Brunello Cucinelli Spa

Good afternoon. Welcome to the presentation of the results for the first half of 2024 of Casa di Moda Brunello Cucinelli. Speakers tonight will be Brunello Cucinelli, Executive Chairman and Creative Director, Luca Lisandroni, CEO, Riccardo Stefanelli, CEO, Dario Pipitone, CFO, Moreno Ciarapica, Co-CFO Senior, and Pietro Arnabaldi, Investor Relations and Corporate Planning Director. If you need assistance from an operator during this conference call, please press star zero. Let me now yield the floor to Mr. Brunello Cucinelli, please. Good afternoon. Welcome back from the holidays. I hope you had a night's rest. And as far as I'm concerned, I spent maybe 10 days of holidays in Sardinia, but I was actually so busy that I don't know whether it's really a holiday, but it was a pleasure. So thank you very much for being back again. And tonight, we would like to give you a good update on 2024. And we would like to discuss 25 and 26 as well. As usual, all of us are around the table here. So how is this going to happen? I will read the complete half-year figure, so then Dario, our CFO, will go into tiny details. Then I will take the floor again to discuss 2024, and then Luca will give a world overview of an update on how things are going. Then I'll speak again. and we'll have an analytical summary of who we are today. So based on the last six months results in particular, and then we'll share our vision for 2025 and 2026. Now, let me read some of our data to you. The revenues stand at 620 million with excellent results, increase in 14% of current exchange rates, and 14.7% of constant exchange rates versus the first half of 2023. EBIT stands at 104 million, up 19% compared to 87 million of June 30 last year, with a margin of 16.9%, which is increasing versus 16.1% of June 30, 2023. So net profit stands at 66 million with a margin of 10.6% up 31% versus last year's net profit and offset by the effect of an extraordinary capital gain, which is relevant to Cariaggi, as you know. Investments are nearly 50 million versus 34.9 last year, which is a part of the major plan that will support a growth project and guarantee production capacity for the next decade and more. The core net financial debt stands at 68 million versus 38 last year. The excellent health of the brand and very interesting salesware reports in our stores allow us to confirm that a nice growth which we expect for 2024 and we expect revenues to grow by about 10%. Now, let me talk about the future. The very beautiful spring-summer 2025 sales campaigns that have now been completed for men and near completion for women reinforce our forecast of an equally beautiful growth for 2025 as well in the region of 10% with the goal of Dublin revenues by 2030. You're all familiar with our 2024-2030 plan. So we have introduced the company's new website in Milano. We built it with artificial intelligence. It's a site without pages where content flows and combines in front of the visitors, trying to understand and to follow the user's intentions thanks to the new Solomay AI technology. We'll discuss this later. It's really interesting. I will be receiving on October 29th a very important and prestigious award, WWD John B. Fairchild Award in America. I will receive this in October. And this is an award which is conferred by WWW, this magazine, which is considered to be the Bible of fashion globally. And apparently this is further strengthening our brand's image. Now, let me read my quote. We closed the first half of 2024 with particularly pleasing results. Sales were excellent. Profits were positive and balanced. The brand is fit and healthy. and the feedback on our product offering was highly favourable. We completed the 2024 summer sales very successfully, we have completed them now, and the winter sales were off to a very good start. All this leads us to confirm our guidance of revenue growth for financial year 2024 of around 10% with healthy and sustainable profits. We're also particularly pleased with the presentation in July in Milan to the world press of our new company website, which we have built together with Artificial Intelligence. We designed a website without pages where content flows and combines in front of the visitor, thanks to technology that seeks to understand and follow the user's intent, creating what they see on the spot. Now, this is a very beautiful project, and it's been three years in the making. We have called this technology Solomai AI to support Solomai again, and we believe this new website is truly very special, also thanks to the endorsement we have received from our friends in the AI world, the kids, as we call them, from Silicon Valley, furthermore. I'm deeply grateful and moved to announce that I will be presented with the WWWD John B. Fairchild Honor Next October in New York in the memory of legendary publisher of the magazine often referred to as the Bible of Global Fashion. I'm deeply honored to be the recipient of such a prestigious award, which I consider to be a tribute to the dignity of work, to my people, their creative genius and industrious nature, as well to our land of Umbria and its spirituality. which is actually what they wrote in their motivations. This new recognition and the excellent results of the spring-summer 25 sales campaigns, the men's has already been completed and the women's is soon to be concluded, allows us to reaffirm with confidence and conviction our guidance of an equally beautiful growth for 2025, around 10%. as well as our plan to double our turnover by 2030. Now, Dario, I am yielding the floor to you for a detailed presentation of the financial statements. Good evening, everyone, and thank you, Brunello. I would like to start with the usual analysis of the main economic and financial dynamics for the first half of 2024. The final revenue figures confirm the preliminary data of July 11th in our P&L with a growth in turnover at current exchange rates of 14.1%, which would be 14.7% at constant exchange rates. I will now proceed directly to the comments on the other items in the P&L with the support of the slides in the analyst presentation. Slide 16 shows a balanced margin and cost structure with EBIT at June 30, 2024, up 19.3%, as against the data of June 30 last year. First margin is up 18.8%, and it represents 74.5% of revenues versus 71.5% in June 2023 and 72.5% on December 31st. This increase is mainly attributable to both the positive contribution of the sales mix and to the expansion of in-house production. And by expansion of in-house production, we refer to the opening of facilities dedicated to the production of top craftsmanship of outerwear and tailor suits for men. And I'm referring in particular to the factories of Penne Abruzzo in the second half of 2023 and recently Gubbio in Umbria. This process of in-house creation of certain processes we're engaged in has a lower incidence of production costs, but on the other hand, it means higher operating costs, mainly personnel costs. Therefore, commenting on the income statement and operating costs, which increased by 21.4%, we can actually say that these are due to the aforementioned in-house process, the select growth of our network, the development of new initiatives both in the commercial and non-commercial area, and important and consolidated investments in communication. Now, the latter, and here we move to slide 18, as of June 30, 2024, stand at 44.6 million euros, with an incidence of 7.2%, as against 6.7% or 6.9%, respectively, in June-December 2023. We're still at slide 18, so the cost of personnel is 113.2 million euros, and it shows an increase of 21.3%, which is more than proportional to the growth in turnover, with an incidence incidence of 18.2%. It used to be 17.2% in June last year, 17.9% at the year end of 2022. As of June 30, 2024, we remind you that the number of human resources amounted to 3,021 full-time equivalents with an increase of 490 FTEs attributable in particular to production workers within the framework of the above-mentioned project in the growth of our craftsmanship structure. And personnel costs also includes the accounting effects of the new stock grant plan, which was approved by the shareholders meeting last April. Still on slide 18, the cost of rental net of the effects of the implementation of IFRS 16 amounted to 87.2 million euros, or plus 14.1% up 18.8% versus 73.4 million or 13.5% we posted at June 30, 2023. The cost of rents is growing mainly because of new and selected openings and renovations and major expansions and relocations we carried out in this timeframe. To conclude, and the comment on slide 18, depreciation and amortization stands at 73.2 million euros versus 67.1 million of June 30, 2023. As a result of all this, as anticipated in the introduction, EBIT as of June 30, 2024 was 104.6 million euros, up 19.3% with an operating margin of 16.9% versus 16.1% last June 2023. Against this growth in EBIT and after financial expenses, which is minus 9.3 million euros and a tax rate of 30.6%, net profit as of June 30, 2024 was 66.1 million euros with a margin of 10.6%. Now, let's go back for a second to slide 19 on financial management template. Here we show the usual breakdown that highlights a component that we could define as recurring on which we can actually protect expectations for the year and separate it from a component which is more closely linked to exchange rate fluctuations and by a further non-recurring component. The ordinary and recurring component, which increased by 2.6 million, is mainly attributable to Financial charges calculated on leasing liabilities, which amounted to 9.2 million as of June 30, 2024, versus 5.9 million at June 30, 2023. This increase is due to new lease agreements and rental agreements, which refer to new and select openings and to the renewal of certain existing stores. The non-recurring component as of June 30, 2023, was significantly impacted by the contribution of the extraordinary capital gain generated by the sale of a minority stake in Lanificio Cariaggi to Chanel.

Finally, to conclude on the profit and loss account, we note that the estimate made for the determination of the tax burden as of 30 June 2024 reflects some dynamics, among which the elimination of the benefits deriving from the AE, effects that we imagine to be slightly diluted over the end of the year. Now, moving on to slide 20 and following, I would like to share some brief comments on the following items of the balance sheet, such as net working capital, investments, net financial debt. Net working capital, including other current assets or liabilities, net, amounted to 200.6 million euros with a ratio of 15.5% to sales compared to 15.7% of the 31st December 2023. Looking at the details that make it up, trade receivables confirm an extremely healthy situation. They show a slight increase equal in absolute value to €5.2 million, despite a significant increase in turnover with particular reference to the wholesale channel equal to 13.1%. The payment terms to suppliers, co-workers and third-party consultants remained unchanged, with trade payables amounting to €162 million, slightly lower than €166.2 million as of 31 December 2023. Inventory as a percentage of rolling turnover for the last 12 months was 28.1%, back to an ordinary level for business. Following last year's reduction to 25.2% as of 31st December 2023, mainly ascribable to the extraordinary sales performance during the year. Lastly, other net current assets or liabilities showed a negative balance of 62.1 million as of 30th of June 24 compared to 20.9 million euros in December 2023, with changes mainly ascribable to the fair value of derivative instruments hedging the exchange rate risk and the balances of tax receivables and payables. To conclude, The typical debt financial debt on slide 23 amounted to €68.7 million as of 30 June 24 compared to €38.6 million as of 30 June 23. Thanks to the positive economic results of the last 12 months, despite the important investment plan of the semester for €44.45 million, as you can see in slide 21, and the payment of dividends for a total of 66.1 million euros. So this is the end of my contribution. Brunello, yes, thank you. So we are particularly pleased, as you might gather. So what about 2024? So the start of the winter collection was very positive. Your style is very much appreciated. So we are very positive about the coming months. Last year we had a very good season and hopefully this year too. So we envisage 2024 as a very, very good year with a nice growth in turnover and a healthy, good balanced net profit. So before Luca takes the floor, who will give you a world market overview, I'd like to make just a tiny remark on the markets about the product. Honestly speaking, I don't think that human beings have stopped paying attention to what to wear. I would say it's the opposite. But we have to take note of the three important factors that should not be underestimated, at least in our business. We believe that collections in general, and I'm saying this because we spent two months of sales campaign and you see multi-brands tell us what they believe and what they are complaining about is that there is too much evergreen products. And they also say that there is lack of exclusive distribution as well as lack of exclusive communication. And then they also moan the fact that sometimes prices are too high compared to what they should be. And this is very strongly felt, you know, what we believe about evergreen and price increases. So for us, this scrutiny is very, very important. So now, Luca, perhaps you can tell us something about the world market. Yes, and I would start from there.

On July 1st,