Increasing market share. Net Sales at Euro 1,392 million.

EBITDA of Euro 144 million. Net Financial Position of Euro 376 million.

The Board of Directors met today in Milan and approved the results for financial year 2018

(1 February 2018 - 31 January 2019)

Market share continues to increase, from 7.8% to 8%.

Sales were almost stable (-1.7% to €1,391.6 million excluding the sell-in to the former Sempione Fashion Group). The slight reduction is due to a very negative market trend, also due to the extraordinarily adverse weather conditions in the second part of the year. Strong growth of online sales (up 87% to €16 million), which although still a marginal part of the business, accelerated far more than the performance of the related market. International organic sales also grew (+18% to almost €70 million).

Adjusted EBITDA of €144.2 million (-26.6% compared to the previous year), with a reduction born entirely in the second half of the year due to (i) extraordinary weather conditions until mid-November, and (ii) high mark- downs made necessary to avoid excess of stock, as well as the fact that high temperatures have normalized only during the "Black Friday" week, with a consequent impact on margins. Reported Ebitda of €74.4 million, mainly affected by the write-downs of the Balance sheet items relating to the former Swiss Group Sempione Fashion. As far as we know, the financial impact of non-recurring expenses was fully completed in 2018.

The adjusted net income was €55.2 million, down by €51.3 million, reflecting the decrease in EBITDA. The reported net result was €25.3 million, up €20.2 million compared with the previous year, mainly due to a positive mark-to-market effect (which was negative in 2017).

Adjusted net financial position of €375.8 million (€364.9 million, taking into account the positive mark-to- market impact of €10.8 million). The difference in net financial position compared with the previous year, which stood at €105.6 million at the end of the third quarter of 2018, decreased to €57.8 million, reflecting a cash generation of €64.7 million in the fourth quarter of 2018 alone (it was €16.9 million in the previous year).

FY18 Financial Results

1

Key consolidated economic and financial results

The table shows both adjusted and reported results to represent the Group's operating performance net of non- recurring events which are unrelated to ordinary operations. The adjusted results therefore enable a uniform analysis of performance in the periods indicated.

For details of non-recurring items unrelated to the core business, see pages 13 and 14 of the document.

€ mln

31.01.2019

31.01.2019

31.01.2018

31.01.2018

Chg.

Chg. %

Reported

Adjusted

Reported

Adjusted

(Adjusted)

(Adjusted)

Net Sales

1,457.2

1,457.2

1,525.7

1,525.7

(68.5)

(4.5%)

Net Sales*

1,391.6

1,391.6

1,415.1

1,415.1

(23.4)

(1.7%)

Gross Margin

789.7

791.6

824.3

828.8

(37.2)

(4.5%)

GM%

56.7%

56.9%

58.2%

58.6%

(169ppt)

EBITDA

74.4

144.2

174.8

196.5

(52.3)

(26.6%)

EBITDA%

5.3%

10.4%

12.3%

13.9%

(352ppt)

EBIT

7.2

85.6

112.0

142.4

(56.7)

(39.8%)

EBIT%

0.5%

6.2%

7.9%

10.1%

(391ppt)

PBT

32.8

67.9

9.5

133.6

(65.7)

(49.1%)

Net Income

25.3

55.2

5.1

106.5

(51.3)

(48.2%)

Net Financial Position

364.9

375.8

377.8

317.9

57.8

Market Share

8.0%

7.8%

+12ppt

(*)In order to give a picture of the organic business and make it comparable to the previous year, the net sales figure used to calculate the financial KPIs was adjusted to exclude sales under the service contract with the former Swiss Group Sempione Fashion.

FY18 Financial Results

2

Business performance

The first half of the year was characterized by substantial stability in sales and margins, and by an increase in working capital largely arising from the stock originally destinated to the former Swiss Sempione Fashion Group. The second part of the year, on the other hand, saw a decline in turnover up to mid November, when finally temperatures went down to seasonal averages. Sales in the "kids" segment, pillar in Group's performance, were even more affected by the lack of season change, especially in the "back to school" period. Overall, sales on a like-for-like basis fell by 5% in the last twelve months.

In the second half of the year, we decided to increase the mark-downs leveraging the two periods usually dedicated to sales in the Italian market: August and January. Thanks to that, we managed to invert the trend in the inventory level, which translated, also due to declining sales, into a lower EBITDA compared to the same period of previous year.

However, also thanks to lower purchases, it allowed a strong cash generation.

At year-end, inventory is still slightly higher than in the previous year (+6%): however, its level and composition improved considerably compared with the first half of the year, and even more so than in the third quarter, when tough seasonal performance prevented the visibility of the progress of the actions already implemented.

The Group's net debt, after being impacted by the worsening of the commercial relationship with former Sempione Fashion Group until the end of the third quarter, benefited from a fourth quarter that reflected the good cash generation, also thanks to the stock rationalisation. The net financial position at year end was €375.8 million, reflecting cash generation of €64.7 million in the fourth quarter only, compared with €16.9 million in the fourth quarter of 2017, thus reducing the gap compared with the previous year from €105.6 million at 31 October 2018 to €57.8 million in January 2019. As of today the situation is further improved.

In 2018, the network grew by 123 stores between Italy and abroad, out of which 14 Full format DOS in Italy and 109 franchising stores mainly in kids format; the overall network is now made up of 1,747 stores, out of which 763 directly managed.

2019 Outlook

OVS will open new stores both directly operated and in franchising, and will continue the refurbisment of the network. Stores renovated in 2018 and beginning 2019 are delivering very positive results.

Also Upim, brand with a format more suitable to neighborhood

locations, will continue to grow, through both directly operated

stores and franchising. In the latter case, openings in small

catchment areas are confirming the expected excellent results,

thanks to the capacity of Upim to offer to residents a modern and

efficient format, with high profitability, also given the lower

competition. In addition, it is confirmed the opportunity to capture

a relevant macro trend, such as the difficulty of hypermarkets in

offering a sufficiently specialised wideness of assortment and price-

quality ratio. In this respect, we have recently signed an important

commercial agreement with Finiper, one of the largest and most

renowned hypermarket chains. In this regard, we have recently

opened three new Upim shops within the hypermarkets' shop

floors, with encouraging results.

Blukids store inside Verona's Iper

FY18 Financial Results

3

These stores, that add up to the three already within the Panorama hypermarkets, represent the proof of an opportunity that we should be able to capture better than other players.

The international expansion will continue mostly with new openings in franchising.

Our digital evolution is making rapid progress. By now more than 50% of sales in brick and mortar stores are anticipated by an on-line search and about 50% of products sold through the e-commerce are collected in physical stores. The integration of digital and physical channels are already allowing us to increase the touch-points with customers moving towards a one-to-one relation.

The central role of customers and optimum understanding of their needs, supported by the ever-more analytical interpretation provided by digital innovation and CRM, encourage us to continue to evolve merchandising towards the values that our customers hold most dear. Entry price, which we will pay constant attention to, is not and will not be the only reason to prefer our product; we have already introduced, with very encouraging feedback, some premium quality products keeping the optimal price-quality ratio for which we are renowned. We will continue along this path, supported by a consistent communication that will highlight not only the convenience of our offer, for which we have always been recognised, but also products' quality.

We believe that margins could gradually improve over 2019, as we expect the markdowns carried out in 2018 to gradually decrease from quarter to quarter. However, the contraction of the market has obliged us to focus further on cost rationalisation. Technological innovation related to certain processes, improvements in logistics and the simplification of many procedures, together with increased flexibility and the reduction in stock, have enabled us to plan a reduction in general costs in 2019, to which we intend to add a reduction in rents in order to align at least partially lease values to the market conditions.

Thanks also to contributions from real estate owners to store restructuring and the increasingly complete finishing level that we require to properties as a condition for the opening of a store, we anticipate a significant reduction in investments, while maintaining those dedicated to technological innovation with particular regard to the digital experience, CRM and supporting the flexibility of our operations.

We expect 2019 with like-for-like sales slightly negative, given our determination to reduce planned purchases which will allow us to continue reducing the stock level and improving its quality. The consequent lower mark downs together with cost saving initiatives lay the basis for the expectation of a partial recovery of EBITDA compared to the past year and a good cash generation.

The transfer of shares of our company from BC Partners to TIP, brought a new structure for the Group's equity base, characterised by the presence of a strategic investor oriented towards achieving growth objectives.

FY18 Financial Results

4

NET SALES

Total sales for the year (excluding the sell-in to the former Group Sempione Fashion) decreased by €23.4 million, or -1.7%, reflecting a performance that in the second half of the year, as anticipated, was affected by extremely mild temperatures that lasted until the end of November, resulting in a marked decrease in traffic throughout the whole apparel sector.

Most affected the OVS brand, which was hit also by the negative performance of the kid's component, a decisive factor for the brand: due to the high temperatures in September and October (the "back to school" period), there was not the usual surge in "wardrobe renewing" purchases.

Upim continued to grow, due to the greater expansion of the network, and also benefited from non-seasonal sales of goods. The brand gained +5.1% in total on the previous year.

Chg.

Chg. %

31 January '19

31 January '18

(Adjusted)

(in EurM)

(Adjusted)

Eur/mln

Total Net Sales

1,391.6

1,415.1

(23.4)

(1.7%)

Breakdown by channel:

DOS & E-commerce

1,161.8

1,205.0

(43.1)

(3.6%)

as % on total

83.5%

85.2%

Franchise & Marketplaces

229.8

210.1

19.7

9.4%

as % on total

16.5%

14.8%

Breakdown by brand:

OVS

1,151.1

1,186.3

(35.2)

(3.0%)

UPIM

240.5

228.8

11.8

5.1%

Note: Net sales exclude the sell-in to the former Swiss Group Sempione Fashion.

FY18 Financial Results

5

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OVS S.p.A. published this content on 17 April 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 17 April 2019 16:57:02 UTC