26 Thursday 05:26 PM The Board of Directors has approved the 2021 Half Year Financial Report

Press Release

BRUNELLO CUCINELLI: The BoD has approved the 2021 Half-Yearly Financial Report

• Revenues of €313.8 million, up +7.7% at current exchange rates (+10.0% at constant exchange rates) compared to June 30, 2019 and +52.9% at current exchange rates (+57.7% at constant exchange rates) compared to June 30, 2020;
• The second quarter of 2021 reported revenues of €149.2 million, up +13.8% compared to the same period in 2019;
• EBITDA of €80.6 million (25.7% margin) compared to -€3.4 million last year and €79.2 million as of June 30, 2019;
• EBITDA excluding IFRS 16 impacts of €39.9 million (incidence of 12.7%) compared to -€14.1 million as of June 30, 20201 and €49.9 million as of June 30, 2019;
• EBIT of €25.3 million (incidence of 8.1%), compared to -€53.3 million as of June 30, 2020 and €39.1 million as of June 30, 2019;
• Net income of €21.9 million (incidence of 7.0%), compared to a loss of -€47.7 million in the first half of 2020 and a profit of €25.0 million in the first half of 2019.
• Significant ongoing investment program of €29.9 million in the first half of 2021, within a multi-year project confirmed even in the presence of the effects of the pandemic, and supported by the solid capital structure;
• Characteristic Financial Indebtedness2 of €96.3 million, compared to €136.5 million as of
  June 30, 2020.

Brunello Cucinelli, Executive Chairman and Creative Director of the Company, commented as follows:

"The first half of 2021 closed with very, very interesting results. Sales of the Fall Winter 2021 collections got off to a very good start, and the brand seems to be gaining broad consensus both in its stylistic expression and in the way it relates to the local community and to humanity as a whole.

Order intake for the Spring Summer 2022 Men's and Women's collections, now almost at an end, was excellent. All this prompts us to envisage a strong rise in turnover of around 20% for the current year, and to view this time as a sort of year of rebalancing, and for 2022 we expect a return to a healthy growth of 10%".

1. EBITDA as at 30/06/2020 equal to -€14.1 million is the normalized value, obtained by sterilizing not only the accounting effects of the application of IFRS 16 but also the extraordinary provision of €30.0 million related to the "Brunello Cucinelli for Humanity" project for the allocation of surplus garments that were generated due to the emergency situation from Covid-19 and the consequent temporary interruption of sales.
2. Financial payables for leases are excluded; therefore, the figure reported has been determined without the application of IFRS 16.

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Solomeo, 26 August 2021 - The Board of Directors of Brunello Cucinelli S.p.A. - an Italian maison operating in the luxury goods sector and listed on the Borsa Italiana Electronic Stock Exchange (MTA)

• today examined and approved the Half-Yearly Financial Report 2021 (data subject to limited audit), in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

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Net Revenues3 are in line with the preliminary figures communicated last July 13, and the dynamics that determined these results confirm what has already been widely commented on that occasion.

	First Half	%	First Half	%	YoY	First Half	Var. %
	2021		2020		Change %	2019
	Eur '000		Eur '000		First Half '21/		First Half '21/
					First Half '20		First Half '19
Europe	95.894	30,6%	66.807	32,6%	+43,5%	87.871	+9,1%
Italy	41.038	13,1%	28.943	14,1%	+41,8%	44.308	-7,4%
Americas	99.983	31,9%	57.976	28,3%	+72,5%	95.046	+5,2%
Asia	76.849	24,4%	51.417	25,0%	+49,5%	64.188	+19,7%
Revenues	313.764	100,0%	205.143	100,0%	+52,9%	291.413	+7,7%
YoY Change at constant exchange rates			+57,7%		+10,0%
	First Half	%	First Half	%	YoY	First Half	Var. %
	2021		2020		Change %	2019
	Eur '000		Eur '000		First Half '21/		First Half '21/
					First Half '20		First Half '19
Retail	165.468	52,7%	102.517	50,0%	+61,4%	149.946	+10,4%
Wholesale	148.296	47,3%	102.626	50,0%	+44,5%	141.467	+4,8%
Revenues	313.764	100,0%	205.143	100,0%	+52,9%	291.413	+7,7%

Income statement

In the first half of 2021, we chose to preserve the soundness of our corporate structure, confirming all the activities and investments planned before the start of the pandemic, with the aim of fully realigning ourselves already in 2023 with the objectives of the first five years (2019-2013) of our 10-year plan 2019-2028.

In the analysis of the Income Statement, the direct comparison of the results of the first 6 months of 2021 with the figures at June 30, 2020, which were strongly influenced by the pandemic, is of limited relevance; on the other hand, the comparison of the first half of 2021 with the first half of 2019 must

3 It should be noted that as of June 30, 2021 the Income Statement line "Other revenues", amounting to €2,162 thousand, has been classified under "Total operating costs", rather than being posted under "Revenues from sales and services" as in the previous interim period. For the sake of uniformity and comparability of data, the same reclassification, amounting to €1,347 thousand, has also been made in the Income Statement as of June 30, 2020.

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take into account both the continuation of the effects related to the pandemic in the first 6 months of this year, and the dynamics related to the commercial initiatives and network development operated in the first part of 2021.

With reference to the development of the network, the first 6 months of 2021 include in fact the costs related to the expansion of sales spaces, new boutique openings and new hard shops managed directly within the luxury Department Stores, while the related benefits on sales and results will be progressively visible in the coming periods.

Analyzing the details of the Income Statement, production costs at June 30, 2021 amounted to €104.3 million, with a First Margin of 66.8%, substantially in line with the marginality of the first half of 2020 and slightly improved compared to June 30, 2019 (marginality of 66.5%).

As of June 30, 2021, personnel costs amounted to €61.5 million (€57.5 million as of June 30, 2020 and €53.8 million as of June 30, 2019), with a FTE number of 2,127, up from 2,026 FTE as of June 30, 2020 and 1,842 FTE as of June 30, 2019.

The gradual increase in our human resources stems primarily from our network growth and development projects (analyzed in detail below), as well as growth in the digital world.

Rental costs net of IFRS 164 effects amounted to €54.4 million, compared to €44.7 million last year and €39.8 million at June 30, 2019.

This increase is substantially related to the network development, in the presence of the new openings of direct boutiques (112 boutiques at June 30, 2021 compared to 102 boutiques at June 30, 2019), the 12 conversions to the direct management of hard shops in luxury Department Stores, carried out in the last 12 months, and the important expansions of some sales spaces.

Investments in communication, amounted to € 14.4 million as of June 30, 2021 (€13.3 million last year and €16.2 million as of June 30, 2019), against the decision to favor the planning of events and activities with customers in the second half of 2021, in the presence of the protracted impacts of the pandemic in the first 6 months of 2021; the growth trend of digital communication activities, as an increasingly important and strategic communication vehicle, continues also in the first 6 months of 2021.

As of June 30, 2021, EBITDA amounted to €80.6 million, compared to a loss of €3.4 million last year and a positive result of €79.2 million as of June 30, 2019.

EBITDA excluding IFRS 16 impacts was €39.9 million5 as of June 30, 2021, compared to €49.9 million as of June 30, 20196; normalized EBITDA as of June 30, 2020 reported a loss of €14.1 million7.

EBITDA margin excluding IFRS 16 impacts reported at June 30, 2021 was 12.7%, compared to 17.1% at June 30, 2019, in the presence of the impacts of the pandemic that continued in the first 6 months of 2021, and the presence of costs, commented above, whose benefits on sales and results will be progressively visible in the coming periods.

Depreciation and amortization, excluding those related to right of use8, amounted to €19.0 million, compared to €15.7 million last year and €13.9 million at June 30, 2019.

1. The cost of rents net of IFRS 16 effects includes total rents. On the other hand, the cost of rents including the application of IFRS 16, which mainly relates to leases with variable consideration, amounted to €12.9 million at 30/06/2021 compared to €4.7 million at 30/06/2020 and €10.3 million at 30/06/2019.
2. EBITDA excluding IFRS 16 impacts as at 30/06/2021 sterilizes the accounting effects of the application of IFRS 16, amounting to €41.5 million referring to the item "Rent payable" and €0.5 million referring to the item "Other revenues".
3. Normalized EBITDA as at June 30, 2019 neutralizes the accounting effects of the application of IFRS 16, amounting to €29.5 million relating to the item "Rental expense" and €0.2 million relating to the item "Other revenues".
4. The normalization of the figures as at 30 June 2020 refers to the sterilization of the accounting effects relating to the application of IFRS 16 and the sterilization of the accounting effects relating to the extraordinary provision of €30.0 million relating to the item "Inventories".
5. Amortization and depreciation including that relating to usage rights amounted to €55.3 million as of 30/06/21, compared to €49.9 million

as of 30/06/2020 and €40.1 million as of 30/06/2019.

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EBIT amounted to €25.3 million, compared to an operating loss of €53.3 million last year and a positive result of €39.1 million as of June 30, 2019.

The result from financial operations was negative and equal to €6.2 million as of June 30, 2021, compared to €11.0 million last year and in line with the €6.5 million as of June 30, 2019.

Excluding the effects related to the application of IFRS 16 related to leases, the balance of financial expenses was negative and equal to €2.3 million as of June 30, 2021, compared to €4.2 million last year and €2.9 million as of June 30, 2019, also in the presence of the volatility of the effects related to interest and exchange rate hedging transactions.

Net Income amounted to €21.9 million as of June 30, 20219, compared to a loss of €47.7 million last year and €25.0 million as of June 30, 201910.

Balance Sheet

Net working capital, including "Other net assets/liabilities"11, amounted to €186.1 million compared to €195.0 million in the previous year.

Inventory amounted to €208.8 million, in line with the figure as of December 31, 2020 and down from €218.1 million as of June 30, 2020.

Inventory dynamics show the complete recovery of the increase reported as of June 30, 2020, mainly related to the lockdown period, with deliveries of Fall Winter 2020 collections that had slipped slightly and efficiently recovered in the second half of 2020.

The inventory balance is also influenced by business development, including the expansion of the network of directly managed spaces, with 5 new openings and 10 hard shop conversions in the first 6 months of 2021, the expansions of some existing boutiques, and the development of new initiatives related to the "Kids" collections and the "Sartoria Solomeo" project, as well as the expansion of the digital channel business.

Trade receivables amounted to €75.7 million, compared to €72.4 million as of June 30, 2020, with a dynamic related to the growth of the wholesale channel and the gradual return to ordinary conditions in the payment terms of some wholesale customers12.

Trade payables amounted to €76.3 million, up slightly from €74.1 million as of June 30, 2020; payment terms to its suppliers, collaborators and consultants remained unchanged during the first 6 months of 2021.

9 Net Income as of June 30, 2021 benefits from the recognition of deferred tax assets, for a total amount of approximately €9.2 million, calculated on the equity balance of the inventory write-down provision for the "Brunello Cucinelli for Humanity" project, not recognized as of December 31, 2020. As of June 30, 2021, the Group has decided to record the deferred tax assets mentioned above, in view of the positive results achieved in the first half of the year, the macroeconomic scenario in further positive evolution as well as important tax clarifications in the second quarter of the year, which also made it possible to launch the garment donation program, in compliance with current tax regulations.

1. The tax benefits of the Patent Box accounted for as of June 30, 2019 amount to €2.5 million. Recall that the Patent Box was related to the agreement signed with the Inland Revenue to define the methods and criteria for calculating the economic contribution to the production of business income of intangible assets; the benefits the tax benefits of the "Patent Box" ended on December 31, 2019, with a total value for 2019 of €5.7 million.
2. "Other net assets/liabilities" were negative by €22.2 million as of June 30, 2021, compared to €21.4 million as of June 30, 2020, with dynamics essentially related to the valuation of fair values on foreign exchange hedging derivatives.
3. These payment extensions were granted in the aftermath of an event of such great tension as the pandemic. Following emergency events and high tension, we have always undertaken with the customers, healthy and selected, a relationship of extreme collaboration and mutual availability, returning in the short term to ordinary conditions. The situation of past due receivables as of June 30, 2021, amounting to €13.7 million compared to €24.7 million as of June 30, 2020 reflects what has been commented and testifies to the validity of an elastic and positive management of receivables over the years.

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Investments and characteristic Financial Indebtedness

In the first half of 2021 the level of investments remained very high, including those aimed at opening new boutiques in the most important world centers, and updating the company's digital image and production/logistics infrastructure.

Investments were made possible by the solid corporate structure, in the conviction that the search for innovation and the offer of a contemporary image is now, more than ever, a decisive factor in keeping the company modern and growth sustainable in the long term.

In detail, investments as of June 30, 2021 amounted to €29.9 million, compared to €22.4 million invested as of June 30, 2020; €22.5 million were commercial investments, while other investments were allocated to production, logistics, IT and digital services.

Commercial investments favoured the development of the network of directly managed retail spaces. There were 112 retail boutiques, compared to 107 boutiques at December 31, 2020 (including the conversion of two wholesale monobrand boutiques, including the important space in the Dubai Mall).

The number of directly managed hard shops within Department Stores totalled 41 compared to 31 hard shops as of December 31, 2020, following the 10 conversions to direct management made in the first six months of the year.

Significant investments in the retail channel also made possible a program of prestigious boutique expansions between the second half of 2020 and the first half of 2021, including those in London, Paris, St. Petersburg, Shanghai and Tokyo.

In terms of digital investments, we have renewed our online presence, with our website to offer a browsing, knowledge and shopping experience that is always fresh, contemporary and appealing.

Finally, we continue to support investments aimed at the renewal of production facilities, the evolution of logistics structures, and ICT investments, including new technological platforms, IT security and new application software.

The characteristic Financial Indebtedness13 as of June 30, 2021 is equal to €96.3 million, compared to €136.5 million as of June 30, 2020, which had been impacted by the effects of the pandemic, resulting already as of December 31, 2020 in a significant improvement equal to €93.5 million.

It should be noted that the Financial Indebtedness reaches its usual peak between June and September, related to the seasonality of sales, and then declines in the last part of the year.

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13 Lease payables, not included in the characteristic Financial Indebtedness, amounted to €543.6 million as of June 30, 2021 compared to €485.4 million as of June 30, 2020.

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