Annual Report 2011

IndexThe PRADA Group
Financial Review
Directors and Senior Management
Directors’ Report
Corporate GovernanceConsolidated Financial Statements
Financial Statements of PRADA spa
Notes to the Consolidated Financial Statements
Independent Auditors’ Report

3
29
45
53
65
73
79
85
153

Patrizio Bertelli

Miuccia Prada2

PRADA Group

Annual Report 2011

The PRADA GroupPRADA Group

Annual Report 2011 - The PRADA Group3

The structure of
Terranuova Bracciolini (AR)The first store Prada,
Galleria Vittorio Emanuele II
Milan

4

PRADA Group

Annual Report 2011 - The PRADA GroupThe PRADA Group
Presentation“For Prada, fashion, luxury and style have always been core aspects of a project that
goes beyond production of clothes, footwear and handbags.
Careful observation and interest in the world, society and culture are at the coreof Prada’s creativity and modernity. This has pushed Prada beyond the physicallimitations of boutiques and showrooms, leading us to interact with diverse, seemingly
distant worlds, and introducing, very naturally, a new way of creating fashion.”
Miuccia Prada and Patrizio Bertelli
These values have formed the basis for all of the activities that have, over the years,transformed a family business into one of the world’s leading luxury goods groups with
the Prada, Miu Miu, Church’s and Car Shoe brands.
The Group operates in more than 70 countries through 388 directly operated stores, 26
franchise operated stores and a network of selected high-end multi-brand stores andluxury department stores.
Prada’s distinctive features and prestige derive from its particular industrial process
management which allows the Group to offer its customers products of unequalled
quality, creativity and exclusivity.
A focus on quality permeates every aspect of the Group’s business. The individual
heritage and identity of each brand is rigorously defended with the Group’s designers
and craftsmen being constantly challenged to keep tradition alive through a continuous
process of re-invention and innovation. Each step of the process, both inside andoutside the company, is carefully monitored in order to guarantee uncompromised
quality.
The result is an exclusive relationship between each customer and the PRADA Groupbrands, its products, its communications and its stores. This is why customers recognize
in Prada’s products a personal and important part of their desire for self-expression andcommunication with the world around them.

PRADA Group

Annual Report 2011 - The PRADA Group5

The first Prada Epicenter Concept Store,
Broadway, New Yorkby architect Rem Koolhaas and Studio OMA

The third Prada Epicenter Concept Store,
Los Angeles, Beverly Hills
by architect Rem Koolhaas and Studio OMA

6

PRADA Group

Annual Report 2011 - The PRADA GroupThe second Prada Epicenter Concept Store,
Aoyama, Tokyo
by architects Herzog & de Meuron

PRADA Group

Annual Report 2011 - The PRADA Group7

Prada Store
by architect Roberto Baciocchi

Prada Store
by architect Roberto Baciocchi

8

PRADA Group

Annual Report 2011 - The PRADA GroupMiu Miu Store
by architect Roberto Baciocchi

Miu Miu Store
by architect Roberto Baciocchi

PRADA Group

Annual Report 2011 - The PRADA Group9

Spring/Summer 2012
Advertising campaign
for Prada

Spring/Summer 2012
Advertising campaign
for Prada

10

PRADA Group

Annual Report 2011 - The PRADA GroupHistory of PRADA Group
The Prada brand dates back to the beginning of the last century. In 1913, Mario Prada
opened a luxury store in the Galleria Vittorio Emanuele II in Milan, selling leather
handbags, travelling trunks, leather accessories and beauty cases, luxury accessories
and articles of value. Thanks to its exclusively designed goods, handcrafted using
fine materials and sophisticated techniques, Prada rapidly became a reference point
for European aristocracy and the most elegant members of the haute-bourgeoisie inEurope.
In 1919, PRADA became an official supplier to the Italian Royal family. Over the years,
the Prada name gained increasing renown and prestige.
The Group saw a turning point in the development of its activities at the end of theSeventies, when Miuccia Prada, Mario’s granddaughter, launched a partnership with
Tuscan businessman Patrizio Bertelli, a partnership that combined creativity andbusiness ideas to commence a new era.
In 1977, Patrizio Bertelli set up I.P.I. spa to consolidate the production resources that
he had built up over the previous ten years. In the same year, I.P.I. spa obtained an
exclusive license from Miuccia Prada to produce and distribute leather goods bearing
the Prada brand name. In the following years, the activities of the two families were
gradually brought together within a single Group.
In 1983, the Prada family opened a second store in the prestigious Via della Spigain Milan. The new store showcased the new brand image as it blended traditional
elements with a modern architectural setting and would represent a revolution and abenchmark for luxury retail. In response to the growing demand for and appreciationof Prada products, the range was extended from leather goods (such as bags, luggage
and accessories) to include footwear, as well as men’s and women’s ready-to-wear
apparel.
A new brand, Miu Miu, was launched in 1993.
The Prada “Linea Rossa” leisure range, with its distinctive “Red Line”, was launched
in 1997.
In 1999 Prada acquired full control of Church’s, one of the most prestigious brands ofEnglish footwear.
In 2001 Prada acquired control of Car Shoe, an historical Italian brand famous for
exclusive driving shoes. The first “Epicenter” store was opened the same year in
SoHo, New York.
In 2003, Prada entered into a licensing agreement with Italian eyewear manufacturer
Luxottica, world leader in the eyewear industry.
The Luxottica Group currently produces eyewear for the Prada and Miu Miu brands.
The second “Epicenter” store was opened in Aoyama, Tokyo in 2003 and the Groupbegan its partnership with Spanish cosmetics manufacturer Puig Beauty & Fashion
Group which launched the Prada Woman fragrance at the end of 2004.

PRADA Group

Annual Report 2011 - The PRADA Group11

Spring/Summer 2012
Advertising campaign
for Miu Miu

Spring/Summer 2012
Advertising campaign
for Miu Miu Eyewear

12

PRADA Group

Annual Report 2011 - The PRADA GroupIn 2006, Miu Miu organized its first fashion show in Paris.
The first Prada by LG cellphone was launched in 2008.
The Prada e-store first went online in 2010.
The Miu Miu e-store went online in 2011. The same year, Prada entered into a joint
venture with the Al Tayer Insignia llc Group to develop a Prada and Miu Miu retail
network in the Middle East.
On June 24, 2011, 19% of the share capital of PRADA spa was successfully placed on
the Main Board of the Hong Kong Stock Exchange.

PRADA Group

Annual Report 2011 - The PRADA Group13

Spring/Summer 2012
Advertising campaign
for Prada Eyewear

Spring/Summer 2012
Advertising campaign
for Prada Eyewear

14

PRADA Group

Annual Report 2011 - The PRADA GroupThe Group brands
PRADA spa owns and operates some of the most prestigious luxury brands in theworld. These brands, together with the Group’s know-how and expertise, represent a
key asset for the Group.
–

Prada: historic brand that represents the best of Italian culture and tradition withunmistakable style, sophisticated elegance and uncompromising quality. At thesame time, this is one of the most innovative fashion brands, able to re-deﬁne
the norm and set new trends. Prada tends to go beyond conventional solutions toanticipate and satisfy consumer tastes;–

Miu Miu: Miuccia Prada’s second soul, a brand with a very strong and autonomous
identity, characterized by an avant-garde, sensual, sometimes provocative, style
aimed at a clientele particularly focused on experimentation and the pursuit oforiginality;–

Church’s: founded in Northampton (England) in 1873, it is a world renowned symbolof a century-old tradition in luxury, handcrafted footwear production, characterized
by classic style and sophisticated English elegance. In 2009 the brand proposed a
new range of lifestyle items;–

Car Shoe: a long established Italian brand, identiﬁed for decades with the most
exclusive driving shoes with black rubber studded soles that give better grip on
the car pedals. More recently, the brand has developed new models and offers acomplementary line of accessories.

A key objective of all the Group’s activities is continually to strengthen its brand equity
as the desirability of a fashion brand must always be accompanied by equally strong
appeal and recognition.
Over the years, Prada has managed to achieve such a high level of international renown
that it has even captured the attention of the arts, literature and the movie industry(the blockbuster movie “The Devil Wears Prada” was based on the bestselling novel ofthe same name). In confirmation of their iconic nature, cultural importance as symbols
of elegance and style, Prada products have even been presented and interpreted asworks of art.

PRADA Group

Annual Report 2011 - The PRADA Group15

Fall/Winter 2011
Advertising campaign
for Car Shoe

Fall/Winter 2011
Advertising campaign
for Church's

16

PRADA Group

Annual Report 2011 - The PRADA GroupStrategic processes
DesignCreativity is the first step of the quality process.
Miuccia Prada has the ability to combine intellectual curiosity, the pursuit of new andunconventional ideas, cultural and social interests with a strong sense of fashion
and close attention to detail. This has made it possible to establish a genuine design
culture, also based on method and discipline, which guides everyone working in the
Prada creative process.
This unique approach enables Prada to anticipate and set trends, continuallyexperimenting with shapes, fabrics, leathers and production techniques. This
experimentation and exchange of ideas are the essential components of the designcontent found in each Prada product. The time spent at the “drawing board” and in
the “fitting room” on research and stylistic development for the brands is fundamental
in defining each collection so that items of ready-to-wear apparel, footwear andaccessories complement one another and create a well-defined, consistent brandimage.
Miuccia Prada and Patrizio Bertelli’s flair, coupled with their extraordinary charisma,continue to attract talents from all over the world who want to work with them in manydifferent creative fields. This results in formidable teams in all aspects of the creative
process: from design to architecture, photography and interior design of the stores.

PRADA Group

Annual Report 2011 - The PRADA Group

17

2011
Advertising campaign
for Prada Parfums

2010
Advertising campaign
for Prada Parfums

18

PRADA Group

Annual Report 2011 - The PRADA GroupProduction
The second phase of the quality process involves the careful selection of materials
which are often exclusively made for Prada based on very detailed specifications. Withan annual consumption of some 4 million meters of fabric and a similarly impressive
amount of leathers, Prada enjoys the priority attention of the best fabric makers andtanners in the world.
Prada products are made at eleven state-of-the-art facilities owned by the Group in Italy
and England and through a network of external sub-contractors, all of them selected fortheir craftsmanship skills. This system enables close control of the overall production
process and maximizes the individual capacities of each facility. Furthermore, itguarantees the utmost quality and the highest level of flexibility.
The core of Prada’s production employees has been working with the company for an
average of 20 years. This leads to the highest level of specialization and dedication to
the brand while ensuring that know-how is handed on smoothly to younger generations.
Distribution
The Group’s innovative approach and quality standards also apply to distribution.
The clearest evidence lies in the Epicenter Concept Store Program. These very
special stores, located in New York, Los Angeles and Tokyo, have been designed incollaboration with world-famous architects Rem Koolhaas and Herzog & de Meuron, to
re-invent and re-visit the concept of shopping.
The retail network is the subject of constant updating and improvement, in terms ofboth architecture and layout, in order to make it easier for customers to use and makeproduct displays more effective.
Over the years, the Group has developed a strong network of Directly Operated Stores(DOS) which is accompanied by franchise stores and a significant presence in selected
high-end multi-brand stores and luxury department stores.
Directly Operated Stores provide a direct relationship with customers and offer realtime information on the performance of each product category. The retail network isalso an effective platform to showcase the product range and project a strong andconsistent brand image.
The wholesale channel (department and multi-brand stores) guarantees a numberof points of sale in prestigious locations in key markets and provides a direct andimmediate comparison with the competition. In recent years, this sales channel has
been carefully reviewed with the aim of being more selective and the number of points
of sale has decreased considerably. This has been done in order to achieve synergy
with retail network expansion and to maintain the positioning and internal image of thebrand.
PRADA Group’s consolidated sales are generated by the retail channel for 78%, while
the remaining 22% comes from wholesale.

PRADA Group

Annual Report 2011 - The PRADA Group19

Luna Rossa
Valencia 2007

Luna Rossa
Auckland 201220

PRADA Group

Annual Report 2011 - The PRADA GroupImage and communication
Effective communications are key to building and maintaining a unique and powerfulbrand image. From impeccably executed fashion shows to award-winning advertising
campaigns, Prada continues successfully to create an appealing and cutting-edge
image that attracts a high quality, international client base.
Strong editorial coverage of Prada and Miu Miu, featured prominently on hundreds ofcovers of the most important fashion magazines worldwide, contributes to the visibilityof both brands’ products.
Cultural and commercial in-store events help raise the brands’ profile and increaseawareness of the most recent collections in local markets and, in particular, in leadinginternational cities from Tokyo to New York and London and from Hong Kong to
Shanghai and Beijing.
Special projects carried out in fields other than Prada’s core business form an importantpart of the Company’s communications strategy, highlighting the many different facetsthat identify the brand.
Prada took part in the America’s Cup in 2000, 2003 and 2007. This experience, which
led also to the development of a sports clothing and accessories line, helped further
spread the image of Prada in the world, associating the brand with one of the oldest
and most prestigious international sports competitions. In October 2011, as sponsor of
the Luna Rossa yacht, Prada once more launched its challenge to win the 34th editionof the America’s Cup which will be held in San Francisco, California, in 2013.
Art and culture
Miuccia Prada and Patrizio Bertelli’s interest in contemporary art led to their decision, in
1993, to create a space to hold exhibitions dedicated to acclaimed international artists.
The Fondazione Prada was born with the purpose of receiving and communicating
what Miuccia Prada calls “the most powerful mental and cultural provocations”.
Organized with the full collaboration of the artists themselves, the exhibitions presented
by the Fondazione Prada in Milan have so far included artists of international famesuch as Anish Kapoor, Mariko Mori, Louise Bourgeois, Laurie Anderson, Walter De
Maria, Marc Quinn, Carsten Hoeller, Steve McQueen, Giulio Paolini, Francesco Vezzoli,
Tom Sachs, Thomas Demand, Tobias Rehberger, Natalie Djurberg, John Wesley, John
Baldessarri and Rotor.
The flexible nature of the Fondazione Prada has also developed along a number ofdifferent routes, in a variety of fields of cultural research including art, architecture,philosophy, science, design and cinema. The exhibition held in 2011 at Ca’ Cornerdella Regina - an historic building on Venice’s Grand Canal that was refurbished by
the Fondazione Prada - is a fine example of the many aspects that have identified the
Fondazione Prada in the past and will continue to identify it in future.

PRADA Group

Annual Report 2011 - The PRADA Group

21

The Calzaturificio Lamos facility
Montevarchi, (AR)by architect Guido Canali

The I.P.I. Amiata facility
Piancastagnaio (SI),project by Studio Cerri

22

PRADA Group

Annual Report 2011 - The PRADA GroupHuman Resources
Human Resources are a fundamental asset for the development of the Group, whichbuilds its competitive advantage on the skills and commitment of its employees,
promoting and rewarding pro-activity, goal orientation and teamwork.
The Human Resources Department operates in an international environment,cooperating closely with the business areas in order to verticalize processes, makethem more efficient and effective and make the most of skills and specific local
characteristics as part of an ongoing process to improve business processes, achieve
integration between central and outlying parts of the business and concentrate on thebusiness as much as possible.
Through a structured and transparent selection process which is also based oncooperation with the most prestigious universities and fashion schools, the Group
constantly seeks and attracts the best talents in the international employment market.
The training and development policies implemented were mainly aimed at strengthening
the retail area fully in line with the development of that channel.
The Group’s presence in the international market through its four brands offers its
employees the chance to grow both inside their areas of competence as well as on ahorizontal and international level.

PRADA Group

Annual Report 2011 - The PRADA Group23

PRADA Group Structure

PRADA spa
Milan

HOLDING - MANUFACTURING, DISTRIBUTION, SERVICES

66,7%

Artisan Shoes srl
Montegranaro
PRODUCTION100%

IPI Logistica srl
Terranuova
SERVICES

Post Develop. Corp
San Francisco
REAL EASTATE

100%

100%

SPACE Caffè srl
Milan
SERVICES

Church Holding UK plc
Northampton
SUB-HOLDING

100%

49%

PAC srl
Milan(IN LIQUIDATION)
equity method

100%
PRADA Canada Corp
Toronto
RETAILPRADA Hong Kong pd ltd 100%Hong KongSERVICES

100%
Church & Co ltd
UK - Northampton
MANUFACTURING
DISTRIBUTION-SERVICES100%

PRADA USA Corp
New York
DISTRIBUTION-SERVICES-RETAIL100%PRADA Far East bv
Amsterdam
SUB-HOLDING / OUTLET
100% PRADA Australia Plv ltd
SydneyRETAILPRADA Korea ltd
Seoul
RETAIL

100%

100%

Space USA Corp
New York
OUTLETS

100% PRADA Singapore Pte ltd
Singapore
RETAIL55%

TRS Hawaii Ilc
Honolulu
RETAIL

100%

55%

TRS Guam Partnership
Guam
RETAIL

100%

100%

PRADA Mexico
Mexico CityRETAILPRADA Retail
Malaysia Sdn Bhd
Malaysia
RETAILPRADA Japan Co ltd
Tokyo
RETAIL55%

100%

TRS PRADA
Okinawa KKTokyo - RETAILPRADA Thailand Co ltd
Bangkok
RETAIL

100% Church’s English Shoes
Switzerland sa
Lugano - RETAIL

Church & Co (USA) ltd
New York
RETAIL100%

55% Travel Retail Shop Pty ltd
Australia
RETAIL

100% Church Japan Company ltd
Tokyo
DORMANT

Church UK Retail ltd
LondonRETAIL

100%

55%

TRS Saipan partnership
SaipanRETAIL

Church’s English Shoes sa 100%
Bruxelles
RETAIL55%

TRS Hong Kong
Hong Kong
DFS

100%

JCS (2009) ltd
Northampton
DISTRIBUTION

TRS Hong Kong ltd
Macau Branch
Hong Kong - RETAIL

100% Church’s Hong Kong ltd
Hong Kong
RETAIL

Church France sa
Paris
RETAIL100%

100% Church & Co (Footwear) ltd
Northampton
TRADEMARKS

Church Italia srl
Milan
RETAIL

100%

55%

TRS New Zealand ltd
AucklandRETAIL

100% Church Singapore pte, ltd
Singapore
RETAIL

Church Spain sl
MadridRETAIL

100%

55%

TRS Singapore
Singapore
RETAIL

Church Ireland Retail ltd 100%
DublinRETAIL100%

PRADA Asia PaciﬁcHong Kong
DISTRIBUTION-RETAIL-SERVICES

100%

Church Netherlands bv
Amsterdam
RETAIL100%

Church Austria gmbh
Wien
RETAILPAP Macau
Branch ltd
Macau - RETAILPRADA Taiwan ltd
Hong KongSERVICES

100%

Taipei BranchTaipeiRETAILPRADA China ltd
Hong Kong
RETAIL100%

PRADA Trading
Shanghai Co ltd
Shanghai - RETAIL

100%

Space Hong Kong ltd
Hong Kong
OUTLET

100%

PRADA Fashion
Comm. Shanghai Co ltd 100%
Shanghai
RETAIL24

PRADA Group

Annual Report 2011 - The PRADA Group100%

PRADA Hellas Single
Partner llc
Athens - RETAIL100%PRADA Stores srl
Milan
RETAIL100%

PRADA Czech Rep. sro
PragueRETAIL

100% PRADA Montecarlo sam
Montecarlo
RETAIL100%

PRADA Portugal
Unipessoal lda
Lisbon - RETAIL100%PRADA Austria gmbh
Wien
RETAIL100%

PRADA Company sa
Luxembourg
SERVICES

99,9%

PRADA Rus llc
Moscow
RETAIL100%

PRADA Spain sl
MadridRETAIL100%

Car Shoe sa
Luxembourg
TRADEMARK

99,9% PRADA Bosphorus Derl
Mamüller ltd Sirketi
Istanbul - RETAIL60%PRADA Middle East fzco
Jebel AliFree Zone Dubai
DISTRIBUTION-SERVICES

49%

PRADA Emirates llc
Dubai
RETAIL100%

PRADA BrasilSãu Paulo
RETAIL100%

PRADA Ukraine llc
Kiev
RETAIL100%

PRADA Maroc Sarlau
Casablanca
RETAILPRADA Group100%
PRADA sa
Luxembourg
TRADEMARKPRADA sa
Swiss Branch
Lugano - SERVICES

100% PRADA Germany gmbh
MünchenRETAIL
100%

Space sa
Mendrisio
OUTLETS100%

PRADA Retail UK ltd
LondonRETAIL100%
Car Shoe Italia srl
Milan
DISTRIBUTION-RETAIL
100%

Car ShoeSingapore pte ltd
Singapore - RETAILPRADA Retail UK ltd
Irish Branch
Dublin - RETAIL

100%

Car ShoeHong Kong ltd
Hong Kong - RETAIL

100% PRADA Retail France sas
Paris
RETAIL100%

Car Shoe UK ltd
LondonRETAIL

Annual Report 2011 - The PRADA Group25

Corporate Information
Registered office

Via A. Fogazzaro, 28
20135 Milan, Italy

Headquarters office

Via A. Fogazzaro, 28
20135 Milan, Italy

Place of business in Hong Kong
registered under Part XI of theHong Kong Companies Ordinance

36/F, Gloucester Tower
The Landmark, 11 Pedder Street
Central, Hong Kong

Company website

www.pradagroup.com

Hong Kong Exchange Stock Code1913

Board of Directors

Miuccia Prada Bianchi(Chairperson and Executive Director)
Patrizio Bertelli(Chief Executive Officer and Executive Director)
Carlo Mazzi(Deputy Chairman and Exectutive Director)
Donatello Galli(Chief Financial Officer and Executive Director)
Marco Salomoni(Non-Executive Director)
Gian Franco Oliviero Mattei(Independent Non-Executive Director)
Giancarlo Forestieri(Independent Non-Executive Director)
Davide Mereghetti(Non-Executive Director, resigned on May 9, 2011)
Sing Cheong Liu(Independent Non-Executive Director, appointed on
May 9, 2011)
Gaetano Micciché(Non-Executive Director, appointed on May 9, 2011)
Marco Cerrina Feroni(Non-Executive Director, resigned on May 9, 2011)

Audit Committee

Gian Franco Oliviero Mattei
Sing Cheong Liu
Giancarlo Forestieri

Remuneration Committee

Gian Franco Oliviero Mattei
Giancarlo Forestieri
Marco Salomoni

Board of Statutory Auditors

Antonino Parisi (Chairman)
Riccardo Perotta (Standing member)
Gianandrea Toffoloni (Standing member)Supervisory Board (Law 231/2001) David Terracina (Chairman)
Franco Bertoli
Marco Salomoni

26

PRADA Group

Annual Report 2011 - The PRADA GroupMain Shareholder

PRADA Holding bv
Dam 3-71012 JS Amsterdam - The Netherlands

Joint Company Secretaries

Patrizia Albano
Via A. Fogazzaro, 28
20135 Milan, Italy
Ying-Kwai Yuen (Fellow member, HKICS)
Flat A, 20th Floor
Block 4, Sceneway Garden
8 Sceneway Road
Kowloon, Hong Kong

Authorized Representatives

Donatello GalliVia Elba, 1020144 Milan, Italy
Ying-Kwai Yuen (Fellow member, HKICS)
Flat A, 20th Floor
Block 4, Sceneway Garden
8 Sceneway Road
Kowloon, Hong Kong

Alternate Authorized
Representative to
Donatello Galli

Sing Cheong Liu
House 7 Severn Hill
4 Severn Road
The PeakHong Kong

Hong Kong Share Registrar

Computershare Hong Kong Investor
Services Limited
Shops 1712-1716
17th Floor, Hopewell Centre
183 Queen’s Road East
Wanchai, Hong Kong

Auditor

Deloitte & Touche Spa
Via Tortona, 2520144 Milan, Italy

Compliance Advisor

Anglo Chinese Corporate Finance, Limited
40th Floor, Two Exchange Square
8 Connaught PlaceCentralHong Kong

PRADA Group

Annual Report 2011 - The PRADA Group

27

28

PRADA Group

Annual Report 2011 - The PRADA GroupFinancial Review

PRADA Group

Annual Report 2011 - Financial Review

29

The Financial review of the Board of Directors refers to the Group of companies
controlled by PRADA spa (the "Company"), holding company of the PRADA Group (the"Group") and is based on the Consolidated Financial Statements of the Group at January
31, 2012 (year 2011), prepared in accordance with IFRS as adopted by the European
Union. The Financial review must be read together with the Financial Statements andthe Notes to the Financial Statements which are an integral part of the Consolidated
Financial Statements.
Consolidated income statement
January 31
2012%

January 31
2011%

1,964,499

76.9%

1,427,356

69.8%

Wholesale

558,83121.8%

589,708

28.8%

Royalties

32,276

1.3%

29,587

1.4%

Net revenues

2,555,606

100.0%

2,046,651

100.0%

Cost of goods sold(727,581)-28.5%(658,763)-32.2%

Gross margin

1,828,025

71.5%

1,387,888

67.8%

Operating expenses(1,199,090)-46.9%(969,501)-47.4%

EBIT

628,935

24.6%

418,387

20.4%

Interest and other financial expenses, net(26,027)-1.0%(30,158)-1.5%

Income before taxation

602,90823.6%

388,229

19.0%

Taxation(166,483)-6.5%(134,678)-6.6%

Net income from continuing operations

436,42517.1%

253,551

12.4%

-

-

-

-

436,42517.1%

253,551

12.4%

-

-

-

-

Net income from continuing operations –non-controlling interests

4,496

0.2%

2,732

0.1%

Net income – non-controlling interests

4,496

0.2%

2,732

0.1%

(amounts in thousands of Euro)
RetailNet income from discontinued operations

Net income for the year

Net income from discontinued operations –non-controlling interests

-

-

-

-

Net income from continuing operations - GroupNet income from discontinued operations - Group

431,92916.9%

250,819

12.3%

Net income – Group

431,92916.9%

250,819

12.3%

Depreciation, amortization and impairment

130,3175.1%

117,543

5.7%

EBITDA

759,25229.7%

535,930

26.2%

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

30

PRADA Group

0.170

Annual Report 2011 - Financial Review

0.100Key financial information
Key income statement information(amounts in thousands of Euro)Net revenues

January 31
2010

January 31
2011

January 31
2012

% chg
on January
2011

CAGR %

1,561,238

2,046,651

2,555,606

24.9%

27.9%

EBITDA

290,219535,930

759,252

41.7%

61.7%

EBIT

187,032

418,387

628,935

50.3%

83.4%

Income before tax

155,150

388,229

602,908

55.3%

97.1%

Net income of the Group

100,163

250,819

431,92972.2%

107.7%

0.04

0.10

0.17

69.8%

106.2%EBITDA %

18.6%

26.2%

29.7%

EBIT %

12.0%

20.4%

24.6%

January 31
2010

January 31
2011

January 31
2012

% chg
on January
2011

CAGR %

1,460,521

1,595,990

1,826,065

14.4%

11.8%

259,278

320,759

357,648

11.5%

17.4%

Net invested capital

1,490,812

1,585,559

1,817,327

14.6%

10.4%

Net financial position (third parties)(485,338)(408,604)

15,804--

Group shareholders’ equity

1,047,903

1,204,350

1,822,743

51.3%

31.9%

Capital expenditure

134,516

206,860

278,856

34.8%

44.0%

Net operating cash flows

279,886

367,712479,954

30.5%

31.0%

6,764

7,199

8,067

12.1%

9.2%

Earnings per share

Key statement of financial position information(amounts in thousands of Euro)

Non-current assets
Net operating working capital

Average headcount (persons)

2011 highlights
In 2011, the PRADA Group successfully pursued its strategy of growth on theworldwide luxury goods market, combining one of the highest sales growth in the
sector with a further, signiﬁcant increase in proﬁtability. The expansion program has
led to the opening of 75 new stores across 17 different countries, including Russia
and the United Arab Emirates for the ﬁrst time. In pursuit of these results, theGroup has continued to invest in sustaining the prestige of its brands with traditional
promotional activities and new projects and partnerships with the world of art, cinema
and architecture: groundbreaking agreements have been reached with the Conseil
Economique, Social et Environnemental to use the Palais d’Iéna in Paris and with the
Fondazione Musei Civici di Venezia to organize art events at Cà Corner della Regina. The
events organized in Paris, Shanghai, Los Angeles and Tokyo have received importantinternational coverage that helped to communicate the unique nature of the products
and the strong identity of the brands.
Consolidated net revenues for the year ended January 31, 2012, amounted to Euro2,555.6 million, an increase of 24.9% compared to the ﬁgure of Euro 2,046.7 million
recorded in prior year. Sales growth was driven by the retail channel which achieved
37.6% growth compared to the year ended January 31, 2011, thanks to the opening of
new stores and like-for-like growth.
EBITDA for the year totaled Euro 759.3 million with an increase of 41.7% compared
to 2010. Sales growth combined with the reduced incidence of operating expenses
meant that EBITDA increased signiﬁcantly as a percentage of net revenues, from
26.2% in 2010 to 29.7% in 2011.
The consolidated income statement for the year ended January 31, 2012, reports
Group net income of Euro 431.9 million, 72.2% more than in 2010. Earnings per shareimproved from Euro 0.10 to Euro 0.17 per share.

PRADA Group

Annual Report 2011 - Financial Review

31June 24, 2011 saw the successful completion of an IPO that led to 19% of the sharesin PRADA spa being listed on the Hong Kong Stock Exchange. The operation involved
the sale of existing and newly issued shares and raised a net amount of Euro 206.6
million for the Group. The Prada Group IPO was the largest consumer goods IPO in theworld during the year and, thanks to its innovative content, it received the prestigious
IFR “IPO of the Year” World Award and the IFR “IPO of the Year” Asia Paciﬁc Markets.
Prada shares have been included in the FTSE Asia Paciﬁc (ex Japan) index and,
consequently, in the FTSE All World index, as well as in the S&P Global Luxury Index.
Cash ﬂows generated by the IPO and, above all, by ordinary activities enabled theGroup not only to cover in full its investing activities for the year but, at January 31,
2012, to achieve a positive net ﬁnancial position of Euro 15.8 million. At January 31,
2011, the Group had a negative net ﬁnancial position of Euro 408.6 million.
Net sales analysis
January 31
2012%

January 31
2011%% changeItaly445,61117.6%

393,285

19.5%

13.3%

Europe540,13121.4%

450,463

22.3%

19.9%

Americas392,677

15.6%

326,780

16.2%

20.2%

Asia Pacific872,992

34.6%

613,803

30.4%

42.2%

Japan

256,69310.2%

220,924

11.0%

16.2%

Other countries

15,2260.6%

11,809

0.6%

28.9%

2,523,330

100.0%

2,017,064

100.0%

25.1%(amounts in thousands of Euro)Net sales by geographical area

Total

Net sales by brandPrada

1,999,345

79.2%

1,586,840

78.7%

26.0%

Miu Miu

441,05417.5%

353,038

17.5%

24.9%

Church's

59,224

2.3%

53,028

2.6%

11.7%

Car shoe

17,0390.7%

17,935

0.9%

-5.0%

Other

6,668

0.3%

6,223

0.3%

7.2%

Total

2,523,330

100.0%

2,017,064

100.0%

25.1%

Net sales by product line
Clothing

512,58520.3%

483,564

24.0%

6.0%

1,426,537

56.5%

1,013,877

50.3%

40.7%

Footwear

560,10822.2%

503,120

24.9%

11.3%

Other

24,1001.0%

16,503

0.8%

46.0%

Total

2,523,330

100.0%

2,017,064

100.0%

25.1%

1,964,499

77.9%

1,427,356

70.8%

37.6%

558,83122.1%

589,708

29.2%

-5.2%

Total

2,523,330

100.0%

2,017,064

100.0%

25.1%

Net sales

2,523,330

98.7%

2,017,064

98.6%

25.1%

Royalties

32,276

1.3%

29,5871.4%

9.1%

2,555,606

100.0%

2,046,651

100.0%

24.9%

Leather goods

Net sales by distribution channel
DOS (including outlet stores)
Independent customers, franchises and relatedparties

Total net revenues

Consolidated net revenues for the period ended January 31, 2012, amounted to Euro2,555.6 million, 24.9% higher than the Euro 2,046.7 million recorded in 2010. At
constant exchange rates, there was a 26.4% increase.

32

PRADA Group

Annual Report 2011 - Financial Review

Distribution channels
Net sales generated by the retail channel, amounting to Euro 1,964.5 million, increased
by 37.6% compared to prior year (+39.2% at constant exchange rates). The exceptional
growth achieved conﬁrms the determination shown by the Group during the year inpursuing its expansion program with the opening of 75 new DOS. The growth achievedis all the more impressive if analyzed at constant exchange rates and assuming thesame number of stores: in fact, like-for-like growth amounted to 23% and was steadythroughout the year.
In contrast, the wholesale channel showed a 5.2% decrease in net sales compared
to prior year. This decrease essentially regarded the Italian and European markets as
the Group continued to be more selective about its authorized accounts and relevantdeliveries, and because of a different pattern of shipments due to particularly bad
weather in Italy at the end of the year and the accompanying industrial action byhauliers that caused some delays. At constant exchange rates, the decrease wasslightly smaller (-3.9%).
As a result of the above factors, the contribution by the retail channel towards total net
sales rose from 70.8% to 77.9%.
Markets
For the third consecutive year, the Asia Paciﬁc market was conﬁrmed as leader bothin absolute terms and for growth: it generated net revenues of Euro 873 million in
2011, a 42.2% increase compared to 2010 (+45.1% at constant exchange rates). Its
contribution to consolidated net revenues rose from 30.4% to 34.6%.
Net sales on the Asia Paciﬁc market were generated almost entirely by the retail
network (+45% compared with 2010, +48% at constant exchange rates and +33%
like-for-like) which included some 115 stores in Asia Paciﬁc as at January 31, 2012.The
Greater China area (China, Hong Kong and Macau) achieved the highest like-for-likegrowth with a 40% increase. Eight of the eighteen new DOS opened in the Asia Paciﬁcmarket are located in China.
Net sales on the European market amounted to Euro 540.1 million, 19.9% more thanin 2010 (+20.5% at constant exchange rates). The outstanding growth achieved by the
DOS (+43%,+44% at constant exchange rates, +19% like-for-like) was partially offset
by a decrease in the wholesale channel compared to 2010. The 28 new stores opened
during the year included the ﬁrst nine shops in Moscow.
The Italian market generated total sales of Euro 445.6 million, 13.3% more than in
2010. As for the rest of the European market, the excellent growth achieved in theretail channel (+45%, +28% like-for-like) contrasts with the fall in sales in the wholesalechannel. The Group’s strategic interest in further developing the domestic market led
to the opening of seven new DOS, among which the ﬁrst in Padova and Palermo.
The American market has continued to grow. Since the ﬁrst half of the year, both
the retail channel and the wholesale channel have shown excellent results. For thewhole year, the retail channel grew by 25% (+32% at constant exchange rates) while
the wholesale channel increased by 12% (+17% at constant exchange rates). Growthin the retail channel was driven by both existing stores (16% like-for-like growth) and
newly opened stores (8 new stores were opened in 2011). The consumer spending
recovery in USA was the fundamental reason for increased sales through department
stores.
In Japan, net sales totaled Euro 256.7 million with excellent growth of 16.2%, also atconstant exchange rates (+11.9%) and assuming the same number of stores (like-forlike growth +1%). These results conﬁrm the solid, resistant nature of the Japanese

PRADA Group

Annual Report 2011 - Financial Review

33market notwithstanding the dramatic events of March 2011 which affected an economy
already stagnant. The importance of Japan to the PRADA Group is conﬁrmed by theretail expansion program which has seen a further increase from 56 to 65 DOS in the
country. The new Miu Miu ﬂagship store in the Ginza Echigoya district of Tokyo, oneof the world’s most exclusive shopping areas, stands out among the newly opened
stores.
Following the rationalization of the distribution network in the Middle East, the OtherCountries area has seen its net sales increase by 29% to Euro 15.2 million. In 2011,
the Group opened its ﬁrst two stores in Dubai, United Arab Emirates.
Products
The increase in net sales was achieved in all product segments. Leather goods
recorded the highest growth of 40.7% (+42.3% at constant exchange rates), mainly
thanks to the higher incidence of the retail channel and the conﬁrmed appeal of theseproducts to Asian consumers. Clothing was affected by the decline in the wholesalechannel but achieved a recovery in the second half of the year, compared to the ﬁrst
half of the year, and ended with a 6% increase compared to the year ended January
31, 2011 (+7.3% at constant exchange rates).
BrandsThe Prada brand achieved stronger sales growth than the other brands compared to2010 (+26%), increasing its contribution towards net sales from 78.7% to 79.2%.
This sales performance largely reflects the excellent results already described at
Group level. Among the successful collections presented, it is worth mentioning thesensation caused by the Prada Woman S/S 2011 collection which was memorable also
for its colorful advertising campaign.
The Prada brand was followed by Miu Miu which contributed 17.5% of the Group’s net
revenues, ending the year 2011 with growth of 24.9% (+26.1% at constant exchange
rates). The American market confirmed its great appreciation for this brand and sales
there increased by 27.1% compared to 2010. In April 2011, Miu Miu also launched its
new e-store, confirming its avant-garde spirit.
The Church’s brand once again achieved double figure growth, driven by both the retailchannel (+11.4% at constant exchange rates) and the wholesale channel (+14.7% atconstant exchange rates). During the year, the first Church’s store wholly dedicated to
the Women’s collection was opened on New Bond Street, London.
Despite expansion in the retail channel (one new DOS was opened in London in 2011),
Car Shoe suffered from a decrease in the wholesale channel, partially because of theaforementioned late shipments at year-end and also because of a different planning indeliveries according to customers’ needs. The brand’s total sales fell by 5% compared
to 2010.
Royalties
The licensed products business contributed net revenues of Euro 32.3 million (Euro29.6 million in 2010). The increased royalties income compared to 2010 was due – aswell as to higher sales of eyewear and fragrances – to a new licensing agreement
signed with Korean car manufacturer Hyundai for the sale of a limited edition versionof its Genesis model. The decline in Miu Miu royalties income registered up to the endof the third quarter of 2011 was reversed in the final quarter of the year with the launchof a new eyewear collection.

34

PRADA Group

Annual Report 2011 - Financial Review

Prada brand sales
January 31
2012%

January 31
2011%% changeItaly

349,852

17.5%

302,025

19.0%

15.8%

Europe411,552

20.6%

341,544

21.5%

20.5%

Americas334,46916.7%

281,178

17.7%

19.0%

Asia Pacific710,157

35.5%

496,156

31.3%

43.1%

Japan

181,7209.1%

157,061

9.9%

15.7%

Other countries

11,595

0.6%

8,876

0.6%

30.6%

1,999,345

100.0%

1,586,840

100.0%

26.0%(amounts in thousands of Euro)Net sales by geographical area

Total

Net sales by product line
Clothing

434,46121.7%

419,464

26.4%

3.6%

1,141,097

57.1%

786,244

49.6%

45.1%

Footwear402,34820.1%

366,392

23.1%

9.8%

Other

21,4391.1%

14,740

0.9%

45.4%

Total

1,999,345

100.0%

1,586,840

100.0%

26.0%

1,562,233

78.1%

1,119,962

70.6%

39.5%

437,11221.9%

466,878

29.4%

-6.4%

Total

1,999,345

100.0%

1,586,840

100.0%

26.0%

Net sales

1,999,345

98.5%

1,586,840

98.3%

26.0%

Royalties

31,341

1.5%

27,914

1.7%

12.3%

2,030,686

100.0%

1,614,754

100.0%

25.8%

January 31
2012%

January 31
2011%% changeItaly

67,103

15.2%

61,337

17.4%

9.4%

Europe86,17819.5%

70,137

19.9%

22.9%

Americas54,91512.5%

43,190

12.2%

27.1%

Asia Pacific155,84135.3%

112,722

31.9%

38.3%

Japan

73,91816.8%

63,341

17.9%

16.7%

Other countries

3,099

0.7%

2,311

0.7%

34.1%

441,054100.0%

353,038

100.0%

24.9%

Clothing

77,251

17.5%

63,258

17.9%

22.1%

Leather goods

282,03364.0%

224,337

63.6%

25.7%

Footwear

79,10917.9%63,681

18.0%

24.2%

Other

2,661

0.6%

1,762

0.5%

51.0%

Total

441,054100.0%

353,038

100.0%

24.9%

DOS (including outlet stores)

354,22780.3%

264,375

74.9%

34.0%

Independent customers, franchises and related parties

86,82719.7%

88,663

25.1%

-2.1%

Total

441,054100.0%

353,038

100.0%

24.9%

Net sales

441,05499.8%

353,038

99.6%

24.9%

Royalties

828

0.2%

1,458

0.4%

-43.2%

441,882

100.0%

354,496

100.0%

24.7%

Leather goods

Net sales by distribution channel
DOS (including outlet stores)
Independent customers, franchises and related parties

Total net revenues

Miu Miu brand sales(amounts in thousands of Euro)Net sales by geographical area

Total

Net sales by product line

Net sales by distribution channel

Total net revenues

PRADA Group

Annual Report 2011 - Financial Review

35Church’s brand sales
January 31
2012%

January 31
2011%% change

Italy

16,50927.9%15,307

28.9%

7.9%

Europe34,27157.9%

31,435

59.3%

9.0%

Americas

2,402

4.0%

1,966

3.7%

22.2%

Asia Pacific

4,789

8.1%

3,622

6.8%

32.2%

Japan

1,052

1.8%

511

0.9%

105.9%(amounts in thousands of Euro)Net sales by geographical area

Other countries
Total

201

0.3%

187

0.4%

7.5%

59,224100.0%

53,028100.0%

11.7%

Net sales by product line
Clothing

762

1.3%

551

1.0%

38.3%

Leather goods

1,702

2.9%

1,432

2.7%

18.9%

Footwear

56,76095.8%

51,045

96.3%

11.2%

Total

59,224100.0%

53,028100.0%

11.7%

DOS (including outlet stores)

38,346

64.7%

34,683

65.4%

10.6%

Independent customers, franchises and relatedparties

20,87835.3%

18,345

34.6%

13.8%

Total

59,224100.0%

53,028100.0%

11.7%

Net sales

59,22499.8%

53,028

99.8%

11.7%

Royalties

107

0.2%

101

0.2%

5.9%

59,331100.0%

53,129100.0%

11.7%

January 31
2012%

January 31
2011

%

var.
%

Italy

10,29460.4%

12,50969.7%-17.7%

Europe

3,383

19.9%

3,353

18.7%

0.9%

Americas

857

5.0%

353

2.0%

142.8%

Asia Pacific

2,174

12.8%

1,275

7.1%

70.5%

-

0.0%

11

0.1%

-100.0%Net sales by distribution channel

Total net revenues

Car Shoe brand sales(amounts in thousands of Euro)Net sales by geographical area

Japan
Other countries
Total

331

1.9%

434

2.4%

-23.7%

17,039100.0%

17,935100.0%-5.0%

Net sales by product line
Leather goods

1,658

9.7%

1,760

9.8%

-5.8%

Footwear

15,381

90.3%

16,175

90.2%

-4.9%

Total

17,039100.0%

17,935100.0%

-5.0%

7,747

45.5%

6,027

33.6%

28.5%

Net sales by distribution channel
DOS (including outlet stores)

36

Independent customers, franchises and relatedparties

9,292

54.5%

11,90866.4%-22.0%

Total

17,039100.0%

17,935100.0%-5.0%

Net sales

17,039100.0%

17,935100.0%-5.0%

Total net revenues

17,039100.0%

17,935100.0%-5.0%

PRADA Group

Annual Report 2011 - Financial Review

Number of stores
January 31, 2012

January 31, 2011

Owned

Franchises

Owned

Franchises

Prada

245

20

207

27

Miu Miu

94

6

71

6

Car Shoe

6

-

5

-

Church’s

43

-

36

-

Total

388

26

319

33

January 31, 2012
Owned

January 31, 2011

Franchises

Owned

Franchises

Italy

44

5

37

5

Europe

115

6

88

13

Americas

47

1

34

-

Asia Pacific

115

14

104

13

Japan

65

-

56

-

Middle East

2

-

-

2

Total

388

26

319

33

Operating results
EBITDA for the 2011 ﬁnancial year amounted to Euro 759.3 million, 41.7% more than in
2010, while rising from 26.2% to 29.7% of net revenues. The increased proﬁtability waslargely due to the excellent results in terms of gross margin which, in turn, beneﬁted
from a more favorable mix of sales in terms of distribution channel, geographical areaand product. The economies of scale achieved in relation to ﬁxed costs were partiallyabsorbed by increased spending on media space.
The improvement in EBIT from 20.4% to 24.6% of net revenues also beneﬁted fromthe fact that depreciation and amortization charges increased by less than net revenues.
The income statement reports net income for the Group of Euro 431.9 million (Euro250.8 million in 2010). The lower tax charge for the year, essentially because of accruals
for tax disputes recorded in 2010, has led to net income of 16.9% of net revenues withan exceptional increase of 72.2% compared to 2010.
Notwithstanding the share capital increase subscribed in relation to the IPO on Hong
Kong Stock Exchange, earnings per share have increased from Euro 0.10 to Euro 0.17
per share.

PRADA Group

Annual Report 2011 - Financial Review

37Analysis of the statement of financial position
Net invested capital
The following table contains the statement of ﬁnancial position, adjusted in order toprovide a better picture of the composition of net invested capital.
(amounts in thousands of Euro)

Non-current assets

January 31
2010

January 31
2011

January 31
2012

1,826,065

1,460,521

1,595,990

Current assets excluding financial assets

532,446

634,462

753,809

Current liabilities excluding financial liabilities

361,403

459,047

546,072

Net working capital

171,043

175,415

207,737

Assets held for sale

1,413

4,948

-

Long-term liabilities, including deferred taxation

92,195103,236

123,656

Post-employment benefits

36,831

34,83335,898Provisions for risks

13,13952,72556,921

Net invested capital

1,490,812

1,585,559

1,817,327

Shareholders’ equity – Group

1,047,903

1,204,350

1,822,743

8,756

5,788

8,224

1,056,659

1,210,138

1,830,967

Long term financial payables

119,107305,917

179,542

Short term financial payables, net of cash and cash equivalents

315,046

69,504(193,182)

Shareholders’ equity – Non Controlling Interests
Total consolidated shareholders’ equity

Net financial position
Shareholders’ equity and net financial payables
Debt to Equity ratio

434,153

375,421(13,640)

1,490,812

1,585,559

1,817,327

0.41

0.31

n.a.

At January 31, 2012, net invested capital stood at Euro 1,817.3 million. It had a similar
breakdown at all three reporting dates analyzed. The additional value generated during
2011 was largely attributable to investments made in relation to the Group’s expansion
program.
The share capital increase subscribed in 2011, as a result of the IPO completed onJune 24, 2011, and, above all, the outstanding operating and ﬁnancial results achievedin recent years have formed the basis for the Group’s solid balance sheet structure. At
January 31, 2012, the Group reported net positive ﬁnancial position of Euro 13.6 million
while Group Shareholders’ Equity stood at Euro 1,822.7 million.
Non-current assets(amounts in thousands of Euro)

January 31
2010

January 31
2011

January 31
2012

Property, plant and equipment

417,965

536,717713,870

Intangible assets

893,319

869,119

863,526

9,509

1,753

15,631

Deferred tax assets

111,373

141,378

175,736

Other non-current assets

28,35544,88357,302

-

2,140

-

1,460,521

1,595,990

1,826,065

0.53

0.50

0.47

Investments in associated undertakings

Derivative financial instruments-non-current

Total non-current assets
Percentage of tangible assets already depreciated

The increase in property, plant and equipment is largely due to capital expenditure forthe year (Euro 278.9 million) and to the effect of translation into Euro (Euro 24.7 million),less depreciation and amortization (Euro 126.3 million) and impairment adjustments(Euro 4.0 million). The Group’s capital expenditure for the year was allocated as follows:
Euro 191.2 million in the retail area, Euro 57.8 million in the production and logistics
area and Euro 29.9 million in the corporate area.

38

PRADA Group

Annual Report 2011 - Financial Review

Deferred tax assets have increased mainly because of higher deductible temporary
differences relating to inventories.
Net operating working capital
January 31
2010

January 31
2011

January 31
2012

Trade receivables

224,198

274,175

266,404

Inventories

231,476

280,409374,782

Trade payables(196,396)(233,825)(283,538)

Net operating working capital

259,278

320,759

357,648(amounts in thousands of Euro)

The increase in net operating working capital is due to the higher volume of business.
The reduction in the wholesale business is reﬂected in the lower level of tradereceivables.
Net financial position
The following table summarizes the items included in the net ﬁnancial position.
January 31
2010

January 31
2011

January 31
2012

111,439

303,408

178,442

7,668

2,509

1,100

Long term financial payables

119,107305,917

179,542

Short term financial payables and bank overdrafts

459,283

194,240

165,485

Payables to parent company and related parties

2,806

281

3,574

(54,537)(34,044)(1,410)Obligations under finance leases

5,513

5,019

1,453

Payables to other shareholders

545

581

-

Cash and cash equivalents(98,564)(96,572)(362,284)

Short term financial payables/(receivables), net of cash and cash equivalents

315,046

69,504(193,182)

Net financial position

434,153

375,421(13,640)

Net financial position, excluding receivables/payables with parent
company and related parties and other shareholders (NFP used to
calculate covenants - note 27 Consolidated financial statements)

485,339

408,604(15,804)(amounts in thousands of Euro)Long term debt
Obligations under finance leases

Receivables from parent company and related parties

NFP/EBITDA ratio

1.68

0.76

n.a.

EBITDA/Net financial charges ratio

9.05

17.77

29.17

The Group’s net ﬁnancial position has seen a longstanding balance of net indebtedness
transformed into a positive net ﬁnancial position at January 31, 2012.
Cash ﬂows generated by operating activities and the share capital increase haveenabled the Group not only to ﬁnance its major capital investment program (Euro 257.2
million), pay dividends (Euro 6.4 million) and repay debt falling due (Euro 156.8 million)
but, above all, to accumulate sufﬁcient liquidity to enable it to report a positive net
ﬁnancial position of Euro 15.8 million at January 31, 2012.
Given the current state of volatility and uncertainty on bank borrowing markets, inparticular, management believes that this position of liquidity will assure the Group
sufﬁcient ﬁnancial ﬂexibility, also in view of planned dividend payments and the major
investment program planned for 2012.

PRADA Group

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39

Risk factors
Risk factors regarding the international luxury goods market
Risks regarding the general state of the economy and the Group’s international
operations
The international environment in which Prada operates exposes the Group to several
macroeconomic factors whose impact on consumer spending and the volume of
tourist travel can affect its income statement, equity and cash ﬂows.
PRADA Group strategy, focusing on international growth in the retail channel, hasalready proven its worth as a means of combating the effects of the worldwide
downturn in 2008-2009 and led to highly satisfactory results when markets recovered.
Risks regarding the protection of intellectual property rights
Trademarks and other intellectual property rights are extremely important in the fashionand luxury goods market.
Prada’s success also depends on its capacity to protect and promote its own trademarks
and intellectual property rights and to prevent counterfeiting. For this purpose, theGroup invests in worldwide trademark protection and in monitoring the market in orderto take tough measures against counterfeiters of trademarks and designs.
Risks regarding brand image and recognition
The success of the Group on the international luxury goods market is linked to theimage and distinctiveness of its brands. These features depend on many factors, likethe style and design of products, the quality of materials and production techniques
used, the image and location of the Group’s directly operated stores, the carefulselection of licensees for certain product categories and communications activities interms of public relations, advertising, marketing and Group proﬁle, in general.
Preservation of the image and prestige acquired by the Group’s brands and trademarksin the fashion and luxury goods industry is an objective that the PRADA Group pursues
by closely monitoring each step of the process, both inside and outside the company,in order to guarantee uncompromised quality. It also engages in a constant search forinnovation in terms of style, product and communications in order to ensure that its
message is always consistent with the strong identity of the brands.
Risks regarding ability to anticipate trends and respond to changing customer
preferences
The Group’s success depends on its ability to create and drive market and producttrends while anticipating changes in customer preferences and in the dynamics of theluxury goods market.
The Group pursues its objective of driving the luxury goods market by stimulating
consumer markets and setting trends thanks to the creative efforts of its ProductCreation and Development department.

40

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Annual Report 2011 - Financial Review

Risk factors specific to PRADA Group
Risks regarding exchange rate fluctuations
The exchange rate risk to which the Group is exposed depends on foreign currency
ﬂuctuations against the Euro. In order to hedge this risk, which is mainly concentrated
in the parent company PRADA spa as worldwide distributor of most products, theGroup enters into option and forward sale and purchase agreements so as to guarantee
the counter value in Euro of identiﬁed ﬁnancial and commercial cash ﬂows.
Exchange rate risk management is described in the Notes to the Consolidated Financial
Statements.
Risks regarding interest rate fluctuations
The interest rate risk is the risk that cash outﬂows might vary as a result of interest
rate ﬂuctuation. In order to hedge this risk, which is mainly concentrated in theparent company PRADA spa, the Group uses interest rate swaps and collars. These
instruments convert variable rate loans into ﬁxed rate loans or loans at rates within anegotiated range of rates.
Interest rate risk management is described in more detail in the Notes to theConsolidated Financial Statements.
Risks regarding the importance of key personnel
The Group’s results depend both on the contribution of certain key ﬁgures who
have played an essential role in the development of the Group and who have great
experience of the fashion and luxury goods industry and on Prada’s ability to attract andretain personnel highly capable in terms of the design, marketing and merchandisingof products.
The Group believes it has a management structure capable of guaranteeing the ongoing
success of the business.
Risks regarding the implementation of strategy
The Group’s ability to increase revenues and improve proﬁtability depends on the
successful implementation of its strategy for each brand. As already stated, thisstrategy is based on the international development of the retail channel.
The Group is pursuing its objectives through gradual expansion in new geographicalareas or in areas where its presence is not yet strong enough. In order to ensure
the success of each new DOS, the Group carefully assesses market conditions andconsumer trends in the new DOS location. In particular, when entering into new
countries, the Group dedicates signiﬁcant resources to ensuring that sales managers
and personnel convey an image consistent with the identity of the Group brands anda level of service in keeping with the quality of the products. The utmost attention ispaid to the design and ﬁtting out of the stores themselves.
Risks regarding the outsourcing of manufacturing activities
The Group designs, checks and produces in-house most of its prototypes and samples
while outsourcing production of most of its accessories and products to third parties
with the right experience and skills.
The Group has implemented a rigorous inspection and quality control process for all
outsourced production. Prada contractually requires its outsourcers to comply withrules and regulations on brand ownership and other intellectual property rights, with all
the provisions of laws and national collective agreements on labor and social security
rules and with laws and regulations on health and safety in the workplace.
PRADA Group

Annual Report 2011 - Financial Review

41Credit risk
Credit risk is deﬁned as the risk that a counterparty in a transaction causes a ﬁnancial
loss for another entity through failure to fulﬁll its obligations. The maximum risk towhich an entity is potentially exposed is represented by all ﬁnancial assets recordedin the ﬁnancial statements. The Directors essentially believe that the Group’s credit
risk mainly regards trade receivables generated in the wholesale channel. The Groupmanages the credit risk and reduces its negative effects through its commercial andﬁnancial strategy. Credit risk management is performed by controlling and monitoring
the reliability and solvency of customers. At the same time, the fact that the total
receivables balance is not highly concentrated on individual customers, the fact thatnet sales are evenly spread geographically and the ongoing strategy of selective
reduction of the wholesale customer base (for reasons including the prevention ofparallel distribution) have led to a reduced credit risk.
Liquidity risk
The liquidity risk relates to the difﬁculty the Group may have in fulﬁlling its obligations
with regard to ﬁnancial liabilities. The Directors are responsible for managing theliquidity risk while the Group Corporate Finance Department, reporting to the CFO, is
responsible for managing ﬁnancial resources as well as possible. The Directors believethat the funds and lines of credit currently available, in addition to those that will be
generated by operating and ﬁnancing activities, will allow the Group to meet its needs
resulting from investing activities, working capital management and repayment ofloans as they fall due. This can be achieved without using all available fund and surplus
resources can thus be used to pay dividends.
Legal and regulatory risks
The PRADA Group operates in a complex regulatory environment and is exposed tolegal risks and risks regarding compliance with applicable laws, including:–

the risks associated with health and safety at work in compliance with Italian
Legislative Decree 81/08 and equivalent regulations in other countries;–

the possible legal sanctions for wrongful acts pursuant to Law 231/2001, as
subsequently amended;–

the risks associated with antitrust rules in the areas where the Group operates;–

the possibility of events that adversely affect the reliability of annual ﬁnancial
reporting and the safeguarding of Group assets;–changes in international tax rules that could expose the Group to the risk of noncompliance;–

the possible industrial compliance risks regarding the conformity of the ﬁnishedgoods distributed and the raw materials and consumables used with Italian andinternational laws and regulations.

By involving all of its various divisions and using external specialist advisors whennecessary, the Group ensures that its processes and procedures are updated to comply
changes in rules and regulations, reducing the risk of non-compliance to an acceptablelevel. As well as by Divisional Managers and by audit activities, monitoring activities
are also carried out by speciﬁc entities and committees such as the Supervisory Board,
the Internal Control Committee and the Industrial Compliance Committee.

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Risks regarding data processing
Data is processed using information systems subject to a governance model that
ensures that:–data is adequately protected against the risk of unauthorized access, loss (including
accidental loss) and utilization inconsistent with assigned duties;–

data is processed in accordance with applicable laws and regulations.

Information on relationships and transactions with related parties
Information on the Group’s relationships and transactions with related parties isprovided in the Notes to the Consolidated Financial Statements.
Outlook for 2012
The results reported for the year ended January 31, 2012 conﬁrm the Group’s ability toachieve strong growth while continuing to become more proﬁtable.
In 2012, the absolute importance of the strategy focused on the retail channel will be
conﬁrmed both by seeking continually to improve existing stores and through anothermajor program to open new stores, mainly in fast growing markets and markets new
to the Group (Brazil, UAE, Morocco, Ukraine). The program of new store openings will
also extend to more mature markets where there is an increasingly signiﬁcant ﬂow offoreign travelers.
The Group will continue to be committed to stylistic innovation and to quality products,
communications and distribution. It will draw on the prestige of its brands to achieve
continued high growth rates in a medium/long term context that is still positive for the
luxury goods sector.
Nonetheless, the current macroeconomic environment is still characterized byuncertainty and volatility which, especially in the short term, could have repercussions
for performance on certain markets. In light of this situation, as in the past, the Groupwill maintain adequate control over the use of resources and ensure that it is ﬂexible
enough to react to possible changes in the situation. This will ensure it preserves its
ability to generate cash and to continue with its investment program.

Milan, March 29, 2012PRADA Group

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43

44

PRADA Group

Annual Report 2011 - Financial Review

Directors and Senior Management

PRADA Group

Annual Report 2011 - Directors and Senior Management

45Directors
Our Board consists of nine Directors, of whom four are executive Directors, two are
non-executive Directors and three are independent non-executive Directors. Our
Directors are appointed for a term of three years.
President
PRADA BIANCHI, Miuccia, aged 63, is our President and was appointed to the Board
on November 20, 2003. Ms. Prada received an Honorary Doctorate from the Royal
College of Art (London) in 2000. Ms. Prada is a co-founder of our Group along with Mr.
Bertelli. Ms. Prada is the wife of Mr. Patrizio Bertelli, our Chief Executive Officer. Ms.
Prada is not and has not been a director of any other listed companies in Hong Kong oroverseas in the past three years.
Executive Directors
BERTELLI, Patrizio, aged 65, is our Chief Executive Officer. Mr. Bertelli holds
directorships in subsidiaries of the Company. He was appointed to the Board on
November 20, 2003. Mr. Bertelli received an honorary degree in Business Economics
from the University of Florence in October, 2000. Mr. Bertelli is a co-founder of ourGroup along with Ms. Prada. Mr. Bertelli is the husband of Ms. Prada, our President.
Mr. Bertelli is not and has not been a director of any other listed companies in Hong
Kong or overseas in the past three years.
MAZZI, Carlo, aged 65, was appointed as our Deputy Chairman on November 9, 2004.
Mr. Mazzi holds directorships in subsidiaries of the Company. Mr. Mazzi obtaineda degree “cum laude” (with praise) in Mechanical Engineering from the Bologna
University of Italy in 1971 and obtained a Master’s degree in Business Administrationfrom Bocconi University of Milan in 1976. Mr. Mazzi worked as a Manager of the Large
Corporate department of IMI and San Paolo IMI Bank from 1994 to 2000. He was aboard member of IBI International Business Advisors Investment N.V. - Amsterdam;
Vice Chairman and Executive Committee Member of IBI Bank AG - Zurich; Board
Member of IBI Corporate Finance B.V. - Amsterdam; Managing Director of IBI S.p.A.
- Milan (financial intermediation ex art. 106 TUB) from 2000 to 2004. He is currently aboard member of SECVA S.r.l. - Arezzo (a service company).He was previously a board
member of ABN AMRO S.p.A. - Milan (focused on merchant banking), SAGO S.p.A. Florence (an IT research company responsible for the management of health facilities),
IMILEASE S.p.A. - Rome (a leasing company), Banca di Intermediazione Mobiliare IMI
S.p.A. - Milan (now Banca IMI S.p.A.) (focused on investment banking), Tecnofarmaci
S.p.A. - Pomezia (a research company in the pharmaceuticals industry), SIM S.p.A. Rome (focused on project management) and Paros International Insurance Brokers
S.r.l. - Milan (in the insurance brokerage sector). Mr. Mazzi is not and has not been a
director of any other listed companies in Hong Kong or overseas in the past three years.
GALLI, Donatello, aged 49, is our Group’s Administration and Finance Director and was
appointed to our Board on January 21, 2005. Mr. Galli holds directorships in subsidiariesof the Company. Mr. Galli received a degree “cum laude” (with praise) in Economics
and Banking from the University of Siena in Italy in July, 1986. He started his career
as business controller at Faricerca S.p.A. (now the Angelini Group) (pharmaceuticallaboratories and Lines consumer products business), from 1987 to 1990. Mr. Galli wasa financial analyst at Istituto Mobiliare Italiano S.p.A. from 1990 to 1999 and then Headof the Large Corporate Division central assessment office of San Paolo IMI S.p.A. until
2000. He was also the Administration and Finance Director of IBI S.p.A. (now Alerion
Clean Power S.p.A., a renewable energy company) from 2000 to 2004 and later joined
Enertad S.p.A. (now ERG Renewable S.p.A., a renewable energies company) - bothare listed companies on the Italian Stock Exchange. Mr. Galli is not and has not been a
director of any other listed companies in Hong Kong or overseas in the past three years.

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Non-Executive Directors
SALOMONI, Marco, aged 57, is our non-executive Director and joined our Group in
January 1997 and was appointed as Director on May 15, 1997. Mr. Salomoni obtaineda degree in economics at the Bocconi University (Milan) in 1980. He has served on theboard of directors of Gianni Versace S.p.A. from June 2005 to May 2011 and of GIVI
Holding S.p.A. (holding company of the Gianni Versace S.p.A.) from April 2008 until
present. Mr. Salomoni is currently a director of Aeffe S.p.A., a company listed on the
Italian Stock Exchange. Mr. Salomoni also served on the board of directors of Il Sole
24 Ore S.p.A., the listed operator of an Italian business newspaper, from October 2007
to December 2009. Mr. Salomoni became a dottore commercialista (certified public
accountant) in 1984 and was admitted as a member of Albo dei Dottori Commercialisti
di Milano (Register of chartered accountants in Milan) in 1984. He became a Public
Chartered Accountant (member of the Registro dei Revisori Contabili) at the Italian
Ministry of Justice in 1992. Mr. Salomoni is currently a member of the Remuneration
Committee and the Nomination Committee. Save as disclosed herein, Mr. Salomoni is
not and has not been a director of any other listed companies in Hong Kong or overseas
in the past three years.
MICCICHÈ, Gaetano, aged 61, is our non-executive Director, and was appointed on
May 9, 2011. Mr. Micciche` obtained a degree in Law from Universita` degli Studi diPalermo (Italy) in 1984 and a master’s degree in Business Administration from SDA
Bocconi University (Italy) in 1985. Mr. Micciche` began his career in Cassa Centrale di
Risparmio delle Provincie Siciliane in 1971 and became Head of Corporate Clients. In
1989 he joined Rodriquez S.p.A., the luxury yachting group, as Chief Financial Officer.
Mr. Micciche` also worked as General Manager of Gerolimich-Unione Manifatture(holding company with business in various industries), as General Manager of Santa
Valeria S.p.A. (chemical company) and as Managing Director and General Manager ofOlcese S.p.A. (yarn and thread mill company), all of which were listed on the Italian Stock
Exchange. Since June 2002, he has been with the Intesa Sanpaolo Group (formerly
Banca Intesa) and currently serves as the General Manager and Head of Corporate andInvestment Banking Division and Chief Executive Officer of Banca IMI. Mr. Micciche`
is also a board member of Telecom Italia S.p.A., a major Italian telecom group whose
shares are listed on the Italian Stock Exchange, a board member of ABI Associazione
Bancaria Italiana, Alitalia - CAI S.p.A. and a member of the Supervisory Board of
Fondazione Ricerca e Imprenditorialità (Foundation of Research and Entrepreneurship).
Save as disclosed herein, Mr. Micciche` is not and has not been a director of any otherlisted companies in Hong Kong or overseas in the past three years.
Independent Non-Executive Directors
MATTEI, Gian Franco Oliviero, aged 66, was appointed as an independent nonexecutive director on May 28, 2009. Mr. Mattei obtained a Degree in Economics fromthe University La Sapienza of Rome in 1970 and became a Public Chartered Accountant(member of the Registro dei Revisori Contabili) with the Italian Ministry of Justice in
1995. He has worked as Managing Director (Investment Banking) in Credit Suisse,
Managing Director (Global Banking & Markets) in The Royal Bank of Scotland, Head ofInvestment Banking at Sanpaolo IMI and Chairman of Banca IMI and was previously
Head of the Finance Department at the Istituto Mobiliare Italiano IMI. Mr. Mattei has
also been a Board Member of Borsa Italiana. Mr. Mattei is currently the Chairman of
the Audit Committee, the Remuneration Committee and the Nomination Committee.
He is currently Chairman of Accretion Corporate Consulting S.p.A., Chairman & CEO of
Holding Gruppo Marchi – HGM S.p.A, Chairman of Officine CST - Consulting Services& Technology - S.p.A., and Chairman and CEO of Quorum Sgr S.p.A.. Mr. Mattei is notand has not been a director of any other listed companies in Hong Kong or overseas in
the past three years.

PRADA Group

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47

FORESTIERI, Giancarlo, aged 65, was appointed to our Board on May 31, 2007. Mr.
Forestieri obtained a degree in Economics and Banking from the University of Siena
in 1970 and obtained a Specialization in Corporate Finance from the Scuola Mattei ENI in 1971. From 1988 to the present, Mr. Forestieri has been a Full Professor of
Financial Markets and Institutions at the Bocconi University in Milan. Mr. Forestieri’s
professional experience includes serving as a member of the boards of directors of
INA and Assitalia (from 1993 to 1994), Mediofactoring (from 1997 to 1999), Cassa di
Risparmio di Parma e Piacenza (from 1996 to 1999 and then from 2003 to 2007 as
the chairman of the board), Banca Intesa (from 1999 to 2006) and as a member of its
executive committee (from 2000 to 2006), Alleanza Assicurazioni (from 2001 to 2007),
Centrosim (from 1998 to 2003 where he was the chairman of the board) and Crédit
Agricole Vita (from 2007 to present as the chairman of the board). Mr. Forestieri is amember of the Italian Scientific Societies in the Fields of Finance and Management.
Mr. Forestieri is a member of the Audit Committee, the Remuneration Committee andthe Nomination Committee. Mr. Forestieri is not and has not been a director of any
other listed companies in Hong Kong or overseas in the past three years.
LIU, Sing Cheong, JP, aged 56, was appointed our independent non-executive director
on May 9, 2011. He has been the Chairman of My Top Home (China) Holdings Limited(a Guangzhou-based property agency and consultancy) since 2005, the Vice Chairmanof Guangzhou Pearl River - Hang Cheong Real Estate Consultants Limited (from 1993
to 2008), Chairman of Evergreen Real Estate Consultants Limited since 2001, Directorof HKS Education Fund Limited (“HKSEF”) since 2005 (HKSEF is a charitable institution
which holds certain % of shares in Hongkong Sales (International) Limited (“HKSI”),
an investment holding, knitwear manufacturing)), and Non-executive Director of HKSI
since 2005 and will re-title to Vice Chairman of HKSI with effect from April 1, 2012 allof which are private companies. He has been an independent non-executive director of
Swire Properties Limited since 2010 (Swire Properties Limited was listed on the Stock
Exchange of Hong Kong on January 18, 2012). He is a director of Hong Kong Scienceand Technology Parks Corporation since 2009. He is also a Member of the Council of
The Hong Kong University of Science and Technology, Development Committee ofthe West Kowloon Cultural District Authority, and the Security and Guarding Services
Industry Authority. Mr. Liu has been a Part-time Member of the Central Policy Unit of
the Government of the Hong Kong Special Administrative Region since January 1, 2011.
Mr. Liu graduated from The Hong Kong Polytechnic in 1979 with an Advanced Higher
Diploma in Surveying and from The Hong Kong University of Science and Technology
in 1994 with a Master of Business Administration degree. He has been a fellow of theRoyal Institution of Chartered Surveyors since 1994 and the Hong Kong Institute ofSurveyors since 1993. Mr. Liu is currently a member of the Audit Committee. Saveas disclosed above, Mr. Liu is not and has not been a director of any other listedcompanies in Hong Kong or overseas in the past three years.

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Senior Management
Our senior management is responsible for the day-to-day management of our business.
BADER, Natalie, aged 48, has been Chief Executive Officer of Prada Retail France since
March 2011. She is responsible for overseeing the commercial operations of the Groupin France and in the Principality of Monaco. Ms. Bader obtained a degree in Business
Administration from Paris IDRAC International School of Management in 1987. She
started her career in the Marketing department of Revlon Group and, after a short
experience as Marketing Manager for make-up and skincare of Yves Rocher Group,
moved to Chanel as Worldwide Media Director and Operational Marketing Director
for perfume (1992 to 2003). Prior to joining our Group, she worked for almost eight
years for the LVMH Group covering different managerial roles, such as Marketing andCommunication Director Sephora (2003 to 2006) and, then, Chief Executive Officer
FRED Jewelry (2006 to 2011). Ms. Bader is not and has not been a director of any otherlisted companies in Hong Kong or overseas in the past three years.
CANTINO, Stefano, aged 45, has been our Group’s Communication and External
Relations Director since June 2009. He is primarily responsible for our Group’s
communication strategy and global marketing functions. Mr. Cantino obtained adegree in Political Science from the University of Turin in 1993. Mr. Cantino joined
our Group in 1996 and held several managerial roles in the commercial and marketingareas with Prada, Church’s and Car Shoe, including Alaïa Operations Director, Car
Shoe Commercial Director and Church’s Brand and Retail Director. He was Prada’s
Marketing Director from 2005 to 2009 until he was appointed to his current position.
Mr. Cantino is not and has not been a director of any other listed companies in Hong
Kong or overseas in the past three years.
CIABATTI, Maurizio, aged 46, has been our Group’s Engineering Director since 2006.
He is primarily responsible for real estate development, equipment and maintenanceof retail stores, corporate offices and production sites. Mr. Ciabatti joined our Groupin 1989 and has covered different managerial roles in the maintenance and real estatearea and, starting from 2005, in Corporate Engineering. Mr. Ciabatti is not and has notbeen a director of any other listed companies in Hong Kong or overseas in the past
three years.
COZZANI, Alessandra, aged 48, has been our Group Investor Relations Director since
July 2010. She is responsible for managing financial communication and for relationships
with investment community. Ms. Cozzani joined our Group in 2000 and has covered
different managerial roles within the Finance department. In 2003, she was appointed
as Group Financial Reports Director. Ms. Cozzani obtained a degree “cum laude” (withpraise) in Business Administration from the University of Genoa in 1988. She started
her career as an auditor at Coopers & Librand (1989 to 1995). Prior to joining ourGroup, she worked in Castelletti International Transports, the Italian subsidiary of aninternational logistic company (now Schenker Group) for five years, most of the timeas Finance and Control Director. Ms. Cozzani is not and has not been a director of any
other listed companies in Hong Kong or overseas in the past three years.
ETHERIDGE, Stephen, aged 53, has been the Chief Executive Officer of Church & Co
since 2001. He is responsible for the industrial operations of the Church Group. Prior
to this he has covered the role of Chief Executive at Cheaney & Son Footwear (1995
to 2001), a company which belonged to the Church Group. He started his career in theSales Department at John White Footwear Limited UK and increased his responsibility
up to the role of Managing Director (1986 to 1990). From 1990 to 1994 he was Managing
Director of SE Marketing for Epic Fashion Footwear Limited, a company specialized in
production and distribution of men’s footwear. Mr. Etheridge is not and has not been a
director of any other listed companies in Hong Kong or overseas in the past three years.

PRADA Group

Annual Report 2011 - Directors and Senior Management49

GIANNESSI, Giuliano, aged 48, has been our Group’s Corporate Finance Director
since March 1999. He is primarily responsible for finance and bank relationships, cash
management and interest and exchange rates hedging activities. Mr. Giannessi obtaineda degree “cum laude” (with praise) in Business Administration from the University of
Pisa in 1987 and obtained the chartered accountant qualification in 1988. He started
his career in Banca Commerciale Italiana. Prior to joining our Group he worked at the
Piaggio Group as Treasurer (1991 to 1993) and Financial Planning Manager (1994 to1995) and later in Salov Group as Treasurer and Credit Manager (1995 to 1999). Mr.
Giannessi is not and has not been a director of any other listed companies in Hong
Kong or overseas in the past three years.
PANERAI, Lorenzo, aged 45, has been our Group’s Leather Goods Industrial Division
Director since July 2008. He is primarily responsible for the manufacturing of ourGroup’s leather goods collection. Mr. Panerai joined our Group in 2001 and undertook
managerial roles in the planning and production of leather goods for the Prada and Miu
Miu brands. Mr. Panerai obtained a degree in Electronic Engineering from the University
of Florence in 1996. In 1996 he joined the Marketing and Commercial Division of FiatGroup Automobiles S.p.A., where he also worked in the Purchasing Department. Hislast role at Fiat was Plant Operational Manager of the body assembly unit. Mr. Panerai
is not and has not been a director of any other listed companies in Hong Kong oroverseas in the past three years.
LUPAS, Domnica Alexandra, aged 39, has been appointed General Manager of Prada
Germany in March 2012. She is responsible for overseeing the commercial operationsof the Group in Germany and northern and eastern Europe. Ms. Lupas joined our Groupin 1997 and has covered different managerial roles within the Group. In 2005, she
was appointed as Administration, Finance and Control European Retail Subsidiaries
Director. Ms. Lupas obtained a degree in International Business Administration fromthe European Business School in London in 1996. Ms. Lupas is not and has not been a
director of any other listed companies in Hong Kong or overseas in the past three years.
SESIA, Davide, aged 44, has been the President of Prada Japan since February 2004.
He is responsible for overseeing the Group operations in Japan, Guam and Saipan. Mr.
Sesia obtained a degree in Business Administration from the University Cattolica delSacro Cuore of Milan in 1991. He joined our Group in 2000 as Representative Director
and Chief Financial Officer of Prada Japan. Prior to that, he was Chief Financial Officer
and Director of Benetton Japan and Managing Director of Benetton Korea Ltd (1997- 2000). He started his career in Japan working for several companies from 1992. Mr.
Sesia is not and has not been a director of any other listed companies in Hong Kong oroverseas in the past three years.
SUTTER, Stefano, aged 38, joined the Group in December 2010 as General Manager
of Prada Retail UK. Mr. Sutter is responsible for overseeing the Group operations in
United Kingdom and Ireland. Mr. Sutter obtained a master in Business Administrationfrom Columbia Business School, New York, in 2005 and graduated “cum laude” (withpraise) in Business Administration at University of Genoa in 1998. Prior to joining ourGroup, he worked for INDITEX Group covering different managerial roles including as
General Manager of Zara Canada (2006 to 2007), Managing Director of Inditex UK and
Ireland (2007 to 2009) and, then, Managing Director of Inditex Austria, Hungary, Czech
Republic and Slovakia. Prior to that, he spent five years working for Bain & Company
Inc.. Mr. Sutter is not and has not been a director of any other listed companies in Hong
Kong or overseas in the past three years.
TOLOMELLI, Armando, aged 46, has been appointed Chief Executive Officer of Prada
Asia Pacific in March 2012. Mr. Tolomelli is primarily responsible for overseeing theGroup operations in Asia Pacific region. Prior to this appointment Mr. Tolomelli has
been our Group Controlling Director since joining our Group in July 2005. Prior to joining
our Group, he spent fourteen years working for the Barilla Group, covering various
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PRADA Group

Annual Report 2011 - Directors and Senior Management

roles including Financing Office Manager, Divisional Business Controller, BusinessController for South Eastern Europe, Group Controller of Wasa in Stockholm, Sweden(1999 to 2001), Finance Manager International Business Development of the Bakery
Division (2001 to 2001) and Corporate Controlling Director of Kamps in Düsseldorf,
Germany (2002 to 2005). Mr. Tolomelli is not and has not been a director of any otherlisted companies in Hong Kong or overseas in the past three years.
ZAMBERNARDI, Fabio, aged 49, has been our Design Director for the Miu Miu andPrada brands since November 2002. He is responsible for the collection concept
development, overseeing all the strategic activities related to the coherence between
image and product development of the collection, as well as supporting the strategic
brands image communication. He has been collaborating with the Group since 1981.
He was promoted Shoe Design Director in 1997 and Design Fashion Coordinator in
1999. Mr. Zambernardi is not and has not been a director of any other listed companies
in Hong Kong or overseas in the past three years.

PRADA Group

Annual Report 2011 - Directors and Senior Management

51

Company Secretary
ALBANO, Patrizia, aged 58, is our joint company secretary. Ms. Patrizia Albano has
been the Group Head of Corporate Affairs of our Company since September 2008 andis responsible for monitoring general legal compliance. Ms. Albano obtained a degreein Law from the University La Sapienza of Rome in 1979 and was admitted to the
Bar Association (Ordine degli Avvocati di Roma) in 2006. She started her career as an
in-house legal advisor at the Istituto Mobiliare Italiano S.p.A. from 1981 to 1999 andthen worked as Head of the Large Corporate Division central legal office of San Paolo
IMI S.p.A. until 2000. She has also worked as General Counsel of IBI (now Alerion
Clean Power S.p.A.), and as Company Secretary of Risanamento Napoli S.p.A. andFincasa S.p.A., both of which are listed companies on the Italian Stock Exchange.
In 2002, Ms. Albano became the Company Secretary of a private company active inservices provision, property and facility management and renewable energy. She thenworked at an Italian law firm, Studio Legale Carbonetti, from 2003 to 2007, and also
founded her own private practice law firm, Albano Baldassari, in 2007 before joining
our Company in 2008. Ms. Albano is the wife of Mr. Carlo Mazzi, the Deputy Chairmanof our Company. Ms. Albano is not and has not been a director of any other listedcompanies in Hong Kong or overseas in the past three years.
YUEN, Ying-kwai, aged 45, is our joint company secretary. She is responsible forcorporate secretarial duties. Ms. Yuen joined our Group and was appointed jointcompany secretary in May 2011. Ms. Yuen has over 20 years of working experiencein the corporate secretariat and compliance areas of sizeable organizations andprofessional firms. Prior to joining our Group, she worked with Li & Fung group for 15
years. She first joined in 1995 as company secretary of Li & Fung (1937) Limited until
1999 when she was transferred to Li & Fung Distribution (Management) Limited andappointed as group company secretary in 2000. Ms. Yuen was the company secretary ofIntegrated Distribution Services Group Limited (member of Li & Fung Group) between
2004 and 2011. Ms. Yuen received an Honours Diploma in Company Secretaryshipand Administration from Lingnan College (now known as Lingnan University) in 1988.
Ms. Yuen holds a Master degree in Business Administration (Executive) from City
University of Hong Kong, awarded in 2003. Ms. Yuen has been a fellow of both theHong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries
and Administrators, UK since 2001. Ms. Yuen is not and has not been a director of any
other listed companies in Hong Kong or overseas in the past three years.

52

PRADA Group

Annual Report 2011 - Directors and Senior Management

Directors’ Report

PRADA Group

Annual Report 2011 - Directors' Report53Principal activities
PRADA S.p.A. (the “Company”), together with its subsidiaries (jointly the “Group”), is aleading global luxury group in the design, production and distribution of high-end leather
goods, handbags, footwear, apparel, accessories, eyewear and fragrances. Through its
directly-operated-stores network (“DOS”) and a selected number of wholesalers, theGroup operates in all major international markets.
The Company is a joint-stock company, incorporated and domiciled in Italy. Its registeredoffice is in Via A. Fogazzaro 28, Milan, Italy.
An analysis of the Group’s performance for the year ended January 31, 2012 byoperating segments are set out in the Financial Review and note 8 to the Consolidated
Financial Statements.
Results and dividends
The results of the Group for the year ended January 31, 2012 are set out in theConsolidated Income Statements.
The Board recommends a final dividend of 5 Euro/cents per share. The payments shallbe made in Euro to the shareholders recorded in the Company’s shareholders register
held at the Company’s registered office in Milan (Italy) and in Hong Kong dollars to theshareholders recorded in the shareholders register held in Hong Kong. The relevant
exchange rate will be the opening buying T/T rate of Hong Kong dollars to Euros asannounced by the Hong Kong Association of Banks (www.hkab.org.hk) on the day of
approval of the final dividend by the shareholders.
The final dividend will be subject to approval by the shareholders at the forthcoming
annual general meeting of the Company to be held on Tuesday, May 22, 2012.
In order to qualify for attending and voting at the annual general meeting of theCompany, 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, not later than 4:30 p.m. on Thursday, May 17, 2012. The
shareholders register of the Company will be closed from Friday, May 18, 2012 toTuesday, May 22, 2012, both days inclusive, during which no share transfer can beregistered. The shareholders registered on the Company’s shareholder register on
Tuesday, May 22, 2012 will be allowed to attend and vote at the annual general meetingof the Company.
Subject to the shareholders’ approving the recommended final dividend, such dividend
will be payable on or about Tuesday, July 3, 2012.
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, atShops 1712-16, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong
Kong, not later than 4:30 p.m. on Monday, May 28, 2012. The shareholders registerof the Company will be closed from Tuesday, May 29, 2012 to Wednesday, May 30,
2012, both days inclusive, during which no share transfer can be registered. The final
dividend will be paid to shareholders recorded on the Company’s shareholder registeron Wednesday, May 30, 2012.
Dividend will be paid net of 20% Italian withholding tax. Further details on withholding
tax have been already reported in the Tax Booklet available on the Company’s website
at www.pradagroup.com.

54

PRADA Group

Annual Report 2011 - Directors' ReportFive-year financial summary
The five year financial summary of the Group is set out in note 41 to the Consolidated
Financial Statements.
Reserves
Details of the movements in the reserves of the Group and the Company during theyear are set out in the Consolidated Statement of Changes in Shareholders’ Equity andin the Statement of Changes in PRADA S.p.A. Equity.
Distributable reserves
As at January 31, 2012, the Company’s reserves available for distribution toshareholders in accordance with the Company’s by-laws amounted to approximately
Euro 645,677,000.
Property, plant and equipment
Details of the movements in the property, plant and equipment of the Group during
the year ended January 31, 2012 are set out in note 16 to the Consolidated Financial
Statements.
Pre-emptive rights
There is no provision for pre-emptive rights under the Company’s by-laws.
Purchase, sale or redemption of the Company’s listed securities
Neither the Company nor any of its subsidiaries has purchased, sold or redeemed anyof the Company’s listed securities during the period from its listing date on June 24,2011 to January 31, 2012 (the “Reviewed Period”).
Subsidiaries
Details of the Company’s subsidiaries as at January 31, 2012 are set out in note 42 to
the Consolidated Financial Statements.
Directors
The Directors of the Company during the Reviewed Period and up to the date of thisannual report are:Executive Directors
Ms. Miuccia PRADA BIANCHI (Chairperson)
Mr. Patrizio BERTELLI (Chief Executive Officer)
Mr. Carlo MAZZI (Deputy Chairman)
Mr. Donatello GALLI (Chief Financial Officer)
Non-Executive Directors
Mr. Marco SALOMONIMr. Gaetano MICCICHÉ
Independent Non-Executive Directors
Mr. Gian Franco Oliviero MATTEIMr. Giancarlo FORESTIERI
Mr. Sing Cheong LIU

PRADA Group

Annual Report 2011 - Directors' Report55

In accordance with the by-laws of the Company, the Directors are appointed by theshareholders’ general meeting for a period of up to three financial years. The term lapses
on the date of the shareholders’ meeting called to approve the financial statements forthe last year of their office. They may be reappointed.
At the ordinary shareholders’ meeting of the Company held on May 28, 2009, theBoard of Directors has been appointed for a term of three financial years. The Board’s
mandate will therefore expire at the shareholders’ meeting to be convened for theapproval of the financial statements of the Company for the year ended January 31,
2012. Accordingly, the term of all Directors will expire at the forthcoming annual general
meeting. They may be reappointed.
Biographical information of Directors
Brief biographical information of the Directors of the Company are set out in the“Directors and Senior Management” section of this annual report.
Directors’ service contracts
None of the Directors of the Company has or is proposed to have a service contract withany member of the Group that is not determinable within one year without payment ofcompensation, other than statutory compensation.
Directors’ interests in competing business
During the Reviewed Period, none of the Directors of the Company, apart from Mr.
Marco Salomoni, had any interests in a business which competes, either directly, or
indirectly, with the business of the Company and the Group.
Mr. Marco Salomoni is currently a director of GIVI Holding S.p.A. (holding company of
the Gianni Versace S.p.A.) and of Aeffe S.p.A., a company listed on the Italian Stock
Exchange.
Directors’ interests and short positions in securities
As at January 31, 2012, the Directors of the Company and their associates had thefollowing interests in the shares, underlying shares and debentures of the Company
and its associated corporations (within the meaning of Part XV of the Securities andFutures Ordinance (“SFO”)) as recorded in the register required to be kept under Section
352 of the SFO or as otherwise notiﬁed to the Company and The Stock Exchange ofHong Kong Limited (the “Stock Exchange”) pursuant to the Model Code for Securities
Transactions by Directors of Listed Companies (“Model Code”) contained in Appendix
10 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (the “Listing Rules”):(a) Long positions in shares and underlying shares of the Company
Name of Director

Number of Shares

Nature of Interest

Approximate Percentage
of Issued Capital

Ms. Miuccia Prada Bianchi

2,046,470,760(Notes 1 and 2)

Interest of Controlled corporation

80%

Mr. Patrizio Bertelli

2,046,470,760(Notes 1 and 3)

Interest of Controlled corporation

80%

Notes
1. Prada Holding B.V. owns approximately 80% of the issued capital in the Company
and is therefore the holding company of the Company.
2. The entire issued share capital in Prada Holding B.V. is held by Gipafin S.à.r.l.. Ms.
Miuccia Prada Bianchi, owns, indirectly through Ludo S.A. 53.8%* of the capitalin Bellatrix S.à.r.l., which in turn owns 65% (or the entire Class B of 1,950 shares)

56

PRADA Group

Annual Report 2011 - Directors' Report

of the capital in Gipafin S.à.r.l.. Ms. Prada Bianchi is therefore deemed under the
SFO to be interested in all the shares registered in the name of Prada Holding B.V..
Ms. Prada Bianchi is also a director of Ludo S.A..
3. Mr. Patrizio Bertelli owns, indirectly through companies owned by him (PaBe1
S.A., PaBe2 S.A., PaBe3 S.A. and PaBe4 S.A.), 35% (or the entire Class A of 1,050
shares) of the capital in Gipafin S.à.r.l.. Mr. Bertelli is therefore deemed under the
SFO to be interested in all the shares registered in the name of Prada Holding B.V..
* Ludo S.A.’s effective shareholding of 53.8% in Bellatrix S.à.r.l. comprises 42,690
shares (being the entire Class A shares) and 495,770 shares (being approximately
51.79% of the Class B shares of 957,310 shares).

The interests of Ms. Miuccia Prada Bianchi and Mr. Patrizio Bertelli in the shares of theCompany as at January 31, 2012 are summarized in the following chart:

Patrizio
Bertelli

M iuccia Prada
BianchiLudo S.A.
53.8%

PaBe1 S.A.
17.6%

PaBe2 S.A.
5.8%

PaBe3 S.A.
5.8%

PaBe4 S.A.
5.8%

Bellatrix S.à.r.l.
65%

Gipafin S.à.r.l.
100%

Prada
Holding B.V.
80%

Prada S.p.A.

PRADA Group

Annual Report 2011 - Directors' Report57

(b) Long positions in shares and underlying shares of associated corporations:
Name ofDirector

Name of associatedcorporations

Class of shares

Numberof shares

Nature of Interests

Approximate
percentage ofInterests

Ms. Miuccia
Prada Bianchi

Prada Holding B.V.

Common Shares

1,001

Controlled Corporation

100%

PRADA Arte B.V.

Registered Shares

180

As above100%

Prapar Corporation

Common Shares

50

As above

100%

EXHL Italia S.r.l.

Participation Quotas(Euro)

15,000As above100%

Mr. Patrizio
Bertelli

EXHL Japan Co. Ltd.

Ordinary Shares

200

As above

100%

I.P.I. (21) UK Ltd

Ordinary Shares

750,000

As above

100%

MFH Munich Fashion
Holding GmbH

Registered Share1

As above

100%

PAC S.r.l.
(in liquidation)

Participation Quotas(Euro)

30,600As above100%

Gipafin S.à.r.l.

Class B Shares

1,950

As above100%

Bellatrix S.à.r.l.

Class A Shares

42,690As above100%

Bellatrix S.à.r.l.

Class B Shares

495,770

As above51.79%

Ludo S.A.

Ordinary Shares

100,310

Beneficial Owner

100%

Arte One B.V.

Ordinary Shares

180

Controlled Corporation

100%

PRA 1 S.r.l.

Participation Quotas(Euro)

10,000As above100%

Prada Holding B.V.

Common Shares

1,001

Controlled corporation

100%

Prapar Corporation

Common Shares

50

As above

100%

EXHL Italia S.r.l.

Participation Quotas(Euro)

15,000As above

100%

EXHL Japan Co. Ltd.

Ordinary Shares

200

As above

100%

I.P.I. (21) UK Ltd

Ordinary Shares

750,000

As above

100%

MFH Munich Fashion
Holding GmbH

Registered Share1

As above

100%

PAC S.r.l.
(in liquidation)

Participation Quotas(Euro)

30,600As above100%

Gipafin S.à.r.l.

Class A Shares

1,050

As above

100%

Save as disclosed above, as at January 31, 2012, none of the Directors of the Company
or their associates had any interest or short position in the shares, underlying shares anddebentures of the Company or any of its associated corporations (within the meaningof Part XV of the SFO) as recorded in the register required to be kept under Section 352
of the SFO or as otherwise notiﬁed to the Company and the Stock Exchange pursuant
to the Model Code.

58

PRADA Group

Annual Report 2011 - Directors' ReportSubstantial shareholders’ interests and short positions in securities
As at January 31, 2012, other than the interests of the Directors of the Company as
disclosed above, the following persons had interests or short positions in the sharesor underlying shares of the Company which fall to be disclosed to the Company under
Section 336 of the SFO:
Capacity

Number of Shares

Approximate percentage
of issued capital

Prada Holding B.V.

Legal and beneficial owner

2,046,470,76080%Gipafin S.à.r.l.

Interest of controlled
corporation

2,046,470,760

80%Bellatrix S.à.r.l.

Interest of controlled
corporation

2,046,470,76080%

Ludo S.A.

Interest of controlled
corporation

2,046,470,76080%

Name of Shareholder

Note:
Prada Holding B.V. owns approximately 80% of the issued capital in the Company. As
Ludo S.A. owns 53.8% of Bellatrix S.à.r.l. which in turn owns 65% of Gipaﬁn S.à.r.l(Giapﬁn S.à.r.l. owns the entire issued capital in Prada Holding B.V.), Gipaﬁn S.à.r.l.,
Bellatrix S.à.r.l. and Ludo S.A. were all deemed to be interested in the 2,046,470,760
shares held by Prada Holding B.V..
Share capital
Details of the movements in the share capital in the Company during the year ended
January 31, 2012 are set out in the Consolidated Statement of Changes in Shareholders’Equity and note 31 to the Consolidated Financial Statements.
Directors’ interests in contracts
Save for those contracts disclosed under the section on Connected Transactions below
and in note 39 to the Consolidated Financial Statements, in the opinion of the Directors,
no contract of signiﬁcance with the Company or the Group subsists at the end of theyear ended January 31, 2012 or subsisted during the Reviewed Period in relation to theCompany’s business and in which a Director’s interest is or was material.
During the Reviewed Period there were no arrangements to which the Company or
any company's subsidiary or holding company or a subsidiary of the Company's holding
company is a party, being arrangements whose objects are, or one of whose objects
is, to enable Directors of the Company to acquire beneﬁts by means of the acquisitionof shares in, or debentures of, the Company or any other body corporate.
At no time during the Reviewed Period the Company issued any debentures.

PRADA Group

Annual Report 2011 - Directors' Report59Connected transactions(A) Continuing Connected Transactions
During the year ended January 31, 2012, the Group had the following non-exempt
continuing connected transactions, details of which were disclosed in the Prospectusof the Company dated June 13, 2011:(a) Franchise Agreement – Prada Milan Stores
As disclosed in the Prospectus dated June 13, 2011, the Company originated asa family business in 1913 in Milan and has continued as such since Ms. Miuccia
Prada Bianchi and Mr. Patrizio Bertelli began their cooperation in the late 1970s.
Therefore, the Prada stores in Milan have historically been operated by companies
that are connected to the Prada family.
The Company’s subsidiary, Prada S.A., currently owns the rights to the Prada
trademark and, as a licensor, licenses the use of the Prada trademark to theCompany as a licensee.
Against such historical background, on January 28, 2009, the Company enteredinto a franchise agreement in relation to ﬁve Prada stores based in Milan (the“Franchise Agreement”) with ﬁve companies that operate the ﬁve stores andtheir controlling entity (the “Franchisees”), which is a company controlled by the
Prada family. The Franchise Agreement will expire on January 31, 2024 and will be
automatically extended for a further 15-year term provided that (i) the Franchisees
have met the minimum annual budget for the initial 15-year term; or (ii) the
cumulative amount of the purchase made by the Franchisees for the entire initial
15-year term is at least equal to the sum of the minimum annual budget for eachof the 15 years.
(b) Consulting Agreement with Ms. Miuccia Prada Bianchi
Ms. Miuccia Prada Bianchi, the Chairperson of the Company, has entered into a
consultancy agreement with effect from February 1, 2007 for a term of ﬁve years
as a strategic consultant for: (i) identifying and elaborating creative design concepts
and styles; (ii) coordinating and supervising collections development and all of thededicated structures and functions; (iii) deﬁning concepts for fashion shows andsupervising their execution and (iv) setting guidelines for brands communication
and advertising campaigns and supervising related activities.
The renewal of the consultancy agreement with Ms. Miuccia Prada Bianchi wasapproved by the Company’s Board on the meeting held on March 29, 2012.
(c) Consulting Agreement with Mr. Patrizio Bertelli
Mr. Patrizio Bertelli, the Chief Executive Ofﬁcer of the Company, has entered into
a consultancy agreement on February 1, 2007 with the Company for a term of ﬁve
years as a strategic consultant for: (i) deﬁning the collections development andindustrialization processes; (ii) developing the leather goods and shoes collection
concept and supervising the related structures and (iii) selecting locations for the
new DOS and refurbishment of existing stores, conceiving store concepts anddeﬁning guidelines and coordination of related project development activities.
The renewal of the consultancy agreement with Mr. Patrizio Bertelli was approvedby the Company’s Board on the meeting held on March 29, 2012.

60

PRADA Group

Annual Report 2011 - Directors' ReportBelow is a table setting out the aggregate value for each of the non-exempt continuingconnected transactions for the year ended January 31, 2012:
Euro in million(a) Franchise Agreement – Prada Milan Stores
Revenues from sales of goods

39.3

Revenues from services

2.4Royalties received

1.1

Purchase of goods by the Company(2.8)

Net transaction amount

40.0(b) Consulting Agreement with Ms. Miuccia Prada Bianchi
Annual amount of remuneration paid to Ms. Miuccia Prada Bianchi

8.7(c) Consulting Agreement with Mr. Patrizio Bertelli
Annual amount of remuneration paid to Mr. Patrizio Bertelli

9.0

The Independent Non-executive Directors have reviewed the above continuingconnected transactions and conﬁrmed that these have been entered into:(i)in the ordinary and usual course of business of the Company;(ii) either on normal commercial terms or, on terms no less favourable to the Company
than terms available to or from independent third parties; and(iii) in accordance with the relevant agreement governing them on terms that are
fair and reasonable and in the interests of the shareholders of the Company as awhole.
The Directors of the Company have engaged the auditors to review the above
continuing connected transactions. The auditors have, based on the work performed,
provided a letter to the Directors of the Company (with a copy provided to the Stock
Exchange) to conﬁrm that the above continuing connected transactions:(i)have been approved by the Company’s Board of Directors;(ii) are in accordance with the pricing policies of the Group;(iii) have been entered into in accordance with the terms of the relevant agreements
governing such transactions; and(iv) have not exceeded the relevant annual limits set out in the Prospectus of theCompany dated June 13, 2011.
(B) Connected Transaction
On January 10, 2012, Prada S.A. a wholly-owned subsidiary of the Company, enteredinto a sponsorship agreement with certain companies which are indirectly owned
by Mr. Patrizio Bertelli, the Chief Executive Director, an Executive Director and asubstantial shareholder (as deﬁned in the Listing Rules) of the Company, in relation to
the sponsorship for the participation of the Luna Rossa yacht in the XXXIV edition of
the America’s Cup.
The total amount of the sponsorship under the sponsorship agreement is Euro 40
million and will be paid in installments over the period from January 2012 to September
2013. The nature and reasons for the above connected transaction have been disclosed
in the Company’s announcement dated January 10, 2012.

PRADA Group

Annual Report 2011 - Directors' Report61

Bank loans and other borrowings
Details of the Group’s bank loans and other borrowings as at January 31, 2012 are set
out in notes 20 and 27 to the Consolidated Financial Statements.
Major customers and suppliers
The nature of the Group’s activities are such that the percentage of sales or purchases
attributable to the Group’s ﬁve largest customers or suppliers is signiﬁcantly less than
30% of the total and the Directors do not consider any one customer or supplier to beinﬂuential to the Group.
Retirement benefit schemes
Details of the retirement beneﬁt schemes of the Group are set out in note 28 to theConsolidated Financial Statements.
Model Code for securities transactions
The Company has adopted the Model Code. Having made speciﬁc enquiries of all
Directors, all Directors have conﬁrmed that they have complied with the required
standard of the Model Code throughout the Reviewed Period.
Post balance sheet events – if applicable
Details of signiﬁcant events occurring after balance sheet date are set out in note 43
to the Consolidated Financial Statements.
Commitments and contingencies
Details of capital commitments and contingent liabilities of the Group as at January
31, 2012 are set out in notes 40 and 29 respectively to the Consolidated Financial
Statements.
Sufficiency of public float
The Stock Exchange granted to the Company at the time of its listing a waiver from strict
compliance with Rule 8.08(1) of the Listing Rules (“Public Float Waiver”). Pursuant to
the Public Float Waiver, the Company must at all times maintain a minimum public
ﬂoat of 20%. Based on the information that is publicly available to the Company andwithin the knowledge of the Directors, the Company has maintained the amount ofpublic ﬂoat as approved by the Hong Kong Stock Exchange and as permitted under the
Listing Rules as at the date of this annual report.
Directors’ responsibilities for the financial statements
The Directors are responsible for the preparation of Consolidated Financial Statementsof the Company for the year ended January 31, 2012 with a view to ensuring suchﬁnancial statements give a true and fair view of the state of affairs of the Group. In
preparing these ﬁnancial statements, the Directors have selected suitable accounting
policies, made judgments and estimates that are prudent and reasonable, and preparedthe ﬁnancial statements on a going concern basis and in accordance with International
Financial Reporting Standards issued by the International Accounting Standards Board
as adopted by the European Union. The Directors are responsible for keeping properaccounting records for safeguarding the assets of the Company and the Group.

62

PRADA Group

Annual Report 2011 - Directors' ReportAuditors
The Consolidated Financial Statements and Separate Financial Statements of PRADA
S.p.A. were audited by Deloitte & Touche S.p.A.. Under Italian company law, theauditors are appointed every three years by the general shareholders’ meeting of theCompany, on the basis of a proposal from the board of statutory auditors.
At the ordinary shareholders’ meeting of the Company held on April 28, 2010, it was
resolved that the auditors be appointed for a term of three ﬁnancial years. Accordingly,
the auditors’ mandate will expire at the shareholders’ meeting to be convened for theapproval of the ﬁnancial statements of the Company for the year ended January 31,
2013.

By order of the Board

Miuccia Prada Bianchi
Chairperson
March 29, 2012PRADA Group

Annual Report 2011 - Directors' Report

63

64

PRADA Group

Annual Report 2011 - Directors' ReportCorporate Governance

PRADA Group

Annual Report 2011 - Corporate Governance65

Corporate governance practices
The Company is committed to maintaining a high standard of corporate governancepractices 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, toprotect the rights of the Company’s shareholders and to enhance shareholder value.
The corporate governance model adopted by the Company is in compliance withthe applicable regulations in Italy, as well as the principles of the Code on Corporate
Governance Practices (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 on Corporate Governance Practices
The Board has reviewed the Company’s corporate governance practices and is satisﬁedthat the Company’s corporate governance practices have complied with the codeprovisions set out in the Code during the period from the time of its listing on June24, 2011 to January 31, 2012 (the “Reviewed Period”). This Corporate Governance
Report summarises how the Company has applied the principles and implemented thecode provisions contained in the Code throughout 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 inAppendix 10 of the Listing Rules. Speciﬁc written conﬁrmations 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 Group has also adopted written procedures governing securities transactions
carried out by the relevant employees who are likely to be in possession of unpublishedprice-sensitive information of the Group. The terms of these procedures are no lessexacting than the standard set out in the Model Code.
Directors’ interests as at January 31, 2012 in the shares of the Company and its
associated corporations (within the meaning of Part XV of the Securities and Futures
Ordinance), are set out in the Directors’ Report section.
Board of Directors
a. Board Composition
The Board is currently composed of nine Directors, of which four are Executive Directors,
two are Non-executive Directors and three are Independent Non-executive Directors.
All Directors have distinguished themselves in their ﬁeld of expertise and advised theBoard in the area of their specialty, relevant to the Group’s business activities andstrategic development. The biographical details and any relevant relationships between
them are set out in the Directors and Senior Management section.
b. Board Meetings
During the Reviewed Period, the Board held four meetings to discuss the Group’s
overall corporate strategic direction and objectives, as well as to assess its operationaland ﬁnancial performance (including annual budget, interim and quarterly results). The
average attendance rate of the Directors for these four meetings either in person or
through electronic means of communication was 88%.

66

PRADA Group

Annual Report 2011 - Corporate GovernanceMinutes of the Board meetings are kept by the Group Corporate Affairs Director
and Joint Company Secretary, Ms. Patrizia Albano. Minutes of the meetings of theBoard and all the Board Committees are available to any Director for inspection at any
reasonable time by giving reasonable notice.
c. Board Attendance
The details of attendance at Board Meetings and Committee Meetings held during the
Reviewed Period are set out in the following table:
Directors

Board

Audit
Committee

Remuneration
Committee

Executive Directors
Ms. Miuccia PRADA BIANCHI (Chairperson)

2/4

Mr. Patrizio BERTELLI (Chief Executive Officer)

4/4

Mr. Carlo MAZZI (Deputy Chairman)

4/4

Mr. Donatello GALLI (1) (Chief Financial Officer)

4/4

2/2

Non-Executive Directors
Mr. Marco SALOMONI (2)4/4

Mr. Gaetano MICCICHÉ

2/4

2/2

Independent Non-Executive Directors
Mr. Gian Franco Oliviero MATTEI (3)

4/4

2/2

2/2

Mr. Giancarlo FORESTIERI (4)

4/4

2/2

2/2

Mr. Sing Cheong LIU (5)

4/4

2/2

Mr. Antonino PARISI (6)

4/4

2/2

Mr. Riccardo PEROTTA

4/4

Mr. Gianandrea TOFFOLONI

4/4

Statutory Auditors

Date(s) of Meeting

Sept 19, 2011

Sept 19, 2011

Sept 19, 2011

Oct 18, 2011

Nov 29, 2011

Nov 18, 2011

100 %

100%

Nov 29, 2011
Jan 26, 2012

Average Attendance Rate of Directors

88%

Notes:
1: Participated in Audit Committee as non-member
2: Member of Remuneration Committee
3: Chairman of Audit Committee and Remuneration Committee
4: Member of Audit Committee and Remuneration Committee
5: Member of Audit Committee
6: Chairman of Statutory Auditors

Ms. Miuccia Prada Bianchi, the Chairperson of the Company, was absent for two of
the Board Meetings due to prior commitments concerning fashion shows. Attendanceat such events was important for the discharge of her duties to the Company. Prior
to the relevant Board Meetings being held, the Chairperson rendered her views andcomments to the Deputy Chairman, who led the Directors through the agenda of therelevant Board Meetings.
d. Roles and Responsibilities
The Board is vested with full powers for the ordinary and extraordinary managementof the Company. The Board has the power to perform all acts it deems advisablefor the implementation and achievement of the corporate purpose, except for thoseacts reserved by laws or by the By-laws for resolution at a shareholders’ meeting. In
particular, the Board is responsible for setting up the overall strategy as well as reviewing
the operation and ﬁnancial performance of the Company. The Board reserved for its
decision or consideration matters covering overall Group strategy, major acquisitions

PRADA Group

Annual Report 2011 - Corporate Governance67and disposals, annual budgets, annual, interim and quarterly results, approval of majortransactions and other signiﬁcant operational and ﬁnancial matters.
Day-to-day operational responsibilities are speciﬁcally delegated by the Board to
management. Such responsibilities include:UÊthe preparation of annual, interim and quarterly results for the approval of theBoard before publication;UÊ

execution of business strategy and other initiatives adopted by the Board;UÊmonitoring of operating budgets adopted by the Board;UÊ

implementation of adequate systems of internal controls and risk management
procedures; andUÊcompliance with relevant statutory requirements, rules and regulations.

e. Independent Non-executive Directors
The Independent Non-executive Directors of the Company are Mr. Gian Franco
Oliviero Mattei, Mr. Giancarlo Forestieri and Mr. Sing Cheong Liu. Each IndependentNon-executive Director meets the independence guidelines set out in Rule 3.13 of
the Listing Rules and provided to the Company his annual conﬁrmation as to his
independence. None of the Independent Non-executive Directors of the Company
has any business or ﬁnancial interests with the Company or its subsidiaries and they
continue to be considered by the Company to be independent.
f. Liability Insurance for the Directors
The Company has arranged for appropriate liability insurance to indemnify its Directors
for their liabilities arising out of the corporate activities. The insurance coverage isreviewed on an annual basis.
Chairperson and Chief Executive Officer
The Chairperson is Ms. Miuccia Prada Bianchi and the Chief Executive Ofﬁcer is Mr.
Patrizio Bertelli. The role of the Chairperson is separate from that of the Chief Executive
Ofﬁcer. The Chairperson is vested with the power to represent the Company and is
responsible for ensuring that the Board is functioning properly, with good corporate
governance practices and procedures. The Chief Executive Ofﬁcer, supported by the other
Executive Directors and senior management, is responsible for managing the Group’sbusiness, including the implementation of major strategies and other initiatives adopted
by the Board. The Chief Executive Ofﬁcer and the Chairperson are husband and wife.
Appointment of Directors
The Board (including the Non-executive Directors) is appointed by the shareholders’general meeting for a term of up to three ﬁnancial years. The mandate of the Directors(including those elected during the term of the Board, if any) lapses on the date of theshareholders’ meeting called to approve the ﬁnancial statements of the Company forthe third year of the Board’s term.
At the ordinary shareholders’ meeting of the Company held on May 28, 2009, theBoard (including the Non-executive Directors) was appointed for a term of up to threeﬁnancial years. The mandate of all the current Directors (including the Non-executive
Directors) will therefore expire at the shareholders’ meeting to be convened for theapproval of the ﬁnancial statements of the Company for the year ended January 31,
2012.
Under the Company’s By-laws, the Directors may be re-appointed.

68

PRADA Group

Annual Report 2011 - Corporate GovernanceBoard committees
The Board has established the Audit Committee, the Remuneration Committee andthe Nomination Committee. Each is chaired by an Independent Non-executive Director.
The written terms of reference of each Committee are available on the Company’s andStock Exchange’s websites. The terms of reference in respect of each Committee areof no less exacting terms than those set out in the Code.
In addition, the Board has established a Supervisory Body under the Italian Legislative
Decree 231 of 8 June 2001.
a. 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 in discharging
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 viewof the effectiveness of the Company’s ﬁnancial reporting process, internal control andrisk management system, 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.
During the Reviewed Period, the Audit Committee held two meetings (with an averageattendance rate of 100%) to review with senior management and the Group’s internaland external auditors and statutory auditors, the signiﬁcant internal and external audit
ﬁndings and ﬁnancial matters as required under the committee’s terms of reference.
The Audit Committee’s review covers the audit plans and ﬁndings of internal andexternal auditors, internal controls, risk assessment and ﬁnancial reporting matters(including the interim ﬁnancial results as of July 31, 2011 and third quarterly results asof October 31, 2011 before recommending them to the Board for approval).
The Audit Committee has also held a meeting on March 29, 2012 to review the annual
results for the year ended January 31, 2012 before recommending it to the Board forapproval.
External Auditor’s Remuneration
The fees recognized through income statements in the current year in relation to
the audit services provided by Deloitte & Touche S.p.A., the external auditors of theCompany, for the year ended January 31, 2012, are set out below:
Euro in million
Audit fees

1.6

b. Remuneration Committee
The Company has established a Remuneration Committee in compliance with theCode. According to its terms of reference, the primary duties of the Remuneration
Committee are to make recommendations to the Board on the Company’s policy
and structure for the remuneration of Directors and senior management and theestablishment of a formal and transparent procedure for developing policy on such
remuneration. The Remuneration Committee consists of two Independent Nonexecutive Directors, Mr. Gian Franco Oliviero Mattei (Chairman) and Mr. Giancarlo
Forestieri and one Non-executive Director, Mr. Marco Salomoni.
During the Reviewed Period, the Remuneration Committee held two meetings (withattendance rate of 100%) to review the budget for the attribution of speciﬁc beneﬁts
to the management of the Company, a long term incentive plan for the management

PRADA Group

Annual Report 2011 - Corporate Governance69

and the attribution to certain Directors and senior managers of a special bonus relating
to the successful listing of the Company.
Remuneration Policy
The Group’s compensation policy is aimed at attracting, rewarding and protecting theemployees of the Group, who are considered to be the key to the success of thebusiness of the Group. The overall market competitiveness and complexity of theposition of an employee is taken into account during the review of an employee’s basic
salary. The Group has an incentive system that links compensation with the annual
performance of the Company, taking into account the Group’s objectives in net sales,
as well as objectives of each department in the Group.
The Group has adopted cash long term incentive plans for senior managers and asmall group of key employees for retention purposes, under which the beneﬁt of asenior manager or a key employee under the incentive plan would vest subject tohis/her presence in the Company at the end of a three years period. Other incentive
schemes speciﬁc to sales staff are also in place, and technicians of the Group may
receive a collection bonus that is provided to them after the development of a seasonalcollection.
The aggregate remuneration of the Directors of the Company is resolved by theshareholders at general meeting. The remuneration of each Director is then determinedby the Board which receives recommendations from the Remuneration Committee.
Under the current compensation arrangements, the executive Directors receive
compensation in the form of fees, salaries and other beneﬁts, discretionary bonuses
and other incentives, non-monetary beneﬁts and other allowance and contributions
to retirement beneﬁts schemes. The Non-executive Directors (including IndependentNon-executive Directors) receive compensation in the form of fees, salaries andcontributions to retirement beneﬁts scheme, as the case may be. No Director isallowed to approve his/her own remuneration.
c. Nomination Committee
The Company established a separate Nomination Committee on March 29, 2012 tocomply with the new Code on Corporate Governance Practices (to be renamed the
Corporate Governance Code), which will take effect on April 1, 2012. According to
its terms of reference, the primary duties of the Nomination Committee are to makerecommendations 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 also assesses the independence of Independent Nonexecutive Directors. The Nomination Committee consists of two Independent Nonexecutive Directors, Mr. Gian Franco Oliviero Mattei (Chairman) and Mr. Giancarlo
Forestieri and one Non-executive Director, Mr. Marco Salomoni.
d. Supervisory Body
In compliance with Italian Legislative Decree 231 of June 8, 2001, the Company has
established a supervisory body whose primary duty is to ensure the functioning,
effectiveness and enforcement of the Company’s Model of Organization, adopted by
the Company pursuant to the Decree. The supervisory body consists of three members
appointed by the Board selected among qualiﬁed and experienced individuals, including
Non-executive Directors, qualiﬁed auditors, executives or external individuals. The
supervisory body consists of Mr. David Terracina (Chairman), Mr. Franco Bertoli and
Mr. Marco Salomoni.
Board of statutory auditors
Under Italian law, a joint-stock company is required to have a board of statutory auditors,
appointed by the shareholders for a term of three ﬁnancial years, with the authority tosupervise the Company on its compliance with the applicable laws, regulations and the70

PRADA Group

Annual Report 2011 - Corporate Governance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. Riccardo Perotta and Mr. Gianandrea
Toffoloni.
The mandate of the current statutory auditors will expire at the shareholders’ meeting
to be convened for the approval of the ﬁnancial statements of the Company for theyear ended January 31, 2012.
Directors’ responsibility and auditors’ responsibility for financial statement
The Directors are responsible for preparing the Consolidated Financial Statementsof the Company for the year ended January 31, 2012 with a view to ensuring suchﬁnancial statements give a true and fair view of the state of affairs of the Group. In
preparing these ﬁnancial statements, the Directors have selected suitable accounting
policies, made judgments and estimates that are prudent and reasonable. The ﬁnancial
statements have been prepared on a going concern basis and in accordance with
International Financial Reporting Standards issued by the International AccountingStandards Board as adopted by the European Union.
As regards the auditors of the Company, their reporting responsibilities are stated in
the auditors’ report on the ﬁnancial statements.
Internal control
The Board places great importance on maintaining a sound and effective system ofinternal control to safeguard the shareholders’ investment and the Company’s assets.
The Board is also responsible for assessing the overall effectiveness of the internal
control system.
The Internal Audit Department provides an independent review of the adequacy andthe effectiveness of the internal control system. The audit plan is discussed and agreed
every year with the Audit Committee and then submitted to the Board for approval. In
addition to its agreed annual schedule of work, the Internal Audit Department conducts
other special reviews as required.
The Company’s internal control system has been designed to safeguard the assetsof the Group, to maintain proper accounting standards, to ensure that appropriate
authority has been given for the performance of acts by the Company, and to comply
with relevant laws and regulations. During the Reviewed Period, no material irregularity
or weakness was noted within any function or process. The Board, through the Audit
Committee, reviewed and is generally satisﬁed that the internal control system has
functioned effectively and is adequate for the Group as a whole.
Investor relations and communications
The Company endeavours to maintain a high level of transparency in communication
with shareholders and the ﬁnancial community in general. The Company has maintained
regular dialogue and fair disclosure with institutional shareholders, fund managers,
analysts and the ﬁnance media. Management attends investor meetings on a regularbasis and has participated in some investor conferences.
The Company’s corporate website (www.pradagroup.com) facilitates effective
communications with shareholders, investors and other stakeholders, making
corporate information and other relevant ﬁnancial and non-ﬁnancial information
available electronically and on a timely basis. This includes extensive information about
the Group’s performance and activities via the annual report, interim report, press
releases, announcements and presentations.

PRADA Group

Annual Report 2011 - Corporate Governance

71

72

PRADA Group

Annual Report 2011 - Corporate GovernanceConsolidated Financial Statements

PRADA Group

Annual Report 2011 - Consolidated Financial Statements

73

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

Note

January 31
2012

January 31
2011

AssetsCurrent assets
Cash and cash equivalents

9362,284

96,572

Trade receivables, net

10266,404

274,175
280,409

Inventories

11

374,782

Derivative financial instruments - current

12

894

7,379

Receivables and prepayments from parent company - related parties

13

12,86436,317

Other current assets

14

100,275

70,225

Assets held for sale

15

-

4,948

1,117,503

770,025

Total current assets
Non-current assets
Property, plant and equipment

16713,870

536,717

Intangible assets

17

863,526

869,119

Associated undertakings

18

15,631

1,753

Deferred tax assets

37

175,736

141,378

Other non-current assets

19

57,30244,883

Derivative financial instruments - non current

12

-

2,140

Total non-current assets

1,826,065

1,595,990

Total Assets

2,943,568

2,366,015

Liabilities and Shareholders’ equity
Current liabilities
Bank overdrafts and short-term loans

20

165,485

194,240

Payables to parent company - related parties

21

4,361

1,148

Other shareholders’ loans

22

-

581

Trade payables

23

283,538

233,825
107,592

Current tax liabilities

24

117,770

Derivative financial instruments - current

12

15,2005,279

Obligations under finance leases - current

25

1,453

5,019

Other current liabilities

26

Total current liabilities

128,777

111,482

716,584

659,166

303,408

Non-current liabilities
Long-term financial payables

27

178,442

Obligations under finance leases non-current

25

1,100

2,509

Post-employment benefits

28

35,89834,83352,725

Provision for contingencies and commitments

29

56,921

Deferred tax liabilities

37

47,66552,711Other non-current liabilities

30

75,65650,207

Derivative financial instruments non-current

12

Total non-current liabilities

Total Liabilities

318
496,711

1,112,601

1,155,877

Share capital

255,882

250,000

Other reserves

1,152,171

743,543

Translation reserve(17,239)(40,012)Net profit for the year

431,929

250,819

Total Shareholders’ Equity – Group

31

1,822,743

1,204,350

Shareholders’ Equity – Non-controlling interests

32

8,224

5,788

2,943,568

2,366,015

Total Liabilities and Shareholders’ Equity

Net current assets
Total assets less current liabilities

74

335
396,017PRADA Group

Annual Report 2011 - Consolidated Financial Statements

400,919

110,859

2,226,984

1,706,849

Consolidated income statement
Note

January 31
2012%

January 31
2011%

Net revenues

33

2,555,606

100.0%

2,046,651

100.0%

Cost of goods sold34

(727,581)-28.5%(658,763)-32.2%

1,828,025

71.5%

1,387,888

67.8%(1,199,090)-46.9%(969,501)-47.4%

628,935

24.6%

418,387

20.4%(26,027)-1.0%(30,158)-1.5%

602,90823.6%

388,22919.0%(166,483)-6.5%(134,678)-6.6%

436,42517.1%

253,551

12.4%

-

-

-

-

436,42517.1%

253,551

12.4%

-

-

-

-

4,496

0.2%

2,732

0.1%

4,496

0.2%

2,732

0.1%

(amounts in thousands of Euro)

Gross margin

Operating expenses

35

EBIT

Interest and other financial income/(expenses), net

36

Income before taxes

Taxation

37

Net income for the year from continuing operations

Net income for the year from discontinued operations

Net income for the year

Net income from discontinued operations –non-controlling interests
Net income from continuing operations –non-controlling interests
Net income – non-controlling interests

Net income from discontinued operations – Group

32

-

-

-

-

Net income from continuing operations – Group

431,92916.9%

250,819

12.3%

Net income – Group

431,92916.9%

250,819

12.3%

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

PRADA Group

0.170

Annual Report 2011 - Consolidated Financial Statements

0.100

75

Consolidated statement of cash flows
January 31
2012

January 31
2011

Income before taxation from continuing operations

602,908388,229

Total income before taxation

602,908388,229

126,302

111,455(amounts in thousands of Euro)

Income Statement adjustments
Depreciation and amortization from continuing operations
Impairment of property, plant and equipment and intangible assets

4,015

6,089

Financial (income) expenses

28,87823,528Other non-monetary charges

14,352

26,837

Balance Sheet changes
Other non-current assets and liabilities(13,423)(9,950)Trade receivables, net

13,824(46,052)

Inventories, net(86,338)(46,377)

Trade payables

46,04536,868Other current assets and liabilities(56,985)(9,937)

Cash flows from operating activities

679,578

480,690

Interest paid, net(16,871)(22,811)

Taxes paid

(182,753)(90,167)

Net cash flows from operating activities

479,954367,712Purchases of property, plant and equipment and intangible assets(248,619)(187,606)

Disposals of intangible assets
Acquisition of consolidated investments from third parties
Disposal of investments held for sale--

(4,000)3,628-

Acquisition of investments(13,956)-

Cash flows generated (utilized) by investing activities(257,147)(191,606)

Dividends paid to shareholders of PRADA spa(2,482)(58,852)

Dividends paid to non-controlling shareholders(3,886)(530)(118,141)(179,702)

Repayment of loans to other shareholders(215)(35,665)

New long-term borrowings arranged

9,069

307,293

Change in short-term borrowings – third parties(38,616)(201,810)

Repayment of long-term borrowings(14,710)-

New loans from related companies

2,808

-

Share capital increases by subsidiary companies

1,412

-

Repayment of short term portion of long term borrowings - third parties

76

1,800

Share capital increase by PRADA spa

205,171-

Cash flows generated (utilized) by financing activities

40,410(169,266)

Change in cash and cash equivalents, net of bank overdrafts

263,217

6,840

Foreign exchange differences

10,8393,463

Opening cash and cash equivalents, net of bank overdraft

79,49869,195

Closing cash and cash equivalents, net of bank overdraft

353,554

79,498Cash and cash equivalents

362,284

96,572

Bank overdraft(8,730)(17,074)

Closing cash and cash equivalents, net of bank overdraft

353,554

79,498PRADA Group

Annual Report 2011 - Consolidated Financial Statements

Statement of changes in consolidated shareholders’ equity(amounts in thousands of Euro, except for number of shares)(amounts in thousandsof Euro)Number ofsharesShare
CapitalSharepremium
reserve

Translation
reserve

Other
reserves

Balance at February 1, 2010

250,000,000

250,000

209,298(45,671)534,113100,163

Allocation of 2009 net profit

-

-

-

-

100,163(100,163)-

Dividends

-

-

-

-

(111,000)-(111,000)

Other movements

-

-

-

-

(4)

-

(4)

Transactions with noncontrolling shareholders

-

-

-

-

1,134

-

1,134

Comprehensive income forthe year

-

-

-

5,659

9,839

250,819

266,317

Balance at January 31, 2011

250,000,000

250,000

209,298(40,012)534,245

250,819

1,204,350

Allocation of 2010 net profit

-

-

-

-

250,819(250,819)-

Conversion of shares fromEuro 1.0 to Euro 0.1

Net Shareholders’profit Equity - Group

1,047,903

2,500,000,000

-

-

-

-

-

-

58,824,000

5,882

200,749---

206,631

Dividends

-

-

-

-

(35,000)-(35,000)

Comprehensive income forthe year---

22,773(7,940)431,929446,762

Balance at January 31, 2012

2,558,824,000

255,882

410,047(17,239)

742,124

431,929

1,822,743

Issue of new shares

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 (Note 38).
Statement of consolidated comprehensive income
January 31
2012

January 31
2011

Net income for the period – Consolidated

436,425

253,551

Change in Translation reserve

23,204

5,608(amounts in thousands of Euro)Tax impact--

Change in Translation reserve less tax impact

23,204

5,608

Change in Cash Flow Hedge reserve(10,432)

8,814

Tax impact

2,795(2,456)

Change in Cash Flow Hedge reserve less tax impact(7,637)

6,358

Change in Actuarial reserve

(705)

4,553

Tax impact

443(1,058)Change in Actuarial reserve less tax impact

(262)

3,495

Change in Fair Value reserve

(77)

-

Tax impact

19

Change in Fair Value reserve less tax impact

(58)

-

451,672

269,012

Consolidated comprehensive income for the period

Comprehensive income for the period – Non-controlling Interests
Comprehensive income for the period - Group

4,910

2,695

446,762

266,317

The accounting policies and the following notes constitute an integral part of theConsolidated Financial Statements.
PRADA Group

Annual Report 2011 - Consolidated Financial Statements

77

78

PRADA Group

Annual Report 2011 - Consolidated Financial Statements

Financial Statements of PRADA spa

PRADA Group

Annual Report 2011 - Financial Statements of PRADA spa

79

PRADA spa Statement of financial position(amounts in thousands of Euro)

January 31
2012

January 31
2011

AssetsCurrent assets
Cash and cash equivalents

114,5873,686

Trade receivables, net

539,783

478,899

Inventories

185,857

130,145

Derivative financial instruments

894

7,368

Receivables from parent company, subsidiaries, associates and related parties

203,128

186,423

Other current assets

45,57434,088Assets held for sale

-

4,948

Total current assets

1,089,823

845,557

Property, plant and equipment

218,972

166,352

Intangible assets

93,926

91,634

Associated undertakings

828,927825,230

Deferred tax assets

32,29530,320

Other non-current assets

1,752

1,228

-

2,140

Total non-current assets

1,175,872

1,116,904

Total Assets

2,265,695

1,962,461

Bank overdrafts and short-term loans

112,470

149,956

Payables to parent company, subsidiaries, associates and related parties

286,517297,339

Trade payables

345,785309,929

Current tax liabilities

42,32542,889Derivative financial instruments

12,811

4,883

Obligations under financial leases

1,002

2,819

Other current liabilities

64,33247,477

Total current liabilities

865,242855,292

134,902

233,694

Non-current assets

Derivative financial instruments - non current

Liabilities and Shareholders' equity
Current liabilities

Non-current liabilities
Long-term debt, net of current portion
Obligations under financial leases

1,081

2,089

Post-employment benefits

17,77820,400

Provisions

23,20428,906

Deferred tax liabilities

9,492

12,261Other non-current liabilities

1,411

737

Derivative financial instruments - non current

335

30

188,203

298,117

Total Liabilities

1,053,445

1,153,409

Share capital

255,882

250,000

Other reserves

717,369

436,276

Net income of the year

238,999

122,776

Shareholders' equity

1,212,250

809,052

Total Liabilities & Shareholders’ Equity

2,265,695

1,962,461

Total non-current liabilities

80

PRADA Group

Annual Report 2011 - Financial Statements of PRADA spa

PRADA spa Income statement
January 31
2012

January 31
2011

Net revenues

1,501,789

1,215,911

Cost of goods sold(717,728)(645,586)

Gross Margin

784,061

570,325

Selling, general and administrative expenses(446,249)(362,071)

6,557

4,334

Income before tax

344,369

212,588

Income taxes(105,370)(89,812)Net income for the year

238,999

122,776

January 31
2012

January 31
2011

Net income for the year

238,999

122,776

Gains/(losses) recognized in cash flow hedge reserve(amounts in thousands of Euro)Interest and other financial income (expenses), net

PRADA spa Statement of comprehensive income(amounts in thousands of Euro)(10,938)

9,243

Tax effect

3,008(2,635)

Change in Cash Flow Hedge reserve after tax effect(7,930)

6,608

498

492

Net gains (losses) recognized directly in equity(7,432)

7,100

Total comprehensive income

231,567

129,876

Gains/ (losses) recognized in actuarial gains/(losses) reserve

PRADA Group

Annual Report 2011 - Financial Statements of PRADA spa

81

PRADA spa Statement of cash flows(amounts in thousands of Euro)

January 31
2012

January 31
2011

344,369

212,588

20,314

20,710Cash flows generated from operations:
Income before taxation
Adjustments for:
Depreciation and amortization
Impairment of fixed assets
Financial (income) expenses

141(20,358)(15,756)

Losses/(gains) on disposal of fixed assets

(431)

(99)

Impairment of investments

3,708

7,744

Other provisions and non-monetary changes

9,278

36,180

Other non-current assets and liabilities(8,556)(2,178)Trade receivables, net(59,210)(19,252)

Inventories, net(55,712)(15,120)

Other current assets and liabilities(7,129)(27,592)

Trade payables

35,322

49,685

Cash flows generated from operations

261,609

246,911

Interest paid

(10,224)(17,643)

Income taxes paid

(107,780)(45,382)

Net cash flows generated from operations

143,605

183,886

Purchase of property, plant and equipment(62,704)(42,473)

Disposal of property, plant and equipment

91

232

(5,503)(4,488)Cash flow generated (used) from investing activities:

Purchase of intangible assets
Disposal of intangible assets

1,800

-

Investments in subsidiaries(7,397)(4,880)

Disposal of investments

3,628

6

Dividends received

31,82830,000Cash flows generated (used) by investing activities(38,257)(21,603)

Cash flows generated (used) by financing activities
Share capital increase less net directly attributable costs(2,482)(58,852)

Change in short-term borrowings(85,601)(221,776)

Repayment of long-term borrowings(108,531)(147,349)

New long term borrowings arranged-

262,400

8,857(165,577)

Change in cash and cash equivalents net of bank overdraft

113,905(3,294)

Exchange differences(1,256)(651)

Opening cash and cash equivalents, net of bank overdraft(11,486)(7,541)

Closing cash and cash equivalents, net of bank overdraft

101,163(11,486)

Cash and bank balances

114,5873,686Bank overdraft(13,424)(15,173)

Closing cash and cash equivalents, net of bank overdraft

101,163(11,486)

Cash flow generated (used) by financing activities

82

205,171

Dividends paid

PRADA Group

Annual Report 2011 - Financial Statements of PRADA spa

Statement of changes in shareholders’ equity - PRADA spa(amounts in thousands of Euro, except for number of shares)(amounts in thousandsof Euro)Number ofsharesSharecapitalSharepremium
reserve

Legal
reserve

Other Retained
reserves earnings

Fair
Value
reserveNet
incomeShareholders’equityBalance at January 31,
2010

250,000,000

250,000

209,298

6,904

182,899

84,252(2,771)59,594790,176

Allocation of 2009 net
income

-

-

2,980

-

56,614-(59,594)-

Dividends paid
Comprehensive net
income---- (111,000)--(111,000)

-

-

-

-

492

6,608

122,776

129,876

209,298

9,884

182,899

30,358

3,837

122,776809,052

Balance at January 31,
2011

250,000,000

250,000

Conversion of parvalue of shares fromEuro 1 to Euro 0.1

2,500,000,000-

Issue of new shares

58,824,000

5,882

200,749

Allocation of 2010 net
income206,631
24,556

98,220

Dividends paid

(122,776)(35,000)

Comprehensive net
income(7,930)238,999

94,076(4,093)238,999 1,212,250

2,558,824,000

PRADA Group

Annual Report 2011 - Financial Statements of PRADA spa

410,047

34,440182,899(35,000)

498

Balance at January 31,
2012

255,882-

231,567

83

84

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Annual Report 2011 - Financial Statements of PRADA spa

Notes to the Consolidated Financial Statements

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

85

1.

General information
PRADA spa (the “Company”), together with its subsidiaries (jointly the “Group”), isa world leader in the design, production and distribution of luxury handbags, leather
goods, footwear, apparel, accessories, eyewear, fragrances and mobile phones.
Through its Directly Operated Stores network (DOS) and a selected number of
independent customers, the Group operates on all major international markets.
The Company is a joint-stock company, registered and domiciled in Italy. Its registeredofﬁce is in via Fogazzaro 28, Milan, Italy. At January 31, 2012, 79.98% of the sharecapital was owned by PRADA Holding bv, a company domiciled in The Netherlands,
while the remaining shares were ﬂoating on the Main Board of the Hong Kong Stock
Exchange.
The ultimate shareholders’ of PRADA Holding bv are Mr. Patrizio Bertelli and the Pradafamily.
These Consolidated Financial Statements were approved and authorized for issue by
the Board of Directors of PRADA spa on March 29, 2012.

2.

Basis of preparation
The Consolidated Financial Statements of the PRADA spa Group as at January 31,
2012, including the “Consolidated statement of ﬁnancial position”, the “Consolidated
income statement”, the “Statement of consolidated comprehensive income”, the“Consolidated statement of cash ﬂows“, the “Statement of changes in consolidated
shareholders’ equity” and the “Notes to the Consolidated Financial Statements” havebeen prepared in accordance with the International Financial Reporting Standards(“IFRS”) issued by the International Accounting Standards Board (“IASB”) as adopted
by the European Union.
At the date of presentation of these Consolidated Financial Statements, there were
no differences between IFRS as adopted 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 interpretationsof the International Financial Reporting Interpretations Committee (“IFRIC”), previously
called the Standing Interpretations Committee (“SIC”).
The Group has prepared the Consolidated statement of ﬁnancial position classifying
separately current and non-current assets and liabilities. All the details needed formore complete information are provided in the Notes.
The Consolidated income statement is classiﬁed by destination.
Cash ﬂow information is provided in the Consolidated statement of cash ﬂows which
has been prepared under the indirect method.
The Consolidated Financial Statements have been prepared on a going concern basis
and are presented in Euro which is the functional currency of the Company.

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3.

Amendments to accounting standards
Amendments to IFRS applicable to the PRADA Group from February 1, 2011
The following amendments to IFRS have been adopted by the European Union andare applicable to the PRADA Group effective from February 1, 2011. The matters inquestion are not applicable to the Group as of the date of these ﬁnancial statements
but they could have future accounting effects:–

minor amendments to IAS/IFRS (2010);–

IFRIC 19 “Extinguishing ﬁnancial liabilities with equity instruments”;–

amendment to IFRIC 14 “Advance payments under minimum funding clauses”;–

revised version of IAS 24 “Related party disclosures”.

New standards and amendments issued by the IASB that are not applicable to
the PRADA Group, but have been adopted by the European Union–IFRS 7 “Financial instruments: disclosures”. The amendments made to thisstandard, effective from July 1, 2011, are intended to improve the quality of
disclosures on the transfer of ﬁnancial instruments.

New standards and amendments issued by the IASB that are not applicable to
the PRADA Group and have not yet been adopted by the European Union–IFRS 9 “Financial instruments”. This new standard, effective from January 1, 2013,
represents the ﬁrst phase of a series of standards intended to replace entirely IAS
39 “Financial instruments: recognition and measurement” with the introductionof new criteria for the classiﬁcation of ﬁnancial assets and liabilities and for thederecognition of ﬁnancial assets;–

IFRS 10 “Consolidated Financial Statements”. This new standard, effective fromJanuary 1, 2013, further develops the concept of control as a fundamental criteria
for consolidation;–

IFRS 11 ”Joint Arrangements”. This new standard, effective from January
1, 2013, will entirely replace IAS 31 “Interests in Joint Ventures” and SIC 13“Jointly controlled entities”. It provides new criteria for use identifying joint
arrangements and indicates the equity method as the only method for use inaccounting for investments in jointly controlled entities in consolidated ﬁnancial
statements;–

IFRS 12 “Disclosure of interests in other entities”. This standard, effective fromJanuary 1, 2013, represents a new guideline on disclosures required in relation to
all types of interests in other entities;–

IFRS 13 “Fair value measurement”. This new standard, effective from January 1,
2013, provides a guide to fair value measurement;–

IAS 1 “Presentation of ﬁnancial statements”. The amendments made to thisstandard, effective from July 1, 2012, are intended to clarify the criteria for
preparation of the statement of “Other items of comprehensive income”;–

IAS 19 “Employee beneﬁts”. The amendments made to this standard, effectivefrom January 1, 2013, exclude the application of the corridor method and require
additional disclosures;–

IAS 12 “Income taxes”. The amendments made to this standard, effective fromJanuary 1, 2012, require the measurement of deferred tax relating to an asset

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

87depending on how the carrying amount of the asset will be recovered (i.e. throughuse or sale);–

IFRS 7 “Financial instruments: disclosures”. The amendments made to thisstandard, effective from January 1, 2013, require additional disclosures to measure
the effects or potential effects of the offsetting of ﬁnancial assets and liabilities on
the ﬁnancial position of an entity;–

IAS 32 “Financial instruments: presentation”. The amendments made to thisstandard, effective from January 1, 2014, supplement the guidelines on theoffsetting of ﬁnancial assets and liabilities.

As at January 31, 2012, the European Union had not yet completed the adoption of the
new standards and amendments described above.
4.

Scope of consolidation
The consolidated ﬁnancial information comprises the accounts of PRADA spa and the
Italian and foreign companies over which the Company directly or indirectly exercises
control, determining their ﬁnancial and operating decisions and obtaining beneﬁts fromtheir activities.
The companies in which the Group has more than 50% of the voting rights or that arecontrolled by the Group in some other way are consolidated on a line by line basis asfrom the date the Group acquired control and are no longer consolidated from the date
control ceases.
Joint ventures and associated undertakings are consolidated using the equity method.
Associated undertakings are those in which the Group has a signiﬁcant inﬂuence but
does not exercise effective control.
Inﬂuence is considered signiﬁcant when the Group owns between 20% to 50% of
the company’s share capital or when signiﬁcant inﬂuence can be exercised throughexisting agreements.
A list of the companies included in the Consolidated Financial Statements is provided
in Note 42.

5.

Basis of consolidation
The main consolidation criteria applied when preparing the consolidated ﬁnancial
statements for the years ended January 31, 2012 and January 31, 2011 in accordancewith IFRS, are as follows:88–

the ﬁnancial statements of PRADA spa are prepared under IFRS and those of its
subsidiaries are adjusted, as necessary, to comply with IFRS accounting standards
and with the standards applied throughout the Group. The ﬁnancial statements
used to prepare the consolidated ﬁnancial information are those closed at thereporting date;–assets and liabilities, costs and revenues of companies consolidated on a line-byline basis are fully included in the consolidated ﬁnancial statements irrespective of
the percentage held. The book value of equity investments, directly or indirectly
owned by the holding company, is eliminated against the corresponding portion ofshareholders’ equity of the companies in which the interest is held;–

for companies consolidated on a line-by-line basis that are not 100% owned byshareholders of the holding company, the share of net equity and results forthe year of minority interests are disclosed as “Non-controlling interests” in the
consolidated statement of ﬁnancial position and consolidated income statement.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

When the equity pertaining to minority interests is negative, it is shown underother receivables where the minority shareholder has made a binding commitment
towards the Group to cover the losses;–

the difference between the acquisition cost of investments acquired after thedate of ﬁrst-time application of IFRS (January 1, 2004) and the corresponding
share of shareholders’ equity at the date of acquisition is allocated, if positive, toassets, liabilities and contingent liabilities based on their fair value at the date ofacquisition. Any residual positive amount is accounted for as goodwill while any
negative amount is charged to the income statement immediately. The positive
difference between the acquisition cost of an additional stake in a controlled
company and the value of the interest acquired is directly recognized in equity;–

at the date of the ﬁrst time application, goodwill was stated at deemed cost less any
impairment losses. Deemed cost is calculated based on the difference between
the amount paid for the investment and the relevant net equity. Goodwill arisingfrom various acquisitions is not amortized but tested annually for impairment. Any
impairment in the value of goodwill is charged to the income statement;–

proﬁts and losses, assets and liabilities of joint ventures and associatedundertakings are accounted for using the equity method. According to thismethod, investments in joint ventures and associated undertakings are recordedin the statement of ﬁnancial position at cost, and adjusted to account for any
changes in the companies’ net equity post acquisition, less any impairment of
the investment value. Losses exceeding the interest of the shareholders of theholding company are recorded only if the Group has undertaken an obligation tocover them. The excess of the acquisition cost of the investment over the interestof the holding company shareholders in the net fair value of identiﬁable assets
and liabilities acquired and contingent liabilities is recorded as goodwill. Goodwill
is included in the book value of the investment and tested for impairment. If thecost is lower than the holding company shareholders’ interest in the fair value ofidentiﬁable assets, liabilities and contingent liabilities, the difference is recorded in
the income statement for the year of acquisition;–

during the consolidation process, receivables and payables, costs and revenues
arising from transactions between entities included in the scope of consolidation
are fully eliminated. Any unrealized gains or losses generated by transactions
between the Group’s consolidated companies and included in inventories andﬁxed assets at the balance sheet date are also eliminated. Unrealized losses are
eliminated unless the transaction provides evidence of an impairment of the asset
transferred. In this case, the transferred asset is adjusted for impairment;–

dividends paid by consolidated companies are also eliminated from the income
statement and added to prior year retained earnings if, and to the extent that, they
have been drawn from the latter;–the ﬁnancial statements of subsidiary companies are prepared in their respective
local currency. The statement of ﬁnancial position is translated into Euro using
the year end exchange rate, whereas the income statement is translatedusing the average exchange rate for the year. Translation differences arising onconversion of the statement of ﬁnancial position, using the exchange rate at thestart of the period and the exchange rate at the end of the period, and translationdifferences arising on conversion of the income statement using the average rate
for the period and the rate at the end of the period are recorded as a translation
reserve in the consolidated shareholder’s equity until disposal of the investment.
The translation reserve in consolidated shareholder’s equity represents translationdifferences recorded as from ﬁrst time application on January 1, 2004. When
preparing the consolidated statement of cash ﬂows, the cash ﬂows of subsidiary

PRADA Group

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89

companies are translated using the average rate for the period;–
6.

the reporting currency used to prepare the consolidated ﬁnancial statements isthe Euro. All amounts are stated in thousands of Euro unless otherwise stated.

Main accounting policies
Cash and cash equivalents
Cash and cash equivalents are carried in the statement of ﬁnancial position at nominal
amount. Cash equivalents include all highly liquid investments with an original maturityof three months or less.
For the purposes of the cash ﬂow statement only, cash and cash equivalents comprise
cash on hand, bank accounts, deposit accounts and bank overdrafts. In the statementof ﬁnancial position, bank overdrafts and current portions of payables to banks for
medium and long-term loans are included in Bank overdrafts and short-term loans.
Trade receivables and payables
Trade accounts receivable are carried at nominal value less the provision for doubtful
accounts, estimated based on an assessment of all disputed and doubtful balances at
the reporting date. Bad debts are written off when identiﬁed.
Trade accounts payable are recorded at nominal amount.
Transactions denominated in foreign currency are recorded at the exchange rate as at
the date of the transaction. At the reporting date, transactions denominated in foreign
currencies are translated using the exchange rate as at the reporting date. Gains andlosses arising from the translation are reﬂected in the income statement.
The transfer of a ﬁnancial asset to third parties implies its derecognition from thestatement of ﬁnancial position only if all risks and rewards connected with the ﬁnancial
asset are substantially transferred. Risks and rewards are considered transferred when
exposure to variability in the present value of future net cash ﬂows associated with theasset changes signiﬁcantly as a result of the transfer.
Inventories
Raw materials, work in progress and ﬁnished products are recorded at the lowerof acquisition cost, production cost and net realizable value. Cost comprises direct
production costs and those overheads that have been incurred in bringing the inventories
to their present location and condition. Acquisition or production cost is determined ona weighted average basis. Provisions, adjusting the value of the inventory, are madefor slow moving and obsolete inventories and if estimated selling prices are lower thancost.
Assets held for sale
A non-current asset is classiﬁed as held for sale if its carrying amount will be mainly
recovered through sale rather than through its continued usage.
Assets held for sale are valued at the lower of net book value and fair value less any
costs to sell.

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Property, plant and equipment
Property, plant and equipment are recorded at purchase cost or production cost, including
any charges directly attributable. They are shown net of accumulated depreciation
calculated on the basis of the useful lives of the assets and any impairment losses.
Interest costs on borrowings to ﬁnance directly purchase, construction or production
are capitalized to increase the value of the asset. All other borrowing costs are charged
to the Income Statement.
Ordinary maintenance expenses are charged in full to the income statement for theyear they are incurred.
Extraordinary maintenance expenses are capitalized if they increase the value or usefullife of the related asset.
The costs included under Leasehold improvements relate to refurbishment work
carried out on assets not owned by the Group.
All costs incurred during the period between the start of refurbishment work and theopening of the store are capitalized as Leasehold improvements, as they are deemednecessary to bring the related assets to their working condition in accordance withcompany guidelines. The relevant construction or refurbishment period ranges fromsix to eighteen months depending on the type of store/work.
Depreciation methods, useful lives and net book values are reviewed annually.
The depreciation rates representing the useful lives are listed below:
Category of Property, plant and equipment

Depreciation rate or period

Buildings

3% - 10%

Production plant and equipment
Improvements to leasehold retail properties
Improvements to leasehold industrial properties

7.5% - 25%
Lower of lease term and 10 years
Remaining period of lease agreement

Furniture and fittings

10% - 20%

Other equipment

6% - 33%

When assets are disposed of, their cost and accumulated depreciation are eliminatedfrom the ﬁnancial statements and any gains or losses are recognized in the income
statement.
The value of land is stated separately from the value of buildings. Depreciation is only
charged on the value of buildings.
Every year, a test is performed for indications that the value of property, plant andequipment has been impaired. If any such indications are found, an impairment test
is used to estimate the recoverable amount of the asset. The impairment loss isdetermined by comparing the carrying value of the asset with its recoverable value(i.e. the higher of the fair value of the asset less costs to sell and its value in use).
Fair value is determined based on the best information available to reﬂect the amountthat could be obtained, from the disposal of the asset, at the reporting date.
Value in use is an estimate of the present value of future cash ﬂows expected to derivefrom the asset tested for impairment.
Impairment losses are recorded immediately in the income statement.
At every reporting date, the Group will assess whether there is any indication thatan impairment loss recognized in prior periods may no longer apply and should be

PRADA Group

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91

decreased. If any such indication exists, the Group will estimate the recoverable
amount of that asset. The recoverable value of the asset shall not exceed the carrying
amount that would have been determined if no impairment loss had been recognized
for the asset in prior years.
Reversal of an impairment loss for an asset will be recorded in the income statement.
Intangible assets
Only identiﬁable assets, controlled by the company and capable of producing future
economic beneﬁts are included in intangible assets.
Intangible assets include trademarks, licenses, store lease acquisition costs, software,development costs and goodwill.
Trademarks are recorded at cost or at the value attributed upon acquisition and include
the cost of trademark registration in the various countries in which the Group operates.
The Directors estimate a useful life of between 20 and 40 years for trademarks. This
assumes there are no risks or limitations on control over their use. Every trademark is
tested for impairment whenever indicators of impairment emerge.
The useful life of trademark registration costs is estimated to be 10 years.
Software refers to Information Technology development projects and includes all
internal and external costs incurred to bring the asset into use. IT projects include
costs incurred to acquire licenses as well as costs of development and installation.
Software is capitalized on condition that it is identiﬁable, reliably measurable and if it isprobable that the asset will generate future economic beneﬁts.
Store lease acquisition costs represent expenditures incurred to enter into or takeover retail store lease agreements. These costs are capitalized and amortized over the
shorter period of the lease term or 10 years.
Development costs include expenses incurred to strengthen the brand image throughthe implementation of retail projects with a high technological or stylistic content,
e.g. “In-Store Technology” project, or through projects aimed at developing the store“concept” . The relevant useful life is estimated based on the Directors’ understanding
and amounts to between 3 and 10 years.
Intangible assets with a determinate useful life are amortized on a straight-line basis
at the following rates:
Category of intangible assets

Amortization rate or period

Trademarks

2.5% - 10%

Store lease acquisition costs

Shorter of lease term and 10 years

Software

10% - 33%

Other intangible assets

10% - 33%

All business combinations included within the scope of IFRS 3 are recorded using theacquisition method whereby identiﬁable assets, liabilities and potential liabilities of theacquired business are measured at their acquisition-date fair value.
The difference between the cost of the business combination and the interest acquiredin the net fair value of identiﬁable assets, liabilities and potential liabilities is recorded
as goodwill. If additional interests in subsidiaries already controlled are acquired, thepositive difference between the acquisition cost and the value of the interest acquired
is recognized in equity.

92

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Goodwill, as an asset that produces future economic beneﬁts but which is notindividually identiﬁed and separately measured, is initially recognized at cost.
Goodwill is not amortized but tested for impairment every year to check if its value
has been impaired. If speciﬁc events or altered circumstances indicate the possibility
that goodwill has been impaired, the impairment test is performed more frequently. If
goodwill is initially recorded during the current year, the impairment test is performed
before the end of the year.
For impairment test purposes, goodwill acquired in a business combination shall,from the acquisition date, be allocated to each of the acquirer’s cash generating units
that are expected to beneﬁt from the synergies of the combination. Cash Generating
Units are determined based on the organizational structure of the Group and represent
groups of assets that generate independent cash inﬂows from continuing use of therelevant assets. The PRADA Group’s Cash Generating Units include trademarks, sales
channels and geographical areas.
The cash generating units to which goodwill has been allocated are tested for
impairment annually and, whenever there is an indication of impairment, the carrying
value of the cash generating units is compared with their recoverable amount.
Recoverable amount is the higher of fair value less costs to sell and value in use, ascalculated based on an estimate of the future cash ﬂows expected to derive from the
cash generating unit tested for impairment. Cash ﬂow projections are based on budget
and forecast and on long-term business plans (generally ﬁve years) approved by the
management of the relevant business units.
An impairment loss is recorded in the Income Statement for the period whenever therecoverable amount of the cash generating unit is lower than its book value.
An impairment loss recorded for goodwill is never reversed in subsequent years.
Investments
Investments in associated undertakings and joint ventures – companies in which
the Group generally holds between 20% and 50% of the voting rights or on which
the Group has signiﬁcant inﬂuence – are accounted for under the equity method of
accounting.
Under the equity method of accounting, investments are initially recognized at cost.
The carrying amount is later increased or decreased to reﬂect the parent company’s
share of the proﬁts or losses of the investee after the date of acquisition. Any goodwill
included in the historical cost of the investment is tested annually for impairment.
The parent company’s share of the proﬁt or loss of the investee is recorded in its
income statement.
Dividends received from the investee company reduce the carrying amount of theinvestment.
The parent company’s share in an associated undertaking’s proﬁts and losses resulting
from intercompany transactions is eliminated.
The reporting date of associated undertakings is the same as the parent company’s.
If a subsidiary or associated undertaking uses accounting policies other than IFRS,
adjustments are made to bring its accounting policies into line with those of the parent
company.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements93

If the parent company’s share of the losses made by an associated undertaking or
joint venture exceeds the carrying amount of the investment in the associate or joint
venture, the parent company will recognize a liability for additional losses only to theextent that it has incurred legal or constructive obligations on behalf of the associateundertaking or joint venture.
Other investments and marketable securities
Investments that are acquired principally for the purpose of generating a proﬁt fromshort-term ﬂuctuations in price are classiﬁed as held for trading. They are included incurrent assets and stated at fair value through proﬁt and loss.
Investments intended to be held for an indeﬁnite period of time that may be solddepending on liquidity requirements, are classiﬁed as available-for-sale and stated
at fair value through shareholders’ equity. These assets are included in non-current
assets unless the Directors intend to hold them for less than twelve months from thereporting date, in which case they are included in current assets.
All purchases and sales of investments are recognized on the trade date i.e. thedate that the Group commits to purchase or sell the asset. Purchase cost includes
all transaction costs. Realized and unrealized gains and losses arising from changes
in the fair value of trading investments are included in the income statement, while
those regarding investments available-for-sale are included in shareholders’ equity inthe period in which they arise.
Deferred tax assets
Deferred tax assets are amounts of income taxes recoverable in future periods inrelation to deductible temporary differences and carryforward of unused tax losses.
Deductible temporary differences are differences between the carrying amount ofan asset or liability in the statement of ﬁnancial position and its tax value which, in
determining taxable income for future years, will result in deductible amounts when
the carrying amount of the asset or liability is realized or settled.
Deferred tax assets are recognized for all deductible temporary differences, tax
losses carried-forward and unused tax credits only to the extent that is probable thattaxable income will be available in future years against which the deductible temporary
differences can be used. Recoverability is reviewed at every year end. Deferred tax
assets are measured at the tax rates which are expected to apply to the period when
the asset is realized based on tax rates (and tax laws) in force at the reporting date.
Deferred tax assets are not discounted.
Deferred tax assets are recognized through the income statement unless the tax
amount is generated from a transaction or an event directly recognized in equity orfrom a business combination.
Taxation for deferred tax assets relating to items credited or debited directly toshareholders’ equity is also credited or debited directly to shareholders’ equity.
Derivative financial instruments
Derivative ﬁnancial instruments that hedge interest rate risk and exchange rate risk
exposure are recorded based on hedge accounting rules.
Hedging contracts are designated as cash ﬂow hedges. Hedge accounting treatment
is used if derivative ﬁnancial instruments are designated as a hedge of the exposure
to changes in future cash ﬂows of a recognized asset or liability or a highly probabletransaction and which could affect proﬁt or loss. In this case, the effective portion of

94

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the gain or loss on the hedging instrument is recognized in shareholders’ equity.
Accumulated gains or losses are reversed from shareholders’ equity and recordedin the income statement for the period in which the income statement effect of thehedged operation is recorded.
Any gain or loss on a hedging instrument (or portion thereof) which is no longer effective
as a cash ﬂow hedge is immediately recorded in the income statement. If a hedging
instrument or a hedging relationship has expired but the hedged transaction has not
yet occurred, any accumulated gains or losses recognized in shareholders’ equity until
then are recorded in the income statement when the transaction takes place.
If the hedge transaction is no longer expected to take place, any related cumulative
gain or loss outstanding in equity will be recognized in the income statement.
Obligations under finance leases
Fixed assets acquired under ﬁnance leases are recorded at the lower of market value
and the present value of future payments due under the lease agreement on the dateof the transaction and are depreciated based on their useful life.
Short-term portions of obligations related to discounted future lease payments arerecorded among current liabilities under Obligations under ﬁnance leases, current,
while medium and long- term portions are recorded among non-current liabilities under“Obligations under ﬁnance leases, non-current”.
Non-current financial liabilities
Non-current ﬁnancial liabilities include payables to banks for medium and long termloans. Bank borrowing includes principal amounts, interest and additional arrangement
costs accruing and due at the balance sheet date even when they are charged at alater date.
Non-current ﬁnancial liabilities are initially recorded at fair value on the transaction dateless transaction costs which are directly attributable to the acquisition.
After initial recognition, non-current ﬁnancial liabilities are valued at amortized costi.e. at the initial amount less principal repayments already made plus or minus theamortization (using the effective interest method) of any difference between that initialamount and the maturity amount.
Post-employment benefits
Post-employment beneﬁts mainly consist of Italian Staff Leaving Indemnities(hereinafter TFR) which are classed as deﬁned-beneﬁt plans.
Deﬁned beneﬁt plans are recognized using actuarial techniques to estimate the amountof the obligations resulting from employee service in the current and past periods anddiscounting it to determine the present value of the Group’s obligations.
The present value of the obligations is determined by an independent actuary using the
Projected Unit Credit Method.
This method considers each period of service provided by the employee as anadditional unit right and measures the actuarial liability on the basis of the matured
years of service only at the date of measurement. This actuarial liability is then remeasured taking into account the relationship between the service years provided by
the employee at the date of measurement and the total years of service expected at
the forecast date of settlement of the beneﬁt. Moreover, this method takes accountof future salary increases, for whatever reason (inﬂation, career progression and new

PRADA Group

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95

employment agreements) until the estimated termination date of the employment
relationship.
The cost of deﬁned beneﬁt plans, accruing during the year and recorded in the income
statement under labor costs, is equal to the average present value of rights accruingin favor of employees for service during the current period. The annual interest
accruing on the present value of the Group’s obligation at the beginning of the year, as
calculated adopting the previous year discount rate of future outﬂows used to estimate
the liability at the reporting date, is recorded under interest and other ﬁnancial income/(expenses).
Actuarial gains and losses are recognized directly in equity, net of the tax effect.
Other long-term employee beneﬁts are recorded among non-current liabilities andtheir value corresponds to the present value of the deﬁned beneﬁt obligation at thereporting date, adjusted according to the period of the underlying agreement. Likedeﬁned beneﬁt plans, other long term beneﬁts are also valued using the Projected Unit
Credit Method.
Provisions for risks and charges
Provisions for risks and charges cover costs of a determinate nature, that were certainor probable but whose amount or due date was uncertain at year end. Provisions
are only recorded when the Group has a legal or constructive obligation as a resultof past events, it is probable that an outﬂow of resources will be required to settle
the obligation and a reliable estimate of the amount can be made based on available
information.
Where the Group expects reimbursement of a charge that has been provided for (e.g.
under an insurance policy) the reimbursement is recognized as a separate asset but
only when the reimbursement is certain.
Deferred tax liabilities
Deferred tax liabilities are amounts of income taxes due in future periods in respect oftaxable temporary differences.
Taxable temporary differences are differences between the carrying amount of an asset
or liability in the statement of ﬁnancial position and its tax base which, in determining
the taxable income for future years, will result in taxable amounts when the carrying
amount of the asset or liability is recovered or settled.
Deferred tax liabilities are recognized for all taxable timing differences except whenliability is generated by the initial recognition of goodwill or the initial recognition of anasset or liability in a transaction other than a business combination that does not affectthe accounting result or the tax result at the transaction date.
Deferred tax liabilities are measured at the tax rates which are expected to apply tothe period when the liability is settled, based on tax rates (and tax laws) that have beenenacted or substantively enacted by the reporting date.
Deferred tax liabilities are not discounted.
Taxation for deferred tax liabilities relating to items credited or debited directly toshareholders’ equity is also credited or debited directly to shareholders’ equity.
The deferred tax provision is only offset against deferred tax assets or when the twoitems refer to the same tax and the same period.

96

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Revenue recognition
Revenues from the sale of goods are recognized in the income statement when:–

the risks and rewards of ownership are transferred to the buyer;–

the value of the revenues can be reliably measured;–

all control over the goods sold has ceased;–

the economic beneﬁts generated by the transaction will probably be enjoyed by
the Company;–

the costs pertaining to the transaction can be measured reliably.

Royalties are accounted for based on sales made by the licensees and the terms of thecontracts. Cash discounts are recognized as ﬁnancial charges.
Costs are recorded on an accrual basis. In particular, a cost is immediately recognizedin the income statement when:–an expense does not generate any future economic beneﬁt;–

the future economic beneﬁts do not qualify or cease to qualify as assets forrecognition in the statement of ﬁnancial position;–a liability is incurred and no asset has been recognized.

Operating leases
Operating leases are recorded in the income statement on a straight-line basis for thewhole lease term.
When calculating the lease term, renewal periods are also considered if provided for by
the agreement and the amount due is known or can be estimated.
Store opening costs
Costs incurred during the pre-opening period of new or refurbished retail stores arecharged to the Consolidated income statement when incurred, except for thosecapitalized as leasehold improvements. Upon closure of a store, the net book value ofthe leasehold improvements, less the expected recoverable amount, is charged to theincome statement.
Financial charges
Financial charges include interest on bank overdrafts, on short and long term loans,ﬁnancial charges on ﬁnance leases and securitization operations, amortization of initialcosts of loan operations, changes in the fair value of derivatives – insofar as chargeable
to the income statement – and annual interest maturing on the present value of postemployment beneﬁts.
Income taxes
The provision for income taxes is determined based on a realistic estimate of the tax
charge of each consolidated entity, in accordance with the tax rates (and tax laws) thathave been enacted or substantially enacted at the reporting date.
Current taxes are recorded in the income statement as an expense. This is except fortaxes deriving from transactions or events directly recognized through shareholders’equity which are directly charged to equity.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

97

Earnings per share
Basic earnings per share are calculated by dividing net proﬁt pertaining to the holding
company shareholders by the weighted average number of ordinary shares.
Changes of accounting policy, errors and changes in accounting estimates
The accounting policies adopted are only modiﬁed from one year to another if thechange is required by an accounting standard or if it provides more reliable and more
relevant information on the effects of operations on the entity’s statement of ﬁnancial
position, income statement or cash ﬂows.
Changes of accounting policy are applied retrospectively, adjusting the opening balanceof each affected component of equity for the earliest prior period presented. Other
comparative amounts, disclosed for each prior period presented, are also adjusted as if
the new accounting policy had always been applied. A prospective approach is applied
only when it is not possible to restate the comparative information.
The adoption of a new or amended accounting standard is implemented in accordancewith the requirements of the standard itself. If the new standard does not include
speciﬁc transition provisions, the change of accounting policy is applied retrospectively
or, if this is not feasible, prospectively.
In case of material errors, the same approach adopted for changes in accounting
standards described in the previous paragraph shall be followed. Non material errors
are recognized in the income statement in the period in which the error is identiﬁed.
The effect of changes in accounting estimates are prospectively recorded in theincome statement for the year the change takes place if it is the only year affected. It
is also reﬂected in later years if they too are affected by the change.
Financial risk management
The Group’s international activities expose it to a variety of ﬁnancial risks including
the risk of exchange rate and interest rate ﬂuctuation. The Group’s overall risk
management policy takes account of the volatility of ﬁnancial markets and seeks tominimize uncertainty regarding cash ﬂow and the resulting potential adverse effects
on its results.
The Group enters into hedging contracts to manage risks arising from exposure to theexchange rate and interest rate risks.
Financial instruments are accounted for based on hedge accounting rules. At the
inception of the hedge contract, the Group formally documents the hedging relationshipassuming that the hedging is effective during the different accounting periods it isdesignated for.
Exchange rate risk
The Group has a multinational structure and sells its products in more than 70 different
countries worldwide. It is exposed to an exchange rate risk due to ﬂuctuations in theexchange rate of the Euro against the US Dollar, Hong Kong Dollar, Japanese Yen and,to a lesser extent, other currencies. The Corporate Finance Department is responsible
for foreign currency hedging by entering into derivative contracts (forward sale andpurchase, options) with third parties.
In accordance with IAS 39, these hedging contracts are classed as cash ﬂow hedges.
The fair value of the hedging contracts designated as cash ﬂow hedges is recorded
under shareholders’ equity net of the tax effect.

98

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Interest rate risk
The debt taken on by the Group exposes it to the interest rate risk. The Group
Corporate Finance Department hedges this risk by arranging Interest Rate Swap andCollar agreements.
These hedging contracts are classed as cash ﬂow hedges. The fair value of the hedging
contracts qualiﬁed as cash ﬂow hedges is recorded under shareholders’ equity net of
the tax effect.
Use of estimates
In accordance with IFRS, the preparation of these consolidated ﬁnancial statements
requires the use of estimates and assumptions regarding certain types of assets,
liabilities, revenues and expenses and when valuing contingent assets and liabilities.
Such assumptions relate primarily to transactions and events not settled as of the yearend. Accordingly, upon settlement, the actual results may differ from the estimatedamounts. Estimates and assumptions are periodically reviewed and the effects of any
differences are immediately charged to the income statement.
Estimates have been used when performing impairment tests, in determining
provisions for risks and charges, the allowance for doubtful accounts, the allowancefor obsolete and slow moving inventories, derivative instruments, post-employment
beneﬁts and when calculating taxes.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

99

7.

Significant acquisitions and disinvestments
On February 23, 2011 PRADA spa sold to Puig sl its investment in Fragrance & Skincare
sl, a joint-venture created with Puig sl in 2003 for the distribution of fragrances. The
relationship with the Spanish fragrance producer is continuing under the license
agreement with Fragrance & Skincare sl that has been extended until 2020.
On April 2, 2011 the Group set up Prada Brasil Importação e Comércio de Artigos deLuxo Ltda in order to develop its commercial activities in Brazil.
On May 25, 2011 PRADA spa and Al Tayer Insignia llc incorporated Prada Middle East
fzco in the Jebel Ali Free Zone of Dubai, United Arab Emirates, with stakes of 60%
and 40%, respectively, in order to handle development of the network of Prada and
Miu Miu stores in the Middle East. The Al Tayer Insignia Group is the largest luxury
retailer in the Middle East and belongs to the Al Tayer conglomerate group, based in
the United Arab Emirates.
On July 7, 2011 the Group set up commercial subsidiary Church Netherlands bv withthe aim of developing Church’s brand retail activities in the Netherlands.
On July 17, 2011, the Group set up PRADA Retail Mexico S. de R.L. de C.V. with theaim of developing retail activities in Mexico.
On August 4, 2011, the Group set up PRADA Emirates llc with the aim of developing
retail activities in the United Arab Emirates.
On October 14, 2011, the Group set up PRADA Ukraine llc with the aim of developing
retail activities in the Ukraine.
On October 28, 2011, the Group set up Car Shoe UK Limited with the aim of developing
Car Shoe brand retail activities in the United Kingdom.
On November 17, 2011, the Group set up PRADA Maroc (Sarlau) with the aim ofdeveloping retail activities in Morocco.
On December 15, 2011, the Group set up PRADA Hong Kong P.D. Limited, a service
company operating in Hong Kong.
On December 20, 2011, the Group set up Church Austria gmbh with the aim ofdeveloping Church’s brand retail activities in Austria.
On December 20, 2011, the Group set up Church Ireland Retail Limited with the aimof developing Church’s brand retail activities in Ireland.

100

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

8.

Operating segments
IFRS 8 requires that detailed information be provided for each operating segmentthat makes up the business. An operating segment is intended as a business division
whose operating results are regularly reviewed by top management so that they canmake decisions about the resources to be allocated to the segment and assess its
performance.
The Group’s matrix-based organizational structure - whereby responsibility is assigned
cross-functionally in relation to brands, products, distribution channels and geographicalareas, together with the complementary nature of the production processes of thevarious brands and the many relationships between the different business segments– means that operating segments that meet the IFRS 8 definition cannot be identified,
as top management is only provided with income statement results on a Group widelevel. For this reason, the business has been considered as a single operating segment
as this better represents the specific characteristics of the PRADA Group businessmodel.
Detailed information on net revenues by brand, geographical area, product anddistribution channel is provided below. It is also reported in the Financial review where
it is accompanied by further information on the Group’s operating results.
Net sales analysis
January 31
2012%

January 31
2011%% changeItaly445,61117.6%

393,285

19.5%

13.3%

Europe540,13121.4%

450,463

22.3%

19.9%

Americas392,677

15.6%

326,780

16.2%

20.2%

Asia Pacific872,992

34.6%

613,803

30.4%

42.2%

Japan

256,69310.2%

220,924

11.0%

16.2%

Other countries

15,2260.6%

11,809

0.6%

28.9%

2,523,330

100.0%

2,017,064

100.0%

25.1%

Prada

1,999,345

79.2%

1,586,840

78.7%

26.0%

Miu Miu

441,05417.5%

353,038

17.5%

24.9%

Church's

59,224

2.3%

53,028

2.6%

11.7%

Car shoe

17,0390.7%

17,935

0.9%

-5.0%

Other

6,668

0.3%

6,223

0.3%

7.2%

Total

2,523,330

100.0%

2,017,064

100.0%

25.1%(amounts in thousands of Euro)Net sales by geographical area

Total

Net sales by brandNet sales by product line
Clothing

512,58520.3%

483,564

24.0%

6.0%

1,426,537

56.5%

1,013,877

50.3%

40.7%

Footwear

560,10822.2%

503,120

24.9%

11.3%

Other

24,1001.0%

16,503

0.8%

46.0%

Total

2,523,330

100.0%

2,017,064

100.0%

25.1%

1,964,499

77.9%

1,427,356

70.8%

37.6%

558,83122.1%

589,708

29.2%

-5.2%

Total

2,523,330

100.0%

2,017,064

100.0%

25.1%

Net sales

2,523,330

98.7%

2,017,064

98.6%

25.1%

Royalties

32,276

1.3%

29,5871.4%

9.1%

2,555,606

100.0%

2,046,651

100.0%

24.9%

Leather goods

Net sales by distribution channel
DOS (including outlet stores)
Independent customers, franchises and related parties

Total net revenues

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

101

Prada brand sales
January 31
2012%

January 31
2011%% changeItaly

349,852

17.5%

302,025

19.0%

15.8%

Europe411,552

20.6%

341,544

21.5%

20.5%

Americas334,46916.7%

281,178

17.7%

19.0%

Asia Pacific710,157

35.5%

496,156

31.3%

43.1%

Japan

181,7209.1%

157,061

9.9%

15.7%

Other countries

11,595

0.6%

8,876

0.6%

30.6%

1,999,345

100.0%

1,586,840

100.0%

26.0%(amounts in thousands of Euro)Net sales by geographical area

Total

Net sales by product line
Clothing

434,46121.7%

419,464

26.4%

3.6%

1,141,097

57.1%

786,244

49.6%

45.1%

Footwear402,34820.1%

366,392

23.1%

9.8%

Other

21,4391.1%

14,740

0.9%

45.4%

Total

1,999,345

100.0%

1,586,840

100.0%

26.0%

1,562,233

78.1%

1,119,962

70.6%

39.5%

437,11221.9%

466,878

29.4%

-6.4%

Total

1,999,345

100.0%

1,586,840

100.0%

26.0%

Net sales

1,999,345

98.5%

1,586,840

98.3%

26.0%

Royalties

31,341

1.5%

27,914

1.7%

12.3%

2,030,686

100.0%

1,614,754

100.0%

25.8%

January 31
2012%

January 31
2011%% changeItaly

67,103

15.2%

61,337

17.4%

9.4%

Europe86,17819.5%

70,137

19.9%

22.9%

Americas54,91512.5%

43,190

12.2%

27.1%

Asia Pacific155,84135.3%

112,722

31.9%

38.3%

Japan

73,91816.8%

63,341

17.9%

16.7%

Other countries

3,099

0.7%

2,311

0.7%

34.1%

441,054100.0%

353,038

100.0%

24.9%

Clothing

77,251

17.5%

63,258

17.9%

22.1%

Leather goods

282,03364.0%

224,337

63.6%

25.7%

Footwear

79,10917.9%63,681

18.0%

24.2%

Other

2,661

0.6%

1,762

0.5%

51.0%

Total

441,054100.0%

353,038

100.0%

24.9%

DOS (including outlet stores)

354,22780.3%

264,375

74.9%

34.0%

Independent customers, franchises and related parties

86,82719.7%

88,663

25.1%

-2.1%

Total

441,054100.0%

353,038

100.0%

24.9%

Net sales

441,05499.8%

353,038

99.6%

24.9%

Royalties

828

0.2%

1,458

0.4%

-43.2%

441,882

100.0%

354,496

100.0%

24.7%

Leather goods

Net sales by distribution channel
DOS (including outlet stores)
Independent customers, franchises and related parties

Total net revenues

Miu Miu brand sales(amounts in thousands of Euro)Net sales by geographical area

Total

Net sales by product line

Net sales by distribution channel

Total net revenues

102

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Church’s brand sales
January 31
2012%

January 31
2011%% change

Italy

16,50927.9%15,307

28.9%

7.9%

Europe34,27157.9%

31,435

59.3%

9.0%

Americas

2,402

4.0%

1,966

3.7%

22.2%

Asia Pacific

4,789

8.1%

3,622

6.8%

32.2%

Japan

1,052

1.8%

511

0.9%

105.9%(amounts in thousands of Euro)Net sales by geographical area

Other countries
Total

201

0.3%

187

0.4%

7.5%

59,224100.0%

53,028100.0%

11.7%

Net sales by product line
Clothing

762

1.3%

551

1.0%

38.3%

Leather goods

1,702

2.9%

1,432

2.7%

18.9%

Footwear

56,76095.8%

51,045

96.3%

11.2%

Total

59,224100.0%

53,028100.0%

11.7%

DOS (including outlet stores)

38,346

64.7%

34,683

65.4%

10.6%

Independent customers, franchises and related parties

20,87835.3%

18,345

34.6%

13.8%

Total

59,224100.0%

53,028100.0%

11.7%

Net sales

59,22499.8%

53,028

99.8%

11.7%

Royalties

107

0.2%

101

0.2%

5.9%

59,331100.0%

53,129100.0%

11.7%

January 31
2012%

January 31
2011%% change

Italy

10,29460.4%

12,50969.7%-17.7%

Europe

3,383

19.9%

3,353

18.7%

0.9%

Americas

857

5.0%

353

2.0%

142.8%

Asia Pacific

2,174

12.8%

1,275

7.1%

70.5%

-

0.0%

11

0.1%

-100.0%Net sales by distribution channel

Total net revenues

Car Shoe brand sales(amounts in thousands of Euro)Net sales by geographical area

Japan
Other countries
Total

331

1.9%

434

2.4%

-23.7%

17,039100.0%

17,935100.0%-5.0%

Net sales by product line
Leather goods

1,658

9.7%

1,760

9.8%

-5.8%

Footwear

15,381

90.3%

16,175

90.2%

-4.9%

Total

17,039100.0%

17,935100.0%-5.0%

DOS (including outlet stores)

7,747

45.5%

6,027

33.6%

28.5%

Independent customers, franchises and related parties

9,292

54.5%

11,90866.4%-22.0%

Total

17,039100.0%

17,935100.0%-5.0%

Net sales

17,039100.0%

17,935100.0%-5.0%

Total net revenues

17,039100.0%

17,935100.0%-5.0%

Net sales by distribution channel

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

103

EBITDA by brandJanuary 31
2012

Group

Prada

Miu Miu

Church’s

Car Shoe

Others

Net sales

2,523,330

1,999,345

441,054

59,224

17,0396,668

Royalties

32,276

31,341

828

107

-

-

2,555,606

2,030,686

441,882

59,331

17,0396,668

EBITDA

759,252

657,249

97,872

7,877(3,579)(167)

EBITDA %

29.7%

32.4%

22.1%

13.3%

-

-

January 31
2011

Group

Prada

Miu Miu

Church’s

Car Shoe

Others

Net sales

2,017,064

1,586,840

353,038

53,02817,935

6,223

Royalties

29,587

27,914

1,458

101

-

114

2,046,651

1,614,754

354,496

53,12917,935

6,337

EBITDA

535,930

453,565

77,443

6,764(1,996)

154

EBITDA %

26.2%

28.1%

21.8%

12.7%

-

2.4%

508,955

415,932

87,386

6,202

(896)

331

24.9%

25.8%

24.7%

11.7%

-5.0%

5.2%

223,322

203,684

20,4291,113(1,583)

(321)

41.7%

44.9%

26.4%

16.5%

79.3%

-208.4%

Net revenues

Net revenues

Change in Net revenues in Euro
Percentage change in
Net Revenues

Change in EBITDA in Euro
Percentage change in EBTIDA

The exceptional EBITDA growth achieved by the Prada brand largely replicates theoutstanding results already examined in relation to the Group as a whole.
Miu Miu brand net sales recorded percentage increase similar to that recorded by
the Prada band. However, its EBITDA growth was somewhat slower – thoughstill impressive and in double figures – mainly because of the higher incidence ofadvertising and communications costs. In 2011, in addition to its shows in Paris (theFall/Winter 2011 and Spring/Summer 2012 Collections were shown at the prestigious
Palais d’Iena, home of the Conseil Economique, Social et Environnemental), Miu
Miu invested heavily in confirming and further establishing its identity as based on a
provocative, experimental and avant-guarde spirit. The events organized included theunique experience offered to more than 800 people who attended the 1940s-style
party held at the Park Hyatt Hotel, Shangahi. Cultural initiatives have included Miu Miu
musings, events where leading exponents of the fashion world meet with people fromother fields of culture to discuss issues relating to fashion, as a form of expression andrepresentation of the spirit of the time. Seven such Miu Miu musing sessions wereorganized in 2011 in locations including New York, Moscow, London, Tokyo and Milan.
Historically, Church’s results have been stable, also because of the nature of its
market. In recent years, they have shown constant growth, albeit of a limited scale. The
Group’s development in commercial terms has been accompanied by measures aimed
at increasing cost efficiency and, in 2011, EBITDA growth exceeded net sales growth.
The Car Shoe brand has seen a drop in net sales and a clear decline in EBITDA. The
already mentioned shipment delays towards the end of the year in Italy undoubtedly
had an adverse effect on results that are still suffering from the inadequate criticalmass of the brand and its limited penetration of faster growing markets.
104

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Geographical information
The Group’s operations are located in Italy (country of domicile of the Company),
Europe, Americas, Asia Pacific, Japan and other countries.
January 31
2012

January 31
2011

Italy

416,542

350,685

Europe814,240

760,588

Americas160,539

156,312Japan

119,355

86,430Asia Pacific

124,527

94,861Other countries

10,938-

1,646,141

1,448,876(amounts in thousands of Euro)

Total

Non-current assets excluded those relating to financial instruments, deferred tax assets
and the surplus arising from a pension benefit scheme.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

105Consolidated statement of financial position
9.

Cash and cash equivalents
Cash and cash equivalents are detailed as follows:
January 31
2012

January 31
2011

Cash on hand

23,77017,794

Bank deposit accounts

195,227

6,222

Bank current accounts

143,287

72,556

Total

362,284

96,572(amounts in thousands of Euro)Bank deposit accounts include some of the proceeds from the share capital increase.
Bank current accounts and deposit accounts generate interest income of between
0.0% and 4.08% per annum (between 0.0% and 0.897% at January 31, 2011).
Bank deposit accounts and current accounts are broken down by currency as follows:(amounts in thousands of Euro)

January 31
2012

January 31
2011

Euro

108,286

9,160

US Dollar

56,17013,819Korean Won

27,52910,990Hong Kong Dollar

70,045

9,995

Other currencies

76,48434,814

Total bank deposit accounts and current accounts

338,51478,778(amounts in thousands of Euro)

January 31
2012

January 31
2011

Trade receivables – third parties

247,577

255,455

10. Trade receivables, net
Trade receivables are detailed as follows:

Trade receivables – associated companies

-

1,924

Trade receivables – related parties

18,827

16,796

Total

266,404

274,175

The decrease in trade receivables is mainly due to the selective policy adopted forsales to independent customers and to the delayed shipment of products towards
the end of the year, mainly because of particularly bad weather in Italy and ongoing
industrial action by road freight transporters.
Trade receivables from related parties refer to sales of ﬁnished products and royalties
under franchise agreements with retail companies owned by the main shareholdersof PRADA Holding bv (Euro 18.6 million) and other receivables from non-controllingshareholders of several companies controlled by the Group (Euro 0.2 million).
Trade receivables from associated companies at January 31, 2011 mainly regarded
royalties accruing from Fragrance & Skincare sl in relation to the sale of fragrances
bearing the Prada brand.

106

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Following the disposal of the interest held in Fragrance & Skincare sl (Note 18),
receivables from the said company have been recorded under third party receivables
at January 31, 2012.
(amounts in thousands of Euro)

January 31
2012

January 31
2011

Third parties trade receivables, gross259,258

265,992

Allowance for bad and doubtful debts(11,681)(10,537)

Total third parties trade receivables, net

247,577

255,455

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.
Movements during the period may be analyzed as follows:(amounts in thousands of Euro)

Opening balance

January 31
2012

January 31
2011

10,537

11,308Exchange differences

198

204

Increase

2,369

1,345

Utilized(866)(2,069)

Reversals

(557)

(251)

11,681

10,537January 31
2012

January 31
2011

Raw materials

66,57563,672Work in progress

17,187

17,186

Finished products

360,379

263,341

Allowance for obsolete and slow moving inventories(69,359)(63,790)

Total

374,782

280,409

Closing balance

11. Inventories
Inventories may be analyzed as follows:(amounts in thousands of Euro)

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.
The increase in inventories of ﬁnished products is consistent with the higher volume of
production necessary to supply the expanded DOS network as well as with the growthof the business in general.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements107Movements on the allowance for obsolete and slow moving inventories are analyzed
as follows:(amounts in thousands of Euro)

Balance at January 31, 2011

Raw
materials

Finished
Products

Total

31,622

32,16863,790Exchange differences

1

21

22

Increases

131

7,233

7,364

Decreases(2,000)-(2,000)

-

183

183

29,75439,60569,359Other movements

Balance at January 31, 2012

12. Derivative financial instruments: assets and liabilities
Derivative financial instruments: assets and liabilities, current portion.
January 31
2012(amounts in thousands of Euro)

Financial assets regarding derivative instruments

January 31
2011

894

7,379

Financial liabilities regarding derivative instruments(15,200)(5,279)Net carrying amount - current(14,306)

2,100

Derivative financial instruments: assets and liabilities, non-current portion.
(amounts in thousands of Euro)

January 31
2012

January 31
2011

Financial assets regarding derivative instruments

-

2,140

Financial liabilities regarding derivative instruments

(335)

(318)

Net carrying amount - non-current

(335)

1,822

The difference between assets and liabilities under derivative financial instruments(current and non-current) is detailed as follows:(amounts in thousands of Euro)

January 31
2012

January 31
2011

IFRS7
Category

Forward contracts

316

607

Level II

Options

578

6,561

Level IIInterest rate swaps

-

2,351

Level II

Positive fair value

894

9,519

Forward contracts(3,279)(469)

Level II

Options(11,428)(4,217)

Level IIInterest rate swaps

(828)

(911)

Level II

Negative fair value(15,535)(5,597)

Net carrying amount(14,641)

3,922

All of the above derivative instruments reported in the financial statements can beclassified as Level II of the fair value hierarchy proposed by IFRS 7. The Group has notentered into any derivative contracts that may be classed as Level I or III.

108

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

The Group entered into the financial derivative contracts in the course of its risk
management activities in order to hedge financial risks connected with exchange rateand interest rate fluctuations.
Foreign exchange rate transactions
The international nature of the Group’s activities exposes its cash flows to exchange
rate volatility. In order to hedge this risk, the Group enters into options and forward saleand purchase agreements so as to guarantee the value in Euro (or in other currenciesof the various Group companies) of identified cash flows.
Expected future cash flows mainly regard the collection of trade receivables andsettlement of trade payables.
The most important currencies in terms of hedged amounts are: U.S. Dollar, Hong
Kong Dollar and Japanese Yen.
The notional amounts of the derivative contracts, designated as foreign exchange riskhedges (as translated at the European Central Bank exchange rate at January 31, 2012)
are stated below.
Contracts in place at January 31, 2012 to hedge projected future trade cash flows.
Options

Forward sale
contracts

Forward purchase
contracts (*)

January 31
2012

US Dollar

123,812-(26,563)

97,249GB Pound

42,672--

42,672

Japanese Yen

67,604

1,985(34,781)

34,808Hong Kong Dollar

164,550(amounts in thousands of Euro)
Currency

159,657

4,893-

Swiss Franc

2,706

3,362

-

6,068

Singapore Dollar

14,551--

14,551

Other

18,15539,831(1,190)56,796

Total

429,157

50,071(62,534)

416,694(*)Positive figures represent forward sales, negative figures represent forward purchases of currency.

Contracts in place as at January 31, 2012 to hedge projected future financial cash flows.
Options

Forward sale
contracts

Forward purchase
contracts

January 31
2012Japanese Yen-

76,617-76,617

Total-

76,617-76,617(amounts in thousands of Euro)
Currency

All contracts in place as at January 31, 2012 will mature within 12 months.
Contracts in place at January 31, 2011 to hedge projected future trade cash flows.
Options

Forward sale
contracts

Forward purchase
contracts

January 31
2011

US Dollar

93,872

18,989(29,214)

83,647

GB Pound

38,241--

38,241

Japanese Yen

76,518

6,978(19,557)

63,939Hong Kong Dollar

116,226

14,612-130,838

Swiss Franc

19,490--19,490Singapore Dollar

15,761285(6,159)

9,887

Other

18,38029,640-48,020

Total

378,488

70,504(54,930)

394,062(amounts in thousands of Euro)
Currency

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

109

Contracts in place as at January 31, 2011 to hedge projected future ﬁnancial cash
ﬂows.
Options

Forward sale
contracts

Forward purchase
contracts

January 31
2011Japanese Yen-

28,891-

28,891

Hong Kong Dollar-

31,659-31,659GB Pound

-

4,646

-

4,646

Total

-

65,196-

65,196(amounts in thousands of Euro)
Currency

A liquidity analysis on the maturity dates of these derivative contracts is included inthese Notes in the Information on Financial Risks section.
All contracts in place at the reporting date were entered into with leading ﬁnancial
institutions and the Group does not expect any default by these institutions.
Interest rate transactions
The Group enters into Interest Rate Swaps agreements (IRS) in order to hedge the riskof interest rate ﬂuctuations regarding several bank loans. The key features of the IRS
agreements in place as at January 31, 2012 and January 31, 2011 are summarized asfollows:
Contract

Currency

Notional
amountInterest
rate

Maturity
date

January 31
2012

Hedged loan –lending institution

AmountExpiryFair value
IRS

Euro/000

180,000

1.511%

26/07/2013(638)

Pool loan

180,000

07/2013IRS

Euro/000

18,7501.545%

02/06/2014(66)

Intesa-Sanpaolo

18,75006/2014IRS

Euro/000

12,000*1.745%

29/05/2012(1)

Unicredit

12,00005/2012IRS

Euro/000

4,200

2.210%

01/07/2015

(80)

MPS

4,200

07/201501/08/2012(43)

Carilucca, Pisa
e Livorno

3,750

08/2012Maturity
date

January 31
2011

Hedged loan –lending institution

AmountExpiryIRSEuro/000

3,750

3.500%* IRS discontinued in compliance with IAS39

Contract

Currency

Notional
amountInterest
rate

Fair value
IRS

Euro/000

260,000

1.511%

26/07/2013

2,027

Pool loan

260,000

07/2013IRS

Euro/000

26,2501.545%

02/06/2014

249

Intesa-Sanpaolo

26,25006/2014IRS

Euro/000

24,0001.745%

29/05/2012(33)

Unicredit

24,00005/2012IRS

Euro/000

5,400

2.210%

01/07/2015

6

MPS

5,400

07/20158,750

08/2012

20,98805/2014IRS

Euro/000

8,750

3.500%

01/08/2012(136)

Carilucca, Pisa
e Livorno

IRS

USD/000

20,9885.700%

01/05/2014(673)

Sovereign BankThe IRS convert the variable interest rates applying to a series of loans into ﬁxed
interest rates. These agreements have been arranged with leading ﬁnancial institutions
and the Group does not expect them to default.
Under applicable regulations, except for the IRS used to hedge the loan fromUnicredit (Euro 12 million), all of the derivatives in place at the reporting date meet therequirements for designation as cash ﬂow hedges.

110

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Movements on the cash ﬂow hedge reserve included in Group shareholders’ equity,
before tax effects, since February 1, 2010, may be analyzed as follows:(amounts in thousands of Euro)

Opening balance as at February 1, 2010

Change in the translation reserve(4,046)

12

Change in fair value, recognized in Equity(17,836)

Change in fair value, charged to Income Statement

26,650

Closing balance at January 31, 2011

4,780

Change in the translation reserve

7

Change in fair value, recognized in Equity(7,223)

Change in fair value, charged to Income Statement(3,209)

Closing balance at January 31, 2012

(5,645)

Changes in the reserve that are charged to the Income Statement are recorded
under Interest and other ﬁnancial income / (expense), net or as operating income andexpenses depending on the nature of the underlying.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

111

Information on financial risks
Capital management
The Group’s capital management strategy is intended to safeguard the Group’s ability
to continue to guarantee a return to shareholders, protect the interests of otherstakeholders and respect covenants, while maintaining an adequate, balanced capital
structure.
Categories of financial assets and liabilities according to IAS 39
Financial assets(amounts in thousands of Euro)

Loans andreceivables

Derivative financial
instruments

Total

Note

Cash and cash equivalents

362,284-

362,2849

Trade receivables

266,404-

266,404

10

Derivative financial instruments
Financial receivables

Total at January 31, 2012

(amounts in thousands of Euro)

-

894

894

12

1,411

-

1,411

13

630,099

894

630,993

Loans andreceivables

Derivative financial
instruments

Total

Note

Cash and cash equivalents

96,572-

96,5729

Trade receivables

274,175-

274,175

10

-

9,519

9,519

12

Financial receivables

Derivative financial instruments

34,044-

34,044

13

Total at January 31, 2011

404,791

9,519

414,310Loans andpayablesDerivative financial
instruments

Total

Note

Financial liabilities(amounts in thousands of Euro)

Financial payables

347,501-

347,50120, 21, 22, 27

Trade payables

283,538-

283,538

23

Obligations under finance leases

2,553

-

2,553

Derivative financial instruments-

15,535

15,535633,592

15,535649,127

Loans andpayablesDerivative financial
instruments

Total

Note

Total at January 31, 2012

(amounts in thousands of Euro)

Financial payables

498,510-498,51020, 21, 22, 27

Trade payables

233,825-

233,825

23

Obligations under finance leases

7,528

-

7,528

Derivative financial instruments

-

5,597

5,597

739,8635,597

745,460

Total at January 31, 2011

112

12

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

12Credit risk
Credit risk is deﬁned as the risk that a counterparty in a transaction, by not fulﬁlling
its obligations, causes a ﬁnancial loss for another entity. The maximum risk to which
an entity is potentially exposed is represented by all ﬁnancial assets recorded in theﬁnancial statements.
The Directors essentially believe that the Group’s credit risk mainly regards tradereceivables generated in the wholesale channel.
The Group manages the credit risk and reduces negative effects through its
commercial and ﬁnancial strategy. Credit risk management is performed by controllingand monitoring the reliability and solvency of customers.
At the same time, the fact that the total receivables balance is not highly concentrated
on individual customers and the fact that net sales are evenly spread geographicallylead to a reduced risk of ﬁnancial losses.
The following table contains a summary of total receivables before the allowance for
doubtful debts at the reporting date:
Overdue (days)

January 31
2012

Current

1 < 3031 < 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

13,500January 31
2011

Current

1 < 3031 < 60

61 < 90

91 < 120> 120

Trade receivables

284,713238,248

18,543

7,438

4,176

342

15,966

Total

284,713238,248

18,543

7,438

4,176

342

15,966(amounts in thousands of Euro)(amounts in thousands of Euro)

Overdue (days)

The following table contains a summary, by due date, of trade receivables less theallowance for doubtful accounts at the reporting date:
Overdue (days)

January 31
2012

Current

1 < 3031 < 60

61 < 90

91 < 120> 120

Trade receivables less allowancefor 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

January 31
2011

Current

1 < 3031 < 60

61 < 90

91 < 120> 120

Trade receivables less allowancefor doubtful accounts

274,175

237,819

18,463

7,390

4,083

239

6,181

Total

274,175

237,819

18,463

7,390

4,083

239

6,181

(amounts in thousands of Euro)(amounts in thousands of Euro)

Overdue (days)

At the reporting date, the expected loss on doubtful receivables was fully coveredby the allowance for doubtful receivables. Movements on the allowance for doubtfulreceivables are shown in Note 10.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

113

Liquidity risk
The liquidity risk relates to the difﬁculty the Group may have in fulﬁlling its obligations
with regard to ﬁnancial liabilities. The Directors are responsible for managing theliquidity risk while the Group Corporate Finance Department, reporting to the CFO, is
responsible for managing ﬁnancial resources as well as possible.
The Directors believe that the funds and lines of credit currently available, in addition to
those that will be generated by operating and ﬁnancing activities, will allow the Groupto meet its needs resulting from investing activities, working capital management andrepayment of loans as they fall due. This can be achieved without using all available
fund and surplus resources can thus be used to pay dividends.
At January 31, 2012, the Group had headroom totaling Euro 461.5 million on available,
unused credit facilities (Euro 440.6 million at January 31, 2011).
The following table summarizes trade payables by maturity date.
Overdue (days)

January 31
2012

Current

1 < 3031 < 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

January 31
2011

Current

1 < 3031 < 60

61 < 90

91 < 120> 120

Trade payables

233,825

210,700

9,450

4,086

2,557

1,731

5,301

Total

233,825

210,700

9,450

4,086

2,557

1,731

5,301

(amounts in thousands of Euro)(amounts in thousands of Euro)

Overdue (days)

The following table details the maturity of derivative and non-derivative ﬁnancial
liabilities showing earliest date on which the Group could be called upon to makepayment (worst-case scenario).
Financial liabilities under derivative financial instruments
Future contractual cash
flows at Jan. 31, 2012

6 mthsor less

6 to 12mths

Cash outflows(66,862)(39,863)(26,999)---

Cash inflows

63,40437,991

25,413---(amounts in thousands of Euro)

1 to 2years

2 to 3years

3 to 4years

Forward contracts designated as
cash flow hedges

Other contracts designated as
cash flow hedges
Cash outflows(12,696)(5,814)(6,882)---

Cash inflows

6,239

1,397

4,842

-

-

-

Interest rate swaps - cash flow
hedge

(858)

(101)

(409)

(321)

(25)

(2)

(10,773)(6,390)(4,035)

(321)

(25)

(2)

Net value

114

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Future contractual cash
flows at Jan. 31, 2011

6 mthsor less

6 to 12mths

Cash outflows(11,986)(11,477)

(509)

-

-

-

Cash inflows

11,432

11,092

340

-

-

-

(amounts in thousands of Euro)

1 to 2years

2 to 3years

3 to 4years

Forward contracts designated as
cash flow hedges

Other contracts designated as
cash flow hedges
Cash outflows(21,771)(20,196)(1,575)---

Cash inflows

18,767

17,345

1,423

-

-

-

Interest rate swaps - cash flowhedge

(1,106)

(305)

(249)

(404)

(145)

(3)

Net value(4,664)(3,541)

(570)

(404)

(145)

(3)

Financial liabilities(amounts in thousands of Euro)

Carrying
Futureamount at
contractual
January 31 cash flows at
2012 Jan. 31, 2012on
demand6 mthsor less

6 to 12mths

1 to 2years

2 to 3years

3 to 4years

Obligations under financeleases

2,553

2,628

-

847

658

597

515

11

Financial liabilities – third
parties345,793

357,065

8,730

94,64571,680164,966

12,735

4,309

Financial liabilities – relatedparties

3,504

3,504

546

-

2,958

-

-

-

351,850

363,197

9,276

95,49275,296

165,563

13,250

4,320

Total

(amounts in thousands of Euro)

Carrying
Futureamount at
contractual
January 31 cash flows at
2011 Jan. 31, 2011

Obligations under financeleases

7,528

7,878

Financial liabilities – third
parties

501,952

530,676862

862

510,342

539,416

Financial liabilities – tonon-controlling shareholders

Total

on 6 mths 6 to 12
demand or less
mths

-

2,317

17,186 115,211
862-

18,048 117,528

1 to 2years

2 to 3years

3 to 4years

4 to 5
years

1,487

616

529

4

76,537 137,738 156,789

24,196

3,019

-

-

-

79,462 139,225 157,405

24,725

3,023

2,925

-

-

Some ﬁnancial liabilities are subject to compliance with covenants as described in
Note 27.
Exchange rate risk
The exchange rate risk to which the Group is exposed depends on foreign currency
ﬂuctuation, mainly against the Euro. It is largely concentrated in PRADA spa.
The exchange rate risk mainly involves the risk that the cash ﬂows of the Group’s distribution
company will ﬂuctuate as a result of changes in exchange rates. The most importantcurrencies for the Group are: the U.S. Dollar, Hong Kong Dollar and Japanese Yen.
Exchange rate risk exposure for subsidiary companies is generated by cash ﬂows incurrencies other than their reporting currency.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

115

The following table shows the sensitivity of the Group’s net income and shareholders’equity to a range of ﬂuctuation in the main foreign currencies against Euro, based on
the Group statement of ﬁnancial position at January 31, 2012.
Euro strengthens by 5%(amounts in thousands of Euro)Euro weakens by 5%

Effect on
net income

Effect on
shareholders’equityEffect on
net income

Effect on
shareholders’equity(5,461)

GB Pound

2,568

5,051

226

Hong Kong Dollar(2,225)

(341)

2,705

109

Japanese Yen

2,371

3,523

(593)

(4,473)

(970)

(790)

2,103

319

Other currencies

US Dollar(7,355)(4,875)

8,712

5,149

Total

(5,611)

2,568

13,153(4,357)

The total impact on shareholders’ equity (Euro 2.6 million positive and Euro 4.4 million
negative) is the sum of the effect on the income statement and on the cash ﬂow
hedge reserve of an hypothetical strengthening/weakening of the Euro against othercurrencies.
The effects on the above-mentioned items are recorded before the tax effect. The
sensitivity analysis is based on the period end exposure which might not reﬂect theeffects actually generated during the year and for this reason it must be consideredmerely indicative.
Interest rate risk
The PRADA Group is exposed to interest rate ﬂuctuations mainly with regard to the interest
charges on the debt carried by parent company PRADA spa and some of its subsidiaries.
Management of this risk falls within the scope of the risk management activities theGroup carries out through its centralized Corporate Finance Department.
The following table shows the sensitivity of the Group’s net result and Shareholders’equity to a shift in the interest rate curve in relation to the Group companies’ ﬁnancial
position as at January 31, 2012.
(amounts in thousands of Euro)

Shift ininterest rate
curve

Effect on net
Effect on
income for shareholders’
the period
equityShift ininterest rate
curve

Effect on net
Effect on
income for shareholders’
the period
equityEuro+ 0.50%(674)

54- 0.50%674

Japanese Yen+ 0.50%

(357)

(357)

- 0.50%357

357

Hong Kong Dollar+ 0.50%350

350- 0.50%

(350)

(350)

US Dollar+ 0.50%279

279- 0.50%

(279)

(279)

Other currencies+ 0.50%368

368- 0.50%

(368)

(368)

(34)

694

34

(700)

Total

(60)

The total impact on Shareholders’ equity (positive impact of Euro 0.7 million andnegative impact of Euro 0.7 million) should be considered as the sum of the effectof an hypothetical shift in the interest rate curve on the income statement and on the
cash ﬂow hedge reserve.
The effects on the above-mentioned items are stated before the tax effect.
The sensitivity analysis was based on the period end net ﬁnancial position so it might
not reﬂect the actual exposure to the interest rate risk during the year. Therefore, thisanalysis should be considered as indicative only.

116

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

13. Receivables and prepayments from parent companies and related parties
Receivables from parent companies and related companies are detailed below:
January 31
2012

January 31
2011

Financial receivables – PRADA Holding bv-

32,558Financial receivables – other companies controlled by PRADA Holding bv

-

77

1,410

1,409

(amounts in thousands of Euro)

Financial receivables – other related parties
Other receivables – PRADA Holding bv

654

767

Other receivables – other related parties

1,646

1,329

154

172

-

5

Prepayments – other related companies

9,000

-

Total

12,86436,317

Other receivables – other companies controlled by PRADA Holding bv
Other receivables – associated companies

The ﬁnancial receivables the Group had from PRADA Holding bv at January 31, 2011were entirely settled during the year by means of the dividend distribution approved by
the Shareholders’ General Meeting of March 28, 2011 (Note 39).
Prepayments includes Euro 7.5 million of advance payments made to Luna Rossa
Challenge NZ ltd and Luna Rossa Challenge srl, in accordance with the contracts signedwith 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 1.5 million consists of advances paid to Progetto
Prada Arte srl for cultural initiatives to be undertaken the following year.
Details of receivables from parent companies and related parties are provided in Note39.
14. Other current assets
Other current assets are detailed as follows:
January 31
2012

January 31
2011

VAT

37,372

19,249

Income tax and other tax receivables

6,597

9,794

Other assets

15,337

7,783

Prepayments and accrued income

39,04931,842

Deposits

1,920

1,557

100,275

70,225January 31
2012

January 31
2011

Advertising contributions under license agreements

3,693

1,952

Advances to suppliers

4,832

566

Incentives for retail investments

4,152

2,222

(amounts in thousands of Euro)

Total

Other assets
Other assets are detailed as follows:(amounts in thousands of Euro)

Advances to employees

754

647

Other receivables

1,906

2,396

Total

15,337

7,783

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

117Prepayments and accrued income
Prepayments and accrued income are detailed as follows:
January 31
2012

January 31
2011

Rental charges

15,664

11,357

Insurance

1,033

873

Design costs

9,914

10,620Fashion shows and advertising campaigns

4,138

2,133

(amounts in thousands of Euro)

Sponsorship

704

236

Consulting

1,757

2,762

Amortized costs on loans

591

985

Other

5,248

2,876

Total

39,04931,842

Design costs mainly include costs incurred for the conception and realization ofcollections that will generate revenue the following year.
Deposits
Deposits mainly includes guarantee deposits paid under commercial lease agreements.
15. Assets held for sale
The decrease in Assets held for sale related to the sale of the investment held in
Fragrance & Skincare sl, a joint-venture set up in 2003 with Spanish fragrance
manufacturer Puig, which was sold on February 23, 2011, and to the Genny brandwhich was also sold on March 16, 2011.
16. Property, plant and equipment
Changes in the historical cost of Property, plant and equipment during the year ended
January 31, 2012 and in prior year are as follows:
Land andbuildings

Production
plant andmachinery

Leaseholdimprovements

Furniture& fittings

Othertangibles

Balance at January 31
2010

128,794

90,119382,524

144,063

72,84861,616879,964

Additions

10,4797,609

83,16526,437

11,93058,446

198,066

Disposals-(1,057)

(110)

(416)

(434)

(309)

(2,326)

Exchange differences

1,257

46

12,788

4,086

579

2,195

20,951Other movements

31,995346

23,766

3,857

(54)

(60,710)

(800)

-

(15)

(14,925)(1,515)(376)(2,081)(18,912)

Balance at January 31
2011

172,525

97,048487,208

176,51284,49359,157 1,076,943

Additions40,806

7,030

110,797

29,32918,82551,820258,607

Disposals

-

(300)

(106)

(525)

(1,656)(15)(2,602)

1,968

238

29,531

6,090

944

3,501

42,272288

1523,893

4,860

1,116

(30,627)

(455)

-

(8)

(10,187)(5,470)(646)(1,216)(17,527)

215,587

104,023

641,136

210,796

103,076(amounts in thousands of Euro)

Impairment

Exchange differences
Other movements
Impairment

Balance at January 31
2012

118

PRADA Group

AssetsTotal
under historicalconstruction
cost

Annual Report 2011 - Notes to the Consolidated Financial Statements

82,620 1,357,238

Changes in accumulated depreciation of Property, plant and equipment during the year
ended January 31, 2012 and in prior year are as follows:
Land andbuildings

Production
plant andmachinery

Leaseholdimprovements

Furniture& fittings

Othertangibles

Total accum.
deprec’nBalance at January 31
2010

22,33776,599221,776

87,85953,428461,999

Depreciation

4,295

6,319

49,923

15,861

6,646

83,044

-

(929)

(25)

(247)

(378)

(1,579)9,789(amounts in thousands of Euro)

Disposals
Exchange differences

134

39

6,975

2,206

435

Other movements

157

(7)

(349)

(32)

38

(193)

-

(15)

(11,204)(1,244)(371)(12,834)

Balance at January 31
2011

26,92382,006

267,096

104,403

59,798540,226

Depreciation

5,055

6,635

62,89918,691

5,850

99,130

-

(296)

(45)

(342)

(1,593)(2,276)
19,933

Impairment

Disposals

525

210

14,894

3,685

619

Other movements

Exchange differences

-

-

(118)

975

(975)

(118)

Impairment-(8)(7,914)(5,000)(605)(13,527)

32,50388,547

336,812

122,41263,094643,368

Balance at January 31
2012

Changes in the net book value of Property, plant and equipment in the year ended
January 31, 2012 and in prior year are as follows:(amounts in thousands of Euro)

Balance at January 31
2010

Land andbuildings

Production
plant andmachinery

Leaseholdimprovements

Furniture& fittings

Othertangibles

Assetsunderconstruction

Total net
book
value

106,458

13,520160,747

56,204

19,42061,616417,965

Additions

10,4797,609

83,16526,437

11,93058,446

198,066

Depreciation(4,295)(6,319)(49,923)(15,861)(6,646)-(83,044)

Disposals

-

(128)

(85)

(169)

(56)

(309)

(747)

Exchange differences

1,122

7

5,814

1,880

144

2,195

11,162Other movements

31,838353

24,115

3,889

(92)

(60,710)

(607)

-

-

(3,721)

(271)

(5)

(2,081)(6,078)145,602

15,042

220,112

72,10924,69559,157536,717

Impairment

Balance at January 31
2011

Additions40,806

7,030

110,797

29,32918,82551,820258,607

Depreciation(5,055)(6,635)(62,899)(18,691)(5,850)-(99,130)

Disposals
Exchange differences
Other movements
Impairment

Balance at January 31
2012

-

(4)

(61)

(183)

(63)

(15)

(326)

1,443

28

14,637

2,405

325

3,501

22,339288

1524,011

3,885

2,091

(30,627)

(337)

-

-

(2,273)

(470)

(41)

(1,216)(4,000)183,084

15,476304,324

88,38439,982

82,620713,870

Additions to Land and buildings, amounting to Euro 40.8 million, mainly regard thepurchase of a number of industrial properties in Tuscany, already used by the Groupin its manufacturing processes under a rental agreement (mainly clothing). These
investments related to a preliminary purchase agreement signed in 2010 whereby

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

119

PRADA spa undertook to purchase a number of buildings mainly situated in Tuscany.
The last two properties relating to this commitment were purchased in the ﬁrst few
months of 2012 for Euro 12.3 million.
The increases in Production plant and machinery mainly relate to purchases ofequipment involved in the footwear production.
In line with the Group’s growth strategy, most of the investments made during theyear were concentrated, as in prior years, in building up the retail network. In 2011, theincrease in Property, plant and equipment and Intangible assets relating to this sales
channel amounted to Euro 191.2 million and was mainly split between “Leasehold
improvements”, Furniture and ﬁttings and Assets under construction. Some Euro
153.3 million of this total amount was invested in opening new stores (Euro 115.9
million for stores that opened in 2011 and Euro 37.4 million for stores opening shortly)
while Euro 37.9 million was invested in the expansion and refurbishment of existing
stores.
Assets under construction amounted to Euro 82.6 million at January 31, 2012 andmainly related to investment in the retail network (primarily in Europe, Japan, theMiddle East and Africa).
Land and buildings included capitalized interest charges as follows:(amounts in thousands of Euro)

Opening net
book value

Increases

Exchangedifferences

Amortization

Closing net
book value

7,821

60

716

(220)

8,377

Land and buildings

17. Intangible assets
Changes in the historical cost of Intangible assets during the year ended January 31,
2012 and in prior year are as follows:(amounts in thousands of Euro)

Trademarks

Goodwill

Store Lease
Acquisitions

SoftwareDevelopment
costs

Assets inprogressTotal
historicalcost

Balance at January 31
2010

395,114532,992

105,51057,01444,033816

1,135,479

Additions

184

-

1,529

3,339

1,599

2,143

8,794

Disposals

-

-

-

(2)

-

(3)

(5)

(5,208)

176

340

185

1

19

(4,487)

Other movements

1

-

381

216

21

(603)

16

Impairment

-

-

-

(24)

(189)

-

(213)

Exchange differences

Balance at January 31
2011

390,091

533,168

107,760

60,72845,4652,372

1,139,584

Additions166-

14,393

4,178

128

1,384

20,249

Disposals

-

-

-

(12)

(1)

-

(13)

2,341

835

686

268

-

12

4,142

Other movements

-

-

300

1,082

180

(2,278)(716)

Impairment

-

-

-

(38)

(191)

(14)

(243)

392,598

534,003

123,139

66,20645,581

1,476

1,163,003

Exchange differences

Balance at January 31
2012

120

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Changes in the accumulated amortization of Intangible assets during the year ended
January 31, 2012 and in prior year are as follows:
Total
Development
accumulated
costs
amortization(amounts in thousands of Euro)

Trademarks

Goodwill

Store Lease
Acquisitions

SoftwareBalance at January 31
2010

66,96029,10363,05851,25031,789242,160

Amortization

11,110

-

8,358

2,955

5,987

28,410

-

-

-

-

-

-

(439)

119

157

162

1

-

Disposals
Exchange differences
Other movements

-

-

100

-

(2)

98

Impairment

-

-

-

(24)

(179)

(203)

Balance at January 31
2011

77,631

29,222

71,67354,34337,596

270,465

Amortization

11,025

-

8,354

3,067

4,726

27,172

-

-

-

(8)

-

(8)

634

561

328

252

-

1,775

Disposals
Exchange differences
Other movements

-

-

110

11

180

301

Impairment

-

-

-

(37)

(191)

(228)

89,29029,78380,46557,62842,311

299,477

Balance at January 31
2012

Changes in the net book value of Intangible assets during the year ended January 31,
2012 and in prior year are as follows:(amounts in thousands of Euro)

Trademarks

Goodwill

Store Lease
Acquisitions

SoftwareDevelopment
costs

Balance at January 31
2010

328,154503,889

42,452

5,764

12,244816

Additions
Amortization
Disposals

Assets in
Total netprogress book value893,319

184

-

1,529

3,339

1,599

2,143

8,794

(11,110)-(8,358)(2,955)(5,987)-(28,410)

-

-

-

(2)

-

(3)

(5)

(4,769)

57

183

23

-

19

(4,487)

Other movements

1

-

281

216

23

(603)

(82)

Impairment

-

-

-

-

(10)

-

(10)

312,460

503,946

36,087

6,385

7,869

2,372

869,119

Exchange differences

Balance at January 31
2011

Additions
Amortization
Disposals

166-

14,393

4,178

128

1,384

20,249(11,025)-(8,354)(3,067)(4,726)-(27,172)

-

-

-

(4)

(1)

-

(5)

1,707

274

358

16

-

12

2,367

Other movements

-

-

190

1,071

-

(2,278)(1,017)

Impairment

-

-

-

(1)

-

(14)

(15)

303,308504,220

42,674

8,578

3,270

1,476

863,526

Exchange differences

Balance at January 31
2012

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

121

The net book value of Trademarks at January 31, 2012 and January 31, 2011 is broken
down as follows:
January 31
2012

January 31
2011

Miu Miu

176,537

182,112Church’s

108,411

110,546

Luna Rossa

7,111

8,093

Car Shoe

5,983

6,177

Prada

4,474

4,637

Other

792

895

Total

303,308

312,460(amounts in thousands of Euro)No impairment losses were recorded in relation to the Group’s trademarks in the year
ended January 31, 2012. Other includes trademark registration expenses.
Store lease acquisition costs (Key Money) includes intangible assets recognized
in respect of costs incurred by the Group to enter into, take over or extend leaseagreements for retail premises in the most prestigious retail locations worldwide.
The increase recorded during the period regards lease agreements in Europe.
The following table contains a summary of total additions to Property, plant andequipment and Intangible assets for each business area.
January 31
2012

January 31
2011

Retail191,169

153,684

Production and logistics

57,82828,385

Corporate

29,85924,792

Total

278,856

206,861(amounts in thousands of Euro)

Goodwill
As at January 31, 2012, Goodwill amounted to Euro 504.2 million.
A breakdown of goodwill by Cash Generating Unit (CGU) is provided below:(amounts in thousands of Euro)

January 31
2012

January 31
2011

Italy Wholesale

78,35578,355Asia Pacific and Japan Retail311,936

311,936

Italy Retail25,85025,850Germany and Austria Retail

5,064

5,064

United Kingdom Retail

9,300

9,300

Spain Retail

1,400

1,400

France and Monte Carlo Retail

11,70011,700

North America Retail and Wholesale

48,00048,000

Production division

3,492

3,492

Church’s

9,123

8,849

504,220

503,946

Total

As required by IAS 36, goodwill with an indeﬁnite useful life is not amortized. Instead,
it is tested for impairment at least once a year.

122

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

The method used to identify the recoverable value (value in use) is based on the
discounted expected free cash-ﬂow generated by the assets directly attributable tothe business to which the goodwill has been allocated (Cash Generating Unit).
Value in use is calculated as the sum of the present value of future free cash-ﬂows
expected from the business plan projections prepared for each CGU and the present
value of the operating activities of the sector at the end of the business plan period(terminal value).
Business plans cover a period of ﬁve years and the discount rate used to discount cash
ﬂows is calculated using the weighted average cost of capital approach (WACC). For
the year ended January 31, 2012, the WACC used for discounting purposes was in arange between 6.8% and 23.3% (between 5.55% and 9.6% at January 31, 2011).
The impairment test performed as at January 31, 2012 did not identify any impairment
losses for the Group CGUs. However, as value in use is measured based on estimates,
the Group cannot guarantee that the value of goodwill will not be impaired in future.
18. Investments
January 31
2012

January 31
2011

Investment in associated undertaking

1,739

1,739

Investment available for sale

13,878-14

14

15,631

1,753(amounts in thousands of Euro)

Other investments

Total

Investment in associated undertaking regards a 49% interest in Pac srl in liquidationthat has been recorded under the equity method.
Investment available for sale regards the acquisition of 4.88% of the share capitalof Sitoy Group Holdings ltd, a company listed on Hong Kong Stock Exchange that
operates on the Asian market in the production of leather bags and other products.
In accordance with IAS 39, the investment was initially recognized at cost andsubsequently restated at fair value in line with the ofﬁcial quoted share price on the
Hong Kong Stock Exchange at the reporting date (Level I of the fair value hierarchy per
IFRS 7). Fair value adjustments are recorded in a speciﬁc equity reserve.
19. Other non-current assets
Other non-current assets are detailed as follows:
January 31
2012

January 31
2011

Guarantee deposits

49,52637,945

Deferred rental income

2,893

1,981

Other receivables

4,883

4,957

Total

57,30244,883(amounts in thousands of Euro)

The increase in Guarantee deposits is due to expansion of the retail network.
Other receivables include Euro 4.2 million representing the actuarial valuation of theGroup’s pension plans in the United Kingdom, as described in Note 28.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

123

Guarantee deposits are analyzed below by nature and maturity:
January 31
2012

January 31
2011

Stores47,652

34,639

Offices

1,335

1,268

(amounts in thousands of Euro)Nature:Warehouses

148

152

Other

391

1,886

Total

49,52637,945January 31
2012(amounts in thousands of Euro)

Maturity:
By 31.01.2014

10,849By 31.01.2015

6,457

By 31.01.2016

5,352

By 31.01.2017

1,419

After 31.01.2017

25,449Total

49,526

20. Short-term financial payables and bank overdrafts(amounts in thousands of Euro)Bank overdrafts and commercial lines of credit

January 31
2012

January 31
2011

8,730

17,074

Short term financial payables

158,144

179,389

Deferred costs on loans(1,389)(2,223)

Total

165,485

194,240

The Euro 29.6 million decrease in Short-term financial payables and bank overdrafts
benefited by the free cash flows for the year and the proceeds of the share capitalincrease (IPO).
Short-term financial payables are analyzed as follows:(amounts in thousands of Euro)

124

January 31
2012

January 31
2011

Short term bank loans

29,87162,304Current portion of long term loans

128,273

117,085

Total

158,144

179,389

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Short-term bank loans and the current position of long-term borrowings may beanalyzed by currency as follows:
January 31
2012

January 31
2011

Euro

99,993

136,451

Japanese Yen

44,47636,163Renminbi

12,818

137

857

6,638

158,144

179,389(amounts in thousands of Euro)

Other currencies

Total

The Group generally borrows at variable rates of interest and manages the risk ofinterest rate ﬂuctuation by entering into hedging agreements as described in Note 12.
Considering hedges in place at the reporting date, some 81% of the current portion of
medium/long term loans consisted of ﬁxed rate loans (96% at January 31, 2011) withvariable rate loans making up the remaining 19% (4% at January 31, 2011).
Financial payables are stated net of amortized costs incurred to arrange the loans (Euro
1.4 million deducted from Short-term loans and Euro 0.5 million deducted from Longterm loans).
21. Payables to parent companies and related parties
Payables to parent companies and related parties may be detailed as follows:(amounts in thousands of Euro)

January 31
2012

January 31
2011

Financial payables – PRADA Holding bv-

40

Financial payables – other companies controlled by PRADA Holding bv-

241

Financial payables – other related companies

3,574

-

Other payables – PRADA Holding bv-

30

Other payables – other related parties

528

827

Other payables – other companies controlled by PRADA Holding bv

259

10

4,361

1,148

Total

Financial payables towards other related companies, totaling Euro 3.6 million, include
an interest-free loan of Euro 2.9 million from non-controlling shareholder Al Tayer tosubsidiary PRADA Middle East fzco to help develop the retail business in the Middle
East.
22. Payables to other shareholders(amounts in thousands of Euro)

January 31
2012

January 31
2011

Payables to other shareholders

-

581

Total

-

581

At January 31, 2012, ﬁnancial payables to non-controlling shareholders of the company
called “TRS” (Travel Retail Shop) were reclassiﬁed to Payables to parent companies
and related parties.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

12523. Trade payables
Trade payables may be summarized as follows:
January 31
2012

January 31
2011

Trade payables – third parties

280,808

231,128

Trade payables – related parties

2,730

2,675

-

22

283,538

233,825(amounts in thousands of Euro)

Trade payables – associated companies

Total

The increase in Trade payables is due to the growth of the Group business in general.
At January 31, 2012, Trade payables towards related parties included Euro 0.9 million
due to retail companies owned by the controlling shareholders of PRADA Holding
bv and Euro 1.8 million due to non-controlling shareholders of several companies
controlled by the Group.
24. Tax payables
Current tax payables are summarized as follows:
January 31
2012

January 31
2011

Current income taxes

94,85889,137

VAT and other taxes

22,912

18,455

Total

117,770

107,592(amounts in thousands of Euro)

The growth of the business during the year has generated greater direct and indirect
tax liabilities.
25. Obligations under finance leases
At January 31, 2012, Obligations under ﬁnance leases included short term payablesof Euro 1.5 million and long term payables of Euro 1.1 million. They mainly related toleases of properties situated in Italy. Further information is provided in Note 40.
26. Other current liabilities
Other current liabilities may be analyzed as follows:126(amounts in thousands of Euro)

January 31
2012

January 31
2011

Payables for capital expenditure

57,844

41,134

Accrued expenses and deferred income

12,944

23,423

Other payables

57,98946,925

Total

128,777

111,482

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Other payables are detailed below:
January 31
2012

January 31
2011

Short term benefits for employees and other personnel

44,55032,768Customer advances

4,688

2,473

Returns from customers

6,988

4,491

Other

1,763

7,193

Total

57,98946,925January 31
2012

January 31
2011

178,919

305,489(477)(2,081)

178,442

303,408(amounts in thousands of Euro)

27. Long-term financial payables
Long-term ﬁnancial payables are analyzed below:(amounts in thousands of Euro)Bank borrowing
Deferred costs on loans

Total

The reduction in long-term ﬁnancial payables is mainly due to the reclassiﬁcation of
the current portion to Short-term ﬁnancial payables and bank overdrafts. Moreover,during the year, the Group made early repayment of a US Dollar loan with a reported
outstanding amount of Euro 14.8 million at January 31, 2011.
The Group generally borrows at variable rates of interest and manages the risk ofinterest rate ﬂuctuation by entering into hedging agreements as described in Note 12.
At the reporting date, some 70% of long term loans consisted of ﬁxed rate loans (80%at January 31, 2011) with variable rate loans making up the remaining 30% (20% at
January 31, 2011).
Details of long term borrowing at January 31, 2012 are provided below:
Amount inthousandsof EuroBorrower

Loan currency

LenderExpiry date

Interest rate
(1)

PRADA spa

100,000

Euro

Pool loan

07/20133.010%PRADA spa

3,000

Euro

Monte dei Paschi di Siena

07/2015

3.310%PRADA spa

11,250Euro

IntesaSanPaolo

06/20142.145%PRADA spa

7,200

Euro

Unicredit

05/20142.345%PRADA spa

13,779Euro

Cariparma

08/2015

2.590%PRADA Japan Co. Ltd

3,279

Japanese Yen

Mizuho Bank

07/20132.090%GB Pound

HSBC

07/20131.200%

Church & Co plc

856

PRADA Japan Co. Ltd

27,825

Japanese Yen

Mizuho Bank

07/2013

1.540%PRADA Fashion Commerce(Shanghai) co limited

11,730Renminbi

Mizuho Bank

09/20136.650%

Total

178,919(1) the interest rates include the effect of interest rate risk hedging transactions

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

127

Details of long term borrowing at January 31, 2011 are provided below.
Amount inthousandsof EuroBorrower

Post Development Corp

14,844PRADA Fashion Commerce(Shanghai) co limited

Lender

US Dollar

Sovereign Bank

Expiry date

Interest rate
(1)

05/20145.700%

Renminbi

Bank of China

09/20125.400%

180,000

Euro

Pool loan

07/20133.010%PRADA spa

4,200

Euro

Monte dei Paschi di Siena

07/2015

3.310%PRADA spa

18,750Euro

IntesaSanPaolo

06/20142.145%PRADA spa

12,000Euro

Unicredit

05/20122.345%PRADA spa

3,750

Euro

C.R. Lucca. Pisa. Livorno

08/20124.400%PRADA spa

16,243Euro

Cariparma

06/2015

2.190%PRADA Japan Co. Ltd

8,872

Japanese Yen

Mizuho Bank

07/20132.090%

Church & Co plc

1,660

GB Pound

HSBC

07/20131.200%PRADA Japan Co. Ltd

32,003

Japanese Yen

Mizuho Bank

07/20131.550%PRADA Fashion Commerce(Shanghai) co limited

9,845

Renminbi

Mizuho Bank

09/20135.570%PRADA spa

Total

3,322

Loan currency

305,489(1) the interest rates include the effect of interest rate risk hedging transactions

During the year, the Group arranged just one new long-term loan for an amount ofRenminbi 81.1 million.
The pool loan is subject to compliance with certain covenants based on the Consolidated
Financial Statements of the PRADA spa. Speciﬁcally the ratio of total net borrowings
to EBITDA cannot exceed 2.5 at year end (3 at six-monthly reporting date), the ratioof EBITDA to total net interest charges must greater than 4 and, ﬁnally, shareholders’equity must not be lower than Euro 650 million. At January 31, 2012, the Group fully
respected all these covenants.
The Japanese Yen loan from Mizuho Bank is subject to compliance with certain
covenants based on the Statutory Financial Statements of Prada Japan co ltd. At
January 31, 2012, all these covenants were fully respected.
An analysis of the debt by maturity date is provided in Note 12.
The long-term loan made by Banca Monte dei Paschi di Siena to PRADA spa in 2008 –outstanding amount of Euro 4.2 million reported at January 31, 2012 (including current
portion of Euro 1.2 million) - is secured by a mortgage on a building in Tuscany thathouses ofﬁces and research and development workshops.
The long-term loan made by Cassa di Risparmio Parma e Piacenza to PRADA spa in2008 – outstanding amount of Euro 16.3 million reported at January 31, 2012 (including
current portion of Euro 2.5 million) - is secured by a mortgage on a building in Tuscany
where the Group has concentrated the logistics activities of the footwear and leather
goods divisions.
In March 2012, the Group exercised its Term Out Option with Unicredit, extending thematurity date of the loan from May 2012 to May 2014.

128

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

All bank borrowing is analyzed below by security proﬁle.
January 31
2012(amounts in thousands of Euro)

January 31
2011

Secured20,44336,487

Unsecured325,350

461,161

Total

345,793497,648

January 31
2012

January 31
2011

28. Long-term employee benefits(amounts in thousands of Euro)

Post-employment benefits

35,28333,451Other long term employee benefits

615

1,382

Total liabilities for long term benefits

35,89834,833Post-employment benefit (pension plan surplus)(4,187)(3,595)Net liabilities for long term benefits

31,711

31,238Post-employment benefits
Liabilities and assets for post-employment beneﬁts reported at January 31, 2012
totaled Euro 31.1 million, net (Euro 29.9 million at January 31 2011) and relate to what
are considered deﬁned beneﬁt plans. The pension plan surplus is included in Other
non-current assets, Note 19.
The balance includes Euro 20.2 million of liabilities recorded in the ﬁnancial statementsof Italian companies and Euro 15.1 million reported by foreign companies. The Italianliabilities for post-employment beneﬁts regard the “Trattamento di Fine Rapporto”(hereinafter “TFR” i.e. staff leaving indemnity) and the balance - which reﬂects fairvalue - was determined projecting the beneﬁt, accruing under Italian law at the reporting
date, to the future date when the employment relationship will be terminated anddiscounting it at the reporting date using the actuarial “Projected Unit Credit Method(PUCM)“.
The following table shows movements on liabilities for post-employment beneﬁts inthe year ended January 31, 2012.

Balance at January 31, 2011

Post-employment benefits
Italian companies (TFR)

Post-employment benefits
non-Italian companies

Group
Total

22,322

7,534

29,856

3,037

Current service cost

111

2,926

Interest cost

439

(162)

277

Actuarial (gains)/losses

(508)

1,213

705

(2,156)(2,016)(4,172)

-

1,393

1,393

20,208

10,88831,096

Benefits paid
Exchange differences

Balance at January 31, 2012

The TFR liability was determined based on an independent appraisal which considereddemographic, economic and ﬁnancial evidence and assumptions.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

129

The technical part of the computation was based on an historical analysis of the data.
For the demographic assumptions, variables such as mortality, early retirement andresignation, dismissal, expiry of employment contract, advance payment on leaving
indemnities and supplementary pension schemes were considered. Economic andﬁnancial assumptions were made based on variables such as inﬂation and discountrates.
Such TFR actuarial valuation was carried out on March 5, 2012 by Federica Zappari, anational registered actuary (n. 1134) of Ordine Nazionale degli Attuari, in Italy.
Post-employment beneﬁts of non-Italian companies are stated net of the surplus on
pension plans relating to Group companies operating in the United Kingdom which
provide pension services for their employees.
As at January 31, 2012, these pension plans had a positive fair value of Euro 4.2 million,
as determined by an independent actuary using the Projected Unit Cost Method. They
are analyzed as follows:
January 31
2012(amounts in thousands of Euro)

January 31
2011

Fair value of plan assets

52,45144,493

Fair value of plan liabilities(43,698)(39,185)

Pension plan surplus

8,753

5,308

Restrictions on recognition of surplus applied during actuarial valuation of the plan

(4,566)(1,713)

Net surplus

4,187

3,595

At the reporting date pension plan assets, along with the expected rates of return,were as follows:(amounts in thousands of Euro)

January 31
2012
AssetsJanuary 31
2012
Rate of return

January 31
2011
AssetsJanuary 31
2011
Rate of return

Equities

12,0487.0%

20,293

7.5%

Alternatives

10,063

7.0%

4,944

7.5%

Bonds

26,958

3.4%-4.0%

17,986

4.9%-5.5%

Cash

3,382

1.0%

1,270

1.0%

Total

52,45144,493

Other long-term employee benefits
These long-term employee beneﬁts fall into the IAS 19 category Other long-term
employee beneﬁts. As at January 31, 2012, their actuarial valuation, obtained using
the Projected Unit Cost Method, was Euro 0.6 million.

130

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

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

Balance at January 31 2011

Exchange differences
Reversals

Provision
for litigation

Provision fortax disputes

Other
provisions

Total

846

40,091

11,78852,725

7

1,158

1,049

2,214

(146)

(7,526)(96)(7,768)

Utilized

(205)

(639)

(1,048)(1,892)

Increases

1,116

4,251

6,275

11,642

Balance at January 31 2012

1,618

37,335

17,96856,921

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 mightarise.
Provision for litigation
The provision for litigation amounted to Euro 1.6 million at January 31, 2012 and mainly
regarded disputes with suppliers and former employees of the Group.
Provision for tax disputes
On December 30, 2005, Genny spa (a company incorporated into PRADA spa)
received two notices of tax assessment for VAT purposes for the 2002 ﬁscal year.
The assessments regarded the failure to apply VAT to the value of the “Genny” and“Byblos” brands which were sold along with their respective business units. The
amount assessed was about Euro 21 million. The Company successfully appealed at
the ﬁrst and second levels of appeal. The second level of appeal decision by Ancona
Regional Tax Commission was issued on December 21, 2010 and formally deposited in
2011. The Tax Authority then announced its appeal to the Supreme Court of Cassation
against which the Company submitted a counter appeal.
On August 4, 2006, IPI Italia spa (a company incorporated into PRADA spa), as purchaserof the Genny business, received a demand for VAT penalties totaling Euro 5.7 million
for the year 2002 in relation to its alleged failure to issue a “self-invoice” for the valueof the “Genny” brand acquired as part of the business. Even though it submitted its
defensive arguments against this claim, on October 9, 2007, the company received arequest for penalties against which it ﬁled an appeal. After that appeal was thrownout, the company ﬁled another appeal with Milan Regional Tax Commission and it, too,
was rejected in a decision issued on January 20, 2010. The Company then prepareda further appeal to the Supreme Court of Cassation and, on April 13, 2011, the Tax
Authorities ﬁled their own counter appeal. The full amount of the penalties imposed
was paid after the related tax demands were issued. Therefore, the related accrual,
made in prior years, does not appear under provisions for risks and charges.
On November 30, 2005 PRADA Retail France sas received a notice of assessment
following an inspection by the French Tax Authorities. The assessment regarded intercompany transfer pricing in 2003 and 2004. The dispute essentially concerned theadjustment of the tax losses incurred by the French company. On May 31, 2007,
PRADA Retail France ﬁled an application to open a mutual agreement procedure interms of the Franco-Swiss Treaty. On December 9, 2009 PRADA Retail France SAS
received another notice of assessment with regard to transfer pricing in 2005, 2006

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

131

and 2007. In the ﬁrst few months of 2010, PRADA Retail France commenced mutual
agreement procedures in relation to this second assessment with regard to both theFranco-Swiss and Franco-Italian bilateral tax conventions. On November 25, 2011, thecompany received a proposal from the tax authorities involved to settle both amicableagreement procedures mentioned above. On January 31, 2012, the company formally
accepted the overall settlement proposal in relation to the agreement procedures
commenced under the Franco-Swiss tax convention. However, on the samedate, PRADA Retail France sas withdrew from the amicable agreement procedurecommenced under the Franco-Italian tax convention, as the presumption of double
taxation between Italy and France no longer applied. The adjustment to the income of
PRADA Retail France sas agreed with the tax authorities did not generate any taxable
income but merely affected accumulated tax losses, in respect of which no deferred
tax assets had been recognized in any case.
In 2011, a settlement was reached under the amicable procedure provided for by
the German-Swiss Double Taxation Agreement, in relation to the assessment raised
against PRADA Germany with regard to transfer pricing in the tax years from 2001
to 2004. A total amount of around Euro 1.3 million was paid under the agreement
reached. A new tax inspection of PRADA Germany gmbh commenced on October 18,
2010 and was still underway at the reporting date. It regarded transfer pricing in the2005, 2006, 2007 and 2008 tax years.
In September 2009, the Japanese tax authorities began a tax inspection of PRADA
Japan co ltd with regard to the transfer prices applied in the 2004, 2005, 2006, 2007
and 2008 tax years. In the closing months of 2011, the Japanese tax authorities issued
a “position paper” and made a formal request to adjust income for the tax years inquestion. At the end of 2011, the requests to commence the amicable settlement
procedure were made to the tax authorities in Italy, Luxembourg and Japan.
During the year, an audit in Japan regarding the reasonableness of the transfer prices
of products used to determine their Customs value ended in the Group’s favor. When
the Japanese customs authorities completed their audit with raising any issues, theDirectors revised the estimates used to quantify contingent liabilities for cases still
subject to review by the customs authorities in other countries.
Except where there is an express statement that no provision has been made, theDirectors, supported by the opinion of their tax advisors, believe that the provisions
totaling Euro 37.3 million carried at January 31, 2012 in respect of the tax disputes
described above represents the best estimate of the obligations that the Group could
be called upon to fulﬁll.
Other provisions for risks
Other provisions amounted to Euro 18 million as at January 31, 2012. They mainly
included the provisions made in relation to lease agreements. The increase for theyear mainly regards the cost of restoring leased assets to their original state.
30. Other non-current liabilities
Other non-current liabilities amounted to Euro 75.7 million (Euro 50.2 million as atJanuary 31, 2011). They mainly regarded liabilities to be recognized on a straight-line
basis in relation to commercial lease costs. The increase is due to expansion of theretail network.

132

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

31. Shareholders’ equity - GroupThe Group’s shareholders’ equity is as follows:
January 31
2012

January 31
2011

Share Capital

255,882

250,000

Other reserves

742,124534,245

Translation reserve(17,239)(40,012)

Share premium reserve

410,047

209,298

Net income for the year

431,929

250,819

1,822,743

1,204,350(amounts in thousands of Euro)

Total

Share capital
On May 26, 2011, the PRADA spa Shareholders - PRADA Holding bv and Intesa San
Paolo spa (representing a 237,216,515 shares and 12,783,485 shares, respectively) resolved to change the par value of the Company shares from Euro 1.00 to Euro 0.10
each. As a result of this decision, the number of shares increased from 250,000,000
to 2,500,000,000.
On June 24, 2011, the Group successfully completed the listing of 19% of the share capitalof PRADA spa on the Main Board of the Hong Kong Stock Exchange. This operation, as
approved by a Shareholders’ General Meeting of 26 May 2011, involved the placement of
423,276,000 shares including 58,824,000 newly issued shares and 364,452,000 existing
shares. The shares were placed at an offer price of HKD 39.5 per share. The share capitalincrease, net of directly related costs, amounted to Euro 206.6 million.
On July 6, 2011, the International Underwriters of the IPO exercised their option topurchase a further 63,489,000 shares. This operation did not lead to a further sharecapital increase as the option was exercised on shares already in issue.
At January 31, 2012, some 79.98% of the share capital of PRADA spa was held by
PRADA Holding bv while the remainder was ﬂoating on the Main Board of the Hong
Kong Stock Exchange.
Capital gain tax in Italy
Capital gains realized on disposals of our Company’s shares may be subject to tax in
Italy. Further details on Italian capital gains taxation have been already reported in theTax Booklet available on the Company’s website at www.pradagroup.com.
Share premium reserve
The increase in the Share premium reserve, amounting to Euro 200.7 million, relates
to the new shares issued in relation to the IPO on the Hong Kong Stock Exchange.
The premium on the shares issued represents the difference between the net capital
injection from the listing (Euro 206.6 million) and the par value of the new sharesissued (Euro 5.9 million).
Other reserves
At January 31, 2012, Other reserves amounted to Euro 742.1 million and mainly
consisted of prior year retained earnings. The balance included, net of the related tax
impact, the actuarial differences arising on the measurement of post-employment
beneﬁts (negative by Euro 0.3 million), the fair value of derivative instruments
designated as cash ﬂow hedges (negative by Euro 7.6 million) and the fair value of aninvestment classed as available for sale (negative by Euro 0.1 million)

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

133

Net income for the year
The Group’s net income for the year amounted to Euro 431.9 million (Euro 250.8 million
as at January 31, 2011).
32. Shareholders’ equity – Non-controlling interests
The following table shows movements on the Shareholders’ equity of Non-controlling
Interests during the years ended January 31, 2012 and January 31, 2011.
(amounts in thousands of Euro)

Opening balance

January 31
2012

January 31
2011

5,788

8,756

Translation differences

432

(51)

(3,886)(530)

Acquisition of 45% of Car Shoe sa-(5,134)

Other movements

-

1

4,496

2,732

Dividends

Net income for the period
Actuarial Reserve

(18)

14

Capital injection in subsidiaries

1,412

-

Closing balance

8,224

5,788

The capital injection relates to PRADA Middle East fzco and was made by noncontrolling shareholders in proportion to the number of shares held by them.
Dividends paid during 2011 (Euro 3.9 million) were distributed by subsidiaries TRS
Guam Partnership, TRS Hong Kong ltd and Artisans Shoes srl.

134

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Consolidated income statement
33. Net revenues
Consolidated revenues are mainly generated by sales of products and are stated netof returns and discounts:
January 31
2012

January 31
2011

Net sales

2,523,330

2,017,064

Royalties

32,276

29,5872,555,606

2,046,651(amounts in thousands of Euro)

Total

A breakdown of net revenues by brand, distribution channel, geographical area andproduct is provided in the Financial review.
Royalties are paid under licensing agreements on sales of eyewear, fragrances, cars
and under franchise agreements. The increase in royalties income compared to 2010is due, in addition to higher sales of eyewear and fragrances, to royalties arising undera new licensing agreement with Korean car manufacturer Hyundai for the sale of alimited edition version of their Genesis model.
34. Cost of goods soldCost of goods sold is analyzed as follows:
January 31
2012

January 31
2011

Purchases of raw materials and production costs

663,587

589,232

Logistics costs, duties and insurance

146,791

115,331

Change in inventories(82,797)(45,800)

Total

727,581

658,763(amounts in thousands of Euro)

Cost of goods sold increased in absolute terms but decreased from 32.2% of net
revenues in 2010 to 28.5%. This improvement was due to a more favorable sales mix
in terms of distribution channel, geographical area and product.
35. Operating costs
Operating costs can be analyzed as follows:(amounts in thousands of Euro)

January 31
2012% of netrevenues

January 31
2011% of netrevenues

Product design and development costs

103,120

4.0%

97,164

4.7%

Advertising and communications costs

129,184

5.1%

85,1194.2%

Selling costs

802,77031.4%

642,507

31.4%

General and administrative costs

164,016

6.4%

144,7117.1%

1,199,090

46.9%

969,501

47.4%

Total

Operating costs increased from Euro 969.5 million in 2010 to Euro 1,199.1 million. They
decreased from 47.4% of net revenues in 2010 to 46.9% in 2011 (decrease almost
unchanged at constant exchange rates).
Product design and development costs increased slightly compared to 2010. They
include both the design phase – i.e. research and testing of shapes, fabrics, leather
and production techniques plus definition of the design concept - and the product

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements135

development phase, involving planning of products, production of prototypes andmanufacture of the products themselves.
The increase in advertising and communications costs is essentially due to higher
purchase of media space and events expenses.
Selling costs increased from Euro 642.5 million in 2010 to Euro 802.8 million in 2011.
They remained unchanged at 31.4% of net revenues notwithstanding the opening of
46 new DOS in the second half of the year out of a total of 75 new DOS opened in theyear as a whole.
In order to provide further information on the income statement structure, we note that
operating expenses include depreciation, amortization and impairment adjustments forboth property, plant and equipment and intangible assets for a total amount of Euro121.3 million (Euro 109.5 million in 2010), personnel costs of Euro 362.8 million (Euro
303.5 million in 2010), fixed rent of Euro 170.1 million (Euro 148.8 million in 2010) andvariable rent of Euro 187.9 million (Euro 140.5 million in 2010).
36. Interest and other financial income / (expenses), net
Interest and other financial income (expenses), net may be analyzed as follows:(amounts in thousands of Euro)Interests expenses on borrowings

January 31
2012

January 31
2011(16,843)(18,002)

Interest income

2,689

1,306

Exchange gains / (losses) – realized(1,158)(5,318)Exchange gains/ (losses) – unrealized(6,116)657

Other financial income / (expenses)(4,599)(4,580)-(4,221)(26,027)(30,158)

Revaluations (writedown) of investments

Total

Net financial expenses have decreased by Euro 4.1 million compared to prior year.
The cost of bank borrowing has fallen compared to 2010. The benefit resulting fromthe lower level of borrowing was partially offset by a shift in the borrowing mix towards
medium and long-term debt compared to prior year. Moreover, the repayment of shortterm Euro borrowing shielded the Group from the impact of the higher spreads seen
mainly in the short-term portion of the interest rate curve.
The increase in interest income essentially relates to the deployment of liquidity which
was generally higher than in 2010, mainly thanks to the proceeds from the IPO.
The writedown of investments recorded in 2010 reflects the fair value measurementof the Fragrance & Skincare sl joint-venture which was classified as an asset held forsale at January 31, 2011.

136

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

37. Income taxes
Income taxes are analyzed as follows:(amounts in thousands of Euro)

January 31
2012

January 31
2011

Current taxation

194,805

166,810Deferred taxation(28,322)(32,132)

Income taxes

166,483

134,678

The increase in income taxes in absolute terms is essentially due to growth of theGroup business in general. As a percentage of net revenues, the tax burden decreased
from 34.7% to 27.6%, mainly thanks to a different geographical distribution of income
and to provisions for contingent tax liabilities recorded in 2010.
The following table shows a reconciliation between the effective tax rate of the Groupand the theoretical tax rate of the parent company PRADA spa:
January 31
2012

Italian theoretical tax rate

31.40%Tax effect of expenses/income that are not deductible/taxable in determining taxable profit

1.73%

Tax effect of utilization of tax losses carried forward-0.30%

Effect of different tax rates of subsidiaries operating in other jurisdictions-5.22%

Group effective tax rate

27.61%

Movements on net deferred tax assets and deferred tax liabilities are shown in thefollowing table:(amounts in thousands of Euro)

Opening balance

January 31
2012

January 31
2011

88,66751,969Exchange differences

6,848

8,345

Deferred taxes on derivative instruments recorded in equity (cash flow hedges)

2,795(2,456)443(1,068)Deferred taxes on post-employment benefits recorded in equity (reserve for actuarial
differences)
Deferred taxes on costs attributable to the share capital increase/IPO

1,023

-

(27)

(255)

Deferred taxes for the period in income statement

28,322

32,132

Closing balance

128,071

88,667

Other movements

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

137

The following table shows deferred tax assets and liabilities classiﬁed by nature:
January 31 2012
(amounts in thousands of Euro)Deferred tax
assetsJanuary 31 2011

Deferred tax
liabilities

Deferred tax
assetsDeferred tax
liabilities

Inventories

86,126-62,284-

Receivables and other assets

1,103

1,575

415

1,515

Useful life of non-current assets

58,695

14,03253,8696,273-

28,556-39,548Provision for risks / accrued expenses

12,928267

10,790267

Non deductible / taxable charges / income

3,566

535

5,893

1,134

Tax loss carryforwards

4,788

-

3,129

-

Derivative financial instruments

1,552

-

303

1,455

Long term employee benefits

Deferred taxes due to acquisitions

6,674

2,015

4,533

1,943

Other

304

685

162

576

Total

175,736

47,665

141,378

52,711

Tax loss carryforwards at January 31, 2012 are analyzed below:
January 31
2012(amounts in thousands of Euro)

Expiring within 5 years

11,156

Expiring after 5 years

25,214

Available for carry forward with no time limit

54,909Total tax loss carryforwards

91,279The Directors have updated their assessment of tax loss carryforwards taking accountof the general macroeconomic environment and developments regarding the businessactivities of each Group company.
38. Additional information
Earnings per share
Earnings per share are calculated by dividing the net income attributable to shareholders
by the weighted average number of ordinary shares in issue.
January 31
2012Group net income in Euro
Weighted average number of ordinary shares in issue

Earnings per share in Euro, calculated on weighted average number of shares

January 31
2011

431,928,921

250,818,884

2,535,777,885

2,500,000,000

0.170

0.100

On May 26, 2011, a Shareholders’ Meeting of PRADA spa resolved to change thepar 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 2010 was retrospectively adjusted for the
purposes of the calculation of earnings per share.

138

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Dividends per share
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 millionof the dividend liability arising was offset against receivables due from parent company
PRADA Holding bv while the remaining amount was paid in April 2011.
During the year ended January 31, 2011, the Company distributed dividends totaling
Euro 80 million, as approved by the Shareholders’ Meeting held on April 28, 2010 toapprove the Financial Statements for the year ended January 31, 2010. Some Euro52.1 million of the dividend liability arising was offset against receivables due fromparent company PRADA Holding bv while the remaining amount was paid on July27, 2010. On January 27, 2011, a Shareholders’ Meeting approved a further dividend
distribution of Euro 31 million and it was paid in full the same day.
Headcount
The average headcount by functional area in the years ended January 31, 2012 and2011 was as follows:(no of employees)

Production

January 31
2012

January 31
2011

1,710

1,765

Product design and development

810

751

Advertising and Communications

99

96

4,732

3,919

716

668

8,067

7,199

Selling
General and administrative services

Total

Employee remuneration
Employee remuneration by functional area for the years ended January 31, 2012 andJanuary 31, 2011 is analyzed below:(amounts in thousands of Euro)

January 31
2012

January 31
2011

Production

75,70774,311

Product design and development

51,577

48,230Advertising and Communications

9,578

8,973

Selling

230,853

188,488

General and administrative services

70,81957,838

Total

438,534

377,840PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

139

Employee remuneration by nature for the years ended January 31, 2012 and January
31, 2011 is analyzed below:
January 31
2012

January 31
2011

Wages and salaries

335,119284,870

Post-employment benefits

14,971

13,868Social security

71,97363,192Other

16,471

15,910

Total

438,534

377,840(amounts in thousands of Euro)Distributable reserves of parent company PRADA spa(amounts in thousands of Euro)

Amount at
January 31 2012

Possibleutilization

Distributableamount393,311

Share Capital

255,882

Share premium reserve

410,047

A, B, C

Legal reserve

34,440B

Other reserves

182,899

A, B, C

182,899

Non distributable reserves Art. 7of Legislative Decree 38/2005

20,516
A, B, C69,467Retained earnings

73,560Fair Value Reserve(4,093)Distributable Amount

Summary of utilizationin last three years
Coverage oflossesDistribution ofdividends

15,774

158,750645,677

A share capital increase
B coverage of losses
C distributable to shareholders

Pursuant to Article 2431 of the Italian Civil Code, the share premium reserve is fully
distributable only when the legal reserve reaches an amount equal to 20% of sharecapital. As at January 31, 2012, the adjustment required to reach this amount wouldbe Euro 16,736 thousand.
Remuneration of the PRADA spa Board of Directors for the year ended January
31, 2012(amounts in thousands of Euro)

Remunerationand otherbenefits

Bonusesand other
incentives

Benefits inkind

Pension,healthcare
and TFR
contributions

Total

Miuccia Prada Bianchi

1,000

8,700

-

-

18

9,718

Patrizio Bertelli

1,000

5,000

4,000

-

18

10,018

Carlo Mazzi
Donatello Galli
Marco Salomoni

250

-

-

83

3

336

-

281

569

37

259

1,146
416

-

400

-

-

16

Marco Cerrina Feroni

11

-

-

-

-

11

Gian Franco Oliviero Mattei

133

-

200

-

9

342

Giancarlo Forestieri

60

-

-

-

7

67

Davide Mereghetti

11

-

-

-

-

11

Gaetano Micciché

29

-

-

-

-

29

Sing Cheong Liu

37

-

-

-

-

37

2,531

14,381

4,769

120

329

22,130

Total

140

Directors’fees

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Remuneration of the PRADA spa Board of Directors for the year ended January
31, 2011(amounts in thousands of Euro)

Directors’fees

Remunerationand otherbenefits

Bonusesand other
incentives

Benefits inkind

Pension,healthcare
and TFR
contributions

Total

Miuccia Prada Bianchi

1,000

8,700

-

-

17

9,717

Patrizio Bertelli

1,000

5,000

4,000

-

17

10,017
1,095

21

1,004

-

59

11

Donatello Galli

Carlo Mazzi

-

281

70

32

105

488

Marco Salomoni

-

800

-

-

32

832

Marco Cerrina Feroni

40

-

-

-

-

40

Gian Franco Oliviero Mattei

120

-

-

-

12

132

Giancarlo Forestieri

60

-

-

-

7

67

Davide Mereghetti

30

-

-

-

-

30

2,271

15,785

4,070

91

201

22,418Total

Mr. Donatello Galli has waived his fees as a Director, in the amount of Euro 40,000, in
respect of the period from February 1, 2011 to January 31, 2012.
Mr. Marco Salomoni has waived Euro 40,000 in respect of his fees as a Director andEuro 10,000 in respect of his fees as a member of the Internal Control Committee forthe period from February 1, 2011 to January 31, 2012.
Five highest paid individuals
The Group’s ﬁve highest paid individuals in the twelve months ended January 31, 2012
and January 31, 2011 included three Directors in the period ended January 31, 2012
and two Directors in the period ended January 31, 2011. The total remuneration of theremaining two of the ﬁve highest paid individuals in the period ended January 31, 2012
and the remaining three of the ﬁve highest paid individuals in the period ended January
31, 2011 was as follows.
January 31
2012

January 31
2011

Wages and salaries

4,220

5,220

Bonus and other incentives

2,634

1,770

(amounts in thousands of Euro)

Non-monetary benefits

132

124

Contributions to retirement benefits scheme

151

167

7,137

7,281

January 31
2012

January 31
2011

between HKD 12,500,000 and HKD 20,000,000

12between HKD 20,000,000 and HKD 50,000,000-

1

in excess of HKD 50,000,000

1-

Total number of individuals

2

3

Total

(amounts in Hong Kong Dollars)

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

141

Exchange rates
The exchange rates against the Euro used to consolidate statements of ﬁnancial
position and income statements prepared in other currencies as at January 31, 2012
and January 31, 2011 are shown below.
Currency

Average rate

Average ratein prior year

Closing rate

Opening rate

US Dollar

1.388

1.319

1.318

1.369

Canadian Dollar

1.374

1.354

1.313

1.368

GB Pound

0.867

0.855

0.835

0.861

Swiss Franc

1.228

1.367

1.205

1.289

1.340

1.426

1.237

1.376

Korean Won

Australian Dollar

1,539.428

1,522.048

1,477.990

1,534.050

Japanese Yen

110.127114.872

100.630112.490

Hong Kong Dollar

10.80410.25310.21910.676Singapore Dollar

1.743

1.786

1.649

1.753

Thai Baht

42.41741.57140.75342.295

Taiwan Dollar

40.88141.24338.95239.752

Russian Ruble

40.88840.09339.69040.795

Czech Koruna

24.67325.15725.18824.223

Macau Pataca

11.127

10.55910.522

10.996Chinese Renminbi

8.942

8.906

8.312

9.030

New Zealand Dollar

1.750

1.822

1.592

1.776

Malaysian Ringgit

4.249

4.215

4.013

4.189

Turkish Lira

2.358

1.996

2.333

2.197
2.296

Brazilian Real

2.331

2.311

2.289

Mexican Peso

18.050-17.057-

UAE Dirham

5.098

-

4.840

-

Ukrainian Hryvna

11.126-

10.551-

Moroccan Dirham

11.270-11.145-

Fees of Deloitte & Touche spa
The fees of independent audit ﬁrm Deloitte & Touche spa for the statutory audit of
PRADA spa (audit of the separate and Consolidated Financial Statements and checks
that the accounting records are properly maintained and operations are correctly
reﬂected in the accounting) affected the income statement for Euro 0.6 million, while
the fees for the statutory and voluntary audit of the subsidiaries of PRADA spa affected
the income statements for Euro 1 million. Deloitte & Touche spa did not provide anyother services to the PRADA Group during the period.
39. Transactions with related parties
The Group enters into commercial and ﬁnancial transactions with companies owned
by entities that directly or indirectly control PRADA spa (“related parties”).
These transactions mainly refer to the sale of goods, the supply of services, the granting
and receipt of loans and sponsorship and franchise agreements. These transactions
take place on an arm’s length basis at the same economic terms as those applied tothird parties.
The following tables show details of related party transactions for each item in theStatement of ﬁnancial position and income statement. They show amounts relating toeach related party and the total amount relating to each line item.

142

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Statement of financial position amounts at January 31, 2012

(amounts in thousands of Euro)PRADA Holding bv
Other related parties

Trade
receivables

Receivables andprepaymentsfrom parent
companies andrelated parties

TradepayablesPayables to parent
companies andrelated parties

-

654

-

-

18,827

12,056

2,730

4,102

DFS Hawaii

-

-

480

-

DFS Australia pty ltd

-

-

347

616

DFS Cotai ltd

4

-

457

-

F.lli Prada srl

18,618

18

938

313

Al Tayer Travels
Al Tayer Insignia llc

-

-

5

-

205

-

435

2,995

Danzas llc UAE

-

-

26

21

Luna Rossa Challenge 2013 NZ ltd

-

7,350

-

-

Luna Rossa Challenge 2013 srl

-

150

-

-

Stellarea

-

28

-

-

Stitching Fondazione Prada/
Progetto Prada Arte srl

-

2,725

-

61

Gipafin sarl

-

20

-

-

CID USA Corp.

-

78

-

-

HMP srl

-

195

-

-

Prada America’s Cup srl

-

1,397

-

-

Other

-

95

42

96

Other companies controlled by
PRADA Holding bv

-

154

-

259

Prapar Corporation

-

148

-

259

EXHL Italia

-

6

-

-

Members of the Board of Directors

-

-

-

87

Other related parties

-

-

-

266

18,827

12,864

2,730

4,714

Total at January 31 2012PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

143

Statement of financial position amounts at January 31, 2011

(amounts in thousands of Euro)PRADA Holding bv

Tradereceivables

Receivables andprepaymentsfrom parent
companies andrelated parties

Payables to parent
companies
and related parties-

33,325-70

Other related parties

16,796

2,738

2,675

827

Venezia 3 srl

2,182

-

272

299

F.lli Prada srl

5,474

-

452

6

Montenapoleone 6 srl

2,263

-

257

2

IPR srl

3,763

-

505

-

Spiga 1 srl

2,148

-

127

-

264

-

2

-

-

28

-

-

Luna Rossa Challenge 2007

318

-

86

5

Stitching Fondazione Prada/
Progetto Prada Arte srl

-

1,128

-

472

PRADA Italia spa
Stellarea

Gipafin sarl

-

20

-

1

CID USA Corp.

-

75

-

-

HMP srl

-

79

-

-

Prada America’s Cup srl

-

1,397

-

-

DFS Hawaii

384

-

167

DFS Australia pty ltd

-

-

307

-

DFS New Zealand ltd

-

-

27

-

DFS Cotai ltd

-

-

473

-

DFS Venture Singapore pte

-

-

-

41

Other

-

11

-

1

Other companies controlled by
PRADA Holding bv

-

249

-

251

EXHL Design llc

-

127

-

2

Prapar Corporation

-

1

-

249

EXHL Retail USA llc

-

102

-

-

EXHL Italia

-

6

-

-

13

-

-

Other
Other related parties

1,924

5

22

-

Fragrance and Skincare sl

1,924

5

22

-

Members of the Board of Directors

-

-

-

171

Other related parties

-

-

-

134

18,72036,317

2,697

1,453

Total at January 31, 2011

144

Trade
payables

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Income statement amounts at January 31, 2012

(amounts in thousands of Euro)PRADA Holding bv

Netrevenues

Cost ofgoods soldGeneral,admin.
& sellingcosts(income)Royalties
incomeInterest
incomeInterest
expense

-

-

(157)

-

149

-

Other related parties correlate

39,252

2,905

17,259

1,140

2

30

F.lli Prada srl

39,2572,768(2,412)

1,140

-

-

-

126

1

-

-

-

(10)

-

2,782

-

-

-

DFS New Zealand ltd

-

-

372

-

-

-

DFS Australia pty ltd

-

-

-

-

-

29

DFS Cotai ltd

-

-

3,421

-

-

-

DFS Venture Singapore pte ltd

-

-

361

-

-

-

Al Tayer Travels

-

-

29

-

-

-

Al Tayer Group llc

-

-

7

-

-

-

Al Tayer Insignia llc

-

-

13

-

-

-

PRADA Italia spa

-

-

-

-

-

-

Luna Rossa Challenge sl

-

17

3,366

-

-

-

HMP srl

-

-

482

-

2

-

Stitching Fondazione Prada/
Progetto Prada Arte srl

5

(6)

5,305

-

-

-

Other

-

-

3,532(*)--

1

39,252

2,905

1,140

151

30

Danzas llc
DFS Hawaii

Total at January 31 201217,102(*) This amount includes fees for services provided by Marina Prada Bianchi (sister of Miuccia Prada Bianchi), Alberto Prada
Bianchi (brother of Miuccia Prada Bianchi), Patrizia Albano (wife of Carlo Mazzi, Deputy Chairman of PRADA spa at January
31, 2012) and Secva srl (an Italian company whose Chairman and majority owner is Carlo Mazzi).

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

145

Income statement amounts at January 31, 2011
(amounts in thousands of Euro)PRADA Holding bv

Netrevenues

General,Cost ofadmin. &goods sold selling costs(income)Royalties
incomeInterest
incomeInterest
expense

-

-

(129)

-

469

38

Other related parties correlate

34,533

2,373

10,549940

82-

Venezia 3 srl

4,454

419

(1,925)118--

F.lli Prada srl

11,851

697

(218)

326

-

-

Montenapoleone 6 srl

5,164

313

(4)

142

-

-

IPR srl

8,283

692

(274)

222

-

-

Spiga 1 srl

4,781

244

(111)

132

-

-

PRADA Italia spa

-

-

(315)

-

-

-

Luna Rossa Challenge 2007

-

-

5,350

-

60

-

HMP srl

-

-

465

-

1

-

Stitching Fondazione Prada/
Progetto Prada Arte srl

-

-

1,966

-

-

-

Maestrale Holding

-

-

-

-

-

-

Prada America’s Cup srl

-

-

-

-

21

-

DFS Hawaii

-

8

2,226

-

-

-

DFS Australia pty ltd

-

-

87

-

-

27

DFS Cotai ltd

-

-

1,853

-

-

-

DFS Venture Singapore pte ltd

-

-

288

-

-

-

DFS New Zealand ltd

-

-

280

-

-

5

Other

-

-

881(*)---

Other companies controlled by
PRADA Holding bv

-

-

(14)

-

1

3

Prapar Corporation

-

-

-

-

-

3

EXHL Retail USA llc

-

-

-

-

1

-

EXHL Italia srl

-

-

(6)

-

-

-

EXHL Japan Co. ltd

-

-

(3)

-

-

-

Prada Arte bv

-

-

(5)

-

-

-

Other

-

-

-

-

-

-

Other related parties

-

22

(245)

3,603

-

-

Fragrance and Skincare sl

-

22

(245)

3,603

-

-

Total at January 31 201134,533

2,395

10,161

4,543

552

73

(*) This amount includes fees for services provided by Marina Prada Bianchi (sister of Miuccia Prada Bianchi), Alberto Prada
Bianchi (brother of Miuccia Prada Bianchi) and Patrizia Albano (wife of Carlo Mazzi, Deputy Chairman of PRADA spa at January
31, 2011)

Compensation of key management personnel
The key management composes of the Company’s Board of Directors and the
remuneration of Directors is determined by the Remuneration Committee having
regard to the performance of individuals and market trends. Details of the directors’
remuneration are disclosed in note 37.

146

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

40. Commitments
Operating leases
At January 31, 2012 and January 31, 2011, operating lease commitments, by maturity
date, were as follows:(amounts in thousands of Euro)

January 31
2012

January 31
2011

Within a year

245,310

198,481

After between one year and five years

746,902660,454

After more than five years

596,745535,779

1,588,957

1,394,714

Total

The following table shows the amounts paid in the ﬁnancial years 2011 and 2010:(amounts in thousands of Euro)

January 31
2012

January 31
2011

Fixed minimum lease payments

173,676

154,582

Variable lease payments

187,866

140,472

Total

361,542

295,054

Some Group companies are required to pay lease charges based on a ﬁxed percentageof net sales.
Finance leases
Property, plant and equipment includes the following assets held under ﬁnance leases:
January 31
2012

January 31
2011

Land and buildings

15,28431,362

Furniture and fittings

15,253

13,644

Other tangibles

3,926

3,567

Accumulated depreciation(19,124)(17,092)

Total

15,33931,481(amounts in thousands of Euro)

The present value of lease payments due after January 31, 2012 is detailed by maturity
date below:(amounts in thousands of Euro)

Payable by the end of the year ending
January 31 2013

1,453

January 31 2014

580

January 31 2015

506

January 31 2016

4

January 31 201710

after January 31 2017

-

Total

PRADA Group2,553

Annual Report 2011 - Notes to the Consolidated Financial Statements

147

Other commitments
On November 16, 2010, PRADA spa signed a preliminary contract with third parties
whereby it undertook to purchase a number of real estate properties in Italy, alreadyused by PRADA spa in its business activities under rental agreements. At the reporting
date, out of the original commitment of Euro 49.5 million, properties totaling Euro 12.3
million had yet to be purchased. In February 2012, the Company fulﬁlled its remaining
commitment with the purchase of two buildings in central Italy.
The Shareholders’ agreement signed between PRADA spa and Al Tayer Insignia llc forthe development of a Prada and Miu Miu DOS network in the Middle East provides
that the parties may exercise an option whereby PRADA spa will buy back up to 20%
of PRADA Middle East fzco shares. The Directors maintain that the fair value of thisclause cannot be reliably measured.
41. Comparative income statement and statement of financial position information
January 31
2012(amounts in thousands of Euro)

January 31
2011

January 31
2010

January 31
2009

January 31
2008
1,660,561

Net revenues

2,555,606

2,046,651

1,561,238

1,643,629

Gross margin

1,828,025

1,387,888

974,656

953,096

949,704

Operating income (EBIT)

628,935

418,387

187,032

190,954239,733

Group net income

431,929

250,819

100,163

98,806

129,521

Total assets

2,943,568

2,366,015

2,147,481

2,176,054

2,041,637

Total liabilities

1,112,601

1,155,877

1,090,822

1,163,755

1,129,106

Total Group shareholders’ equity

1,822,743

1,204,350

1,047,903

1,003,107

908,41042. Consolidated companies
The companies included in the scope of consolidation are as follows:

EntityLocalcurrency

Sharecapital%(000s ofinterest
local
currency)

RegisteredofficeDate ofincorporation/ Main businessestablishment

Italy
Production/Distribution/
Group Holding company

66.70

Montegranaro,
09/02/1977
Italy

Footwear production

20

100.00Milan, Italy

06/12/1990

Service company

600

100.00Milan, Italy

26/01/1999

Service company

11/04/2001

Retail/sub holding company

EUR

255,882

Artisans Shoes srl(*)

EUR

1,000

Space Caffè srl (*)(ex PRADA Advertising srl)

EUR

IPI Logistica srl(*)

EUR

PRADA Stores srl(*)

148

Milan, Italy

PRADA spa

EUR

520

100.00Milan, Italy

Car Shoe Italia srl

EUR

10

100.00Milan, Italy

16/03/2001

Distribution/Retail

Church Italia srl

EUR

51

100.00Milan, Italy

31/01/1992

Distribution/Retail

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Localcurrency

EntitySharecapital%(000s ofinterest
local
currency)

RegisteredofficeDate ofincorporation/ Main businessestablishment

EuropePRADA Retail UK ltd (**)

GBP

5,000

100.00London,UK

07/01/1997

RetailPRADA Germany gmbh

EUR

215

100.00

Munich,Germany

20/03/1995

RetailPRADA Austria gmbh

EUR

40

100.00Vienna,Austria

14/03/1996

RetailPRADA Spain sa

EUR

240

100.00Madrid,Spain

14/05/1986

Retail10/10/1984

RetailRetailPRADA Retail France sas

EUR

4,000

100.00Paris,
FrancePRADA Hellas Single
Partner Limited Liability
Company(*)

EUR

6,000

100.00Athens,Greece19/12/2007

PRADA Monte-Carlo sam

EUR

150

100.00Monte-Carlo,
Monaco25/05/1999

RetailService company/
Trademark owner

PRADA sa(*)

EUR

31

100.00

Luxembourg

29/07/1994

PRADA Company sa

EUR

3,204

100.00

Luxembourg

12/04/1999

Service company

Car Shoe sa

EUR

2,100

100.00

Luxembourg

13/03/2001

Service company/
Trademark owner

PRADA Far East bv(*)

EUR

20

100.00Amsterdam,
Netherlands

27/03/2000

Sub-holding company/
Service company/ RetailSpace sa

CHF

200

100.00

Lugano,Switzerland

17/07/2008

RetailChurch Holding UK plc(*)

GBP

78,126100.00

Northampton,UK

22/07/1999

Sub-holding

Church France sa

EUR

241

100.00Paris,
France01/06/1955

Retail

16/07/1987

RetailChurch UK Retail ltd

GBP

1,021

100.00

Northampton,
UK

Church’s English Shoes
Switzerland sa

CHF

100

100.00

Lugano,Switzerland

29/12/2000

RetailChurch & Co. Ltd

GBP

2,811

100.00

Northampton,
UK

16/01/1926

Sub-holding company/
Production/Distribution

Church & Co. (Footwear) ltd

GBP

44

100.00

Northampton,
UK

06/03/1954

Trademark ownerChurch English Shoes sa

EUR

75

100.00Brussels,
Belgium

25/02/1963

RetailPRADA Czech Republicsro(*)

CZK

2,500

100.00Prague,25/06/2008
Czech Republic

RetailPRADA Portugal. Unipessoal
lda(*)

EUR

5

100.00Lisbon,Portugal

07/08/2008

Retail07/11/2008

RetailPRADA Rus llc(*)

RUR

250

99.90

Moscow,
RussiaChurch Spain, S.L.

EUR

3100.00Madrid,Spain

06/05/2009

RetailPRADA Bosphorus Deri
Mamuller Ticaret Limited
Sirketi

TRY

7,630

100.00Istanbul,
Turkey26/02/2009

RetailPRADA Ukraine (***)

UAH

700

100.00

Kyiv,
Ukraine14/10/2011

RetailChurch Netherlands

EUR

18

100.00Amsterdam,
Netherlands

07/07/2011

RetailCar Shoe UK

GBP

100

100.00London,UK

28/10/2011

RetailChurch Ireland Retail

EUR

50

100.00Dublin,Ireland

20/11/2011

Retail17/01/2012

Retail21/09/1920

Dormant

Church Austria

EUR

35

100.00Vienna,Austria

JCS (2009) ltd

GBP

90

100.00

Northampton,UK

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

149

Localcurrency

EntitySharecapital%(000s ofinterest
local
currency)

RegisteredofficeDate ofincorporation/ Main businessestablishment

Americas
PRADA USA Corp.(*)

USD

152,211100.00

New York, U.S.A. 25/10/1993

Services / Distribution/
RetailSpace USA Corp.

USD

301

100.00

New York, U.S.A. 15/02/1994

RetailTRS Hawaii llc

USD

400

55.00

Honolulu, U.S.A. 17/11/1999

Duty-free stores

PRADA Canada corp.(*)

CAD

300

100.00Toronto,CanadaDistribution/Retail

01/05/1998

Church & Co. (USA) ltd

USD

85

100.00

New York, U.S.A. 08/09/1930

RetailPost Development corp

USD

42,221100.00

New York, U.S.A. 18/02/1997

Real estate

PRADA Retail Mexico,
S. de R.L. de C.V.

MXN

2,058

100.00

Mexico City,
Mexico12/07/2011

RetailPRADA Brasil Importação e
Comércio de Artigos de Luxo
Ltda. (*)

BRL

250

100.00

Sao Paulo,
Brazil12/04/2011

RetailAsia-Pacific and Japan
PRADA Asia Pacific ltd

HKD

3,000

100.00Hong Kong

12/09/1997

Retail /Distrib./Services

PRADA Taiwan ltd

TWD

3,800

100.00Hong Kong

16/09/1993

Retail1,000

100.00Hong Kong

25/02/1993

RetailSpace HK ltd

HKD

PRADA Retail Malaysia Sdn.
Bnd.

MYR

1,000

100.00

Malaysia

23/01/2002

RetailPRADA China ltd

HKD

7,000

100.00Hong Kong

03/11/1997

RetailTRS Hong Kong

HKD

500

55.00

Hong Kong

23/02/2001

Duty-free stores

PRADA Singapore Pte. ltd

SGD

1,000

100.00Singapore

31/10/1992

RetailTRS Singapore

SGD

500

55.00

Singapore

08/08/2002

Duty-free stores

PRADA Korea ltd

KRW

8,125,000

100.00Seoul, Korea

27/11/1995

RetailPRADA (Thailand) Co.. ltd

BTH

172,000

100.00

Bangkok,Thailand19/06/1997

RetailPRADA Japan Co.. ltd

JPY

200,000

100.00Tokyo, Japan

01/03/1991

RetailTRS Guam Partnership

USD

1,095

55.00

Guam

01/07/1999

Duty-free stores

TRS Saipan Partnership

USD

1,405

55.00

Saipan01/07/1999

Duty-free stores

TRS New Zealand ltd

NZD

100

55.00

Auckland,
New Zealand

04/11/1999

Duty-free stores

PRADA Australia Pty. Ltd

AUD

7,500

100.00

Sydney,Australia

21/04/1997

RetailTRS Australia ltd

AUD

600

55.00

Sydney,Australia

23/03/2000

Duty-free stores

PRADA Trading (Shanghai)

RMB

1,653

100.00Shanghai,China

09/02/2004

RetailTRS Okinawa KK

JPY

10,000

55.00

Tokyo, Japan

21/01/2005

Duty-free stores

PRADA Fashion Commerce(Shanghai) Co. Ltd

RMB

48,966100.00Shanghai,China

31/10/2005

RetailChurch Japan Co.. ltd

JPY

3,050

100.00Tokyo, Japan

17/04/1992

Dormant

Church Hong Kong Retail ltd

HKD

1,000

100.00Hong Kong

04/06/2004

RetailChurch Singapore Pte., ltd.

SGD

500

100.00Singapore

18/08/2009

RetailCar Shoe Singapore ltd.

SGD

500

100.00Singapore

01/02/2010

RetailCar Shoe Hong Kong ltd.

HKD

3,000

100.00Hong Kong

26/02/2010

RetailPRADA Hong Kong P.D. ltd (****)

HKD-

100.00Hong Kong

15/12/2011

Service company

PRADA Maroc

MAD

1,500

100.00Casablanca,
Morocco

11/11/2011

RetailPRADA Middle East fzco(*)

AED

18,00060.00

Jebel Ali Free
Zone Dubai

25/05/2011

Services / Distribution

PRADA United Arab Emirates(*****)

AED

300

-

Dubai

04/08/2011

RetailOther countries(*) Companies owned directly by PRADA spa(**) Share capital less than one thousand of local currency(***) Subscribed share capital - UAH 30,000(****) Subscribed share capital - HKD 11,000(*****) Company consolidated based on definition of control per IAS 27

150

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

The following table shows the companies not included in the consolidation area andthe related consolidation method:
Company

PAC srl (in liquidation)

Percentage directinterest as atJanuary 31 2012

Percentage directinterest as atJanuary 31 2011

Note

Consolidation method

49.00

49.00

Associate

Equity method

43. Events after the reporting period
In February 2012, the Company purchased the last two buildings subject to acommitment signed with third parties in 2010 to acquire properties in Italy and already
employed by the Company in its production processes.

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

151

152

PRADA Group

Annual Report 2011 - Notes to the Consolidated Financial Statements

Independent Auditors’ Report

PRADA Group

Annual Report 2011 - Independent Auditors' Report

153

154

PRADA Group

Annual Report 2011 - Independent Auditors' ReportPRADA Group

Annual Report 2011 - Independent Auditors' Report155