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IPO Costs Dampen Profits at Brunello Cucinelli

Excluding costs, profits gained 35 percent in the period ended June 30.

MILAN — Costs related to its initial public offering dented Brunello Cucinelli SpA’s net profits, causing them to drop to 7.6 million euros, or $9.8 million, in the first half from 8.8 million euros, or $12.7 million, in the corresponding period last year.

However, “normalized” net profits, which do not include the non-recurring expenses incurred for the IPO, gained 35.1 percent to 11.9 million euros, or $15.3 million, in the period ended June 30, compared with 2011. The company went public on the Italian Stock Exchange on April 27.

Confirming preliminary results reported last month, gains in all geographic markets except for Italy, and a 51.6 percent jump in Greater China, helped the luxury fashion house post a 16.1 percent increase in revenues in the first six months of the year, to 135.2 million euros, or $174.4 million, compared with 116.5 million euros, or $163.1 million, in the first half of last year.

Dollar amounts have been converted at average exchange for the periods to which they refer.

Brunello Cucinelli, who founded the firm in 1978, said, “The healthy results enjoyed in the first semester of this year, both in terms of revenues and profitability, have confirmed the successful moment experienced by the Brunello Cucinelli brand globally and lead us to envisage full-year growth both in terms of sales volumes and profitability: a sustainable and gracious growth, the same we have been imagining from the very beginning.”

Earnings before interest, taxes, depreciation and amortization dropped 10.5 percent to 16.4 million euros, or $21.1 million, affected by non-recurring costs of 6.2 million euros, or $8 million, stemming from the IPO process.

“Normalized” EBITDA, which do not include these expenses, rose 23.5 percent to 22.7 million euros, or $29.2 million, lifted by the growth of the company’s retail sales, which climbed 49.4 percent. Franchised sales increased 46.7 percent.

Revenues in the U.S. rose 23.3 percent to 35.4 million euros, or $45.6 million, and despite the euro zone woes, sales in Europe grew 17.3 percent. Cucinelli posted a 51.6 percent spike in sales in Greater China, which reached 6.2 million euros, or $8 million, and a 52.9 percent gain in the rest of the world. Italy registered a 2.8 percent drop. “Worldwide we are reaping the fruits of our belief in the brand’s quality, craftsmanship and exclusivity by reminding ourselves of our work’s fundamentals: simplicity, creativity and rapidity,” said Cucinelli.

The company has opened nine new directly operated stores and 62 new franchised boutiques since the end of June 2011. In the period from Jan. 1 to Aug. 19 this year, like-for-like retail sales grew 12.9 percent.

As of June 30, the company had a total of 70 stores, of which 30 were directly operated, compared with 55 stores at the end of June 2011. Two new openings have been added recently to these, in Taichung, Taiwan, in July, and in Lugano, Switzerland, in August.

The firm has been focusing on the expansion of its retail network and additional openings are slated in the current quarter, “with agreements already signed for 10 new single store locations,” it said.

Investments of 8.8 million euros, or $11.3 million, were made in the first half. Of these, 6.5 million euros, or $8.3 million, were channeled in commercial capital expenditures and 2.3 million euros, or $3 million, in production and logistics.

The injection of cash derived from the IPO helped reduce the firm’s net debt, which, as of June 30, stood at 14.2 million euros, or $18.3 million, compared with 58.4 million euros, or $84.6 million, at the end of June last year.