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Financial Reports 

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The Group’s performance at 30 September 2015

 Performance by Geographic Area
EMEA: growth accelerates. sustained by significant marketing investments & further expansion of the retail network 
In EMEA the positive trend in revenue was confirmed again in the third quarter, despite a particularly challenging comparison period. Sales in the first nine months of 2015 amounted to Euro 477.9 million with an increase of 12.6%. The increase against the prior period is attributable for 7.0% to strong organic growth and for 3.7% to acquisitions, while exchange differences had a positive impact of 1.9%. The performance was particularly brilliant in Italy, where sales rose 10.2% in the period, boosted by the acceleration of investments in marketing. Organic growth also remained strong in Switzerland where sales in CHF rose 13.7% (further boosted by the positive exchange effect of 16.7%), and in the Iberian Peninsula where sales rose 15.2%, only partially due to the contribution of the new openings. Acquisitions contributed to the growth posted in France, where sales rose 14.4% in the period (8.2% of which is explained by organic growth), and Germany where sales rose 11.8% (+0.2% of which is linked to organic growth in a local market that shrank by 5% after the strong performance recorded in 2014). Sales volumes were solid in the Netherlands, but partially offset by the strong price pressure (which resulted in an overall increase in sales of 1.9%), while revenue in Belgium-Luxembourg rose 2.6%. Sales fell slightly in the United Kingdom (-1.9% in GBP) which, however, closed the period with sales up 9.5% thanks to the positive exchange effect. Sales in Hungary fell by 10.4% in HUF as the sale of cochlear implants to the national healthcare service which boosted the 2014 results did not take place in the period under examination. The performance in the Middle East and Africa (MEA) was positive with growth of 83.1% against the prior year. EBITDA for the EMEA area – net of the non-recurring items and the positive exchange effect – rose 21.8% and 0.9 points as a percentage of revenue. Reported EBITDA amounted to Euro 39 million, an increase of 2.7% against the comparison period.
AMERICAS: profitable growth and market share on the rise
Sales in AMERICA reached Euro 145.0 million, an increase of 43% (+17.6% in USD) against the same period of the prior year, thanks to an acceleration in the growth of all the business units and the strong boost of the positive exchange effect. The performances of Miracle-Ear, the future growth of which will continue to be supported by increased investments in marketing, and Amplifon Hearing Health Care, which also benefited in the period from the signing of a contract with a premiere insurance company, were particularly brilliant. Elite Hearing Network also posted growth thanks to the new commercial initiatives undertaken and the continuous development of the business. Expansion of the network continued in Canada (a new store was opened and 3 new stores were acquired), where improving the operating performance of the existing stores continues to be a priority. EBITDA improved significantly, thanks also to the one-off income of USD 2.8 million recognized in the third quarter. On a recurring basis, EBITDA increased +25.9% in USD (+53.1% at current exchange rates), rising by 1.3% as a percentage of sales.
ASIA-PACIFIC: growth posted in all the performance indicators driven by improved operating efficiency
In ASIA-PACIFIC revenue rose 13.8% to Euro 110.8 million due primarily to strong organic growth (+9.6%) which continues despite the robust increase also recorded in the prior year. The positive exchange effect for the entire period was largely neutralized in the third quarter, coming in at 1.7% for the nine month period. Volumes and sales in Australia continue to grow (+6.0% at constant exchange rates) thanks also to the positive performance of the local market. A brilliant performance was posted in New Zealand where sales rose 24.3% at constant exchange rates thanks to improved operations supported by adequate investments in marketing and the consolidation, beginning in April, of Dilworth Hearing Limited. Profitability in Asia-Pacific improved noticeably thanks to the operational excellence achieved which resulted in an increase in the EBITDA margin of 2.8 percentage points in AUD against the same period of the prior year.
All the performance indicators showed decided improvement, net of the non-recurring items. More in detail, recurring EBITDA rose 30.1% (+23.2% at constant exchange rates) to Euro 108.3 million, with the EBITDA margin rising 1.4 percentage points against the same period of the prior year. Reported EBITDA – which rose 24.4% against the first nine months of 2014 to Euro 103.5 million – was negatively impacted by Euro 4.8 million in non-recurring items (Euro 5.7 million of which linked to severance indemnities and Euro 1.1 million to the accelerated vesting of the Performance Stock Grant rights granted to the exiting Chief Executive Officer Franco Moscetti; and Euro 2.5 million in non-recurring income following the advanced termination of a franchising contract in the United States, partially offset, for Euro 0.5 million, by costs linked to the optimization of the network in the Netherlands). The Group’s EBIT rose noticeably, again on a recurring basis notwithstanding the increased amortization and depreciation linked to the investments made to expand the network, by 43.6% against the same period of the prior year (+34.2% net of the exchange effect). The Group’s net profit for the first nine months of 2015 amounted to Euro 25.3 million and reflects the non-recurring costs and income that impacted the period under examination and the previous one. More in detail: costs of Euro 5.3 million net of taxes (severance indemnities paid to the exiting Chief Executive Officer, income of Euro 3.9 million linked to the advance termination of a franchising contract in the United States, network optimization costs of Euro 0.5 million incurred in the Netherlands, a make whole payment of Euro 4.3 million linked to the advance repayment of the Private Placement 2006-2016), income of Euro 1.3 million generated by equity investments in New Zealand and the one-off tax income recorded in Australia (Euro 10.6 million) which positively impacted the comparison period. Net of the non-recurring items, the Group’s net profit amounted to Euro 29.3 million in the first nine months, an increase of 89.6%.
The financial structure continues to be solid and to sustain the Group’s ambitious expansion program. Net equity amounted to Euro 454.7 million at September 30th, 2015, an increase against the Euro 443.2 million posted at year-end 2014. Net financial debt amounted to Euro 252.5 million, a decided decrease against the Euro 289.5 million reported at September 30th, 2014, after the Euro 42.3 million in acquisitions made in the last 12 months. Net debt is slightly higher than the Euro 248.4 million recorded at December 31st, 2014 due to acquisitions, period seasonality and the payment of dividends. Free cash flow was positive for Euro 38.4 million, an improvement of Euro 12.7 million against the comparison period on a recurring basis (net of the non-recurring transactions which generated Euro 3.3 million in positive cash flow and the tax refund of Euro 8.0 million recognized in the previous period), and absorbed CAPEX and acquisitions of Euro 63.5 million, as well as the payment of dividends to shareholders for Euro 9.4 million
For the rest of 2015 the Group expects to confirm the positive trend in sales and profitability, continuing to sustain organic growth through adequate investments in marketing and communication, including the digital channels, and CRM initiatives. In Europe, in particular, growth is expected to continue and profitability to improve further, thanks also to the accelerated investments in marketing and continuous expansion of the store network. The outlook for AMERICAS is also positive thanks to the development of new commercial initiatives supporting the growth of Miracle Ear and Elite Hearing Network, as well as the contracts signed by the business unit Amplifon Hearing Health Care with premiere insurance companies. Lastly, in ASIA-PACIFIC organic growth should be stable in both Australia and New Zealand. The Group will continue to pursue, including through external growth, the strategy to strengthen market share in the countries where it already operates and to seek out new development opportunities.