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Financial Reports 

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e Group’s performance at June 30th, 2014
Performance by Geographic Area
EMEA: reinforced recovery in Europe and organic growth accelerates in the rest of the region.
As expected, Italy posted a weak performance (-5% in the semester), due above all to the difficult comparison with an exceptional second quarter 2013 when growth reached 12%. The forecasts for the full year, however, continue to be positive in light of the recovery expected from the third quarter, as well as the consolidation of the 55 Audika Italia stores. France performed well – thanks also to external growth – posting a +4% in the semester. Remarkable improvement was recorded in the Netherlands where a significant increase in volumes led to +33% growth in the second quarter resulting in a positive semester (+9.2% against the comparison period). Germany (+33.7%), the Iberian Peninsula (+15.1%), and Hungary (+111.7%) also reported particularly strong performances in the first half-year. Growth was also posted in Belgium-Luxembourg (+5.1%), while the United Kingdom recovered in the second quarter (+4.7%) and closed the half-year with a minor downturn (-1.8%). Positive contributions also came from Poland and Israel (consolidated for the first time in the semester contributing with Euro 2.4 million), Turkey (+62.5%) and Egypt (+3.9% despite a strong exchange effect). EBITDA improved decidedly in the semester, rising 8.5% net of the exchange effect and the non-recurring costs, thanks, in particular, to Germany’s brilliant performance and the recovery recorded in the Netherlands.
AMERICAS: year off to a slow start but expected to recover in the second half.
The semester performance in AMERICAS was impacted by the bad weather conditions recorded in the first four months of the year, as well as a change in the mix of suppliers providing products to the Elite network. Sales in the region were, however, basically unchanged (-1% in USD), influenced negatively solely by a strong adverse exchange effect (-4.4%). The expectations for the second half of the year continue to be positive, sustained by the pickup recorded in the last part of the quarter and the general recovery of the private sector. Profitability in the period fell 9.1% due to a decline in sales, the Elite channel’s less favorable product mix and higher investments in marketing. 
ASIA-PACIFIC: sharp margins expansion supported by solid organic growth.
In the first half of 2014 revenue in ASIA-PACIFIC amounted to Euro 60.7 million, up 10.9% in Australian dollars. Australia (+10.2% in AUD) and India (+34.7% in INR) both made a positive contribution thanks to strong organic growth and the continuous expansion of the store networks in both markets. Sales in New Zealand fell 2.7% in NZD due to market weakness (while waiting for a change in regulations that calls for increased subsidies from July) and the decrease in the number of stores (after the decision of having all stores operating under the Bay Audiology brand). The exchange rate had a strong negative impact of 11.3%. Profitability for the region improved noticeably: EBITDA grew 302 basis points in AUD thanks to the growth in volumes recorded in Australia, the rationalization undertaken last year in New Zealand and improved operating efficiency in India.
Overall profitability showed decided further improvement in the first semester: EBITDA rose to Euro 57.5 million, an increase of 4.3% with respect to the same period of the prior year. Net of the negative exchange effect (Euro 2.8 million) and the non-recurring costs incurred in the comparison period (Euro 0.7 million), EBITDA rose 7.9%. This result reflects the contribution of EMEA, which rose 8.5% net of the exchange effect and non-recurring costs, and ASIA-PACIFIC where the EBITDA margin rose 302 basis points. The EBITDA margin in AMERICAS fell 161 basis points. Strong growth was also posted in EBIT which rose 10.6% against the same period of the prior year (+14.7% net of the exchange effect and non-recurring costs). Net profit improved, reaching Euro 22.6 million versus Euro 4.3 million in the same period of the prior year. In addition to the general improvement in margins, the result also reflects the non-recurring financial charges incurred last year (equal to Euro 6.8 million before tax) due to the advance repayment of the syndicated loan, as well as the tax income (equal to Euro 10.6 million) recorded following the Australian tax authority’s recognition of the deductibility for tax purposes of part of the assets acquired in 2010.
Balance Sheet Figures
Net equity amounted to Euro 413.8 million at June 30th, 2014, an increase with respect to the Euro 381.1 million posted at year-end 2013. Net financial debt amounted to Euro 297.3 million, a slight increase with respect to the Euro 275.4 million reported at December 31st, 2013, as a result of the acquisitions completed in the first semester (totaling Euro 26.3 million) and the payment of dividends (Euro 9.4 million). Nonetheless, it represents an improvement with respect to the Euro 313.2 million recorded at June 30th, 2013. Free cash flow at June 30th, 2014 amounted to Euro 19.6 million, up with respect to the Euro 0.9 million recorded at June 30th, 2013 after net CAPEX of Euro 16.5 million (Euro 13.7 million in the previous year).
In the second half of 2014, the Group expects profitability in Europe to improve gradually: the first, reassuring signs recorded in July indicate that the performance in Italy will likely recover as the result was, in part, penalized by a difficult comparison with the same period of the prior year. Organic growth should continue in the remaining regions. AMERICAS, in particular, is expected to post a sharp recovery, facilitated also by the general improvement of the private sector. The Group will continue with its strategy to reinforce its market share, including through external growth, in countries where it is already active and to seek out new investment opportunities in markets where it is not yet present.