STEFANEL : S BOARD APPROVES GROUP RESULTS FOR Q1 2014

STEFANEL'S BOARD APPROVES GROUP RESULTS FOR Q1 2014

Q1 2014 CONFIRMS THE TREND IN MARGIN IMPROVEMENT:
• Net sales of 44.5 million euro (48.4 mn in Q1 2013), which reflects the closure of underperforming stores; like-for-like sales are stable; the proportion of foreign sales is rising (62% on 59% in Q1
2013)
• Gross operating margin up from 51% to 55%
• Selling, general and administrative expenses have decreased significantly (- 10%)
• Adjusted EBITDA of -0.8 million euro (-3.7 mn euro in Q1 2013)
• Adjusted EBIT of -2.5 million euro (-5.8 mn euro in Q1 2013)
• Net loss of 4.6 million euro (Net loss 4.1 mn in Q1 2013, which benefited from 3.5 mn euro of non-recurring income)
• Net financial indebtedness of 82.8 million euro (78.4 mn at 31 March 2013, boosted by the non- recurring income of 3.5 mn euro)

Ponte di Piave, 15 May 2014. The Board of Directors of Stefanel S.p.A. met today under the chairmanship of Giuseppe Stefanel and approved the interim report at 31 March 2014.

Giuseppe Stefanel, Chairman of Stefanel S.p.A., has made the following declaration:"The first quarter results confirm the trend of improvement in profit margins that we saw in the second half of 2013. The effect of the measures taken to improve margins, reduce costs and lower the operating break-even point are producing the results we expected. Indeed, the improvement is even more evident if we consider that the first quarter of 2013 benefited from the extraordinary impact of a gain on the sale of Hallhuber. We will therefore continue to work in this direction with the aim of restoring the Company's accounts to profit."

GROUP PERFORMANCE

During the first quarter of 2014, the Group posted consolidated net sales of 44.5 million euro, versus
48.4 million euro in 2013), a decline of 3.9 million euro mainly because of the closure of medium- large Stefanel monobrand stores that were not performing up to standard, with the balance due to certain deliveries of the 2014 Spring-Summer collection being postponed to the second quarter.

(in thousands of euro) 1st Quarter 2014 1st Quarter 2013 Change % Stefanel business unit 31,644 34,698 (8.8%)

Interfashion business unit 12,865 13,720 (6.2%) Total net sales 44,509 48,418 (8.1%)

With reference just to the Stefanel business unit, we can see that the directly operated monobrand stores (Stefanel Shops/DOS) on a like-for-like basis produced stable sales (-0.4% compared with a like-for-like figure in 2013 of -5%).
During the first quarter of 2014, 17 new points of sale were opened and 22 were closed. To date the
Stefanel Business Unit has 410 monobrand stores geographically distributed as follows:

31.03.2014

Stefanel Shops of which DOS

Italy	149	59
Rest of Europe	208	104

Rest of the world 53 2

Total 410 165

As a result of the latest closures and openings, the share of monobrand stores located abroad has risen to 106 out of a total of 165.
The sales by geographical area of the Stefanel business unit see Italy as its principal market with
43.04% of the total, a decrease of over 2% in favour of foreign markets.

(in millions of euro) 1st Quarter 2014 1st Quarter 2013 Change %

Italy 13.6 15.6 (12.8%) Rest of Europe 16.5 17.9 (7.8%)

Rest of the world 1.5 1.2 25.0% Total net sales 31.6 34.7 (8.8%)

The Interfashion business unit has turned in revenues of Euro 12.9 million, with a decrease of 6.2% on the first quarter of the previous year, essentially due to the decision not to renew the licence agreement for the I'm Isola di Marras brand: the 2014 Spring-Summer collection will be the brand's last season of production and sales with us. However, the decrease in revenues generated by this brand have already been partially offset by the strong performance of our own "High" brand, which has allowed us to repeat the EBITDA achieved in the first quarter of 2013.
Sales by geographical area of the Interfashion business unit have the following breakdown:

(in millions of euro) 1st Quarter 2014 1st Quarter 2013 Change %

Italy 3.5 4.3 (18.6%) Rest of Europe 8.6 8.5 1.2%

Rest of the world 0.8 0.9 (11.1%) Total net sales 12.9 13.7 (6.2%)

***** Consolidated profitability is showing a remarkable improvement.
The gross industrial margin has risen from 51% to 55% and by holding down administrative and selling expenses, consolidated adjusted EBITDA has come in close to break-even (-0.8 million euro), which compares with a net loss of Euro 3.7 million at 31 March 2013.
The consolidated adjusted EBIT (net of non-recurring charges) of Euro -2.5 million has improved by
Euro 3.2 million, more than halving the loss recorded in the first quarter of 2013 (-5.8 million).

Net financial charges have deteriorated by Euro 0.4 million (Euro 1.1 million versus Euro 0.7 million in the same period last year), principally because of a positive financial element booked in the first quarter of 2013.

The result of assets held for sale and discontinued operations in the first quarter of 2014 shows a zero balance, whereas in the corresponding period of 2013 it was positive for Euro 3.5 million thanks to the "conditional earn-out" on the sale of Hallhuber GmbH.
So without this non-recurring element, the consolidated net result for the first quarter of 2014 (-4.6 million euro) would show a significant improvement, almost halving the Q1 2013 loss (pro-forma
2013: -7.6 million euro).

THE GROUP'S FINANCIAL AND EQUITY STRUCTURE

Consolidated net financial indebtedness (NFI) comes to Euro 83.1 million (Euro 78.4 million at 31
December 2013)1. The Group has short-term NFI of Euro 83.0 million2.
The NFI of Stefanel S.p.A. amounts to Euro 82.5 million (Euro 77.7 million at 31 December 2013). Short-term NFI comes to Euro 82.4 million.

SIGNIFICANT EVENTS

No significant events took place during the period ended 31 March 2014.

AGREEMENTS WITH THE FINANCING BANKS

On 23 June 2011, the Company signed an agreement (called the "New Agreement") with the financing banks (the "Banks") with a duration until 31 December 2015. This provided for a moratorium on repayments of the principal of medium/long-term loans up to 2014, with subsequent repayments up to 2017, as well as confirmation of the operational lines of credit up to 31 December
2013.
The covenants in the New Agreement, which had to be observed subject to a six-monthly review, were not met as of 30 June 2013, resulting in the loss of the benefit of the term on the existing medium/long-term loans and giving the Banks the right to revoke the lines of credit that fell due on
31 December 2013; this acts as a limit on the use of the funds that are available to the Group.
In view of the results expected in 2013, a new business plan called the "2013-2017 Business Plan and Budget" (hereinafter the "2013-2017 Plan") was prepared with the support of a leading advisor. It was initially approved by the Board of Directors on 29 August; a second version was prepared for the Banks to accompany a new debt restructuring proposal and approved on 28 December 2013, with the definitive version being authorised on 14 March 2014.
The 2013-2017 Plan was initially presented to the Banks on 18 July 2013; in it, Stefanel's management explained to the Banks current market trends, the Group's overall situation, the measures already taken and still to be taken, the results expected from these measures and the consequent prospects.
In the months that followed, further meetings were held with the banks, at which documentation was presented as support for the definition of a new agreement. In this sense, it is worth pointing out that

1

Configuration of net financial indebtedness as required by CESR/05-054b Communication of February 2005, i.e. excluding

financial fixed assets.

2

For the sole purpose of complying with the accounting standards, in the financial statements, the Directors have also classified as

short-term the current portions of long-term loans, even though they expect to be able to maintain the ability to pay them in the longer term as part of the next debt restructuring agreement.

pending the completion of the new plan, the banks did not withdraw their support for the Group,
maintaining as normally available and operational the lines of credit that the Group is currently using, even for periods subsequent to 31 December 2013.
The strategy reflected in the 2013-2017 Plan takes into account the specific features of the project to relaunch Stefanel, with particular reference to:
− completion of the process of re-launching the Stefanel brand, mainly acting on the levers of product and communication by upgrading the design, rationalising expenditure on advertising and refurbishing the points of sale;
− the increase in like-for-like sales which, compared with the growth forecasts for the "women's clothing" market made by independent sources for the geographical areas in which Stefanel sells the most, includes elements that are specific to the Company and to the brand, such as the market share held, the steps identified to relaunch the brand and the sales performance in recent years;
− the development of the shop network (principally in monobrand franchising and independent multi-brand stores) with the aim of further rebalancing the mix of revenues in non-euro areas and containing investment needs, focusing on geographical areas, particularly in the East, that are emerging, but already active for the Group from a distribution point of view;
− the improvement in gross profit thanks to stronger sourcing and initial mark-up policies.
The assumptions of the 2013-2017 Plan include the main terms of the proposed new financial measures that provide for a rescheduling of the medium and long-term loans while maintaining the operational lines of credit over the period of the Plan.
If certain circumstances take place, the 2013-2017 Plan envisages further financial support from the reference shareholder, who in previous years helped to curb the situation of financial stress by injecting fresh funds and purchasing assets in support of the capital.
With reference to the covenants that are not met at 30 June 2013, during the discussions of the new budget with the banks, the Company also asked for a waiver to be issued at the time the new restructuring agreement is signed.
With reference to the key performance indicators analysed by the Group, the 2013-2017 Plan expects to achieve:
• a positive consolidated EBITDA and positive operating cash flows from 2014, and
• positive consolidated net results with an improvement in the net financial position from 2016.
As shown in the section entitled "Group performance", the first quarter of 2014 closed with a consolidated net operating loss mainly due to a contraction in sales volumes and rationalisation of the sales network, partly offset by a distinct improvement in the gross operating margin and a reduction in selling, general and administrative expenses, as well as optimisation of advertising expenditure. With respect to the 2013-2017 Plan, the results achieved by the Group in the first quarter of 2014 have largely confirmed our expectations in terms of EBITDA.
In support of this, a leading advisor was appointed to carry out an independent business review on the 2013-2017 Plan. This review was completed on 5 March 2014 without finding anything significantly wrong in the forecasts for 2014. The Company also appointed an independent expert to certify the 2013-2017 Business Plan pursuant to art. 67 R.D. 267/42. On completion of this assignment, the expert issued a certification on 23 April 2014, whose effectiveness is subject to the new restructuring agreement (the "2014 Agreement") being signed.
In April 2014, the Banks continued with their approval procedures. As of today, the Banks have confirmed that they have decided in favour of the 2013-2017 Plan and Budget (apart from two of them that still have to complete their credit assessment and approval procedure).

In addition, the Company's and the Banks' lawyers are still completing the draft contracts necessary
to conclude the 2014 Agreement prepared on the basis of the 2013-2017 Plan.
Even though there has been a delay in the timetable for signing the 2014 Agreement by the end of
2013, based on the above considerations, the Directors still expect to sign the Agreement in the near future.

SUBSEQUENT EVENTS

No particular significant events have occurred subsequent to the end of the first quarter of 2014.

OTHER INFORMATION

At 31 March 2014 the Group had renegotiated the due dates of overdue trade payables of Euro
15,783 thousand, extending them to later dates without any charge for penalties or default interest. The Group has not suffered particularly in terms of payment reminders, injunctions or suspended supplies.
There are no past due liabilities for loans, taxes, social contributions or payroll.
As regards related-party transactions, including those between Group companies, they could not be classified as abnormal or unusual as they form part of their normal course of business. Such transactions are settled on arms'-length terms, having regard for the characteristics of the goods and services provided. The principal economic and financial transactions between Group companies and related parties (excluding intercompany transactions, which have already been eliminated on consolidation) are summarised below.

(in thousands of euro) 31.03.2014 31.12.2013

Purchase of intangible assets from related parties - 5

Purchase of commercial equipment from related companies 546 1,051

Due from related parties for supplies 1,115 852

Accounts receivable from related parties for disposal of stores 45 49

Other financial receivables from related parties 2,645 3,445

Due to related parties for supplies (1,152) (958)

1st Quarter

(in thousands of euro) 2014

1st Quarter

2013

Income from recharges to related parties	7	46
Costs recharged by related parties	(666)	(813)
Other financial income from related financial parties	9	9

The interim report on operations at 31 March 2014 provides detailed information on the impact that related-party transactions or positions have on the Group's balance sheet, financial position and income statement.
*****

PUBLICATION OF THE MINUTES OF THE SHAREHOLDERS' MEETING
The minutes of the Ordinary Shareholders' Meeting of 29 April 2014 is available to the general public at the Company's registered office, at Borsa Italiana S.p.A. (www.borsaitaliana.it) and on the Company's website www.stefanel.com (in the Investors/Corporate Governance/Shareholders' Meetings section at the address: http://cdnlevel3.stefanel.com/media/assets/2/5/2511verbale_assemblea_29.04.14.pdf).
*****

DECLARATION BY THE EXECUTIVE IN CHARGE OF PREPARING CORPORATE ACCOUNTING DOCUMENTS

Monica Cipolotti, the executive in charge of preparing corporate accounting documents, declares, pursuant to article 154-bis para. 2 of the CFA, that the financial information contained in this press release agrees with the documentary records, books of account and accounting entries.
*****
The interim report on operations at 31 March 2014 is available to the general public at the Company's registered office, on the Company's website www.stefanel.com (in the Investors/Financial statements section at the address: http://cdnlevel3.stefanel.com/media/assets/2/5/2513resocontogestioneal310314.pdf) and on the website of Borsa Italiana S.p.A. www.borsaitaliana.it.

THE STEFANEL GROUP

*****

The Stefanel Group, which operates through the Stefanel brand as one of the historical brand names of Italian fashion, is currently present nationally and internationally in the apparel sector through two business units: Stefanel and Interfashion. The Stefanel business unit takes care of the production and international distribution - mainly to monobrand stores - of collections of Stefanel brand women's apparel and accessories, while the Interfashion business unit designs, takes care of production and distributes at international level items of female apparel under the HIGH brand (owned by the Group) as well as I'm Isola Marras (under licence).

DISCLAIMER

This document contains forward-looking statements with forecasts relating to future events and the operating, economic and financial results of the Stefanel Group. By their nature, such forecasts are subject to an element of risk and uncertainty, since they depend on the outcome of future events and developments. Actual results may differ significantly from those announced due to a multitude of factors.

ATTACHMENTS

• Consolidated income statement

• Reclassified consolidated balance sheet

• Reclassified consolidated cash flow statement

Note: the numbers relating to 2013 and 2012 have been prepared in accordance with IAS/IFRS. The numbers relating to 2012 have been audited, while those for the first quarter of 2013 and 2012 have not been subject to audit. The balance sheet and cash flow statement have been reclassified in accordance with a format that is normally used by management and by investors to evaluate the results of the Group. These reclassified statements do not comply with the standards of presentation requested by IFRS and should not be considered a substitute for them. However, since they disclose the same content, they are easily reconcilable to IFRS statements.

*****
STEFANEL S.p.A.

Investors/analysts: Stefanel S.p.A. Monica Cipolotti

Ph. [phone] [e-mail] www.stefanel.com

Media Relations:

Ad Hoc Communication Advisors

Ph. +39 02/7606741

Sara Balzarotti Mob. [phone] [e-mail]

CONSOLIDATED INCOME STATEMENT

(in thousands of euro) 1st Quarter

2014

% 1st Quarter %

2013

%

2013

Net sales 44,509 100.0% 48,418 100.0% 168,517 100.0% Cost of sales (20,040) (45.0%) (23,516) (48.6%) (76,027) (45.1%) Gross operating margin 24,469 55.0% 24,902 51.4% 92,490 54.9%

- Selling, general and administrative expenses (24,184) (54.3%) (26,890) (55.5%) (93,338) (55.4%)

- Non-recurring income (charges) (543) (1.2%) (273) (0.6%) (2,716) (1.6%)

- Advertising and promotion (1,049) (2.4%) (1,685) (3.5%) (5,605) (3.3%) EBITDA * (1,307) (2.9%) (3,946) (8.2%) (9,169) (5.4%) Adjusted EBITDA ** (764) (1.7%) (3,673) (7.6%) (6,453) (3.8%)

- Depreciation and amortisation (1,779) (4.0%) (2,097) (4.3%) (8,372) (5.0%)

- Value adjustments (14) (0.0%) (112) (0.2%) (3,287) (2.0%) EBIT * (3,100) (7.0%) (6,155) (12.7%) (20,828) (12.4%) Adjusted EBIT ** (2,543) (5.7%) (5,770) (11.9%) (14,825) (8.8%)

- Financial income (expense) (1,075) (2.4%) (701) (1.5%) (4,404) (2.6%)

- Income (expenses) from investments (22) (0.1%) (35) (0.1%) (394) (0.2%) Profit (loss) before tax (4,197) (9.4%) (6,891) (14.2%) (25,626) (15.2%)

- Income taxes for the period (425) (1.0%) (753) (1.6%) (1,719) (1.0%)

Net profit (loss) from continuing operations (4,622) (10.4%) (7,644) (15.8%) (27,345) (16.2%)

- Result of assets held for sale and discontinued

operations - 0.0% 3,500 7.2% 3,500 2.1% Net profit (loss) for the period (4,622) (10.4%) (4,144) (8.6%) (23,845) (14.2%) Attributable to:

- Shareholders of the Parent Company (4,686) (10.5%) (4,196) (8.7%) (23,957) (14.2%)

- Minority interests 64 0.1% 52 0.1% 112 0.1%

* EBITDA consists of operating income plus amortisation, depreciation and writedowns of fixed assets, while EBIT consists of operating income

** Adjusted EBITDA does not include non-recurring income (charges), whereas adjusted EBIT does not include non-recurring income (charges) and write-downs of non-current assets.

RECLASSIFIED CONSOLIDATED BALANCE SHEET

(in thousands of euro) 31.03.2014 31.12.2013 31.03.2013

Intangible assets 30,992 31,389 34,538

Property, plant and equipment 26,295 27,025 31,956

Other non-current assets, net 9,956 10,149 11,363

Employee termination indemnities, provision for risks and charges (non-

current portion) (6,709) (6,964) (7,165) Non-current assets 60,534 61,599 70,692

Operating net working capital 30,722 27,448 31,675

Other net current assets (liabilities) 5,894 5,500 16,258 Invested capital 97,150 94,547 118,625

Shareholders' equity 14,336 18,977 40,258

Net financial position 82,814 75,570 78,367 Invested capital 97,150 94,547 118,625

RECLASSIFIED CONSOLIDATED CASH FLOW STATEMENT

(in thousands of euro)

Net profit (loss)

Depreciation, amortisation and writedowns of non- current assets

Result of assets held for sale and discontinued

operations

Gains from the sale of assets

Other adjustments (86) (452) 3,701

(3,019) (17,965) (1,793)Change in operating net working capital (3,274) (1,973) (7,178)

Change in other current assets/liabilities (1,325) 2,275 (4,605)

Cash flow from operating activities (7,618) (17,663) (13,576)

Capital investments	(698)	(2,724)	(801)
Sale value of the fixed assets sold	72	2,266	31
Increase in receivables from the sale of fixed assets	951	5,039	-
Disposals of non-current financial assets	68	510	321
Net capital investments Earn out from the sale of the investment in Hallhuber	393 -	5,091 3,500	(449) 3,500
Other changes on the sale of the investment in Noel

International S.A. - 3,000 -

Free cash flow (7,225) (6,072) (10,525)

Other changes in shareholders' equity (19) (1,563) 93

Change in net financial position (7,244) (7,635) (10,432)

Opening net financial position	(75,570)	(67,935)	(67,935)
Closing net financial position	(82,814)	(75,570)	(78,367)