Annual Report • Jan 4, 2023
Annual Report
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Annual Report and Unaudited financial statements For the year ended 31 December 2021
| Three year summary3 | |
|---|---|
| Management board report 4 | |
| Consolidated financial statements 20219 | |
| Consolidated statement of comprehensive income 10 | |
| Consolidated statement of financial position 11 | |
| Consolidated statement of changes in shareholder's equity 12 | |
| Consolidated cash flow statement13 | |
| Notes to the consolidated financial statements14 | |
| 1. Corporate information 14 | |
| 2. Accounting policies14 | |
| 3. Critical accounting judgments and key sources of estimation uncertainty22 | |
| 4. Revenue25 | |
| 5. Cost of sales 25 | |
| 6. Impact of Covid – 19 on consolidated financial statements25 | |
| 7. Auditor's remuneration 26 | |
| 8. Information regarding directors and employees26 | |
| 9. Financial income/(expenses) 26 | |
| 10. Other income and expenses27 | |
| 11. Income taxes27 | |
| 12. Brand and other intangible assets28 | |
| 13. Right-of-use of assets30 | |
| 14. Properties, plant and equipment 31 | |
| 15. Other non-current assets32 | |
| 16. Inventories and work in progress 32 | |
| 17. Trade receivables33 | |
| 18. Other current assets33 | |
| 19. Cash and cash equivalents33 | |
| 20. Borrowings34 | |
| 21. Provisions35 | |
| 22. Deferred tax liabilities35 | |
| 23. Other non-current liabilities 36 | |
| 24. Trade payables36 | |
| 25. Other current liabilities36 | |
| 26. Analysis and reconciliation of net debt 37 | |
| 27. Equity 37 | |
| 28. Financial commitments 38 | |
|---|---|
| 29. Post-employment benefits38 | |
| 30. Subsequent events39 | |
| 31. Related party transactions 39 | |
| 32. La Perla Group companies40 | |
| Company financial statements 2021 41 | |
| Statement of company income42 | |
| Statement of company financial position43 | |
| Statement of company changes in shareholder's equity 44 | |
| Notes to the company financial statements45 | |
| 1. Corporate information 45 | |
| 2. Basis of preparation45 | |
| 3. Investments in subsidiaries46 | |
| 4. Cash and cash equivalents46 | |
| 5. Shareholders' equity47 | |
| Appropriation of result47 | |
| 6. Non-current liabilities47 | |
| 7. Differences in equity and profit/(loss) between the company and consolidated financial statements48 | |
| 8. Average number of employees48 | |
| 9. Remuneration of the directors48 | |
| 10. Audit fees48 | |
| 11. Subsequent events48 | |
| 12. Adoption of financial accounts48 | |
| Other information 50 | |
| Appropriation of result50 |
| 2021 | 2020 | 2019 | |
|---|---|---|---|
| € 000 | € 000 | € 000 | |
| Income statement in summary | |||
| Net sales Retail | 63,106 | 54,987 | 74,077 |
| Net sales Wholesale / Other | 9,042 | 11,250 | 11,744 |
| Revenue | 72,148 | 66,237 | 85,821 |
| Gross margin | 44,037 | 35,684 | 41,871 |
| Operating expenses | (83,326) | (75,900) | (86,132) |
| EBITDA | (39,289) | (40,216) | (44,261) |
| Operating profit/(loss) | (44,058) | (114,768) | (72,765) |
| Profit/(loss) before tax | (44,822) | (136,566) | (88,289) |
| Profit/(loss) for the year | (45,327) | (136,366) | (89,041) |
| Balance sheet in summary | |||
| Brand and other intangible assets | 28,543 | 26,292 | 28,249 |
| Right of use assets | 5,784 | 576 | 62,218 |
| Properties, plant and equipment | 2,922 | 778 | 12,278 |
| Other non-current assets | 5,680 | 5,933 | 9,526 |
| Inventories and work in progress | 23,766 | 27,410 | 33,566 |
| Trade receivables | 7,424 | 6,001 | 6,013 |
| Other current assets | 5,945 | 11,081 | 7,773 |
| Cash and cash equivalents | 7,238 | 7,640 | 11,443 |
| Total assets | 87,302 | 85,711 | 171,066 |
| Non-current liabilities | 311,686 | 260,729 | 218,037 |
| Current liabilities | 63,593 | 60,936 | 58,691 |
| Equity | (287,977) | (235,954) | (105,662) |
| Total equity and liabilities | 87,302 | 85,711 | 171,066 |
| Key ratios | |||
| Gross profit margin | 0.61 | 0.54 | 0.49 |
| Operating profit margin | -0.61 | -1.73 | -0.85 |
| Average number of employees in FTE | 1,199 | 1,199 | 1,199 |
| Earnings per share in € | (0.4312) | (1.2974) | (0.8471) |
| Number of shares | 105,111,112 | 105,111,112 | 105,111,112 |
La Perla Fashion Holding N.V. ("the Company") is a public company with limited liability, incorporated under the laws of The Netherlands on 9 September 2016. The Company's registered office is Schiphol Boulevard 127 1118 BG Schiphol, the Netherlands. The company is registered at the Chamber of Commerce at 66809681.
La Perla Fashion Holding N.V. and its Subsidiaries (hereinafter the "Group") operate in the markets of luxury underwear, swimwear, and make-up (hereinafter the "Business"). The activities of design, production and sale (through retail and wholesale channels) are performed by the Group through its network of subsidiaries.
The direct subsidiaries La Perla Global Management (UK) Ltd and La Perla Beauty (UK) Ltd are the Principals in all intercompany transactions, purchasing goods from the manufacturing entity of the Group and reselling those to the distributors and the commercial subsidiaries.
On 30 December 2022, the Board of Managing Directors authorized the consolidated financial statements for issue. The consolidated financial statements as presented in this report are subject to adoption by the Annual General Meeting of Shareholders, to be held in 2023.
In 2021, revenues amounted to € 72.0 million (2020: € 66.2 million), a 9% reported increase compared with the prior year and comprise sales from the following channels:
| 2021 | 2020 | |||
|---|---|---|---|---|
| € 000 | % | € 000 | % | |
| Continuing operations | ||||
| Net sales Boutique | 36,876 | 51% | 33,251 | 51% |
| Net sales Outlet | 7,858 | 11% | 8,880 | 13% |
| Net sales Online | 18,372 | 25% | 12,856 | 19% |
| Net sales Retail | 63,106 | 87% | 54,987 | 83% |
| Net sales Wholesale | 7,664 | 11% | 9,792 | 15% |
| Net sales Stock | 813 | 1% | 1,074 | 2% |
| Royalties and other income | 565 | 1% | 384 | 1% |
| 72,148 | 100% | 66,237 | 100% |
Also in 2021 revenues have been driven significantly by the Covid-19 pandemic and the impact of store closings as well as much lower markdown sales. Although the year is still affecting by the above-mentioned factors, retail revenues increased by 15%. Wholesale revenues decreased by 21% compared with the previous year.
Group net debt as at 31 December 2021 amounted to € 277.4 million (31 December 2020: € 197.4 million) as follows:
| 31 December 2021 | 31 December 2020 | ||
|---|---|---|---|
| € 000 | € 000 | ||
| Long term borrowings | 274,444 | 205,025 | |
| Short term borrowings | 10,214 | 11 | |
| Cash and cash equivalents | (7,238) | (7,640) | |
| 277,420 | 197,396 |
For additional details on loan terms please refer to Note 20 of the consolidated financial statements.
The Group is exposed to several uncertainties whose outcome could impact on its financial performance, operations, regulatory or corporate reputation. Some of these are generic to any multinational commercial enterprise and others are more specific to the group. The key risk factors that the directors consider potentially material in nature are set out below, together with mitigating actions in place.
Management of risk is an integral part of the day-to-day activities of the Group and, where reasonably possible, steps are taken to mitigate know material risks. However, these steps can only reduce the likelihood of risk events occurring or the impact on the Group should they occur. They do not provide absolute certainty over the mitigation or elimination of the risks as may risk factors are wholly or partially outside the control of the Group.
The Group's activities expose it to the risk that the company will not be able to meet its financial obligations as they fall due.
Full details of the Group's going concern position are disclosed in Note 2.2 to the financial statements.
The Group is exposed to transactional foreign currency risk in relation to trade in foreign currencies and purchases (from third parties), whilst borrowings are mainly denominated in Euros. The directors review currency risk on an ongoing basis.
Credit risk is the risk of financial loss to the company if a customer or counterparty fails to meet its contractual obligations.
The Group's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.
The credit risk can be considered limited as the Group adopts restrictive credit policies and regularly monitors the exposure with each single client. The receivables' credit risk is fragmented over its retail and trade customers.
The credit risk on liquid funds is limited as the counterparties are banks with high credit-ratings assigned by international creditrating agencies.
The Group's borrowings from related parties are issued at variable rates that expose the Group to interest rate risk.
Management focus on all rising costs included raw materials, transport, rent, rates and wages and seek all possible means to ensure that the effects of price rises are minimised.
The group relies upon its IT infrastructure to deliver its operations and through which it handles significant volumes of data. The security, resilience and control of these key assets are of significant importance to and focus of management.
The Group's performance depends largely on its staff. The loss of key individuals and the inability to recruit people with the right experience and skills could adversely impact the Group's results. To mitigate these issues, the Group continues to run programmes to improve staff retention.
The pandemic which started in China in late 2019, before extending first to Europe and then to the Americas in 2020, continued through the whole of 2021, affecting the entire world in different waves with different timings in each region. The effect in different geographic markets evidently reflects differing local levels of severity of the health crisis and lockdown durations, as well as the extent to which each region is exposed to tourism.
The partial or full closure of its stores due to lockdowns had a very material effect on the Group's revenue. During 2021 the pandemic continued to impact revenues, particularly in the EMEA region during the first half with stores closed for more than three months and more sporadically in Asia and North America, with reduced in store foot traffic. At the end of the year, and extending into 2022, the Asian market has continued to experience disruption and closures to various degrees across the individual markets. Despite the negative impact described above, Covid–19 has however significantly increased the online traffic and sales.
During 2021 the Group continued to face some additional costs related to health measures put in place (purchases of hand sanitizer and face masks, exceptional measures for regularly disinfecting premises, etc.) accounted for as recurring expenses.
Rent concessions negotiated with lessors due to the consequences of Covid-19 were immediately recognized in the income statement as negative variable lease payments rather than as an amendment to the associated leases in line with Covid-19 Related Rent Concessions (Amendment to IFRS16) as described in Note 6 to the consolidated financial statements.
As the virus is still in active circulation and new targeted lockdown measures are continuing to have to be implemented, it is difficult to anticipate trends with absolute certainty. Nevertheless, over the past few years luxury market growth has shown to be particularly resilient, as shown in the strong propensity to consume returning once trading conditions have opened up.
For the year ended 31 December 2021, the Group reported a total loss for the year of € 45.3 million (2020: loss for the year of € 136.4 million), shareholders' deficiency of € 288.0 million (2020: € 236.0 million) and retained earnings of € 301.4 million (2020: € 256.1 million).
The Board of Managing Directors have considered the going concern assumption given the current trading of the Company and Group and the funding considerations of the Group and have formed the conclusion that it is appropriate to consider that the Company will continue to operate in the foreseeable future. The Group has received a financial commitment from the parent company in writing, that the parent company will provide financial support to enable the Group to meet its financial obligations as they fall due.
In forming the judgment, the board of managing directors also considered the following matters:
i) During 2021 and 2022, the Company received a letter of financial support from a shareholder, La Perla Fashion Finance B.V., backed by a debt facility up to € 400 million. As a result, the consolidated entity will have sufficient funding to enable it to meet its objectives and financial obligations. By the end of 2021, € 225.5 million of funding had been provided and the Directors are confident that La Perla Fashion Finance B.V. has the ability to provide all the necessary financial support. To date La Perla Fashion Finance B.V. has been able to provide financial support when required in support of this assessment.
ii) The consolidated entity reported a net operating cash outflow for the financial year ended 31 December 2021 of € 38.9 million (2020: € 57.2 million). Management expect operating costs will be reduced in the subsequent financial year as a result of restructuring its operations, which will reduce the negative operating cash flows.
iii) At the time of signing, the global impact of Covid-19 is evolving. Management has continually assessed the situation so that as the 'lock down' in Asia was introduced, measures were taken to switch the marketing focus to e-commerce and towards the European and American markets; and as the Chinese markets reopened, and the US and EMEA ones shut, the focus returned to Asia. At the same time, contingency plans, including recruitment freezes and project and investment delays, have been made and the company is able to utilize all the various government backed payroll and taxation support initiatives made available to retail companies around the world.
Although the restructuring is still ongoing and therefore includes uncertainties surrounding its implementation, the directors are confident that the reorganization process will provide positive results in a short period of time allowing the Group to continue to operate for the foreseeable future, being a period of at least 12 months from the date of approval of these financial statements.
Please refer to Note 2.2 of the consolidated financial statements for further details on going concern.
The company is in the process of engaging a new audit firm for the financial year 2021. The absence of an auditor does not relate to the company or its financial statements. The financial statements have been prepared on the basis of the accounting principles used for the previously audited financial accounts. Therefore, the board believe the financial statements give a true and fair reflection of the group's financial position.
The Board of Managing Directors do not recommend the payment of a dividend (2020: nil).
Research and development is not applicable for the Company.
The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting the performance of the Group and the Company. Employee representatives are consulted regularly on a wide range of matters affecting their current and future interests.
La Perla Fashion Holding N.V. is set up in a two-tier corporate structure consisting of a Board of Managing Directors and a Supervisory Board.
La Perla Fashion Holding N.V. is managed by the Board of Directors. Under Dutch Law, the Board of Directors is accountable and ultimate responsible for the management and external reporting of La Perla Fashion Holding N.V. The Board of Directors is answerable to shareholders at the Annual General Meeting of Shareholders and is accountable for its performance to the Supervisory Board.
The Board of Managing Directors consists of one director:
• C.S. Vickers, appointed per 23 August 2019
The Supervisory Board supervises the Board of Managing Directors. The Supervisory Board is an independent corporate body.
The Supervisory Board of the Company consists of one director:
• E. Speight, appointed per 5 December 2019
R.D. Salem stepped down from the Supervisory Board on the 26th of May 2021.
F. Kodellas de la Morena, stepped down from the Supervisory Board on the 11th of September 2022.
The directors are confident that the proper execution of the strategic plan will allow the Group to break-even in the mid-term.
The Board of Managing Directors is responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Director(s) is (are) required to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS-EU). Under company law, the Board of Managing Directors must not approve the annual report unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing the financial statements, International Accounting Standard 1 requires that Board of Managing Directors:
We as Board of Managing Directors confirm that to the best of our knowledge:
This Responsibility Statement was approved by the Board of Managing Directors on 30 December 2022 and is signed on its behalf by:
Sheena Vickers
| Notes | 2021 | 2020 | |
|---|---|---|---|
| € 000 | € 000 | ||
| Revenue | 4 | 72,148 | 66,237 |
| Cost of sales | 5 | (28,111) | (30,553) |
| Gross margin | 44,037 | 35,684 | |
| Marketing and selling expenses | (41,381) | (38,128) | |
| General and administrative expenses | (41,945) | (37,772) | |
| Operating loss before amortisation and depreciation | (39,289) | (40,216) | |
| Amortisation, depreciation & write off | (4,769) | (74,552) | |
| Operating profit/(loss) | (44,058) | (114,768) | |
| Financial income/(expenses) | 9 | (18,035) | (24,936) |
| Other income/(expenses) | 10 | 17,271 | 3,138 |
| Profit/(loss) before tax | (44,822) | (136,566) | |
| Taxation | 11 | (505) | 200 |
| Profit/(loss) for the year | (45,327) | (136,366) | |
| Items that will not be reclassified subsequently to the profit and loss | - | - | |
| Actuarial gains/(losses) | 12 | (92) | |
| Deferred taxes on actuarial gains/(losses) | - | - | |
| Items that may be reclassified subsequently to the profit and loss |
12 | (92) | |
| Exchange differences on translationof operations in foreign currencies | (6,708) | 6,166 | |
| Total other gains/(losses) net of tax effect | (6,708) | 6,166 | |
| Total comprehensive profit/(loss) for the year | (52,023) | (130,292) | |
| Earnings per share (in euro) | |||
| Basic, profit/(loss) for the year attributable to the equity holders of the parent | (0.4949) | (1.2974) | |
| Total number of shares (in thousands) | |||
| Per end of period | 105,111 | 105,111 |
| Notes | 31 December 2021 | 31 December 2020 | |
|---|---|---|---|
| € 000 | € 000 | ||
| Non-current assets | |||
| Intangible assets | 12 | 28,543 | 26,292 |
| Right-of-use assets | 13 | 5,784 | 576 |
| Property, plant, and equipment | 14 | 2,922 | 778 |
| Other non-current assets | 15 | 5,680 | 5,933 |
| Total non-current assets | 42,929 | 33,579 | |
| Current Assets | |||
| Inventories and work-in-progress | 16 | 23,766 | 27,410 |
| Trade receivables | 17 | 7,424 | 6,001 |
| Other current assets | 18 | 5,945 | 11,081 |
| Cash and cash equivalents | 19 | 7,238 | 7,640 |
| Total current assets | 44,373 | 52,132 | |
| Non-current liabilities | |||
| Long term borrowings | 20 | 274,444 | 205,025 |
| Long term financial lease liabilities | 27,721 | 44,905 | |
| Provisions. | 21 | 5,504 | 6,760 |
| Deferred tax liabilities | 22 | 165 | 103 |
| Other non-current liabilities | 23 | 3,852 | 3,936 |
| Total non-current liabilities | 311,686 | 260,729 | |
| Current liabilities | |||
| Short term borrowings | 20 | 10,214 | 11 |
| Short term financial lease liabilities | 25,627 | 24,064 | |
| Trade payables | 24 | 11,156 | 20,564 |
| Provisions | 21 | 3,552 | 3,543 |
| Other current liabilities | 25 | 13,044 | 12,754 |
| Total current liabilities | 63,593 | 60,936 | |
| Net assets/(liabilities) | (287,977) | (235,954) | |
| Equity | |||
| Share capital | 1,051 | 1,051 | |
| Share premium | 21,741 | 21,741 | |
| Cumulative translation adjustment | (731) | 5,977 | |
| Other reserves | (8,639) | (8,651) | |
| Retained earnings | (301,399) | (256,072) | |
| Total Equity | (287,977) | (235,954) |
| Share premium |
Translation reserve |
Other reserves |
Retained earnings |
Total equity | ||
|---|---|---|---|---|---|---|
| Share capital € 000 |
€ 000 | € 000 | € 000 | € 000 | € 000 | |
| Balance at 1 January 2020 |
||||||
| 1,051 | 21,741 | (189) | (8,559) | (119,706) | (105,662) | |
| Comprehensive income Profit/(loss) for the period |
- | - | - | - | (136,366) | (136,366) |
| Other comprehensive income |
- | - | 6,166 | (92) | - | 6,074 |
| Total comprehensive income |
- | - | 6,166 | (92) | (136,366) | (130,292) |
| Balance at 31 December 2020 |
1,051 | 21,741 | 5,977 | (8,651) | (256,072) | (235,954) |
| Comprehensive income Profit/(loss) for the period |
- | - | - | - | (45,327) | (45,327) |
| Other comprehensive income |
- | - | (6,708) | 12 | - | (6,696) |
| Total comprehensive income |
- | - | (6,708) | 12 | (45,327) | (52,023) |
| Balance at 31 December 2021 |
1,051 | 21,741 | (731) | (8,639) | (301,399) | (287,977) |
| 2021 | 2020 | ||
|---|---|---|---|
| € 000 | € 000 | ||
| Cash and cash equivalent at the beginning of the year | 7,629 | 11,432 | |
| Cash flows from operating activities | |||
| Net income (loss) of the year | (43,870) | (136,228) | |
| Depreciation and Amortisation | 4,387 | 20,548 | |
| Impairment intangible assets | 285 | 5,184 | |
| Impairment right of use assets | 87 | 36,384 | |
| Impairment tangible assets | 10 | 11,969 | |
| Loss on tangible and intangible assets disposals | (3,506) | 467 | |
| Gain on lease contract closing and tangible assets | (11,972) | (1,121) | |
| Interests expense | 17,763 | - | |
| (Increase)/Decrease in inventories | 3,592 | 6,019 | |
| (Increase)/Decrease in receivables | 2,164 | (5,108) | |
| Increase/(Decrease) in payables | (7,650) | 5,268 | |
| Increase/(Decrease) in provision | (1,582) | (1,949) | |
| Other working capital variation | 1,380 | 1,393 | |
| Net cash generated from operating activities | (38,912) | (57,175) | |
| Cash flow from investing activities | |||
| Purchase of property, plant and equipment | (3,422) | (4,440) | |
| Sale of property, plant and equipment | 43 | 59 | |
| Purchase of right-of-use assets | (7,351) | (8,046) | |
| Sale of right-of-use assets | - | - | |
| Purchase of intangible assets | (3,509) | (5,105) | |
| Investment in long term receivables | 3,500 | - | |
| (Increase)/Decrease in security deposits | 583 | 3,249 | |
| Net cash used in investing activities | (10,156) | (14,283) | |
| Cash flow from financing activities | |||
| Short term borrowing | 119 | - | |
| Long term borrowing | 60,371 | 72,379 | |
| Lease liabilities | (7,060) | (8,414) | |
| Proceeds from issuance of shares | - | - | |
| Net cash generated from financing activities | 53,430 | 63,965 | |
| Effect of forex on cash | (4,760) | 3,689 | |
| Cash and cash equivalent at the end of the period | 7,231 | 7,629 | |
| Analysis of Net Cash | |||
| 31 December 2021 | 31 December 2020 | ||
| Cash and cash equivalents as per Balance Sheet | 7,238 | 7,640 | |
| Bank overdrafts | (7) | (11) | |
| Net Cash | 7,231 | 7,629 |
La Perla Fashion Holding N.V. ("the Company") is a public company with limited liability, incorporated under the laws of The Netherlands on 9 September 2016. The Company's registered office is Schiphol Boulevard 127 1118 BG Schiphol, the Netherlands. The company is registered at the Chamber of Commerce at 66809681.
La Perla Fashion Holding N.V. and its Subsidiaries (hereinafter the "Group") operate in the markets of luxury underwear, swimwear, and make-up (hereinafter the "Business"). The activities of design, production and sale (through retail and wholesale channels) are performed by the Group through its network of subsidiaries.
The direct subsidiaries La Perla Global Management (UK) Ltd and La Perla Beauty (UK) Ltd are the Principals in all intercompany transactions, purchasing goods from the manufacturing entity of the Group and reselling those to the distributors and the commercial subsidiaries.
On 30 December 2022, the Board of Managing Directors authorized the consolidated financial statements for issue. The consolidated financial statements as presented in this report are subject to adoption by the Annual General Meeting of Shareholders, to be held in 2023.
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied with those applied by the Group's trading entities.
The Group and company financial statements are expressed in thousands of euro's (rounded to the nearest thousand) unless otherwise stated.
The consolidated and company financial statements for the year ended 31 December 2021 have been prepared and approved by the Directors and drawn up in accordance with the International Financial Reporting Standards ("IFRS") as endorsed in the EU and with the statutory provisions of Part 9, Book 2 of the Dutch Civil Code.
The Group and company financial statements have been prepared on the historical cost basis except for certain intangible assets that are measured at fair values at the end of the reporting period, as explained in the accounting policies below.
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate, Intragroup balances and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. The cash flow statement was prepared applying the indirect method.
For the year ended 31 December 2021, the Group reported a total loss for the year of € 45.3 million (2020: loss for the year of € 136.4 million), shareholders' deficiency of € 288.0 million (2020: € 236.0 million) and retained earnings of € 301.4 million (2020: € 256.1 million).
The Board of Managing Directors have considered the going concern assumption given the current trading of the Company and Group and the funding considerations of the Group and have formed the conclusion that it is appropriate to consider that the Company will continue to operate in the foreseeable future. The Group has received a financial commitment from the parent company in writing, that the parent company will provide financial support to enable the Group to meet its financial obligations as they fall due.
In forming the judgment, the board of managing directors also considered the following matters:
i) During 2021 and 2022, the Company received a letter of financial support from a shareholder, La Perla Fashion Finance B.V., backed by a debt facility up to € 400 million. As a result, the consolidated entity will have sufficient funding to enable it to meet its objectives and financial obligations. By the end of 2021, € 225.5 million of funding had been provided and the Directors are confident that La Perla Fashion Finance B.V. has the ability to provide all the necessary financial support. To date La Perla Fashion Finance B.V. has been able to provide financial support when required in support of this assessment.
ii) The consolidated entity reported a net operating cash outflow for the financial year ended 31 December 2021 of € 38.9 million (2020: € 57.2 million). Management expect operating costs will be reduced in the subsequent financial year as a result of restructuring its operations, which will reduce the negative operating cash flows.
iii) At the time of signing, the global impact of Covid-19 is evolving. Management has continually assessed the situation so that as the 'lock down' in Asia was introduced, measures were taken to switch the marketing focus to e-commerce and towards the European and American markets; and as the Chinese markets reopened, and the US and EMEA ones shut, the focus returned to Asia. At the same time, contingency plans, including recruitment freezes and project and investment delays, have been made and the company is able to utilize all the various government backed payroll and taxation support initiatives made available to retail companies around the world.
Although the restructuring is still ongoing and therefore includes uncertainties surrounding its implementation, the directors are confident that the reorganization process will provide positive results in a short period of time allowing the Group to continue to operate for the foreseeable future, being a period of at least 12 months from the date of approval of these financial statements.
The following IFRS standards, amendments or interpretations became effective during the period ended 31 December 2021 but have not had a material effect on this consolidated financial information:
All new standards and amendments to standards and interpretations effective for periods beginning on or after 1 January 2021 that are applicable to the Group have been applied in preparing these consolidated financial statements.
A number of amendments to existing standards have been issued and are mandatory for the company beginning on or after January 1, 2022, or later periods, and the company has not early-adopted them. The changes to those standards are not expected to have a material impact on the company's financial statements.
The Group and company financial statements are presented in Euro, which is the Group and company's presentational and functional currency. Each Group company determines the functional currency to be used to value the accounts in the financial statements. Transactions in foreign currency are initially recorded at the exchange rate (referred to the functional currency) at the transaction date. Monetary assets and liabilities in foreign currency are translated to the functional currency at the exchange rate at the balance sheet date. All exchange differences are recognised in the income statement. Non-monetary items valued at historical cost in foreign currency are translated by using the exchange rates in effect on the date the transaction was first recorded. Non-monetary items recorded at fair market value in foreign currency are translated by using the exchange rate on the date the value was calculated.
At the closing date of each subsidiary's financial statements, assets and liabilities were translated into the currency in which Group presents its financial statements (the Euro) at the exchange rate in effect on such date, and the income statement was translated by using the average exchange rate for the year. Exchange differences deriving from translation are charged directly to equity and are recorded in a specific equity reserve.
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from 'profit before tax' as reported in the consolidated statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.
The Group and company's current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Depreciation of property, plant and equipment is calculated to write off the cost or deemed cost, less residual value, of the assets in equal annual instalments over their estimated useful lives at the following rates:
| Type of asset | Category of property, plant and equipment | Useful life |
|---|---|---|
| Land | Land and buildings | Not depreciated |
| Freehold buildings | Land and buildings | Up to 50 years |
| Plant, machinery, fixtures and fittings | Machinery and equipment | 3 – 8 years |
| Retail fixtures and fittings | Retail fixtures and fittings | 2 – 8 years |
| Office equipment | Machinery and equipment | 3 years |
| Computer equipment | Machinery and equipment | 3 – 5 years |
| Assets under construction | Construction in progress | Not depreciated |
| Leasehold improvements | Leasehold improvements | Term of lease |
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Intangible assets such as trademarks, licences and key money that are acquired separately are capitalised at the purchase cost and amortised on a straight-line basis over their estimated useful economic lives, which are as follows:
| Type of asset | Category of intangible assets | Useful life | |
|---|---|---|---|
| Trademarks | Concessions, licences & trademarks | 15 – 25 years | |
| Licences | Concessions, licences & trademarks | 3 years | |
| Software | Industrial patens & software | 3 – 5 years | |
| Know How | Industrial patens & software | 2 years |
Intangible assets also include amounts paid by the Group to take over lease contracts relating to certain retail stores, defined as "key money". Key money, only in specific and identified cases based on the location and the terms of the lease contract, are considered intangible assets with indefinite useful lives. Consistent with valuations prepared by independent experts, certain specific safeguards provided by the landlord, market practice and the Group's strategy to renew leases significantly in advance of the end of the contract, together suggest that the value of certain key money may remain constant over time and should therefore not be subject to amortisation, but tested for impairment in accordance with IAS 38 and IAS 36.
Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date.
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses except for the key money rights, on the same basis as intangible assets that are acquired separately.
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell and value in use in assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in this case the reversal of the impairment loss is treated as a revaluation increase.
In accordance with the exemptions provided by paragraph 5 of the standard, the Group and the Company has elected to apply IFRS 16 to all of its leases, except for the following:
Under IFRS 16, for each affected lease, the following items are recognised in the balance sheet as of the commencement date:
After the commencement date and at each reporting date the lease liability is remeasured as follows:
The right-of-use asset is remeasured as follows:
• a reduction reflecting the depreciation of the asset on a straight-line basis over the term of the lease, with a corresponding entry to "Depreciation of right-of-use assets" within "Amortisation, depreciation & write off" in the Statement of comprehensive income;
The lease term corresponds to the non-cancellable period for which a lessee has the right to use an underlying asset, together with both:
When estimating the terms of its property leases, the company divides the underlying assets into two categories:
Certain leases include automatic renewal clauses or have indefinite terms. The company is unable to reliably determine the estimated lease term for these leases beyond their strictly contractual period. Accordingly, they are accounted for as leases with no extension option. For the transition purpose, they were considered for a period of 18 months starting from the transition date.
The company continues to depreciate improvements to its stores and other buildings consistently with the term of the underlying leases, and has not changed its approach compared to the accounting treatment applicable in previous year. Many different factors are taken into account in determining the depreciation period of leasehold improvements, including the term of the underlying lease.
The Group and the Company believes that there is no readily available means of determining the interest rates implicit in its leases and has thus elected to apply the incremental borrowing rate.
Considering that the company has no external line of credit, the incremental borrowing rate corresponds to the rate of interest that the company pays on shareholder loans.
The rates used as of 1 January 2019 to calculate the impact of the transition to IFRS 16 were based on the interest rate applicable to the incremental funding of the shareholder loans.
The first-time application of IFRS 16 gave rise to deferred tax assets as of 1 January 2019 because the company has applied the simplified retrospective approach for its transition to the standard, with negative impact on equity due to the impairment of the right-of-use assets for certain point of sales for which the fixed assets were expected not to be recoverable. These deferred tax assets were not recognised in the balance sheet as they were not expected to be recoverable.
Future changes in lease liabilities and right-of-use assets, which each follow their own respective logic in terms of financial amortisation/straight-line depreciation will generate deferred taxes in subsequent periods. These deferred taxes will be recognised on a net basis (deferred tax asset or liability) for each contract if they are expected to be recoverable.
Inventories are stated at the lower of cost and net realisable value. Raw material stock value is determined on yearly weighted average cost basis. Stock values of work-in-progress and finished goods include costs of materials, direct labour, external manufacturing labour costs and an appropriate proportion of production overheads based on normal levels of activity. Where necessary, provision is made to reduce cost to no more than net realisable value having regard to the nature and condition of inventory, as well as its anticipated saleability. Provision is made for obsolete, slow-moving or defective items where appropriate.
Trade and other receivables are stated at their cost less impairment provisions.
The Group and the company apply the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due.
Trade and other payables are stated at their cost.
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, considering the risks and uncertainties surrounding the obligation.
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.
Contributions to defined contribution pension schemes are recognised as an employee benefit expense within personnel expenses in the income statement, as incurred.
The Group's net obligation in respect of defined benefit pension schemes is calculated separately for each scheme by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to its present value amount and recognised in the income statement as personnel expense; a corresponding liability for all future benefits is established on the statement of financial position and the fair value of any schemes' assets is deducted.
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. The Group and the company apply the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all loans and receivables. To measure the expected credit losses, loans and receivables have been grouped based on shared credit risk characteristics.
Interest income is recognised by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.
Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'.
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if:
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the 'other gains and losses' line item.
Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Revenue comprises the fair value of the sale of goods and services, net of value added tax, rebates and discounts and after eliminating sales within the Group.
The Group recognises revenue when performance obligations have been satisfied and for the Group this is when the goods have transferred to the customer and the customer has control of these. The Group's activities are described in detail below. The Group bases its estimate of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
The Group manufactures and sells a range of goods in the wholesale market. Sales are recognised when control of the products has transferred, being when the products are delivered to the wholesaler. The wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the wholesaler's acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the company has objective evidence that all criteria for acceptance have been satisfied. No element of financing is deemed present as the sales are made with a credit term, which is consistent with market practice. The Group's obligation to accept return, to repair or replace faulty products under the agreement terms is recognised as a provision.
No element of financing is deemed present as the sales are made with a credit term, which is consistent with market practice. The Group's obligation to accept return, to repair or replace faulty products under the agreement terms is recognised as a provision.
The Group operates a chain of retail stores and the revenue from the sale of goods is recognised when the goods are sold to the customer.
Payment of the transaction price is due immediately when the customer purchases the goods and takes delivery in store. Retail sales are usually in cash or by debit/ credit cards. It is the Group's policy to sell its products to the end customer with a right of return within 30 days. Accumulated experience is used to estimate such returns at the time of sale at a portfolio level (expected value method). Because the number of products returned has been steady for years, it is highly probable that a significant reversal in the cumulative revenue recognised will not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date. The Group's obligation to accept return, to repair or replace faulty products under the agreement terms is recognised as a provision.
Preparation of the consolidated financial statements in conformity with IFRS as adopted by the EU requires that management make certain judgements, estimates and assumptions that affect the reported assets and liabilities and the disclosure of contingent liabilities. If in the future such estimates and assumptions, which are based on management's best judgement at the date of the financial statements, deviate from actual circumstances, the original estimate and assumptions will be updated as appropriate in the period in which the circumstances change.
Estimates and Judgements are continually evaluated and are based in historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
In making their assessment of the going concern basis of accounting, the directors have considered the Group's existing cash position as of end of December 2021 and projected cash requirements for the years ending 31 December 2022 and 2023 which have been estimated by the shareholders and reviewed by the board together with the ability of the shareholders to make available sufficient funds to the Group to enable it to meet its liabilities and obligations as they fall due. The directors have also considered the financial impact of the restructuring of the Group's business operations by the shareholders which commenced in 2019 is expected to take place over the next few years to increase revenues and reduce costs to bring the group back into a cash-positive position. On this basis, due to the ongoing restructuring plan and uncertainties surrounding any implementation, the directors exercised their judgement to estimate the group's future cash requirements and the outcome and timing of the ongoing restructuring plan. As with all business plans actual results may therefore differ materially from expectations. During 2021 and 2022, the Company received a letter of financial support from the ultimate parent company, Tennor Holding B.V backed by a debt facility of up to €400 million, which will provide support for a period of at least 12 months from the date of approval of these financial statements. Whilst all the directors do not have visibility over Tennor Holding B.V.'s financial position, they are confident that Tennor Holding B.V. has the ability to provide all the necessary financial support. To date Tennor Holding B.V. has been able to provide financial support when required to support this assessment.
The Group manufactures and sells luxury intimate apparel and is subject to changing consumer demands and fashion trends. As a result, it is necessary to consider the recoverability of the cost of inventories and the associated provisioning required. When calculating the inventory provision, management considers the nature and condition of the inventory, as well as applying assumptions around anticipated saleability of finished goods and future usage of raw materials. Whilst the directors consider their assumptions to be realistic, the inventory provisioning is sensitive to external factors which are outside the control of the directors and may impact the future sales strategies and the recoverability of the inventories.
The Group is required to make an estimate of the recoverable value of trade and other receivables. When assessing impairment of trade and other receivables, management considers factors including the ageing profile of debtors as well as any specific known problems or risks. The Group and the Company apply the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due.
Given global economic conditions and the range of countries the Group trades in and operates, unanticipated future events may occur that could impact the appropriateness of the assessment made as to the recoverability of the Group's trade and other receivables. Refer to Note 17 and 18 for further details on the net carrying value and credit quality of trade and other receivables.
When applying IAS 36 Impairment of Assets, the Group compares the carrying value of tangible and intangible non-current assets with the higher of their net realisable value and value-in-use to determine whether an impairment exists. Impairment testing is an area requiring management judgement.
To determine the present value of expected future cash flows, certain assumptions have to be made in respect of uncertain matters including management's expectations of (a) the discount rates reflecting the risks involved; (b) the timing and quantum of capital expenditure; (c) short and long-term growth rates; and (d) the future development of the business.
Whilst the Directors consider their assumptions to be realistic, the Group's impairment evaluation is highly sensitive to actual results and factors outside of the control of the Directors, including the ability of the Group to secure sufficient funding to be able to fulfil the financial projections and continue as a going concern, and if those differed from expectations the Group's impairment could be affected. In addition, the use of different estimates, assumptions and judgements, in particular those involved in (a) determining a value based on our current expectations of future conditions and the associated cash flows from the Group's operations, (b) our determination of the level at which groups of assets can be reasonably tested for impairment separately from other parts of the business, and (c) our treatment of centrally held assets, could each result in material differences in the carrying values of assets and assessments of impairment.
In order to identify the carrying value of the intangible asset "brands" acquired of € 24.3 million, management is required to estimate the value-in-use and either uses an appraisal from independent third party or perform an independent valuation based on relief from royalty method.
Management will continue to review the key estimates and assumptions used, against both actual experience and market data, and adjustments will be made in future periods where appropriate.
Amounts due from group companies are stated initially at fair value and subsequently at amortised cost. Amortised cost is determined using the effective interest rate method. The Company recognises a credit loss for financial assets (such as a loan) based on an expected credit loss (ECL) which will occur in the next twelve months or, after a significant decrease in credit quality or when the simplified model can be used, based on the entire remaining loan term. Recognition of an ECL for intercompany receivables could result in differences between equity recognised in the consolidated and separate Company financial statements that would be reversed in profit and loss.
At 31 December 2021, the management booked impairment losses related to intercompany loans and receivables amounting to € 0.7 million (2020: € nihil). The impairment losses reflect the reduction of the realisable value of intercompany loans with respect to the carrying amount in order to restore the shareholder's deficiency of the subsidiaries.
The Group's defined benefit obligation of € 3.9 million is discounted at a rate set by reference to market yields at the end of the reporting period on high quality corporate bonds. Significant judgement is required when setting the criteria for bonds to be included in the population from which the yield curve is derived. The most significant criteria considered for the selection of bonds include the issue size of the corporate bonds, quality of the bonds and the identification of outliers which are excluded.
The Group is required to make estimates and critical judgment in the application of the IFRS 16. The main assumptions made by the Group are detailed in the specific section of the IFRS 16 - First Time Application. In particular, leases with a lease term of less than 12 months and leases for which the underlying asset value is less than the equivalent of € 5.0 thousand, have been excluded. A discount rate of 7.25% has been applied in calculating the values to be used, being the rate applicable to all Group borrowings from La Perla Fashion Finance B.V., its sole source of borrowings. The lease terms considered are the noncancellable periods together with any periods covered by an option to extend where the Group is reasonably certain to extend that term.
Revenues of the year amount to € 72.1 million (2020: € 66.2 million) and include sales as follows:
| 2021 | 2020 | |||
|---|---|---|---|---|
| € 000 | % | € 000 | % | |
| Continuing operations | ||||
| Net sales | 71,583 | 99.2% | 65,853 | 99.4% |
| Royalties and other income | 565 | 0.8% | 384 | 0.6% |
| 72,148 | 100.0% | 66,237 | 100.0% | |
| 5. Cost of sales |
||||
| 2021 | 2020 | |||
| € 000 | % | € 000 | % | |
| Cost of goods sold (raw materials | ||||
| and manufacturing costs) | (22,477) | 80.0% | (24,918) | 81.6% |
| Indirect production costs | (5,634) | 20.0% | (5,635) | 18.4% |
| (28,111) | 100.0% | (30,553) | 100.0% |
Cost of inventories included in cost of sales amounts to € 22.5 million (2020: € 24.9 million) and reversal of write-downs of inventories amounts to € 2.4 million (2020: € 9.6 million).
The impacts arising from the Covid-19 pandemic have been recognized in the income statement for the year ended 31 December 2021 and essentially affect recurring operating income. In particular, the costs related to health measures put in place (purchases of hand sanitizer and face masks, additional measures for regularly disinfecting premises, etc.) have been accounted for as recurring expenses.
During the period the group benefited from € 0.3 million (2020: € 0.2 million) of government grants in the form of the Job Retention Scheme in UK. In addition, the subsidiaries also benefitted from personnel cost reductions for a total amount of € 5.9 million (2020: €4.2 million) due to Government assistances around the world. In accordance with accounting policy (t), this credit is included in the Income Statement over the same period as the staff costs for which it compensates.
During the period the group benefited from government assistance in the form of Business Rates Relief. This provided a 100% relief for the group's qualifying properties. Without this relief it is estimated that business rates of € 0.3 million (2020: €0.3 million) would have been recognised within the Income Statement in the period.
In addition, the group benefitted from other government assistances for € 0.4 million (2020: € 0.3 million) as form of contribution and health measures put in place.
The rent concessions negotiated with lessors due to the consequences of the Covid-19 pandemic were immediately recognized in the income statement as negative variable lease payments rather than as an amendment to the associated leases. This accounting method complies with the simplification measure provided for in the Amendment to IFRS 16 – Leases, issued by the IASB on May 28, 2020 and adopted by the European Union on 9 October 2020.
| 2021 | 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Fees payables to the company's auditor and their associates | ||
| for the audit of the company's annual accounts | (38) | (38) |
| Fees payables to the company's auditor and other audit firms | ||
| for the audit of the company's subsidiaries | (504) | (457) |
| (542) | (495) |
The Group financial statements also include € 1 (2020: € 1) of audit fees payable to other audit companies.
The average number of persons employed by the company including directors, during the year was as follows:
| 2021 | 2020 | |
|---|---|---|
| n°. | n°. | |
| Executive | 40 | 38 |
| Manager & Employees | 692 | 737 |
| Factory workers | 349 | 429 |
| 1,081 | 1,204 | |
| The aggregate payroll costs were as follows: | ||
| 2021 | 2020 | |
| € 000 | € 000 | |
| Wages and salaries | (38,696) | (37,392) |
| Social security costs | (6,467) | (6,323) |
| Other personnel costs | (5,434) | (5,539) |
| (50,597) | (49,253) | |
| In 2021 the directors' remuneration amounts to € nil (2020: € nil). | ||
| 9. Financial income/(expenses) | ||
| 2021 | 2020 | |
| € 000 | € 000 | |
| Interest expense on bank facilities and loans | (9) | (2) |
| Interest expense on loan from related parties and others | (17,475) | (13,899) |
| Interest on financial lease liabilities | (3,421) | (5,846) |
|---|---|---|
| Other charges | (255) | (523) |
| Interest income from other non-current assets | 5 | 7 |
| Gain (loss) foreign exchange transaction | 3,120 | (4,673) |
| (18,035) | (24,936) |
Interest on loans from related parties and others comprised interest and fees on the shareholder loans in accordance the Financing Agreement in place with La Perla Fashion Finance B.V. and one of the beneficial owners, Lars Windhorst.
Other income and expenses relate to miscellaneous income of € 17.3 million (2020: € 3.1 million). The increase in 2021 mainly refers to lease agreement closure occurred during the year in Paris and in particular the Faubourg boutique.
| 2021 | 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Corporation Tax | ||
| Current year | (357) | 215 |
| Adjustments in respect of prior years | (98) | 8 |
| (455) | 223 | |
| Deferred tax | (50) | (23) |
| (505) | 200 | |
The tax expense for the year is as follows:
| 2021 | 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Profit/(loss) before tax | (44,822) | (136,566) |
| Income tax at the domestic corporation tax rate of 25% (2020: 25%) | 8,516 | 34,142 |
| Effects of: | ||
| Change in unrecognised part of deferred tax assets | (8,445) | (25,257) |
| Write-off of tax loss carried forward | (192) | (256) |
| Effect of tax rates in overseas jurisdictions | 119 | (7,872) |
| Expenses non-deductible for tax purposes | (394) | (351) |
| Other | (109) | (205) |
| Tax expense for the year | (505) | 200 |
The Corporation tax rate in the Netherlands is 25%. As at 31 December 2021, the unrecognised tax assets at Group level amounted to € 158.1 million (2020: € 142.5 million).
| Industrial | Concessions, | |||||
|---|---|---|---|---|---|---|
| patens & software |
licences & | Other | Assets under | |||
| trademarks | Key money | intangibles | construction | |||
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | |
| Cost | ||||||
| At 1 January 2020 | 4,873 | 35,709 | 11,603 | 3,156 | - | 55,341 |
| Additions | 1,951 | 11 | - | 209 | 3,304 | 5,475 |
| Disposals | - | - | - | - | - | - |
| Currency translation | (17) | (1) | (16) | (36) | - | (70) |
| Impairment | (1,585) | (8) | (8,217) | (2,350) | - | (12,160) |
| Reclassification | - | - | - | (192) | - | (192) |
| At 31 December 2020 | 5,222 | 35,711 | 3,370 | 787 | 3,304 | 48,394 |
| Depreciation | ||||||
| At 1 January 2020 | (3,930) | (8,575) | (11,603) | (2,984) | - | (27,092) |
| Charge for the year | (600) | (1,429) | - | (81) | - | (2,110) |
| Disposals | 1,541 | 8 | 8,217 | 2,346 | - | 12,112 |
| Currency translation | 16 | - | 16 | 34 | - | 66 |
| Impairment | (1,880) | - | - | - | (3,304) | (5,184) |
| Reclassification | - | - | - | 106 | - | 106 |
| At 31 December 2020 | (4,853) | (9,996) | (3,370) | (579) | (3,304) | (22,102) |
| Net book value | ||||||
| 31 December 2020 | 369 | 25,715 | - | 208 | - | 26,292 |
| Cost | ||||||
| At 1 January 2021 | 5,222 | 35,711 | 3,370 | 787 | 3,304 | 48,394 |
| Additions | 1,334 | 1,001 | - | 221 | 1,323 | 3,879 |
| Disposals | - | - | - | - | - | - |
| Currency translation | (179) | - | (800) | - | - | (979) |
| Impairment | 10 | - | 97 | 30 | - | 137 |
| Reclassification | - | 208 | - | - | (208) | - |
| At 31 December 2021 | 6,387 | 36,920 | 2,667 | 1,038 | 4,419 | 51,431 |
| Depreciation | ||||||
| At 1 January 2021 | (4,853) | (9,996) | (3,370) | (579) | (3,304) | (22,102) |
| Charge for the year | (142) | (1,428) | - | (50) | - | (1,620) |
| Disposals | - | - | - | - | - | - |
| Currency translation | (9) | - | (97) | (29) | - | (135) |
| Impairment | 169 | - | 800 | - | - | 969 |
| Reclassification | - | - | - | - | - | - |
| At 31 December 2021 | (4,835) | (11,424) | (2,667) | (658) | (3,304) | (22,888) |
| Net book value | ||||||
| 31 December 2021 | 1,552 | 25,496 | - | 380 | 1,115 | 28,543 |
During the year retail Fixtures and Fittings previous recorded under other intangible assets in the Far East were reclassified to tangible assets (see note 14).
The value of brands was defined on the acquisition of La Perla S.r.l. by the Italian subsidiary La Perla Manufacturing S.r.l. (previously named "La Perla Global Management S.r.l."), on the basis of an appraisal made by a consultant appointed by the Italian Court in June 2013. The estimated value was confirmed by an internal evaluation made in accordance with the "Relief from Royalty Method". The amount of € 35.7 million refers to the value of all the brands acquired during 2013 along with the business (net book value as at 31 December 2021 is € 24.3 million).
The carrying value of the remaining intangible fixed assets and the value-in-use of tangible fixed assets were subject to an impairment test at year-end. In accordance with IAS 36, in the analysis of the value for the impairment test the discounted cash flow method was used. This criterion is based on the general concept that the value of an enterprise ("Enterprise Value") is equal to the discounted value of the following two elements:
The discount rate from the operating cash flows considered is the weighted average cost of capital ("WACC"). The WACC is the weighted average cost of own capital and debt, based on the average financial structure of comparable groups. In addition to the cash flows expected for the period 2022 to 2026, those relating to the so-called Perpetuity criteria establishing the Terminal Value are considered.
The discount rate utilised, as well as the medium-long term growth rate "g", was determined based on the country risk where the Group operates. Key assumptions of the impairment test performed were as follows:
Under the parameters described above, the result for the Group was positive, highlighting a differential between the value-in-use based on the parameters outlined above and the corresponding carrying value.
The Plan utilised for the test reflects the results which Group Management expects to develop in the coming years from the restructuring process ongoing. The implementation of this plan, along with the ability of the Group to secure sufficient funding to be able to fulfil its financial projections will allow the Group to rebalance its capital, financial and income structure in the medium to long term.
A sensitivity analysis was carried out according to various risk scenarios in the period of the plan by decreasing the Group marginality during the years of the plan for performing worse case analysis, with positive results. The situation caused by the current economic and financial crisis resulted in the need to make assumptions on a future outlook characterised by significant uncertainty, for which it cannot be excluded that results in the near future will be different from such estimates and which therefore could require adjustment. If the long-term growth rate was reduced by 1%, or if the estimated discount rates applied to the cash flows were increased by 1%, there would still be headroom to support the carrying value of the assets.
| Right-of-use assets | |
|---|---|
| € 000 | |
| Cost | |
| At 1 January 2020 | 79,807 |
| Additions | 8,046 |
| Disposals and amendments | (25,578) |
| Currency translation | (1,468) |
| At 31 December 2020 | 60,807 |
| Amortisation | |
| At 1 January 2020 | (17,589) |
| Charge for the year | (15,392) |
| Disposals and amendments | 8,640 |
| Impairment | (36,384) |
| Currency translation | 494 |
| At 31 December 2020 | (60,231) |
| Net book value at 31 December 2020 | 576 |
| Cost | |
| At 1 January 2021 | 60,807 |
| Additions | 7,350 |
| Disposals and amendments | (19,011) |
| Currency translation | 2,229 |
| At 31 December 2021 | 51,375 |
| Amortisation | |
| At 1 January 2021 | (60,230) |
| Charge for the year | (2,177) |
| Disposals and amendments | 19,011 |
| Impairment | (87) |
| Currency translation | (2,107) |
| At 31 December 2021 | (45,591) |
| Net book value at 31 December 2021 | 5,784 |
Based on the annual impairment review at 31 December 2020, the net book value of right of use assets at 31 December 2020 was entirely impaired by € 36.4 million. Moreover at 31 December 2021, the net book value of the right of use was additionally impaired for € 0.1 million.
| Machinery | Retail | Leasehold | Con | ||||
|---|---|---|---|---|---|---|---|
| Land and | and | Fixtures | fixtures and | improve | struction in | ||
| buildings | equipment | and tools | fittings | ments | progress | Total | |
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | |
| Cost | |||||||
| At 1 January 2020 | 3,161 | 3,334 | 9,724 | 7,451 | 13,762 | 19 | 37,451 |
| Additions | 2 | 60 | 730 | 639 | 2,640 | - | 4,071 |
| Disposals | - | (5) | (3) | (1,475) | (4,837) | (3) | (6,323) |
| Currency translation | - | (4) | (225) | (349) | (1,181) | - | (1,759) |
| Reclasses | - | - | 226 | (68) | 34 | - | 192 |
| At 31 December 2020 | 3,163 | 3,385 | 10,452 | 6,198 | 10,418 | 16 | 33,632 |
| Depreciation | |||||||
| At 1 January 2020 | (492) | (1,787) | (9,106) | (5,201) | (8,587) | - | (25,173) |
| Charge for the year | (146) | (338) | (274) | (650) | (1,637) | - | (3,045) |
| Disposals and write-off | - | 4 | - | 1,452 | 4,398 | - | 5,854 |
| Impairment | (2,525) | (1,241) | (607) | (1,919) | (5,661) | (16) | (11,969) |
| Currency translation | - | 4 | 186 | 326 | 1,069 | - | 1,585 |
| Reclasses | - | - | - | (106) | - | - | (106) |
| At 31 December 2020 | (3,163) | (3,358) | (9,801) | (6,098) | (10,418) | (16) | (32,854) |
| Net book value | |||||||
| 31 December 2020 | - | 27 | 651 | 100 | - | - | 778 |
| Cost | |||||||
| At 1 January 2021 | 3,163 | 3,385 | 10,452 | 6,198 | 10,418 | 16 | 33,632 |
| Additions | - | 81 | 515 | 683 | 2,044 | - | 3,323 |
| Disposals | - | (19) | (47) | (7) | (4) | (16) | (93) |
| Currency translation | - | 5 | 245 | 369 | 1,508 | - | 2,127 |
| Reclasses | - | 791 | (4,752) | 3,591 | - | - | (370) |
| At 31 December 2021 | 3,163 | 4,243 | 6,413 | 10,834 | 13,966 | - | 38,619 |
| Depreciation | |||||||
| At 1 January 2021 | (3,163) | (3,358) | (9,801) | (6,098) | (10,418) | (16) | (32,854) |
| Charge for the year | - | (18) | (114) | (118) | (330) | - | (580) |
| Disposals and write-off | - | - | 39 | - | 3 | 16 | 58 |
| Impairment | - | (9) | (7) | (97) | (172) | - | (285) |
| Currency translation | - | (5) | (243) | (362) | (1,426) | - | (2,036) |
| Reclasses | - | (791) | 4,382 | (3,591) | - | - | - |
| At 31 December 2021 | (3,163) | (4,181) | (5,744) | (10,266) | (12,343) | - | (35,697) |
| Net book value | |||||||
| 31 December 2021 | - | 62 | 669 | 568 | 1,623 | - | 2,922 |
This caption mainly includes leasehold improvements, boutique and offices' furniture and equipment used in the production process.
As described in Note 12, the value-in-use of tangible fixed assets was subject to an impairment test at year-end. The discount rate utilised, as for the medium-to long-term growth rate "g", was established based on the country risk where the Group operates. The key assumptions of impairment test performed were:
The result for the Group was positive, highlighting a differential between the value-in-use based on the parameters outlined above and the corresponding value.
A sensitivity analysis was carried out according to various risk scenarios in the period of the plan by decreasing the Group marginality during the years of the plan for performing worse case analysis, with positive results. If the long-term growth rate was reduced by 1%, or if the estimated discount rates applied to the cash flows were increased by 1%, there would still be headroom to support the carrying value of the assets.
Other non-current assets, amounting to € 5.7 million as at 31 December 2021 (31 December 2020: € 5.9 million) mainly includes guarantee deposits for store rents in various countries and for utilities and financial assets for a store sublease.
| 31 December 2021 | 31 December 2020 | |||
|---|---|---|---|---|
| € 000 | % | € 000 | % | |
| Raw materials and consumables | 4,654 | 19.6% | 1,444 | 5.3% |
| and semi-finished goods | 846 | 3.6% | 393 | 1.4% |
| Finished goods | 16,821 | 70.7% | 25,471 | 92.9% |
| Advances | 1,445 | 6.1% | 102 | 0.4% |
| 23,766 | 100.0% | 27,410 | 100.0% |
There is no material difference between the balance sheet value of stocks and their replacement cost. The amount of inventory at the year-end includes a reserve for obsolescence risk amounting to € 20.1 million made up of € 10.9 million for raw materials and € 9.2 million for finished goods (2020: € 23.1 million made up of € 12.7 million for raw materials and € 10.4 million for finished goods). At the year-end finished goods available for sale amount to € 15.3 million or 77% of the total inventory value (2020: € 25.5 million or 93% of the total inventory amount). Raw materials, work in progress and advances to suppliers relate to lines that will be available for sale in 2022.
As at 31 December 2021, total net inventory is € 23.8 million (31 December 2020: € 27.4 million) and it is aligned at its fair value, with a decrease of € 3.6 million compared with 2020. The decrease is mainly due to the application of the new Group sales strategy.
| 31 December 2021 | 31 December 2020 | ||
|---|---|---|---|
| € 000 | € 000 | ||
| Trade receivables at nominal amount | 8,752 | 7,337 | |
| Accrual for bad debt provision | (1,328) | (1,336) | |
| 7,424 | 6,001 |
The carrying value of trade receivables approximates their fair value after an accrual for bad debt provision amounting to € 1.3 million (31 December 2020: € 1.3 million). Before accepting any new customer, the Group uses an external resource to assess the potential customer's credit quality and financial reliability.
The Group applies the IFRS 9 simplified approach to measuring the loss allowance on trade receivables from the date credit was initially granted up to the end of the reporting period. To measure the loss allowance, trade receivables are grouped based on similar credit risk and aging. The concentration of credit risk is limited due to the fact that the customer base is large and unrelated.
Movement in bad debt provision:
| 2021 | 2020 |
|---|---|
| € 000 | € 000 |
| 1,336 | 2,252 |
| (305) | (812) |
| 297 | (104) |
| 1,328 | 1,336 |
The bad debt provision is sufficient to cover the expected credit losses.
| 31 December 2021 | 31 December 2020 | ||
|---|---|---|---|
| € 000 | € 000 | ||
| Other current assets | 3,416 | 2,378 | |
| Accrued income and prepaid expenses | 1,635 | 5,604 | |
| VAT receivable | 845 | 3,099 | |
| 5,896 | 11,081 |
Accrued income and prepaid expenses mainly related to the stores' lease agreements.
The carrying amount of cash and cash equivalents is deemed to reflect its fair value.
| 31 December 2021 | 31 December 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Bank and postal account | 7,161 | 7,508 |
| Cash on hand | 77 | 132 |
| 7,238 | 7,640 |
Cash and cash equivalents of the Group as at 31 December 2021 amount to € 7.2 million (31 December 2020: € 7.6 million) and are mainly composed of bank and postal accounts. The changes in liquidity are illustrated in the cash flow statement. The above amount includes € 0.1 million (31 December 2020: € 2.3 million) of cash deposits that guarantees the rent obligations under lease agreements.
| 31 December 2021 | 31 December 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Unsecured at amortised cost | ||
| Loans from: | ||
| Related parties | 283,790 | 204,608 |
| Banks | 860 | 417 |
| Bank overdraft | 7 | 11 |
| Total Borrowings | 284,657 | 205,036 |
| Non-current | 274,444 | 205,025 |
| Current | 10,214 | 11 |
| Total Borrowings | 284,658 | 205,036 |
As at 31 December 2021, the Group presents a total financial indebtedness of € 284.7 million (31 December 2020: € 205.0 million). Current borrowings amounted to € 10.2 million (31 December 2020: € nihil) while the non-current borrowing position amounted to € 274.4 million (2020: €205.0 million). The detail of the borrowings is provided below.
The loans from related parties refers to the facilities received from La Perla Fashion Finance B.V. amounting to € 247.1 million (31 December 2020: € 196.8 million), from Tennor Holding B.V. € 26.6 million (31 December 2020: € 7.8 million) and from Lars Windhorst 10.1 million (31 December 2020: € 0).
Borrowings with related parties are denominated in Euros. The non-current borrowings bear interest at 7.25% plus 1% fee on facility amounts and are due for repayment in 2023.
Loan from bank was received by the Portuguese subsidiary as a measure of financial support to facilitate the cash management of the subsidiary during the pandemic situation caused by Covid-19. In 2021 the company reimbursed the Swiss subsidiary loan from bank that was received in 2020.
The short-term borrowings increased in 2021 for €10.1m due to the issuing of new financing from one of the beneficiary owners, Lars Windhorst through a drawdown dated November 2021. The long-term borrowings increased in 2021 mainly as consequence of the issuing of new financing from La Perla Fashion Finance B.V. through 14 instalments.
Changes in loan amounts incurred in 2021 and 2020 are:
| 2021 € 000 |
2020 € 000 |
|
|---|---|---|
| Total short-term loan | ||
| At 1 January | 11 | - |
| Loans advanced from banks during the year | 116 | 11 |
| Loans advanced from related parties during the year | 10,000 | - |
| Financial costs incurred | 87 | - |
| At period end | 10,214 | 11 |
| 2021 | 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Total long-term loan | ||
| At 1 January | 205,025 | 132,650 |
| Loans advanced from related parties during the year | 51,709 | 59,056 |
| Loans advanced from banks during the year | 741 | 417 |
| Reimboursment of loan to bank | (418) | - |
| Financial costs incurred | 17,387 | 12,902 |
| At period end | 274,444 | 205,025 |
The Group as at 31 December 2021 has provisions of € 9.1 million (31 December 2020: € 10.3 million), of which € 3.6 million are current (31 December 2020: € 3.5 million) and € 5.5 million are non-current (31 December 2020: € 6.8 million). The nature of the provisions is detailed below:
| 31 December 2021 | 31 December 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Provisions | ||
| Allowance for sales return | 829 | 800 |
| Layoff, restructuring and other charges | 1,700 | 2,052 |
| Provision for restoration | 3,834 | 4,337 |
| Restructuring | 2,275 | 2,275 |
| Litigation (agents) | 20 | 420 |
| Litigation (employee) | 231 | 281 |
| Litigation (suppliers) | 167 | 138 |
| 9,056 | 10,303 | |
| Non-current | 5,504 | 6,760 |
| Current | 3,552 | 3,543 |
| 9,056 | 10,303 |
The provision for sales returns € 0.8 million as at 31 December 2021 (31 December 2020: € 0.8 million) refers to the expected amount of returns from clients related to goods supplied by the Group in the last two months of the 2021 financial year. This amount has been evaluated based on historical data.
The provision for restoration costs amounting to € 3.8 million (2020: € 4.3 million) includes the estimated cost of restoring the leased assets where required by the terms and conditions of the lease agreements.
The provision for restructuring amounting to € 2.3 million (2020: € 2.3 million) includes the costs to be incurred for the reorganisation plan of the Italian subsidiaries.
Provisions for litigation costs relate to the costs expected to be incurred in closing litigation claims existing at the year end. These are related to agents for an amount of nihil (2020: € 0.4 million), employees € 0.2 million (2020: 0.3 million) and suppliers € 0.2 million (2020: € 0.1 million).
Current portion consists of allowance for sales returns, restructuring, litigation with employees and € 50,000 of layoff and other charges.
Deferred tax liabilities amount to € 165 as at 31 December 2021 (31 December 2020: € 103) and relates mainly to the value of unrealised exchange gains.
Other non-current liabilities include other employee benefits granted to Group employees in Europe and comprise, amongst others, the Italian TFR with an obligation at 31 December 2021 of € 3.9 million (31 December 2020: € 3.9 million) and the French severance indemnities. These indemnities are the residual obligation of the benefit due to employees of the Italian company up until 31 December 2006 having more than 50 employees and accrued over the employee's working life and settled when an employee leaves the Group.
The main assumptions used in developing the required estimates for other post-employment benefits include the discount rate, the retirement or employee leaving rate and the mortality rates.
The main assumptions used for the purposes of the actuarial valuations were as follows:
| 31 December 2021 | 31 December 2020 | |
|---|---|---|
| Employee leaving Indemnity (Italy) | ||
| Discount rate | 0.44% | 0.02% |
| Annual increase in cost of living | 1.20% | 1.00% |
| Expected rate of employee turnover | 2.40% | 2.25% |
| Probably of death | ||
| - For a male aged 50 now | 19% | 19% |
| - For a female aged 46 now | 19% | 9% |
| Average age (years) | ||
| Males | 51.34 | 49.14 |
| Females | 47.31 | 46.02 |
| Average working seniority (years) | ||
| Males | 22.01 | 18.90 |
| Females | 18.59 | 17.01 |
The discount rates used for the measurement of the Italian TFR obligation are based on yields of high-quality (AA rated) fixed income securities for which the timing and amounts of payments match the timing and amounts of the projected benefit payments. For this plan, the single weighted average discount rate that reflects the estimated timing and amount of the scheme future benefit payments for 2021 is equal to 0.44%. The average duration of the Italian TFR is approximately 10 years. Retirement or employee leaving rates are developed to reflect actual and projected Group experience and law requirements for retirement in Italy. The effect on the TFR obligation of 0.5% increase or decrease in the assumed discount rate, holding all other assumption constant, is € (158) and € 168, respectively.
For further details please refer to Note 29 to the consolidated financial statements.
Trade accounts payable of the Group amounted to € 11.5 million as at 31 December 2021 (31 December 2020: € 20.6 million). The average credit period on purchases of goods and services for the Group is between 60 and 90 days. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.
Below are the details of other current liabilities as at 31 December 2021:
| 31 December 2021 | 31 December 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Other payables | 4,921 | 4,956 |
| Payables for social security | 2,702 | 3,285 |
| Accrued expenses and deferred income | 3,692 | 1,731 |
| Prepayment | 11 | 5 |
| VAT payable | 1,718 | 2,777 |
| 13,044 | 12,754 |
Other payables represent, mainly, wages and salaries payable.
Group net debt at 31 December 2021 is € 291.9 million (31 December 2020: € 197.4 million). Group borrowings are almost entirely relates to La Perla Fashion Finance B.V. An additional €10.1m loan was issued in 2021 with the beneficiary owner, Lars Windhorst.
| 31 December 2021 | 31 December 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Long term borrowings | 274,444 | 205,025 |
| Short term borrowings | 10,214 | 11 |
| Cash and cash equivalents | 7,238 | (7,640) |
| Net debt | 291,896 | 197,396 |
For further details on borrowings please refer to Note 20 of the consolidated financial statements.
The equity of the Group as at 31 December 2021 amount to € 288.0 million negative (31 December 2020: € 236.0 million negative).
| 2021 | 2020 | |
|---|---|---|
| n° 000 | n° 000 | |
| Balance at 1 January | 1,051 | 1,051 |
| Issued during the year | - | - |
| Balance at 31 December | 1,051 | 1,051 |
The share capital as at 31 December 2021 amounts to € 1,051 and consists of authorised, issued and fully paid 105,111,112 shares of € 0.01 per share.
Share premium Movement in share premium:
| 31 December 2021 | 31 December 2020 | ||
|---|---|---|---|
| € 000 | € 000 | ||
| Balance at 1 January | 21,741 | 21,741 | |
| Issuance of share capital | - | - | |
| Transaction costs for issued share capital | - | - | |
| Balance at 31 December | 21,741 | 21,741 |
Translation reserve
The translation reserve compromises of the exchange impact of the translation of the operation occurred in foreign currency.
Other reserves
The cumulated effect of actuarial gain and loss generated by the application of IAS 19.
Retained earnings
The retained earnings consists of the accumulated gains and losses over the previous years.
The changes in the shareholders' equity are illustrated in the equity statement of consolidated financial statements. As at 31 December 2021 and 2020, shareholders and the companies of the Group did not hold any treasury shares.
The Group provided bank guarantees of € 0.1 million as at 31 December 2021 (2020: € 2.3 million).
The table below shows the composition of the employee benefits as at 31 December 2021:
| 31 December 2021 | 31 December 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Employee leaving Indemnity (Italy) | 3,802 | 3,886 |
| Pension and good service bonus (France) | 50 | 50 |
| 3,852 | 3,936 |
Employee leaving indemnity is considered a liability with specific benefits that are to be accounted for according to IAS 19, and therefore the related liability is determined using actuarial techniques. The main assumptions used in the determination of the current value of the employee leaving indemnity are illustrated in Note 23.
The annual discount rate utilised for the valuation of employee leaving indemnity as at 31 December 2021 was based on the weighted average of the iBoxx Eurozone Corporates AA 7- 10 rates in 2021.
Amounts recognised in income in respect of these defined benefit scheme are as follows:
| 2021 | 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Service cost | ||
| Current service cost | 1,132 | 1,135 |
| Net interest expense | (1) | 16 |
| Components of defined benefit costs recognised in profit and loss | 1,131 | 1,151 |
Of the expense (service cost) for the year, € 1.1 million (2020: € 1.2 million), has been mainly included in the income statement
as a selling expense. The net interest expense has been included within finance costs. The re-measurement of the net defined benefit liability is included in the statement of comprehensive income.
Amount recognised in the statement of comprehensive income are as follows:
| 2021 | 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Actuarial gains and losses arising from changes in financial assumptions | (115) | 133 |
| Acturial gains and losses arising from experience adjustment | 103 | (41) |
| Remeasurement of the net defined benefit liability | (12) | 92 |
Movements in the present value of defined benefit obligations in the year were as follows:
| 2021 | 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Opening defined benefit obligation | 3,936 | 4,709 |
| Current service cost | 1,132 | 1,135 |
| Interest cost | (1) | 16 |
| Actuarial gains and losses arising from changes in financial assumptions | (115) | 134 |
| Acturial gains and losses arising from experience adjustment | 103 | (41) |
| Benefit paid | (1,203) | (2,017) |
| Closing defined benefit obligation | 3,852 | 3,936 |
The provision allocated by the Group's French subsidiary in applying French legislation with regards to employee severance indemnities is € 50 (2020: € 50). This provision is considered a defined benefit obligation and recognised in accordance with IAS 19.
Future cash flows of the benefit obligation
| 31 December 2021 | 31 December 2020 | ||
|---|---|---|---|
| € 000 | € 000 | ||
| Within one year | 105 | 125 | |
| Between 2 and 5 years | 556 | 618 | |
| Between 5 and 10 years | 1,949 | 1,615 | |
| Closing defined benefit obligation | 2,610 | 2,358 |
There were no events subsequent to the year end to report.
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.
During the year, group entities did not enter into trading transactions with related parties that are not members of the Group.
The Group has not provided any loans to related parties or to its key management personnel, while it has received loans from related parties as described in Note 20 Borrowings.
List of Group entities as of 31 December 2021:
| Name | Country of incorporation or legislation | Ownership % |
|---|---|---|
| La Perla Global Management (UK) Limited | United Kingdom | 100% |
| La Perla Beauty (UK) Limited | United Kingdom | 100% |
| La Perla Manufacturing S.r.l | Italy | 100% |
| La Perla Italia S.r.l. | Italy | 100% |
| Gruppo La Perla Deutschland GmbH | Germany | 100% |
| La Perla Store France S.à.r.l. | France | 100% |
| Gruppo La Perla Fashion España SA | Spain | 100% |
| La Perla Portugal LDA | Portugal | 100% |
| La Perla Store España SA | Spain | 100% |
| La Perla (UK) Ltd. | United Kingdom | 100% |
| La Perla North America Inc. | United States | 100% |
| La Perla Store Suisse SA | Switzerland | 100% |
| La Perla Far East Ltd. | Hong Kong | 100% |
| La Perla Asia Pte LTD | Singapore | 100% |
| La Perla Beijing Trading Co. LTD | China | 100% |
| La Perla Shanghai Trading Co. Ltd. | China | 100% |
| La Perla Korea Ltd. | Korea | 100% |
| La Perla Malaysia SDN. BHD. | Malaysia | 100% |
| La Perla Macau Limited | Macau | 100% |
| La Perla Japan KK | Japan | 100% |
| LPGM Middle East Readymade Garments Trading LLC U.A. | Emirates | 100% |
| La Perla Mexico S.A. | Mexico | 100% |
Approved by the Board of Managing Directors on 30 December 2022 and is signed on its behalf by:
Approved by the Supervisory Board on 30 December 2022 and is signed on its behalf by:
E. Speight
| 2021 | 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Result from investments after tax | (1,660) | (1,668) |
| Result from operations after tax | 1,139 | 1,094 |
| Profit/(loss) for the year | (521) | (574) |
For the year ended 31 December 2021
After appropriation of the result
| Notes | 31 December 2021 | 31 December 2020 | |
|---|---|---|---|
| € 000 | € 000 | ||
| Non-current assets | 3 | - | - |
| Current Assets | |||
| Other current assets | - | - | |
| Cash and cash equivalents | 4 | 29 | 29 |
| Total current assets | |||
| Non-current liabilities | |||
| Long term borrowings | 5 | 1,129 | 921 |
| Total non-current liabilities | 1,129 | 921 | |
| Current liabilities | |||
| Trade payables | 240 | - | |
| Other current liabilities | 73 | - | |
| Total current liabilities | 313 | - | |
| Net assets/(liabilities) | (1,413) | (892) | |
| Equity | |||
| Share capital | 6 | 1,051 | 1,051 |
| Share premium | 6 | 21,741 | 21,741 |
| Other reserves | 6 | (8,639) | (8,651) |
| Cumulative translation adjustment | 6 | (731) | 5,977 |
| Retained earnings | 6 | (14,835) | (21,010) |
| Total Equity | (1,413) | (892) |
For the year ended 31 December 2021
| Share capital | Share premium |
Translation reserve |
Other reserves |
Retained earnings |
Total equity | |
|---|---|---|---|---|---|---|
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | |
| Balance at | ||||||
| 1 january 2020 | 1,051 | 21,741 | (189) | (8,559) | (14,362) | (318) |
| Comprehensive income | ||||||
| Profit/(loss) for the period | - | - | - | - | (574) | (574) |
| Other comprehensive | ||||||
| income | - | - | 6,166 | (92) | (6,074) | - |
| Total comprehensive | ||||||
| income | - | - | 6,166 | (92) | (6,648) | (574) |
| Balance at | ||||||
| 31 December 2020 | 1,051 | 21,741 | 5,977 | (8,651) | (21,010) | (892) |
| Comprehensive income | ||||||
| Profit/(loss) for the period | - | - | - | - | (521) | (521) |
| Other comprehensive | ||||||
| income | - | - | (6,708) | 12 | 6,696 | - |
| Total comprehensive | ||||||
| income | - | - | (6,708) | 12 | 6,175 | (521) |
| Balance at | ||||||
| 31 December 2021 | 1,051 | 21,741 | (731) | (8,639) | (14,835) | (1,413) |
La Perla Fashion Holding N.V. ("the Company") is a public company with limited liability, incorporated under the laws of The Netherlands on 9 September 2016. The Company's registered office is Schiphol Boulevard 127 1118 BG Schiphol, the Netherlands. The company is registered at the Chamber of Commerce at 66809681.
La Perla Fashion Holding N.V. and its Subsidiaries (hereinafter the "Group") operate in the markets of luxury women's and men's underwear and swimwear (hereinafter the "Business"). The activities of design, production and sale (through retail and wholesale channels) are performed by the Group through its network of subsidiaries.
The direct subsidiaries La Perla Global Management (UK) Ltd and La Perla Beauty (UK) Ltd are the Principals in all intercompany transactions, purchasing goods from the manufacturing entity of the Group and reselling those to the distributors and the commercial subsidiaries.
The financial statements of La Perla Fashion Holding N.V. for the year ended 31 December 2021 were prepared by management and authorised for issue in accordance with a resolution of the Board of Managing Directors on 30 December 2021.
The company financial statements of La Perla Fashion Holding N.V. has been prepared in accordance with the statutory provisions of Part 9, Book 2 of the Dutch Civil Code while applying IFRS-based accounting principles. In accordance with subsection 8 of section 362, Book 2 of the Netherlands Civil Code, the measurement principles applied in these company financial statements are the same as those applied in the consolidated financial statements, except for investments in subsidiaries which are carried at net asset value. This means that the principles for recognition and measurement of assets and liabilities and determination of the result of La Perla Fashion Holding N.V. are the same as those applied for the consolidated financial statements.
In the company financial statements of La Perla Fashion Holding N.V., the same accounting principles were applied as set out in the notes of the consolidated financial statements. These principles were consistently applied to all years presented. The amounts in the company financial statements are presented in thousands of euros (€) unless otherwise stated.
As the financial data of La Perla Fashion Holding N.V. (the parent company) is included in the consolidated financial statements, the income statement in the parent company financial statements is presented in condensed form (in accordance with section 402, Book 2 of the Netherlands Civil Code).
The Company's functional currency is the euro, which is the currency of the primary economic environment in which it operates. The Company's performance is evaluated and its liquidity is managed in euros. Therefore, the euro is considered as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. The fund's presentation currency is also the euro.
The directors consider the use of the going concern basis of accounting is appropriate. We refer to the note regarding going concern in the consolidated financial statements for the disclosure.
Investments in subsidiaries are accounted for using the net asset value. The net asset value of subsidiaries comprises the cost, excluding goodwill, of La Perla Fashion Holding N.V.'s share in the net assets of the subsidiary, plus the share in income or losses since acquisition, less dividends received.
In case the net asset value is negative and the Company is liable for the deficit of the subsidiary, the carrying amount is presented as "provision for the net capital deficit of investments". If the Company is not liable the subsidiary is valued at € nihil.
Movements of the Company's investments were as follows:
| 2021 | 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Balance at 1 January | - | - |
| Long term loan La Perla Global Man. UK | 1,660 | 1,668 |
| Translation difference | (6,708) | 6,166 |
| Actuarial gains | 12 | (92) |
| Result subsidiary | 5,036 | (7,742) |
| Balance at 31 December | - | - |
The company is the 100 % shareholder of La Perla Global Management (UK) Ltd and La Perla Beauty (UK) Ltd.
La Perla Global Management (UK) Ltd is valued at € nil since the underlying company has a negative asset value. The investment is not given a liability undertaking or any other guarantee for this company.
La Perla Beauty (UK) Ltd is incorporated on 10 October 2019 and had a net asset value of € nihil since the underlying company has a negative asset value. The investment is not given a liability undertaking or any other guarantee for this company.
Direct investments of the Company as per 31 December 2021 are as follows:
| Name | Country of incorporation or legislation | Ownership % |
|---|---|---|
| La Perla Global Management (UK) Limited | United Kingdom | 100% |
| La Perla Beauty (UK) Limited | United Kingdom | 100% |
There are no restrictions on the availability of cash and cash equivalents. They are at the company's free disposal.
Share capital
As of 31 December 2021, issued and fully paid share capital consists 105,111,112 common shares (31 December 2020: 105,111,112 common shares), each share having a par value of € 0.01. Authorized capital consists of 500,000,000 shares.
The following table shows the movements in the outstanding number of shares:
| 2021 | 2020 | |
|---|---|---|
| n° 000 | n° 000 | |
| Balance at 1 January | 1,051 | 1,051 |
| Issued during the year | - | - |
| Balance at 31 December | 1,051 | 1,051 |
Share premium Movement in share premium:
| 31 December 2021 | 31 December 2020 | |
|---|---|---|
| € 000 | € 000 | |
| 21,741 | 21,741 | |
| - | - | |
| - | - | |
| 21,741 | 21,741 | |
Cumulative translation adjustment and other reserves comprised:
The changes in the shareholders' equity are illustrated in the equity statement of consolidated financial statements. As at 31 December 2021 and 2020, shareholders and the companies of the Group did not hold any treasury shares.
The retained earnings consists of the accumulated gains and losses over the previous years.
According to the articles of association of the Company, appropriation of result for the year is at the discretion of the annual general meeting of shareholders of the Company, taking into consideration any limitations by Dutch law.
The Board of Managing Directors proposes to add the result for the year to the retained earnings. This proposal has been reflected in the parent company financial statements.
The non-current liabilities is a loan from related parties and refers to the facilities received from La Perla Fashion Finance B.V. amounting to € 1,129 (31 December 2020: € 921).
| 31 December 2021 | 31 December 2020 | |
|---|---|---|
| € 000 | € 000 | |
| Equity according to consolidated financial statements | (287,788) | (235,954) |
| Negative net asset value of consolidated participating interests | 313,427 | 260,454 |
| Loan receivable of consolidated participating interests | (27,052) | (25,392) |
| Equity according to company financial statements | (1,413) | (892) |
The difference between equity according to the company balance sheet and equity according to the consolidated balance sheet is due to the fact that that the consolidated participating interest in La Perla Global Management (UK) Ltd has a negative net asset value but is carried at € nihil in the company balance sheet.
During 2021 there were no employees (2020: 0).
The directors and supervisory board members are considered to be key management and they are entitled to receive a compensation for their respective services in terms of an individual agreement. The remuneration for 2021 is € nihil (2020: € nihil)
The audit fee related to the audit of 2021 in connection with the company financial statements amounts to € 38 (2020: € 38).
There were no events subsequent to the year end to report.
These annual accounts have not yet been adopted by the general meeting of shareholders.
Approved by the Board of Managing Directors on 30 December 2022 and is signed on its behalf by:
C.S. Vickers
Approved by the Supervisory Board on 30 December 2022 and is signed on its behalf by:
E. Speight
According to the articles of association of the Company, appropriation of result for the year is at the discretion of the annual general meeting of shareholders of the Company, taking into consideration any limitations by Dutch law.
The Board of Managing Directors proposes to add the result for the year to the retained earnings. This proposal has been reflected in the parent company financial statements.
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