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PRADA S.p.A. — Earnings Release 2013
Apr 5, 2013
50262_rns_2013-04-05_133065ba-df1b-4ece-96e5-df2d64cf54b7.pdf
Earnings Release
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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
PRADA S.p.A.
Via A. Fogazzaro n. 28, Milan, Italy
Registry of Companies of Milan, Italy: No. 10115350158
(Incorporated under the laws of Italy as a joint-stock company)
(Stock Code: 1913)
ANNOUNCEMENT OF THE CONSOLIDATED RESULTS FOR THE YEAR ENDED JANUARY 31, 2013
FINANCIAL HIGHLIGHTS
- Group's net revenues were Euro 3,297.2 million, recording an increase of 29.0% compared with the year ended January 31, 2012
- Retail net sales were Euro 2,664.2 million, up by 35.6% compared with the year ended January 31, 2012
- the number of Directly Operated Stores (DOS) reached 461
- Retail Same Store Sales Growth (SSSG) was 14% compared with the year ended January 31, 2012
- EBITDA was Euro 1,052.5 million (representing a margin of 31.9% on net revenues)
- Group's net income amounted Euro 625.7 million, an increase of 44.9% compared to Euro 431.9 million for the year ended January 31, 2012
- Positive net financial position at Euro 312.6 million as at January 31, 2013
- Net operating cash flow for the year ended January 31, 2013, was Euro 759.3 million
2
Consolidated results for the year ended January 31, 2013
The Board of Directors (the “Board”) of PRADA S.p.A. (the “Company”, or “PRADA spa”) is pleased to announce the audited Consolidated results of the Company and its subsidiaries (collectively, the “Group”) for the year ended January 31, 2013, together with the audited comparative figures for the year ended January 31, 2012. The following financial information has been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as adopted by the European Union. The consolidated results of the Group for the year ended January 31, 2013, and January 31, 2012, have been audited by Deloitte & Touche spa.
Scope of work of Messrs. Deloitte & Touche spa
The figures in respect of the Group’s consolidated statement of financial position, consolidated statement of comprehensive income and the related notes thereto for the year ended January 31, 2013, as set out in this preliminary announcement have been agreed by the Group’s auditors, Messrs. Deloitte & Touche spa, to the amounts set out in the Group’s audited consolidated financial statements for the year. The work performed by Messrs. Deloitte & Touche spa in this respect did not constitute an assurance engagement in accordance with Auditing Standards issued by the Italian Accounting Profession (CNDCEC) and recommended by Consob, the Italian Commission for listed Companies and the Stock Exchange and consequently no assurance has been expressed by Messrs. Deloitte & Touche spa on the preliminary announcement.
Key financial information
| Key information on income statement (amounts in thousands of Euro) | twelve months ended January 31 2011 audited | twelve months ended January 31 2012 audited | twelve months ended January 31 2013 audited | % change on January 31 2012 |
|---|---|---|---|---|
| Net revenues | 2,046,651 | 2,555,606 | 3,297,219 | 29.0% |
| EBITDA | 535,930 | 759,252 | 1,052,469 | 38.6% |
| EBIT | 418,387 | 628,935 | 889,781 | 41.5% |
| Income before tax | 388,229 | 602,908 | 883,616 | 46.6% |
| Net income of the Group | 250,819 | 431,929 | 625,681 | 44.9% |
| Average headcount (persons) | 7,199 | 8,067 | 9,427 | 16.9% |
| Earnings per share | 0.10 | 0.17 | 0.24 | 41.2% |
| EBITDA % | 26.2% | 29.7% | 31.9% | |
| EBIT % | 20.4% | 24.6% | 27.0% | |
| Key information on Statement of financial position (amounts in thousands of Euro) | as at January 31 2011 audited | as at January 31 2012 audited | as at January 31 2013 audited | change on January 31 2012 |
| --- | --- | --- | --- | --- |
| Net operating working capital | 320,759 | 357,648 | 317,714 | (39,934) |
| Net invested capital | 1,585,559 | 1,817,327 | 2,017,844 | 200,517 |
| Net financial position surplus/(deficit) | (375,421) | 13,640 | 312,648 | 299,008 |
| Group shareholders' equity | 1,204,350 | 1,822,743 | 2,320,022 | 497,279 |
| Capital expenditure | 206,860 | 278,856 | 351,129 | 72,273 |
| Net operating cash flows | 367,712 | 479,954 | 759,272 | 279,318 |
Highlights for the year ended January 31, 2013
During the year 2012 the PRADA Group consolidated its position at the head of the worldwide luxury goods market. Despite the challenging global economic environment, with some major concerns in Europe, the Group has made further important progress along its path of growth leveraging on the strength of its brands and on a relentless commitment to innovation and quality. The actions undertaken in the course of 2012 have always been consistent with the long-term business expansion strategy implemented in recent years. The Group went on investing massive resources in strengthening the retail channel while maintaining a unique and powerful brand image: many new DOS were unveiled in 2012, including the first ever stores in Brazil, Mexico, Morocco, Kuwait and Ukraine and prestigious sponsorships and projects in fields other than Prada's core business successfully took place. At the same time, the Group strove tightly to control unit margins over the supply chain so as to benefit from economies of scale resulting from the expansion without compromising the Group's reputation for craftsmanship and quality cultivated throughout its hundred-year long history. These strategies delivered significant revenue growth and improved operating results for the twelve months ended January 31, 2013.
The Group's net revenue for the twelve months ended January 31, 2013, totaled Euro 3,297.2 million, 29% more than in 2011, one of the highest growth rates in the industry. The boost in sales, coupled with a further improvement in profitability, was mainly achieved thanks to the performance
of the retail channel. In fact, the Group's EBITDA for the twelve months ended January 31, 2013, totaled Euro 1,052.5 million, 38.6% up on 2011, while reaching a record high of 31.9% as a percentage of net revenues. The Group's net profit was Euro 625.7 million, up by 44.9% compared to 2011 and standing at 19% of net revenues.
The capital expenditure incurred during the year amounted to Euro 351.1 million and was mainly focused on the enlargement and renovation of the DOS network. The investment program led to the opening of 78 new DOS, most of them completed in the second half of the year.
Free cash flows of the year enabled the Group to accumulate total of cash and cash equivalents of some Euro 572 million and a positive net financial position of Euro 312.6 million at January 31, 2013.
At January 31, 2013, the Group operated 461 DOS worldwide, employed more than 10,000 people and had a market capitalization of some Euro 17 billion based on the Hong Kong Stock exchange share price at the reporting date.
4
Consolidated income statement for the year ended January 31, 2013
| (amounts in thousands of Euro) | Note | twelve months ended January 31 2013 audited | % | twelve months ended January 31 2012 audited | % |
|---|---|---|---|---|---|
| Net revenues | 3 | 3,297,219 | 100.0% | 2,555,606 | 100.0% |
| Cost of goods sold | (920,678) | -27.9% | (727,581) | -28.5% | |
| Gross margin | 2,376,541 | 72.1% | 1,828,025 | 71.5% | |
| Operating expenses | 4 | (1,486,760) | -45.1% | (1,199,090) | -46.9% |
| EBIT | 889,781 | 27.0% | 628,935 | 24.6% | |
| Interest and other financial income/(expenses), net | 5 | (7,131) | -0.2% | (26,027) | -1.0% |
| Dividends received from third parties | 5 | 966 | - | - | - |
| Income before taxes | 883,616 | 26.8% | 602,908 | 23.6% | |
| Taxation | 6 | (250,339) | -7.6% | (166,483) | -6.5% |
| Net income from continuing operations | 633,277 | 19.2% | 436,425 | 17.1% | |
| Net income for the period | 633,277 | 19.2% | 436,425 | 17.1% | |
| Net income – Non-controlling interests | 7,596 | 0.2% | 4,496 | 0.2% | |
| Net income – Group | 625,681 | 19.0% | 431,929 | 16.9% | |
| Depreciation, amortization and impairment | 162,688 | 4.9% | 130,317 | 5.1% | |
| EBITDA | 1,052,469 | 31.9% | 759,252 | 29.7% | |
| Basic and diluted earnings per share (in Euro per share) | 7 | 0.245 | 0.170 |
Consolidated income statement for the three months ended January 31, 2013
| (amounts in thousands of Euro) | Note | three months ended January 31 2013 unaudited | % | three months ended January 31 2012 unaudited | % |
|---|---|---|---|---|---|
| Net revenues | 3 | 957,897 | 100.0% | 825,228 | 100.0% |
| Cost of goods sold | (265,801) | -27.7% | (232,852) | -28.2% | |
| Gross margin | 692,096 | 72.3% | 592,376 | 71.8% | |
| Operating expenses | (414,779) | -43.3% | (355,758) | -43.1% | |
| EBIT | 277,317 | 29.0% | 236,618 | 28.7% | |
| Interest and other financial income/(expenses), net | (2,837) | -0.3% | (8,167) | -1.0% | |
| Dividends received from third parties | 966 | 0.1% | - | - | |
| Income before taxes | 275,446 | 28.8% | 228,451 | 27.7% | |
| Taxation | (56,234) | -5.9% | (68,015) | -8.2% | |
| Net income from continuing operations | 219,212 | 22.9% | 160,436 | 19.4% | |
| Net income for the period | 219,212 | 22.9% | 160,436 | 19.4% | |
| Net income – Non-controlling interests | 2,083 | 0.2% | 1,672 | 0.2% | |
| Net income – Group | 217,129 | 22.7% | 158,764 | 19.2% | |
| Depreciation, amortization and impairment | 47,279 | 4.9% | 36,127 | 4.4% | |
| EBITDA | 324,596 | 33.9% | 272,745 | 33.1% |
Consolidated statement of financial position
| (amounts in thousands of Euro) | Note | as at January 31 2013 audited | as at January 31 2012 audited |
|---|---|---|---|
| Assets | |||
| Current assets | |||
| Cash and cash equivalents | 571,746 | 362,284 | |
| Trade receivables, net | 9 | 304,525 | 266,404 |
| Inventories, net | 8 | 343,802 | 374,782 |
| Derivative financial instruments - current | 43,060 | 894 | |
| Receivables and advance payments from parent company and other related parties | 10 | 19,493 | 12,864 |
| Other current assets | 12 | 104,823 | 100,275 |
| Total current assets | 1,387,449 | 1,117,503 | |
| Non-current assets | |||
| Property, plant and equipment | 11 | 857,299 | 713,870 |
| Intangible assets | 11 | 878,750 | 863,526 |
| Associated undertakings | 23,024 | 15,631 | |
| Deferred tax assets | 176,057 | 175,736 | |
| Other non-current assets | 13 | 61,682 | 57,302 |
| Derivative financial instruments - non current | 1,018 | - | |
| Total non-current assets | 1,997,830 | 1,826,065 | |
| Total Assets | 3,385,279 | 2,943,568 | |
| Liabilities and Shareholders' equity | |||
| Current liabilities | |||
| Bank overdrafts and short-term loans | 175,570 | 165,485 | |
| Payables to parent company and other related parties | 14 | 5,599 | 4,361 |
| Trade payables | 15 | 330,613 | 283,538 |
| Current tax liabilities | 97,148 | 117,770 | |
| Derivative financial instruments - current | 912 | 15,200 | |
| Obligations under finance leases - current | 575 | 1,453 | |
| Other current liabilities | 16 | 131,645 | 128,777 |
| Total current liabilities | 742,062 | 716,584 | |
| Non-current liabilities | |||
| Long-term financial payables | 78,830 | 178,442 | |
| Obligations under finance leases non-current | 518 | 1,100 | |
| Post-employment benefits | 45,538 | 35,898 | |
| Provisions for risks and charges | 17 | 46,914 | 56,921 |
| Deferred tax liabilities | 55,636 | 47,665 | |
| Other non-current liabilities | 84,905 | 75,656 | |
| Derivative financial instruments non-current | 384 | 335 | |
| Total non-current liabilities | 312,725 | 396,017 | |
| Total Liabilities | 1,054,787 | 1,112,601 | |
| Share capital | 255,882 | 255,882 | |
| Other reserves | 1,480,747 | 1,152,171 | |
| Translation reserve | (42,288) | (17,239) | |
| Net profit for the period | 625,681 | 431,929 | |
| Shareholders' Equity – Group | 2,320,022 | 1,822,743 | |
| Shareholders' Equity – Non-controlling interests | 10,470 | 8,224 | |
| Total Liabilities and Shareholders' Equity | 3,385,279 | 2,943,568 | |
| Net current assets | 645,387 | 400,919 | |
| Total assets less current liabilities | 2,643,217 | 2,226,984 |
7
Statement of changes in consolidated shareholders' equity (amounts in thousands of Euro, except for number of shares)
| (amounts in thousands of Euro) | Number of Shares | Share Capital | Share premium reserve | Translation reserve | Cash flow hedge reserve | Actuarial gain (losses) reserve | Available for sale reserve | Other reserves | Net profit | Equity attributable to owners of the Group | Non-controlling interests | Total Equity |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at January 31, 2011 (audited) | 250,000,000 | 250,000 | 209,298 | (40,012) | 3,464 | (948) | - | 531,729 | 250,819 | 1,204,350 | 5,788 | 1,210,138 |
| Allocation of 2010 net profit | - | - | - | - | - | - | - | 250,819 | (250,819) | - | - | - |
| Conversion of shares from Euro 1.0 to Euro 0.1 each | 2,500,000,000 | - | - | - | - | - | - | - | - | - | - | - |
| Issue of new shares | 58,824,000 | 5,882 | 200,749 | - | - | - | - | - | - | 206,631 | - | 206,631 |
| Dividends | - | - | - | - | - | - | - | (35,000) | - | (35,000) | (3,886) | (38,886) |
| Capital injection in subsidiaries | - | - | - | - | - | - | - | - | - | - | 1,412 | 1,412 |
| Comprehensive income for the year (not recycled to P&L) | - | - | - | - | - | (244) | - | - | - | (244) | (18) | (262) |
| Comprehensive income for the year (recycled to P&L) | - | - | - | 22,773 | (7,637) | - | (58) | - | 431,929 | 447,006 | 4,928 | 451,934 |
| Balance at January 31, 2012 (audited) | 2,558,824,000 | 255,882 | 410,047 | (17,239) | (4,173) | (1,192) | (58) | 747,548 | 431,929 | 1,822,744 | 8,224 | 1,830,968 |
| Allocation of 2011 net profit | - | - | - | - | - | - | - | 431,929 | (431,929) | - | - | - |
| Dividends | - | - | - | - | - | - | - | (127,941) | - | (127,941) | (5,576) | (133,517) |
| Capital injection in subsidiaries | - | - | - | - | - | - | - | - | - | - | 1,166 | 1,166 |
| Comprehensive income for the year (recycled to P&L) | - | - | - | (25,049) | 24,321 | - | 5,544 | - | 625,681 | 630,497 | 6,656 | 637,153 |
| Comprehensive income for the year (not recycled to P&L) | - | - | - | - | - | (5,278) | - | - | - | (5,278) | - | (5,278) |
| Balance at January 31, 2013 (audited) | 2,558,824,000 | 255,882 | 410,047 | (42,288) | 20,148 | (6,470) | 5,486 | 1,051,536 | 625,681 | 2,320,022 | 10,470 | 2,330,492 |
Under Italian law, the Company is required to allocate a portion of its net profit to non-distributable reserves and to provide additional information on the distribution of earnings for the period.
Summarized statement of consolidated cash flows
| (amounts in thousands of Euro) | twelve months ended January 31 2013 audited | twelve months ended January 31 2012 audited |
|---|---|---|
| Net cash flows from operating activities | 759,272 | 479,954 |
| Cash flows generated (utilized) by investing activities | (331,645) | (257,147) |
| Cash flows generated (utilized) by financing activities | (197,965) | 40,410 |
| Change in cash and cash equivalents, net of bank overdrafts | 229,662 | 263,217 |
Statement of consolidated comprehensive income
| (amounts in thousands of Euro) | twelve months ended January 31 2013 audited | twelve months ended January 31 2012 audited |
|---|---|---|
| Net income for the period – Consolidated | 633,277 | 436,425 |
| A) Items recycled to P&L: | ||
| Change in Translation reserve | (25,989) | 23,204 |
| Tax impact | - | - |
| Change in Translation reserve less tax impact | (25,989) | 23,204 |
| Change in Cash Flow Hedge reserve | 33,530 | (10,432) |
| Tax impact | (9,209) | 2,795 |
| Change in Cash Flow Hedge reserve less tax impact | 24,321 | (7,637) |
| Change in Fair Value reserve | 7,391 | (77) |
| Tax impact | (1,847) | 19 |
| Change in Fair Value reserve less tax impact | 5,544 | (58) |
| B) Item not recycled to P&L | ||
| Change in Actuarial reserve | (6,369) | (705) |
| Tax impact | 1,091 | 443 |
| Change in Actuarial reserve less tax impact | (5,278) | (262) |
| Consolidated comprehensive income for the period | 631,875 | 451,672 |
| Comprehensive income for the period – Non-controlling Interests | 6,656 | 4,910 |
| Comprehensive income for the period – Group | 625,219 | 446,762 |
10
Notes to the consolidated results for the year ended January 31, 2013
1. Presentation of PRADA Group
PRADA spa (the “Company”), together with its subsidiaries (jointly the “Group”), is listed on the Hong Kong Stock Exchange (HKSE code: 1913) and is one of the world leaders in the luxury goods sector where it operates with the Prada, Miu Miu, Church’s and Car Shoe brands in the design, production and distribution of luxury handbags, leather goods, footwear, apparel and accessories. The Group also operates, under licensing agreements, in the eyewear, fragrances and mobile telephone sectors. Its products are sold in 70 countries worldwide through a network that included 461 Directly Operated Stores (DOS) at January 31, 2013, and a selected network of luxury department stores, independent retailers and franchise stores.
The Company is a joint-stock company, registered and domiciled in Italy. Its registered office is in Via Fogazzaro 28, Milan, Italy.
2. Basis of preparation
The Consolidated financial statements of the PRADA Group as at January 31, 2013, including the “Consolidated statement of financial position”, the “Consolidated income statement for the year ended January 31, 2013”, the “Statement of consolidated comprehensive income”, the “Summarized statement of consolidated cash flows”, the “Statement of changes in consolidated shareholders’ equity” and the “Notes to the consolidated results for the year ended January 31, 2013” have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) as endorsed by the European Union.
At the date of presentation of these Consolidated financial statements, there were no differences between IFRS as endorsed by the European Union and applicable to the PRADA Group and those issued by the IASB.
IFRS also refers to all International Accounting Standards (“IAS”) and all interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), previously called the Standing Interpretations Committee (“SIC”).
The contents of this Announcement on the consolidated results for the year ended January 31, 2013, are included in the 2012 Annual Report of PRADA spa.
11
- Operating segment
Net revenues analysis
Net revenues for the year ended January 31, 2013
| (amounts in thousands of Euro) | twelve months ended January 31 2013 audited | twelve months ended January 31 2012 audited | % change | ||
|---|---|---|---|---|---|
| Net sales by geographical area | |||||
| Italy | 528,302 | 16.2% | 445,611 | 17.6% | 18.6% |
| Europe | 739,634 | 22.7% | 540,131 | 21.4% | 36.9% |
| Americas | 484,103 | 14.9% | 392,677 | 15.6% | 23.3% |
| Asia Pacific | 1,160,166 | 35.6% | 872,992 | 34.6% | 32.9% |
| Japan | 293,245 | 9.0% | 256,693 | 10.2% | 14.2% |
| Other countries | 50,978 | 1.6% | 15,226 | 0.6% | 234.8% |
| Total | 3,256,428 | 100.0% | 2,523,330 | 100.0% | 29.1% |
| Net sales by brand | |||||
| Prada | 2,649,559 | 81.4% | 1,999,345 | 79.2% | 32.5% |
| Miu Miu | 512,762 | 15.7% | 441,054 | 17.5% | 16.3% |
| Church's | 68,447 | 2.1% | 59,224 | 2.3% | 15.6% |
| Car Shoe | 19,660 | 0.6% | 17,039 | 0.7% | 15.4% |
| Other | 6,000 | 0.2% | 6,668 | 0.3% | -10.0% |
| Total | 3,256,428 | 100.0% | 2,523,330 | 100.0% | 29.1% |
| Net sales by product line | |||||
| Clothing | 563,322 | 17.3% | 512,585 | 20.3% | 9.9% |
| Leather goods | 2,036,005 | 62.5% | 1,426,537 | 56.5% | 42.7% |
| Footwear | 625,390 | 19.2% | 560,108 | 22.2% | 11.7% |
| Other | 31,711 | 1.0% | 24,100 | 1.0% | 31.6% |
| Total | 3,256,428 | 100.0% | 2,523,330 | 100.0% | 29.1% |
| Net sales by distribution channel | |||||
| DOS | 2,664,238 | 81.8% | 1,964,499 | 77.9% | 35.6% |
| Independent customers and franchises | 592,190 | 18.2% | 558,831 | 22.1% | 6.0% |
| Total | 3,256,428 | 100.0% | 2,523,330 | 100.0% | 29.1% |
| Net sales | 3,256,428 | 98.8% | 2,523,330 | 98.7% | 29.1% |
| Royalties | 40,791 | 1.2% | 32,276 | 1.3% | 26.4% |
| Total net revenues | 3,297,219 | 100.0% | 2,555,606 | 100.0% | 29.0% |
Prada brand sales
| (amounts in thousands of Euro) | twelve months ended January 31 2013 audited | twelve months ended January 31 2012 audited | % change | ||
|---|---|---|---|---|---|
| Net sales by geographical area | |||||
| Italy | 414,119 | 15.6% | 349,852 | 17.5% | 18.4% |
| Europe | 589,780 | 22.3% | 411,552 | 20.6% | 43.3% |
| Americas | 422,646 | 16.0% | 334,469 | 16.7% | 26.4% |
| Asia Pacific | 969,864 | 36.6% | 710,157 | 35.5% | 36.6% |
| Japan | 210,161 | 7.9% | 181,720 | 9.1% | 15.7% |
| Other countries | 42,989 | 1.6% | 11,595 | 0.6% | 270.8% |
| Total | 2,649,559 | 100.0% | 1,999,345 | 100.0% | 32.5% |
| Net sales by product line | |||||
| Clothing | 467,161 | 17.6% | 434,461 | 21.7% | 7.5% |
| Leather goods | 1,710,274 | 64.6% | 1,141,097 | 57.1% | 49.9% |
| Footwear | 444,462 | 16.8% | 402,348 | 20.1% | 10.5% |
| Other | 27,662 | 1.0% | 21,439 | 1.1% | 29.0% |
| Total | 2,649,559 | 100.0% | 1,999,345 | 100.0% | 32.5% |
| Net sales by distribution channel | |||||
| DOS | 2,189,977 | 82.7% | 1,562,233 | 78.1% | 40.2% |
| Independent customers and franchises | 459,582 | 17.3% | 437,112 | 21.9% | 5.1% |
| Total | 2,649,559 | 100.0% | 1,999,345 | 100.0% | 32.5% |
| Net sales | 2,649,559 | 98.5% | 1,999,345 | 98.5% | 32.5% |
| Royalties | 39,453 | 1.5% | 31,341 | 1.5% | 25.9% |
| Total net revenues | 2,689,012 | 100.0% | 2,030,686 | 100.0% | 32.4% |
Miu Miu brand sales
| (amounts in thousands of Euro) | twelve months ended January 31 2013 audited | twelve months ended January 31 2012 audited | % change | ||
|---|---|---|---|---|---|
| Net sales by geographical area | |||||
| Italy | 84,252 | 16.4% | 67,103 | 15.2% | 25.6% |
| Europe | 100,519 | 19.6% | 86,178 | 19.5% | 16.6% |
| Americas | 57,963 | 11.3% | 54,915 | 12.5% | 5.6% |
| Asia Pacific | 181,996 | 35.5% | 155,841 | 35.3% | 16.8% |
| Japan | 80,904 | 15.8% | 73,918 | 16.8% | 9.5% |
| Other countries | 7,128 | 1.4% | 3,099 | 0.7% | 130.0% |
| Total | 512,762 | 100.0% | 441,054 | 100.0% | 16.3% |
| Net sales by product line | |||||
| Clothing | 95,091 | 18.5% | 77,251 | 17.5% | 23.1% |
| Leather goods | 321,713 | 62.8% | 282,033 | 64.0% | 14.1% |
| Footwear | 91,908 | 17.9% | 79,109 | 17.9% | 16.2% |
| Other | 4,050 | 0.8% | 2,661 | 0.6% | 52.2% |
| Total | 512,762 | 100.0% | 441,054 | 100.0% | 16.3% |
| Net sales by distribution channel | |||||
| DOS | 421,067 | 82.1% | 354,227 | 80.3% | 18.9% |
| Independent customers and franchises | 91,695 | 17.9% | 86,827 | 19.7% | 5.6% |
| Total | 512,762 | 100.0% | 441,054 | 100.0% | 16.3% |
| Net sales | 512,762 | 99.8% | 441,054 | 99.8% | 16.3% |
| Royalties | 1,248 | 0.2% | 828 | 0.2% | 50.7% |
| Total net revenues | 514,010 | 100.0% | 441,882 | 100.0% | 16.3% |
Church's brand sales
| (amounts in thousands of Euro) | twelve months ended January 31 2013 audited | twelve months ended January 31 2012 audited | % change | ||
|---|---|---|---|---|---|
| Net sales by geographical area | |||||
| Italy | 16,550 | 24.2% | 16,509 | 27.9% | 0.2% |
| Europe | 40,884 | 59.7% | 34,271 | 57.9% | 19.3% |
| Americas | 2,842 | 4.1% | 2,402 | 4.0% | 18.3% |
| Asia Pacific | 5,663 | 8.3% | 4,789 | 8.1% | 18.3% |
| Japan | 2,180 | 3.2% | 1,052 | 1.8% | 107.2% |
| Other countries | 328 | 0.5% | 201 | 0.3% | 63.2% |
| Total | 68,447 | 100.0% | 59,224 | 100.0% | 15.6% |
| Net sales by product line | |||||
| Clothing | 967 | 1.4% | 762 | 1.3% | 26.9% |
| Leather goods | 2,047 | 3.0% | 1,702 | 2.9% | 20.3% |
| Footwear | 65,433 | 95.6% | 56,760 | 95.8% | 15.3% |
| Total | 68,447 | 100.0% | 59,224 | 100.0% | 15.6% |
| Net sales by distribution channel | |||||
| DOS | 42,881 | 62.6% | 38,346 | 64.7% | 11.8% |
| Independent customers and franchises | 25,566 | 37.4% | 20,878 | 35.3% | 22.5% |
| Total | 68,447 | 100.0% | 59,224 | 100.0% | 15.6% |
| Net sales | 68,447 | 99.9% | 59,224 | 99.8% | 15.6% |
| Royalties | 90 | 0.1% | 107 | 0.2% | -15.9% |
| Total net revenues | 68,537 | 100.0% | 59,331 | 100.0% | 15.5% |
Car Shoe brand sales
| (amounts in thousands of Euro) | twelve months ended January 31 2013 audited | twelve months ended January 31 2012 audited | % change | ||
|---|---|---|---|---|---|
| Net sales by geographical area | |||||
| Italy | 10,937 | 55.7% | 10,294 | 60.4% | 6.2% |
| Europe | 4,900 | 24.9% | 3,383 | 19.9% | 44.8% |
| Americas | 651 | 3.3% | 857 | 5.0% | -24.0% |
| Asia Pacific | 2,638 | 13.4% | 2,174 | 12.8% | 21.3% |
| Other countries | 534 | 2.7% | 331 | 1.9% | 61.3% |
| Total | 19,660 | 100.0% | 17,039 | 100.0% | 15.4% |
| Net sales by product line | |||||
| Leather goods | 1,948 | 9.9% | 1,658 | 9.7% | 17.5% |
| Footwear | 17,712 | 90.1% | 15,381 | 90.3% | 15.2% |
| Total | 19,660 | 100.0% | 17,039 | 100.0% | 15.4% |
| Net sales by distribution channel | |||||
| DOS | 8,595 | 43.7% | 7,747 | 45.5% | 10.9% |
| Independent customers and franchises | 11,065 | 56.3% | 9,292 | 54.5% | 19.1% |
| Total | 19,660 | 100.0% | 17,039 | 100.0% | 15.4% |
| Net sales | 19,660 | 100.0% | 17,039 | 100.0% | 15.4% |
| Total net revenues | 19,660 | 100.0% | 17,039 | 100.0% | 15.4% |
Geographical information
The following table reports the carrying value of most of the Group's non-current assets by geographical area, as requested by IFRS 8 for entities, like the PRADA Group, that have a single reportable segment.
| (amounts in thousands of Euro) | January 31 2013 | January 31 2012 |
|---|---|---|
| Italy | 484,945 | 416,542 |
| Europe | 842,289 | 814,240 |
| Americas | 185,688 | 160,539 |
| Japan | 93,156 | 119,355 |
| Asia Pacific | 175,674 | 124,527 |
| Other countries | 34,852 | 10,938 |
| Total | 1,816,604 | 1,646,141 |
The total amount of Euro 1,816.6 million (Euro 1,646.1 million at January 31, 2012) relates to the Group's non-current assets excluding, as requested by IFRS 8, those relating to financial instruments, deferred tax assets and surplus arising from a pension benefit scheme.
Net revenues analysis for the three months ended January 31, 2013
| (amounts in thousands of Euro) | three months ended January 31 | three months ended January 31 | % change | ||
|---|---|---|---|---|---|
| 2013 unaudited | 2012 unaudited | ||||
| Net sales by geographical area | |||||
| Italy | 143,237 | 15.1% | 127,390 | 15.6% | 12.4% |
| Europe | 203,144 | 21.4% | 167,542 | 20.5% | 21.2% |
| Americas | 155,120 | 16.4% | 135,034 | 16.5% | 14.9% |
| Asia Pacific | 345,472 | 36.4% | 293,255 | 35.9% | 17.8% |
| Japan | 79,573 | 8.4% | 87,772 | 10.8% | -9.3% |
| Other countries | 21,879 | 2.3% | 5,761 | 0.7% | 279.8% |
| Total | 948,425 | 100.0% | 816,754 | 100.0% | 16.1% |
| Net sales by brand | |||||
| Prada | 772,956 | 81.5% | 653,247 | 80.0% | 18.3% |
| Miu Miu | 152,098 | 16.0% | 143,709 | 17.6% | 5.8% |
| Church's | 18,310 | 1.9% | 15,622 | 1.9% | 17.2% |
| Car Shoe | 4,525 | 0.5% | 3,032 | 0.4% | 49.2% |
| Other | 536 | 0.1% | 1,144 | 0.1% | -53.1% |
| Total | 948,425 | 100.0% | 816,754 | 100.0% | 16.1% |
| Net sales by product line | |||||
| Clothing | 175,393 | 18.5% | 174,864 | 21.4% | 0.3% |
| Leather goods | 591,788 | 62.4% | 467,007 | 57.2% | 26.7% |
| Footwear | 175,046 | 18.5% | 168,732 | 20.7% | 3.7% |
| Other | 6,198 | 0.6% | 6,151 | 0.7% | 0.8% |
| Total | 948,425 | 100.0% | 816,754 | 100.0% | 16.1% |
| Net sales by distribution channel | |||||
| DOS | 746,686 | 78.7% | 626,477 | 76.7% | 19.2% |
| Independent customers and franchises | 201,739 | 21.3% | 190,277 | 23.3% | 6.0% |
| Total | 948,425 | 100.0% | 816,754 | 100.0% | 16.1% |
| Net sales | 948,425 | 99.0% | 816,754 | 99.0% | 16.1% |
| Royalties | 9,472 | 1.0% | 8,474 | 1.0% | 11.8% |
| Total net revenues | 957,897 | 100.0% | 825,228 | 100.0% | 16.1% |
Number of stores
| as at January 31, 2013 | as at January 31, 2012 | |||
|---|---|---|---|---|
| Owned | Franchises | Owned | Franchises | |
| Prada | 283 | 20 | 245 | 20 |
| Miu Miu | 126 | 5 | 94 | 6 |
| Church's | 45 | - | 43 | - |
| Car Shoe | 7 | - | 6 | - |
| Total | 461 | 25 | 388 | 26 |
| as at January 31, 2013 | as at January 31, 2012 | |||
| Owned | Franchises | Owned | Franchises | |
| Italy | 48 | 5 | 44 | 5 |
| Europe | 137 | 6 | 115 | 6 |
| Americas | 66 | - | 47 | 1 |
| Asia Pacific | 130 | 14 | 115 | 14 |
| Japan | 66 | - | 65 | - |
| Middle East | 11 | - | 2 | - |
| Africa | 3 | - | - | - |
| Total | 461 | 25 | 388 | 26 |
- Operating Expenses
| (amounts in thousands of Euro) | twelve months ended January 31 2013 audited | % of net revenues | twelve months ended January 31 2012 audited | % of net revenues |
|---|---|---|---|---|
| Product design and development costs | 111,370 | 3.4% | 103,120 | 4.0% |
| Advertising and communications costs | 150,574 | 4.6% | 129,184 | 5.1% |
| Selling costs | 1,040,133 | 31.5% | 802,770 | 31.4% |
| General and administrative costs | 184,683 | 5.6% | 164,016 | 6.4% |
| Total | 1,486,760 | 45.1% | 1,199,090 | 46.9% |
18
5. Interest and other financial expenses, net
| (amounts in thousands of Euro) | twelve months ended January 31 2013 audited | twelve months ended January 31 2012 audited |
|---|---|---|
| Interests expenses on borrowings | (12,956) | (16,843) |
| Interest income | 4,804 | 2,689 |
| Exchange gains / (losses) – realized | 1,550 | (1,158) |
| Exchange gains/ (losses) – unrealized | 4,314 | (6,116) |
| Other financial income / (expenses) | (4,843) | (4,599) |
| Dividends received from third parties | 966 | - |
| Total | (6,165) | (26,027) |
6. Taxation
| (amounts in thousands of Euro) | twelve months ended January 31 2013 audited | twelve months ended January 31 2012 audited |
|---|---|---|
| Current taxation | 258,613 | 194,805 |
| Deferred taxation | (8,274) | (28,322) |
| Income taxes | 250,339 | 166,483 |
The increase in income taxes in absolute terms is essentially due to growth of the Group business in general. As a percentage of profit before taxation, the tax burden increased from 27.6% to 28.3%, essentially because of the extraordinary Euro 42 million tax charge regarding the rejection by the Italian Tax Authorities of PRADA spa's request not to apply the Italian Controlled Foreign Companies rules (CFC) to its Dutch sub-holding company PRADA Far East bv.
7. Earnings and dividends per share
Earnings per share
Earnings per share are calculated by dividing the net income attributable to Group's shareholders by the weighted average number of ordinary shares in issue.
| twelve months ended January 31 2013 audited | twelve months ended January 31 2012 audited | |
|---|---|---|
| Group's net income in Euro | 625,681,459 | 431,928,921 |
| Weighted average number of ordinary shares in issue | 2,558,824,000 | 2,535,777,885 |
| Earnings per share in Euro, calculated on weighted average number of shares | 0.245 | 0.170 |
On May 26, 2011, a Shareholders' Meeting of PRADA spa resolved to change the par value of the Company's shares from Euro 1 to Euro 0.1 each. In accordance with IAS 33, the number of shares in issue in 2011 was retrospectively adjusted for the purposes of the calculation of earnings per share.
Dividends per share
The PRADA spa Board of Directors recommended, for the twelve months ended January 31, 2013, a final dividend of Euro 230.3 million (or 9.0 Euro/cents per share). For the year ended January 31, 2012, the final dividend of Euro 127.9 million (or 5 Euro/cents per share) recommended by the Board of Directors on March 29, 2012, was approved by the Annual General Meeting held on May 22, 2012.
During the period ended January 31, 2013, the Company distributed dividends of Euro 127,941,200, as approved by the Annual General Meeting held on May 22, 2012 to approve the financial statements for the year ended January 31, 2012. The payment of the dividends and the related Italian withholding tax payable, arising from the application of the Italian ordinary withholding tax rate to the whole amount of dividends paid to beneficial owners of the Company shares held through the Hong Kong Central Clearing and Settlement System, was completed by January 31, 2013.
During the year ended January 31, 2012, the Company distributed dividends of Euro 35 million, as approved by the Shareholders' Meeting held on March 28, 2011 to approve the financial statements for the year ended January 31, 2011. Some Euro 32.5 million of the dividend liability arising was offset against receivables due from parent company PRADA Holding bv while the remaining amount was paid in April 2011.
8. Inventories, net
| (amounts in thousands of Euro) | as at January 31 2013 audited | as at January 31 2012 audited |
|---|---|---|
| Raw materials | 79,559 | 66,575 |
| Work in progress | 24,620 | 17,187 |
| Finished products | 314,244 | 360,379 |
| Allowance for obsolete and slow moving inventories | (74,621) | (69,359) |
| Total | 343,802 | 374,782 |
The containment in finished products was achieved thanks to measures aimed at further improving the sell-through retail ratio so as to react better to market changes and reduce risks.
Materials being worked upon by third parties are included in raw materials. Work in progress includes materials at the production stage with PRADA spa, Church & Co Ltd and third party sub-contractors.
Movements on the allowance for obsolete and slow moving inventories are analyzed as follows:
| (amounts in thousands of Euro) | Raw materials | Finished Products | Total |
|---|---|---|---|
| Balance at January 31, 2012 (audited) | 29,754 | 39,605 | 69,359 |
| Exchange differences | - | (21) | (21) |
| Increases | - | 5,409 | 5,409 |
| Uses | - | (126) | (126) |
| Balance at January 31, 2013 (audited) | 29,754 | 44,867 | 74,621 |
9. Trade receivables, net
Trade receivables are detailed as follows:
| (amounts in thousands of Euro) | as at January 31 2013 audited | as at January 31 2012 audited |
|---|---|---|
| Trade receivables from third parties | 286,390 | 259,063 |
| Allowance for bad and doubtful debts | (11,547) | (11,681) |
| Trade receivables from related parties | 29,682 | 19,022 |
| Total | 304,525 | 266,404 |
Trade receivables from third parties increased by Euro 27.3 million compared to January 31, 2012, and stood at Euro 286.4 million at January 31, 2013. Higher sales and royalties were the main reasons behind the increase.
Trade receivables from related parties included a total amount of Euro 28.4 million essentially arising from sales of finished products and royalties to companies owned by the main shareholder of PRADA Holding bv and operating the retail business under franchise agreements.
The allowance for doubtful debts was determined on a specific basis considering all information available at the date the financial statements were prepared. It is revised periodically to bring receivables as close as possible to their fair value.
20
Movements during the period may be analyzed as follows:
| (amounts in thousands of Euro) | as at January 31 2013 audited | as at January 31 2012 audited |
|---|---|---|
| Opening balance | 11,681 | 10,537 |
| Exchange differences | (67) | 198 |
| Increases | 805 | 2,369 |
| Uses | (754) | (866) |
| Reversals | (118) | (557) |
| Closing balance | 11,547 | 11,681 |
The following table contains a summary, by due date, of total receivables before the allowance for doubtful debts at the reporting date:
| (amounts in thousands of Euro) | as at January 31, 2013 audited | Current | Overdue (days) | ||||
|---|---|---|---|---|---|---|---|
| 1 < 30 | 31 < 60 | 61 < 90 | 91 < 120 | ≥ 120 | |||
| Trade receivables | 316,072 | 263,079 | 27,328 | 7,708 | 5,852 | 1,607 | 10,498 |
| Total | 316,072 | 263,079 | 27,328 | 7,708 | 5,852 | 1,607 | 10,498 |
| (amounts in thousands of Euro) | as at January 31, 2012 audited | Current | Overdue (days) | ||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| 1 < 30 | 31 < 60 | 61 < 90 | 91 < 120 | ≥ 120 | |||
| Trade receivables | 278,085 | 226,300 | 18,991 | 12,096 | 5,031 | 2,167 | 13,500 |
| Total | 278,085 | 226,300 | 18,991 | 12,096 | 5,031 | 2,167 | 13,500 |
The following table contains a summary, by due date, of trade receivables less the allowance for doubtful accounts at the reporting date:
| (amounts in thousands of Euro) | as at January 31 2013 audited | Current | Overdue (days) | ||||
|---|---|---|---|---|---|---|---|
| 1 < 30 | 31 < 60 | 61 < 90 | 91 < 120 | ≥ 120 | |||
| Trade receivables less allowance for doubtful accounts | 304,525 | 262,799 | 27,141 | 7,708 | 5,804 | 634 | 439 |
| Total | 304,525 | 262,799 | 27,141 | 7,708 | 5,804 | 634 | 439 |
22
| (amounts in thousands of Euro) | as at January 31 2012 audited | Current | Overdue (days) | ||||
|---|---|---|---|---|---|---|---|
| 1 < 30 | 31 < 60 | 61 < 90 | 91 < 120 | ≥ 120 | |||
| Trade receivables less allowance for doubtful accounts | 266,404 | 225,313 | 18,944 | 12,056 | 4,864 | 2,044 | 3,183 |
| Total | 266,404 | 225,313 | 18,944 | 12,056 | 4,864 | 2,044 | 3,183 |
10. Receivables and advance payments from parent company and other related parties
Receivables and advance payments from parent companies and related parties are detailed below:
| (amounts in thousands of Euro) | as at January 31 2013 audited | as at January 31 2012 audited |
|---|---|---|
| Financial receivables – other related parties | 1,413 | 1,410 |
| Other receivables – PRADA Holding bv | 249 | 654 |
| Other receivables – other related parties | 2,652 | 1,646 |
| Other receivables – other comp. controlled by PRADA Holding bv | 3 | 154 |
| Advance payments – other related parties | 15,176 | 9,000 |
| Total | 19,493 | 12,864 |
Advance payments includes Euro 12.3 million of advance payments made to Luna Rossa Challenge NZ Ltd and Luna Rossa Challenge srl, in accordance with the contracts signed with subsidiary PRADA sa, for sponsorship of the Luna Rossa yacht in relation to its participation on the XXXIV edition of the America's Cup to be held in San Francisco, California, in 2013. The remaining Euro 2.9 million mainly consists of advances paid to Progetto Prada Arte srl for cultural initiatives to be undertaken the following year.
11. Capital expenditure
Changes in the net book value of “Property, plant and equipment” in the year ended January 31, 2013, are as follows:
| (amounts in thousands of Euro) | Land and buildings | Production plant and machinery | Leasehold improvements | Furniture & fittings | Other tangible | Assets under construction | Total net book value |
|---|---|---|---|---|---|---|---|
| Balance at January 31, 2011 (audited) | 145,602 | 15,042 | 220,112 | 72,109 | 24,695 | 59,157 | 536,717 |
| Additions | 40,806 | 7,030 | 110,797 | 29,329 | 18,825 | 51,820 | 258,607 |
| Depreciation | (5,055) | (6,635) | (62,899) | (18,691) | (5,850) | - | (99,130) |
| Disposals | - | (4) | (61) | (183) | (63) | (15) | (326) |
| Exchange differences | 1,443 | 28 | 14,637 | 2,405 | 325 | 3,501 | 22,339 |
| Other movements | 288 | 15 | 24,011 | 3,885 | 2,091 | (30,627) | (337) |
| Impairment | - | - | (2,273) | (470) | (41) | (1,216) | (4,000) |
| Balance at January 31, 2012 (audited) | 183,084 | 15,476 | 304,324 | 88,384 | 39,982 | 82,620 | 713,870 |
| Additions | 35,371 | 8,977 | 136,368 | 48,655 | 24,347 | 73,617 | 327,335 |
| Depreciation | (5,977) | (7,087) | (84,272) | (25,324) | (6,932) | - | (129,592) |
| Disposals | (3) | (17) | (708) | (856) | (17,654) | (1) | (19,239) |
| Exchange differences | (898) | (23) | (18,247) | (3,497) | (351) | (5,448) | (28,464) |
| Other movements | 3,334 | 122 | 37,770 | 3,252 | 1,223 | (44,583) | 1,118 |
| Impairment | (3,331) | - | (2,192) | (304) | (1,202) | (700) | (7,729) |
| Balance at January 31, 2013 (audited) | 211,580 | 17,448 | 373,043 | 110,310 | 39,413 | 105,505 | 857,299 |
23
Changes in the net book value of "Intangible assets" in the year ended January 31, 2013, are as follows:
| (amounts in thousands of Euro) | Trade- marks | Goodwill | Store Lease Acquisitions | Software | Development costs | Assets in progress | Total net book value |
|---|---|---|---|---|---|---|---|
| Balance at January 31, 2011 (audited) | 312,460 | 503,946 | 36,087 | 6,385 | 7,869 | 2,372 | 869,119 |
| Change in scope of consolidation | - | - | - | - | - | - | - |
| Additions | 166 | - | 14,393 | 4,178 | 128 | 1,384 | 20,249 |
| Amortization | (11,025) | - | (8,354) | (3,067) | (4,726) | - | (27,172) |
| Disposals | - | - | - | (4) | (1) | - | (5) |
| Exchange differences | 1,707 | 274 | 358 | 16 | - | 12 | 2,367 |
| Other movements | - | - | 190 | 1,071 | - | (2,278) | (1,017) |
| Impairment | - | - | - | (1) | - | (14) | (15) |
| Balance at January 31, 2012 (audited) | 303,308 | 504,220 | 42,674 | 8,578 | 3,270 | 1,476 | 863,526 |
| Change in scope of consolidation | - | - | 15,694 | - | - | - | 15,694 |
| Additions | 286 | - | 17,476 | 1,909 | 9 | 7,740 | 27,420 |
| Amortization | (11,137) | - | (9,471) | (2,963) | (1,677) | - | (25,248) |
| Disposals | - | - | - | (81) | - | - | (81) |
| Exchange differences | (1,352) | (233) | (500) | (26) | - | (57) | (2,168) |
| Other movements | - | - | (110) | 571 | 86 | (819) | (272) |
| Impairment | - | - | - | - | (11) | (110) | (121) |
| Balance at January 31, 2013 (audited) | 291,105 | 503,987 | 65,763 | 7,988 | 1,677 | 8,230 | 878,750 |
12. Other current assets
Other current assets are detailed as follows:
| (amounts in thousands of Euro) | as at January 31 2013 audited | as at January 31 2012 audited |
|---|---|---|
| VAT | 25,072 | 37,372 |
| Income tax and other tax receivables | 20,540 | 6,597 |
| Other assets | 16,731 | 15,337 |
| Prepayments and accrued income | 41,266 | 39,049 |
| Deposits | 1,214 | 1,920 |
| Total | 104,823 | 100,275 |
25
13. Other non-current assets
Other non-current assets are detailed as follows:
| (amounts in thousands of Euro) | as at January 31 2013 audited | as at January 31 2012 audited |
|---|---|---|
| Guarantee deposits | 50,898 | 49,526 |
| Deferred rental income | 2,410 | 2,893 |
| Other receivables | 8,374 | 4,883 |
| Total | 61,682 | 57,302 |
14. Payables to parent company and other related parties
Payables to parent companies and other related parties are detailed as follows:
| (amounts in thousands of Euro) | as at January 31 2013 audited | as at January 31 2012 audited |
|---|---|---|
| Financial payables – other related parties | 5,018 | 3,574 |
| Other payables – PRADA Holding bv | 120 | - |
| Other payables – other related parties | 458 | 528 |
| Other payables – other companies controlled by PRADA Holding bv | 3 | 259 |
| Total | 5,599 | 4,361 |
15. Trade payables
| (amounts in thousands of Euro) | as at January 31 2013 audited | as at January 31 2012 audited |
|---|---|---|
| Trade payables – third parties | 323,894 | 279,236 |
| Trade payables – related parties | 6,719 | 4,302 |
| Total | 330,613 | 283,538 |
The increase in Trade payables was due to the growth of the business in general.
The following table summarizes trade payables by maturity date.
| (amounts in thousands of Euro) | as at January 31 2013 audited | Current | Overdue | ||||
|---|---|---|---|---|---|---|---|
| 1 < 30 | 31 < 60 | 61 < 90 | 91 < 120 | ≥ 120 | |||
| Trade payables | 330,613 | 301,940 | 14,991 | 3,859 | 3,119 | 1,180 | 5,524 |
| Total | 330,613 | 301,940 | 14,991 | 3,859 | 3,119 | 1,180 | 5,524 |
| (amounts in thousands of Euro) | as at January 31 2012 audited | Current | Overdue | ||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| 1 < 30 | 31 < 60 | 61 < 90 | 91 < 120 | ≥ 120 | |||
| Trade payables | 283,538 | 251,483 | 17,392 | 5,507 | 2,553 | 2,131 | 4,472 |
| Total | 283,538 | 251,483 | 17,392 | 5,507 | 2,553 | 2,131 | 4,472 |
16. Other current liabilities
Other current liabilities are detailed as follows:
| (amounts in thousands of Euro) | as at January 31 2013 audited | as at January 31 2012 audited |
|---|---|---|
| Payables for capital expenditure | 57,969 | 57,844 |
| Accrued expenses and deferred income | 9,810 | 12,944 |
| Other payables | 63,866 | 57,989 |
| Total | 131,645 | 128,777 |
17. Provisions for risks and charges
Movements in provisions for risks and charges are summarized as follows:
| (amounts in thousands of Euro) | Provision for litigation | Provision for tax disputes | Other provisions | Total |
|---|---|---|---|---|
| Balance at January 31, 2012 (audited) | 1,618 | 37,335 | 17,968 | 56,921 |
| Exchange differences | (18) | (2,548) | (1,254) | (3,820) |
| Reversals | (88) | (7,532) | (4,937) | (12,557) |
| Uses | (822) | (197) | (2,048) | (3,067) |
| Increases | 1,085 | 409 | 7,943 | 9,437 |
| Balance at January 31, 2013 (audited) | 1,775 | 27,467 | 17,672 | 46,914 |
Provisions represent the Directors' best estimate of maximum contingent liabilities. In the Directors' opinion and based on the information available to them as supported by the opinions of independent experts at the reporting date, the total amount provided for risks and charges was reasonable considering the contingent liabilities that might arise.
27
Management Discussion and Analysis for the three months period ended January 31, 2013
Net revenues
In the three months ended January 31, 2013, consolidated net revenues amounted to Euro 957.9 million and recorded an increase of 16.1% (+13.7% at constant exchange rates) compared to Euro 825.2 million scored the same quarter of the 2011 financial year.
The business expansion was substantially achieved thanks to the retail channel that, posting net sales for Euro 746.7 million (+19.2% as reported, +16.8% at constant exchange rates and +5% on a Same Store Sales Growth (SSSG) basis over the same quarter of 2011), contributed 78.7% of total net sales in the three months ended January 31, 2013. The wholesale channel totaled Euro 201.7 million, 6% more than in three months ended January 31, 2012 (+3.6% at constant exchange rates).
A net of 33 new stores (36 openings, 3 closing) was opened in the last three months ended January 31, 2013, including 10 in the Far East area.
All markets, except for Japan, delivered double-digit growth rates. The Asia Pacific market, contributing 36.4% to the Group's net sales for the three months ended January 31, 2013, recorded revenues for Euro 345.5 million (+17.8% as reported and +12.5% at constant exchange rates over the three months ended January 31, 2012). In Europe the Group continued to post the excellent performances achieved all along 2012. In fact, net revenues in this region amounted to Euro 203.1 million in the three months ended January 31, 2013 (+21.2% as reported and +19.6% at constant exchange rates compared to the same period of 2011).
In terms of product mix, the Leather goods division drove the Group's business expansion with a +26.7% increase compared to the three months ended January 31, 2012 (+24% at constant exchange rates).
Net sales generated by the Prada brand amounted to Euro 773 million or 81.5% on net revenues, +18.3% more than in the three months ended January 31, 2013 (+15.8% at constant exchange rates).
Operating results
In the three months ended January 31, 2013, EBITDA totaled Euro 324.6 million, +19% compared to Euro 272.7 million posted in the same three months period of 2011. Profitability measured as a percentage on Net revenues increased further from 33.1% in the three months ended January 31, 2012 to 33.9%. Such increase in profitability was substantially achieved thanks to the improvement gained at the delivery margin level.
The Group's net result amounted to Euro 217.1 million and recorded a +36.8% increase compared to Euro 158.8 million posted the three months ended January 31, 2012. Due to some adjustments in tax assessments
recognized at year end, the incidence on net revenues grew up to 22.7% from 19.2% achieved last year.
28
29
Management Discussion and Analysis for the twelve months period ended January 31, 2013
Net revenues
Consolidated net revenues for the year ended January 31, 2013, amounted to Euro 3,297.2 million, 29% higher than the Euro 2,555.6 million recorded in 2011. At constant exchange rates, there was a 22.9% increase.
Distribution channels
The retail channel delivered net sales of Euro 2,664.2 million for the twelve months ended January 31, 2013, an increase of 35.6% compared to 2011 (+28.6% at constant exchange rates). The progress in the channel was achieved thanks to double-digit Same Store Sales Growth (SSSG) which was robust throughout the year and measured 14% at year end, as well as to the additional 73 net new DOS opened in 2012 (78 openings and 5 closures). The contribution of the retail channel to the Group's net sales increased from 77.9% in the financial year 2011 to 81.8%.
The wholesale channel, mainly sustained by the Italian market, contributed the remaining 18.2% and generated net sales of Euro 592.2 million for the twelve months ended January 31, 2013, up by 6% compared to 2011 (+2.9% at constant exchange rates).
Markets
In 2012 all regions posted double-digit rates of growth.
The Asia Pacific market reported net sales of Euro 1,160.2 million, an increase of 32.9% (+22.7% at constant exchange rates) compared to the Euro 873 million posted in 2011. Its contribution to Group's net sales rose to 35.6% from 34.6% in 2011. The growth was achieved almost entirely by the retail network which, including the 15 new DOS opened during the year (16 openings and 1 closure), owned a total of 130 DOS in the region at January 31, 2013. The Greater China area (PRC, Hong Kong and Macau) was involved in the retail strengthening program with the opening of 12 DOS net (13 openings and 1 closure) in Hong Kong, Macau, Hangzhou, Taiyuan, Jinan, Chengdu, Nanjing, Beijing, Shenyang and Hefei. In 2012, the Greater China area generated net sales of Euro 735.6 million, 35% up on 2011 (+24% at constant exchange rates, +14% on a SSSG basis).
The European market recorded net sales of Euro 739.6 million, an increase of 36.9% compared to the Euro 540.1 million posted in 2011 (+34.3% at constant exchange rates and +26% on a SSSG basis). The Group's ability to attract travelers drove the performance of the retail channel which was excellent throughout the year and recorded 53.9% growth at year end (+50.4% at constant exchange rates). A total of 22 new DOS opened in 2012, including 9 in France and the largest store in Moscow in an impressive building at Stoleshnikov Pereylok. The strengthening of the retail network also involved the renovation of existing stores, leading to the unveiling of the refurbished Prada flagship store on Old Bond Street, London. The wholesale channel
posted a slight 4.6% fall in net sales compared to the previous year (a reduction of 5.1% at constant exchange rates).
The Italian market posted net sales of Euro 528.3 million, an increase of 18.6% compared to 2011. The retail channel contributed most of the growth with a 27.5% increase in reported net sales and a 20% increase on a SSSG basis compared to 2011. The wholesale channel posted 5.7% growth.
The American market reported net sales of Euro 484.1 million, 23.3% up on the Euro 392.7 million generated in the previous year (+14.8% at constant exchange rates). Both the channels achieved double-digit rates of growth, but it was the DOS network that fueled the performance as it delivered net sales of 29.9% more than in 2011 (+21.1% at constant exchange rates and +3% on a SSSG basis). Some 19 new DOS were opened in the region during the year, including the first 5 stores ever in Brazil. The wholesale channel increased by 12% (+4.1% at constant exchange rates).
On the Japanese market, where the Group largely operates through the retail channel, net sales for 2012 totaled Euro 293.2 million, up by 14.2% compared to 2011 (+7.9% at constant exchange rates and -2% on a SSSG basis). The efforts made to sustain the vitality of this very sophisticated market led during the year to 5 openings, 4 closures and 11 relocations.
The sales growth in other countries was essentially attributable to the Middle East region where, since mid-2011, the Group has embarked upon a DOS expansion program which led to the opening of 9 new stores in 2012 in Abu Dhabi, Kuwait city and Dubai, including the impressive free standing store in the Mall of Emirates, key contributor to the 2012 performance. Overall, the Middle East area delivered Euro 44.8 million in 2012 compared to some Euro 11.1 million in 2011, while the whole other countries area delivered Euro 51 million of net sales in 2012 compared to Euro 15.2 million in 2011.
Products
All product categories achieved positive performances. Leather goods led the way with Euro 2,036 million of net sales generated in 2012 compared to Euro 1,426.5 million in 2011 (+42.7% as reported and +35.5% at constant exchange rates). The Leather goods performance, underpinned by strong growth in the Far East region, was double digit growth for all brands, all channels and all other regions. This product category now contributes almost two thirds of the Group's net sales. Footwear delivered net sales of Euro 625.4 million in 2012, up by 11.7% compared to 2011 (+7.2% at constant exchange rates), with the sales generated on a more balanced geographical split. Net sales of ready to wear products were worst hit by the selective strategy regarding wholesale accounts but still managed to achieve 9.9% growth (+4.9% at constant exchange rates).
Brands
The net sales generated by the Prada brand totaled Euro 2,649.6 million in 2012, an increase of 32.5% compared to 2011 (+26.1% at constant exchange rates). This brand, representing 81% of the Group's net sales in 2012, has largely benefited from the expansion strategy realized in recent years
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drawing on outstanding brand awareness.
Miu Miu net sales totaled Euro 512.8 million in 2012, 16.3% up on 2011 (+10.7% at constant exchange rates). During the year, the Group continued to sustain the brand with the opening of 32 new DOS all around the world: 8 in Europe, 8 in Asia Pacific, 7 in the Americas, 3 in Japan, 3 in the Middle East, 2 in Italy and 1 in Africa. The Group's objective through this strategy of expansion was to achieve immediate revenue growth, as in 2012 and recent years, while also increasing the brand's critical mass so as to improve further in future years the returns resulting from the high growth potential of the brand.
The Church's brand again achieved steady double figure growth. In 2012, its net sales totaled Euro 68.4 million, up by 15.6% compared to 2011 (+10.7% at constant exchange rates). In Europe, Church's main market, net sales increased by 19.3% (+13.2% at constant exchange rates).
The Car Shoe brand generated net sales of Euro 19.7 million in 2012, up by 15.4% compared to 2011 (+13.8% at constant exchange rates). A new DOS was opened in Dubai during the year, taking the retail network to a total of 7 DOS at January 31, 2013.
Royalties
Income from royalty agreements contributed net revenues of Euro 40.8 million, up by 26.4% compared to Euro 32.3 million in 2011. The launch of the Prada phone by LG 3.0 in 2012 contributed most to the increase, while fragrances performed best in terms of rate of growth thanks to the launch of Luna Rossa perfume and the strength of the Prada Candy great success.
Operating results
Gross margin for the year was Euro 2,376.5 million, up by 30% compared to the Euro 1,828 million reported for 2011. Compared to net sales, the higher rate of growth was achieved thanks to a more favorable sales mix in terms of channel, geographical area and product category as well as a positive exchange rate effect.
Operating costs increased from Euro 1,199.1 million in 2011 to Euro 1,486.8 million. As a percentage of net revenues they decreased from 46.9% in 2011 to 45.1% (45.4% at constant exchange rates).
Product design and development costs increased slightly compared to 2011 but fell as a percentage of net revenues as most of the costs of this corporate area are fixed.
Advertising and communications costs raised from Euro 129.2 million to Euro 150.6 million while falling from 5.1% of net revenues in 2011 to 4.6%. The increase in absolute terms was mainly attributable to higher purchases of media space as well as to new sponsorships. In fact, during the year the Group started to sponsor the Luna Rossa yacht that raced the 2012 America's Cup World series taking part in regattas in Naples, Venice, San Francisco and Newport.
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Selling costs increased from Euro 802.8 million in 2011 to Euro 1,040.1 million in 2012 mainly as a result of the ongoing enlargement and renovation of the DOS network. As a percentage of net revenues, they remained almost unchanged (from 31.4% in 2011 to 31.5%).
General and administrative expenses increased from Euro 164 million in 2011 to Euro 184.7 million essentially because of business expansion which led to higher overhead expenses. As a percentage of net revenues they decreased from 6.4% to 5.6%.
EBITDA was Euro 1,052.5 million for the twelve months ended January 31, 2013, 38.6% up on the Euro 759.3 million achieved in 2011. The Group draw on its revenue growth to increase profitability notwithstanding more retail operating and overhead expenses and higher media and sponsorship spending.
EBIT improved further as a result of smaller increases in depreciation, amortization and impairment adjustments. In fact, it stood at Euro 889.8 million, 41.5% higher than the Euro 628.9 million reported for 2011.
The tax charge for the year, represented as a percentage of profit before taxation, was 28.3% against 27.6% last year. The 2012 tax rate was affected by an extraordinary tax charge paid in October 2012, amounting to some Euro 42 million and related to the years 2010 and 2011. Despite this extraordinary tax charge, equal to Euro 42 million, the profits generated by operating activities were enough to lead to an improvement in the Group's net income in 2012 that raised Euro 625.7 million (Euro 431.9 million in 2011) or 19% of net revenues (16.9% in 2011). Consequently, earnings per share have increased from Euro 0.17 to Euro 0.24.
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Net invested capital
The following table reports the Statement of financial position as adjusted in order to provide a better picture of the composition of the Net invested capital.
| (amounts in thousands of Euro) | as at January 31 2013 audited | as at January 31 2012 audited |
|---|---|---|
| Non-current assets (excluding deferred tax assets) | 1,821,773 | 1,650,329 |
| Trade receivables, net | 304,525 | 266,404 |
| Inventories, net | 343,802 | 374,782 |
| Trade payables | (330,613) | (283,538) |
| Net operating working capital | 317,714 | 357,648 |
| Other current assets (excluding financial position items) | 165,962 | 112,623 |
| Other current liabilities (excluding financial position items) | (230,285) | (262,534) |
| Other current assets/(liabilities), net | (64,323) | (149,911) |
| Provisions for risks | (46,914) | (56,921) |
| Post-employment benefits | (45,538) | (35,898) |
| Other long-term liabilities | (85,289) | (75,991) |
| Deferred taxation, net | 120,421 | 128,071 |
| Other non-current assets/(liabilities), net | (57,320) | (40,739) |
| Net invested capital | 2,017,844 | 1,817,327 |
| Shareholders' equity – Group | (2,320,022) | (1,822,743) |
| Shareholders' equity – Non Controlling Interests | (10,470) | (8,224) |
| Total consolidated Shareholders' equity | (2,330,492) | (1,830,967) |
| Long term financial payables | (79,348) | (179,542) |
| Short term financial, net surplus/(deficit) | 391,996 | 193,182 |
| Net financial position surplus/(deficit) | 312,648 | 13,640 |
| Shareholders' equity and Net financial position | (2,017,844) | (1,817,327) |
At January 31, 2013, Net invested capital stood at Euro 2,017.8 million. It had a similar breakdown at all three reporting dates analyzed with Non-current assets always making the greatest contribution to the net total. For the twelve months ended January 31, 2013, the increase was again largely attributable to the change in Non-current assets, essentially because of capital expenditure incurred during the year. The reduction in the Net operating working capital, Euro 40 million, was entirely offset by the positive change in the fair value of derivative financial instruments included in other current assets for Euro 42.2 million and in other current liabilities for Euro 14.3 million.
Consolidated shareholders' equity rose from Euro 1,831 million to Euro 2,330.5 million at January 31, 2013. The increase generated by the Group's net income for the twelve months ended January 31, 2013, Euro 625.7 million, was partially offset by the dividends of Euro 127.9 million distributed to the PRADA spa shareholders (as approved by the Annual General Meeting on May 22, 2012 on the financial statements for the year ended January 31, 2012) and by the dividends of Euro 5.6 million paid to Non-controlling interests. Other changes resulting from translation differences and changes in fair value equity reserves accounted for the rest of the increase.
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Net financial position
| (amounts in thousands of Euro) | as at January 31 2013 audited | as at January 31 2012 audited |
|---|---|---|
| Long term debt | (78,830) | (178,442) |
| Obligations under finance leases | (518) | (1,100) |
| Long term financial payables | (79,348) | (179,542) |
| Bank overdraft and short term loans | (175,570) | (165,485) |
| Payables to related parties | (5,018) | (3,574) |
| Receivables from related parties | 1,413 | 1,410 |
| Obligations under finance leases | (575) | (1,453) |
| Cash and cash equivalents | 571,746 | 362,284 |
| Short term net financial surplus/(deficit) | 391,996 | 193,182 |
| Net financial position surplus/(deficit) | 312,648 | 13,640 |
| Net financial position surplus/(deficit), excluding receivables/(payables) with parent company and other related parties | 316,253 | 15,804 |
| NFP/EBITDA | n.a. | n.a |
The Group's net financial position turned into a net financial surplus during the previous year thanks both to the capital injection resulting from the listing of 58,824,000 PRADA spa shares on the Main Board of the Hong Kong Stock exchange and to the results of operations. At January 31, 2013, the Group net financial surplus improved further to Euro 312.6 million. In fact, cash flows from operations generated during the year 2012 (Euro 759.3 million) allowed the Group to fund its capital expenditure program (Euro 331.6 million), to pay dividends to PRADA spa shareholders (Euro 127.9 million), to pay dividends to Non-controlling interests (Euro 5.6 million) and to take the net financial surplus from Euro 13.6 million at January 31, 2012, to Euro 312.6 million at the reporting date.
Analysis of Capital expenditure
The increase in Property, plant and equipment and Intangible assets was mainly driven by the capital expenditure incurred during the year, as allocated as follows: Euro 265.4 million in the retail area, Euro 42.8 million in the production and logistics area and Euro 46.6 million in the corporate area.
Outlook for 2013
The Group remains confident that the strategy which has been coherently deployed in recent years with regard to brand positioning and retail expansion will again be a key success factor for the forthcoming fiscal year, even in a general economic environment that remains challenging.
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Corporate governance practices
The Company is committed to maintaining a high standard of corporate governance practices and fulfilling its commitment to effective corporate governance. The corporate governance model adopted by the Company consists of a set of rules and standards with the aim of establishing efficient and transparent operations within the Group, to protect the rights of the Company's shareholders and to enhance shareholder value. The corporate governance model adopted by the Company is in compliance with the applicable regulations in Italy, as well as the principles of the Corporate Governance Code (the "Code") contained in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules").
Full details on the Company's corporate governance practices are set out in the Company's 2012 Annual Report.
Audit Committee
The Company has established an Audit Committee in compliance with Rule 3.21 of the Listing Rules where at least one member possesses appropriate professional qualifications in accounting or related financial management expertise to discharge the responsibility of the Audit Committee. The membership of the Audit Committee consists of three Independent Non-Executive Directors, namely, Mr. Gian Franco Oliviero Mattei (Chairman), Mr. Giancarlo Forestieri and Mr. Sing Cheong Liu. The primary duties of the Audit Committee are to assist the Board in providing an independent view of the effectiveness of the Company's financial reporting process and internal control and risk management systems, to oversee the external audit process and the internal audit process carried out by the internal audit department of the Company and to perform other duties and responsibilities as are assigned to the Audit Committee by the Board.
The Audit Committee has held a meeting on April 3, 2013, to review the annual results for the year ended January 31, 2013 before recommending it to the Board for approval.
Compliance with the Code
The Board has reviewed the Company's corporate governance practices and is satisfied that the Company's corporate governance practices have complied with the code provisions set out in the Code on Corporate Governance Practices formerly contained in Appendix 14 of the Listing Rules during the period from February 1 to March 31, 2012, and the Code during the period from April 1, 2012, to January 31, 2013 (the period from February 1, 2012, to January 31, 2013, both days inclusive is referred to as the "Reviewed Period").
Directors' securities transactions
The Company has adopted written procedures governing Directors' securities transactions on terms no less exacting than the standard set out in the Model
Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") contained in Appendix 10 of the Listing Rules. Specific written acknowledgments have been obtained from each Director to confirm compliance with the Model Code throughout the Reviewed Period. There was no incident of non-compliance during the Reviewed Period.
The Company has also adopted written procedures governing securities transactions carried out by the relevant employees who are likely to possess inside information in relation to the Company and its securities. The terms of these procedures are no less exacting than the standard set out in the Model Code.
Purchase, sale or redemption of the Company's listed securities
Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities during the Reviewed Period.
Shareholders' general meeting
The Shareholders' general meeting of the Company will be held on Thursday, May 23, 2013.
Notice of the Shareholders' general meeting will be published on the Company's website at www.pradagroup.com and on the Hong Kong Exchanges and Clearing Limited's website at www.hkexnews.hk in due course.
Final dividend
The Board recommends for the twelve month period ended January 31, 2013, a final dividend of Euro 230.3 million (or 9.0 Euro/cents per share). The payments shall be made in Euro to the shareholders recorded in the section of the Company's shareholders register held at the Company's registered office in Milan (Italy) and in Hong Kong dollars to the shareholders recorded in the section of the Company's shareholders register held in Hong Kong. The relevant exchange rate will be the opening buying T/T rate of Hong Kong dollars to Euros as announced by the Hong Kong Association of Banks (www.hkab.org.hk) on the day of approval of the final dividend by the shareholders.
Subject to the shareholders' approving the recommended final dividend, such dividend will be payable on or about Thursday, June 20, 2013.
Closure of register of shareholders
The shareholders registered on the Company's shareholders register on Thursday, May 23, 2013, will be allowed to attend and vote at the Shareholders' general meeting of the Company. In order to qualify for attending and voting at the Shareholders' general meeting of the Company, all transfers accompanied by the relevant share certificate(s) must be lodged with the Company's Hong Kong share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-16, 17th Floor, Hopewell Centre,
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183 Queen's Road East, Wanchai, Hong Kong or with the Company's registered office in Milan (Italy), Via Antonio Fogazzaro, 28, if the transfer concerns shares registered in the section of the Company's shareholders register kept by the Company itself, not later than 4:30 p.m. on Monday, May 20, 2013. The shareholders register of the Company will be closed from Tuesday May 21, 2013 to Thursday May 23, 2013, both days inclusive, during which no share transfer can be registered.
The final dividend will be paid to shareholders recorded on the Company's shareholders register on Friday, May 31, 2013. In order to qualify for the payment of the proposed final dividend, all transfers accompanied by the relevant share certificate(s) must be lodged with the Company's Hong Kong share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-16, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong or with the Company's registered office in Milan (Italy), Via Antonio Fogazzaro, 28, if the transfer concerns shares registered in the section of the Company's shareholders register kept by the Company itself, not later than 4:30 p.m. on Wednesday, May 29, 2013. The shareholders register of the Company will be closed from Thursday, May 30, 2013, to Friday, May 31, 2013, both days inclusive, during which no share transfer can be registered.
Publication of Annual Results Announcement and Annual Report
This Annual Results Announcement is published on the Company's website at www.pradagroup.com and on the Hong Kong Exchanges and Clearing Limited's website at www.hkexnews.hk. The annual report will be published on the same websites and dispatched to shareholders in due course.
By Order of the Board
PRADA S.p.A.
Mr. Carlo Mazzi
Deputy Chairman
Milan (Italy), April 5, 2013
As at the date of this announcement, the Company's executive directors are Ms. Miuccia PRADA BIANCHI, Mr. Patrizio BERTELLI, Mr. Carlo MAZZI and Mr. Donatello GALLI; the Company's non-executive directors are Mr. Marco SALOMONI and Mr. Gaetano MICCICHE and the Company's independent non-executive directors are Mr. Gian Franco Oliviero MATTEI, Mr. Giancarlo FORESTIERI and Mr. Sing Cheong LIU.
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