1

CONTENTS
REPORT ON OPERATIONS
Significant events during the period

4

The Selle Royal Group and the Coronavirus-19 pandemic

6

The Selle Royal Group and the ongoing war events in Ukraine

6

Economic performance

7

Financial position

8

Derivative financial instruments

11

Investments

11

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

12

Risk analysis

12

Significant events after the end of the period

15

Business outlook

16

Relations with parent companies, affiliates and related parties

16

Environment, personnel and sector regulations

16

FINANCIAL STATEMENTS
Consolidated income statement

18

Consolidated statement of comprehensive income

19

Consolidated balance sheet

20

Statement of changes in shareholders' equity

22

Consolidated cash flow statement prepared using the indirect method

23

2

EXPLANATORY NOTESIntroduction
Accounting standards, amendments and mandatory interpretations adopted by theGroup
Accounting standards, amendments and interpretations not yet applicable and not
adopted

24
25
25

IFRS standards and interpretations adopted by the IASB and not endorsed in Europe

27

2018-2020 annual improvements

29

Financial statement formats and classification criteria

30

Activities of Group companies

31

General preparation criteria and consolidation principles

33

Measurement criteria

36

Estimates and assumptions

49

Segment reporting

51

Derivative financial instruments

53

Risk management

53

Transactions with related parties

53

Analysis and composition of the income statement

55

Analysis and composition of the balance sheet

62

Independent auditors’ report

3

REPORT ON OPERATIONS

Dear Shareholders,
the nine months that ended on 31 March 2022 show a consolidated profit of € 19,542,309 ofwhich € 17,151,253 pertaining to the Group.
SIGNIFICANT EVENTS DURING THE PERIOD

During the nine months in question, the factors that characterised the cycle sector in theprevious twelve months continued. The rapid and robust growth in demand for bicycles andaccessories at global level continued thanks to some trends that emerged before or in
conjunction with the pandemic crisis: the growing ecological awareness, supported bysignificant public investments for the benefit of an increasingly widespread and safe use of
bicycles also in urban contexts; product innovation, of which pedal assisted bicycles are, in
their various applications, the most important example; the appeal of cycling, as a unique wayof being in contact with the environment.
The nine months in question were 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 and energy on the one hand and the congestion of global
logistics flows, on the other hand.
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 logistics congestion shows no signs of abating, on thecontrary it is further exacerbated by the increase in the cost of oil and the shortage of labour,
as highlighted by the Global Supply Chain Pressure Index (GSCPI): this index, calculatedmonthly by the Federal Reserve of New York, measures the standard deviations with respect
to a "normal" situation in the world supply chain, and is calculated by taking 27 variables into
account, of both production and logistic nature. With respect to a value of "0", which would
indicate a situation of normality and positive values that highlight a situation worse than the
average, the index jumped to an unprecedented level of 4.50 at the end of December 2021,
and then retraced to 3.31 in February 2022 (before the opportunity to take into account theeffects of the war in Ukraine). To give a perspective of the severity of the situation, startingfrom September 1997 and up to the pre-Covid period, the index had reached an all-time high4

of 1.72 in April 2011, when the Japanese automotive sector was blocked by the effects of thetsunami of 11 March; in April 2020, in full pandemic emergency, the index had reached 3.60;
post 11 September 2001 and post sub-prime crisis of 2008, to mention two other crucial
events,

the

index

had

falleninto

negativeterritory

https://libertystreeteconomics.newyorkfed.org/2022/03/global-supply-chain(source:-pressure-index-march-2022-update).
2022 finally opened in the shadow of growing tensions on the eastern Ukrainian border,
culminating in the country's invasion by the Russian Federation army and in the continuing
war scenario, which further accentuated the tensions on the currency, capital andcommodities markets, causing a further deterioration to a macroeconomic framework which
was already under pressure due to the forecast of an inflation-driven slowdown in global
growth.
Despite this macroeconomic scenario, the Group continued both to increase its turnover andto increase its gross margin compared to the same period of the previous year; therefore, theGroup's ability to create value is consolidated thanks to its position of undisputed leadershipin its reference segments.
On 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 completed in accordance with market conditions and subject to obtaining the required
approvals from Borsa Italiana S.p.A. and CONSOB.
Please also note that the liquidation process of Royal Concept Co., Ltd. has officially ended, as
formal notification of its cancellation from the local Companies Registry was received in
March 2022.
Further relevant events that occurred in the current fiscal year, which had already been
acknowledged in the consolidated half-yearly report as at 31 December 2021, are reported
below.
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 the5same 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 first half of the current fiscal year, 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.
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 interim report, the company was
already consolidated using the line-by-line method as Selle Royal Group S.p.A. exercised defacto control over it.
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.
THE SELLE ROYAL GROUP and the WAR EVENTS in UKRAINE

Despite having commercial relations with counterparties residing in Ukraine, the Russian6Federation and Belarus, the Selle Royal Group is not significantly exposed to the risks derivingfrom the ongoing war events in Ukraine. The turnover generated for the Group in thesecountries, even in aggregate form, represents an essentially insignificant portion of theconsolidated turnover. At the same time, none of the Group's direct suppliers are based inthose countries, so no significant impacts on the supply chain are expected at present.
ECONOMIC PERFORMANCE

The income statement for the first nine months of 2021/22 is shown below, compared withthe same period of the previous year:

The period in question, which ended as at 31 March 2022, recorded sales of € 166.1 million, amarked increase compared to the turnover in the same period of the previous year (+13.3%).
Moreover, during the nine-month period, the Group's margins increased (from 43.8% to44.3%), 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 and7

administrative costs of a non-recurring nature and linked to the listing process currently inprogress. Overall, however, the Group continues to benefit from an operating leverage effect,
which brought the EBITDA margin to 20.0% of revenues (compared to 19.7% in thecomparison period). In absolute terms, this item reached € 33.3 million compared to € 28.9
million in the comparison period, indicating a significant growth of +15.0%.
Net of non-recurring items, adjusted EBITDA was € 34.8 million, with an impact on turnoverof 21.0%, while in the period of comparison it was € 28.5 million, with a margin of 19.4% (agrowth of +22.2%).
In spite of the increase in amortisation and depreciation compared to the comparative figure,the operating result grew more than proportionally with respect to EBITDA (+16.6%).
The actual financial charges are down compared to the same period of the previous year byapproximately € -0.3 million. Including exchange rate differences, the overall figure was down
by approximately € -1.4 million also due to the lower impact of the latter compared to theprevious year (€ +264 thousand compared to € -785 thousand in the first nine months of
2020/21).
As outlined, the first nine months closed with a strongly growing net result (+37.3%)
compared to the previous period (€ 19.5 million and € 14.2 million, respectively), with anincidence of 11.8% on turnover (10.3% when considering only the profit pertaining to theGroup; +47.9% compared to the first nine months of 2020/21).
FINANCIAL POSITION

The financial position of the Group as at 31 March 2022, compared with the situation
emerging from the consolidated financial statements for the year ended 30 June 2021, is asfollows:

8

The increase in net working capital (€ +24,4 million) was basically driven by higher
inventories and higher trade receivables, while the increase in other items classified undercurrent assets was more than offset by the higher balance of current liabilities with respect tothe comparison date. The dynamics of this data clearly refer to the growth in size of theGroup; furthermore, the complex global logistics situation continues to affect the balance of9inventories, as well as the higher unit value resulting from the increase in procurement costs.
With specific reference to products originating in Asia, the marked lengthening of the time
elapsing between the booking of sea freight and the delivery of goods to destination led to asignificant increase in the level of stocks as at 31 March, both as regards finished products andgoods in transit. The continuous increase in the costs of raw materials and some episodic
critical issues in the procurement of the same have also led to the evaluation of an increase,
where possible, of stocks, both in order to reduce possible production inefficiencies and to
mitigate the inflationary impact; as previously commented, the result of these strategic
choices, together with the revision of the sales price lists, made it possible to increase theGroup's gross profitability.
The operating investments ("capital expenditure") made by the various Group companies, fora total amount of € 11.5 million (of which € 4.8 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 over 70 registered product and/or process patents andtrademarks under which the Group markets its products. Net invested capital rose by € 32.1
million to € 115.4 million, mainly driven by the trend in net working capital.
Net financial debt increased by around € 9.8 million to € 51.9 million, with an increase mainly
concentrated in the medium/long-term portion, as shown in the table below:

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 these first nine months, 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 March 2022, the market value of one of these is recognised
under “current financial liabilities at fair value” since the underlying loan matures in May
2022. The market value of the other two, on the other hand, is recorded under non-current
assets, as they expire 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 interim report.

INVESTMENTS

As already mentioned, during the current year the Group incurred operating investments(capital expenditure) of approximately € 11.5 million, as shown in the following detail:11

As shown in the previous table, € 4.8 million relates to the recognition of rights of use on
assets under lease, leases 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
12

As at 31 March 2022, approximately 77% of the Group’s consolidated gross financial debt was
floating rate, equal to € 48.9 million. In relation to a portion of this debt (approximately 31%of the total), the parent company Selle Royal Group S.p.A. made use of derivative financial
instruments (known as IRS, interest rate swap) to hedge the risk of fluctuations in interest
rates on three medium/long-term loans. The aggregate mark-to-market of these derivatives
as at 31 March 2022 was positive for € 534,112. The remaining part of the consolidated grossfinancial debt at floating rate, equal to approximately 46% of the total, is not hedged byinterest rate risk hedging instruments. Significant changes in interest rates could result in an
increase in financial charges relating to floating rate debt.
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.
13

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.
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.
14

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”), which caused
a major international economic crisis, characterised by a significant contraction in demand on
the main markets and in global gross domestic product. The cycle sector was marginallyimpacted by the pandemic, to the extent that the Group recorded substantially stablerevenues 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 (as, in fact, it is
the case in China; please refer to the next paragraph for a more detailed examination of thisissue), the Group could be exposed to the risk of a slowdown or decrease in sales of its
products. Any occurrence of these circumstances could have negative effects on the Group’sbusiness and economic, equity and financial situation.
SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD

Starting from March, the "Omicron" variant became widespread in the People's Republic ofChina. In spite of the fact that the official data on the spread of the virus are absolutely
contained compared to the similar data in the main European countries and beyond, the "zerotolerance" policy adopted by the local government has imposed draconian measures to limit
the possibility of movement which have affected tens of millions of inhabitants; moreover,unlike in the past, it is a metropolis such as Shanghai, the economic heart of the country andthe country's main export port, to be literally blocked. The impact of these containment
measures on global logistics and the components market cannot yet be fully assessed; on theother hand, the performance of the Chinese subsidiary Selle Royal Vehicle (China) Co., Ltd in
April was partially affected. Lastly, the subsequent worsening of the health situation in theprovince of Jiangsu, where the Group's Chinese plant is based, prompted the local government
to adopt stringent measures to combat the spread of the epidemic, including significant
restrictions on personal freedom of movement and forced closure of economic activities,
including the Group's factory. At the date of approval of this interim report, the plant is closed
15

and discussions are underway with the local authorities to define the reopening date; the local
management, in coordination with that of the parent company, is evaluating and will adopt
the most appropriate measures to limit the impact of this event in terms of customer service
and on the Group's economic and financial results.
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 nine months 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, despite the fears relating to the possible impacts of the spread of Omicron in China,
as described above, the economic and financial objectives set for the current tax year are
considered achievable, and in the first nine months of the year they are in line with theforecasts made.

RELATIONS WITH PARENT COMPANIES, AFFILIATES AND RELATED PARTIESAs regards transactions with related parties, please refer to the Explanatory Notes to thisconsolidated interim 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.
16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 1,127, essentially stable comparedto the 1,153 employees in the previous year. The net decrease of around 26 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 327 employees were hired in the current period through temporary work agencies.

* * *Pozzoleone (VI), 16 May 2022
The Chairperson of the Board of Directors(Barbara Bigolin)

17

FINANCIAL STATEMENTS

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

18

Consolidated statement of comprehensive income

19Consolidated balance sheet(*)(*) The effects of transactions with related parties are described in the “Transactions withrelated parties” section.

20

21

Statement of changes in shareholders' equity

22Consolidated cash flow statement prepared using the indirect method

23

EXPLANATORY NOTES TO THE CONSOLIDATED INTERIM REPORT AS AT 31 MARCH
2022
1. INTRODUCTION

The consolidated interim report as at 31 March 2022 of Selle Royal Group S.p.A. was preparedin 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 interim financial report was also prepared in accordance with International
Accounting Standard (“IAS”) 34 - Interim Financial Reporting. The consolidated interim reportas at 31 March 2022 was prepared for inclusion in the Prospectus envisaged as part of thelisting 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 interim report as at 31 March 2022 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 interim 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 time by thereference 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 interim report was prepared on a going concern basis, as the directors
verified that there were no financial, operational or other indicators that could indicate
24critical issues regarding the Group’s ability to meet its obligations in the foreseeable futureand in particular in the next 12 months.
The consolidated interim report was prepared using the interim reports of the Group
companies as a basis.
The reference date of the consolidated interim report coincides with the closing date of thefirst nine months 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
interim report as at 31 March 2022 are the same as those adopted for the preparation of theconsolidated 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•

The classification is not affected by the probability with which the entity will exercise
its right of deferment•

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.

25

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 provision26

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.
27

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 for28

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 the contractual
activities. General and administrative expenses are not directly related to a contract and are
excluded unless they are explicitly recharged to the counterparty on the basis of the contract.
The amendments will be effective for years beginning on or after 1 January 2022. The Groupwill assess the impacts of these changes in the event of contracts for which 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

29

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 interim report 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 interim 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;30

(c) it must be settled within twelve months from the interim reporting date;(d) the entity does not have an unconditional right to defer settlement of the liability
for at least twelve months from the interim 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 period 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 method31

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.
Furthermore, please note that on 22 December 2021 Selle Royal Group S.p.A. signed anagreement with 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 the subsidiary's share capital. The higher value recognised to the minority shareholder in
the acquisition, 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. Finally, during the period in question, the liquidation
procedure of the Hong-Kong company Royal Concept Co., Ltd. was concluded.
The consolidated interim report as at 31 March 2022 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, themajority of the votes that can be exercised at the Shareholders' Meeting or in which it 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.
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 SmethwickBirmingham, 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, with32

registered office in Chicago (Illinois), share capital of USD 1,000, equal to approximately€ 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 thereporting date was € 2.266.022.
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.

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 other33

companies 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.
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 third34

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 theassumption 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 timethey are incurred;-

the excess of the acquisition cost over the market value of the Group’s share of net assets
is accounted for as goodwill;-

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;-

dividends distributed among group companies are eliminated, as are the coverage oflosses and write-downs of equity investments in consolidated companies;-

the 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 theshareholders' 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 therelative 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 the35

contract 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 fromthe 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:

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.
36

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 andbenefits 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.

37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 of
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 the38

end 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 receivables
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
39

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
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 the40requirements 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.
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 economictechnical duration of the assets. This criterion is considered well represented by the following
rates:


Land

0%



Buildings

3%

Generic plants

10% -12.50%

Machinery

10%-12.50%

Equipment

10%-35%



Office furniture and equipment

12%Electronic office equipment

18% -20%Motor vehicles and internal transport vehicles

20%

-

25%


Light constructions

10%



Leasehold improvements

Duration of the contract on the underlying assetRights of use

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.
41

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, equal
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;42-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 inmarkets 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 by
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 themarket;-in fact, the brands are considered by their consumers as constantly innovative and on
trend, so much so that they become models to be imitated or inspired by;-

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 preeminence 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.
43

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 isdetermined 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 use
44

of 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 or
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 income45

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; or-current 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;

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 of46

recent 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 at
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
47

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.
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 of48

changes 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 financial
statements, such as the balance sheet, 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 abovementioned 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 intangible assets and could result in a difference inthetimingoftheamortisation

process,

as

well

as

on

the

amountofdepreciation/amortisation costs.
-

Income 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.

49-

Provision for inventory obsolescence: reflects the Company management's estimate of
expected impairment losses in relation to inventories, determined on the basis of pastexperiences. 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
observed, the expected economic conditions and the “ECLs” is a significant estimate. The
amount of the “ECLs” 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 inthe 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 mostrecent 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
50

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 the
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 pure51

marketing, 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,
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.
52

The following tables present data on revenues for the first nine months as at 31 March 2022
and the same period of the previous year and on certain balance sheet items relating to theGroup’s business segments as at 31 March 2022 and 30 June 2021.

12. DERIVATIVE FINANCIAL INSTRUMENTS

As at 31 March 2022, 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 sections on financial assets measured at fair value and tofinancial 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
53

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.

-

Minority shareholders in subsidiaries: the amount shown in the table below refers to the
remuneration for consultancy activities carried out for the benefit of the subsidiary
Royal Ciclo Industria de Componentes Ltda. by the minority shareholder.

-

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 nine months as at 31 March2022 are summarised in the following table:

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:

16. REVENUES

Revenues for the current period (1 July 2021 - 31 March 2022) deriving from the Group’s
ordinary operations amounted to a total of € 166,059,497 and were generated by the sale ofsaddles, pedals and other accessories, and by the provision of services. The breakdown ofrevenues from sales and services by business category is shown in the following table:55

17. COST OF SALES

The components of the cost of sales are shown below, compared with the same period of theprevious year:

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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.

20. COSTS of the MANAGEMENT STRUCTURE

This item, which amounts to €13.312.409 for the period 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

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 andnegativeincomecomponents.

58

The net balance of this item is positive for € 863.228.
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:

59This item, negative for € 1,921,968, 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.
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 nine months in question for € 264,098 (compared to a negativebalance of € -784,912 in the same period of the previous year). This item includes bothexchange gains and losses realised as at 31 March 2022 (which show a negative net balance of€ -199,900), 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 € +463,997).
60

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.

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.

61

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 March 2022, amounting to € 20,949,873 (of which € 5,448,559 in Selle
Royal Group S.p.A. and € 11,611,708 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 period.
As at 31 March 2022 (and as at 30 June 2021) there were no restrictions or limitations on theuse 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:

Receivables insured at the date of this Report amounted to € 22.3 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 € 2.264.567. 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.
62

Finally, the change in the bad debt provision during the year in question is shown below:

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:

The growth of this item can be seen in each inventory category and is conducive to the higher
business volumes.
Furthermore, the global logistical congestion, to which reference was made previously, led toa lengthening 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:

28. TAX RECEIVABLES

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

63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:

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. The decrease insundry receivables is attributable to the completion of the financial lease transaction
connected with the installation of a new production plant at Selle Royal Group S.p.A.; thisplant went into operation in the first quarter of 2022.
NON-CURRENT ASSETS

64

30. INTANGIBLE ASSETS

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

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 € 18.301.251; 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 31 December 2021, Board of Directors checked the consistency of theassumptions underlying the business plan used in preparing the impairment tests as at 30
June 2021 and the results provided therein; 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. In light of the results achieved in the period, alsowith reference to the quarter from the date of the last check to that of this interim report, theprevious determination is confirmed with reference to the appropriate valuation of thebrands in the financial statements.
The item “Other” refers to the recognition of intangible assets that meet the requirements of
IAS 38 for their recognition in the financial statements.
Intangible assets in progress and payments on account mainly relate to expenses incurred by65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:

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 recognition of the rights ofuse of the above mentioned new industrial plant, to the lease of a property in San Clemente(California) to which personnel and equipment previously at the branch office of CrankBrothers Inc. in Ogden, Utah, have been 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.
32. EQUITY INVESTMENTS

66

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 € 2,266,022, 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 € 17,651, relates to minority interests held bySelle Royal Group S.p.A. (€ 723) and the subsidiary Royal Ciclo (€ 16,928).
Some economic indicators of Highway Two LLC, relating to 2021, are listed below, as well as
the balance sheet figures as at 31 March 2022, and related comparative data. For the sake ofcompleteness, the tax year of the joint venture coincides with the calendar year.

33. GOODWILLThis item had a balance as at 31 March 2022 of € 10,492,994.
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 inthe same American subsidiary, in the Chinese subsidiary Selle Royal Vehicle (China) Co. Ltd.
67

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 represented with reference to trademarks, at the date of this interim
report, the outcome of the control carried out as at 31 December 2021, which confirmed theconsistency of the value of goodwill as represented in the financial statements, with respect tothe cash flows that it can reasonably be expected that the cash generating units to which theyrefer will generate in the future, is confirmed to maintain its validity in the light of the results
achieved with respect to the data expected for the period as well as in light of the trend in thecycle sector.
34. DEFERRED TAX ASSETS

Details of the item in question is shown in the following table:

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 € 632.576, the value of a financial asset recognised in thefinancial statements of the subsidiary Royal Ciclo and refers to the amounts paid by the latterto a financing consortium in which it participates. The increase in value compared to the data68

as at 30 June 2021 is significantly influenced by the appreciation, in the current year, of theBrazilian Reais, the currency in which this asset is recognised in the financial statements ofthe subsidiary, compared to the reference currency of the Group.
Furthermore, this item includes the market value of two hedging derivative instruments withrespect to the risk of fluctuations in interest rates (“IRS”), for an amount of €534,177; thesederivatives were subscribed by Selle Royal Group S.p.A. in October 2021 as collateral for the
opening of the same number of long-term floating rate loans maturing in September 2027,
previously recognised under financial liabilities at fair value.
These derivatives, maturing at the same time, 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 contractual fixed rate 30E/360 paid at the end of thequarter - contractual fixed rate 0.10%;
Debtor Bank: basic product index rate 30E/360 paid at the end of the quarter - 3-month
Euribor at the beginning of the period, with a minimum rate (floor) of 0.90%;
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.
36. OTHER NON-CURRENT ASSETSThis item, amounting to € 638.963, 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 LIABILITIES69

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 € 26.406.543, 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:

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
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, the70most advantageous market for the asset or liability; and-the possibility for the entity to carry out a transaction with the asset or liability
at 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;-

quoted prices for identical or similar assets or liabilities in non-active markets;-data other than the quoted prices observable for the asset or liability, forexample: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 nonobservable 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, unobservable
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 March 2022

71

As at 30 June 2021

40. SHORT-TERM LOANS

The balance of this item, as at 31 March 2022, amounting to € 23,859,950, up 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 thecurrent portion of medium/long-term loans.
41. CURRENT FINANCIAL LIABILITIES AT FAIR VALUEThis item, amounting to € 65, 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:
72

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 March 2023.
43. OTHER CURRENT LIABILITIESThe item in question, compared with the balance as at the reporting date of the previous year,
is detailed as follows:

The growth in this item is essentially attributable to the higher value of payables for tax
consolidation corresponding to the allocation of IRES on the taxable income of Selle Royal73

Group S.p.A. for the current period.
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 be
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 1.36% 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:

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

1,700,157
74

-1% on the turnover rate

1,721,838+1/4% on the annual inflation rate

1,734,369-1/4% on the annual inflation rate

1,686,765+1/4% on the annual discount rate

1,672,712-1/4% on the annual discount rate

1,749,434

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:
Years

Expected
disbursements

1

204,2702

69,896

3

68,7574

169,233

5

44,195

45. BONDS

The amount due for bonds is shown under current liabilities, in relation to the portion
maturing within twelve months from the interim reporting date, and under non-current
liabilities for the 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.
75

During the first half-year of the tax current tax year, the second repayment instalment waspaid, amounting to € 2,000,000.
46. MEDIUM/LONG-TERM LOANS

This item, amounting to € 33,354,258, up by € 6,622,889 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.
47. PROVISIONS for RISKS and CHARGESThe breakdown and changes in this item are shown below:

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:

The increase in the balance of this item is mainly attributable to the recognition of deferredtaxes calculated on the market value of the derivatives described above.

76

49. 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 March 2023.
50. SHAREHOLDERS’ EQUITY

The share capital is composed as follows:
Ordinary shares – 37.500.000,00 (with no par value). For the sake of completeness, please
note that the Shareholders' Meeting, which met on 18 February 2022, resolved to split theshares of the parent company Selle Royal Group S.p.A., on the basis of a ratio of 6.25 newshares for each previously outstanding share.
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:

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 nine-month period ended
31 March 2022 and correspond to the results of the accounting records.
***

Pozzoleone (VI), 16 May 2022
The Chairperson of the Board of Directors(Barbara Bigolin)77Selle Royal Group S.p.A.

Report of the independent auditors

Consolidated interim financial statements as at 31 March 2022

CCN/FBL/AZN/cpt – RC015932022BD0132

BDO

BDO

Tel: +39 02 58 20 10

Viale Abruzzi 94

www.bdo.it

20131 Milan

Report of the independent auditors
To the Board of Directors of
Selle Royal Group S.p.A.
Report on the independent audit of the consolidated interim financial statements
Introduction
We have carried out the limited independent audit of the attached consolidated condensed financial
statements, constituted by the balance sheet, the income statement, the statement of comprehensive
income, the statement of changes in shareholders’ equity, the statement of cash flows and the relative
explanatory notes of Selle Royal S.p.A. and its subsidiaries (Selle Royal Group) as at 31 March 2022.
The Directors are responsible for the preparation of the nine‐month consolidated condensed financial
statements in compliance with the international accounting standard applicable for interim financial
disclosure (IAS 34) adopted by the European Union. It is our responsibility to express an opinion on
the nine‐month consolidated condensed financial statements on the basis of the limited independent
audit carried out.
Extent of the limited independent audit
Our work was carried out in compliance with the International Standard on Review Engagements 2410
“Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. The
limited independent audit of the nine‐month consolidated condensed financial statements consists inholding interviews, mainly with the company’s personnel responsible for the financial and accounting
aspects, preparing budgetary analyses and other limited audit procedures. The extent of a limited
independent audit is substantially reduced compared to that of a full independent audit carried out incompliance with international accounting standards (ISA Italy) and, consequently, does not allow us
the certainty we have become aware of all the significant facts that may be identified in theperformance of a full independent audit. Therefore, we do not express a professional opinion on thenine‐month consolidated condensed financial statements.
Conclusions
On the basis of the limited independent audit carried out, we have not become aware of any elements
such as to make us consider that the nine‐month consolidated condensed financial statements of theSelle Royal Group as at 31 March 2022 have not been prepared, in all significant aspects, in compliancewith the international accounting standard applicable for interim financial disclosure (IAS 34) adopted
by the European Union.

Milan, 16 May 2022
BDO Italia S.p.A.
[illegible signature]
Carlo Consonni
Partner
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 partof the BDO international network, a network of independent companies.