Brunello Cucinelli — Investor Presentation 2017

Aug 29, 2017

1H 17 Results

August 29th , 2017

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press release 29 th August 2017

"We are very pleased with the performance of our business in the first half of the year; both revenues and profit show strong growth. Sales of the winter collections are going very well. All this considered, we expect 2017 to display double-digit growth in both revenues and profit."

"Order intake for Summer 2018, which is now about to end, is truly positive. The feedback on our collection is particularly positive, as well as the allure surrounding our brand. As a result of a careful analysis of the above-mentioned elements, we can express a very positive view on 2018 and we keep envisaging more double-digit growth for the near future."

"We have recently celebrated our fifth anniversary since our listing on the Italian Stock Exchange. Going public has been an important choice and we are immensely glad with it; we feel we have confirmed all that we had planned back then with our coworkers, analysts and investors in terms of constant, double-digit gracious growth."

Humanist Artisans of the Web

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Solomeo is vital for the direct management of the online boutique

Devote special attention to customer service, packaging and visual merchandising

Convey, like in the physical world, the taste of our collections and brand lifestyle

Act as a "kind advisors", also offering advice to online shoppers on a total lifestyle offering

We are "very very" pleased with these results and feel that 2017 is the start of a "new world", where the Internet will have an enormous impact on humanity

We believe that this will change "buyer/seller relationships" forever, making it even more important to care for and Protect the Brand

We believe that the next major global challenge is to try to "humanize the web" and we would like to approach the web as "humanist and contemporary artisans", with a global vision

We believe that another crucial aspect of operating in the digital world is delivery-time and the value of waiting, which completes the luxury experience

We believe that each order should be handled very carefully

Essential role of "Brand Protection" both in the digital and physical world, to which we are committed in all our daily activities

Financial Highlights

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Net Financial Position

€22.2 mln in 1H 17

€59.4 mln (€79.7 mln as of June '16)

Investment Plan

Net Revenues	EBITDA	Net Profit
€243.3 mln	€41.6 mln	€19.9 mln
+10.7%	+13.1%*	+10.6%*
(performance at current exchange rates)		* compared with 1H 16 adjusted, excluding non recurring items reported last year
Italian	North America	Greater China
market	+9.3% sales	+34.6% sales

Retail +21.7% sales Wholesale multibrand +6.7% sales +6.0% sales Europe +9.9% sales RoW +11.4% sales Wholesale monobrand +2.6%** sales

(-20.8% reported)

** compared with 1H 16 wholesale monobrand adj., excluding sales related 4 physical boutiques and on-line boutique converted into direct channel from the 1st quarter 2017

€ mln	1H 16	1H 17	YoY % Chg
Net Revenues	219.8	243.3	+10.7%
			Constant exchange rates +9.7%
Italy	39.5	41.8	+6.0%
Rest of Europe	68.4	75.2	+9.9%
North America	76.4	83.6	+9.3%
Greater China	13.7	18.4	+34.6%
RoW	21.8	24.3	+11.4%

Revenues by Region

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Revenues Breakdown

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Revenues Highlights

Rest of Europe

The strong performance achieved is supported by the presence of local customers, as always a target for the brand

Results supported by local demand and the increase in top-end tourism

Purchases made by "young new customers" are playing an increasingly important role

Greater China

Strong growth of 34.6%, even if on limited starting values; commitment to pursuing sustainable growth, seizing the potentials of an evolving market, maintaining the allure and the exclusivity

Evolution of the end customer, ever more sophisticated; gradual increase in Asian tourism in the fashion and luxury capitals of the world

Exclusive distribution approach in the multibrand channel, which is now gradually developing in China

Italy

• The Italian market continue to be extremely important for the brand's image, especially within the prêt-à-porter offer
• The success of the offering in Italy contributes to our success across all international markets
• Opening of our largest "physical" boutique in Via Montenapoleone, Milan further contributed to heightening the brand's allure

North America

Growth related our offering which try to stay modern and on our presence in prestigious spaces in the monobrand and multibrand channels; visual merchandising always contributed to success

Distinctive relationship with all Luxury Department Stores, committed to seeking out luxurious, which might attract high-end customers and help make purchasing experience "unique"

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Rest of the World

Growth in all core markets, thanks to the loyal local clients buying in the domestic market or travelling for pleasure or on business

Increasing flow of new clients, attracted particularly to our refined and modern "Ready to Wear" offer.

Thanks to the brand's allure, the quality level of our spaces is further enhanced which, in particular, the Luxury department stores in Japan

Revenues by Distribution Channel

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€ mln

* Wholesale Monobrand Revenues as of 30/06/2016, excluding sales related 4 physical boutiques and on-line boutique converted into direct channel in the last 12 months

-20.8% 22.2 17.6

Retail & Wholesale Monobrand

Wholesale Monobrand

Wholesale Monobrand Network with 32 boutiques as of June '17 (36 boutiques as of June '16)

Network decrease related to conversion to Retail Monobrand

Retail

Retail network with 91 boutiques as of June '17 (86 boutiques as of June '16)

Network increase mainly related to 4 boutiques conversions in Moscow from wholesale monobrand network

+4.0% LFL* between 1 st January and 20th August 2017

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* Like-for-Like calculated as the worldwide average of sales growth, at constant exchange rates, reported by DOS opened as of 01/01/2016

Wholesale Multibrand

Multibrand channel considered extremely important for the exclusivity attributed to the brand

Presence in "prestigious" areas

Multibrand helps the brand to maintain the Ready To Wear offer always contemporary and fresh

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The 2017 Autumn/Winter collections are showing interesting sell-out figures, confirming the very positive feedback received during the presentation by specialized press and multibrand partners

Positive results for 2018 Spring/Summers orders collected

Particularly special relationship successfully created over the years with the most beautiful luxury multibrand boutiques and Luxury Department Stores

Growth supported also by areas destined to the brand in the multibrand channel in Asia, which have great growth potential over the medium to long-term

Income Statement

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€ mln

	1H 2016	1H 2017	Ch. %
	Adj.*
Net Revenues	219.8	243.3	+ 10.7%
Other operating income	0.5	1.2	+ 138.5%
Revenues	220.3	244.5	+ 11.0%
First Margin	142.2	158.7	+ 11.6%
%	64.5%	64.9%	+ 40 b.p.
SG&A	-105.4	-117.1	+ 11.1%
%	47.8%	47.9%	+ 10 b.p.
EBITDA	36.8	41.6	+ 13.1%
%	16.7%	17.0%	+ 30 b.p.
D&A	-9.6	-10.6	+ 10.6%
%	4.3%	4.3%	-
EBIT	27.2	31.0	+ 14.0%
Income before taxation	25.4	28.0	+ 10.1%
Net Income	17.9	19.9	+ 10.6%
Tax Rate	29.4%	29.1%

EBITDA & Key Income Statement Analysis

Operating Costs*

Operating costs up from € 105.4 million* (47.8%) to € 117.1 million (47.9%), in line with business development

Cost of rents increase (+8.6%) related retail network development, some expansion of important sales space and prestigious repositioning

Personnel costs* growth (+10.6%) related retail network development and passage to direct operations of 5 shop-in-shops in the Holt Renfrew luxury department stores in Canada, previously run using the wholesale formula

Other Operating costs incidence moved up from 18.0% to 18.4%

First Margin

First Margin improved by 40 basis points (from 64.5% to 64.9%) driven by:

• Development of the business
• LFL growth & Sell-outs increase
• Retail network from 86 to 91 boutiques, driven by 4 conversions from wholesale monobrand to retail channel
• Channel mix evolution, with retail sales reaching 49.8% compared to the 45.3% previous year

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*Excluding non recurring costs related 1H 16

Operating Costs

Other operating costs increase related:

• investments in communication increase, up from 11.2€ mln to 12.5€ mln, maintaining the same incidence (5.1%) on sales
• structure costs connected to DOS network evolution
• direct management of 5 shop-in shop in the Holt Renfrew Department store in Canada
• direct Management of the on-line boutique, converted to Retail Operations since beginning of 2017
• Costs related all digital activities management

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€ mln

Net Working Capital

14

* Trend related to the fair value of the currency forwards derivatives, underwritten as per the Company standard practice at the time price lists are defined and with the only purpose to hedge the non-euro commercial fx exposure

Inventory

Very positive sell-out figures drove inventory incidence decrease

Inventory incidence as of 30 June 2017 (33.1%) in line with the incidence as of 31 st December 2016 (33.9%)

Trade Receivables

Trade Receivables decrease related to:
- positive trade receivable management
- conversion to direct management of our online boutique and 4 Moscow boutiques from third party management
- conversion to direct management of 5 shop-in-shops in the Holt Renfrew luxury department stores in Canada, previously run as wholesale boutiques

	1H 2016	1H 2017	delta	FY 16
Trade Receivables	63.1	54.4	-8.7	47.2
Inventories	154.7	158.6	3.9	154.8
Trade Payables	-62.5	-61.9	0.6	-63.4
Strict Net Working Capital	155.2	151.0	-4.2	138.7	Strict Net Working Capital incidence (on 12 months rolling sales)
Incidence on Net Revenues	35.8%	31.5%		30.4%	decreased from 35.8% to 31.5%
Other Credits/(Debts)	-19.4	-9.5	9.9	-9.4
Net Working Capital	135.8	141.6	5.7	129.3	Net Working Capital incidence decreased from 31.3% to 29.5%, with
Incidence on Net Revenues	31.3%	29.5%		28.4%	"Other Credits/(Debts)" declined from -19.4€ million to -9.5€ million*

Trade Payables

Flattish trend related Trade Payables

Investments

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Commercial investments

• mainly related the conversion of 4 boutiques from third party management to direct mgmt. - selected boutique opening and repositioning - increase of spaces in the Luxury Department Stores

€ mln

Production/Logistics/IT/ Digital Investments

• IT and Digital Platform Investments related to the "Great Internet Project"

• Capex to support "brand protection" and exclusivity in the digital and physical world

Net Financial Position € mln

Net debt of €59.4million at 30 June 2017, a decrease from €79.7 million at 30 June 2016

Decrease mainly related

• operating cash flow generation
• trend in NWC management

Capex invested in the first 6 months of FY2017 higher compared with the capex invested the same period previous year, targeting the exclusivity of the positioning and allure of the brand in both the "physical" and "online" channels

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Net Financial Position & Seasonality € mln

NFP confirming its seasonality, with the peak reached between June and September, than falling by year end

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FY 2017

NFP by the end of FY2017 expected to be lower compared with previous year

1H 17

Annex

Income Statement Reported Vs. Adjusted

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1H 2016	1H 2017	Ch. %	1H 2016 Adj.*	1H 2017	Ch. %	1H 16 adjusted figures due to non-recurring costs and
Net Revenues 219.8	243.3	+ 10.7%	219.8	243.3	+ 10.7%	normalized tax rate
Other operating income 0.5	1.2	+ 138.5%	0.5	1.2	+ 138.5%
Revenues 220.3	244.5	+ 11.0%	220.3	244.5	+ 11.0%
First Margin 142.2	158.7	+ 11.6%	142.2	158.7	+ 11.6%
% 64.5%	64.9%	+ 40 b.p.	64.5%	64.9%	+ 40 b.p.	1H 16 SG&A adjusted does not include one-off costs mainly
SG&A -106.7	-117.1	+ 9.7%	-105.4	-117.1	+ 11.1%	related to the termination of employment payment of former
% 48.4%	47.9%	- 50 b.p.	47.8%	47.9%	+ 10 b.p.	co-Chief Commercial Officer
EBITDA 35.5	41.6	+ 17.2%	36.8	41.6	+ 13.1%
% 16.1%	17.0%	+ 90 b.p.	16.7%	17.0%	+ 30 b.p.
-9.6 D&A	-10.6	+ 10.6%	-9.6	-10.6	+ 10.6%
% 4.3%	4.3%	-	4.3%	4.3%	-
EBIT 25.9	31.0	+ 19.7%	27.2	31.0	+ 14.0%
24.1 Income before taxation	28.0	+ 16.1%	25.4	28.0	+ 10.1%	1H 16 Tax Rate adjusted does not include one-off costs related
Net Income 16.0	19.9	+ 23.9%	17.9	19.9	+ 10.6%	tax and accounts a normalized IRES tax rate (the IRES tax rate cut from 27.5% to 24.0% affecting deferred tax assets in FY 16)
Tax Rate 33.6%	29.1%		29.4%	29.1%

Detailed Income Statement Reported

	1H 2016	1H 2017
Net Revenues	219.8	243.3
Other operating income	0.5	1.2
Revenues	220.3	244.5
Consumption Costs	(33.3)	(37.9)
Raw Material Cost	(43.6)	(45.4)
Inventories Change	10.3	7.5
Outsourced Manufacturing	(44.8)	(47.9)
First Margin	142.2	158.7
Services Costs (excl. Out. Manuf.)	(63.5)	(70.0)
Personnel costs	(40.5)	(43.4)
Other operating costs	(2.3)	(2.6)
Increase in tangible assets	0.5	0.7
Bad Debt and other provisions	(0.8)	(1.9)
EBITDA	35.5	41.6
D&A	(9.6)	(10.6)
EBIT	25.9	31.0
Financial expenses	(11.3)	(13.1)
Financial income	9.5	10.1
EBT	24.1	28.0
Income taxes	(8.1)	(8.1)
Tax rate	33.6%	29.1%
Net Income	16.0	19.9
Minority Interest	(0.2)	0.3
Group Net Profit	16.2	19.6

Detailed Balance Sheet & Cash Flow Statement

The change in "Other net liabilities" is due to the reporting at fair value of derivatives underwritten with the only purpose of hedging the exchange risk on commercial transactions in foreign currency. These derivatives are accounted following the "cash flow hedge" rules, which provide for the fair value to be booked as an asset or liability item on the Balance Sheet (Asset or Liabilities for current financial instruments), with a corresponding balancing reserve in Shareholders'equity to reflect the effective component of the change in fair value of derivatives, which will be reversed through revenues in the income statement at the point when the transaction being hedged is recognised for accounting purposes.

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€ mln

Decrease in "Trade Payables" related different approach to the declarations of intent which gives rise to VAT exemption for suppliers gives rise to a lower amount receivable from Tax Authorities and a corresponding decrease in trade payables. The lower amount in payables arising from investing activities is due to higher capital expenditure related to works performed on buildings near the closing of the previous year.

	1H 2016	1H 2017
Trade receivables	63.1	54.4
Inventories	154.7	158.6
Trade payables (-)	(62.5)	(61.9)
Other current assets/(liabilities)	(19.4)	(9.5)
Net Working Capital	135.8	141.6
Goodwill	0.0	7.0
Intangible assets	30.5	26.5
Tangible assets	109.6	113.2
Financial assets	5.5	7.1
Total Assets	145.6	154.0
Other assets/(liabilities)	2.5	1.2
Net Invested Capital	284.0	296.8
Cash & Cash equivalents (-)	(42.3)	(52.0)
Short term Debt	74.6	54.6
Long term Debt	47.4	56.9
Net Financial Position	79.7	59.4
Shareholders Capital	13.6	13.6
Share-premium Reserve	57.9	57.9
Reserves	110.7	138.3
Group Net Profit	16.2	19.6
Group Equity	198.5	229.4
Minority shareholders	5.8	7.9
Total Equity	204.2	237.3
Total Funds	284.0	296.8

	1H 2016	1H 2017
Net Income	16.0	19.9
D&A	9.6	10.6
Ch. In NWC and other	(21.2)	(3.9)
Cash flow from operations	4.3	26.5
Tangible and intangible investments	(18.0)	(13.5)
Other (investments)/divestments	1.1	(9.2)
Cash flow from investments	(16.8)	(22.7)
Dividends	(8.9)	(10.9)
Share capital and reserves increase	(0.8)	-
Net change in financial debt	16.2	12.2
Total Cash Flow	(6.0)	5.1

Investor Relations

Significant Shareholdings*

Trust Brunello Cucinelli (Fedone s.r.l.)	57.0%
FMR LLC (Fidelity)	10.0%
Oppenheimer Funds	5.0%
Other	28.0%

Board of Directors

Brunello Cucinelli	Chairman and C.E.O.
Moreno Ciarapica	Director and C.F.O.
Riccardo Stefanelli	Director and Co-C.E.O.
Luca Lisandroni	Director and Co-C.E.O.
Camilla Cucinelli	Director
Giovanna Manfredi	Director
Carolina Cucinelli	Director
Andrea Pontremoli	Lead Indipendent Director
Candice Koo	Indipendent Director
Matteo Marzotto	Indipendent Director
Massimo Bergami	Indipendent Director

Head of Investor Relations

Pietro Arnaboldi	Brunello Cucinelli S.p.A.
mail: pietro.arnaboldi@brunellocucinelli.it	Viale Parco dell'Industria, 5
	Solomeo (PG)
Tel. +39 075 6970079	Italia

* As of the date of this document

This presentation may contain forward looking statements which reflect Management's current views and estimates.

The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements.

Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.

Figures as absolute values and in percentages are calculated using precise financial data. Some of the differences found in this presentation are due to rounding of the values expressed in millions of Euro.

The Manager in Charge of preparing the Corporate accounting documents, Moreno Ciarapica, declares pursuant to and to the effects of article 154-bis, paragraph 2 of Legislative Decree no. 58 of 1998 that the disclosures included in this release correspond to the balances on the books of account and the accounting records and entries.