Amplifon: the first half of 2019 confirms the excellent growth in revenues and significant increase in profitability

Main results for the first half of 20191:

• Consolidated revenues of 832.0 million euros, up 25.0% at constant exchange rates and 26.1% at current exchange rates compared to the same period of 2018
• Recurring EBITDA rose 28.4% to 141.2 million euros, with the margin coming in at 17.0% of revenues, an increase of 30 basis points compared to the same period of 2018, even after the consolidation of GAES. EBITDA as reported reached 135.4 million euros, or 16.3% of revenues
• Recurring Net profit amounted to 61.9 million euros, an increase of 31.6% compared to the first half of 2018. Net profit as reported rose 21.2% to 57.0 million euros
• Net financial debt was 841.1 million euros, substantially unchanged with respect to the 840.9 million euros reported at December 31st, 2018 thanks to strong cash flow generation, also after a higher dividend payment
• Recurring Free cash flow reached 64.8 million euros, an increase of 20.3 million euros or 45.7% compared to the same period of 2018

Milan, July 30th, 2019 - Today the Board of Directors of Amplifon S.p.A. (MTA; Bloomberg ticker: AMP:IM), global leader in hearing solutions and services, approved the Interim Financial Report as at June 30th, 2019 during a meeting chaired by Susan Carol Holland.

For the sake of effective comparison with the same period of 2018, key figures for the first half and second quarter of 2019 in the following tables were prepared without applying the accounting standard IFRS 16. The following comments are, therefore, based on these figures, unless stated otherwise.

1 For the sake of effective comparison with the as reported figures for the first half and second quarter of 2018, figures for the first half and second quarter of 2019 commented in this press release refer to figures without the application of the accounting standard IFRS16 ("H1 2019 w/o IFRS 16" and "Q2 2019 w/o IFRS 16"), unless stated otherwise

MAIN CONSOLIDATED ECONOMICAL AND FINANCIAL FIGURES - FIRST HALF 2019

(Euro millions))		H1 2019 w/o IFRS 16 (*)			H1 2018
	Recurring	Non-	Total	% on	Recurring	Non-	Total	% on Change % on
	recurring	recurring	recurring	recurring	recurring
Net revenues	832.0	-	832.0	100.0%	659.6	-	659.6	100.0%	26.1%
EBITDA	141.2	(5.8)	135.4	17.0%	109.9	-	109.9	16.7%	28.4%
EBIT	92.8	(5.9)	86.9	11.2%	76.1	-	76.1	11.5%	22.0%
Net income	61.9	(4.9)	57.0	7.4%	47.0	-	47.0	7.1%	31.6%
Free cash flow		57.9				44.5
		06/30/2019				12/31/2018			Change %
Net Financial Position		841.1				840.9			-

(*) For the sake of comparison, 2019 data are shown without the application of IFRS 16.

MAIN CONSOLIDATED ECONOMICAL AND FINANCIAL FIGURES - SECOND QUARTER 2019

(Euro millions)		Q2 2019 w/o IFRS 16 (*)			Q2 2018
	Recurring	Non-	Total	% on	Recurring	Non-	Total	% on Change % on
	recurring	recurring	recurring	recurring	recurring
Net revenues	440.1	-	440.1	100.0%	350.2	-	350.2	100.0%	25.7%
EBITDA	84.9	(4.4)	80.5	19.3%	66.7	-	66.7	19.1%	27.2%
EBIT	59.9	(4.4)	55.4	13.6%	49.5	-	49.5	14.1%	21.0%
Net income	41.9	(3.8)	38.1	9.5%	32.4	-	32.4	9.3%	29.3%

(*) For the sake of comparison, 2019 data are shown without the application of IFRS 16.

"The first half of 2019 shows once again extremely positive results. These results are characterized by solid, above-market organic growth, further accelerating in the second quarter, as well as by the extraordinary contribution from acquisitions, mostly driven by GAES. In fact, GAES integration continues in the wake of the excellent first quarter results, thus contributing positively to the double-digit growth in revenues", said Enrico Vita, Amplifon's Chief Executive Officer "We are also very satisfied with the results achieved in terms of profitability at group level which showed significant improvement, even after the consolidation of GAES. This allows us to be confident of achieving a recurring EBITDA margin in 2019 higher than the 2018 margin. Lastly, we are proceeding at a sustained pace with the execution of our other strategic initiatives, as demonstrated by the first very positive results of the progressive roll-out of the Amplifon Product Experience also in the Netherlands and Germany."

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Overview

Amplifon reported consolidated revenues of 832.0 million euros in the first half of 2019, an increase of 25.0% at constant exchange rates and of 26.1% at current exchange rates compared to the first half of 2018. This outstanding performance reflects strong, above market organic growth (+4.8%) and the extraordinary contribution of acquisitions (+20.2%) fueled by the consolidation of GAES and its double-digit organic growth (reported in M&A), as well as the bolt-on acquisitions carried out mainly in France and Germany. The foreign exchange effect was positive for 1.1%.

Recurring EBITDA rose 28.4% in the first half of 2019 to 141.2 million euros. The margin came in at 17.0%, an increase of 30 basis points compared to the first half of 2018, even after the consolidation of GAES, characterized by a lower initial profitability compared to the rest of the Amplifon group. EBITDA as reported reached 135.4 million euros or 16.3% of revenues, up 23.1% year on year. Recurring net profit rose 31.6% to 61.9 million euros, while net profit as reported grew by 21.2% to 57.0 million euros. Adjusted earnings per share (adjusted EPS)2 came in at 34.1 euro cents, 37.7% higher than the 24.8 euro cents reported in the first half of 2018.

The balance sheet and financial indicators show a positive trend: free cash flow reached 57.9 million euros, showing strong improvement compared to the 44.5 million euros posted in the first half of 2018, after absorbing net capex of 42.0 million euros. Recurring free cash flow reached an even higher 64.8 million euros, with an increase of 45.7% compared to the first half of 2018. Net debt came in at 841.1 million euros, substantially unchanged with respect to the 840.9 million euros recorded at December 31st, 2018 thanks to the strong cash flow generation, also after a higher dividend payment.

Amplifon reported excellent results also in the second quarter of 2019. Revenues amounted to 440.1 million euros, an increase of 24.7% at constant exchange rates and of 25.7% at current exchange rates compared to the second quarter of 2018, even after the application of IFRS 15 which had a negative impact of around 1%. The increase was driven by strong, above market organic growth (+5.6%), in acceleration compared to the first quarter of 2019, as well as the contribution of acquisitions (+19.1%), which was fueled by the consolidation of GAES and its double-digit organic growth (reported in M&A) along with the bolt-on acquisitions carried out mainly in France and Germany. The foreign exchange effect was positive for 1.0%. Recurring EBITDA amounted to 84.9 million euros, while the margin rose 20 basis points to 19.3%. EBITDA as reported reached 80.5 million euros or 18.3% of revenues. Recurring net profit was 29.3% higher than in the comparison period, coming in at 41.9 million euros, whereas net profit as reported grew 17.5% to 38.1 million euros.

The network expansion program continued in the first half, both organically and through acquisitions, with the addition of 82 stores, of which 33 in the second quarter. The acquisitions, 64 stores, were made mainly in France and Germany for a total cash-out of 27.7 million euros.

Economic results for the first half of 2019

Consolidated revenues amounted to 832.0 million euros in the first half of 2019, an increase of 25.0% at constant exchange rates and of 26.1% at current exchange rates compared to the first half of the prior year. Revenues were driven by strong organic growth (+4.8%), outpacing the market, while acquisitions contributed 20.2%. The foreign exchange effect had a positive impact of 1.1%, attributable mainly to the strengthening of the USD against the Euro. The growth trend was sustained by the solid performances posted in all the geographic areas in which the Company operates: an excellent performance was recorded in EMEA, thanks also to strong organic growth which accelerated further in the second quarter and the extraordinary contribution of GAES; strong revenue growth was posted in AMERICAS, driven by positive organic growth and significant contribution of acquisitions linked to the consolidation, as well as the excellent performance, of GAES LATAM business; the good growth in revenues recorded in APAC reflects

2 Net earnings per share adjusted (adjusted EPS) for non-recurring expenses and amortization linked to acquisitions in accordance with the Purchase Price Allocation accounting treatment.

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solid organic growth, which outpaced the market, as well as the contribution made by the first Chinese joint venture.

Thanks to the significant acceleration in revenues and operating leverage, recurring EBITDA maintained its solid growth trend increasing 28.4% to 141.2 million euros. The recurring EBITDA margin rose 30 basis points compared to the first half of 2018 to 17.0% even after the consolidation of GAES and the continuous investments in marketing. EBITDA as reported rose 23.1% to 135.4 million euros. Non-recurring expenses related to the GAES integration amounted to 5.8 million euros in the first half of 2019. Recurring and as reported EBITDA after the application of IFRS 16 came to 186.6 million euros and 180.8 million euros, respectively.

Recurring EBIT rose 22.0% compared to the same period of 2018 to 92.8 million euros or 11.2% of revenues. This increase is attributable to the improvement in EBITDA, which was partially offset by higher depreciation and amortization related to network expansion, innovation, and IT infrastructure, as well as the impact of the 18.5 million euros in amortization recognized for acquisitions in accordance with Purchase Price Allocation accounting treatment. EBIT as reported rose 14.3% to 86.9 million euros.

Recurring Net profit (NP) reached 61.9 million euros, an increase of 31.6% compared to the first half of 2018. This excellent result is attributable to both the 27.1% decrease in financial expenses, especially considering that net financial debt at June 30th, 2019 was around 2.6x higher than at June 30th, 2018, and a reduction in the tax rate from the 29.1% recorded in the first half of 2018 to the current 27.7%. Net profit as reported rose 21.2% in the first half of 2019 to 57.0 million euros, with a tax rate of 28.5%. Adjusted earnings per share (adjusted EPS)3 came in at 34.1 euro cents, 37.7% higher than the 24.8 euro cents reported in the first half of 2018.

Performance by geographic area

EMEA: outstanding performance boosted by strong organic growth, accelerating in the second quarter, and the excellent results of Spain

Revenues in Europe, the Middle East and Africa (EMEA) reached 607.1 million euros in the first half of 2019, an increase of 30.9% at constant exchange rates and of 31.1% at current exchange rates. This result was driven for 5.5% by strong organic growth, thanks also to the further acceleration to 6.9% in the second quarter, and for 25.4% by acquisitions. The latter reflect the combined effect of the consolidation of GAES as of January 1st, 2019, GAES double-digit organic growth (reported in M&A) and the bolt-on acquisitions made in Germany and France. The foreign exchange effect was positive for 0.2%.

In Europe, Italy recorded excellent organic growth thanks also to the continuous success of the roll-out of the Amplifon product line and digital ecosystem, which were also launched in the Netherlands and Germany with very positive initial results. In Spain, both GAES and Amplifon businesses reported excellent, above expectations, double-digit organic growth, stemming also from the first successful activities of the integration process. Double-digit growth was recorded in Germany, driven by strong organic growth and acquisitions. France returned to double-digit revenue growth in the second quarter, after a largely unchanged performance in the first quarter due to an adverse phasing related to the introduction of the new regulatory framework.

The contribution of EMEA to the Group's profitability continues to be very significant, with recurring EBITDA rising 33.1% to 109.2 million euros. The margin showed strong improvement, rising 30 basis points to 18.0% of revenues, despite the slight contraction reported in the second quarter due to the dilutive effect of the integration of GAES which has a different seasonality.

3 Earnings per share adjusted (adjusted EPS) for non-recurring items and amortization related to acquisitions according to the Purchase Price Allocation accounting treatment

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AMERICAS: strong top-line growth and excellent profitability improvement

Revenues in AMERICAS reached 131.9 million euros in the first half of 2019, an increase of 13.7% in local currency and 20.6% at current exchange rates. The performance was driven by the strong contribution of acquisitions (+11.4%), explained mainly by the consolidation and growth of GAES LATAM business. Organic growth, which grew by 2.3%, even after the negative impact of the accounting standard IFRS 15 of around 1%, is attributable to the good performance of Miracle-Ear and Amplifon Hearing Health Care which more than offset the softer performance of Elite Hearing Network and Canada. The foreign exchange effect was positive for 6.9%.

Recurring EBITDA in AMERICAS grew from the 20.8 million euros recorded in the first half of 2018 to 27.0 million euros in the first half of 2019 (+29.6%). The margin rose 140 basis points (peaking at 160 basis points in the second quarter) to 20.5% of revenues thanks to the strong operating leverage which more than offset the dilutive effect stemming from the consolidation of GAES LATAM business.

ASIA-PACIFIC: robust and above-market sales performance; profitability reflecting lower fixed cost absorption

Revenues in ASIA-PACIFIC amounted to 91.0 million euros in the first half of 2019, an increase of 6.8% in local currency and 5.7% at current exchange rates. Revenues were penalized by the unfavorable foreign exchange effect which had a negative impact of 1.1%. The region's performance is explained for 3.4% by solid organic growth which outpaced the market, despite one less working day. Acquisitions contributed for 3.4% and are related to the Chinese joint venture. A good performance, driven by solid organic growth, was reported in Australia, while revenues in New Zealand were still largely unchanged due to the anniversary of the regulatory change that took place in 2013.

In ASIA-PACIFIC, EBITDA decreased by 6.4% compared to the same period in 2018 to 22.1 million euros due primarily to the lower absorption of fixed costs, especially in the second quarter, as a result of the softer market environment and the one less working day, as well as the dilutive effect stemming from the consolidation of the Chinese joint venture. The margin came in at 24.3% and is expected to improve in the coming quarters.

Balance sheet figures as at June 30th, 2019

The balance sheet and financial indicators show a positive trend, confirming the Group's solidity and ability to sustain future growth opportunities. Total net equity amounted to 625.5 million euros at June 30th, 2019, higher than the 595.94 million euros reported at December 31st, 2018.

According to the application of the new accounting standards, operating cash flow before repayment of lease liabilities amounted to 139.5 million euros. Repayment of lease liabilities, equal to 39.7 million euros, brings the operating cash flow to 99.8 million euros (106.8 million euros on a recurring basis), an increase of 29.4 million euros compared to 70.4 million euros in the 2018 comparison period. Free cash flow, positive for 57.9 million euros, was also higher than the 44.5 million euros generated in the first half of 2018, after investments (net of disposals) of 42.0 million euros versus 26.0 million euros in the 2018 comparison period. Recurring free cash flow reaches 64.8 million euros in the first half of 2019, an increase of 45.7% compared to the same period of the prior year. Net cash-out for acquisitions (27.7 million euros compared to 37.6 million euros in the first half of 2018) along with the dividends paid and other investing activities, accounting for 29.7 million euros, bring the cash flow for the period to positive 0.4 million euros compared to negative 23.7 million euros in the same period of the prior year.

Net financial debt amounted to 841.1 million euros at June 30th, 2019 largely unchanged with respect to the 840.9 million euros recorded at December 31st, 2018 thanks to the strong cash flow generation

4 2018 Balance Sheet has been revised for the provisional allocation of the GAES acquisition price

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