Italia Independent : 27 SEPTEMBER 2019 - PRESS RELEASE Italia Independent Half-Year 2019

PRESS RELEASE

CONSOLIDATED HALF-YEAR FINANCIAL REPORT AT 30 JUNE 2019 APPROVED:

STARTED THE INTENSE ACTIVITY OF IMPLEMENTATION OF THE NEW BUSINESS MODEL

SCHEDULED FOR OCTOBER 18th THE APPROVAL OF THE BUSINESS PLAN FOR THE NEXT

FIVE YEARS

• Net sales of the Group equal to € 4,170 thousand (€ 11,783 thousand at 30 June 2018)
• Negative EBITDA of € 4,444 thousand (positive for € 512 thousand at 30 June 2018)
• Group net loss of € 12,158 thousand (positive for € 1,766 thousand at 30 June 2018)
• Negative net financial position of € 15,886 million (€ 16,310 thousand at 31 December 2018)

Venaria Reale, 27 September 2019 - Italia Independent Group S.p.A. ("IIG" or the "Company") hereby announces that the Board of Directors, which met today, examined and approved the consolidated half-year financial report at 30 June 2019.

In the first half of the current year, all ratios are reflecting an intense activity of restructuring aimed at the relaunch plan, that started with the sale of certain assets and the closure of non-strategic businesses, in addition to the lack of extraordinary components recorded in the first six months of 2018.

The Company implemented a series of actions of streamlining and restructuring of the distribution network, aimed at better enhancing the high-end brands of the current portfolio, namely Italia Independent, Laps Collection, The Walt Disney Company and Hublot, global leader in luxury watches.

These initiatives will have a positive impact on the second half of 2019 in terms of brand image and a consequent expected improvement in sell-out for point of sale.

The Company, which appointed a new Board of Directors and the new Chief Executive Officer Mario Pietribiasi in april following the share capital increase on 27 March 2019 in execution of the investment contract concluded on 4 February 2019 between Italia Independent Group S.p.A. and Lapo Edovard Elkann on the one hand and Creative Ventures S.r.l. on the other, has scheduled the approval of a Business Plan for the next five years for October 18th

This plan will be aimed at implementing the strategies envisaged by the business model identified during the first six months of the year and at supporting the growth path undertaken in terms of product development

and collaborations, with the objective of creating a solid future based on the key factors that distinguish Italia Independent on the market: strong brand identity and innovation.

In the current day took place also the Board of Directors of the subsidiary Italia Independent S.p.A., which approved its half-year financial statements as of June 30, 2019. Following the operating results that emerged from the balance sheet, the board of directors resolved to convene the shareholders' meeting according to art. 2446 Cod. Civ., giving to the President the mandate to proceed with the convocation following the approval by the Board of Directors of IIG of the Business Plan for the next five years.

Mario Pietribiasi, Chief Executive Officer of the Company, stated:

"The first six months of the year marked a decline in economic ratios due to the portfolio restructuring and preparatory activities for the re-launch of the company, which we are sure will be able to restore the role that Italia Independent deserves."

Main consolidated financial results at 30 June 2019

Consolidated net sales in the first half of 2019 amounted to € 4,170 thousand, down 64.6% compared to € 11,783 thousand in the same period of the previous year. This decrease, equal to € 7,613 thousand was mainly due to the reduced use of stock and barter channels for a total of € 2,643 thousand, higher returns generated by unsuccessful commercial initiatives for € 2,515 thousand, the reduction of retail and lifestyle product sales, due to the closure of non-performing businesses for € 198 thousand, lower sales and royalties from collaborations with important brands for € 147 thousand, lower chargebacks for rent, transport, etc. for € 423 thousand and the refocusing of sales markets for € 1,687 thousand.

The breakdown of consolidated net sales in the first half of 2019 by strategic business unit is shown below:

SALES BY SBU (Euro/000)

300			804
100%			536						670
80%			31				94
60%					10.215
3.303
40%
20%
0%
30 Giugno 2019			30 Giugno 2018
		EYEWEAR		LIFESTYLE PRODUCTS	RETAIL			OTHER

The Group's sector of reference is Eyewear, which generated sales of € 3,303 thousand, equal to 79.2% of total sales and was down 67.7% compared to the volumes recorded in June 2018 (€ 10,215 thousand).

The breakdown of sales by region in the first half of 2019 compared to sales at 30 June 2018, for the eyewear sector alone, is shown below:

Euro/000	1st half 2019	1st half 2018	absolute ∆	∆ %
ITALY	1,688	7,263	(5,575)	-76.8%
% of total sales	51.1%	71.1%
REST OF EUROPE	849	1,359	(510)	-37.5%
% of total sales	25.7%	13.3%
APAC	443	550	(107)	-19.5%
% of total sales	13.4%	5.4%
MEA	153	231	(78)	-33.8%
% of total sales	4.6%	2.3%
REST OF THE WORLD	170	812	(642)	-79.1%
% of total sales	5.1%	7.9%
Total Gross revenue Eyewear	3,303	10,215	(6,912)	-67.7%
% of total sales	100.0%	100.0%

In the first half of 2019, total sales in the retail sector amounted to € 536 thousand, down 20.0% compared to the first half of 2018 (€ 670 thousand). This decrease was mainly due to the closure of Italian stores in Torino, Mantova, Franciacorta and Courmayeur in 2018, and the closure of the outlet in Castel Romano in June 2019.

The volume of business generated by lifestyle products recorded sales for € 31 thousand, against € 94 thousand in the first half of 2018.

The gross margin decreased by 63.4%, amounting to € 2,611 thousand compared to € 7,134 thousand in the first half of 2018, but increased as a percentage of revenue by two percentage points, coming in at 62.6%, against the 60.5% recorded in the first half of 2018.

The EBITDA was affected by the aforementioned difference in the gross margin, reaching a negative € 4,444 thousand, against the positive €512 thousand recorded at 30 June 2018.

EBIT came in at a negative € 12,568 thousand at 30 June 2019, essentially due to higher write-downs and provisions in the period, including provisions for inventory write-down equal to € 5,810 thousand.

In light of the foregoing, the consolidated net result was a loss of € 12,158 thousand, compared to the profit of € 1,766 at 30 June 2018. The result of the previous period benefitted from capital gains from the disposal of the equity investment in Independent Ideas S.r.l. for € 3,862 thousand.

As regards the balance sheet and financial data, the net invested capital is equal to Euro 14,739 thousand at June 30 2019 towards Euro 20,027 thousand at December 31 2018, recording a decrease of Euro 5,288 thousand, mainly due to the significant decrease in working capital net, which shows a decrease of 32.7% equal to Euro 6,081 thousand.

Fixed assets recorded a total change of € 25 thousand, standing at € 3,789 thousand, compared to € 3,814 thousand at 31 December 2018, affected by the sale of 279,349 shares in the company Triboo S.p.A. during the first quarter (€ 438 thousand), the write-down of goodwill relating to the acquisition of a stake in the subsidiary Italia Independent S.p.A. (€ 690 thousand), the write-down of goodwill generated by the acquisition of the store at the Serravalle Designer Outlet (€ 84 thousand) and the write-down of fixed assets due to the closure of the single-brand store in Miami (€ 47 thousand).

The adoption of the new IFRS 16 accounting standard at the start of the year (which establishes a single model for the recognition and measurement of leases by lessees, requiring the recognition of the leased asset, even if operating, and an offsetting financial liability - for more information, please refer to the paragraph "New accounting standards adopted by the Group") resulted in an increase in tangible fixed assets for € 1,719 thousand.

At 30 June 2019, inventories, which were significantly written down by € 5,810 thousand as mentioned above, amounted to € 5,899 thousand, compared to € 10,426 thousand at 31 December 2018, with a difference in absolute values of € 4,527 thousand.

Trade receivables decreased by € 2,830 thousand, equal to € 9,217 thousand at 30 June 2019, against € 12,047 thousand at 31 December 2018.

On 27 March 2019, in execution of the investment contract concluded on 4 February 2019 between Italia Independent Group S.p.A. and Lapo Edovard Elkann on the one hand and Creative Ventures S.r.l., on the other hand, all 3,404,255 new shares in the Company resulting from the reserved capital increases resolved by the shareholders' meeting of 11 March 2019 were subscribed, at the price of € 2.35 each (of which € 1.35 premium), for an already paid amount of € 7,999,999.25 (of which € 3,404,255.00 by way of capital).

Therefore, at 30 June 2019, net equity decreased by € 4,864 thousand, due to the effects of:

• Capital increase (€ 8,000 thousand, of which € 3,404 thousand as Share Capital and € 4,596 thousand as Share Premium Reserve, net of the Capital contribution reserve used the previous year for € 1,000 thousand);
• Consolidated loss recorded in the first half of 2019 (€ 12,158 thousand);
• Losses recognised under OCI (Other Comprehensive Income - € 89 thousand);
• Other changes in net equity (positive effect of € 383 thousand).

The equity dynamics described above and the adoption of the new IFRS 16 accounting standard at the start of the year led to a sight decrease in cash flow requirements, which influenced the trend of the Net Financial Position, which went from a negative € 16,310 thousand at 31 December 2018 to a negative € 15,886 thousand at 30 June 2019.

It should be noted that the negative impact generated by IFRS 16 amounted to € 1,724 thousand.

Significant events after 30 June 2019

n August 2019, the store owned in Miami was closed, while in September 2019, the two outlet stores in Serravalle and Valdichiana closed along with the single-brand store in Porto Rotondo.

The following main financial schedules for the half-year period ended 30 June 2019, prepared according to the international accounting standards (IAS/IFRS) are shown below:

• the reclassified consolidated income statement;
• the reclassified consolidated balance sheet;
• the consolidated net financial position;
• the consolidated cash flow statement.

MANAGEMENT Consolidated Income Statement	30 June 2019	30 June 2018
Revenue	6,434		11,028
Sales revenue	154.3%	93.6%
Returns and allowances	(2,564)	-61.5%	(49)	-0.4%
Total revenue	3,870	92.8%	10,979	93.2%
Other income - royalties	300	7.2%	804	6.8%
Total value of production	4,170	100%	11,783	100%
Cost of sales	(1,559)	-37.4%	(4,649)	-39.5%
Gross profit/margin	2,611	62.6%	7,134	60.5%
Operating costs
Sales and distribution costs	(4,000)	-95.9%	(2,303)	-19.5%
Travel costs	(76)	-1.8%	(107)	-0.9%
Leases	(150)	-3.6%	(623)	-5.3%
Personnel expenses	(2,018)	-48.4%	(2,393)	-20.3%
General and administrative costs	(666)	-16.0%	(772)	-6.6%
Other operating costs	(145)	-3.5%	(424)	-3.6%
Total operating costs	(7,055)	-169.2%	(6,622)	-56.2%
EBITDA	(4,444)	-106.6%	512	4.3%
Depreciation and amortization	(787)	-18.9%	(845)	-7.2%
Provisions and write-downs	(7,337)	-175.9%	(698)	-5.9%
EBIT	(12,568)	-301.4%	(1,031)	-8.7%
Net Financial Income / (Expenses)	(323)	-7.7%	(375)	-3.2%
Extraordinary Income / (Expenses)	(589)	-14.1%	3,686	31.3%
EBT	(13,480)	-323.3%	2,280	19.3%
Taxes	1,322	31.7%	(514)	-4,4%
Net loss for the period	(12,158)	-291.6%	1,766	15.0%