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Financial Reports 

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The Group’s performance at 31 December 2014

 Performance by Geographic Area
  
EMEA: solid organic growth supports a noticeable recovery of margins. 
 
Total sales in Europe, the Middle East and Africa (EMEA) reached Euro 617.7 million, an increase of 10.2% against the prior year. Improvement was posted in Europe, where growth reached 8.3% at constant exchange rates (6.0% of which attributable to organic growth), as well as the rest of the geographic area, thanks also to the consolidation of Israel where sales rose by 198.8% against the prior year. Sales were stable in Italy, where the consolidation of the 55 Audika stores contributed 1.6% to growth. France also performed well, benefiting from the continuous investments made in the network and solid organic growth, posting an increase of 7.7% in the year, 3.3% of which explained by acquisitions. Thanks to the commercial initiatives implemented by management and the positive overall market trend, the marked recovery continued in the Netherlands (+12% against the prior year). Sales were also particularly strong in Germany (+34.9%) thanks to the reorganization carried out by management in 2013 and the substantial increase in government refunds. A positive contribution to the growth recorded in EMEA also came from the Iberian Peninsula, where an increase of 19% was reported, Switzerland  which closed the year up by 10.8% in CHF, Hungary (+37.6% in HUF), Turkey (+91.8% in TRY), Egypt (+20.9% in EGP), Poland and Israel, the consolidation of which contributed 1.5% to the geographic area’s increased sales. Revenues were basically in line with the prior year in Belgium and Luxembourg (+0.4%), as well as in the United Kingdom (-0.3% in GBP). EBITDA reached Euro 73 million, a significant increase of 18.2% (net of the non-recurring costs and exchange effect) thanks to the general recovery of volumes in Europe. On the commercial front, of note is the strategic agreement reached with the chain Salmoiraghi & Viganò which, thanks to its more than 450 stores, is the Italian leader in the distribution of eyewear and contact lenses. 
 
AMERICA: strong recovery in sales in the second half and good profitability confirmed
 
Thanks to the significant recovery posted in the second half of the year, AMERICA closed 2014 with sales up by 1.6%, coming in at Euro 140.9 million. The favorable exchange effect in the last quarter (+8.4%), offset the overall effect of the year’s exchange differences which was largely immaterial (-0.3%). All the distribution channels contributed to the growth: Hear PO (renamed Amplifon Hearing Health Care), thanks also to a new contract with a premiere insurance company; Miracle Ear, which will benefit in the American and Canadian markets from the contract that was renewed with Siemens Audiology (now Sivantos); and Elite Hearing Network. In November, following the acquisition of 51% of Direito de Ouvir, the entry into the Brazilian market was announced and the foundation for further growth in South America was laid. Profitability was stable in the period, despite the change in the product mix and the increase in marketing investments: EBITDA reached Euro 26.8 million with the EBITDA margin coming in at 19%.
 
ASIA-PACIFIC: growth continues to outpace the market average
 
In 2014 revenue in ASIA-PACIFIC amounted to Euro 132.3 million, an increase of 3.4% against the prior year; the marked increase in organic growth (7.9%) was strongly impacted by the negative exchange effect that reached 4.5%. The favorable sales trend in Australia continued (+7.3% at constant exchange rates), thanks to diversified marketing strategies and further expansion of the network (5 new openings) while, thanks to the acceleration recorded in the second half, New Zealand recovered significantly with total growth reaching 7.6% in local currency. In India, sales rose 34.6% in local currency. Profitability improved in the entire geographic area: the EBITDA margin rose 220 basis points or Euro 37.8 million on a recurring basis to 28.6%.
 
 Profitability
 
Overall profitability showed a remarkable improvement in the period: EBITDA came to Euro 137.7 million: an increase of 13.8% (net of the non-recurring costs and exchange effects) with respect to the same period of the prior year. The EBITDA margin came in at 15.5% (14.1% in 2013). All the geographic areas where the Group operates contributed to the result: more in detail, EBITDA in EMEA and ASIA-PACIFIC posted an increase of respectively 18.2% and 17.7% against the prior year net of non-recurring costs and at constant exchange rates. The EBITDA in America was stable, though at 19% (-1% net of non-recurring costs and the exchange effect) the EBITDA margin is still higher than the Group average. Exchange differences had a negative impact on consolidated EBITDA of Euro 2.2 million.
 
EBIT also increased, rising 22.6% on a recurring basis against the same period of the prior year thanks to the improved gross profit. The net profit (NP) showed marked improvement, rising – net of non-recurring costs - 53% against 2013 to Euro 46.5 million. In addition to the general improvement in margins, the result also benefitted from the absence of the debt restructuring expenses incurred in 2013 (equal to Euro 4.9 million after tax), as well as the tax income recorded following the Australian tax authority’s recognition of the possibility to deduct the amortization of a few assets acquired in 2010.
Balance Sheet Figures
 
Net equity amounted to Euro 443.2 million at December 31st, 2014, an increase against the Euro 381.1 million posted at year-end 2013. Net financial debt at December 31st, 2014 amounted to Euro 248.4 million, a significant improvement with respect to the Euro 275.4 million posted at December 31st, 2013, despite the Euro 35.9 million in acquisitions made in the period. Free cash flow was positive for Euro 78.4 million, up with respect to the Euro 51.0 million posted at December 31st, 2013 after CAPEX of Euro 37.7 million, confirmation of the Group’s ability to generate steady cash flows.
 
Outlook
 
In 2015 the Group expects the favorable trend in sales and the key performance indicators to continue. In Europe, even though the global market conditions are not expected to improve markedly, the improvement in profitability recorded in 2014 is expected to persist. In America the expectation is that the growth that materialized in the latter part of 2014 will continue, thanks also to the development of new commercial and marketing initiatives. In Asia-Pacific the Group expects to see stable organic growth in Australia and that New Zealand will benefit from the increased subsidies that took effect beginning in July 2014. Toward this end, please note that John Pappalardo has assumed charge of Asia-Pacific as Executive Vice President APAC, in substitution of Paul Mirabelle who tendered his resignation for personal reasons. Pappalardo joined National Hearing Care Group in 2006 as Head of NHC’s Australian business, contributing to its significant development and assuming subsequently the role of Australia and New Zealand Managing Director.
 
The improvement in overall profitability reported in the period is expected to persist in 2015, thanks not only to a general increase in volumes, but also to the specific programs put in place to increase productivity. The Group will continue to sustain organic growth through investments in the opening of new stores, digital marketing and CRM initiatives. External growth will remain a priority in order to enter new countries with a growing and wealthy elderly population segment, as well as consolidate the Group’s presence in markets where it is already present.