Iervolino & Lady Bacardi Entertainment S p A : Consolidated Half Year Financial Report as at 30 June 2022

Consolidated Half-Year Financial Report as

at 30 June 2022

Parent Company: IERVOLINO & LADY BACARDI ENTERTAINMENT S.P.A.

Registered Office: Via Barberini n. 29 - 00187 - ROMA

Registered in the Register of Companies of: ROME

Fiscal code and VAT number: 11636381003

Registered at the R.E.A. of ROME no. RM-1318599

Subscribed capital EUR: 1,410,427.92 fully paid up

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ILBE GROUP MANAGEMENT REPORT FOR THE CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS AS AT 30 JUNE 2022

1. Introduction
2. The macroeconomic context and the 'Media & Entertainment' reference industry
3. The ILBE Group's business model
4. The activities carried out in the first half of 2022
5. Backlog and projects in development
6. Summary data and alternative performance indicators (APIs)
7. Transactions with related parties
8. Human Resources
9. Research and development
10. Disclosure of principal risks and uncertainties
11. Significant events occurring after the end of the period
12. Business Outlook

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CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS AS AT 30 JUNE 2022

Statement of the consolidated half-year financial position

Statement of comprehensive consolidated income/(loss) for the half year

Consolidated statement of changes in shareholder's equity for the half year

Consolidated half-year cash flow statement

1. Company information
2. Basis of preparation and changes in accounting standards for the Group
3. Operating sectors: Policy
4. Business combinations
5. Explanatory Notes

REPORT OF THE AUDITORS EY SPA

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ILBE GROUP MANAGEMENT REPORT FOR THE CONSOLIDATED HALF- YEAR FINANCIAL STATEMENTS AS AT 30 JUNE 2022

1. Introduction

The condensed consolidated half-year financial statements as at 30 June 2022 of the Iervolino

• Lady Bacardi Entertainment Group (hereinafter also referred to as the ILBE Group or the Group) include the parent company Iervolino & Lady Bacardi Entertainment S.p.A. (formerly Iervolino Entertainment S.p.A.) and the investments in Arte Video S.r.l. and Arte Video Llc, R.E.D. Carpet S.r.l., Wepost S.r.l., Iervolino Studios d.o.o. e Sobe Sport S.r.l., which last represented a variation from the scope of the previous financial year.

The consolidated half-year financial statements as at 30 June 2022 is due with total revenues amounting to EUR 83,260 thousand and an EBIT, before some non-recurring charges of EUR 1,511 thousand, of EUR 11,207 thousand. The EBIT margin for the half year was 13.46%.

At the same time, the net financial position (net of the net effect of EUR 2,095 thousand all of the year 2022 of IFRS 16 relating to the new lease contracts) is improving to EUR 26,531 compared with 31 December 2021 equal to EUR 29,289.

The results obtained are consistent and consistent with the backlog and the projects under development and the guideline of the foreseeable evolution of management represented in the consolidated management report of the previous year.

These results are, moreover, in line with the strategic choices of:

1. Investing in quality Intellectual Properties;
2. essentially international market choice and, predominantly, aimed at a streaming audience;
3. Prioritise growth and value creation over time over short-term profitability;
4. Investment and growth in the context of financial balance.

In this regard, the successes of appreciation with the international and national public on SKY- cinema, Apple TV, SKY-Dea Kids and Amazon Prime Video of the collections of "Arctic Friends", "Puffins", Waiting for the Barbarians, In Dubious Battle - Il Courage of the Last, The Bleeder, The Humbling, Shiraz - The City of Roses, Beyond the Edge, and others, confirm the goodness of the choices made.

2. The macroeconomic context and the 'Media & Entertainment' reference industry

The global entertainment and media (M&E) industry experienced a major increase last year, strongly outpacing overall global economic growth. Following a pandemic-related 2.3% decline in 2020, M&E revenues increased 10.4% in 2021, from USD 2.12 trillion to USD 2.34 trillion.

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The industry is becoming more digital, more mobile and more youth-oriented. Virtual reality (VR) and games are powerful growth drivers, while digital advertising permeates the entire industry.

The Outlook results expected from a sector study by an important international consulting firm include:

• Global video game and eSport production totalled USD 215.6 billion in 2021 and are projected to grow at an 8.5% CAGR to USD 323.5 billion in 2026. Asia Pacific generated the lion's share of revenue in 2021 with USD 109.4 billion, nearly double that of North America, the second-highest region. Gaming is now the third largest category of M&E content that consumes data, behind video and communications.
• VR continues to be the fastest growing M&E segment, albeit from a relatively small base. Global spending on virtual reality increased 36% year-on-year in 2021 to USD 2.6 billion, after growing 39% in 2020. Growth between 2021 and 2026 is expected at 24% CAGR, bringing the segment to USD 7.6 billion. Gaming content is the largest contributor to VR revenue, grossing USD 1.9 billion in 2021. This is expected to increase to USD 6.5 billion in 2026, 85% of total virtual reality revenue.
• The spread of advertising across the digital world has made it a dominant industry category. After a nearly 7% decline in 2020, advertising grew an impressive 22.6% in 2021 to USD 747.2 billion. Driven almost entirely by digital, advertising is set to grow at a CAGR of 6.6% until 2026. Internet advertising revenues are seen growing even faster, expanding to 9.1% CAGR. In 2026, advertising is projected to be a USD 1 trillion market and the largest M&E revenue stream, having outpaced consumer spending and internet access.
• After growing 35.4% in 2020, over-the-top (OTT) videos increased another 22.8% in 2021, driving revenues to USD 79.1 billion. The pace of growth in OTT revenues will moderate slightly; it is expected to grow at a CAGR of 7.6% through 2026, driving revenues to USD 114.1 billion.
• Traditional TV, besieged by competition from OTT streaming services, still generates sizable revenues, but its inexorable decline will continue, with global revenues expected to shrink to a -0.8% CAGR from USD 231 billion in 2021 to USD 222.1 billion in 2026.
• Global movie revenue is rebounding, reversing losses caused by the pandemic, and is expected to reach a new high of USD 46.4 billion in 2023. Box office revenue is projected to reach USD 49.4 billion in 2026 from USD 20.8 billion in 2021, a CAGR of 18.9%. China has overtaken the United States to become the largest film market in the world in 2020 and is expected to maintain this leadership until 2026.
• Live music revenue is projected to surpass pre-pandemic levels in 2024. Digital music streaming subscriptions are driving growth in the recorded music industry, where revenues are projected to increase from $ 36.1 billion in 2021 to $ 45.8 billion in 2026.
• Content growth is fuelling mass data consumption: 2.6 million petabytes (PB) of data were consumed in 2021 and is expected to increase at a CAGR of 26% to reach 8.1 million PB by 2026. The game will be the fastest growing consumer of data over the forecast period, with an expected CAGR of 29.6%. Mobile phones will be the fastest growing device category between 2021 and 2026, with a CAGR of 28.8% and are expected to drive mobile data consumption from 1.1 million PB to 3.8 million PB.

Essentially, what emerges as the M&E market trend is that the choices billions of consumers make about where they will invest their time are fuelling the transformation of the industry and driving trends. We are essentially seeing the emergence of a global M&E consumer base for the next few years that is younger, more digital and more streaming and gaming than the current consumer population. This is shaping the future of the industry.

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