1

CONTENTS
REPORT ON OPERATIONS

Significant events during the period

4

Economic performance

6

The Selle Royal Group and the Coronavirus-19 pandemic
Financial position

6
8

Derivative financial instruments

11

Data on treasury shares and any equity investments in the parent company

12

Investments

11

Risk analysis

12

Business outlook

15

Significant events after the end of the period
Relations with parent companies, affiliates and related parties
Environment, personnel and sector regulations
FINANCIAL STATEMENTS

15

16

16

Consolidated income statement

17

Consolidated balance sheet

19

Consolidated statement of comprehensive income
Statement of changes in shareholders' equity

Consolidated cash flow statement prepared using the indirect method

18
21
22

2

EXPLANATORY NOTESIntroduction

Accounting standards, amendments and mandatory interpretations adopted by theGroup
Accounting standards, amendments and interpretations not yet applicable and not
adoptedIFRS standards and interpretations adopted by the IASB and not endorsed in Europe
2018-2020 annual improvements

23
24
24
26

28

Financial statement formats and classification criteria

29

General preparation criteria and consolidation principles

33

Activities of Group companies
Measurement criteria

Estimates and assumptions
Segment reporting

Derivative financial instruments
Risk management

Transactions with related parties

Analysis and composition of the income statement
Analysis and composition of the balance sheet
Independent auditors’ report

30
36
48

51
53
53
53
55
61

3

REPORT ON OPERATIONS

Dear Shareholders,The half-year ended 31 December 2021 recorded a consolidated profit of € 13,433,034, of
which € 11,569,197 pertaining to the Group.
SIGNIFICANT EVENTS DURING THE PERIOD

During the half-year in question, the factors that characterised the cycle sector in the previous
12 months continued. The rapid and robust growth in demand for bicycles and accessories at

global level continued thanks to some trends that emerged before or in conjunction with the
pandemic crisis: the growing ecological awareness, supported by significant public
investments for the benefit of an increasingly widespread and safe use of bicycles also inurban contexts; product innovation, of which pedal assisted bicycles are, in their various
applications, the most important example; the appeal of cycling, as a unique way of being incontact with the environment.

The half-year in question was also characterised, in addition to the persistence of thepandemic emergency, by two enduring global phenomena already described in the past: theincrease in the cost of raw materials on the one hand and the congestion of global logistics
flows, on the other hand. In addition to these, there was the trend in the cost of energy,

deriving from the significant increase in LNG consumption by China, the reduced productionof energy from renewable sources in Europe and geopolitical tensions.

As regards the first, the production plants of the entire Group had to face a rapid increase in
the procurement costs of the main categories of materials (plastic, chemical, ferrous and, also,
paper derivatives).

As for the second phenomenon, global logistic congestion shows no signs of abating.

According to Bloomberg (as cited in a report published by ChemOrbis in December 2021 1),

the 45 days typically elapsing in the past between the collection of a load in Asia and the startof the journey (by land or railway) from the US port on the west coast to the final destination
warehouse increased to around 105. What has increased dramatically, in particular, is thenumber of days required to process a container, once it reaches the destination port: while
China has managed to reduce the average number of waiting days from 61 to 5 (and other

Asian countries are between 11 and 19 days), the average waiting time is around 50 days in
1“After a tumultuous 2021, another rocky year ahead for plastic resins industry?” - ChemOrbis - December 2021

4the United States (source: “C-Timing” study, by Container xChange and Fraunhofer CML, asreported in an article published on Bike Europe on 18 January 2022). This discrepancy inprocessing times means that around 36% of containers were blocked in ports in November
2021 (source: Jefferies Equity Research, as mentioned in the same article by Bike Europe).

This lengthening of timings poses significant challenges for the planning of stocks, especiallyin a sector characterised by seasonality such as the cycling. Given the approaching highseason, the Group opted for an approach that favours customer service (mainly independent

retailers and chains, both physical and online) in the most important months of the year, tothe detriment of current capital levels at the date of this half-yearly report. Moreover, theincrease in the cost of sea freight recorded in the last 12 months (from US$ 2,000-3,000 at the

beginning of 2020 to US$ 20,000 at the end of 2021 for a 40' container (source: among others,

Commodities Outlook, of T-Commodity) adds further inflationary pressure to the alreadyconsiderable one deriving from the trend in the prices of raw materials and energy alreadydiscussed above.

In this context, favourable as regards the cycle sector and, on the whole, turbulent for thefactors just highlighted, the Group maintained a gross margin substantially in line with thefigures of the same period of the previous year, highlighting once again the importance ofbeing a leader in its reference segments.

As regards the corporate structure, on 6 July 2021, Jiangyin Selle Royal Cycling Co., Ltd., acompany under Chinese law, 68.29% owned by the Selle Royal group, was establishedthrough the Hong Kong holding Selle Royal Asia Limited (the remaining interest is held by thesame minority shareholder of Selle Royal Vehicle (China) Co., Ltd). This company wasestablished in order to take over the concession of land for industrial use located in themunicipality of Jiangyin (province of Jiangsu, People's Republic of China), to be used for theconstruction of a new production plant. The land was optioned and the necessary discussions
are underway with the relevant local administration in order to obtain the necessary
authorisations and building permits. This new initiative became necessary due to the

expropriation notification received by the subsidiary Selle Royal Vehicle (China) Co., Ltd.
during the half year in question, and relating to the land on which its production plant stands.

The date of execution of the expropriation measure and the amount to be paid ascompensation have not yet been defined.

On 6 December 2021, the merger by incorporation of SR84 S.r.l. into Selle Royal Group S.p.A.
5was successfully completed, with tax effect from 1 July 2021.

On 22 December 2021, Selle Royal Group S.p.A. signed an agreement with M J K Partecipações

Ltda., equal shareholder in the Brazilian company Royal Ciclo Industria de Componentes Ltda.,
aimed at the purchase of an additional share of 1% of the latter's share capital. As a result of
this transaction, the parent company holds 51% of the subsidiary's share capital. As
illustrated in the explanatory notes to this consolidated half-yearly report, the company was

already consolidated on a line-by-line basis as Selle Royal Group S.p.A. exercised de facto

control over it. With regard to the liquidation of Royal Concept Co., Ltd., the process issubstantially completed, as at the moment only the formal notification of its cancellation fromthe local register of companies is pending (the "Companies Registry"). This notification is
expected by the end of the first quarter of 2022.

THE SELLE ROYAL GROUP and the CORONAVIRUS-19 PANDEMIC

As is known, the period in question was characterised by the persistence of the state of
emergency linked to the Covid-19 pandemic at global level.

As regards the Selle Royal Group, the adoption of stringent prevention and control measuresby each of the companies in the perimeter (including, by way of example, the deployment offorms of remote work organisation, free periodic tests for employees and the restructuring of

personnel flows and work shifts in the production sites) have ensured that no outbreaks ofthe virus have occurred within the facilities, thus making it possible to increase the output
volumes, needed to deal with the increased demand from the various markets in which theGroup operates.

ECONOMIC PERFORMANCE

The income statement for the first half of 2021/22 is shown below, compared with the same
period of the previous year:6

1st half of 2021/22% of revenues

1st half of 2020/21% of revenues% Change

Revenues

105,513,820

100.0%

89,170,259

100.0%

18.3%

Cost of sales

58,206,052

55.2%

49,064,862

55.0%

18.6%

GROSS MARGIN

47,307,768

44.8%

40,105,397

45.0%

18.0%

Operating costs

24,979,232

23.7%

23,148,256

26.0%

7.9%

EBITDA

22,328,536

21.2%

16,957,141

19.0%

31.7%

Amortisation / depreciation and write-downs of fixed assets

3,822,742

3.6%

3,247,036

3.6%

17.7%

EBIT

18,505,793

17.5%

13,710,105

15.4%

35.0%

Financial income / (charges) and other financial components(1,251,436)-1.2%(2,557,730)-2.9%-51.1%

PRE-TAX RESULT

17,254,358

16.4%

11,152,375

12.5%

54.7%

Taxes for the year

3,821,324

3.6%

3,705,140

4.2%

3.1%

NET PROFIT FOR THE YEAR

13,433,034

12.7%

7,447,235

8.4%

80.4%

Minority interests

1,863,837

1.8%

1,696,953

1.9%

9.8%

NET PROFIT FOR THE YEAR PERTAINING TO THE GROUP

11,569,197

11.0%

5,750,282

6.4%

n.s.

The half-year in question, which ended as at 31 December 2021, recorded sales of € 105.5

million, a marked increase compared to the turnover of the previous year (+18.3%).
Moreover, during the period, the Group's margins remained essentially stable (from 45.0% to44.8%), despite the impact deriving from the increase in the procurement costs of raw
materials.

The increase in operating costs, and in particular in some industrial costs linked to production
volumes, was partly driven by the growth in turnover; to these, there are general andadministrative costs of a non-recurring nature. Overall, however, the Group strongly benefited

from a significant operating leverage effect, which brought the EBITDA margin to 21.2% ofrevenues (compared to 19.0% in the year of comparison).

In absolute terms, this item reached € 22.3 million compared to € 17.0 million in the previous
year.

Adjusted EBITDA, net of non-recurring items, was € 23.0 million, with a percentage impact onturnover of 21.8%, while in the year of comparison it was € 17.0 million, with a margin of
19.0%.

Depreciation and amortisation increased over the comparison figure, with the operating
result increasing in proportion to EBITDA.

7

Financial charges are in line with the first half of the previous year. The overall figure,including exchange rate differences, was down by approximately € 1.3 million due to thelower impact of the latter compared to the previous year (€ +165 thousand compared to€ -1,094 thousand).

As anticipated, the year in question closed with a sharp increase in net profit compared to theprevious half-year (€ 13.4 million and € 7.4 million, respectively), with an incidence of 12.7%

on turnover (11.0% considering only the profit pertaining to the Group).
FINANCIAL POSITION

The financial position of the Group as at 31 December 2021, compared with the situation

emerging from the consolidated financial statements for the year ended 30 June 2021, is asfollows:8

31/12/2021

30/06/2021

ChangeTrade receivables
Inventories
Tax receivables
Other current assets
CURRENT ASSETS

30,876,346
40,197,721
3,907,719
1,258,763
76,240,550

28,453,316
26,318,545
2,266,907
1,480,397
58,519,166

2,423,030
13,879,176
1,640,812(221,634)
17,721,384

Trade payables
Tax payables
Other current liabilities
CURRENT LIABILITIES

26,406,496
5,606,779
11,568,949
43,582,224

22,080,469
6,262,892
9,690,052
38,033,412

4,326,028(656,112)
1,878,897
5,548,812

NET WORKING CAPITAL

32,658,325

20,485,753

12,172,572

Tangible assets
Intangible assets
Equity investments
Goodwill
Other non-current assets
NON-CURRENT ASSETS

36,110,769
20,979,284
2,222,317
10,440,855
2,096,115
71,849,340

30,529,614
21,142,693
2,060,638
10,320,071
2,050,345
66,103,361

5,581,155(163,409)
161,679
120,784
45,7695,745,979

Employee severance indemnity and other provisions
Deferred taxes
NON-CURRENT LIABILITIES

2,680,263
686,5123,366,775

2,500,819
760,993
3,261,812

179,443(74,481)
104,962

NET INVESTED CAPITAL

101,140,890

83,327,302

17,813,588

Short-term financial debt, net
Medium/long-term financial debt
NET FINANCIAL DEBT

(108,659)
46,350,985
46,242,326

3,770,491
38,353,309
42,123,800(3,879,150)
7,997,676
4,118,526

Share capital and other reserves
Group profit for the year
GROUP SHAREHOLDERS' EQUITY

32,694,990
11,569,197
44,264,187

17,621,302
14,917,555
32,538,857

15,073,688(3,348,358)
11,725,331

Share capital and other reserves
Profit for the year pertaining to minority interests
MINORITY INTERESTS

8,770,540
1,863,837
10,634,377

5,042,274
3,622,371
8,664,645

3,728,266(1,758,534)
1,969,732

The increase in net working capital (€ +12.2 million) was basically driven by higher

inventories, while the increase in other items classified under current assets was more thanoffset by the higher balance of current liabilities with respect to the comparison date. The

trend of these figures is clearly related to the Group's growth in size; in addition, the balanceof inventories was affected on the one hand by the seasonal nature of the sector and, on theother, by the complex situation of global logistics which has been ongoing for several months
9now. With specific reference to products originating in Asia, the marked lengthening of thetime elapsing between the booking of sea freight and the delivery of goods to destination led
to a significant increase in the level of stocks as at 31 December, both as regards finishedproducts and goods in transit.

The operating investments ("capital expenditure") made by the various Group companies, fora total amount of € 9.3 million (of which € 4.7 million pertaining to the increase in the item

“rights of use” recognised in accordance with the IFRS 16 accounting standard), are mainly
aimed at product innovation, one of the key elements on which the Group bases its future
growth, the renewal and improvement of production sites and the protection of intellectual
assets consisting in particular of the 70 registered product and/or process patents andtrademarks under which the Group markets its products. Net invested capital rose by € 17.8
million to € 101.1 million, mainly driven by the trend in net working capital.

Net financial debt increased by around € 4.1 million to € 46.2 million, with a significant
increase in the medium/long-term portion to the detriment of the current portion, as shownin the table below:

31/12/2021

30/06/2021

ChangeA
B
CD

Cash on hand
Cash and cash equivalents
Other current financial assets
Liquidity (A + B + C)

21,493,845
21,493,845

19,846,067
19,846,067

1,647,778
1,647,778

E
F
G

Current financial debt *Current portion of non-current financial debt **Current financial debt (E + F)

9,089,639
12,295,547
21,385,186

10,963,212
12,653,347
23,616,559(1,873,573)(357,799)(2,231,372)

H

Net current financial debt (G-D)(108,659)

3,770,491(3,879,150)

I.
J
K
L

Non-current financial debt ***Debt instruments
Trade payables and other non-current payables
Non-current financial debt (I + J + K)

42,427,070
3,923,915
46,350,985

32,477,712
5,875,597
38,353,309

9,949,358(1,951,682)
7,997,676

M
Net financial debt (H + L)
46,242,326
42,123,800
4,118,526* Excluding current portion of non-current financial debt; includes the current financial liability atfair value (equal to € 338 and classified under other current liabilities)** Includes the current portion of bank loans and bonds as well as lease liabilities pursuant to IFRS 16*** Includes the non-current portion of mortgages and lease liabilities pursuant to IFRS 16 and non-current financial liabilitie
at fair value (€ 123,049)

10

The increase in net financial debt is however limited compared to the increase in net invested
capital, thanks to the operating cash flow generated in this first half of the year, net of thechange in net working capital.

DERIVATIVE FINANCIAL INSTRUMENTS

The parent company Selle Royal Group S.p.A. subscribed three derivative financial

instruments, with the aim of hedging the risk of fluctuations in interest rates on as many
medium/long-term loans. As at 31 December 2021, the market value of one of these isrecognised under “current financial liabilities at fair value” since the underlying loan maturesin May 2022. The market value of the other two, on the other hand, is recorded under noncurrent liabilities, as it expires in September 2027.

As these instruments were effective, the initial recognition and subsequent changes in value

were recognised in a specific equity reserve (“cash flow hedge reserve”), net of the related tax
effect. For further information, please refer to the Explanatory Notes to this half-yearly report.
INVESTMENTS

As already mentioned, during the first half of the year the Group incurred operating
investments (capital expenditure) of approximately € 9.3 million, as shown in the following
detail:Land and buildings
Right of use of leased assets
Plant and machinery
Industrial and commercial equipment
Other assets
Fixed assets in progress and payments on accountSub-total - Investments in tangible assets

Research and development costs
Industrial patent rights and intellectual property rights
Concessions, licences, trademarks and similar rights
Other
Fixed assets in progress and payments on accountSub-total - Investments in intangible assets
TOTAL OPERATING INVESTMENTS

1st half of 2021/22
115,418
4,733,498
621,015
623,321316,837
2,626,943
9,037,033

44,522
188,316
55,958288,796
9,325,82911

As shown in the previous table, € 4.7 million relates to the recognition of rights of use on
assets under lease, lease or similar contracts, for which the application of IFRS 16 is required.
DATA on TREASURY SHARES and any EQUITY INVESTMENTS in the PARENT COMPANY

Neither the parent company Selle Royal Group S.p.A. nor its associates and subsidiaries held
shares in the parent company at the reporting date.
RISK ANALYSIS

The main financial and operational risks to which the Group is exposed are shown below:
Financial risks

Credit risk
The Group is exposed to credit risk deriving mainly from commercial relations with its
customers and, in particular, due to any delays or non-fulfilment of their payment obligations

according to the agreed terms and methods. On the other hand, some Group companies havetaken out insurance policies with a leading international institution to mitigate this risk. At

the reporting date, approximately 68% of the consolidated receivables (gross of the bad debt
provision) were covered by insurance.

Risks associated with changes in interest rates
As at 31 December 2021, approximately 84% of the Group’s consolidated gross financial debt,

amounting to € 48.5 million, was floating rate. In relation to a portion of this debt
(approximately 34% of the total), the parent company Selle Royal Group S.p.A. made use ofderivative financial instruments (known as IRS, interest rate swap) to hedge the risk offluctuations in interest rates on three medium/long-term loans. The aggregate mark-to-

market of these derivatives as at 31 December 2021 was negative for € 123,387. The

remaining part of the consolidated gross financial debt at floating rate, equal to approximately

50% of the total, is not hedged by interest rate risk hedging instruments. Significant changes
in interest rates could result in an increase in financial charges relating to floating rate debt.

12Liquidity risk
It should be noted that there are sufficient credit lines to meet the reasonably foreseeableliquidity requirements, also in view of the typical seasonality of the sector in which the Group
operates.

Risks associated with exchange rate trends
Part of the Group’s activities are carried out, also through subsidiaries, outside the Eurozone

and the fees for some orders and transactions are agreed in currencies other than the Euro,
mainly in US Dollars, Chinese Renminbi, Brazilian Real and Taiwanese Dollars. In this regard,

it should be noted that any fluctuations in currencies other than the Euro could have negative
effects on the Group’s operating margins. In addition, fluctuations in the exchange rates used

to convert the financial statements of certain foreign Group companies, originally expressedin currencies other than the Euro, could affect the economic, equity and financial situation of
the Group, which prepares the consolidated financial statements in Euro.
Operational risks

Risks associated with the operations of production plants
The Group is exposed to the risk of having to interrupt or suspend its production activities
due to events beyond its control, including the revocation of permits and authorisations,breakdowns, malfunctions, damage or natural disasters. This could have negative effects on
the economic, equity and financial situation of the Group.

Risks associated with fluctuations in the price of raw materials and procurement difficulties, aswell as the congestion of global logistics flows.
As mentioned previously, the purchase prices of some key raw materials in the Group’s

production processes increased significantly during the half-year. In the same way, the global

logistics crisis has partly affected the normal operations of the Group companies, both asregards the procurement of components and products sold of Asian origin, and as regards
shipments to customers.

13

Risks related to relations with manufacturers and suppliers of products and services anddependence on a limited number of suppliers for certain product categories
The Group is exposed to the risk that the relationship with the main producers and suppliersof goods and services that it uses may be interrupted, dissolved or terminated, and/or that thelatter do not meet the contractually agreed quality standards and/or applicable regulations,putting at risk the Group's ability to meet the delivery of products to its customers according

to the pre-established objectives. On the other hand, the strategic decision to develop solid

multi-year partnerships with the most critical suppliers also meets the need to maintainadequate supervision in terms of quality control, both during the approval of new products
and during the mass production of previously approved products.

Risks related to the impossibility of realising the book value of the stocks and to the increase in
the obsolescence of said stocks
The Group is exposed to the risk of inventory obsolescence, against which adjustment
provisions have been made, deemed reasonably adequate by the management based on theanalyses carried out on stock rotation.

Risks associated with dependence on Group brands
These risks may materialise in the form of both a loss of value of the Group's brands, as
perceived by the reference consumer communities, and in the difficulty of protecting anddefending the intellectual property that belongs to the Group in the event of violations by
third parties, including in foreign jurisdictions.

Risks associated with labour shortage and any increase in related costs
The Group is exposed to risks deriving from any increase in labour turnover rates and fromdifficulties in sourcing skilled and unskilled labour to an extent that satisfies the trend indemand for Group products.

Risks related to the consequences of the effects of the Covid-19 pandemic
During the years 2020 and 2021, the Group had to comply with the restrictive measures

adopted by the national governments of the individual countries in which the Group
companies operate to deal with the Covid-19 health emergency ( “Coronavirus”), whichcaused a major international economic crisis, characterised by a significant contraction in14

demand on the main markets and in global gross domestic product. The cycle sector was

marginally impacted by the pandemic, to the extent that the Issuer recorded substantiallystable revenues in the year ended 30 June 2020 compared to the previous year (€ 130.1

million in the year ended 30 June 2020 compared to € 130.6 million in the year ended 30 June

2019, equal to -0.3%), and strong growth during the year ended 30 June 2021 (revenues of €205.1 million, an increase of +58% compared to the previous year). Nevertheless, if the Covid-

19 pandemic, whose evolution is still uncertain, were to persist or worsen, leading to theadoption of new restrictive measures by the competent national authorities for the sectors

where the Group operates, the latter could be exposed to the risk of a slowdown or decreasein sales of its products. Any occurrence of these circumstances could have negative effects on
the Group’s business and economic, equity and financial situation.
SIGNIFICANT EVENTS AFTER THE END OF THE PERIODOn 12 January 2022, the Shareholders’ Meeting of Selle Royal Group S.p.A., in addition to thechange of company name (it should be recalled that the company was previously named Selle

Royal S.p.A.), resolved to approve a project aimed at the listing of the same on the electronic

equity market Euronext Milan organised and managed by Borsa Italiana S.p.A., and inparticular on the Euronext STAR Milan segment, if the conditions are met. This placement will

be initiated in accordance with market conditions and subject to obtaining the required
approvals from Borsa Italiana S.p.A. and CONSOB.
BUSINESS OUTLOOKThe current context is significantly affected by the uncertainty relating to the evolution of theCovid-19 pandemic in the various countries where the Group is present, by the persistentturbulence in the global markets of some strategic raw materials and by the critical global
logistics issues which the sector has been experiencing for months. Excluding these
considerations, it is clear that a context of sustained demand continues to characterise thecycle sector, following a trend that took hold before the outbreak of the Covid-19 pandemic
and, to a certain extent, strengthened by the changes in social behaviour it brought about.

The performance in the first half of the year, despite the critical issues highlighted above,
testifies to the solidity and resilience of the business model adopted by the Group. At present,

the economic and financial objectives set for the current tax year are considered achievable,
and in the first half of the year they are in line with the forecasts made.

15

RELATIONS WITH PARENT COMPANIES, AFFILIATES AND RELATED PARTIESAs regards transactions with related parties, please refer to the Explanatory Notes to thisconsolidated half-yearly report.

ENVIRONMENT, PERSONNEL and SECTOR REGULATIONS

The production, manufacture and sale of Group products is not currently subject to specificsector regulations. However, in consideration of the use of certain substances, environmental

regulations are particularly important, especially for their treatment, emissions and waste
disposal.

The Group carefully monitors the risks deriving from environmental and personnel
regulations and any situations that may arise within the scope of operations are handled incompliance with the regulations.

With reference to personnel, the Selle Royal Group protects the health and safety of its
workers in compliance with current regulations on health and safety in the workplace.

The average number of employees in the current year was 1,134, essentially stable comparedto the 1,153 employees in the previous year. The net decrease of around 19 units is entirely
attributable to the production employees of the Brazilian subsidiary Royal Ciclo Industria deComponentes Ltda. In addition to the employees hired by the Group companies, a total of anadditional 465 employees were hired in the first half of the year through temporary work
agencies.

Average workforce

1st half of
2021/22

Executives
Employees
Workers
Others
Total

Pozzoleone (VI), 15 February 2022

Financial Year
2020/21

Change

25.5
227.2
899.5
1.0
1,153.2(0.5)
8.7(27.3)
0.0(19.1)

25.0
235.9
872.2
1.0
1,134.0* * *The Chairman of the Board of Directors(Barbara Bigolin)

16

FINANCIAL STATEMENTS
Consolidated income statement(*)
2021/22

1st half

2020/21% Change

Revenues

NOTES
16

105,513,820

89,170,259

18.3%

Cost of sales

17

58,206,052

49,064,862

18.6%

47,307,768

40,105,397

18.0%

GROSS MARGIN
Industrial costs

18

3,066,641

2,833,926

8.2%

Sales and promotion costs

19

6,778,404

6,636,821

2.1%

Costs of the management structure

20

8,445,986

7,857,119

7.5%

General and administrative costs

21

7,508,004

5,581,333

34.5%

Other operating income and (expenses)

22

819,803(239,057)

n.s.

EBITDA

22,328,536

16,957,141

31.7%

Amortisation / depreciation and write-downs of fixed assets

3,822,742

3,247,036

17.7%

EBIT

18,505,793

13,710,105

35.0%

Profits / (losses) from companies measured at equity

-

-

-

Gains / (losses) on acquisition/disposal of financial assets

-

-

-

Financial income / (charges)

23(1,251,436)(2,557,730)-51.1%

17,254,358

11,152,375

54.7%

3,821,324

3,705,140

3.1%

NET PROFIT FOR THE YEAR

13,433,034

7,447,235

80.4%

Minority interests

1,863,837

1,696,953

9.8%

NET PROFIT FOR THE YEAR PERTAINING TO THE GROUP

11,569,197

5,750,282

n.s.

PRE-TAX RESULTTaxes for the year24(*) The effects of transactions with related parties are described in the “Transactions withrelated parties” section.

17

Consolidated statement of comprehensive income
1st half of 2021/22

1st half of 2020/21

13,433,034

7,447,235

Change in fair value of hedging derivatives
net of the tax effect(92,403)

1,923

Actuarial gains / (losses)(57,446)(85,794)

Acquisition of shares in companies already subject to control(684,950)-

Translation differences of foreign financial statements

990,931(396,638)

13,589,167

6,966,725

Net profit

Total comprehensive profit / (loss) after tax

NOTES

18

Consolidated balance sheet(*)

31/12/2021

30/06/2021

ChangeASSETSNOTESCash and cash equivalents
Trade receivables
Inventories
Tax receivables
Other current assets
TOTAL CURRENT ASSETS

25, 392627
28
29

21,493,845
30,876,346
40,197,721
3,907,719
1,258,763
97,734,394

19,846,067
28,453,316
26,318,546
2,266,907
1,480,397
78,365,233

1,647,778
2,423,030
13,879,176
1,640,812(221,634)
19,369,161

Intangible assets
Tangible assets
Equity investments
Goodwill
Deferred tax assets
Financial assets at fair value
Other non-current assets
TOTAL NON-CURRENT ASSETS

30
31
32
33
34
35, 3936

20,979,284
36,110,769
2,222,317
10,440,855
916,362
512,913666,840
71,849,340

21,142,693
30,529,614
2,060,638
10,320,071
871,708
509,813668,824
66,103,361(163,409)
5,581,155
161,679
120,784
44,654
3,100(1,984)
5,745,979

169,583,734

144,468,594

25,115,140

TOTAL ASSETS(*) The effects of transactions with related parties are described in the “Transactions withrelated parties” section.

19

31/12/2021

30/06/2021

ChangeLIABILITIES
Trade payables
Tax payables
Bonds - Portion maturing within 12 months
Short-term loans
Current financial liabilities at fair value
Current liabilities for leased assets
Other current liabilities
TOTAL CURRENT LIABILITIES

37
38
39, 4539, 4039, 4142
43

26,406,496
5,606,779
1,903,363
17,403,758
338
2,077,727
11,568,949
64,967,410

22,080,469
6,262,892
1,903,363
20,630,896
1,452
1,080,847
9,690,052
61,649,971

4,326,028(656,112)(3,227,138)(1,115)996,880
1,878,897
3,317,439

Provisions for employees
Bonds - Portion maturing beyond 12 months
Medium / long-term loans
Provisions for risks and charges
Payables for deferred taxes
Non-current financial liabilities at fair value
Non-current liabilities for leased assets
TOTAL NON-CURRENT LIABILITIES

44
39, 4539, 464748
49
50

1,950,472
3,923,915
34,110,785
729,791
686,512
123,049
8,193,236
49,717,760

1,874,444
5,875,597
26,731,370
626,375
760,9935,746,342
41,615,121

76,027(1,951,682)
7,379,416
103,416(74,481)
123,0492,446,894
8,102,639

114,685,170

103,265,092

11,420,078

51

6,000,000
1,244,082
1,798,320
10,716,446
12,936,142
11,569,197
44,264,187

6,000,000
1,244,082
807,389
10,716,446(1,146,615)
14,917,555
32,538,857

990,931
14,082,757(3,348,358)
11,725,330

51

8,770,540
1,863,837
10,634,377

5,042,274
3,622,371
8,664,645

3,728,266(1,758,534)
1,969,732

169,583,734

144,468,594

25,115,139

TOTAL LIABILITIESSHAREHOLDERS’ EQUITY
Share capital
Legal reserve
Translation reserve
Reserve for first-time adoption of IAS
Other reserves and undistributed profitsGroup profit / (loss) for the year
GROUP SHAREHOLDERS’ EQUITY
Share capital and undistributed profits pertaining to minority interests
Profit / (loss) for the year of minority interests
MINORITY INTERESTSTOTAL LIABILITIES and SHAREHOLDERS’ EQUITY

20

Statement of changes in shareholders' equity

Transfer ofBalance as at 30
previous year
June 2020
resultFair value IRS

Effect of
discounting of
employeeseverance
indemnity

Otherconsolidation
adjustments

Profit / (loss)
for the year

Balance as at
30 June 2021

418,969
418,969

14,917,555
14,917,555

6,000,000
1,244,082
807,389
10,716,446(1,146,616)
14,917,555
32,538,856

164,784
164,784

3,622,371
3,622,371

5,042,274
3,622,371
8,664,645(15,500,000)

583,753

18,539,926

41,203,501

Effect of
discounting of
Increase inemployee
Group interests
severance
indemnity

Otherconsolidation
adjustments

Profit / (loss)
for the year

Balance as at
31 December
2021

Share capital
Legal reserve
Translation reserve
Reserve for first-time adoption of IAS
Other reserves and undistributed profitsGroup profit / (loss) for the year
TOTAL GROUP SHAREHOLDERS’ EQUITY

6,000,000
1,244,082
388,420
10,716,446
11,800,466
2,582,359
32,731,773

2,582,359(2,582,359)
-

3,835
3,835

(33,276)(33,276)

Share capital and undistributed profits pertaining to minority interests
Profit / (loss) for the year of minority interests
TOTAL MINORITY INTERESTS

3,837,143
1,040,347
4,877,490

1,040,347(1,040,347)---

TOTAL SHAREHOLDERS' EQUITY

37,609,263

-

3,835

(33,276)

Transfer ofBalance as at 30
previous year
June 2021
resultFair value IRS

Dividend
distribution(15,500,000)(15,500,000)-

Share capital
Legal reserve
Translation reserve
Reserve for first-time adoption of IAS
Other reserves and undistributed profitsGroup profit / (loss) for the year
TOTAL GROUP SHAREHOLDERS’ EQUITY

6,000,000
1,244,082
807,389
10,716,446(1,146,616)
14,917,555
32,538,856

14,917,555(14,917,555)-(92,403)(92,403)(57,446)(57,446)-

990,931(684,950)
305,981

11,569,197
11,569,197

6,000,000
1,244,082
1,798,320
10,716,446
12,936,142
11,569,197
44,264,187

Share capital and undistributed profits pertaining to minority interests
Profit / (loss) for the year of minority interests
TOTAL MINORITY INTERESTS

5,042,274
3,622,371
8,664,645

3,622,371(3,622,371)---(65,220)(65,220)

171,116
171,116

1,863,837
1,863,837

8,770,540
1,863,837
10,634,377

TOTAL SHAREHOLDERS' EQUITY

41,203,501-(92,403)(57,446)(65,220)

477,097

13,433,033

54,898,564

21

Consolidated cash flow statement prepared using the indirect method
STATEMENT OF CASH FLOWS FROM OPERATIONS

31.12.2021

31.12.2020

Pre-tax result
Adjustments for+/non-monetary elements
Depreciation of tangible assets
Amortisation of intangible assets
Amortisation of Right Of Use
Net financial charges
Minor independent works(Gains) / losses on the sale of property, plant and equipment and financial assets
Change in the bad debt provision
Changes in deferred taxes, provisions and employee benefits
Change in cash flow hedge reserve
Change in actuarial reserves

17,254,358

11,152,375

2,548,564
527,849
746,330
1,228,970(5,131)
18,57872,6952,523,491(121,934)(57,446)

2,067,375
548,099
631,5622,555,486(4,604)
104,008(139,663)
1,372,398
1,923(80,884)

Cash and cash equivalents generated by transactions before working capital

24,736,324

18,208,074+/+/+/+/+/+/-

change in working capital
Change in inventories
Change in trade receivables
Change in trade payables
Change in other current assets
Change in other current liabilities(16,459,883)(2,869,532)
4,326,028(510,331)(161,866)(7,393,828)(8,516,958)
6,401,344(706,578)
137,156

Cash and cash equivalents generated by transactions

9,060,739

8,129,209+-

118,034(1,072,062)(1,929,915)

55,682(1,069,689)(1,233,533)

Net cash and cash equivalents from operating activities (A)6,176,797

5,881,669

STATEMENT OF CASH FLOWS FROM INVESTMENT ACTIVITIESPayments for acquisitions of property, plant, machinery and other tangible assets
Payments for acquisitions of intangible assets and capitalised costs
Payments for the granting of advances or loans to third parties
Payments for derivatives(4,303,535)(288,796)(1,052,175)(22,465)(2,452,404)(349,600)(280,485)(2,244)

Net cash and cash equivalents from / used in investing activities (B)(5,666,971)(3,084,733)

STATEMENT OF CASH FLOWS FROM FINANCING ACTIVITIES+Collections from obtaining loans
Payments for rents that fall under the application of IFRS 16(Redemption) bond loan (known as mini-bond)
Loan repayments

23,634,392 20,947,349(1,014,325)(810,619)(2,000,000) (2,000,000)(19,482,115) (13,700,342)

Interest collectedInterest paid
Taxes paid

Net cash and cash equivalents from / used in financing activities (C)1,137,953

4,436,387

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (D) = (A + B + C)

1,647,778

7,233,323

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR (E)19,846,067

20,888,905

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR (F) = (D + E)

21,493,845

28,122,228

22

EXPLANATORY NOTES TO THE CONSOLIDATED HALF-YEARLY REPORT AS AT
31 DECEMBER 2021
1. INTRODUCTION

The consolidated half-yearly report as at 31 December 2021 of Selle Royal Group S.p.A. wasprepared in compliance with the IFRSs or International Financial Reporting Standards (also“IFRS”) issued by the IASB (International Accounting Standards Board) and approved by theEuropean Commission in accordance with the procedure pursuant to Article 6 of EC

Regulation no. 1606/2002 of the European Parliament and Council of 19 July 2002 on the dateof preparation of this report as well as the provisions of Legislative Decree 38/2005. This

consolidated half-yearly financial report was also prepared in accordance with International
Accounting Standard (“IAS”) 34 - Interim Financial Reporting. The consolidated half-yearlyreport as at 31 December 2021 was prepared for inclusion in the Prospectus envisaged aspart of the listing process on the Euronext Milan market organised and managed by Borsa

Italiana S.p.A., whose launch was approved by the Board of Directors of Selle Royal Group
S.p.A. on 12 January 2022, and is subject to voluntary audit by the independent auditors.

IFRS also means all the revised international accounting standards (“IAS”) and all theinterpretations of the International Financial Reporting Interpretations Committee (“IFRIC”),

previously called the Standing Interpretations Committee (“SIC”), which, at the date of
approval of the consolidated financial statements for the year ended 30 June 2021, have been
subject to endorsement by the European Union in accordance with the procedure envisaged
by Regulation (EC) no. 1606/2002 by the European Parliament and Council of 19 July 2002.

The half-yearly report as at 31 December 2021 consists of the Income Statement, the Balance

Sheet, the Statement of Changes in Shareholders' Equity, the Cash Flow Statement and the
Explanatory Notes that follow.

This half-yearly report was prepared on the basis of the best knowledge of IFRSs and taking

into account the best practice on the subject; any future guidelines and interpretative updates

will be reflected in subsequent years, according to the methods envisaged from time to timeby the reference accounting standards.

All amounts included in this report are presented in Euro, which is the currency of the maineconomic environment in which the Group operates, unless otherwise indicated.

The consolidated half-yearly report was prepared on a going concern basis, as the directors
verified that there were no financial, operational or other indicators that could indicate

23critical issues regarding the Group’s ability to meet its obligations in the foreseeable futureand in particular in the next 12 months.

The consolidated half-yearly report was prepared using the interim reports of the Group
companies as a basis.

The reference date of the consolidated half-yearly report coincides with the closing date of thefirst half of the financial year of the Parent Company and of the other companies included in
the scope of consolidation.

2. ACCOUNTING STANDARDS, AMENDMENTS AND MANDATORY INTERPRETATIONS ADOPTEDBY THE GROUP

The accounting standards adopted by the Group for the preparation of the consolidated half-

yearly report as at 31 December 2021 are the same as those adopted for the preparation of
the consolidated financial statements as at 30 June 2021.

3. ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS NOT YET APPLICABLE
AND NOT ADOPTED IN ADVANCE BY THE GROUP

Below are the international accounting standards, interpretations, amendments to existingaccounting standards and interpretations, or specific provisions contained in the standards
and interpretations approved by the IASB that have not yet been endorsed for adoption in
Europe at the date of this financial report or were not adopted early.

Amendments to IAS 1: Classification of Liabilities as Current or Non-current
In January 2020, the IASB published amendments to paragraphs 69 to 76 of IAS 1 to specify
the requirements for classifying liabilities as current or non-current. The amendments clarify:••

What is meant by the right to defer the maturity date•That the right of deferment must exist at the end of the year•

its right of deferment

The classification is not affected by the probability with which the entity will exercise
Only if an embedded derivative in a convertible liability is itself an equity instrument
does the liability's maturity have no impact on its classification.

The amendments will be effective for years beginning on or after 1 January 2023, and must be

applied retrospectively. No material impacts are expected for the Group with reference to thisamendment.

24

Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2:
Disclosure of Accounting Policies
Presented in February 2021, these amendments are intended to help the drafter of thefinancial statements in deciding which accounting policies to present in their financial
statements. They will be effective for financial years beginning on or after 1 January 2023. In

particular, the entity is required to make the disclosure of the material accounting policies,

rather than the significant accounting policies and several paragraphs are introduced thatclarify the process of defining the material policies, which could be such by their very nature,even if the related amounts may be intangible. An accounting policy is material if the users offinancial statements need it to understand other information included in the financial
statements.

Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors:
Definition of Accounting Estimates
From February 2021, changes were introduced to the definition of accounting estimates,
replacing the concept of changing them. According to the new definition, accounting estimates
are monetary amounts subject to measurement uncertainty. The Board clarifies that a change

in the accounting estimate, which results from new information or new developments, is not
the correction of an error. Moreover, the effects of a change in the inputs or in themeasurement technique used to develop an accounting estimate are changes in estimates
unless they result from the correction of errors of previous years. A change in an accounting

estimate may affect only the profit (or loss) for the current period or, alternatively, for boththe current period and future periods. These amendments will be applicable, subject toapproval, from 1 January 2023. No material impacts are expected for the Group withreference to this amendment.

Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising froma Single Transaction
Issued in May 2021, IAS 12 requires the recognition of deferred taxes whenever there aretemporary differences, i.e. taxes due or recoverable in the future. In particular, it wasestablished that companies, in specific circumstances, may be exempted from recognisingdeferred tax when they recognise assets or liabilities for the first time. This provision25

previously raised some uncertainty as to whether the exemption would apply to transactions
such as leasing and dismantling obligations, transactions for which the companies recogniseboth an asset and a liability. With the amendment to IAS 12, the IFRS clarifies that theexemption does not apply and that companies are required to recognise deferred tax on thesetransactions. The objective of the amendments is to reduce the diversity in the reporting ofdeferred taxes on lease agreements and dismantling obligations. The amendments are

effective for years starting on 1 January 2023 and early application is envisaged. No material
impacts are expected for the Group with reference to this amendment.

4. IFRS STANDARDS and INTERPRETATIONS APPROVED by the IASB and NOT ENDORSED in
EUROPE

Below are the international accounting standards, interpretations, amendments to existingaccounting standards and interpretations, or specific provisions contained in the standards
and interpretations approved by the IASB that have not yet been endorsed for adoption in
Europe at the date of these financial statements.
IFRS 17 Insurance Contracts

In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a new comprehensive

standard relating to insurance contracts that covers recognition and measurement,

presentation and disclosure. When it comes into force, IFRS 17 will replace IFRS 4 Insurance
Contracts, issued in 2005. IFRS 17 applies to all types of insurance contracts (e.g. life, non-life,

direct insurance, reinsurance) regardless of the type of entity that issues them, as well as tocertain guarantees and financial instruments with discretionary participation features. For
this purpose, limited exceptions will be applied. The general objective of IFRS 17 is to present

an accounting model for insurance contracts that is more useful and consistent for insurers. In
contrast to the provisions of IFRS 4, which are largely based on the maintenance of previous
accounting policies, IFRS 17 provides a complete model for insurance contracts that covers all
relevant accounting aspects. The core of IFRS 17 is the general model, supplemented by:••

A specific adaptation for contracts with direct participation features (the variable fee
approach)

A simplified approach (the premium allocation approach) mainly for short-term
contracts.

26

IFRS 17 will be in force for years beginning on or after 1 January 2023, and will require thepresentation of comparative balances. Early application is permitted, in which case the entity
must also have adopted IFRS 9 and IFRS 15 at the date of first-time application of IFRS 17 or

earlier. No material impacts are expected for the Group’s consolidated financial statementswith reference to this amendment.

Amendment to IFRS 16 – Leases: Covid-19-Related Rent Concessions beyond 30 June 2021
Issued on 31 March 2021, it should have been effective from 1 April 2021, but was approvedon 30 August 2021. With this amendment, the IASB further amended IFRS 16 to extend thetime limit of one of the criteria that the lessor must comply with in order to apply the practical

expedient to the concessions received (exemption to lessees from the obligation to determine
whether a concession in terms of leases is a change to the lease), i.e. that any reduction inlease payments could only affect payments originally due by 30 June 2021.
Reference to the Conceptual Framework – Amendments to IFRS 3

In May 2020, the IASB published the amendments to IFRS 3 Business Combinations – Reference
to the Conceptual Framework. The amendments were approved on 28 June 2021. The Board

added an exception to the measurement standards of IFRS 3 to avoid the risk of potential
losses or profits “of the day after” deriving from liabilities and contingent liabilities that would

fall within the scope of IAS 37 or IFRIC 21 Levies, if contracted separately. At the same time,
the Board decided to clarify that the existing guidance in IFRS 3 for contingent assets will not

be impacted by the update of the references to the Framework for the Preparation and
Presentation of Financial Statements. The amendments will be effective for the years startingon 1 January 2022 and apply prospectively. No material impacts are expected for the Group’s
consolidated financial statements with reference to this amendment.

Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16
In May 2020, the IASB published Property, Plant and Equipment – Proceeds before IntendedUse, which prohibits the entity from deducting from the cost of property, plant and equipment

any revenue deriving from the sale of items produced while the company is preparing theasset for its use in testing. These revenues must be recognised in the income statement underincome from sales as well as the related costs. The amendments were approved on 28 June
2021. The amendment will be effective for years beginning on or after 1 January 2022 andmust be applied retrospectively to items of property, plant and equipment made available for27

use at or after the start date of the period prior to the period in which the entity applies thisamendment for the first time. No material impacts are expected for the Group with reference
to these amendments.

Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37
In May 2020, the IASB published amendments to IAS 37 to specify which costs must be
considered by an entity when assessing whether a contract is onerous or loss-making. The

amendments were approved on 28 June 2021. The amendment provides for the application of
a “directly related cost approach”. Costs that refer directly to a contract for the supply of

goods or services include both incremental costs and costs directly attributed to thecontractual activities. General and administrative expenses are not directly related to acontract and are excluded unless they are explicitly recharged to the counterparty on thebasis of the contract. The amendments will be effective for years beginning on or after 1
January 2022. The Group will assess the impacts of these changes in the event of contracts forwhich it has not yet satisfied all its obligations at the beginning of the year of first application.
5. 2018-2020 ANNUAL IMPROVEMENTSIFRS 1 First-time Adoption of International Financial Reporting Standards – Subsidiary as afirst-time adopter
As part of the 2018-2020 annual improvements process of the IFRS standards, the IASB

published an amendment to IFRS 1 First-time Adoption of International Financial ReportingStandards. This amendment allows a subsidiary that chooses to apply paragraph D16(a) of

IFRS 1 to account for the cumulative translation differences on the basis of the amounts
recorded by the parent company, considering the date of transition to IFRS by the parent

company. This amendment also applies to associates or joint ventures that choose to apply
paragraph D16(a) of IFRS 1. The amendment will be effective for years beginning on or after 1

January 2022, and early application is permitted. No material impacts are expected for theGroup’s consolidated financial statements with reference to this amendment.

IFRS 9 Financial Instruments – Fees in the '10 per cent' test for derecognition of financial
liabilities
As part of the 2018-2020 annual improvements process of the IFRS standards, the IASB
published an amendment to IFRS 9. This amendment clarifies the fees that an entity includes

28

in determining whether the conditions of a new or amended financial liability aresubstantially different with respect to the terms of the original financial liability. These fees
include only those paid or received between the debtor and the lender, including those paid or
received by the debtor or the lender on behalf of others. An entity applies this amendment tofinancial liabilities that are amended or exchanged after the date of the financial year in which

the entity applies the amendment for the first time. The amendment will be effective for years

beginning on or after 1 January 2022, and early application is permitted. The Group will apply
this amendment to financial liabilities that are amended or exchanged subsequently or at thedate of the financial year in which the entity applies this amendment for the first time. No

material impacts are expected for the Group’s consolidated financial statements withreference to this amendment.

6. FINANCIAL STATEMENT FORMATS AND CLASSIFICATION CRITERIAWhen preparing the formats of the documents that make up the financial statements, theCompany adopted the following criteria:- Income statement

The classification of costs was carried out on the basis of the criterion of their destination,
which is considered more representative, as well as adhering to the criteria of the reportingused by the management of the Group companies in determining the strategic direction andthe execution of the related business plans.

- Balance Sheet

The assets and liabilities shown in the financial statements have been separately classified as
current and non-current in compliance with the provisions of IAS 1.

In particular, an asset must be classified as current when it meets one of the following criteria:(a) it will be realised, or held for sale or consumption, in the normal course of theentity’s operating cycle;(b) it is held primarily for the purpose of trading;(c) it is expected to be realised within twelve months of the reporting date;(d) these are cash and cash equivalents.

All other assets were classified as non-current.

A liability must be classified as current when it meets one of the following criteria:(a) it is expected to be settled in the normal operating cycle of an entity;(b) it is held primarily for the purpose of trading;29

(c) it must be settled within twelve months from the reporting date;(d) the entity does not have an unconditional right to defer settlement of the liability
for at least twelve months from the reporting date.

All other liabilities were classified as non-current.

Moreover, on the basis of the provisions of IFRS 5, those assets (and related liabilities) whosebook value will be recovered mainly through a sale transaction rather than continuous use areclassified, where they exist, as “Assets held for sale” and “Liabilities related to assets held forsale”.

- Statement of changes in shareholders’ equity

The statement was prepared by showing the items in individual columns with a reconciliationof the opening and closing balances of each item that makes up Shareholders' equity.
- Cash flow statement

The cash flows from operating activities are presented using the indirect method as permitted

by IAS 7, since this criterion was considered the most appropriate to the business sector inwhich the company operates. By means of this criterion, the result for the year was adjusted
for the effects of non-monetary transactions, operating, investing and financial activities.
7. ACTIVITIES OF GROUP COMPANIESThe companies that make up the Selle Royal Group produce and sell saddles, sports shoes andcycle accessories.

The structure of the Group as at the date of these consolidated financial statements is shown
below, with an indication of the equity investment percentages.

* Following the change of company name resolved by the shareholders’ meeting of 12 January 2022** Consolidated using the equity method30This structure has changed compared to the composition of the Group as at 30 June 2021, due

to the establishment, on 6 July 2021, of Jiangyin Selle Royal Cycling Co., Ltd., a company under
Chinese law, 68.29% controlled by the Group through the Hong Kong holding company Selle

Royal Asia Limited and, for the remainder, by the same local shareholder holding the minority

interest in Selle Royal (Vehicle) Co., Ltd. For further details, please refer to the section“Significant events during the period”. On 6 December 2021, the merger by incorporation of
SR84 S.r.l. into Selle Royal Group S.p.A. was completed, as resolved by the respective
corporate bodies on 28 September 2021. The statutory effects of this transaction became
effective as from 31 December 2021, while the taxation effect applied as from 1 July 2021.

Lastly, please note that on 22 December 2021 Selle Royal Group S.p.A. signed an agreementwith M J K Partecipações Ltda., equal shareholder in the Brazilian company Royal Ciclo
Industria de Componentes Ltda., for the purchase of an additional shareholding equal to 1% of

the latter's share capital. As a result of this transaction, the parent company holds 51% of thesubsidiary's share capital. The higher value recognised to the minority shareholder in theacquisition, with respect to the portion of shareholders’ equity of Royal Ciclo Industria deComponentes Ltda. subject to transfer, was recorded as a decrease in shareholders’ equity
reserves, as required by international accounting standards in the event of increase of interestin companies already subject to control.

The consolidated half-yearly report as at 31 December 2021 includes the data of the parent
company Selle Royal Group S.p.A. and those of the subsidiaries in which it has, directly or

indirectly, the majority of the votes that can be exercised at the Shareholders' Meeting or inwhich it has decision-making power, i.e. the ability to direct the relevant activities of theinvestee, i.e. those activities that have a significant influence on the investee’s returns.

In particular, the scope of consolidation is broken down as follows:

Selle Royal Group S.p.A., parent company, with registered office in Pozzoleone (VI),share capital of € 6,000,000. It should be noted that, as already described above,following a shareholders’ meeting resolution of 12 January 2022, Selle Royal S.p.A.
changed its company name as indicated above.

Brooks England Limited, acquired in 2002, with registered office in Smethwick-Birmingham, United Kingdom, share capital of £ 239,100, equal to approximately €301,799, 100% owned by Selle Royal Group S.p.A.

Selle Royal USA Inc. (previously known as Hi-Move Inc.), established in 2006, withregistered office in Chicago (Illinois), share capital of USD 1,000, equal to approximately31€ 901. The company is 100% owned by Selle Royal Group S.p.A. A joint venture was alsoestablished in 2006 with a leading German operator for the direct distribution of
products on the US market. To this end, Highway Two Llc. was established, based in theUSA, currently 50% owned by Selle Royal USA Inc. In these consolidated financial
statements, Highway Two Llc. is measured using the equity method. The value at the

reporting date was € 2,207,383.

Crank Brothers Inc., with share capital of US$ 2,000, equal to approximately € 1,802,100% owned by Selle Royal Group S.p.A.

Selle Royal Vehicle (China) Co. Ltd., formerly Jiangyin Justek Vehicle Co., Ltd.; theacquisition, completed in February 2010, was effective retroactively from 1 January

2010. The interest in Selle Royal Group S.p.A., through its wholly-owned subsidiary Selle
Royal Asia Ltd., grew in 2014/15 from 51.86% of the share capital held since theacquisition to the 68.29% currently held, following a corporate reorganisation. Lastly, it

should be noted that the aforementioned company Selle Royal Asia Ltd. is a pure holding
company that holds exclusively the equity investment in Selle Royal Vehicle (China) Co.
Ltd and does not carry out any activities.

Selle Royal Jiangyin Cycling Co. Ltd.: established on 6 July 2021, with registered officein Jiangyin (Jiangsu province, People's Republic of China), the company is 68.29% owned

by Selle Royal Asia Limited.

Pannier Ltd., with registered office in Smethwick-Birmingham, United Kingdom, sharecapital of £ 100.00 (corresponding to approximately € 120), fully subscribed and paid inby the subsidiary Brooks England Ltd. It should be noted that this company is exemptedfrom the requirements of the Companies Act with reference to the audit of individual
financial statements, as envisaged by Section 479A.

Royal Ciclo Industria de Componentes, Ltda., with registered office in Rio do Sul, in
the State of Santa Catarina, Brazil. The share capital, equal to 11,601,802 Brazilian Real,is 51% owned by Selle Royal Group S.p.A.

Royal Concept Co., Ltd.: the liquidation process of this Company, with registered officein Hong Kong, is substantially completed, as at present only the formal notification of its

cancellation from the local register of companies is pending ( "Companies Registry").
This notification is expected by the end of the first quarter of 2022.

32

8. GENERAL PREPARATION CRITERIA AND CONSOLIDATION PRINCIPLES

Consolidation is carried out using the line-by-line method. The criteria adopted for theapplication of this method are mainly the following:-

the book value of the equity investments held by the Parent Company or by the othercompanies subject to consolidation is eliminated against the relative shareholders'equity as a result of the assumption of the assets and liabilities of the investee-

companies;

any higher book value of the equity investments with respect to the shareholders' equity

pertaining to the acquisition is allocated, where possible, to the assets of the companies
included in the scope of consolidation up to the current value of the same and, for the-

residual part, to the “Goodwill” item;

significant transactions between consolidated companies are eliminated, as well as

receivables and payables and unrealised profits deriving from transactions between-

group companies, net of any tax effect;

the portion of shareholders' equity pertaining to minority shareholders is shown in thespecific item of consolidated shareholders’ equity, while the portion pertaining tominority interests of the result for the year is shown separately in the consolidated-

income statement;

the equity investments acquired during the year are included in the scope of
consolidation from the date of acquisition.

Subsidiaries are those in which the Group simultaneously has:-decision-making power, i.e. the ability to direct the relevant activities of the investee, i.e.
those activities that have a significant influence on the investee's returns;

the right to variable (positive or negative) results from its investment in the entity;

the ability to use its decision-making power to determine the amount of the returns

deriving from its investment in the entity.

Control can be exercised either by virtue of the direct or indirect ownership of the majority ofshares with voting rights, or by virtue of contractual or legal agreements, also regardless ofshareholder relations. In assessing the existence of control, the Company also considers its

own and third-party potential voting rights to determine whether it has power. “Potential
voting rights” are rights to obtain voting rights of an investee, such as those deriving fromconvertible financial instruments or options. These rights are considered only if they aresubstantial.

33

The existence of control is verified every time that facts or circumstances indicate a change in
one or more of the three elements qualifying the control.

Subsidiaries are consolidated on a line-by-line basis from the date on which control is actuallyacquired and cease to be consolidated from the date on which control is transferred to third
parties. The criteria adopted for line-by-line consolidation are as follows:-

the book value of the equity investments in the companies included in the scope of
consolidation is eliminated against the relative shareholders' equity as a result of the-assumption of the assets and liabilities of the investees;according to the provisions of IFRS 3, subsidiaries acquired by the Group are accounted
for using the acquisition method, according to which the consideration transferred in abusiness combination is measured at fair value, calculated as the sum of the fair value ofthe assets transferred and liabilities assumed by the Group at the acquisition date and of

the equity instruments issued in exchange for control of the acquired company.
Accessory charges to the transaction are recognised in the income statement at the time-they are incurred;-is accounted for as goodwill;-

the excess of the acquisition cost over the market value of the Group’s share of net assets
if the acquisition cost is lower than the fair value of the Group’s share in the net assets of
the acquired subsidiary, the difference is recognised directly in the income statement;

profits and losses not yet realised with third parties, deriving from transactions between
Group companies, are eliminated as well as receivables, payables, costs, revenues,

margins on products in inventory and all significant transactions that have taken place-

between the consolidated companies;-

losses and write-downs of equity investments in consolidated companies;

dividends distributed among group companies are eliminated, as are the coverage ofthe portions of shareholders' equity and profit for the year pertaining to minority

interests are shown separately, respectively, in a specific item of the consolidatedbalance sheet and income statement; pursuant to IFRS 10, the total loss is attributed tothe shareholders of the parent company and to the minority interests, even when the-shareholders' equity attributable to the minority interests presents a negative balance;

acquisitions of minority interests relating to entities for which control already exists or

the sale of minority interests that do not entail the loss of control are considered equity
transactions; therefore, any difference between the acquisition/disposal cost and the34relative portion of shareholders' equity acquired/sold is recorded as an adjustment to

the Group’s shareholders’ equity. Any obligation, relating to a forward contract, topurchase its own equity instruments for cash and cash equivalents entails therecognition of a liability whose fair value is reclassified from shareholders' equity. If thecontract expires without a delivery, the accounting amount of the liability is transferredto shareholders' equity. The contractual obligation for the acquisition of own equity

instruments gives rise to a liability for the present value of the redemption amount even

if the obligation is subordinated to the exercise by the counterparty of the redemption
right.

The financial statements of subsidiaries are prepared using the currency of the primaryeconomic environment in which they operate. The rules for the translation of the financial
statements of companies expressed in currencies other than the Euro are as follows:-

the assets and liabilities are converted using the exchange rates in force at the reporting
date;costs and revenues are converted at the average exchange rate for the year;

the “translation reserve” included among the items of the statement of comprehensive

income includes both the exchange differences generated by the conversion of theeconomic items at an exchange rate different from the closing one and those generated
by the conversion of the opening shareholders' equity at a different exchange rate from-the one at the end of the reporting period;

goodwill, if any, and fair value adjustments related to the acquisition of a foreign entity
are treated as assets and liabilities of the foreign entity and converted at the closing
exchange rate for the period.

The exchange rates adopted for the conversion of these financial statements are shown in thefollowing table:
Currency
British Pound (GBP)US Dollar (USD)
Hong Kong Dollar (HKD)
Chinese Yuan Renminbi (RMB)
Brazilian Real (BRL)

Exact exchange rate as at
31 December 30 June Appreciation /2021
2021 (deprec.)0.8403
1.1326
7.1947
6.31010.85811.18849.22937.67425.9050

2.11%
4.93%
n.s.
6.66%
-6.42%

Average exchange rate in the first half of the year
Appreciation /2021/22 2020/21(deprec.)
0.85161.161207.4681
6.27070.9042
1.18089.1526
7.99386.3597

6.18%
1.69%
n.s.
7.04%
1.42%

35

9. MEASUREMENT CRITERIA

The measurement criteria, the accounting standards and the financial statements drafting

principles, adopted according to a prudent approach and on a going concern basis, were as
follows.

Revenues, income, costs and charges
On the basis of the five-step model introduced by IFRS 15, the company recognises revenues

after identifying the contracts with its customers and the related performance obligations to

be satisfied (transfer of goods and/or services), determined the consideration to which it
expects to be entitled in exchange for the fulfilment of each of these performance obligations,as well as assessed the manner of satisfaction of these performance obligations (fulfilment at

a given point in time versus fulfilment over time). In particular, the Company recognises
revenues only if the following requirements are met (so-called requirements for identifying
the “contract” with the customer):a) the parties to the contract have approved the contract (in writing, orally or in compliancewith other usual commercial practices) and have undertaken to fulfil their respective

obligations; there is therefore an agreement between the parties that creates enforceable
rights and obligations regardless of the form in which said agreement is expressed;b) the Company may identify the rights of each party with regard to the goods or services tobe transferred;c) the Company may identify the payment terms for the goods or services to be transferred;d) the contract has commercial substance; ande) it is likely that the Company will receive the consideration to which it is entitled in
exchange for the goods or services that will be transferred to the customer.

If the above requirements are not met, the related revenues are recognised when: (i) the

Company no longer has any obligation to transfer goods and/or provide services to thecustomer and all, or almost all, of the consideration promised by the customer has been

received and is not refundable; or (ii) the contract was terminated and the consideration that
the Company received from the customer is not refundable.

If the above requirements are met, the revenues deriving from the sale of goods arerecognised at the time of transfer of ownership, which generally takes place at the time ofdelivery or shipment, unless the delivery terms are such as to cause significant risks and36benefits to pass to the purchasing counterparty at a later time than the aforementioneddelivery or shipment of the asset, in which case, on the basis of the average delivery time, thesales revenues and the related costs are deferred to the following year.

Revenues from the provision of services are considered to have been achieved on the date on

which the services are completed. Revenues of a financial nature and those deriving from theprovision of continuous services are recognised on an accrual basis.
Income taxes

Taxes are allocated on the basis of the rates in force applied to taxable income, taking into

account the regulations in force at the time of preparation of the financial statements, incompliance with the accrual principle.

Taxes for the period include current and deferred taxes. Income taxes are generally
recognised in the income statement, except when they relate to items recorded directly inshareholders' equity. In this case, income taxes are also charged directly to shareholders'equity.

Current taxes are the taxes that are expected to be paid on the taxable income for the year andare calculated in compliance with the regulations in force in the various countries in which
the Selle Royal Group operates.

Deferred taxes are calculated using the liability method on the temporary differences between

the amount of assets and liabilities in the consolidated financial statements and thecorresponding values recognised for tax purposes. Deferred taxes are calculated on the basisof the tax rate that is expected to be in force at the time the asset is realised or the liability is
extinguished.

Deferred tax assets are recognised only if it is probable that sufficient taxable income will be
generated in subsequent years for the realisation of these assets.

Income taxes relating to previous years include charges and income recognised in the year forincome taxes relating to previous years.

Criteria for the translation of currency items
Receivables and payables in foreign currency and liquid funds in foreign currency at the endof the accounting period are stated in the financial statements at the exchange rate in force on
the reporting date.

Profits and losses deriving from the translation of individual receivables and payables and of37

liquid funds in foreign currency, at the exchange rate in force on the date of the financial
statements, are credited and debited respectively to the income statement as financial income

components. If a net profit emerges from their conversion at the exchange rate in force at theend of the year, when the financial statements are approved, this net profit is recorded in a
non-distributable reserve for the part not absorbed by any loss for the year.
Fair value measurement

In compliance with IFRS 13 - Fair value measurement, the Group measures financial

instruments like derivatives at fair value at each reporting date. Fair value is the price thatwould be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The measurement of fair value isbased on the presumption that the transaction to sell the asset or transfer the liability takes

place in the main market or, in the absence of a main market, in the most advantageous
market for the asset or liability.

The Group uses valuation techniques that are appropriate to the circumstances and for which
sufficient data are available to measure the fair value, maximising the use of relevant

observable inputs and minimising the use of unobservable inputs. All assets and liabilities forwhich the fair value is measured or disclosed in the financial statements are classified in thefair value hierarchy, described below, based on the lowest level input that is significant for themeasurement of fair value in its complex:- Level 1 - (Unadjusted) market prices listed in active markets for identical assets or liabilities;- Level 2 - Valuation techniques for which the lowest level input that is significant for themeasurement of fair value is directly or indirectly observable;- Level 3 - Valuation techniques for which the lowest level input that is significant for themeasurement of fair value is unobservable.
Cash and cash equivalents
The item consists of cash and current account deposits, recognised at nominal value,corresponding to the fair value. Cash and cash equivalents are short-term investments, highly

liquid and readily convertible into cash, which are subject to an insignificant risk of change invalue.

Trade receivables38

Trade receivables are measured on the basis of the impairment model introduced by IFRS 9

on the basis of which the Group measures receivables by adopting an expected loss approach,replacing the IAS 39 framework based on the measurement of incurred losses. The Group has
applied a simplified approach in the calculation of Expected Credit Losses (“ECL”), therefore it
does not keep track of changes in credit risk, but recognises a provision for losses based on“ECL” calculated over the entire life of the loan (known as lifetime ECL) at each reference date,based on its historical experience of credit loss, adjusted for specific forward-looking factorsof the debtors and the economic context. The amount of the receivables is shown in thebalance sheet net of the related bad debt provision. The write-downs reported pursuant to
IFRS 9 (including recoveries or write-backs) are recognised in the income statement under
the other operating income and charges item.
Inventories
Inventories of raw materials, semi-finished and finished products are measured at the lowerof cost and net realisable value.

The cost configuration used is that of the “weighted average cost”.

Production costs include the expenses incurred to bring the assets to the state in which they

are found in the financial statements; they include both the specific costs of the individual
assets and the overall costs incurred in the activities carried out for their preparation.

Obsolete and slow-moving stocks are valued in relation to their possibility of use andrealisation, with reference to the average duration of the production cycle, with the allocationof a specific write-down both directly and through the establishment of a provision to adjust
their value.

Tangible assets
Property, plant and equipment are recognised according to the cost criterion and recognised

at the purchase price or at the cost of production, revalued if necessary in accordance with thelaw, including directly attributable accessory costs necessary to make the assets ready for use.

Financial charges directly attributable to the acquisition, construction or production of atangible asset are recognised in the income statement at the time they are incurred if they do
not refer to a qualifying asset. The Group does not hold assets for which a certain period oftime normally elapses to make the asset ready for use (qualifying asset).

The expenses incurred for ordinary and/or cyclical maintenance and repairs are directly

39charged to the income statement in the year in which they are incurred. The capitalisation of

costs relating to the expansion, modernisation or improvement of structural elements owned
or used by third parties is carried out exclusively to the extent that they meet therequirements to be separately classified as an asset or part of an asset by applying the“Component approach”.

Property, plant and equipment, with the exception of land, are systematically depreciatedeach year on a straight-line basis over the estimated useful life in relation to the remaining
useful life of the assets. If the asset being depreciated is composed of distinctly identifiable

elements whose useful life differs significantly from that of the other parts that make up theasset, depreciation is carried out separately for each of the parts that make up the asset inapplication of the “component approach” principle.

Depreciation begins when the asset is available for use, taking into account the actual momentin which this condition occurs.

40

The depreciation amounts charged to the income statement are calculated on the basis of theresidual possibility of use, taking into account the use, the destination and the economic-

technical duration of the assets. This criterion is considered well represented by the following
rates:












Land

0%

Generic plants

10% -12.50%

Buildings

3%

Machinery

10%-12.50%

Equipment

10%-35%

Electronic office equipment

18% -20%

Office furniture and equipment

12%

Motor vehicles and internal transport vehicles
Light constructions

Leasehold improvements

Rights of use

20% -25%

10%

Duration of the contract on the underlying asset

Duration of the lease

The depreciation rates of property, plant and equipment are reviewed and updated, where
necessary, at least at the end of each year.

If, regardless of the depreciation already recorded, there is an impairment loss, the tangible
asset is written down; if in subsequent years the reasons for the write-down no longer apply,
the original value is restored.

The residual values and the useful life of the assets are reviewed at each reporting date and, if
deemed necessary, the appropriate adjustments are made.
Intangible assets••

Goodwill and other assets with an indefinite useful life
Other intangible assets.

These are non-monetary assets, identifiable even if they have no physical substance, fromwhich it is probable that future economic benefits will flow. Intangible assets are recognised
at cost, represented by the purchase price and any direct cost incurred to prepare the asset

for use, net of accumulated amortisation, for intangible assets with a limited useful life, andimpairment losses.

If there is objective evidence that an individual asset may have suffered a reduction in value, acomparison is made between the carrying amount of the asset and its recoverable value, equal41

to the higher of the fair value, less costs to sell, and the related value in use, intended as thepresent value of future cash flows that are expected to originate from the asset. Any value
adjustments are recognised in the income statement.

Intangible assets with an indefinite useful life are not amortised. For these assets, the bookvalue is compared annually with the recoverable value. If the book value is higher than therecoverable value, a loss equal to the difference between the two values is recognised in theincome statement.

In the case of reversal of the value of intangible assets, excluding goodwill, previously written

down, the increased net book value cannot exceed the book value that would have been
determined if no impairment loss had been recognised for the asset in the previous years.

An intangible asset is derecognised from the balance sheet upon disposal or when no future
economic benefits are expected from its use or disposal.

IAS 38 defines as intangible assets those identifiable non-monetary assets without physicalsubstance. The main characteristics to meet the definition of an intangible asset are:-identifiability;

control of the resource in question;

existence of future economic benefits.

In the absence of one of the above characteristics, the expense to acquire or generate the sameinternally is considered as a cost in the year in which it was incurred.

With reference to trademarks owned by the Group, it should be noted that they are classified
among intangible assets with an indefinite life, and therefore not amortised, since:-

they play a key role in the Group’s strategy and constitute a primary value driver;the corporate structure, in its concept of organised tangible assets and organisation in a
broad sense, is heavily committed, at the moment, to the dissemination anddevelopment of the brands on the markets for the products marketed by the Group,

although the aforementioned brands may represent assets that may be freely used in-markets adjacent to those of consolidated entities;

the trademarks are owned and are correctly registered and constantly protected from a

regulatory perspective, with options for renewing the legal protection at the end of theregistration periods that are inexpensive, easy to implement and without external-

impediments;

the products marketed by the Group under these brands are not subject to particulartechnological obsolescence in consideration of the development activities carried out by42

the Group that allow them to qualify in the luxury market for the categories of cycling

products that are subject to marketing and in which the Group is perceived by the-market;-trend, so much so that they become models to be imitated or inspired by;in fact, the brands are considered by their consumers as constantly innovative and on
the brands are distinguished, in the typical national and/or international context foreach of them, by market positioning and reputation such as to ensure their pre-eminence in the respective market segments, being constantly associated and compared-

to products of absolute reference;in the reference competitive context, it can be stated that the investments to maintainthe brands are proportionally limited, compared to the substantial and favourable cash
flows expected.

Goodwill
Goodwill recognised in the financial statements is that paid for a business combination, i.e. forthe acquisition of control of a company or business unit. It is not subject to amortisation, but
to an impairment test to be carried out at least annually. If the purchasing company candemonstrate that it is able to achieve the value creation objectives implicit in the acquisition

price, it does not make any adjustments to the goodwill recorded; otherwise, it must record an
impairment loss in accordance with IAS 36. The goodwill generated internally by the company

is not recognised. In accordance with IAS 36, the impairment test is based on the discountingof cash flows.

Impairment losses
IAS 36, in the presence of indicators, events or changes in circumstances that suggest theexistence of impairment, requires intangible assets and tangible assets be subjected to theimpairment test, in order to ensure that they are not recognised as assets at a value higher

than the recoverable amount. This test is performed at least annually for assets and goodwill
with an indefinite useful life, in the same way as for tangible and intangible assets not yet inuse.

The certification of the recoverability of the values recorded in the financial statements is

obtained by comparing the book value at the reference date and the fair value net of costs tosell (if available) or the value in use. The value in use of a tangible or intangible asset is43determined on the basis of the estimated future cash flows expected from the asset,

discounted through the use of an after-tax discount rate, which reflects the current market
valuation of the present value of money and risks related to the Group’s activities, as well as
cash flows deriving from the disposal of the asset at the end of its useful life. If it is notpossible to estimate an independent cash flow for an individual asset, the smallest operating
unit (cash generating unit) to which the asset belongs and to which it is possible to associate

future cash flows that can be objectively determined and independent from those generated
by others is identified. The identification of the cash generating units was carried out in linewith the organisational and operating architecture of the Group.

If the impairment test shows an impairment loss on an asset, its book value is reduced to therecoverable value, through direct recognition in the income statement, unless the asset ismeasured at revalued value, in which case the write-down is charged to the revaluation
reserve. When the reasons for a write-down no longer apply, the book value of the asset (or of
the cash-generating unit), with the exception of goodwill, is increased to the new value

deriving from the estimate of its recoverable value, but not beyond the net book value that theasset would have had if the write-down for impairment had not been made. The write-back ischarged to the income statement immediately, unless the asset is measured at the revalued
amount, in which case the write-back is charged to the revaluation reserve.
LeasesThe Group assesses at the beginning of the contract whether a contract is, or contains, a lease.
This occurs if the contract transfers, in exchange for consideration, the right to control the useof an identified asset for a period of time.

According to IFRS 16 - Leases, the Group applies a recognition and measurement approach for

all leases, with the exception of short-term leases and leases of low-value assets.

Consequently, the lease payments for short-term leases and the leases of low-value assets arerecognised as expenses on a straight-line basis for the duration of the lease.

The Group recognises the lease liabilities that represent the obligations to pay the lease
payments and the right-of-use assets that represent the right of use for the underlying assets.

The Group recognises the right-of-use assets at the start date of the lease and measures themat cost, less accumulated depreciation and impairment, and adjusted for any re-measurementof lease liabilities. Right-of-use assets are measured at cost, which includes the following: (i)the amount of the initial measurement of the lease liability; (ii) any lease payment made on or44

before the commencement date, less any lease incentive received; (iii) any initial direct costs
and, if applicable, (iv) restoration costs. Right-of-use assets are depreciated on a straight-line

basis for the shorter of the lease term and the estimated useful life of the assets.
Financial assets

Other equity investments are recognised at purchase or subscription cost, adjusted if
necessary for impairment losses.
Provisions for risks and charges
Provisions for risks and charges relate to costs and charges of a certain nature and of certainor probable existence that at the end of the year are undetermined in terms of amount or dateof occurrence. Allocations to these provisions are recognised when:-

it is probable that there is a current legal or implicit obligation deriving from a past
event;

it is probable that the fulfilment of the obligation will be onerous;
the amount of the obligation can be reliably estimated.

Provisions are recognised at the value representing the best estimate of the amount that thecompany would reasonably pay to extinguish the obligation or to transfer it to third parties atthe end of the year. When the financial effect of time is significant and the payment dates ofthe obligations can be reliably estimated, the provision is determined by discounting back the
expected cash flows determined taking into account the risks associated with the obligation;
the increase in the provision related to the passage of time is recognised in the income
statement under “financial income” or “financial charges”.

The provisions are periodically updated to reflect changes in cost estimates, realisation times

and the discount rate; revised estimates are charged to the same income statement item that
previously included the provision.

The existence of contingent liabilities, represented by obligations:-

possible, but not probable, arising from past events, the existence of which will be

confirmed only upon the occurrence or otherwise of one or more uncertain future-

events not fully under the control of the company; orcurrent events, as they derive from past events, for which, however, the possibility of
incurring charges in the future is considered remote, or the amount of which cannot be
reliably estimated;45

it does not give rise to the recognition of liabilities recorded in the financial statements, but is
illustrated in a special explanatory note to the financial statements.
Employee benefits
The Group has defined benefit pension plans with employees. Defined benefit pension plans
typically define the amount of benefit that employees will receive at the time of retirement
and which, usually, depends on one or more factors such as age, years of service andcompensation. The liability recognised in the balance sheet in respect of defined benefit
pension plans is equal to the present value of the pension obligation at the end of the period,
also including any adjustment deriving from unrecognised costs relating to past benefits, lessthe fair value of pension assets (“plan asset”). The pension obligation is calculated annually,
with the help of external actuaries, using the “Projected Unit Credit Method”. The present

value of the pension obligation is calculated by discounting the disbursements expected in the
future on the basis of the interest rate applied to bonds issued by leading companies in thesame currency in which the benefits will be paid and which have a maturity similar to that ofthe pension obligation. Actuarial gains and losses relating to defined benefit plans derivingfrom changes in the actuarial assumptions used or from changes in the plan conditions arerecognised in the statement of comprehensive income in the year in which they occur. The

amount reflects not only the payables accrued at the reporting date, but also future salary
increases and the related statistical trends. Costs relating to services provided in previous
periods are recognised immediately in the income statement.

The benefits guaranteed to employees through defined contribution plans (also by virtue ofrecent changes in national pension legislation) are recognised on an accrual basis and at thesame time give rise to the recognition of a liability measured at nominal value.
Current and deferred taxation
Provisions for income taxes for the year made by the individual companies included in thescope of consolidation are calculated in accordance with the current tax regulations of thecountry where the companies are based and are recorded under “tax payables”, net of any tax
credits legally offset during the subsequent tax period.

Deferred taxes are calculated on the cumulative amount of all temporary differences between

the value of an asset or a liability determined according to statutory criteria and the value
attributed to that asset or liability for tax purposes, applying the presumed tax rate in force at46

the moment in which the temporary differences will reverse, as well as the tax effect of thetypical consolidation adjustments.

It should also be noted that no deferred taxes have been allocated against the revaluation

reserves subject to taxation recognised under shareholders’ equity since, at present, it isbelieved that no transactions are carried out that would result in taxation.

Deferred tax assets deriving from losses that can be carried forward for tax purposes are also

recognised if the conditions of reasonable certainty of obtaining taxable income that will beable to absorb the losses carried forward and the losses in question derive from wellidentified circumstances and it is reasonably certain that these circumstances will not be
repeated.

Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired fromsuppliers in the course of ordinary activities. Trade payables are classified as current
liabilities if payment is due within one year or less from the reference date. Otherwise, they
are presented as non-current liabilities.

Trade payables are stated at their nominal value, modified in the event of returns or invoicing
adjustments. This measurement approximates the fair value in an appropriate manner.

The Group recognises payables from other taxes and social security and other non-financial
payables at the amount payable on the due date.
Payables to banks and other lenders
Payables to banks and other lenders are initially recognised at fair value net of directly

attributable accessory costs and are subsequently measured at amortised cost, applying theeffective interest rate method. If there is a change in the expected cash flows and/or theinternal rate of return initially determined, the value of the liabilities is recalculated to reflect

this change. Payables to banks and other lenders are classified under current liabilities, unlessthe Group has an unconditional right to defer their payment for at least 12 months after thereference date. Payables to banks and other lenders are removed from the financial

statements when they are extinguished, i.e. when all risks and charges relating to the
instrument are transferred, derecognised or settled. The bond payable is recognised on thebasis of the amounts collected, net of the transaction costs and subsequently measured atamortised cost, using the effective interest rate method.

47

Derivative contracts
Derivative contracts can be considered trading or hedging contracts and, based on IAS rules,
must be recognised in the financial statements and measured at fair value regardless of theirdestination and classification. The hedging transaction must also be attributable to apredefined risk management strategy, must be consistent with the risk management policies

adopted, must be documented and effective in effectively neutralising the risk to be hedged.
This principle of consistency can be maintained only in the presence of effective hedging
contracts. Hedging transactions can be divided into fair value and cash flow hedges of specificfinancial statements items.
Share capital
The item is represented by the subscribed and paid-in capital.
Reserve for first-time adoption of IAS/IFRS
The item includes the total amount of IAS/IFRS adjustments recognised directly inshareholders' equity at the time of First Time Adoption (1 July 2014).
Other shareholders' equity reserves

Among others, the item includes the cash flow hedge reserve, where changes in the fair valueof hedging derivatives are recognised directly in shareholders' equity net of the related taxes.

It also includes the employee severance indemnity discounting reserve, where the effects ofchanges in the severance indemnity provision of employees of the Italian companies of theGroup are accounted for, as resulting from the actuarial analysis carried out by professionals

enrolled in the professional register to which the data in question are subjected on an annual
basis.

10. ESTIMATES AND ASSUMPTIONS
The preparation of the consolidated financial statements requires the directors to apply

accounting standards and methods which, in certain circumstances, are based on difficult andsubjective assessments and estimates based on historical experience and assumptions thatare considered reasonable and realistic from time to time depending on the relevant
circumstances.

The application of these estimates and assumptions affects the amounts shown in the financial48

statements, such as the statement of financial position, the income statement and the cash
flow statement, as well as the information provided.

The final results of the items in the consolidated financial statements for which the above-

mentioned estimates and assumptions were used, may differ from those reported in thefinancial statements of the individual companies due to the uncertainty that characterises theassumptions and the conditions on which the estimates are based.

The estimates and assumptions are reviewed periodically and the effects of each change arereflected in the income statement of the period in which the estimate is revised.

Below is a summary of the financial statement items that require greater subjectivity thanothers on the part of the directors in preparing the estimates and for which a change in theconditions underlying the assumptions used could have a significant impact on the financial
statements:-

Depreciation/amortisation: changes in the economic conditions of the markets, intechnology and in the competitive scenario could significantly affect the useful life ofproperty, plant and equipment and of intangible assets and could result in a difference inthe-timingoftheamortisation

depreciation/amortisation costs.

process,

as

well

as

on

the

amountofIncome taxes: determined in each country in which the Group operates according to a

prudent interpretation of current tax regulations. This sometimes involves complex

estimates in determining the taxable income and the deductible and taxable temporary-

differences between the carrying amounts and taxable amounts.

Provision for inventory obsolescence: reflects the Company management's estimate of
expected impairment losses in relation to inventories, determined on the basis of pastexperience. Any anomalous trends in market prices could have repercussions in future-

inventory write-downs.

Bad debt provision: the recoverability of receivables is measured taking into account therisk of non-collectability, their age and losses on receivables recognised in the past forsimilar types of receivables. The company uses a simplified approach to calculate theECL (Expected Credit Loss) for trade receivables and contractual assets, initially basedon the historical default rates observed . The Company adjusts the historical experienceof credit loss with forward-looking information. At each reporting date, the historicaldefault rates observed are updated and changes in forward-looking estimates areanalysed. The assessment of the correlation between the historical default rates

49

observed, the expected economic conditions and the “ECLs” is a significant estimate. The
amount of the “ECL” is sensitive to changes in circumstances and expected economic
conditions. The company's historical experience of credit loss and the forecast of
economic conditions may not be representative of the actual default of the customer in-the future.

Non-current assets: the Group periodically reviews the carrying amount of property,

plant and equipment, intangible assets, investments in joint ventures and associates andother non-current assets, when facts and circumstances require such revision in order todetermine their recoverable value. The recoverability analysis of the book value isgenerally carried out using estimates of expected cash flows from the use or sale of theasset and appropriate discount rates to calculate the present value. When the book valueof a non-current asset is impaired, the Group recognises a write-down equal to theexcess between the book value of the asset and its recoverable value through the use orsale of the same, determined with reference to the cash flows inherent in the most-recent business plans.

Deferred tax assets: the Group has deferred tax assets on deductible temporary

differences and theoretical tax benefits for losses carried forward that are recognises tothe extent it is probable that future taxable income will be available against which they

can be recovered. The valuation of the recoverability of deferred tax assets, recognised

in relation to both tax losses usable in subsequent years and deductible temporary

differences, takes into account the estimate of future taxable income and is based on-

prudent tax planning.

Employee benefits: provisions for employee benefits and net financial charges aremeasured using an actuarial method that requires the use of estimates and assumptions
to determine the net value of the obligation. The actuarial methodology considers
financial parameters such as, for example, the discount rate and the growth rates ofwages and takes into account the probability of occurrence of potential future events

through the use of demographic parameters such as, for example, employee mortality-

rates and resignation or retirement rates.

Contingent liabilities: the Group ascertains a liability for pending disputes and lawsuits
when it deems it probable that a financial outlay will occur and when the amount of theresulting losses can be reasonably estimated. In the event that a financial outlay

becomes possible but the amount cannot be determined, this fact is reported in the50explanatory notes to the financial statements. The lawsuits may concern complex legal

and tax issues, subject to a different degree of uncertainty against which it is possiblethat the value of the provisions may change as a result of future developments in theongoing proceedings. The Group monitors the status of pending lawsuits and consultswith its legal advisors and experts.

11. SEGMENT REPORTING

The segment reporting of the Selle Royal Group, in application of IFRS 8, is provided withreference to the geographical areas in which the Group operates based on the availability offinancial statement information and in line with the main method with which the results are

periodically reviewed by management for performance assessment purposes. Morespecifically, the Group’s areas of activity can be broken down as follows:
EUROPE
From a corporate point of view, this area is represented by the parent company Selle RoyalGroup S.p.A. and its direct and indirect subsidiaries, whose registered office and whose
operating activities are mainly concentrated in the territory of the European Union.

From a business point of view, this sub-scope includes both industrial activities, carried out inthe factories of Selle Royal Group S.p.A. in Pozzoleone (VI) and of Brooks England Ltd. in
Smethwick (GB), as well as purely commercial activities. The latter consist of the sale anddistribution of own-brand products, the result of both internal production and puremarketing, and the distribution of third-party brand products. With specific reference to thislatter aspect, please note that the parent company Selle Royal Group S.p.A. has, for years now,

supported the traditional sales in the OEM ("original equipment") and aftermarket (sales ofspare products to national/regional distributors) channels with direct sales to retailers in
Italy, France and Austria, under the A4 Selection brand name.
AMERICAThis area is represented, from a corporate point of view, by the subsidiaries whose registeredoffice and operating activities are mainly concentrated in North America and by Royal Ciclo,
whose registered office and reference market are in Brazil.

The activities carried out by the companies belonging to this sub-scope are varied and mainly

include the design, development and marketing of hardware products (defined, for simplicity,51

as all those “non-saddles” and “non-sports shoes” products); the production of saddles andother accessories in the Brazilian plant and the marketing of the Group’s brands and selected

third-party brands on the American, Canadian and Brazilian markets, through the retailchannel and selected specialised chains.

ASIA
This area is represented, from a corporate point of view, by the subsidiaries whose registeredoffice and operating activities are mainly concentrated in Asia.

These are primarily industrial activities carried out in the Chinese plants of Selle Royal

Vehicle (China) Co., Ltd., whose products are intended for both the domestic market and theexport market. The main sales channel that includes these products is the so-called “OEM”

channel, in which the Group's direct customers are bicycle assemblers, who operate both on

their own behalf and on behalf of third parties. In the latter case, the Group exploits its
relations and its sales force by negotiating supplies with Western brands (mainly Europeanand American), which then decide to allocate production to its own and/or third-party plants,

mainly in Europe or in the Far East.

Overall, it should be emphasised that the global presence, both in production and commercial
terms, and the portfolio of own brands, which is also accompanied by a service for thedevelopment of specific products at the request of customers, make the Selle Royal Group a

privileged counterparty for the large groups/agglomerations of brands that have formed over
the years in the cycle sector.

The following tables present data on revenues for the first half of 2021/22 and the same
period of the previous year and on certain balance sheet items relating to the Group’sbusiness segments as at 31 December 2021 and 30 June 2021.
1st half of 2021/22

2020/21EUROPEAMERICAASIAEUROPEAMERICA

ASIA

Revenues

56,430,314

30,925,576

18,157,930

45,038,937

28,371,506

15,759,817

Current assets
Non-current assets
Current liabilities
Non-current liabilities

44,749,632
43,222,418
42,630,563
46,410,058

32,110,517
20,729,817
18,622,885
3,244,192

20,874,245
7,897,105
3,713,962
63,51032,570,097
38,290,469
35,786,701
38,417,919

25,938,873
20,423,318
18,289,299
3,137,661

19,856,263
7,389,573
7,573,971
59,54152

12. DERIVATIVE FINANCIAL INSTRUMENTS

As at 31 December 2021, the parent company Selle Royal Group S.p.A. held three derivative
financial instruments, subscribed with a leading Italian bank, for the purpose of hedging
against interest rate volatility ( “IRS”).

The first financial derivative was subscribed in May 2019 and will expire in May 2022. The

other two derivative financial instruments were subscribed on 29 October 2021, at the sametime as the opening of two multi-year unsecured mortgages at variable rates. For further

information, please refer to the section on financial liabilities measured at fair value in these
Explanatory Notes.

These derivative financial instruments are found to be hedges from the effectiveness tests

carried out and, as a result, the effects relating to the change in their value were reflected in a
specific equity reserve (“cash flow hedge reserve”), net of the related tax effect.
13. RISK MANAGEMENT

In relation to financial and other risks, please refer to the Report on Operations.
14. TRANSACTIONS with RELATED PARTIESThe main transactions with related parties are described below:-

Dec. 28, 1928 Holding S.p.A.: parent company of Selle Royal Group S.p.A., of which it

holds 66.6% of the share capital; the debit balances for IRES are transferred to it.
Following the merger by incorporation of SR84 S.r.l. already mentioned, Selle RoyalGroup S.p.A. and its majority parent company participate in the related tax-

consolidation.

Dec. 28, 1928 Real Estate S.r.l.: the parent company Selle Royal Group S.p.A., by virtue ofa lease signed on 1 July 2021, which renewed the agreement previously signed in June
2013, and with a duration of 6 years, manages the property leased from Dec. 28, 1928

Real Estate S.r.l. in which the production and sales activities of Selle Royal Group S.p.A.
-

are carried out.

Wise Equity SGR S.p.A.: some shareholders of Wise Equity SGR S.p.A. (which holds 33.3%of the share capital of the parent company Selle Royal Group S.p.A.) are members of thelatter's Board of Directors, a position for which Wise Equity SGR S.p.A. charges therelative emoluments periodically; these emoluments are fully paid for the amounts
pertaining to the period in question.

53

-

Minority shareholders in subsidiaries: the amount shown in the table below refers to theamount due to the minority shareholder in Royal Ciclo Industria de Componentes Ltda.,
for the transfer of 1% of the latter's share capital, already commented on previously.

-This debt was settled on 12 January 2022.

Family members of the controlling shareholders of the parent company: the amounts
refer to the residual payables at the reporting date for future lease payments on theproperty located in Rossano Veneto, the parent company’s secondary headquarters
where the offices of the A4Selection division are located, and recorded in accordancewith the provisions of IFRS 16. This contract, with a duration of 6 years, will expire in
February 2025.

The economic and financial transactions carried out during the half year ended 31 December
2021 are summarised in the following table:
COUNTERPARTY

Wise Equity SGR
Dec. 28, 1928 Holding S.p.A.
Dec. 28, 1928 Real Estate S.r.l.
Minority shareholders in subsidiaries
Directors
Family members of the controlling shareholders of the parent company
TOTAL RELATED PARTIES

GENERAL and
ADMINISTRATIVE
C.
105,000
797,125
902,125

OTHER NONCURRENTASSETS
600,000
25,200625,200

CURRENT
LIABILITIES
3,269,668
1,079,323
750,000
128,034
46,7505,273,775

NONCURRENT
LIABILITIES
5,258,225
101,1815,359,406

54

ANALYSIS and COMPOSITION of the INCOME STATEMENT
15. SEGMENT REPORTING

An additional level of analysis used by management in ordinary operations and in
determining strategic initiatives is provided below:

1st half of 2021/22

SELLE ROYALFIZIKBROOKSCRANK
BROTHERSOTHER / NOT
PEdALED

ALLOCATED (*)

CONSOLIDATEDRevenues

34,477,456

23,061,473

9,008,132

18,770,687

1,322,232

18,873,840

105,513,820

Gross margin

16,183,587
46.9%

11,405,436
49.5%

5,191,082
57.6%

8,251,49144.0%

700,03252.9%

5,576,140n.s.

47,307,768
44.8%

1st half of 2020/21
CRANK
BROTHERSOTHER / NOT
ALLOCATED (*)

CONSOLIDATED

19,639,667

89,170,259

14,742,351
7,807,651
4,658,083
6,949,287
585,0035,363,022
48.3%
50.2%
58.6%
48.5%
50.2%
n.s.
(*) Revenues represent the turnover of third-party brands that do not exceed the materiality thresholds set for separate disclosure,as envisaged by par. 13 of IFRS 8, as well as non-core turnover. The gross margin instead represents the net balance between the marginof “other” turnover and cost of sales elements not directly attributable to a specific brand.

40,105,397
45.0%

SELLE ROYAL
Revenues

30,528,656

FIZIK

BROOKS

15,558,638

7,947,111

14,331,329

Gross margin

PEdALED
1,164,858

16. REVENUES

Revenues for the current year deriving from the Group’s ordinary operations amounted to a
total of € 105,513,820 and were generated by the sale of saddles, pedals and otheraccessories, and by the provision of services. The breakdown of revenues from sales andservices by business category is shown in the following table:

55

1st half of 2021/22 1st half of 2020/21
Revenues from sales of saddles
Revenues from the sale of accessory components
Revenues from the sale of sundry materials
Revenue from services
Total gross revenues

Change54,757,475
48,839,372
2,128,615
131,521
105,856,983

48,136,743
40,148,872
1,168,837
112,185
89,566,637

6,620,732
8,690,500
959,778
19,336
16,290,346

Price changes and others
Year-end bonus
Revenue adjustments(7,371)(335,792)(343,163)(72,195)(324,183)(396,378)

64,824(11,608)
53,215

Total revenue from sales

105,513,820

89,170,259

16,343,562

105,513,820
105,513,820

89,170,259
89,170,259

16,343,562
16,343,562

RECOGNITION of REVENUES
Realised at a specific point in time
Realised over time
Total revenue from sales

17. COST OF SALES

The components of the cost of sales are shown below, compared with the previous year:
1st half of 2021/22 1st half of 2020/21

Purchase of raw materials
Ancillary charges on RM purchases
Outsourcing
LabourChange in inventories
Total cost of sales

52,834,947
2,550,534
3,480,403
11,083,959(11,743,790)
58,206,052

40,678,202
1,650,846
2,900,715
9,850,069(6,014,970)
49,064,862

Change12,156,745
899,688579,688
1,233,890(5,728,820)
9,141,190

18. INDUSTRIAL COSTSThis item includes ancillary production process costs, although not directly variable withrespect to production volumes, and therefore can be classified under the item “cost of sales”.

56

1st half of 2021/22 1st half of 2020/21
Electricity
Consumables
Minor equipment
MaintenanceLease payments
Research and development costs
Other industrial costs
Total industrial costs

713,811760,832
238,993
305,268
61,786
415,520
570,430
3,066,641

706,295
730,791
302,699
367,103
67,120219,729440,189
2,833,926

Change7,516
30,041(63,705)(61,835)(5,334)
195,791
130,241
232,715

19. SALES AND PROMOTION COSTS

The balance of the item “sales and promotion costs”, which is composed of costs directly
related to sales activities, is shown below.

1st half of 2021/22 half of 2020/21

Sales and advertising costs
Transports on sales
Commissions
Royalties
Gifts
Other sales and promotion costs
Total sales and promotion costs

2,730,225
2,447,711
1,025,141
28,080132,633
414,614
6,778,404

2,773,597
2,355,484
1,192,455
24,895
199,908
90,482
6,636,821

Change(43,372)
92,226(167,313)
3,185(67,275)
324,133
141,583

20. COSTS of the MANAGEMENT STRUCTURE

This item, which amounts to € 8,445,986 for the year in question, includes the cost of theclerical and managerial structures of the various Group companies.
21. GENERAL and ADMINISTRATIVE COSTS

The item in question is detailed below, mainly consisting of services purchased by the various
Group companies.

57

1st half of 2021/22 1st half of 2020/21
Consulting
Travel expenses
Board of Directors' fees
Board of Statutory Auditors' fees
Utilities
Entertainment and hospitality expenses
Motor vehicles
Fees and IT support
Insurance
Lease payments
Bank charges
Other general and administrative costs
Total general and administrative costs

2,748,746
439,151
902,125
24,000145,791
114,850
224,821633,289
696,781180,679
265,149
1,132,622
7,508,004

1,820,164
103,362
525,930
21,000165,762
188,505
226,197
563,447
427,429
143,123
332,993
1,063,422
5,581,333

Change928,582335,789
376,195
3,000(19,970)(73,655)(1,376)
69,842
269,352
37,557(67,844)
69,2001,926,671

As previously mentioned, this item includes some non-recurring costs linked to the listing
project of the parent company Selle Royal Group S.p.A. on the Italian electronic market
Euronext Milan.

22. OTHER OPERATING INCOME and EXPENSES

The table below provides details of other operating income and expenses that cannot beclassified in other items of the income statement, including extraordinary positive andnegative income components.

1st half of 2021/22 1st half of 2020/21

ChangeOperating income:Minor independent works
Repayments and sundry income
Capital gains
Contingent assets and other income
Royalty income
Research & development
Total operating income

5,131
427,807445
597,501
066,439
1,097,323

4,604
48,2871,000
363,54538
197,117614,591527
379,520(555)
233,957(38)(130,678)
482,732

Operating expenses:
Allocation to provision for obsolescence
Allocation to provision for credit risks
Losses on receivables
Capital losses
Contingent liabilities and other charges
Total operating expenses

3,502(76,229)1,619(19,023)(187,390)(277,521)(660,846)0(17,815)(105,008)(69,980)(853,648)

664,348(76,229)
19,43485,985(117,410)
576,127

TOTAL OPERATING INCOME / (EXPENSES)

819,803(239,057)

1,058,860
58

The net balance of this item is positive for € 819,803.

The growth in the item “repayments and sundry income” is mainly attributable to the results

achieved in the marketing of the product lines of some premium brands in the cycle sector, forwhich the joint venture Highway 2 Llc. operates as a distributor in the North American

market. This business is complementary and in support of the relevance of the brands of theSelle Royal Group and the Continental Group, equal partners in Highway 2 LLC.

The greater balance of the item “contingent assets and other income” is mainly attributable to
the reimbursement deriving from winning the tax dispute by Royal Ciclo Industria deComponentes Ltda. This amount, net of the costs for consultancy incurred as part of theproceedings, was subject to normalisation in the calculation of the “adjusted” EBITDA, as it isnon-recurring.

23. OTHER FINANCIAL INCOME and CHARGESThe breakdown of interest and other financial charges is provided in the table below:
1st half of 2021/22 1st half of 2020/21 Change
Financial income:Bank and postal interest
Dividends
Other financial income
Total financial income
Financial charges:
Interest on bonds
Interest expense
Interest cost provision for employee severance indemnity
Discounts
Fees on loans
Other financial charges
Total financial charges
Net exchange rate differences
TOTAL FINANCIAL INCOME / (CHARGES)

58,902
460
58,786
118,148

46,4242,445
7,313
56,182

12,478(1,985)51,473
61,966(246,318)(629,502)(2,242)(416,301)(106,792)(133,697)(1,534,853)(309,607)(654,062)(2,715)(384,641)(71,907)(96,627)(1,519,561)

63,28924,560473(31,660)(34,885)(37,070)(15,292)

165,269(1,094,352) 1,259,620(1,251,436)(2,557,730) 1,306,294

This item, negative for € 1,251,436, was positively affected by the decrease in interest
expense to service the debt subscribed by some Group companies, as well as lower interest on

the bond loan issued by Selle Royal Group S.p.A. The item “other financial charges” mainly
includes the recognition of financial charges related to the adoption of IFRS 16.

59

On the other hand, the item relating to cash discounts increased, in line with the increase inturnover and fees on loans, mainly due to the higher commissions paid to SACE S.p.A. for theguarantees offered by the latter on some loan agreements signed by the parent company withleading Italian banks, pursuant to Law Decree no. 23 of 8 April 2020, as converted with
amendments into Law no. 40 of 5 June 2020.

Lastly, the impact of the net exchange rate differences significantly improved. On the whole,these were positive in the half-year in question for € 165,269 (compared to a negative balanceof € -1,094,352 in the same period of the previous year). This item includes both exchange

gains and losses realised as at 31 December 2021 (which show a negative net balance of € 61,306), and unrealised exchange gains and losses at the same date deriving from thealignment of foreign currency balances with the current exchange rates at the end of the year,

in addition to exchange differences resulting from the elimination of intragroup items (which
cumulatively show a positive net balance of € +226,575).
24. TAXES FOR THE YEAR

The following table details the tax burden emerging at the level of the individual companies
belonging to the Group scope and any income adjustment items related to the consolidation.
1st half of 2021/22 1st half of 2020/21

Current taxes
Deferred tax (assets) / liabilities
TOTAL TAXES FOR THE YEAR

4,772,199(950,875)
3,821,324

4,178,974(473,834)
3,705,140

Change593,225(477,041)
116,184

The increase in current taxes is attributable to the better results achieved by the Group
companies with respect to the comparison period.

The increase in the balance relating to deferred tax assets is mainly attributable to higher
deferred tax assets allocated during the period, and in particular to the increase in theprovision for the reversal of the unrealised intra-Group margin.

60

ANALYSIS and COMPOSITION of the BALANCE SHEETCURRENT ASSETS

25. CASH AND CASH EQUIVALENTS

This item refers to the positive balances in the bank current accounts and postal deposits of
the Group Companies, together with a limited amount of cash held by each Company to meetcurrent needs.

The balance as at 31 December 2021, amounting to € 21,493,845 (of which € 11,348,130 inSelle Royal Group S.p.A. and € 7,936,271 in Selle Royal China, the latter with a positive net
financial position), was up compared to the previous year thanks to the liquidity generated
during the half year.

As at 31 December 2021 (and as at 30 June 2021) there were no restrictions or limitations on
the use of the Group's cash and cash equivalents.
26. TRADE RECEIVABLES

The breakdown of this item, expressed in the financial statements net of allocations to the bad
debt provision carried out prudentially on the portion of receivables not covered byinsurance, is as follows:

31/12/2021

30/06/2021

ChangeTrade receivables
Bad debt provision
TRADE RECEIVABLES, net

31,861,248(984,902)
30,876,346

29,365,523(912,207)
28,453,316

2,495,725(72,695)
2,423,030

Receivables insured at the date of this Report amounted to € 21.7 million, compared to € 18.8
million as at 30 June 2021.

For receivables of uncertain collectability, for which legal procedures for collection have been

initiated, and for some receivables from customers with a potential lower degree ofcollectability, specific provisions for write-downs have been allocated up to the presumed
realisable value.

It should be noted that the parent company Selle Royal Group S.p.A. transferred receivablesfrom certain foreign and domestic customers, through a factoring transaction without
recourse, to a leading bank for € 2,333,571. During the previous year, the cumulative value ofthe transfers of receivables without recourse made by Selle Royal Group S.p.A. and by thesubsidiary Selle Royal Vehicle (China) Co., Ltd. amounted to € 4,014,502.

61

Finally, the change in the bad debt provision during the year in question is shown below:
Balance as at 30
June 2021

Provisions (+)

Releases (-)

Uses (-)

Translation diff.

Balance as at 31
December 2021

Bad debt provision912,206

76,2290(10,089)

6,555

984,902

TOTAL BAD DEBT PROVISION

912,206

76,2290(10,089)

6,555

984,902

27. INVENTORIESThe breakdown of this item by type of stock and with details of the provisions recorded
against the risk of potential obsolescence is shown in the table below:
31/12/2021

30/06/2021

ChangeRaw materials, supplies and consumables
Work in progress and semi-finished products
Finished products and goods
Goods in transit
Gross inventories

12,299,313
5,940,671
19,178,762
8,468,337
45,887,083

9,767,182 2,532,131
4,631,511 1,309,160
12,649,871 6,528,891
2,378,635 6,089,702
29,427,199 16,459,883

Provision for obsolescence
Provision for unrealised intra-Group margin(2,178,460)(3,510,901)(2,210,367)
31,907(898,287) (2,612,614)

INVENTORIES

40,197,721

26,318,546 13,879,176

The growth of this item can be seen in each inventory category and is conducive to the higher
business volumes. Moreover, the cycle sector in which the Group operates is characterised byseasonality of sales, given that it pertains to outdoor activities and therefore subject toweather trends during the year. Therefore, the increase in stocks in anticipation of theincrease in sales that usually characterises the second half of the fiscal year (with particularreference to the aftermarket channel, i.e. sales to wholesalers, retailers and end consumers) is
typical.

Lastly, the global logistical congestion, to which reference was made previously, led to alengthening of transit times, especially for products from Asia and destined to the North
American market, with a consequent increase in both the balance of finished products and thegoods in transit. At the state of the art, the global situation remains critical and there are still
no signs of normalisation.

Lastly, the change in provisions for adjusting the value of stocks during the year in question isshown below:

62Balance as at 30
June 2021
Provisions for obsolescence
Provision for unrealised intra-Group margin
TOTAL ADJUSTMENT PROVISIONS of INVENTORIES

2,210,367
898,287
3,108,654

Provisions (+)

Releases (-)

7,195
2,612,614
2,619,810(8,108)(8,108)Uses (-)

Translation diff.

Balance as at 31
December 2021

60,68860,6882,178,460
3,510,901
5,689,361(91,683)(91,683)

28. TAX RECEIVABLES

Tax receivables increased compared to the balance as at 30 June 2021, as detailed below:
31/12/2021

30/06/2021

ChangeFor direct taxes
For indirect taxes
For other withholdings
Subtotal current taxes

820,487
1,353,945
422,826
2,597,258

1,555,585
137,865
149,963
1,843,413(735,098)
1,216,080
272,863
753,845

Current deferred tax assets

1,310,461

423,494

886,967

TOTAL TAX RECEIVABLES

3,907,719

2,266,907

1,640,812

Current tax receivables:

Compared to 30 June 2021, the receivables for direct taxes of the subsidiaries Crank Brothers
Inc. and Royal Ciclo Industria de Componentes Ltda were down.

The growth in receivables for indirect taxes is mainly due to the growth in the VAT credit ofSelle Royal Group S.p.A. and of the Taiwanese branch of Crank Brothers Inc.

Lastly, for an examination of the change in current deferred tax assets, please refer to therelevant section of these notes.
29. OTHER CURRENT ASSETS

The breakdown of this item and the comparison with the previous year are as follows:
Advance costs
Accrued income and prepaid expenses
Sundry receivables
TOTAL CURRENT ASSETS

31/12/2021

30/06/2021

Change19,033605,653
634,077
1,258,763

154,547
598,724
727,126
1,480,397(135,514)
6,930(93,050)(221,634)

The lower advance costs compared to 30 June 2021 derive from the seasonality of the sector

and from incurring, at the end of the fiscal year, costs related to the launch of new products

and participation in events in the following fiscal year, which are therefore suspended under
this item as at 30 June of each year to comply with the accrual principle.

63

NON-CURRENT ASSETS
30. INTANGIBLE ASSETS

Details of the item and the changes that have taken place since the previous year are shown in
the table below:

Balance as at
Increases (+) Decreases (-)
30 June 2021

Reclassification Amortisation (-)

Translation
diff.

Balance as at 31
December 2021

Industrial patent rights andintellectual property rights

1,588,355

44,522--(304,793)

36,2501,364,334

Concessions, licences, trademarks and similar rights

19,477,822

188,316--(221,932)

34,23919,478,445

Other

25,552---(1,124)

1,644

26,071

Fixed assets in progress and payments on account50,96455,958

-

-

-

3,511

110,434

21,142,693

288,796--(527,849)

75,644

20,979,284

Total intangible assets

The item “Industrial patent rights” mainly includes the corresponding item recorded in thefinancial statements of the subsidiary Crank Brothers, Inc. at the time of the acquisition of thesame company by Selle Royal Group S.p.A.; the value was also tested on the basis of valuations
issued by independent experts who also indicated the useful life on which to calculate theamortisation; higher values for a total of US$ 7,694,000 are recognised in the financial
statements of Crank Brothers Inc., allocated for US$ 4,780,500 to the item “Industrial patentrights”, amortised over 15 years. The residual portion was recorded under “Goodwill”, asshown below.

The item “Concessions, licences, trademarks and similar rights” refers to the value of the

trademark portfolio held by the Group companies, for a value of € 18,288,242; the remainder
relates to the concession rights of the land on which the Selle Royal China plant stands and tolicenses and costs for the implementation of non-proprietary management software.

Trademarks are considered “with an indefinite useful life” and are therefore subject to annual

impairment tests. As at the date of this consolidated half-yearly report, the Board of Directors

checked the consistency of the assumptions underlying the business plan used in preparing
the impairment tests as at 30 June 2021 and the results provided therein; in light of theresults achieved in the period compared to those expected and of the current market context,

which confirm the assumptions adopted, the outcome of this audit confirmed the validity of

the annual impairment test conducted and, consequently, the consistency of the value of the
trademarks as represented in the financial statements.

The item “Other” refers to the recognition of intangible assets that meet the requirements of
64

IAS 38 for their recognition in the financial statements.

Intangible assets in progress and payments on account mainly relate to expenses incurred by

the Group in relation to projects for the development of new products and product lines not
yet operational at the end of the year.
31. TANGIBLE ASSETS

Details of the item and the changes that have taken place since the previous financial
statements are shown in the following table:

Balance as at 30
Increases (+) Decreases (-)
June 2021

Reclassification Depreciation (-)

Translation
diff.

Balance as at 31
December 2021

Land and buildings

7,564,390

115,418--(380,586)(198,007)

7,101,216

Right of use of leased assets

6,853,524

4,733,498--(746,330)

46,641

10,887,332

Plant and machinery

8,537,565

621,015(3,907)-(695,809)(64,911)

8,393,954

Industrial and commercial equipment

4,824,429

623,321(2,201)

106,605(1,249,700)(2,689)4,299,765

Other assets

1,457,009

316,837(1,210)(8,535)(222,468)

69,701

1,611,334

Fixed assets in progress and payments on account1,292,697

2,626,943(14,780)(98,070)-

10,377

3,817,168

Total tangible assets

30,529,614

9,037,033(22,097)-(138,887)

36,110,769(3,294,894)

The increases in the item “land and buildings” relate to improvements made by Selle RoyalGroup S.p.A. and by some of its subsidiaries on properties used for production andcommercial activities.

The item “rights of use of leased assets” represents the discounted value recorded in thefinancial statements following the adoption of IFRS 16, and relates to the premises leased bySelle Royal Group S.p.A. and the offices of Crank Brothers Inc. The increase in this item relates
to the redetermination of future payments due for the lease of the Selle Royal Group S.p.A.

headquarters following the signing of a new lease contract, to the lease of a property in San

Clemente (California) to which personnel and equipment previously at the branch office of
Crank Brothers Inc. in Ogden, Utah, will be transferred, as well as, lastly, new multi-year rental

contracts that meet the criteria for recognition in the financial statements in accordance withthe provisions of accounting standard IFRS 16.

The increases in other items, and in particular “plant and machinery”, “industrial andcommercial equipment” and “fixed assets in progress and payments on account” mainly referto investments of an industrial nature, made mainly by the parent company and the
production subsidiaries.

65

32. EQUITY INVESTMENTS

The balance reflects the cost incurred for the acquisition of equity investments in companies
not consolidated on a line-by-line basis and relates, for € 2,207,383, to the equity investment
in Highway Two Llc., with registered office in Olney (USA) and share capital of US$ 241,648,
over which indirect joint control of 50% is exercised. This investment is measured using theequity method. The residual amount, equal to € 14,934, relates to minority interests held bySelle Royal Group S.p.A. (€ 723) and the subsidiary Royal Ciclo (€ 14,211).

Some economic indicators of Highway Two LLC, relating to 2021, are listed below, as well as
the balance sheet figures as at 31 December 2021, and related comparative data. For the sakeof completeness, the tax year of the joint venture coincides with the calendar year.
31/12/2021

Highway 2 Llc:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Shareholders’ equity

$
$
$
$
$

Group interest (50%)$-3,079,847-172,240
3,386,747
6,954
141,6132,507,902 $2,437,095 $

70,807

Carrying amount of the investment
in Highway 2 Llc. (in €)2,207,383

2,045,238

162,145

Other equity investments (in €)Total equity investments

14,9342,222,317

15,4002,060,638(466)
161,679

Financial year 2021 Financial year 2020

ChangeRevenues
Cost of sales
Operating and financial costs
Net profit

$
$
$
$

Group interest (50%)$

24,958,248-13,929,547-10,751,125
277,577

$
$
$
$
$

$
$
$
$

138,789 $

23,813,171
1,043,037-19,918,573-63,4444,874,191

Change$$$$$Highway 2 Llc:

20,733,324
870,797-16,531,827-56,490
5,015,804

30/06/2021

21,082,877-10,725,502-10,018,082
339,293$$$$3,875,372-3,204,045-733,043-61,716

169,647 $-30,858

33. GOODWILLThis item had a balance at the reporting date of € 10,440,855.

This item includes the goodwill recorded in the financial statements of the subsidiary CrankBrothers Inc., as well as the higher value recognised at the time of acquisition of the shares in66

the same American subsidiary, in the Chinese subsidiary Selle Royal Vehicle (China) Co. Ltd.
and the Brazilian subsidiary Royal Ciclo Industria de Componentes Ltda.

In line with the provisions of IAS 36, goodwill is not subject to amortisation but to impairment

testing. As already illustrated with reference to trademarks, at the date of this interim report,
the current consistency of the assumptions underlying the business plan used in preparing

the impairment tests as at 30 June 2021 was verified, in light of the current context and theperformance achieved in this first half of the year compared to what was then expected. The

outcome of this check confirmed the consistency of the value of goodwill as stated in thefinancial statements, with respect to the cash flows that can reasonably be expected to begenerated in the future by the cash generating units to which they refer.
34. DEFERRED TAX ASSETS

Details of the item in question is shown in the following table:
31/12/2021

TEMPORARY DIFFERENCESTAX EFFECT

30/06/2021
TEMPORARY DIFFERENCESTAX EFFECT

Current deferred tax assets:
Estimate of customer bonuses
Employee bonuses
Accrued leave for employees
Bad debt provision
Unrealised margin on intra-Group sales
Tangible assets
Other temporary differences
Subtotal current deferred tax assets

332,101
574,307131,203258,7453,604,337
122,055
136,597
5,159,344

92,656160,232
36,37255,143903,794
20,74941,514
1,310,461

18,818
133,686
247,858
989,788
243,538
106,959
1,740,647

5,250
40,481
52,857250,100
41,401
33,403
423,494

Provision for supplementary customer indemnities
Inventory write-down provision
Intangible assets
Tangible assets
Derivative financial instruments
Prior tax losses - Federal taxes
Prior tax losses - State taxes
Subtotal non-current deferred tax assets

195,177
1,735,190
580,859
710,520
123,049
426,860
103,3023,874,957

54,454405,273
162,060
113,564
29,532
89,641
61,839916,362

144,961
1,685,361
580,859
227,614566,552
1,296,687
4,502,033

40,444
394,650
162,060
30,652
118,976
124,926
871,708

TOTAL DEFERRED TAX ASSETS

9,034,302

2,226,823

6,242,681

1,295,202

Non-current deferred tax assets:

The change in the current portion of deferred tax assets is mainly related to the deferred tax
effect on the higher value of the provision for unrealised margin on intra-Group sales.
Non-current deferred tax assets, as a whole, did not record significant changes.
35. FINANCIAL ASSETS AT FAIR VALUEThis item includes, for an amount of € 512,913, the value of a financial asset recognised in thefinancial statements of the subsidiary Royal Ciclo and refers to the amounts paid by the latter67

to a financing consortium in which it participates. During the first half of the year in question,
there were no significant changes.
36. OTHER NON-CURRENT ASSETSThis item, amounting to € 666,840, mainly refers to security deposits relating to lease

contracts pertaining to Selle Royal Group S.p.A. and Crank Brothers, Inc. The balance is in linewith that as at 30 June.
CURRENT LIABILITIES
37. TRADE PAYABLES“Trade payables” are recognised net of trade discounts and any advances paid to suppliers;

cash discounts are instead recognised at the time of payment. The nominal value of thesepayables was adjusted, in relation to returns or allowances (invoicing adjustments), to theextent corresponding to the amount defined with the counterparty.

The balance is equal to € 26,406,496, up compared to the previous year, also due to the effectof what is described with reference to inventories.
38. TAX PAYABLES

The item in question is detailed below:
Direct taxes
Indirect taxes
Local taxes
Withholding taxes on employees and others
Payables due to tax disputes
TOTAL TAX PAYABLES

31/12/2021 30/06/2021
1,516,878
715,463
14,856
781,768
2,577,814
5,606,779

1,175,186
931,773
54,327
1,485,159
2,616,446
6,262,892

Change341,692(216,310)(39,471)(703,392)(38,632)(656,112)

The higher payables for direct taxes are attributable to the significant profits recorded by theGroup companies; the decrease in payables for withholdings, almost entirely pertaining to theparent company Selle Royal Group S.p.A., is due to the payment of the amount withheld as at
30 June 2021 for the higher performance bonuses recognised by virtue of the extremely
positive results achieved in the previous fiscal year.
39. MEASUREMENTS AT FAIR VALUEIFRS 13 establishes a three-level hierarchy useful for categorising assets/liabilities measured

68

at fair value on the basis of increasingly less certain inputs; these levels, shown in descendingorder of priority, can be described as follows:

Level 1: Level 1 inputs are quoted prices (not adjusted) in active markets for identicalassets or liabilities, which the entity can access at the measurement date. A price quoted in an
active market provides the most reliable proof of fair value and, when available, must be usedwithout any adjustment to measure the fair value. A Level 1 input will be available for manyfinancial assets and liabilities, some of which may be traded in different active markets (forexample, on different stock exchanges). Therefore, in Level 1 the focus is on the determinationof the following elements:-

the main market for the asset or liability or, in the absence of a main market, the-the possibility for the entity to carry out a transaction with the asset or liability

most advantageous market for the asset or liability; andat the price of that market at the measurement date.

Level 2: Level 2 inputs are inputs other than the listed prices included in Level 1

observable directly or indirectly for the asset or liability. If the asset or liability has a certain(contractual) duration, a Level 2 input must be observable for substantially the entire
duration of the asset or liability. Level 2 inputs include:-

quoted prices for similar assets or liabilities in active markets;-data other than the quoted prices observable for the asset or liability, for-quoted prices for identical or similar assets or liabilities in non-active markets;
example:o interest rates and yield curves observable at commonly quoted intervals;
o implied volatility;-o credit spreads;

inputs corroborated by the market.

Level 3: Level 3 inputs are unobservable inputs for the asset or liability. The non-observable inputs must be used to measure the fair value to the extent that the relevant

observable inputs are not available, therefore allowing situations of low market activity forthe asset or liability at the measurement date. However, the purpose of the fair value
measurement remains the same, i.e. a closing price at the measurement date from theperspective of a market operator who owns the asset or liability. Therefore, unobservable69inputs must reflect the assumptions that market participants would use in determining theprice of the asset or liability, including assumptions about risk.

The following tables summarise the financial assets and liabilities measured at fair value
shown in the financial statements and the related measurement criteria adopted:
As at 31 December 2021
Cash and cash equivalents
Equity investments
Financial assets at fair value
TOTAL ASSETS
Loans
Bonds
Derivative financial instruments
TOTAL LIABILITIESAs at 30 June 2021
Cash and cash equivalents
Equity investments
Financial assets at fair value
TOTAL ASSETS
Loans
Bonds
Derivative financial instruments
TOTAL LIABILITIES

Notes

Total

fair value measurements
Level 1
Level 225, 3932
35, 3921,493,845
2,222,317
512,913
24,229,075

21,493,845
21,493,845

39, 40, 50
39, 4539, 4151,514,543
5,827,278
123,387
57,465,208

-

-

-

Level 3-

2,222,317
512,913
2,735,230

51,514,543
5,827,278
123,387
57,465,208--

fair value measurements
Level 1
Level 2

-

Notes

Total

25, 3932
35, 3919,846,067
2,060,638
509,813
22,416,519

19,846,067
19,846,067--

2,060,638
509,8132,570,452

39, 40, 50
39, 4539, 4147,362,266
7,778,960
1,452
55,142,678-

47,362,266
7,778,960
1,452
55,142,678-

Level 340. SHORT-TERM LOANS

The balance of this item, as at 31 December 2021, amounting to € 17,403,758, down

compared to 30 June 2021, reflects the actual payable for principal, interest and accessory
charges accrued and payable and includes both credit lines whose duration does not exceed

12 months and the current portion of medium/long-term loans. The decrease is mainly

attributable to the non-use of short-term credit lines by Selle Royal Vehicle (China) Co., Ltd. at
the reporting date.

7041. CURRENT FINANCIAL LIABILITIES AT FAIR VALUEThis item, amounting to € 338, relates to the market value of a hedging derivative instrumentwith respect to the risk of fluctuations in interest rates (“IRS”) subscribed by Selle RoyalGroup S.p.A. in June 2017 as collateral for a new multi-year floating rate loan maturing in May
2022.

This derivative, maturing in May 2022, has the following characteristics:
Interest Rate Swap;
Purpose: hedging;

Underlying financial risk: interest rate risk;
Date of trading: 05/06/2017;
Notional value: € 2,000,000;

Liability hedged: medium-term loan;
Initial date: 05/06/2017;
End date: 31/05/2022;

Debtor Selle Royal Group S.p.A.: basic product index rate act/360 paid at the end of thequarter - 3-month Euribor at the beginning of the period;

Bank debtor: basic contractual fixed rate act/360 paid at the end of the quarter - contractual
fixed rate -0.21%;

Periodic expiry date: quarterly.

Since the hedge is effective, the change in the fair value of this derivative instrument occurred

during the year in question was recorded in a special reserve in shareholders’ equity (socalled “cash flow hedge reserve”).

42. CURRENT LIABILITIES FOR LEASED ASSETS

The balance of this item expresses the discounted value of the lease payments subject torecognition in accordance with IFRS 16 and falling due by 31 December 2022.
43. OTHER CURRENT LIABILITIESThe item in question, compared with the balance as at the reporting date of the previous year,
is detailed as follows:71Payables to employees
Payables to social security institutions
Payables to sales agents
Payables for tax consolidation
Accrued expenses and deferred income
Sundry payables
TOTAL CURRENT LIABILITIES

31/12/2021

30/06/2021

Change4,967,295
1,012,563
207,224
3,269,668
317,462
1,794,738
11,568,949

6,099,043
825,331305,035
1,339,644
168,747
952,253
9,690,052(1,131,748)
187,232(97,812)1,930,024
148,716
842,485
1,878,897

This item increased as at 31 December 2021 compared to 30 June 2021, due, however, to the
opposite trend.

Payables to employees were down, especially due to the payment of the thirteenth monthly
salary in December, by Selle Royal Group S.p.A.

The higher value of payables for tax consolidation corresponds to the allocation of IRES

(corporate income tax) on the taxable income of Selle Royal Group S.p.A., which is added tothe payable balance relating to the previous year, the latter paid to the parent company forthe tax consolidation during the month of January 2022.

Lastly, the increase in the balance of sundry payables is mainly due to the payable to theminority shareholders of Royal Ciclo Industria de Componentes Ltda. for the purchase of 1%of the latter's share capital, as already mentioned previously.
NON-CURRENT LIABILITIES
44. EMPLOYEE BENEFITSThis item mainly includes the employee severance indemnity provision of the Italiancompanies of the Group.

The value of the employee severance indemnity provision was correctly determined by theGroup by applying actuarial methods. The valuation of the liability was carried out by
independent actuaries using the projected unit credit method, which determined the value on
the basis of the following fundamental assumptions:- mortality rate: these data were taken from the actuary technician on the basis of the RG48
mortality tables published by the State General Accounting Office;- disability rate: the annual probabilities of elimination from the service due to incapacity
were inferred on the basis of what was published by INPS in 2000;- annual probability of elimination from the service for other reasons: this was assumed to be72

0.5%, determined on the basis of the historical trend of this parameter within the company;- annual probability of request for employee severance indemnity advances: this was assumed
to be 3.0%, based on the historical trend of this parameter within the company;- annual discount rate: this was assumed to be 0.44% based on the average financial durationof the liabilities to employees;- annual rate of increase in employee severance indemnity: as envisaged by art. 2120 of the
Italian Civil Code, is determined as 75% of the inflation rate plus 1.5% and equal to 2.813%;- annual inflation rate: estimated at 1.75% over the time horizon considered.
The relative changes are shown in the following table:
Balance as at 30
June 2021

Provisions (+)

Uses (-)

Interest cost

Actuarial (gains) / Translation Balance as at 31
lossesdiff.
December 2021

Provisions for employees

1,874,444

37,773(24,814)

2,242

57,4463,380

1,950,472

TOTAL

1,874,444

37,773(24,814)

2,242

57,4463,380

1,950,472

In compliance with the provisions of IAS 19 revised, the possible effects on the employee

severance indemnity provision deriving from fluctuations in the main parameters used in theactuarial estimate are given below:
VariableValue-1% on the turnover rate

1,902,593+1% on the turnover rate
+1/4% on the annual inflation rate
-1/4% on the annual inflation rate

+1/4% on the annual discount rate
-1/4% on the annual discount rate

1,852,997
1,904,520
1,848,463
1,831,430
1,922,825

The above-mentioned sensitivity analysis on employee severance indemnity is based onreasonable changes in the key assumptions that occur at the end of the year, while
maintaining all other assumptions constant.

This analysis may not be representative of an actual change in the provision for employee

benefits, as it is unlikely that the changes in the assumptions will occur independently of eachother.

Lastly, the expected future disbursements are shown below, based on the assumptions
presented above:73

Years12345Expected

disbursements
152,567
125,61470,846

115,046
160,397

45. BONDS

The amount due for bonds is shown under current liabilities, in relation to the portion

maturing within twelve months from the reporting date, and under non-current liabilities forthe residual portion.

These items refer to the value of the liability in the books of the parent company Selle RoyalGroup S.p.A. relating to the bond loan (so-called mini-bond) listed on the Pro3 segment of theExtraMOT list managed by Borsa Italiana SpA, and issued on 24 September 2018 for anominal amount equal to € 10,000,000.00.

The payable recorded therein, in compliance with the provisions of IAS 39, is recognised on

the basis of the amounts collected, net of the transaction costs and subsequently measured atamortised cost, using the effective interest rate method.

During the half year, the second repayment instalment was paid, amounting to € 2,000,000.
46. MEDIUM/LONG-TERM LOANS

This item, amounting to € 34,110,785, up by € 7,379,416 compared to 30 June 2021, relates tothe portion falling due beyond the next year of medium/long-term loans (mainly unsecuredloans) taken out for the most part by the parent company Selle Royal Group S.p.A. withleading credit institutions. The increase in the balance is essentially attributable to the signingof two unsecured mortgages backed by a government guarantee, according to the methods

and terms set forth in the emergency decrees issued by the Italian government to support theliquidity of companies.

7447. PROVISIONS for RISKS and CHARGESThe breakdown and changes in this item are shown below:
Balance as at 30
June 2021

Provision for supplementary customer indemnities
Provision for payment of foreign agents
End of mandate indemnity
TOTAL

75,164
144,961
406,250
626,375

Provisions (+)

Uses (-)

8,200
50,21645,000103,416-

IAS adjustment

Balance as at 31
December 2021-

83,364
195,177
451,250
729,791

The end of mandate indemnity provision refers to the pension fund set up by the parent
company Selle Royal Group S.p.A. in compliance with the resolutions of the Shareholders'Meeting.

48. DEFERRED TAXESThe balance and breakdown of this item are broken down as follows:
31/12/2021

TEMPORARY DIFFERENCES

Intangible assets
Tangible assets
Other temporary differences
TOTAL DEFERRED TAXES

304,066
2,187,333
76,8392,568,238

TAX EFFECT

69,671
600,704
16,136
686,51230/06/2021

TEMPORARY DIFFERENCES

423,877
2,379,229
65,123
2,868,228

TAX EFFECT

97,121
650,196
13,676760,993

49. NON-CURRENT FINANCIAL LIABILITIES AT FAIR VALUEThis item, amounting to € 123,049, relates to the market value of two hedging derivative

instruments with respect to the risk of fluctuations in interest rates (“IRS”) subscribed bySelle Royal Group S.p.A. in October 2021 as collateral for the opening of the same number oflong-term floating rate loans maturing in September 2027.

These derivatives, maturing on the same date, have the following characteristics:
Interest Rate Swap;
Purpose: hedging;

Underlying financial risk: interest rate risk;
Date of trading: 29/10/2021;

Notional value: € 10,000,000, the first; € 9,500,000, the second;
Liability hedged: medium-term loan;
Initial date: 31/10/2021;
End date: 30/09/2027;

Debtor Selle Royal Group S.p.A.: basic product index rate 30E/360 paid at the end of the75

quarter - 3-month Euribor at the beginning of the period, with a minimum rate (floor) of
0.90%;

Bank debtor: basic contractual fixed rate 30E/360 paid at the end of the quarter - contractual
fixed rate 0.10%;

Periodic expiry date: quarterly.

Since the hedge is effective, the initial recognition and subsequent change in the fair value ofthese derivative instruments during the period in question were recognised in a special
restricted equity reserve (“cash flow hedge reserve”), net of the related deferred tax effect.
50. NON-CURRENT LIABILITIES for LEASED ASSETS

The balance of this item expresses the discounted value of the lease payments subject torecognition in accordance with IFRS 16 and falling due after 31 December 2022.
51. SHAREHOLDERS’ EQUITY

The share capital is composed as follows:

Ordinary shares - 6,000,000.00 (with no par value)
The reconciliation between shareholders' equity and profit for the year of the parent company
and consolidated shareholders’ equity and profit for the year is shown in the following table:
31 December 2021
Shareholders’ equity Profit for the year

30 June 2021
Shareholders’ equity Profit for the year

Selle Royal S.p.A. as per the financial statements

24,846,490

6,047,870

21,372,116

10,144,396

Difference between book value and pro-rata value
shareholders' equity of consolidated companies

15,948,592-

5,214,939-

Pro-rata results achieved by consolidated subsidiaries-

7,603,153-

11,415,016

Elimination of intercompany profits included in inventories(2,633,175)(1,959,461)(673,714)

31,769Other consolidation differences

6,102,279(122,366)

6,625,516(6,673,626)

Shareholders' equity and profit for the year pertaining to the Group

44,264,187

11,569,197

32,538,857

14,917,555

Shareholders' equity and profit for the year attributable to minority interests

10,634,377

1,863,837

8,664,645

3,622,371

Shareholders' equity and profit for the year as reported in the consolidated financial statements

54,898,563

13,433,034

41,203,502

18,539,926

These consolidated financial statements, consisting of the Income Statement, the Balance
Sheet, the Cash Flow Statement and the Explanatory Notes, provide a true and fair view of theequity and financial position as well as the economic result for the half year ended 31
December 2021 and correspond to the results of the accounting records.
*

*

*

76

Pozzoleone (VI), 15 February 2022
The Chairman of the Board of Directors(Barbara Bigolin)77Selle Royal Group S.p.A.
Independent Auditors' Report
Consolidated Financial Statements as at 31 December 2021

CCN/FBL/AZN/cpt - RC015932021BD0882

Tel. +39 02 582010
www.bdo.it

Viale Abruzzi, 94
20131 Milan

Independent Auditors' Report
To the Board of Directors of
Selle Royal Group S.p.A.

Report on the audit of the consolidated interim financial statements
OpinionWe have audited the consolidated interim financial statements comprising the balance sheet, the income
statement, the statement of comprehensive income, the statement of changes in shareholders' equity,
the cash flow statement and the relative explanatory notes for the six-month period ended as at 31
December 2021 of Selle Royal Group S.p.A (the “Company”) and of its subsidiaries (Selle Royal Group).
The consolidated interim financial statements were prepared by the directors for the purpose of inclusionin the Prospectus relative to the public offer for sale and subscription of the shares of Selle Royal Group
S.p.A. for listing on the electronic equity market organised and managed by Borsa Italiana S.p.A.
In our opinion, the consolidated interim financial statements of the Selle Royal Group for the period
ended as at 31 December 2021 was drafted, in all its significant aspects, in compliance with theinternational financial standard applicable for interim financial disclosures (IAS 34) adopted by theEuropean Union.
Basis for a qualified opinion
We have carried out the audit in compliance with the International Standards on Auditing (ISA Italy). Our
responsibilities pursuant to these standards are further described in the section Responsibilities of the
independent auditors for the audit of the consolidated Interim Financial Statements of this report.
We are independent from the Company in compliance with the rules and standards in relation to ethics
and independence applicable in Italian law to the audit of financial statements. We believe we haveobtained sufficient and appropriate evidence on which to base our opinion.
Responsibilities of the Directors and of the Board of Statutory Auditors with regard to theConsolidated Interim Financial Statements
The directors are responsible for the preparation of the consolidated interim financial statements incompliance with the applicable international accounting standard for interim financial disclosures (IAS 34)
adopted by the European Union and, within the terms provided by the law, for that part of internal
control on the part of the same deemed necessary to allow the preparation of consolidated Interim
Financial Statements without significant errors due to fraud or to unintentional behaviours or events.
The directors are responsible for the evaluation of the Company’s ability to continue to operate as a going
concern and, in the preparation of the consolidated Interim Financial Statements, for the appropriatenessof the use of the going concern assumption, as well as for adequate disclosures at this regard.
The directors use the going concern assumption in the preparation of the consolidated Interim Financial
Statements unless they have evaluated the presence of conditions for the liquidation of the Company or
the suspension of activities or have no realistic alternatives to such choices.
The Board of Statutory Auditors has the responsibility of supervision, in the terms provided by the law, on
the process of preparation of the Company’s financial disclosures.

Bari, Bologna, Brescia, Cagliari, Florence, Genoa, Milan, Naples, Padua, Palermo, Rome, Turin, Verona

BDO Italia S.p.A. – Registered office: Viale Abruzzi, 94 - 20131 Milan - Share capital - EUR 1,000,000, fully paid-in
Tax code, VAT registration and Milan Companies Register no. 07722780967 - Milan Economic and Administrative Index (REA) 1977842
Enrolled in the Register of Independent Auditors at no. 167911 with Ministerial Decree of 15 March 2013, Official Gazette no. 26 of 2 April 2013.
BDO Italia S.p.A., Italian joint-stock company, is a member of BDO International Limited, an English-registered company (company limited by guarantee), and is part of the BDO
international network, a network di independent companies.

Responsibilities of the independent auditors for the audit of the consolidated Interim Financial
Statements
Our objectives are the acquisition of a reasonable certainty that the consolidated Interim Financial
Statements as a whole do not include significant errors, due to fraud or to unintentional behaviours or
events, and the publication of an audit report including our opinion. Reasonable certainty means a highlevel of security which, however, does not guarantee that an audit carried out in compliance with theinternational standards on auditing (ISAs) will always identify a significant error, if present. Errors may
derive from fraud or unintentional behaviours or events and are deemed to be significant if it isreasonable to expect that they, individually or as a whole, are able to influence the economic decisions ofusers taken on the basis of the Interim Financial Statements.
As part of the audit carried out in compliance with the international standards on auditing (ISAs), we haveexercised our professional judgement and we have maintained our professional scepticism for the entire
duration of the audit. Furthermore:

we have identified and evaluated the risks of significant errors in the consolidated financial
statements, due to fraud or unintentional behaviours or events; we have defined and implemented
audit procedures in response to such risks; we have acquired sufficient and appropriate evidence
on which to base our opinion. The risk of not identifying a significant error due to fraud is higher
than the risk of not identifying a significant error due to unintentional behaviours or events, as
fraud may imply collusions, falsifications, intentional omissions, misleading representations oroverriding of internal controls;

we have gained an understanding of the relevant internal controls for the purposes of the audit
with the objective of defining audit procedures appropriate to the circumstances and not to
express an opinion on the efficiency of the Group’s internal control;

we have evaluated the appropriateness of the accounting standards used as well as thereasonableness of the accounting estimates made by the directors, including the relative
disclosures;

we have come to a conclusion on the appropriateness of the use by the directors of the going
concern assumption and, on the basis of the evidence acquired, on the possible existence ofsignificant uncertainty regarding events or circumstances that may give rise to significant doubtson the Group’s ability to continue to operate as a going concern. In the presence of a significant
uncertainty, we are required to draw attention in the audit report on the relative disclosures in
the financial statements, or, if these disclosures are not adequate, to highlight this circumstancein the formulation of our opinion. Our conclusions are based on evidence acquired up to the dateof this report. However, subsequent events or circumstances may lead to the Group ceasing tooperate as a going concern;

we have evaluated the presentation, structure and content of the consolidated financial
statements as a whole, including the relative disclosures, and whether the consolidated financial
statements provide a true representation of the underlying transactions and events;

we have acquired sufficient and appropriate evidence on the financial information of thecompanies or different economic activities carried out within the Group to express an opinion on
the consolidated financial statements. We are responsible for management, supervision andimplementation of the mandate for the Group’s audit engagement. We are sole party responsible
for the audit opinion on the consolidated financial statements.

We have informed the persons responsible for governance activities, identified at an appropriate level as
required by ISA Italy, among other things, about the extent and planned timeframe for the audit and thesignificant results identified, including any significant shortcomings in the internal controls identified
during the audit.
Selle Royal Group S.p.A. | Independent Auditors' Report

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We have also provided the persons responsible for governance activities with a declaration on the factthat we have respected the rules and standards in relation to ethics and independence applicable in
Italian law and we have communicated to them any situation that may reasonably have an effect on our
independence and, where applicable, the relative safeguarding measures adopted.

Milan, 15 February 2022
BDO Italia S.p.A.
Carlo Consonni
Partner[signed on the original]

Selle Royal Group S.p.A. | Independent Auditors' Report

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