Masi Agricola: consolidated results of the first half of 2019

PRESS RELEASE

MASI AGRICOLA: CONSOLIDATED RESULTS OF THE FIRST HALF OF 2019

REVENUES: A POSITIVE SECOND QUARTER BRINGS THE GROUP BACK TO GROWTH (+1%)

HYPERINFLATION IN ARGENTINA INFLUENCES PROFITABILITY

• • Net revenues €29.7 million (€29.5 million in 1H 2018, +1%)

• • EBITDA €5.5 million (€5.9 million in 1H 2018)

• • EBIT €3.7 million (€4.5 million in 1H 2018)

• • Net profit €1.7 million (€2.7 million in 1H 2018, mainly due to Argentine hyperinflation and the new accounting standard on rents)

• • Net financial debt1 €10.3 million (€9.1 million at 31 December 2018)

• • Consolidated shareholders' equity €126.0 million (€127.2 million at 31 December 2018)

Sant'Ambrogio di Valpolicella, 2 August 2019. The Board of Directors of Masi Agricola S.p.A., a company listed on AIM Italia and one of the Italian leaders in the production of premium wines, met today to approve the consolidated half-year financial report as at 30 June 2019.

Sandro Boscaini, President of Masi Agricola, said: "The first half of 2019 highlighted a context that remains generally very challenging for premium still wines. In Europe, it was also characterised by adverse weather conditions, delaying the arrival of spring and with a consequent decline in demand, especially in tourist destinations. In this scenario, we are therefore satisfied with the trend of our revenues and, in particular, in the second quarter, which allowed a visible recovery from the -5% recorded at the end of March, returning to positive territory. It remains a priority to maintain and develop qualified distribution, in order to consolidate the positioning of Masi and the other brands of the Group, favouring channels and customers with high visibility, solidity, and quality. We have a reduction from a cost-income ratio perspective, while the net profit would be substantially in line with the same period in 2018, if calculated net of the elements not dependent on the management, such as hyperinflation in Argentina and the new accounting policy on rents. The particularly positive trend of Canevel Spumanti and the Masi Wine Experience project, aimed at direct contact with the consumer, should be highlighted".

ECONOMIC PERFORMANCE OF THE GROUP

Revenue analysis

1 Liabilities for rights of use are not included.

MASI AGRICOLA S.P.A.

VIA MONTELEONE, 26 - 37015 GARGAGNAGO DI SANT'AMBROGIO DI VALPOLICELLA - VERONA - ITALY

TELEPHONE [phone] - FAX [phone] [e-mail] -WWW.MASI.IT

Breakdown of sales by geographical area:

1H-2019	%	1H-2018	%	Financial year	%
2018
Italy	5,949	20.0%	5,817	19.7%	14,272	21.9%
Other European countries	12,072	40.6%	12,705	43.1%	26,681	40.9%
Americas	10,309	34.7%	9,961	33.8%	22,556	34.5%
Rest of the World	1,396	4.7%	988	3.4%	1,804	2.8%
Total	29,726	100.0%	29,471	100.0%	65,313	100.0%

(thousands of euro)

The first half of 2019 closed with an increase in consolidated revenues of approximately 1%. In particular, Italy increased by 2.3%, the other European countries decreased by 5%, while the Americas increased by 3.5% and the Rest of the World by 41.3%.

Revenues reclassified according to the commercial positioning of the product2:

Top Wines

22.5%

22.9%

24.9%

Premium Wines

1H-2019	1H-2018	Financial year
2018
49.4%	53.5%	51.2%

Classic Wines

28.1%

23.6%

23.9%

Customer creditworthiness and credit collection were not particularly critical and remained in line with previous years.

Considering the seasonal aspect, it should be remembered that generally in recent years, the second half of the year has generated more than half of the annual revenue.

Hyperinflation and rents: new accounting standards

Before examining the income statement, balance sheet, and financial data for the first half of 2019, it should be noted that they were clearly influenced by extra-operational elements, as described below:

a) following the recent increase in the inflation index in Argentina, which reached over 100% on a cumulative three-year basis, from the second half of 2018 the Group proceeded to apply IAS 29 "Financial reporting in hyperinflationary economies" in relation to the Argentine subsidiary Masi Tupungato Vigneti La Arboleda S.A. In practice, in order to reflect the loss of purchasing power of the local functional currency in the financial statements, non-monetary items and equity items are remeasured by applying an inflation index that reflects the general trend in prices during the period of hyperinflation;

2 With regards to the trend towards retail price range positioning on shelves in Italy, note: Top Wines: wines with a price per bottle of more than 25 euros; Premium Wines: wines with a price per bottle of between 10 and 25 euros; Classic Wines: wines with a price per bottle of between 5 and 10 euros.

MASI AGRICOLA S.P.A.

VIA MONTELEONE, 26 - 37015 GARGAGNAGO DI SANT'AMBROGIO DI VALPOLICELLA - VERONA - ITALY

TELEPHONE [phone] - FAX [phone] [e-mail] -WWW.MASI.IT

b) the half-yearly financial report at 30 June 2019 saw the first application - as is mandatory for financial years beginning on or after 1 January 2019 - of the international accounting standard IFRS 16, which establishes the criteria for the recording, measurement, presentation, and disclosure of lease/rental contracts and requires lessees to account for all lease/rental contracts using a single accounting model. In this context, at the date of commencement of a lease, the lessee will record an asset (under fixed assets), representing the right to use the related asset during the contractual term, i.e. the so-called right of use, and at the same time a financial liability relating to the sum of the discounted rental payments. The lessee is required to record imputed interest expense on the lease liability and imputed depreciation on the right of use in the income statement. On the other hand, compared to the previous accounting regime, lease/rental fees are not charged to the income statement. As shown in the balance sheet, the first-time adoption of IFRS 16 at 30 June 2019 generated an amount of 9,729,000 euros as "Assets for rights of use" and an amount of 9,799,000 euros as "Liabilities for rights of use".

The impact resulting from the application of the above IAS 29 and IFRS 16 on the income statement for the first half of 2019 is equal to:

(in thousands of euros)	IAS 29	IFRS 16	Total
EBITDA	(241)3	394	153
EBIT	(290)	(6)	(296)
Result for the period	(826)	(92)	(918)

Analysis of consolidated operating and net results

EBITDA increased from 5,896,000 euros to 5,492,000 euros (EBITDA margin of 18.5%). Specifically:

a) despite an increase in revenues of 255,000 euros, gross profit decreased in absolute terms (from 20,233,000 euros to 19,904,000 euros) and in percentage terms (67% compared to 68.7% in the first half of 2018). Among the various causes we note the increase in the cost of goods generated mainly by the aforementioned Argentine hyperinflationary effect and a lower expectation of wine-growing performance compared to 2018;

b) costs for services decreased by 215,000 euros (from 10,564,000 euros to 10,349,000 euros); in the first half of 2019, compared to the first half of 2018, this item includes 394,000 euros in lower lease costs for land, vineyards, and buildings, due to the application of IFRS 16;

• c) staff costs and other operating costs increased only moderately;

• d) other revenues and income decreased by 165,000 euros, from 727,000 euros to 562,000 euros, mainly due to lower operating capital gains and OCM contributions.

  3 Mainly at the level of Cost of Goods.

MASI AGRICOLA S.P.A.

VIA MONTELEONE, 26 - 37015 GARGAGNAGO DI SANT'AMBROGIO DI VALPOLICELLA - VERONA - ITALY

TELEPHONE [phone] - FAX [phone] [e-mail] -WWW.MASI.IT

Half-year EBIT decreased from 4,515,000 euros to 3,651,000 euros (12.3% EBIT margin), after amortisation, depreciation, and write-downs of 1,841,000 euros. In this sense, depreciation and amortisation increased by 401,000 euros following the recording of operating leases according to the new method established by IFRS 16.

Financial income and expenses, income and expenses from equity investments, foreign exchange gains and losses: these items recorded an overall increase of 667,000 euros, due to Argentine hyperinflation for 550,000 euros and IFRS 16 for 85,000 euros.

Taxes: are substantially in line with the tax burden historically recorded by the Group.

Consolidated net income therefore amounted to 1,730,000 euros, compared to 2,706,000 euros in the first six months of 2018.

Balance sheet and financial position

Consolidated net financial indebtedness4 at 30 June 2019 amounted to 10,310,000 euros, compared with 9,054,000 euros at 31 December 2018. When examining the cash flow, it is useful to remember that the first half of the previous year benefited from the fact that in 2018 dividends were paid in September, while in 2019 the related cash flow occurred in June (same amount in both years, equal to 3,215,000 euros). At the same time, the first half of 2018 benefited from the provision for the substitute tax - equal to 2,245,000 euros - related to the higher value attributed to the final inventories at the time of the IFRS transition, with a corresponding improvement in net working capital.

SIGNIFICANT EVENTS DURING THE PERIOD

During the first half of 2019, Canevel Spumanti S.p.A. presented the new concept of Valdobbiadene Prosecco Superiore DOCG Brut and its counterpart Extra Dry, distinguished by the "Setàge" trademark: the latter, affixed on the label, promotes Canevel's consolidated corporate sparkling wine expertise towards the trade and consumers, which is expressed in a tried and true method, in a plurality of factors and at various levels of the value chain. The foaming process, carried out with particular care, including the slowness and use of selected yeasts, generates a very perceptible organoleptic result in terms of creaminess, softness, and pleasantness of the perlage, with bubbles as thin and elegant as silk. The Masi Technical Group is in charge of this, validating it and, at the same time, developing projects for further study and continuous improvement: Among other things, this can be seen in the theme of the XXXI Masi Technical Seminar, held during the last Vinitaly entitled "Sparkling Wines: simple bubbles or biotechnology?".

In 2019, Masi wines again received a wide range of certifications and exceptional scores from the main international rating authorities. We mention here: Wine Spectator, with 91/100 points for

4 Liabilities for rights of use are not included.

MASI AGRICOLA S.P.A.

VIA MONTELEONE, 26 - 37015 GARGAGNAGO DI SANT'AMBROGIO DI VALPOLICELLA - VERONA - ITALY

TELEPHONE [phone] - FAX [phone] [e-mail] -WWW.MASI.IT

Amarone Costasera 2013; Wine Enthusiast (94 points for Amarone Riserva di Costasera 2012 and the cru of Cantina Privata Boscaini Campolongo di Torbe 2011, 93 points for Amarone Costasera 2013, 92 points for the cru of Cantina Privata Boscaini Mazzano 2011, and 91 points for Vaio Armaron Serego Alighieri 2012); Wine & Spirits, with 95 points for Campolongo di Torbe 2011, 94 for Mazzano 2011, 93 for Costasera 2013, 92 for Riserva Costasera 2012, and 91 for Vaio Armaron.

After it was announced that Milan-Cortina had been selected as the venue for the 2026 Winter Olympic Games, the Masi Wine Bar "Al Druscié" is preparing to continue the success of its first season and become more of a landmark on the Ampezzo scene. The ski area of Tofana - Freccia nel Cielo, where the Masi Wine Bar "Al Druscié" is located, includes the famous Col Druscié A slope, which is known worldwide thanks to the 1956 Olympics and shall now reign once again for the 2026 Milan-Cortina Olympics.

SIGNIFICANT EVENTS OCCURRING AFTER THE END OF THE PERIOD

The recent recognition of the Hills of Conegliano and Valdobbiadene as UNESCO World Heritage Sites is not only an important success for the entire Veneto region, but also an important event for the Masi Group and for Canevel in particular, both because this "qualification" concerns the territory and consequently its wine products too, and because last year a Masi Wine Experience location was also set up at Canevel, with a wine shop and a programme of guided tours of the winery, the vineyards, and the surrounding area; a location that will hopefully benefit from the imaginable additional influx of national and international tourists.

FORESEEABLE EVOLUTION OF THE MANAGEMENT

Unfortunately, there are elements that make management predictability somewhat more difficult: among others, the general socio-political and economic uncertainty in many markets, the volatility of financial markets and consequently of exchange rates, and the increased caution of customers when purchasing.

At the end of July 2019, based on company statistics, sales continued to grow slightly compared to the same date of the previous year.

OTHER INFORMATION

The Board of Directors has verified the independence requirements in accordance with art. 148, c. 3 of the TUF, as referred to art. 147 - ter, c. 4 of the TUF, with respect to the Directors Enrico Maria Bignami and Stefano Saccardi.

PUBLICATION OF THE CONSOLIDATED HALF-YEARLY FINANCIAL REPORT AND THE INDEPENDENT AUDITORS' REPORT

MASI AGRICOLA S.P.A.

VIA MONTELEONE, 26 - 37015 GARGAGNAGO DI SANT'AMBROGIO DI VALPOLICELLA - VERONA - ITALY

TELEPHONE [phone] - FAX [phone] [e-mail] -WWW.MASI.IT