabilities), net 2, (942) Net invested capital 243, , ,144 Cash and cash equivalents (52,050) (53,635) (42,512) Current bank payables 62,423 48,709 48,522 Non-current bank payables 52,355 42,450 18,173 Other financial instruments, net 5,501 5,112 4,142 Net debt 68,229 42,636 28,325 Share capital 13,600 13,600 13,600 Reserves 144, , ,824 Group result 9,858 33,060 9,732 Equity attributable to owners of the parent 167, , ,156 Equity attributable to non-controlling interests 7,488 5,568 6,663 Shareholders equity 175, , ,819 Sources of funding 243, , ,144 27

29 NET WORKING CAPITAL Net working capital at 31 st March 2015 rose by 24,789 thousand over the corresponding figure at 31 st March The increase is essentially due to inventories, which rose by 36,088 thousand in absolute terms and from 27.5% to 34.7% as a percentage of net revenues, partially offset by that in other current net liabilities to 20,404 thousand at 31 st March 2015 from 5,353 thousand at 31 st March 2014; this latter is mainly due to the effect of measuring hedging derivatives at fair value. The rise in inventories is principally due to the opening of nine new sales points over the past twelve months in addition to the growth of the business during the period. The increase in net working capital was partially offset by the rise in other current net liabilities to 20,404 thousand at 31 st March 2015 from 5,353 thousand at 31 st March 2014; this latter difference is mainly due to the effect of measuring derivatives that are acquired for hedging the foreign exchange risk of commercial transactions in foreign currency at fair value. In this respect the Group accounts for these instruments as cash flow hedges: their fair value is recognized under the item Derivative instruments current assets or Derivative instruments current liabilities, with a counter-entry being made to the cash flow hedge reserve in equity for the portion that is determined to be an effective hedge which is then reclassified to revenues in the income statement in the period in which the hedged transactions are accounted for. Trade receivables ( 64,234 thousand at 31 st March 2015 compared to 59,793 thousand at 31 st March 2014) and trade payables ( 57,258 thousand at 31 st March 2015 compared to 56,569 thousand at 31 st March 2014) essentially moved in line with business trends. CAPEX The Group made net investments in fixed assets amounting to 13,567 thousand in the quarter ended 31 st March 2015, of which 3,631 thousand in intangible assets, 9,073 thousand in property, plant and equipment and 863 thousand in financial fixed assets (guarantee deposits). Investments totaling 40,264 thousand have been made over the past twelve months. The following table sets out the gross and net capital expenditure made by the Group in the quarters ended 31 st March 2015 and 2014, analyzed by type and category. (In thousands of Euro) 31 st March st March 2014 from 31 st March 2014 to 31 st March 2015 Capex in intangible assets 3,631 4,822 6,360 Capex in property, plant and equipment 9,073 7,527 32,197 Capex in financial fixed assets ,707 Total capex 13,567 12,964 40,264 The most significant investments made were for the opening and structuring of points of sale, to a large extent due to the entry into the consolidation scope of SAM Brunello Cucinelli Monaco, which will operate the Monte Carlo boutique, and the opening of new stores directly operated by the Group in Europe, North America and the Rest of the World. 28