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Financial Reports 

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The Group’s performance at 30 June 2015

 Performance by Geographic Area
  
EMEA: strong organic growth supports a further noticeable margin improvement
 
Total sales in EMEA reached Euro 330.7 million, an increase of 14.3% (+12.3% at constant exchange rates) against the same period of the prior year. The increase is attributable for 8.4% to strong organic growth and for +4.1% to acquisitions, while exchange differences had a positive impact of 1.8%. The performance was particularly brilliant in Italy, where sales rose 12.0% in the half, 10.7% of which explained by strong organic growth. In addition to benefiting from the contribution of the Audika Italia stores acquired in second quarter 2014, the Italian market also reaped the benefits of the intense marketing activities carried out at the end of 2014, as well as the increased and diversified investments made in the period. The outlook for the entire year continues to be positive, supported by the launch of a new marketing campaign in second quarter 2015. Growth continued at a robust pace in France where sales rose 16.8% (10.8% of which explained by organic growth), as well as in Switzerland, where sales increased 17.9% in CHF, result further boosted by a particularly favorable exchange effect (+18.4%), and the Iberian Peninsula (+11.9%). Good performance was confirmed in Germany where, while the market shrank (-11%) in the wake of the strong growth registered in 2014, Amplifon posted growth of 9.8% (9.6% of which explained by acquisitions). Positive results were posted in the Netherlands (+4.4%), and the United Kingdom (+2.7% at constant exchange rates, +14.9% at current exchange rates). Revenue was basically unchanged in Belgium-Luxembourg (-0.1%), while in Hungary it fell by 18.3% reflecting the fact that the cochlear implant sales to the NHS which benefitted the 2014 result were not repeated in the period under examination. Lastly, the performance was also positive in Middle East and Africa (MEA) where growth reached +129.4% against the prior year due, in part, to the consolidation of the Israel acquisition. The area's EBITDA – net of the extraordinary entries - rose 27.7% with the EBITDA margin rising 1.2%.
 
 
AMERICAS: revenue growth accelerates sustaining further improvement in profitability
                                                                                                                   
Sales in AMERICAS reached Euro 96.0 million, an increase of 44.6% against the prior year (+18.4% at constant exchange rates), also thanks to strong private market growth and the positive exchange effect. All the business units contributed to the result. More in detail, all of Miracle-Ear’s performance indicators improved significantly and the renewal of the MEMSI contract at better conditions will make it possible already in the second half to intensify investments in marketing to support growth. Positive performances were also posted by the Elite Hearing Network, which reaped the benefits of new commercial initiatives, and Amplifon Hearing Health Care which benefits significantly from a new contract signed with a primary insurance company. Growth of the Canadian network continues with one new opening and the acquisition of three new stores, while the potential for long term growth in Brazil remains high. Driven by the strong revenue growth, EBITDA for the area grew 25.8% at constant exchange rates resulting in a further increase in the EBITDA margin of 1.3%.
 
 
ASIA-PACIFIC: strong growth in revenue and profitability
 
Revenue for the first six months of 2015 in ASIA-PACIFIC amounted to Euro 73.6 million, an increase of 21.1% (+14.2% at constant exchange rates). Sales in Australia continue to grow (+6.3% at constant exchange rates) thanks also to the positive performance of the reference market. Brilliant performance was posted in New Zealand where sales rose 31.4% at constant exchange rates thanks to effective marketing campaigns, the new rules governing subsidies that took effect in July of last year, and the consolidation of Dilworth Hearing Limited. Lastly, sales in India rose 34.8% in local currency thanks to organic growth and the expansion of the store network (20 new service centers opened in the half). The area’s EBITDA margin also improved even further, rising 4% against the same period of the prior year.
 
 
Profitability
 
EBITDA amounted to Euro 71.8 million, being affected by the Euro 6.8 million extraordinary costs (of which Euro 5.7 million as cash termination indemnity and Euro 1.1 million as a fair value provision following the Performance Stock Grant rights accelerated vesting) relating to the termination agreement with the CEO Franco Moscetti – whose term is ending on the forthcoming October 22nd. The Group’s overall profitability improved significantly on recurring basis, supported by the strong growth in sales recorded in all the geographic areas. In particular, on recurring basis EBITDA reached Euro 78.6 million in the first half, rising 36.7% at current exchange rates (+28.3% net of exchange differences) and the EBITDA margin improved by 1.9%, rising from the 13.8% posted in first half 2014 to 15.7% in the period under examination. All the geographic areas where the Group operates contributed to the result. Net of the extraordinary entries, EBITDA in EMEA increased 27.7% against the first half of the prior year which caused the area’s EBITDA margin to rise by 1.2%. As a result of the increase in sales, EBITDA in AMERICAS rose 25.8% at constant exchange rates with the EBITDA margin up by 1.3%. The positive trend continued in ASIA-PACIFIC where profitability rose 39.4% (32.5% net of the exchange effect) with the EBITDA margin up 4.0% at current exchange rates. The Group’s EBIT, affected by the extraordinary costs, increased 50.1% on recurring basis against the same period of the prior year (+39.5% net of the exchange effect), thanks to an improvement in the gross margin and despite the increased amortization linked to the investments made in 2014 to expand the network. Group Net profit, coming to Euro 18.5 million in the semester, was affected by non-recurring costs (on the whole amounting to Euro 6.0 million net of taxes and relating to the extraordinary costs for the termination agreement with the CEO Franco Moscetti, the make whole advance repayment of the Private Placement 2006-2016 and the investment income in New Zealand) and the one-off tax income in Australia (for Euro 10.5 million) which benefitted the comparison period. Considering only the recurring operations, net profit increased by Euro 12.4 million, +102.9% against the first half of the prior year.
 
BALANCE SHEET FIGURES
 
Net equity amounted to Euro 473.4 million at June 30th, 2015, an increase against the Euro 443.2 million posted at year-end 2014 explained primarily by the exchange effect. The net financial position continues to be extremely solid and ready to sustain the Group’s expansion. Net financial debt amounted to Euro 257.0 million, an increase with respect to the Euro 248.4 million reported at December 31st, 2014 due to period seasonality and the payment of dividends, but down considerably against the Euro 297.3 million recorded at June 30th, 2014 despite the acquisitions finalized in the last 12 months (Euro 30.2 million). Free cash flow, positive for some Euro 19.8 million, improved with respect to the Euro 19.6 million recorded at June 30th, 2014 after absorbing the payment of the non-recurring make whole of Euro 4.3 million recognized in the first quarter and net of the Euro 7.9 million tax refund received in 2014.
 
 
OUTLOOK
 
For the rest of 2015 the Group expects to confirm the positive trend in sales and in profitability, continuing to sustain the organic growth through adequate investments in marketing and communication, including digital channels, and CRM initiatives. In Europe, in particular, growth is expected to continue and profitability to improve further, thanks also to the positive outcome of the new marketing and communication strategy, and despite the persistent pressure on sale prices in the Netherlands where, at the end of the year, insurance tenders are expected to be renewed. Toward this end, Amplifon has already secured a first significant contract for the two-year period 2016-2017. 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 and the operating performance in India is expected to show gradual improvement. 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. Following the termination agreement with the CEO Franco Moscetti, who will conclude his term on October 22nd, the Board of Directors will propose to the Shareholder’s Meeting, to be shortly convened, to appoint the current Chief Operating Officer Enrico Vita as a member of the Board of Directors. Given the leadership and competency requirements requested by the position of Chief Executive Officer, Vita is considered the ideal candidate to hold the role, as a sign of an exemplar continuity.