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 toits 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 thisannouncement.

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 INTERIM RESULTS FOR THE SIX MONTHSENDED JULY 31, 2013
FINANCIAL HIGHLIGHTS
-

-

-

-

Group’s net revenues were Euro 1,728.1 million, recording an
increase of 11.7% compared with the six months ended July 31,
2012
Retail net sales were Euro 1,422.5 million, up by 15.7% comparedwith the six months ended July 31, 2012
the number of Directly Operated Stores (DOS) reached 491
Retail Same Store Sales Growth (SSSG) was 7% compared with thesix months ended July 31, 2012
EBITDA was Euro 551.1 million, up by 17.4% compared with the six
months ended July 31, 2012 (representing a margin of 31.9% on net
revenues)
Group’s net income amounted Euro 308.2 million, an increase of
7.6% compared to Euro 286.4 million for the six months ended July
31, 2012
Positive net financial position at Euro 195.6 million as at July 31,
2013
Net operating cash flow for the six months ended July 31, 2013,
was Euro 403.8 million

1Consolidated results for the six months ended July 31,
2013
The Board of Directors (the “Board”) of PRADA S.p.A. (the “Company”, or“PRADA spa”) is pleased to announce the unaudited Consolidated results of
the Company and its subsidiaries (collectively, the “Group”) for the six
months ended July 31, 2013, together with the unaudited comparative
figures for the six months ended July 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, havebeen audited by Deloitte & Touche spa.

Key financial informationsix
monthsended
July 312013(unaudited)

twelvemonthsended
January 31
2013(audited)sixmonthsended
July 312012(unaudited)% changeon
July 312012

1,728,065
551,053458,338
443,428
308,2390.120

3,297,219
1,052,469
889,781883,616
625,6810.245

1,547,373
469,373
394,882
391,971
286,409
0.112

11.7%
17.4%
16.1%
13.1%
7.6%
7.1%

Average headcount (persons)Capital expenditure
Net operating cash flows

10,364
293,031403,764

9,427
351,129759,272

9,101
121,688332,192

13.9%-

EBITDA %EBIT %

31.9%
26.5%

31.9%
27.0%

30.3%
25.5%

six
monthsended
July 312013(unaudited)

twelvemonthsended
January 31
2013(audited)sixmonthsended
July 312012(unaudited)change on
January 31
2013

323,132
2,205,677
195,626
2,388,096

317,7142,017,844
312,648
2,320,022

351,874
1,944,812
82,532
2,017,482

5,418
187,833(117,023)
68,074

Key information on
income statement(amounts in thousands of Euro)Net revenues
EBITDAEBIT
Income before tax
Net income of the Group
Earnings per share

Key information on
Statement of financial position(amounts in thousands of Euro)Net operating working capital
Net invested capital
Net financial position surplus/(deficit)
Group shareholders’ equity

2

Highlights for the six months ended July 31, 2013
In the six months ended July 31, 2013, the Group pursued its commercial
strategy through the retail network expansion, also resigning some wholesaleaccounts in favor of the opening of Directly Operated Stores (DOS), mainly inNorth America. Keep following this path and leveraging on the worldwide
success of its iconic products, the Group posted net revenues of Euro 1,728.1
million in the six months ended July 31, 2013, growing 11.7% as reported and14.8% at constant exchange rates. The progress in sales was achieved despite
an extremely volatile international economic environment and was mainly
led by leather goods and the Prada brand.
The sales development was coupled with an improvement in the operating
profit: the EBITDA for the six months ended July 31, 2013, amounted to Euro
551.1 million, or 31.9% as a percentage on net revenues, showing a progressof 17.4% over the results posted in the six months ended July 31, 2012.
The Group’s net result for the six months ended July 31, 2013, totaled Euro308.2 million, up by 7.6% compared to Euro 286.4 million recorded in thefirst half of 2012. It was slightly diluted by the impact of currencies
fluctuation as well as by a higher tax rate.
At July 31, 2013, the positive net financial position of the Group stood at
Euro 195.6 million, after the distribution of dividends of Euro 232.2 million
and after a capital expenditure spending for the period of Euro 292.5 million
that also included the purchase of a prestigious retail location in London
where the Group already operated under a lease agreement.
On July 29, 2013, Prada spa issued a Euro 130 million Notes listed on the Irish
Stock Exchange with an issue price of 99.641 per cent, settled on August 1,
2013. The Notes is due in 2018 and pays annual interest at the rate of 2.75%.
Being the Notes settled on August 1, 2013, there is neither cash received nor
liability recognized at the reporting date.

3

Consolidated income statement for the six months ended July
31, 2013%

six months
ended
July 312012(unaudited)%

1,728,065(460,407)

100.0%-26.6%

1,547,373(440,872)

100.0%-28.5%

1,267,658

73.4%

1,106,501

71.5%(809,320)-46.8%(711,619)-46.0%

458,33826.5%

394,882

25.5%(15,194)-0.9%(2,911)

-0.2%

284

-

-

-

443,42825.7%

391,97125.3%(130,609)-7.6%(102,756)-6.6%

Net income from continuing operations

312,81918.1%

289,215

18.7%

Net income for the period

312,81918.1%

289,215

18.7%

4,580

0.3%

2,806

0.2%

Net income – Group

308,23917.8%

286,409

18.5%

Depreciation, amortization and impairment

92,715

5.4%

74,491

4.8%

EBITDA

551,05331.9%

469,373

30.3%(amounts in thousands of Euro)Net revenues
Cost of goods sold

Note

3

Gross margin
Operating expenses

4

EBIT
Interest and other financial income/(expenses),net
Dividends received from third parties

5

Income before taxes
Taxation

6

Net income – Non-controlling interests

Basic and diluted earnings per share(in Euro per share)7

six months
ended
July 312013(unaudited)

0.120

4

0.112

Consolidated income statement for the three months ended
July 31, 2013
(amounts in thousands of Euro)Net revenues
Cost of goods sold

Note

3

three months
ended
July 312013(unaudited)

three months
ended%
July 312012(unaudited)%

945,771(253,971)

100.0%-26.9%

860,639(250,564)

100.0%-29.1%

Gross margin

691,800

73.1%

610,075

70.9%

Operating expenses(429,182)-45.4%(379,976)-44.2%

EBIT

262,61827.8%

230,099

26.7%

Interest and other financial income/(expenses),
net(9,035)-1.0%(4,371)-0.5%

Income before taxes

253,58326.8%

225,728

26.2%

Taxation(82,652)-8.7%(59,800)-6.9%

Net income from continuing operations

170,93118.1%

165,928

19.3%

Net income for the period

170,93118.1%

165,928

19.3%

851

0.1%

1,238

0.1%

Net income – Group

170,080

18.0%

164,690

19.1%

Depreciation, amortization and impairment

47,6095.0%

39,176

4.6%

EBITDA

310,22732.8%

269,275

31.3%

Net income – Non-controlling interests

5Consolidated statement of financial position(amounts in thousands of Euro)

Note

AssetsCurrent assets
Cash and cash equivalents
Trade receivables, net
Inventories, net
Derivative financial instruments - current
Receivables from and advance payments toparent company and other related parties
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Associated undertakings
Deferred tax assets
Other non-current assets
Derivative financial instruments - non current
Total non-current assets

9
8

as at
July 312013(unaudited)

as atJanuary 31
2013(audited)

439,654
317,519
408,534
22,863571,746
304,525
343,80243,06010

17,973

19,493

12

125,607
1,332,150

104,823
1,387,449

11
11

1,047,291
879,477
16,672
182,244
72,028198
2,197,910

857,299
878,750
23,024
176,057
61,682
1,018
1,997,830

3,530,060

3,385,279

159,468
5,018
402,921105,2291,845
197
132,153
806,831

175,570
5,599
330,613
97,148912
575
131,645742,062

81,124448
57,88847,75045,50589,054
157
321,926

78,830518
45,53846,91455,63684,905384
312,725

Total Liabilities

1,128,757

1,054,787

Share capital
Other reserves
Translation reserve
Net profit for the period
Shareholders’ Equity – Group

255,882
1,860,837(36,862)
308,2392,388,096

255,882
1,480,747(42,288)625,6812,320,022

13,207

10,470Total Liabilities and Shareholders’ Equity

3,530,060

3,385,279

Net current assets
Total assets less current liabilities

525,319
2,723,229

645,387
2,643,217

13

Total Assets
Liabilities and Shareholders’ equity
Current liabilities
Bank overdrafts and short-term loans
Payables to parent company and other related parties
Trade payables
Current tax liabilities
Derivative financial instruments - current
Obligations under finance leases - current
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term financial payables
Obligations under finance leases non-current
Post-employment benefits
Provisions for risks and charges
Deferred tax liabilities
Other non-current liabilities
Derivative financial instruments non-current
Total non-current liabilities

14
15

16

17

Shareholders’ Equity – Non-controlling interests

6

Statement of changes in consolidated shareholders’ equity(amounts in thousands of Euro, except for number of shares)
Number of
Share
Shares Capital

Share
premiumreserve

Translation
reserve

Cash
flow
hedge
reserve

Actuarial
gain(losses)
reserve

Available
for salereserve

Balance atJanuary 31, 2012
(audited)

2,558,824,000 255,882

410,047(17,239)(4,173)(1,192)(58)

Allocation of2011 net profit

-

-

-

-

-

-

Dividends

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Balance atJanuary 31, 2013
(audited)

2,558,824,000 255,882

Allocation of2012 net profit-

Dividends(amounts inthousands ofEuro)

Capital injection
in subsidiaries
Comprehensive
income for theyear(recycled to P&L)
Comprehensive
income for theyear(not recycled to
P&L)

Capital injection
in subsidiaries
Comprehensive
income for theyear(recycled to P&L)
Comprehensive
income for theyear(not recycled to
P&L)
Balance at
July 31, 2013
(unaudited)

Other
Net profit
reserves

747,548

Equityattributableto owners of
the Group

Noncontrollinginterests

Total
Equity431,929

1,822,744

8,224

1,830,968-

431,929 (431,929)

-

-

-

-

-

(127,941)-(127,941)(5,576)(133,517)

-

-

-

-

-

-

1,166

1,166

(25,049)

24,321

-

5,544

-

625,681

630,497

6,656

637,153---(5,278)---(5,278)-(5,278)410,047(42,288)

20,148(6,470)5,486

1,051,536

625,6812,320,022

10,4702,330,492

-

-

-

-

-

-

625,681 (625,681)

-

-

-

-

-

-

-

-

-

-

(230,294)-(230,294)(1,881)(232,175)

-

-

-

-

-

-

-

-

-

-

10

10

-

-

-

5,426 (10,225)-(4,764)-308,239

298,676

4,608

303,284

-

-

-

-

-

(308)

-

-

-

(308)

-

(308)

2,558,824,000 255,882

410,047(36,862)

9,923(6,778)722

1,446,923

308,2392,388,096

13,2072,401,303

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.

7Summarized statement of consolidated cash flows
six months
ended
July 312013(unaudited)

six months
ended
July 312012(unaudited)

Net cash flows from operating activities

403,764

332,191

Cash flows generated (utilized) by investing activities(293,189)(140,054)

Cash flows generated (utilized) by financing activities(245,918)(168,045)

Change in cash and cash equivalents, net of bank overdrafts(135,343)

24,092(amounts in thousands of Euro)Statement of consolidated comprehensive income
six months
ended
July 312013(unaudited)

twelve months
ended
January 31
2013(audited)

312,819

633,277

5,454
5,454

(25,989)(25,989)

Change in Cash Flow Hedge reserve
Tax impact
Change in Cash Flow Hedge reserve less tax impact(14,099)
3,874(10,225)

33,530(9,209)24,321

Change in Fair Value reserve
Tax impact
Change in Fair Value reserve less tax impact(6,352)
1,588(4,764)

7,391(1,847)
5,544

(385)
77
(308)

(6,369)1,091(5,278)302,976

631,875

4,608

6,656

298,368

625,219(amounts in thousands of Euro)Net income for the period – ConsolidatedA) Items recycled to P&L:
Change in Translation reserve
Tax impact
Change in Translation reserve less tax impact

B)

Item not recycled to P&L

Change in Actuarial reserve
Tax impact
Change in Actuarial reserve less tax impact
Consolidated comprehensive income for the period
Comprehensive income for the period – Non-controlling Interests
Comprehensive income for the period – Group8

Notes to the Interim results for the six months ended
July 31, 2013
1.

Presentation of PRADA GroupPRADA spa (the “Company”), together with its subsidiaries (jointly the“Group”), is listed on the Hong Kong Stock Exchange (HKSE code: 1913) andis 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 andaccessories. The Group also operates, under licensing agreements, in theeyewear, fragrances and mobile telephone sectors. Its products are sold in 70
countries worldwide through a network that included 491 Directly Operated
Stores (DOS) at July 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 content of this Announcement is based on the Interim condensed
consolidated financial statements of the PRADA Group for the six months
ended July 31, 2013. Such Interim condensed consolidated financial
statements, including the “Consolidated statement of financial position”,
the “Consolidated income statement”, the “Statement of consolidated
comprehensive income”, the “Summarized statement of consolidated cash
flows“, the “Statement of changes in consolidated shareholders’ equity” andthe “Notes to the Interim condensed consolidated financial statements” havebeen prepared in accordance with “IAS34 Interim Financial Reporting” asendorsed by the European Union.
The Interim condensed consolidated financial statements should be read
together with the Consolidated financial statements of the PRADA Group forthe twelve months ended January 31, 2013, that were prepared inaccordance with the International Financial Reporting Standards (“IFRS”)
issued by the International Accounting Standards Board (“IASB”) as endorsedby the European Union.
At the date of presentation of these Interim results, there were nodifferences between IFRS as endorsed by the European Union, and applicableto the PRADA Group, and those issued by the IASB.
IFRS also refers to all International Accounting Standards (“IAS”) and allinterpretations of the International Financial Reporting Interpretations
Committee (“IFRIC”), previously called the Standing Interpretations
Committee (“SIC”).
The Interim condensed consolidated financial statements have been preparedusing the same scope of consolidation, basis of consolidation and accounting
policies adopted for the preparation of the Consolidated financial statements
for the twelve months ended January 31, 2013, except for the amendments
to accounting standards as reported below.

9New standards and amendments issued by the IASB, endorsed by theEuropean Union and applicable to the PRADA Group from February 1, 2013
The following amendments to IFRS have been endorsed by the European
Union and are applicable to the PRADA Group effective from February 1,
2013. The matters in question do not significantly impact the Group as of thedate of these Interim condensed consolidated financial statements:- Amendments to “IAS 1 Presentation of financial statements”;- Amendments to “IAS 19 Employee benefits”;- “IFRS 13 Fair Value Measurement”;- Amendments to “IAS 12 Income Taxes”;- Amendments to “IFRS 7 Financial Instruments: Disclosures”;- “IFRIC Interpretation 20 Stripping Costs in the Production Phase of a
Surface Mine”;- Amendments to “IFRS 1 First-time Adoption of IFRS – Governments Loans”;- Annual improvements to IFRSs (2009-2011 Cycle).
On December 29, 2012, the European Union endorsed the “IFRS 10
Consolidated Financial Statements”, the “IFRS 11 Joint Arrangements”, the“IFRS 12 Disclosure of Interests in Other Entities”, the Amendments to “IAS
28 Investment in Associates and Joint Ventures” and the Amendments to “IAS
27 Separate Financial Statements” that, according to IASB, are effectivefrom January 1, 2013, but, because of the timing of the endorsement process
in the European Union, are applicable to the PRADA Group from February 1,
2014. The early adoption of these new IFRS and amendments would not have
had any significant impact on the Consolidated financial information of the
Prada Group for the six months ended July 31, 2013.

10

3.

Operating segment

Net revenues analysis
Net revenues for the six months ended July 31, 2013
six months
ended
July 312013(unaudited)

six months
ended%
July 312012 change(unaudited)

Net sales by geographical area
Italy
EuropeAmericas
Asia PacificJapan (including Hawaii)
Middle East
Other countries
Total

268,531 15.7%
374,300 21.9%
231,587 13.6%
627,564 36.8%
159,449
9.3%
43,287
2.5%
2,866
0.2%
1,707,584 100.0%

259,326 17.0%
3.5%
349,277 22.9%
7.2%
204,161 13.4% 13.4%
532,471 34.9% 17.9%
164,415 10.8% -3.0%
12,5500.8% 244.9%
2,487
0.2% 15.2%
1,524,687 100.0% 12.0%

Net sales by brand
Prada
Miu Miu
Church's
Car Shoe
Other
Total

1,410,062 82.6%
255,950 15.0%
32,673
1.9%
7,551
0.4%
1,348
0.1%
1,707,584 100.0%

1,233,433 80.9% 14.3%
245,971 16.1%
4.1%
31,0102.1%
5.4%
11,342
0.7% -33.4%
2,931
0.2% -54.0%
1,524,687 100.0% 12.0%

Net sales by product line
Clothing
Leather goods
Footwear
Other
Total

248,817 14.6%
1,156,369 67.7%
282,396 16.5%
20,002
1.2%
1,707,584 100.0%

248,677 16.3%
0.1%
943,060 61.8% 22.6%
315,290 20.7% -10.4%
17,6601.2% 13.3%
1,524,687 100.0% 12.0%

Net sales by distribution channelDOS
Independent customers and franchises
Total

1,422,460 83.3%
285,124 16.7%
1,707,584 100.0%

1,229,966 80.7%
294,721 19.3%
1,524,687 100.0%

15.7%
-3.3%
12.0%

Net sales
Royalties

1,707,584
20,481

1,524,687
22,686

98.5%
1.5%

12.0%
-9.7%

Total net revenues

1,728,065 100.0%

1,547,373 100.0%

11.7%(amounts in thousands of Euro)

11

98.8%
1.2%

Net revenues analysis for the three months ended July 31,
2013
three months
ended
July 312013(unaudited)

three months
ended%
July 312012 change(unaudited)

Net sales by geographical area
Italy
EuropeAmericas
Asia PacificJapan (including Hawaii)
Middle East
Other countries
Total

167,168 17.9%
215,975 23.1%
137,432 14.7%
312,000 33.4%
80,417
8.6%
20,456
2.2%
1,565
0.1%
935,013 100.0%

149,261 17.5% 12.0%
200,831 23.6%
7.5%
127,536 15.0%
7.8%
279,698 32.8% 11.5%
83,916
9.9% -4.2%
8,836
1.0% 131.5%
1,332
0.2% 17.5%
851,410 100.0%
9.8%

Net sales by brand
Prada
Miu Miu
Church's
Car Shoe
Other
Total

771,224 82.5%
143,291 15.3%
15,910
1.7%
3,818
0.4%
770
0.1%
935,013 100.0%

691,894 81.3% 11.5%
138,633 16.3%
3.4%
14,706
1.7%
8.2%
5,040
0.6% -24.3%
1,137
0.1% -32.2%
851,410 100.0%
9.8%

Net sales by product line
Clothing
Leather goods
Footwear
Other
Total

140,772 15.1%
617,993 66.1%
164,176 17.5%
12,072
1.3%
935,013 100.0%

134,840 15.8%
525,803 61.8%
180,596 21.2%
10,171
1.2%
851,410 100.0%

4.4%
17.5%
-9.1%
18.7%
9.8%

Net sales by distribution channelDOS
Independent customers and franchises
Total

743,751 79.5%
191,262 20.5%
935,013 100.0%

660,314 77.6%
191,096 22.4%
851,410 100.0%

12.6%
0.1%
9.8%

Net sales
Royalties
Total net revenues

935,013 98.9%
10,758
1.1%
945,771 100.0%

851,410 98.9%
9,229
1.1%
860,639 100.0%

9.8%
16.6%
9.9%

(amounts in thousands of Euro)

12

Number of storesas atJuly 312013
DOS
franchises

as atJanuary 31
2013
DOS
franchises

as atJuly 312012
DOS
franchises

Prada
Miu Miu
Church’s
Car Shoe

301
133
49
8

23
7
-

283
126
45
7

19
6
-

263
102
43
6

19
6
-

Total

491

30

461

25

414

25

as at
July 312013
DOS
franchises

as atJanuary 31
2013
DOS
franchises

as atJuly 312012
DOS
franchises

ItalyEuropeAmericas
Asia PacificJapan (including Hawaii)
Middle East
Africa

50
138
75
142
70
13
3

6
6
18
-

48
137
61
130
71
11
3

5
6
14
-

46
125
49
119
69
3
3

5
6
14
-

Total

491

30

461

25

414

25

4.

Operating Expenses(amounts in thousands of Euro)six months
ended
July 312013(unaudited)

six months
ended
July 312012(unaudited)% of netrevenues% of netrevenues

Product design and development costs
Advertising and communications costs
Selling costs
General and administrative costs

66,40582,053563,954
96,908

3.8%
4.7%
32.6%
5.6%

56,226
68,295488,920
98,178

3.6%
4.4%
31.6%
6.3%

Total

809,32046.8%

711,61946.0%

5.

Interest and other financial expenses, net
six months
ended
July 312013(unaudited)

six months
ended
July 312012(unaudited)

Interests expenses on borrowings
Interest income
Exchange gains / (losses) – realized
Exchange gains/ (losses) – unrealized
Other financial income / (expenses)(4,527)
2,035(4,148)(6,248)(2,306)(6,184)
2,557
8,203(5,074)(2,413)

Total(15,194)(2,911)(amounts in thousands of Euro)

13

6.

Taxation
six months
ended
July 312013(unaudited)

six months
ended
July 312012(unaudited)

Current taxation
Deferred taxation

143,557(12,948)

119,942(17,186)

Income taxes

130,609102,756(amounts in thousands of Euro)The charge for income taxes raised from Euro 102.8 million in the six months
ended July 31, 2012, or 26.2% as a percentage on result before taxation, toEuro 130.6 million in the current period, or 29.4% as a percentage on result
before taxation. The higher incidence rate mainly resulted from a change in
the geographical mix of taxable incomes.

7.

Earnings and dividends per share

Earnings per share
Earnings per share are calculated by dividing the net income attributable toGroup’s shareholders by the weighted average number of ordinary shares inissue.

Group’s net income in Euro
Weighted average number of ordinary shares in issue
Earnings per share in Euro, calculated on weighted average number ofsharessix months
ended
July 312013(unaudited)

six months
ended
July 312012(unaudited)308,238,604
2,558,824,000

286,408,505
2,558,824,000

0.120

0.112

Dividends per share
During the period ended July 31, 2013, the Company distributed dividends forEuro 230,294,160, as approved by the Annual General Meeting held on May
23, 2013, to approve the financial statements for the year ended January 31,
2013. The payment was arranged on June 2013, net of the Italian withholding
tax payable (Euro 9.2 million), as arising from the application to the wholeamount of dividends payable to beneficial owners of the Company shares
held through the Hong Kong Central Clearing and Settlement System of the
Italian ordinary withholding tax rate for dividends paid to non-Italianresidents.
During the period ended January 31, 2013, the Company distributed dividendsof 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 the14Company shares held through the Hong Kong Central Clearing and Settlement
System, was completed by January 31, 2013.

8.

Inventories, net
as atJuly 312013(unaudited)

as atJanuary 31
2013(audited)

Raw materials
Work in progress
Finished products
Allowance for obsolete and slow moving inventories

88,30232,811
362,044(74,623)

79,55924,620314,244(74,621)

Total

408,534

343,802(amounts in thousands of Euro)

The increase in inventories was essentially attributable to the higher unitary
value of the more expensive fall/winter finished products stocked at July 31,
2013, as well as to larger quantities of raw materials purchased to support
the growth of the retail business.
Movements on the allowance for obsolete and slow moving inventories areanalyzed as follows:Rawmaterials

Finished
Products

Total

29,75444,86774,621

(1)
-

3
-

2
-

29,75344,87074,623

as atJuly 312013(unaudited)

as atJanuary 31
2013(audited)

Trade receivables from third parties
Allowance for bad and doubtful debts
Trade receivables from related parties

294,351(12,140)
35,308286,390(11,547)
29,682

Total

317,519

304,525(amounts in thousands of Euro)
Balance at January 31, 2013 (audited)
Exchange differences
Increases
Uses
Balance at July 31, 2013 (unaudited)9.

Trade receivables, net

Trade receivables are detailed as follows:(amounts in thousands of Euro)

Trade receivables from third parties increased for the six months ended July
31, 2013, by Euro 8 million compared to January 31, 2012, and stood at Euro
294.4 million at July 31, 2013. The increase was generated by slightly higher
volumes in general as well as by the higher sale prices of the fall/wintercollection delivered to wholesalers at the end of the first half 2013.
Trade receivables from related parties included a total amount of Euro 31.9
million essentially arising from the sales of finished products and royalties to15

companies owned by the main shareholder of PRADA Holding bv andoperating the retail business in Italy 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.
Movements during the period may be analyzed as follows:
as atJuly 312013(unaudited)

as atJanuary 31
2013(audited)

Opening balance

11,547

11,681

Exchange differences
Increases
Uses
Reversals

71
746
(224)
-

(67)
805
(754)
(118)

Closing balance

12,140

11,547(amounts in thousands of Euro)The following table contains a summary, by due date, of total receivables
before the allowance for doubtful debts at the reporting date:as atJuly 31,2013
unaudited

Current

Trade receivables

329,659

Total

329,659(amounts in thousandsof Euro)as atJanuary
31, 2013
auditedCurrent

Trade receivables

316,072

Total

316,072(amounts in thousandsof Euro)Overdue (days)
1 < 3031 < 60

61 < 90

91 < 120≥ 120

283,606

17,060

6,635

2,406

4,558

15,394

283,606

17,060

6,635

2,406

4,558

15,394

Overdue (days)
1 < 3031 < 60

61 < 90

91 < 120≥ 120

263,079

27,328

7,708

5,852

1,607

10,498263,079

27,328

7,708

5,852

1,607

10,49816

The following table contains a summary, by due date, of trade receivables
less the allowance for doubtful accounts at the reporting date:(amounts in thousandsof Euro)as at July 31
2013
unaudited

Current

Overdue (days)

Trade receivables lessallowance for doubtful
accounts

317,519

Total

1 < 3031 < 60

61 < 90

91 < 120≥ 120

283,305

17,060

6,635

2,406

4,558

3,555

317,519

283,305

17,060

6,635

2,406

4,558

3,555

(amounts in thousandsof Euro)as atJanuary 31
2013
auditedCurrent

Trade receivables lessallowance for doubtful
accounts

304,525

Total

304,525

Overdue (days)
1 < 3031 < 60

61 < 90

91 < 120≥ 120

262,799

27,141

7,708

5,804

634

439

262,799

27,141

7,708

5,804

634

439

10. Receivables from and advance payments to parent
company and other related parties
Receivables from and advance payments to parent company and otherrelated parties are detailed below:
as atJuly 312013(unaudited)

as atJanuary 31
2013(audited)

Financial receivables from other related parties
Other receivables from PRADA Holding bv
Other receivables from other comp. controlled by PRADA Holding bv
Other receivables from other related parties
Advance payments to other related parties

1,415
314
17
2,446
13,781

1,413
249
3
2,652
15,176

Total

17,973

19,493(amounts in thousands of Euro)

Advance payments included Euro 11 million of advance payments made to
Luna Rossa Challenge NZ ltd and Luna Rossa Challenge srl in accordance withthe contracts signed with subsidiary PRADA sa for sponsorship of the Luna
Rossa yacht in relation to its participation on the XXXIV edition of theAmerica’s Cup. The remaining Euro 2.8 million mainly consisted of advances
paid to Progetto Prada Arte srl and Stichting Fondazione Prada, in
accordance with the signed agreements, for cultural initiatives to beundertaken in the future.

17

11. Capital expenditure
Changes in the net book value of “Property, plant and equipment” in the
period ended July 31, 2013, are as follows:(amounts inthousands of Euro)Leasehold
Furniture
improve& fittings
ments

Land and Production plantbuildings and machinery

Othertangible

Assets underconstruction

Total net
book value

Balance at January
31, 2012 (audited)

183,084

15,476304,324

88,38439,982

82,620713,870

Additions
Depreciation
Disposals
Exchange differences
Other movements
Impairment

35,371(5,977)
(3)
(898)
3,334
(3,331)

8,977(7,087)
(17)
(23)
122
-

136,368(84,272)(708)(18,247)
37,770(2,192)

48,655(25,324)(856)(3,497)
3,252
(304)

24,347(6,932)(17,654)
(351)
1,223
(1,202)

73,617(1)(5,448)(44,583)(700)

327,335(129,592)(19,239)(28,464)
1,118(7,729)Balance at January
31, 2013 (audited)

211,580

17,448373,043

110,310

39,413

105,505

857,299

Additions
Depreciation
Disposals
Exchange differences
Other movements
Impairment

109,613(3,776)(3)(2,276)
7,361
-

4,049
(3,778)
(34)
(16)
48
-

47,054(52,391)(52)(3,112)
26,325(330)

25,766(14,823)
(365)
(808)
6,065
(424)

24,644(3,442)
(33)
(45)
5,634
(2)

65,604(24)(817)(45,614)(6)

276,730(78,210)(511)(7,074)
(181)
(762)

Balance at July 31,
2013 (unaudited)322,499

17,717

390,537

125,721

66,169124,648

1,047,291

18

Changes in the net book value of “Intangible assets” in the period ended July
31, 2013, are as follows:(amounts inthousands of Euro)

Trademarks

Goodwill

Store Lease
Acquisitions

SoftwareDevelopment
costs

Balance at January
31, 2012 (audited)

303,308504,220

42,674

8,578

3,270

1,476

863,526--

15,694---

15,694286(11,137)(1,352)-(233)-

17,476(9,471)
(500)
(110)
-

1,909
(2,963)
(81)
(26)
571
-

9
(1,677)
86
(11)

7,740
(57)
(819)
(110)

27,420(25,248)(81)(2,168)
(272)
(121)

291,105

503,987

65,763

7,988

1,677

8,230

878,750

-

-

-

-

-

-

-

175
(5,488)
(997)
-

(168)
-

5,411
(5,973)
(19)
3,710
-

571
(1,699)
(25)
1,736
(79)

(455)
-

10,144(552)(5,517)(48)

16,301(13,615)(1,761)(71)(127)

284,795

503,819

68,892

8,492

1,222

12,257879,477

Change in scope of
consolidation
Additions
Amortization
Disposals
Exchange differences
Other movements
Impairment
Balance at January
31, 2013 (audited)
Change in scope of
consolidation
Additions
Amortization
Disposals
Exchange differences
Other movements
Impairment
Balance at July 31,
2013 (unaudited)

Assets in Total net bookprogressvalue

12. Other current assets
Other current assets are detailed as follows:
as atJuly 312013(unaudited)

as atJanuary 31
2013(audited)

VAT
Income tax and other tax receivables
Other assets
Prepayments and accrued income
Deposits
Financial assets held for trading

27,88018,91326,09749,402
2,332
983

25,072
20,54016,731
41,266
1,214
-

Total

125,607

104,823(amounts in thousands of Euro)19

13. Other non-current assets
Other non-current assets are detailed as follows:
as atJuly 312013(unaudited)

as atJanuary 31
2013(audited)

Guarantee deposits
Deferred rental income
Other receivables

56,932
5,337
9,759

50,898
2,410
8,374

Total

72,02861,682(amounts in thousands of Euro)

14. Payables to parent company and other related parties
Payables to parent company and other related parties are detailed asfollows:
as atJuly 312013(unaudited)

as atJanuary 31
2013(audited)

Financial payables to other related parties
Other payables to PRADA Holding bv
Other payables to other companies controlled by
PRADA Holding bv
Other payables to other related parties

4,205
118

5,018
120

-

3

695

458

Total

5,018

5,599

(amounts in thousands of Euro)

as at
July 312013(unaudited)

as atJanuary 31
2013(audited)

Trade payables – third parties
Trade payables – related parties

390,078
12,843323,894
6,719

Total

402,921330,613(amounts in thousands of Euro)

15. Trade payables

The increase in Trade payables was due to the growth of the business ingeneral. The following table summarizes trade payables by maturity date.
as atJuly 312013
unaudited

Current

1 < 3031 < 60

61 < 90

91 < 120≥ 120

Trade payables

402,921375,006

14,835

5,795

996

443

5,846

Total

402,921375,006

14,835

5,795

996

443

5,846

(amounts in thousandsof Euro)Overdue20

as atJanuary 31
2013
auditedCurrent

1 < 3031 < 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 thousandsof Euro)Overdue

16. Other current liabilities
Other current liabilities are detailed as follows:
as atJuly 312013(unaudited)

as atJanuary 31
2013(audited)

Payables for capital expenditure
Accrued expenses and deferred income
Other payables

53,16910,74868,23657,9699,810
63,866

Total

132,153

131,645(amounts in thousands of Euro)

17. Provisions for risks and charges
Movements in provisions for risks and charges are summarized as follows:(amounts in thousands of Euro)

Provision Provision for tax
for litigation
disputes

Other
provisions

Total

Balance at January 31, 2013 (audited)

1,775

27,467

17,672

46,914

Exchange differences
Reversals
Uses
Increases

7
(8)
(22)
29

(259)
(118)
188

(272)
(317)
1,608

(524)
(8)
(457)
1,825

Balance at July 31, 2013 (unaudited)

1,781

27,27818,69147,750

Provisions represented 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 reasonableconsidering the contingent liabilities that might arise. During the six months
ended July 31, 2013, there were neither significant development regarding
the outstanding litigations at January 31, 2013, nor new controversy occurred
during the period so as to considerably adjust the estimates made to accountfor Provisions for risks and charges at January 31, 2013.

21

Management Discussion and Analysis for the threemonths period ended July 31, 2013
Net revenues
In the three months ended July 31, 2013, the Group’s consolidated net
revenues totaled Euro 945.8 million and advanced 9.9% over Euro 860.6
million recorded in the three months period ended July 31, 2012 (+14.5% atconstant exchange rates). The progress in sales was substantially achieved
thanks to:

the expansion of the retail channel which contributed 79.5% of total
net sales and, totaling Euro 743.8 million, recorded a growth of 12.6%
compared to the results reported in the three months ended July 31,
2012 (+18.3% at constant exchange rates);
the Prada brand that, contributing 82.5% of total net sales, posted a
11.5% rise compared to the three months ended July 31, 2012 (+16% atconstant exchange rates);
the performances achieved by the leather goods product category(+17.5% as reported and +23% at constant exchange rates over the
results scored in the same quarter of 2012) in all markets.

A net of 29 new shops (34 openings, 5 closures) were opened during the threemonths period ended July 31, 2013.

Operating results
In the three months ended July 31, 2013, the consolidated EBITDA amounted
to Euro 310.2 million, up by 15.2% over Euro 269.3 million posted in the threemonths ended July 31, 2012. As a percentage on net revenues, the EBITDA
raised from 31.3% to 32.8%. The improvement was largely achieved at grossmargin level.
In the period under analysis, the Group’s net result totaled Euro 170.1
million, up by 3.3% compared to the result reported in the three months
ended July 31, 2012. As a percentage on net revenues it decreased from
19.1% to 18% mainly because of the higher interest and other financial
expense and the higher effective tax rate.

22

Management Discussion and Analysis for the six months
period ended July 31, 2013
Net revenues
Consolidated net revenues for the six months ended July 31, 2013, amounted
to Euro 1,728.1 million, 11.7% higher than the Euro 1,547.4 million recordedin the same period of 2012. At constant exchange rates, the increase was
14.8%.

Distribution channels
In the six months ended July 31, 2013, the retail channel contributed 83.3%
of total net sales compared to 80.7% of the first six months of last year.
Retail net sales amounted to Euro 1,422.5 million, up by 15.7% over Euro
1,230.0 million recorded in the same period of 2012 (+19.5% at constantexchange rates). The performance of this channel measured on a Same Store
Sales Growth (SSSG) basis was 7%.
At July 31, 2013, the Group operated through 491 DOS, a net of 77 stores
more than July last year. From the beginning of the financial year, a net of
30 new DOS were opened (36 openings, 6 closures): 24 Prada, 7 Miu Miu, 4Church’s and 1 Car Shoe.
Along with the Group’s expectations, and contributing for the remaining
16.7% of total net sales, the wholesale channel generated net sales of Euro
285.1 million and recorded a 3.3% slowdown compared to the results
achieved in the six months ended July 31, 2012. The shrinkage mostly
occurred in Europe, Italy included, and was partially compensated by thecontribution of the Asia Pacific region where 4 duty free fanchisee shops
were opened in the period.

Markets
In terms of geography, the six months ended July 31, 2013, reported
different growth trends.
Asia Pacific posted net sales for Euro 627.6 million and recorded a progressequal to 17.9% compared to Euro 532.5 million achieved during the six
months ended July 31, 2012 (+18.7% at constant exchange rates). The
contribution to total net sales reached 36.8% (34.9% last year). The
performance in this area was pushed both by the retail openings in the
period and by the growth delivered by the existing shops. The Greater China
area (PRC, Hong Kong and Macau) generated net sales for Euro 396.7 million,
contributing significantly to the development of the Far East market.
In the six months ended July 31, 2013, net sales in the European market(Italy excluded) amounted to Euro 374.3 million, up by 7.2% compared toEuro 349.3 million posted during the same period of last year (+8.9% atconstant exchange rates). As the second largest market for the Group, it
contributed 21.9% to consolidated net sales (22.9% in 2012) with different
trends by distribution channels. The 138 DOS operating at period end posted
a double-digit growth while the wholesale channel suffered a decline

23compared to the results posted in the same period of 2012 due to thepersistent selective strategy over independent clients in the region anddifficult market conditions especially in secondary cities.
The Italian market posted net sales of Euro 268.5 million that resulted froma high single-digit growth rate generated by the network of stores directly
operated by the Group (50 at July 31, 2013), and, not differently from therest of Europe, a slowdown in the wholesale channel.
The total net sales generated by the American market were Euro 231.6
million, up by 13.4% compared to Euro 204.2 million posted in the six months
ended July 31, 2012 (+15.9% at constant exchange rates). The increase insales was strongly contributed by retail as wholesale contracted.
In the six months ended July 31, 2013, the Japanese market demand proved
to be robust recording net sales of Euro 159.4 million and delivering adouble-digit growth of 16.4% at constant exchange rates and a slight declineof 3% as reported because of the persistent weakening of the Japanese Yen.
The Middle East area posted net sales amounting to Euro 43.3 million in thesix months ended July 31, 2013, delivering a triple-digit expansion ratecompared to the same period of 2012. The extraordinary advance in sales
was essentially achieved thanks to the performances of the stores opened in
the second half of previous year.

Products
In the six months ended July 31, 2013, the Leather goods segment recorded
net sales of Euro 1,156.4 million, up by 22.6% compared to Euro 943.1
million posted in the same period of 2012 (+26.3% at constant exchange
rates). Again, this product category, sustained by the impressive success of
iconic handbags and by the launch of widely appreciated new styles,delivered double-digit growth rates in all markets (except in Japan) atconstant and reported exchange rates.
Clothing generated net sales of Euro 248.8 million in the six months ended
July 31, 2013, compared to Euro 248.7 million posted in the same period of2012 (+0.1% as reported and +2.8% at constant exchange rates). Although thegeneral increase was small, growth was positive in all markets at constantexchange rates.
Footwear contributed net sales of Euro 282.4 million in the six months ended
July 31, 2013, down by 10.4% as reported (-8.4% at constant exchange rates)
compared to Euro 315.3 million achieved in the same period of last year.
This category particularly suffered for the shrinkage of the wholesale
business except for the Miu Miu shoes that managed to grow double-digit atconstant exchange rates in this first half of the year compared to the same
period of 2012.

BrandsDuring the six months ended July 31, 2013, the Prada brand generated net
sales for Euro 1,410.1 million and the increase over Euro 1,233.4 million
posted in the six months ended July 31, 2012, was 14.3% (+17.4% at constant24

exchange rates). The contribution to total net sales raised to 82.6% from
80.9% in the same period of 2012. Except for Italy, Prada delivered solid
double-digit performances everywhere.
Miu Miu net sales amounted to Euro 256.0 million, up by 4.1% compared toEuro 246.0 million recorded in the six months ended July 31, 2012. The
increase at constant exchange rates was 8.2%. The retail network delivered a
5.6% growth over the results achieved in the same period of 2012 (+10.6% atconstant exchange rates). The brand posted positive increase in all productcategories.
The Church’s brand net sales totaled Euro 32.7 million and managed toachieve a 5.4% advance compared to the results posted in the six months
ended July 31, 2012 (+8% at constant exchange rates). All markets delivered
positive paces of growth, with Europe continuing to be the most important
market for the English brand.
Car shoe totaled net sales of Euro 7.6 million, down by 33.4% over the same
period of 2012. That was substantially due to timing differences in wholesaledeliveries. The brand opened a new store in Italy during the period.

Royalties
In the six months ended July 31, 2013, the contribution of the licensed
products business was equal to Euro 20.5 million, down by 9.7% compared toEuro 22.7 million posted in the same period of 2012. The results of the firsthalf of 2012 were boosted for some Euro 4.6 million by the income following
the launch of the PRADA phone by LG 3.0 that finished contributing royalties
by the end of last year.

Operating results
In the six months ended July 31, 2013, the Group’s gross margin amounted toEuro 1,267.7 million, up by 14.6% compared to the same period of 2012.
Profitability climbed up to 73.4% on net revenues from 71.5% achieved in thesix months ended July 31, 2012. A more favorable sales mix in terms ofchannel, geographical area and product category allowed reaching a doubledigit pace of growth.
Operating costs went from Euro 711.6 million in the six months ended July
31, 2012, to Euro 809.3 million in the current period. The incidence on net
revenues was slightly higher at 46.8% from 46%.
Product design and development expenses raised mainly because of higher
labor costs following the introduction of new retention plans in favor of key
resources operating in this corporate area.
Advertising and communications costs increased from Euro 68.3 million in thesix months ended July 31, 2012, to Euro 82.1 million in the current period.
The sponsorship of the Luna Rossa yacht challenging the XXXIV edition of theAmerica’s Cup raised significantly the spending in the current period.
Selling costs increased from Euro 488.9 million in the six months ended July
31, 2012, or 31.6% on net revenues, to Euro 564.0 million in the current
period, or 32.6% on net revenues. The DOS expansions program undertaken in25

the last years involved the growth of the most important expenses typical of
the selling area, namely rent, labor and depreciation and amortization.
General and administrative expenses remained almost unchanged in absoluteterms essentially thanks to economies of scale, as most of the costs of thisarea are fixed. In fact, they decreased from Euro 98.2 million in the six
months ended July 31, 2012, or 6.3% on net revenues, to Euro 96.9 million in
the current period, or 5.6% on net revenues.
The consolidated EBITDA amounted to Euro 551.1 million and recorded anincrease of 17.4% compared to Euro 469.4 million posted in the six months
ended July 31, 2012. Following the above mentioned improvement at grossmargin level and despite the increased incidence of the operating expenses,
the EBITDA profitability, as a percentage on net revenues, raised to 31.9%
from 30.3% of the same six months period of last year.
The EBIT totaled Euro 458.3 million, or 26.5% on total net revenues, andgrew 16.1% compared to Euro 394.9 million reported in the six months ended
July 31, 2012 (25.5% on net revenues).
The tax charges for the first six months of 2013 represented 29.4% on profit
before taxation compared to 26.2% reported in the comparable period of lastyear. The higher incidence rate mainly resulted from a change in thegeographical mix of taxable incomes.
The net result for the six months ended July 31, 2013, amounted to Euro308.2 million, or 17.8% on net revenues, up by 7.6% compared to Euro 286.4
million earned in the same period of 2012. The dilution in terms of
profitability of the Group’s net result was affected, in addition to the higher
tax rate, by the negative impact of finance expenses that increased fromEuro 2.9 million in the first half of 2012 to Euro 15.2 million, mainly becauseof the foreign exchange fluctuations.

26

Net invested capital
The following table reports the Statement of financial position as adjusted inorder to provide a better picture of the composition of the Net invested
capital.
(amounts in thousands of Euro)

as at
July 312013(unaudited)

as atJanuary 31
2013(audited)

Non-current assets (excluding deferred tax assets)
Trade receivables, net
Inventories, net
Trade payables
Net operating working capital
Other current assets (excluding financial position items)
Other current liabilities (excluding financial position items)
Other current assets/(liabilities), net
Provisions for risks
Post-employment benefits
Other long-term liabilities
Deferred taxation, net
Other non-current assets/(liabilities), net
Net invested capital
Shareholders’ equity – Group
Shareholders’ equity – Non Controlling Interests
Total consolidated Shareholders’ equity
Long term financial payables
Short term financial , net surplus/(deficit)
Payable for withholding on dividends
Net financial position surplus/(deficit)
Shareholders’ equity and Net financial position

2,015,666
317,519
408,534(402,921)
323,132
165,028(240,039)(75,011)(47,750)(57,888)(89,211)
136,739(58,110)2,205,677(2,388,096)(13,207)(2,401,303)(81,572)
277,199(1)
195,626(2,205,677)

1,821,773
304,525
343,802(330,613)
317,714
165,962(230,285)(64,323)(46,914)(45,538)(85,289)
120,421(57,320)2,017,844(2,320,022)(10,470)(2,330,492)(79,348)
391,996
312,648(2,017,844)

At July 31, 2013, Net invested capital totaled Euro 2,205.7 million comparedto Euro 2,017.8 million at January 31, 2013. The investments occurred during
the period contributed the most to the increase.
The consolidated shareholders’ equity rose from Euro 2,330.5 million to Euro
2,401.3 million at July 31, 2013. The increase generated by the Group’s net
income for the six months ended July 31, 2013, amounting to Euro 308.2
million, was partially offset by Euro 230.3 million of dividends distributed to
the PRADA spa shareholders (as approved on May 23, 2013, by the Annual
General Meeting on the financial statements for the year ended January 31,2013) and by Euro 1.9 million of dividends paid to Non-controlling interests.
Other changes resulting from translation differences and changes in fairvalue equity reserves accounted for the rest of the increase.

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Net financial position(amounts in thousands of Euro)

as at
July 312013(unaudited)

as atJanuary 31
2013(audited)Long term debt
Obligations under finance leases(81,124)(448)(78,830)(518)

Long term financial payables(81,572)(79,348)

Bank overdraft and short term loans
Payables to related parties
Receivables from related parties
Obligations under finance leases
Cash and cash equivalents(159,468)(4,205)
1,415(197)
439,654(175,570)(5,018)1,413(575)
571,746

Short term net financial surplus/(deficit)

277,199

391,996

Net financial position surplus/(deficit)

195,627

312,648

Payable for withholding on dividends(1)-

195,626

312,648

n.a.

n.a.

Net financial position surplus/(deficit), including payable for withholding
on dividends
NFP/EBITDA

The operational free cash flow generated during the period allowed theGroup to book a net positive financial position of Euro 195.6 million (Euro
312.6 million at January 31, 2013) after the payment of Euro 230.3 million ofdividends on the 2012 financial statements and the massive ongoing capital
expenditure program (Euro 292.5 million).
The composition in the short-term bank debt was affected by a shift occurredin the six months ended July 31, 2013. In fact, the Pool loan borrowed by
PRADA spa and PRADA Japan co ltd expiring in the period was definitively
repaid for some Euro 122 million. At the same time, PRADA spa arranged a
new revolving credit facility for Euro 170 million, drawn for Euro 100 million
at July 31, 2013, and PRADA Japan co ltd arranged a new working capitalsyndicate loan of Japanese Yen 3 billion, drawn at July 31, 2013, for someJapanese Yen 2.9 billion, or Euro 22.2 million.
On the long-term side the subsidiary PRADA Japan co ltd entered into a
syndicate loan agreement with a pool of Japanese banks for a total amountof Japanese Yen 6 billion, drawn at July 31, 2013, for some Japanese Yen 3.3
billion, or Euro 25.5 million.

Analysis of Capital expenditure
The Group’s capital expenditure for the period was allocated as follows: Euro
250.2 million in the retail area, Euro 11.9 million in the production andlogistics area and Euro 30.9 million in the corporate area. It is worthhighlighting that the spending in the retail area included the purchase of two

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prestigious retail locations: one in London, in Old Bond street, and one in St.
Petersburg.

Outlook for the second half of 2013
The Group will continue to pursue its retail growth strategy and support theworld wide awareness of its brands. The challenging environment determinedby a still weak general economic situation and the added international
tensions of the recent weeks, will – nevertheless - require a close attention
to efficiency of operations and execution of strategy in order to be able torespond to possible sudden change of conditions.

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 efficientand transparent operations within the Group, to protect the rights of theCompany’s shareholders and to enhance shareholder value. The corporate
governance model adopted by the Company is in compliance with theapplicable 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”).

Compliance with the Code
The Board has reviewed the Company’s corporate governance practices andis satisfied that the Company has been in compliance with all the applicablecode provisions set out in the Code throughout the six months ended July 31,
2013.

The Board
The Board of Directors of the Company (the “Board”) is responsible forsetting up the overall strategy as well as reviewing the operation andfinancial performance of the Company and the Group.
The Board has established the following committees:
1.

Audit Committee

2.

Remuneration Committee

3.

Nomination Committee

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Audit Committee
The Company has established an Audit Committee in compliance with Rule3.21 of the Listing Rules. 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 review and supervise our financial reporting process
and internal controls. The Audit Committee has held four meetings on April
3, 2013, May 23, 2013, June 11, 2013, and September 17, 2013, withattendance rate of 91.7% to discuss the auditing and internal controls
activities, to propose the appointment of the external Auditor, to review theaudited separate and consolidated financial statements of the Company forthe year ended January 31, 2013, the unaudited consolidated quarterly
financial statements of the Company for the three months ended April 30,
2013, and the unaudited consolidated interim financial statements of theCompany for the six months ended July 31, 2013, before recommending to
the Board for approval.

Remuneration Committee
The Company has established a Remuneration Committee in compliance with
the Code. According to its terms of reference, the primary duties of theRemuneration Committee are to make recommendations to the Board on the
Company’s policy and structure for all remuneration of directors and senior
management and the establishment of a formal and transparent procedurefor developing policy on such remuneration. The Remuneration Committee
consists of two independent non-executive directors, Mr. Gian Franco
Oliviero Mattei (Chairman) and Mr. Giancarlo Forestieri and one nonexecutive director, Mr. Marco Salomoni. The Remuneration Committee has
held one meeting on April 3, 2013, with an attendance rate of 100% todiscuss the implementation of the long-term incentive plan connected to theGroup’s results and its application to certain strategic consultants of theCompany.

Nomination Committee
The Company has established a Nomination Committee in compliance with
the Code. According to its terms of reference, the primary duties of theNomination Committee are to make recommendations to the Board on the
structure, size and composition of the Board itself, on the selection of new
Directors and on the succession plans for Directors. The Nomination
Committee consists of two independent non-executive directors, Mr. Gian
Franco Oliviero Mattei (Chairman) and Mr. Sing Cheong Liu and one nonexecutive director, Mr. Marco Salomoni. The Nomination Committee has held
two meetings on April 3, 2013, and September 17, 2013, with attendance
rate of 100% to review the adequacy of the structure and composition of theBoard, to perform the annual review of the independence of the independent
non-executive directors and to propose to the Board the adoption of theBoard diversity policy.

30Supervisory Body
In compliance with Italian Legislative Decree 231 of June 8, 2001 (the“Decree”), the Company has established a Supervisory Body whose primary
duty is to ensure the functioning, effectiveness and enforcement of theCompany’s Model of Organization, adopted by the Company pursuant to theDecree. The Supervisory Body consists of three members appointed by the
Board selected among qualified and experienced individuals, including nonexecutive director, qualified auditors, executives or external individuals.
The Supervisory Body consists of Mr. David Terracina (Chairman), Mr. Franco
Bertoli and Mr. Gian Franco Oliviero Mattei (who replaced Mr. Marco
Salomoni on June 11, 2013).

Board of Statutory Auditors
Under Italian law, a joint-stock company is required to have a Board of
Statutory Auditors, appointed by the shareholders, with the authority tosupervise the Company on its compliance with the law and the by-laws,
compliance with the principles of proper management and, in particular, on
the adequacy of the organizational, administrative and accounting structure
adopted by the Company and on its functioning. The Board of Statutory
Auditors of the Company consists of Mr. Antonino Parisi (Chairman), Mr.
Roberto Spada and Mr. David Terracina.

Dividends
The Company may distribute dividends subject to the approval of theshareholders in an ordinary shareholders’ meeting.
On April 5, 2013, the Board recommended the payment of a final dividend of
Euro/cents 9 per share in the capital of the Company, representing a total
dividend of Euro 230,294,160. The Shareholders approved this dividend at
the Shareholders’ General Meeting of the Company held on May 23, 2013.
The dividend was paid on June 20, 2013.
No dividends have been declared or paid by the Company in respect of thesix months ended July 31, 2013.

Directors’ Securities Transactions
The Company has adopted written procedures governing Directors’ securities
transactions in compliance with on terms no less than the standard set out inthe Model Code for Securities Transactions by Directors of Listed Issuers as
set out in Appendix 10 of the Listing Rules (the “Model Code”). Relevant
employees who are likely to be in possession of unpublished inside
information of the Group are also subject to compliance with written
procedures. Specific written confirmations have been obtained from each
Director to confirm compliance with the Model Code for the six months
ended July 31, 2013. There was no incident of non-compliance during the six
months ended July 31, 2013.

31

Purchase, Sale, or Redemption of the Company’s Listed
Securities
Neither the Company nor any of its subsidiaries has purchased, sold orredeemed any of the Company’s listed securities during the six months ended
July 31, 2013.

Publication of Interim Results Announcement and Interim
Report
The interim results announcement of the Company is published on thewebsites of the Hong Kong Exchanges and Clearing Limited atwww.hkexnews.hk and the Company at www.pradagroup.com. The interim
report will be available on the same websites and dispatched to theshareholders of the Company in due course.

By Order of the Board
PRADA S.p.A.
Mr. Carlo Mazzi
Deputy Chairman

Milan (Italy), September 17, 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 MICCICHÈ and the Company’s independent non-executive directors are Mr.
Gian Franco Oliviero MATTEI, Mr. Giancarlo FORESTIERI and Mr. Sing Cheong LIU.

32