Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited
take no responsibility for the contents of this announcement, make no representation as toits accuracy or completeness and expressly disclaim any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the contents of thisannouncement.

PRADA spa
(Stock Code: 1913)

ANNOUNCEMENT
OF THE INTERIM RESULTS FOR THE SIX MONTHSENDED JULY 31, 2014

- Net revenues were Euro 1,751.3 million, recording an increase of 1.3%
compared with the six months ended July 31, 2013 (+4.5% at constantexchange rates)- Retail net sales were Euro 1,442.2 million, up by 1.4% compared withthe six months ended July 31, 2013 (+5.1% at constant exchange rates)- EBITDA was Euro 492.8 million, representing a margin of 28.1% on net
revenues (31.9% in the six months ended July 31, 2013)- Group’s net income amounted to Euro 244.8 million, compared toEuro 308.2 million for the six months ended July 31, 2013
- Net financial position standing slightly negative at Euro 1.4 million as
at July 31, 2014
- Net operating cash flow for the six months ended July 31, 2014, wasEuro 209.2 million

1Consolidated results for the six months ended July 31,
2014
The Board of Directors (the “Board”) of PRADA S.p.A. (the “Company”, or“PRADA spa”) is pleased to announce the unaudited Consolidated results of
the Company and its subsidiaries (collectively, the “Group”) for the six
months ended July 31, 2014, together with the unaudited comparative
figures for the six months ended July 31, 2013. The following financial
information has been prepared in accordance with the International Financial
Reporting Standards (“IFRS”) as adopted by the European Union. The
Consolidated results of the Group for the year ended January 31, 2014, havebeen audited by Deloitte & Touche spa.

Key financial information
Key information from the Income
statement(amounts in thousands of Euro)six
monthsended
July 312014(unaudited)

twelvemonthsended
Jan 312014(audited)Sixmonthsended
July 312013(unaudited)

Net revenues
EBITDAEBITDA %EBITEBIT %
Income before tax
Net income of the Group
Earnings per share (Euro)
Capital expenditure
Net operating cash flows
Average number of employees

1,751,315
492,83528.1%
373,158
21.3%
364,121244,848
0.096
289,616
209,186
11,824

3,587,347
1,143,186
31.9%
939,237
26.2%
922,896627,785
0.245
611,227
769,436
10,816

1,728,065
551,05331.9%
458,33826.5%
443,428
308,2390.120
293,031403,764
10,364

1.3%-10.6%-18.6%-17.9%-20.6%-20.6%-48.2%
14.1%

Key information from the Statement offinancial position(amounts in thousands of Euro)

as at
July 312014(unaudited)

as at
Jan 312014(audited)

as atJuly 312013(unaudited)change vs
Jan 31
2014

Net operating working capital
Net invested capital
Net financial position surplus/(deficit)
Group shareholders’ equity

510,217
2,683,766(1,366)
2,666,923

409,774
2,405,650
295,8902,687,554

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

100,443
278,116(297,256)(20,631)%change vsJuly 312013

Highlights for the six months ended July 31, 2014
During the first half of the year the PRADA Group continued to pursue its
long-term growth strategy investing in its brands’ equity. Despite a difficult
political and macroeconomic environment, and a general unfavorable
exchange rate situation, the Group kept strengthening its retail network tofurther extend its global reach. At the same time, in order to limit marginpressure, several measures to increase efficiency have been taken at all
operational levels.
The consolidated net revenues amounted to Euro 1,751.3 million, slightly up
by 1.3% compared to Euro 1,728.1 million achieved in the same six months
2period of 2013. At constant exchange rates the growth was 4.5%.
The EBITDA for the six months ended July 31, 2014, totaled Euro 492.8
million, down compared to the EBITDA of Euro 551.1 million achieved in thefirst half of 2013. The dilution recorded at gross margin level, mainly due tothe negative impact of the exchange rate fluctuations, coupled with thehigher incidence of the selling expenses following the retail expansion,
generated the reduction in the EBITDA margin which went down from 31.9%
on net revenues in the six months ended July 31, 2013, to 28.1%.
In this first half of 2014, the Group’s net result amounted to Euro 244.8
million, or 14% as a percentage of net revenues. In the same period of lastyear, the Group’s net result totaled Euro 308.2 million, 17.8% on revenues.
The capital expenditure for the period amounted to Euro 289.6 million andwas mainly focused to enlarge, renovate and strengthen the retail network
worldwide, but it also included the significant investment of Euro 61.5 million
for the acquisition of the Milan buildings where the Group operates its
corporate headquarter.
At July 31, 2014, the Group’s net financial position was slightly negative forEuro 1.4 million, decreasing from Euro 295.9 million at January 31, 2014,
after the capital expenditure for the period and the payment of the dividends
to the PRADA spa shareholders for Euro 281.5 million.

3

Consolidated income statement for the six months ended July
31, 2014
six months
ended
July 312014(unaudited)%

1,751,315(493,715)

100.0%-28.2%

1,728,065(460,407)

100.0%-26.6%

1,257,600

71.8%

1,267,658

73.4%(884,442)-50.5%(809,320)-46.8%

373,15821.3%

458,338

26.5%(9,492)-0.5%(15,194)

-0.9%

455

-

284

-

364,12120.8%

443,42825.7%(113,075)-6.5%(130,609)-7.6%

Net income from continuing operations

251,04614.3%

312,819

18.1%

Net income for the period

251,04614.3%

312,819

18.1%

6,198

0.3%

4,580

0.3%

Net income – Group

244,84814.0%

308,239

17.8%

Depreciation, amortization andimpairment

119,677

6.8%

92,715

5.4%

EBITDA

492,835

28.1%

551,053

31.9%(amounts in thousands of Euro)Net revenues
Cost of goods sold

Note

3

Gross margin
Operating expenses

4

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

5

Income before taxes
Taxation

6

Net income – Non-controlling interests

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

7

0.096

4

six months
ended
% on
July 31
Net
2013 revenues(unaudited)

0.120

Consolidated income statement for the three months ended
July 31, 2014%

three
monthsended
July 312013(unaudited)%973,575(291,471)

100.0%-29.9%

945,771(253,971)

100.0%-26.9%

Gross margin

682,104

70.1%

691,800

73.1%

Operating expenses(465,288)-47.8%(429,182)-45.4%

EBIT

216,81622.3%

262,618

27.8%

Interest and other financial
income/(expenses), net(3,452)-0.4%(9,035)-1.0%

Income before taxes

213,36421.9%

253,583

26.8%

Taxation(71,743)-7.4%(82,652)-8.7%

Net income from continuing operations

141,62114.5%

170,93118.1%

Net income for the period

141,62114.5%

170,931

18.1%

2,104

0.2%

851

0.1%

Net income – Group

139,51714.3%

170,080

18.0%

Depreciation, amortization andimpairment

62,072

6.4%

47,609

5.0%

EBITDA

278,88828.7%

310,227

32.8%(amounts in thousands of Euro)Net revenues
Cost of goods sold

Note

3

Net income – Non-controlling interests

5

three
monthsended
July 312014(unaudited)Consolidated statement of financial position(amounts in thousands of Euro)

as at
July 312014(unaudited)

as atJanuary 31
2014(audited)

98

510,591
373,848
539,0422,754

568,414
308,405449,903
13,984

10

3,820

5,993

12

151,004
1,581,059

114,897
1,461,596

11
11

1,366,552
947,075
27,228
212,958
74,208856

1,230,192
901,289
21,186201,245
69,867
1,430

11,6341,487

2,640,511
4,221,570

2,426,696
3,888,292

NoteAssetsCurrent assets
Cash and cash equivalents
Trade receivables, net
Inventories, net
Derivative financial instruments - current
Receivables from, and advance payments to,parent company and other related parties current
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Associated undertakings
Deferred tax assets
Other non-current assets
Derivative financial instruments non-current
Receivables from, and advance payments to,parent company and other related parties – noncurrent
Total non-current assets
Total Assets
Liabilities and Shareholders’ equity
Current liabilities
Bank overdrafts and short-term loans
Payables to parent company and other relatedparties - current
Trade payables
Current tax liabilities
Derivative financial instruments - current
Obligations under finance leases - current
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term financial payables
Obligations under finance leases non-current
Post-employment benefits
Provision for risks and charges
Deferred tax liabilities
Other non-current liabilities
Derivative financial instruments non-current
Payables to parent company and other relatedparties – non-current
Total non-current liabilities
Total Liabilities
Share capital
Other reserves
Translation reserve
Net profit for the period
Total Shareholders’ equity – Group
Shareholders’ equity – Non-controlling interests
Total Liabilities and Shareholders’ equity

13

10

242,061

61,909

14

4,697

4,894

15

402,673
119,534
11,993437
203,764
985,159

348,534
132,1453,803
524
154,666
706,475

265,965
7
68,76056,22940,466
108,444825

207,950
19
63,27952,66042,671
98,982
1,469

16

17

14

Net current assets
Total assets less current liabilities

6

13,315

13,247554,011
1,539,170
255,882
2,192,938(26,745)244,848
2,666,923
15,4774,221,570

480,277
1,186,752
255,882
1,853,325(49,438)
627,785
2,687,554
13,986
3,888,292

595,900
3,236,411

755,1213,181,817

Statement of changes in consolidated shareholders’ equity(amounts in thousands of Euro, except for number of shares)(amounts inthousands of Euro)

Number of
SharesBalance at January
31, 2013 (audited)

2,558,824,000

Allocation of 2012
net profit
Dividends
Capital injection in
subsidiaries
Comprehensive
income for the six
months(recyclable to P&L)
Comprehensive
income for the six
months (notrecyclable to P&L)
Balance at July 31,
2013 (unaudited)
Dividends
Capital injection in
subsidiaries
Comprehensive
income for the six
months(recyclable to P&L)
Comprehensive
income for the six
months(not recyclable to
P&L)
Balance at January
31, 2014 (audited)
Allocation of 2013
net profit
Dividends
Acquisition ofMarchesi Angelo srl
Capital injection in
subsidiaries
Comprehensive
income for the six
months(recyclable to P&L)
Comprehensive
income for the six
months(not recyclable to
P&L)
Balance at July 31,
2014 (unaudited)

Share
Share
premium
Capitalreserve

Translation
reserve

Cash Actuarial
flow
gain
hedge (losses)
reserve reserve

255,882(42,288)

20,148410,047(6,470)EquityNonAvailable
attributable
Other
controlfor sale
Net profit to owners
reserves
ling
reserveof theinterests
Group
5,486 1,051,536

625,681625,681 (625,681)

2,320,022-

Total
Equity10,470 2,330,492

-

-

-

-

-

-

-

-

-

-

-

-

-

- (230,294)-(230,294)

-

-

-

-

-

-

-

-

-

-

-

-

10

10

-

-

-

5,426

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

298,676

4,608

303,284

-

-

-

-

-

(308)

-

-

-

(308)

-

(308)

2,558,824,000

255,882

410,047(36,862)

9,923(6,778)722 1,446,923

308,2392,388,096(1,881) (232,175)

13,207 2,401,303

-

-

-

-

-

-

-

-

-

-

(4,753)(4,753)

-

-

-

-

-

-

-

-

-

-

30

30

-

-

-

(12,576)(6,224)

-

3,386

-

319,546

304,132

5,502

309,634

-

-

-

-

-

(4,674)---(4,674)-(4,674)2,558,824,000

255,882

410,047(49,438)

3,699(11,452)

4,108 1,446,923

627,785

2,687,554

-

-

-

-

-

-

-

-

-

-

-

-

-

- (281,471)-(281,471)

-

-

-

-

-

-

-

(2,459)-(2,459)107(2,352)

-

-

-

-

-

-

-

-

-

-

1,589

1,589

-

-

-

22,693(6,844)

-

4,531

-

244,848

265,2286,558

271,786

-

-

-

-

-

(1,929)---(1,929)-(1,929)2,558,824,000

255,882

410,047(26,745)(3,145)(13,381)8,639 1,790,778

244,848

2,666,923

7

627,785 (627,785)-

13,986 2,701,540--(6,763) (288,234)

15,477 2,682,400

Condensed statement of consolidated cash flows
six months
ended
July 312014(unaudited)

six months
ended
July 312013(unaudited)

Net cash flows from operating activities

209,186

403,764

Cash flows generated/(utilized) by investing activities(227,670)(293,189)

Cash flows generated/(utilized) by financing activities(62,839)(245,918)

Change in cash and cash equivalents, net of bank overdrafts(81,323)(135,343)(amounts in thousands of Euro)Statement of consolidated comprehensive income
six months
ended
July 312014(unaudited)

twelve months
ended
January 31
2014(audited)six months
ended
July 312013(unaudited)

251,046

637,805

312,819

Change in Translation reserve
Tax impact
Change in Translation reserve less tax
impact23,053-(7,057)-

5,454-

23,053(7,057)5,454

Change in Cash Flow Hedge reserve
Tax impact
Change in Cash Flow Hedge reserve lesstax impact(9,279)2,435(22,755)
6,306(14,099)
3,874(6,844)(16,449)(10,225)

Change in Fair Value reserve
Tax impact
Change in Fair Value reserve less tax
impact6,041(1,510)(1,837)459(6,352)
1,588

4,531

(1,378)(4,764)

Change in Actuarial reserve
Tax impact
Change in Actuarial reserve less tax impact(2,033)104(1,929)(6,403)
1,418(4,985)

(385)
77
(308)

Consolidated comprehensive income forthe period

269,857

607,936

302,976

Comprehensive income for the period –Non-controlling Interests

6,558

10,1104,608

Comprehensive income for the period –Group

263,299

597,826

298,368(amounts in thousands of Euro)Net income for the period – ConsolidatedA) Items recyclable to P&L:

B) Item not recyclable to P&L:

8

Notes to the Interim results for the six months ended
July 31, 2014
1.

Presentation of PRADA GroupPRADA spa (the “Company”), together with its subsidiaries (jointly the“Group”), is listed on the Hong Kong Stock Exchange (stock code: 1913). It is
one of the world leaders in the luxury goods sector where it operates with
the Prada, Miu Miu, Church’s and Car Shoe brands in the design, production
and distribution of luxury handbags, leather goods, footwear, apparel andaccessories. The Group also operates, under licensing agreements, in theeyewear and fragrances sectors. Its products are sold in 70 countries
worldwide through a network that included 566 Directly Operated Stores(DOS) at July 31, 2014, and a selected network of luxury department stores,
independent retailers and franchise stores.
The Company is a joint-stock company, registered and domiciled in Italy. Its
registered office is in Via Antonio Fogazzaro 28, Milan, Italy.

2.

Basis of preparation

The consolidated financial information for the six months ended July 31,
2014, included in this Announcement refers to the Group of companies
controlled by PRADA spa (the "Company"), holding company of the PRADA
Group (the "Group"), and is based on its Interim condensed consolidated
financial statements. Such Interim results were prepared on a consistentbasis compared to the Consolidated financial statements of the Group for thetwelve months ended January 31, 2014, with the exception of the new andrevised IFRS issued by the IASB and endorsed by the European Union that are
effective for the PRADA Group starting from February 1, 2014. Such new andrevised IFRS did not have a significant impact on the Interim condensed
consolidated financial statements.
IFRS also refer to all the International Accounting Standards (“IAS”) and all
the interpretations of the International Financial Reporting Interpretation
Committee (“IFRIC”), previously named the Standing Interpretations
Committee (“SIC”).
New standards and amendments issued by the IASB, endorsed by theEuropean Union and applicable to the PRADA Group from February 1, 2014
The following amendments to IFRS have been endorsed by the European
Union and are applicable to the PRADA Group effective from February 1,
2014. These changes do not have any significant impact to the Group as ofthe date of these consolidated financial statements:
 “IFRIC Interpretation 21 Levies”;
 Amendments to “IAS 36 Impairment of Assets”;
 Amendments to “IAS 39 Financial Instruments:

Recognition andMeasurement”;
 “Investment Entities”, meant as a group of amendments to IFRS 10, IFRS
12 and IAS 27;
9









Transition Guidance (amendments to IFRS 10, IFRS 11 and IFRS 12);“IFRS 10 Consolidated Financial Statements”;“IFRS 11 Joint Arrangements”;“IFRS 12 Disclosure of Interests in Other Entities”;
Amendments to “IAS 28 Investment in Associates and Joint Ventures”;
Amendments to “IAS 27 Separate Financial Statements”;
Amendments to “IAS 32 Financial Instruments: Presentation”.

10

3.

Net revenues analysis

Net revenues for the six months ended July 31, 2014
six months
ended
July 312014(unaudited)(amounts in thousands of Euro)six months
ended%
July 312013 change(unaudited)

Net sales by geographical area
Italy
EuropeAmericas
Asia PacificJapan
Middle East
Other countries
Total

286,808 16.6%
361,539 20.9%
233,452 13.5%
619,221 35.8%
175,262 10.1%
51,930
3.0%
2,688
0.1%
1,730,900 100.0%

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

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

1,431,114 82.7%
256,031 14.8%
35,560
2.0%
6,516
0.4%
1,679
0.1%
1,730,900 100.0%

1,410,062 82.6%
1.5%
255,950 15.0%
0.0%
32,673
1.9%
8.8%
7,551
0.4% -13.7%
1,348
0.1% 24.6%
1,707,584 100.0%
1.4%

Net sales by product line
Clothing
Leather goods
Footwear
Other
Total

275,779 15.9%
1,110,715 64.2%
314,423 18.2%
29,9831.7%
1,730,900 100.0%

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

10.8%
-3.9%
11.3%
49.9%
1.4%

Net sales by distribution channelDOS
Independent customers and franchises
Total

1,442,161 83.3%
288,739 16.7%
1,730,900 100.0%

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

1.4%
1.3%
1.4%

Net sales
Royalties

1,730,900
20,415

1,707,584
20,481

98.8%
1.2%

1.4%
-0.3%

Total net revenues

1,751,315 100.0%

1,728,065 100.0%

1.3%

11

98.8%
1.2%

6.8%
-3.4%
0.8%
-1.3%
9.9%
20.0%
-6.2%
1.4%

Net revenues analysis for the three months ended July 31,
2014
three months
ended
July 312014(unaudited)(amounts in thousands of Euro)

three months
ended%
July 312013 change(unaudited)

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

189,855 19.7%
209,778 21.8%
139,981 14.6%
311,853 32.4%
82,874
8.6%
26,313
2.7%
1,795
0.2%
962,449 100.0%

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

13.6%
-2.9%
1.9%
0.0%
3.1%
28.6%
14.7%
2.9%

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

790,194 82.1%
148,845 15.5%
18,369
1.9%
3,852
0.4%
1,189
0.1%
962,449 100.0%

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

2.5%
3.9%
15.5%
0.9%
54.4%
2.9%

Net sales by product line
Clothing
Leather goods
Footwear
Other
Total

157,093 16.3%
593,568 61.7%
194,260 20.2%
17,5281.8%
962,449 100.0%

140,772 15.1%
617,678 66.1%
164,176 17.5%
12,3871.3%
935,013 100.0%

11.6%
-3.9%
18.3%
41.5%
2.9%

Net sales by distribution channelDOS
Independent customers and franchises
Total

744,350 77.3%
218,099 22.7%
962,449 100.0%

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

0.1%
14.0%
2.9%

Net sales
Royalties
Total net revenues

962,449 98.9%
11,126
1.1%
973,575 100.0%

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

2.9%
3.4%
2.9%

12

Number of storesas atJuly 312014
DOS
franchises

as atJanuary 31
2014
DOS
franchises

as atJuly 312013
DOS
franchises

Prada
Miu Miu
Church’s
Car Shoe

342
162
54
8

27
7
-

330
150
52
8

24
8
-

301
133
49
8

23
7
-

Total

566

34

540

32

491

30

as at
July 312014
DOS
franchises

as atJanuary 31
2014
DOS
franchises

as atJuly 312013
DOS
franchises

ItalyEuropeAmericas
Asia PacificJapan
Middle East
Africa

52
159
100
164
71
17
3

6
4
21
3
-

51
150
91
157
72
16
3

6
6
20
-

50
138
75
142
70
13
3

6
6
18
-

Total

566

34

540

32

491

30

4.

Operative expenses
six months
ended
July 312014(unaudited)% on netrevenues

six months
ended
July 312013(unaudited)% on netrevenues

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

69,68676,535639,366
98,855

4.0%
4.4%
36.5%
5.6%

66,40582,053563,954
96,908

3.8%
4.7%
32.6%
5.6%

Total

884,44250.5%

809,320

46.8%(amounts in thousands of Euro)

5.

Interest and other financial income/(expenses), net
six months
ended
July 312014(unaudited)

six months
ended
July 312013(unaudited)

Interests expenses on borrowings
Interest expenses IAS 19
Interest income
Exchange gains /(losses) – realized
Exchange gains/(losses) – unrealized
Other financial income/(expenses)(6,020)
(101)
1,713
3,031
(6,707)(1,408)(4,402)(125)
2,035(4,148)(6,248)(2,306)

Total(9,492)(15,194)(amounts in thousands of Euro)

13

6.

Taxation
six months
ended
July 312014(unaudited)

six months
ended
July 312013(unaudited)

Current taxation
Deferred taxation

123,157(10,082)

143,557(12,948)

Income taxes

113,075

130,609(amounts in thousands of Euro)

7.

Earnings and dividends per share

Earnings per share
Earnings per share are calculated by dividing the net income attributable toGroup’s shareholders by the weighted average number of ordinary shares inissue.
six months
ended
July 312014(unaudited)Group net income in Euro
Weighted average number of ordinary shares in issue
Earnings per share in Euro, calculated on weighted average
number of shares

six months
ended
July 312013(unaudited)

244,847,587 308,238,604
2,558,824,000 2,558,824,000
0.096

0.120

Dividends per share
During the six months ended July 31, 2014, the Company distributed
dividends of Euro 281,470,640 (or Euro 11 cents per share), as approved by
the Shareholders’ Meeting held on May 22, 2014, to approve the financial
statements for the year ended January 31, 2014. The payment of thedividends and the related Italian withholding tax payable (Euro 11.3 million),
arising from the application of the Italian ordinary withholding tax rate to thewhole amount of dividends paid to beneficial owners of the Company shares
held through the Hong Kong Central Clearing and Settlement System, wascompleted by July 31, 2014.
During the year ended January 31, 2014, the Company distributed dividendsof Euro 230,294,160 (or Euro 9 cents per share) as approved by the
Shareholders’ Meeting held on May 23, 2013, to approve the financial
statements for the year ended January 31, 2013. The payment of thedividends and the related Italian withholding tax payable (Euro 9.2 million),
arising from the application of the Italian ordinary withholding tax rate to thewhole amount of dividends paid to beneficial owners of the Company shares
held through the Hong Kong Central Clearing and Settlement System, wascompleted by July 31, 2013.

14

8.

Inventories, net
as atJuly 312014(unaudited)

as atJanuary 31
2014(audited)

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

106,41236,418
460,574(64,362)

85,33328,424403,473(67,327)

Total

539,042449,903(amounts in thousands of Euro)Overall, the increase in inventories was due to the larger number of storesand the wider replenishment strategy that the Group is realizing with theaim to better serve the retail activities.

9.

Trade receivables, net
as atJuly 312014(unaudited)

as atJanuary 31
2014(audited)

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

347,864(10,560)
36,544

288,504(10,432)
30,333

Total

373,848

308,405(amounts in thousands of Euro)

Trade receivables from third parties increased for the six months ended July
31, 2014, by Euro 59.4 million compared to January 31, 2014, and stood at
Euro 347.9 million. The rise mainly followed the deliveries of the 2014
fall/winter collection to independent clients that occurred significantly in
July.
Trade receivables from related parties includes an amount of Euro 28.6
million (Euro 25.5 million at January 31, 2014) essentially arising from salesof finished products and royalties, as provided by the franchising agreementwith Fratelli Prada spa, a retail company owned by the majority shareholdersof parent company PRADA Holding bv.
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 the fair value.

15

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

July 312014(unaudited)

January 31
2014(audited)

10,432

11,547

5
375
(207)
(62)
17

55
830
(1,922)(78)-

10,56010,432

Opening balance
Exchange differences
Increases
Uses
Reversals
Change in scope of consolidation
Closing balance

The following table contains a summary, by due date, of total receivables
before the allowance for doubtful debts at the reporting date:(amounts inthousands of Euro)

as at
July 31,2014
unaudited

Current

Overdue (days)

Trade receivables

384,408Total

1 < 3031 < 60

61 < 90

91 < 120≥ 120

315,256

26,788

11,624

3,986

7,098

19,656384,408

315,256

26,788

11,624

3,986

7,098

19,656(amounts inthousands of Euro)

as at
January
31, 2014
auditedCurrent

Trade receivables

318,837

Total

318,837

Overdue (days)
1 < 3031 < 60

61 < 90

91 < 120≥ 120

262,213

20,331

9,817

6,446

3,633

16,397262,213

20,331

9,817

6,446

3,633

16,397

The following table contains a summary, by due date, of trade receivables
less the allowance for doubtful accounts at the reporting date:(amounts inthousands of Euro)as at July
31, 2014
unaudited

Current

Overdue (days)

Trade receivables
less allowance for
doubtful accounts

373,848

Total

373,848

1 < 3031 < 60 61 < 90

314,765

26,789

11,624

314,765

26,789

11,624(amounts inthousands of Euro)

as at
January 31
2014
auditedCurrent

Trade receivables
less allowance for
doubtful accounts

308,405

Total

308,405

91 < 120

≥ 120

3,800

7,098

9,772

3,800

7,098

9,772

Overdue (days)
1 < 3031 < 60

61 < 90

91 < 120≥ 120

261,862

20,331

9,817

6,213

3,633

6,549

261,862

20,331

9,817

6,213

3,633

6,549

16

10. Receivables from, and advance payments to, parent
company and other related parties – current and non-current(amounts in thousands of Euro)

Financial receivables - other related parties
Other receivables - PRADA Holding bv and other companies
controlled by PRADA Holding bv
Other receivables - other related parties
Advance payments - other related parties
Receivables from, and advance payments to, parent company andother related parties - current

as atJuly 312014(unaudited)

as atJanuary 31
2014(audited)

11

2,008

206

392

2,348
1,255

2,159
1,434

3,820

5,993

The financial receivables from other related parties reported at January 31,
2014, were due from Luna Rossa Challenge 2013 srl and were reimbursed in
the first half of 2014 financial period.
as atJuly 312014(unaudited)

as atJanuary 31
2014(audited)

Accrued rental income – long-term
Deferred sponsorship expenses

2,905
8,729

1,487
-

Receivables from, and advance payments to, parent
company and other related parties – non-current

11,634

1,487(amounts in thousands of Euro)Accrued rental income – long-term - was recognized in relation to Fratelli
Prada spa and Progetto Prada Arte srl in application of “IAS 17 Leases” which
requires rental income to be recognized on a constant basis. Deferredsponsorship expenses related to the sponsorship of the Luna Rossa sailingteam for the participation in the XXXV edition of the America’s Cup, as incompliance with the agreement signed on February 27, 2014.

17

11. Capital expenditure
Changes in the net book value of Property, plant and equipment in the period
ended July 31, 2014, are as follows:(amounts inthousands ofEuro)

Land andbuildings

Balance atJanuary 31,
2014 (audited)

390,677

20,279487,227

153,428

69,223

109,358

1,230,192

-

42

-

19

24

-

85

67,071(4,463)(19)

3,940(4,156)(18)

55,855(69,280)(75)

25,258(18,301)
(174)

3,088
(4,721)(43)

73,289(1,305)228,501(100,921)(1,634)

6,946

29

2,249

1,760

127

514

11,625595

124

21,0565,217

119(27,137)

(26)

-

-

(849)

(297)

(13)

(111)

(1,270)460,807

20,240496,183

166,91067,804

154,608

1,366,552

Change inscope ofconsolidation
Additions
Depreciation
Disposals
Exchangedifferences
Other
movements
Impairment
Balance at
July 31, 2014
(unaudited)

Production Leasehold Furniture
AssetsOther
plant and improve&under
tangiblemachineryments
fittings
construction

Total net
book
value

Changes in the net book value of Intangible assets in the period ended July
31, 2014, are as follows:
Trademarks

Balance atJanuary 31,
2014 (audited)

282,913504,373

78,994

10,63719,0295,343

901,289-

7,983

21,3312

1-29,31792(5,552)--

11,443(8,710)-494(1,807)(5)

133(1,377)-

19,551-

31,713(17,446)
(5)

1,919

334

430

26

-

31

2,740

-

-

3,712
-

332
-

-

(4,537)
(40)

(493)
(40)

279,372

512,690

107,200

9,679

17,786

20,348947,075

Change in scopeof consolidation
Additions
Amortization
Disposals
Exchangedifferences
Other movements
Impairment
Balance at
July 31,2014 (unaudited)

Store
Goodwill
Lease
SoftwareAcquisitions

Development
costs and
Assets Total net
other
in
book
intangible progress value
assets(amounts inthousands of
Euro)

18

12. Other current assets
as atJuly 312014(unaudited)

as atJanuary 31
2014(audited)

VAT
Income tax and other tax receivables
Other assets
Prepayments and accrued income
Deposits

39,92439,88017,205
48,7685,227

39,25014,062
13,47042,375
5,740

Total

151,004

114,897

as atJuly 312014(unaudited)

as atJanuary 31
2014(audited)

Guarantee deposits
Deferred rental income
Other receivables

57,691
6,868
9,649

57,158
6,923
5,786

Total

74,20869,867(amounts in thousands of Euro)

13. Other non-current assets(amounts in thousands of Euro)

14. Payables to parent company and other related parties –current and non-current(amounts in thousands of Euro)

as at
July 312014(unaudited)

as atJanuary 31
2014(audited)

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

119

136

3,498
1,080

4,130
628

Payables to parent company and other related parties – current

4,697

4,894

Financial payables towards other related parties, totaling Euro 3.5 million at
July 31, 2014, include an interest-free loan contributed by Al Tayer, the noncontrolling shareholder of PRADA Middle East fzco, according to its share in
the said company. The loan was partially repaid during the period.
The non-current portion of payables to parent company and other relatedparties may be detailed as follows:
as atJuly 312014(unaudited)

as atJanuary 31
2014(audited)

Other payables – other related companies

13,315

13,247

Payables to parent company and other related parties –non-current

13,315

13,247(amounts in thousands of Euro)

19

Other payables to related companies includes the amount due to Fin-Reta srl
in relation to the establishment of a ten year right of usufruct to a realestate property in Tuscany, Italy, and to a business party to the rental
agreement for said property which the Group is using as part of its retail
operations. The payable reported at July 31, 2014, represents the present
value of future payments due after July 31, 2015.

15. Trade payables(amounts in thousands of Euro)

as at
July 312014(unaudited)

as atJanuary 31
2014(audited)

Trade payables – third parties
Trade payables – related parties

392,061
10,612337,807
10,727

Total

402,673348,534

The increase in Trade payables is typical of this part of the year and it isstrictly connected with the industrial processes involved in the ongoingstrategy pursued by the Group to replenishing the inventories with the aim tobetter serve the retail activities.
The following table contains a summary, by due date, of total payables:
as atJuly 312014
unaudited

Current

1 < 3031 < 60

61 < 90

91 < 120≥ 120

Trade payables

402,673

365,743

18,170

7,681

2,359

591

8,129

Total

402,673

365,743

18,170

7,681

2,359

591

8,129

(amounts inthousands of Euro)

Overdue

as atJanuary 31
2014
auditedCurrent

1 < 3031 < 60

61 < 90

91 < 120≥ 120

Trade payables

348,534

314,375

17,261

8,524

2,099

1,086

5,189

Total

348,534

314,375

17,261

8,524

2,099

1,086

5,189

(amounts inthousands of Euro)

Overdue20

16. Other current liabilities
as atJuly 312014(unaudited)

as atJanuary 31
2014(audited)

Payables for capital expenditure
Accrued expenses and deferred income
Other payables

119,076
13,07871,61070,848
10,842
72,976

Total

203,764

154,666(amounts in thousands of Euro)

17. Provisions for charges
Movements in provisions for risks and charges are summarized as follows:
Provision
for litigation

Provision fortax disputes

Provisions
for othercharges

Total

Balance at January 31, 2014
(audited)

1,400

22,72428,536

52,660Exchange differences
Reclassifications
Reversals
Uses
Increases

6
148
(101)
(188)
-

1
(17)
3,232

258
(148)
(510)
(557)
1,445

265
(17)
(611)
(745)
4,677

Balance at July 31, 2014
(unaudited)

1,265

25,94029,02456,229(amounts in thousands of Euro)

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 is reasonableconsidering the contingent liabilities that might arise.
The increases occurred in the provision for tax disputes during the six months
ended July 31, 2014, for Euro 3.2 million essentially related to tax risks on
direct taxes with reference to subsidiaries located in the European Union forwhich the management deemed more likely than not the rising of future
liabilities as a consequence of the probable outcome of tax inspections
ongoing at the reporting date.

21

Management Discussion and Analysis for the threemonths period ended July 31, 2014
Net revenues
In the three months ended July 31, 2014, the consolidated net revenues
amounted to Euro 973.6 million, up by 2.9% compared to Euro 945.8 million
recorded in the same three months period of 2013. At constant exchange
rates the growth was 5%. The increase was achieved at net sales level thanks
to:






the expansion of the wholesale channel that in the three months
ended July 31, 2014, recorded Euro 218.1 million, up by 14% over Euro
191.3 million achieved in the same three months period of 2013(+14.4% at constant exchange rates). The development in the channel
was also affected by the timing differences in shipments aimed to amore efficient logistic process. The retail channel was essentially flatas reported and grew 2.7% at constant exchange rates;
the Prada brand which reported net sales totaling Euro 790.2 million,
Euro 19 million more than Euro 771.2 million achieved in the same
three months period of last year (+2.5% as reported and +4.6% atconstant exchange rates). Miu Miu recorded a steady positive trend
across the two quarters. In the period also the other brands reported
growth both as reported and at constant exchange rates;
the double-digit growths achieved by the ready-to-wear and shoes
department both as reported and at constant exchange rates on the
results scored in the same three months period of last year. On thecontrary leather goods contracted 3.9% (-2% at constant exchange
rates).

A net of 15 new shops (19 openings and 4 closures) were opened during thethree months period ended July 31, 2014.

Operating results
In the three months ended July 31, 2014, the consolidated EBITDA totaled
Euro 278.9 million, Euro 31.3 million less than Euro 310.2 million reported in
the same three months period of previous year. Profitability measured as apercentage of net revenues for the period also decreased from 32.8% to28.6%.
Main cause of the EBITDA dilution was the reduced profitability registered atgross margin level. In fact, gross margin for the three months ended July 31,
2014, that amounted to Euro 682.1 million, was negatively impacted by theexchange rates fluctuations and decreased its incidence on the consolidated
net revenues for the period from 73.1% to 70.1%. In addition, the EBITDA also
contracted for the effect of the increased operative expenses that went from
45.4% on net revenues in the three months ended July 31, 2013, to 47.8%.
In the period under analysis the Group’s net result amounted to Euro 139.5
million while in the same period of last year it totaled Euro 170.1 million.

22

Management Discussion and Analysis for the six months
ended July 31, 2014
Net revenues
During the six months ended July 31, 2014, the consolidated net revenues
recorded by the Group amounted to Euro 1,751.3 million, slightly up by 1.3%
compared to Euro 1,728.1 million posted in the same period of 2013. At
constant exchange rates the increase was 4.5%.

Distribution channels
In the six months ended July 31, 2014, the retail channel generated net salesof Euro 1,442.2 million, up by 1.4% compared to Euro 1,422.5 million
recorded in the same period of 2013. At constant exchange rates, theincrease was 5.1%. The contribution to the Group’s total net sales was
83.3%, in line with the same period of last year. As at July 31, 2014, thenumber of Directly Operated Stores (DOS) was 566 with a net of 26 newstores operating from the beginning of the fiscal period (32 openings: 17
Prada, 12 Miu Miu, 3 Church’s; 6 closures: 5 Prada, 1 Church’s). From August
1, 2013, the total net openings were 75.
For the six months ended July 31, 2014, the wholesale channel delivered net
sales totaling Euro 288.7 million. Compared to Euro 285.1 million posted in
the first half of 2013 the increase was 1.3% as reported and 1.8% at constantexchange rates. In the second quarter of 2014 the deliveries to independent
clients were normalized absorbing those timing differences in shipments that
affected the comparison of the results of the first quarter of 2014 with theprior year’s period.

Markets
In the first half of 2014 the Asia Pacific market recorded net sales of Euro
619.2 million, down by 1.3% compared to Euro 627.6 million of the six
months ended July 31, 2013. At constant exchange rates, there was anincrease of 2.3%. Counting on 164 DOS in the area, the retail channel
expanded 2.1% at constant exchange rates compared to the results posted in
the same period of 2013 (-2.1% as reported). In this channel, the Greater
China posted net sales for Euro 388.1 million and recorded an increase of
2.7% at constant exchange rates (1.8% as reported) as a result of double-digit
paces of growth in China and Macau and weak sales in Hong Kong. Sales inSouth Korea and Singapore were weak too, while the other Asian markets
reported solid rates of growth at constant exchange rates. It is worth notingthat in South Korea, the only significant wholesale market in the area, theindependent clients business (mainly duty free operations) increased doubledigit both as reported and at constant exchange rates.
The European market reported net sales of Euro 361.5 million, down by 3.4%
compared to Euro 374.3 million achieved in the six months ended July 31,
2013 (-3.1% at constant exchange rates). The uncertainty that prevailed on
the political and economic landscape, together with a relatively strong Euro,
resulted in lower flows of tourists; on the other side, the domestic demand23was still weak. In fact, with a total of 159 DOS, the retail channel recorded aslight contraction of 0.9% (-0.5% at constant exchange rates). With a longer
term view the Group continued to invest in the region through the openingof some important new stores to cover primary locations where it was notpresent yet such as Geneva, Amsterdam and St Tropez. The wholesalechannel posted a double-digit decrease both as reported and at constantexchange rates compared to the same period of 2013, principally as aconsequence of the ongoing selective strategy of the independent clients’accounts and the conversion program of the Swiss market from wholesale toretail.
In the six months ended July 31, 2014, the Italian market generated net salesof Euro 286.8 million, 6.8% higher than Euro 268.5 million posted in the same
period of last year. The expansion was substantially achieved through thewholesale channel that increased by 20.4% over the results recorded in thesix months ended July 31, 2013. The retail channel was basically in line withthe same period of 2013.
The Americas, meant as North, Centre and South America, reported net salesof Euro 233.5 million, up by 0.8% over Euro 231.6 million posted in the
period of six months ended July 31, 2013 (+6.3% at constant exchange rates).
In the area the progression in sales was fully delivered by the retail channel
that achieved a growth of 8.2% that became an increase of 14.2% at constantexchange rates. During the period 9 new DOS were opened in the area out of
which 8 were corners converted between United States and Canada.
In the first half of 2014 the Japanese market confirmed a trend of positive
performances compared to the results recorded in the same period of 2013.
Net sales amounted to Euro 175.3 million advancing 9.9% over Euro 159.4
million achieved in the six months ended July 31, 2013 (+19.5% at constantexchange rates).
The Middle East, that at July 31, 2014, counted 17 stores directly operated
by the Group, reported net sales of Euro 51.9 million and achieved a doubledigit expansion both as reported and at constant exchange rates: +20% and+24.7% respectively.

Products
In the six months ended July 31, 2014, net sales generated by leather goods
amounted to Euro 1,110.7 million, down by 3.9% compared to Euro 1,156.4
million recorded in the same period of 2013 (-0.9% at constant exchange
rates). The contribution of this product category to the consolidated net
sales dropped to 64.2% from 67.7% achieved in the same period of 2013. As
already highlighted in the first quarter of the year, the good performancesdelivered by Japan and the Americas were compensated by the slowdowns
recorded in Europe (Italy excluded) and in Asia Pacific.
The ready-to-wear division generated net sales of Euro 275.8 million andadvanced 10.8% over the results achieved in the six months ended July 31,
2013 (+14.5% at constant exchange rates). The contribution to consolidated
net sales rose to 15.9% from 14.6%. The expansion was totally delivered
through the retail network that recorded double-digit growths both as24

reported and at constant exchange rates: +13.9% and +18.3% respectively.
All markets contributed to the business expansion.
Footwear reported net sales of Euro 314.4 million, up by 11.3% compared toEuro 282.4 million posted in the first half of 2013 (+14.2% at constantexchange rates). As a result, the contribution to consolidated net sales
increased up to 18.2% from 16.5% recorded in the six months ended July 31,
2013. With the exception of the Americas, all markets delivered businessexpansion. Same as the ready-to-wear division, the growth was totally
generated through the retail channel: +18.8% as reported and +22.6% atconstant exchange rates.

BrandsIn the six months ended July 31, 2014, contributing 82.7% to the total net
sales for the Group, the Prada brand generated Euro 1,431.1 million, up by
1.5% compared to net sales of Euro 1,410.1 million reported in the same
period of last year (+4.7% at constant exchange rates), with similar trends inthe two channels. In terms of geography, as reported, Italy, Japan, Middle
East and Americas contributed with increases, while Europe and Asia Pacificslightly contracted. The ready-to-wear and footwear categories scoreddouble-digit increases both as reported and at constant exchange rates.
Miu Miu net sales amounted to Euro 256 million for the six months ended July
31, 2014, basically flat as reported compared to the results achieved in thesix months ended July 31, 2013 (+3.6% at constant exchange rates). In theretail business Miu Miu advanced 2.9% as reported and 7.1% at constantexchange rates thanks to the contribution of markets such as Asia Pacific,
Japan, Middle East and, to a lesser extent, Americas. Similarly to the Pradabrand, it is worth noting the performance of the ready-to-wear division that
increased double-digit at constant exchange rates. Instead, shoes slightly
contracted as reported, but turned into a moderate growth at constantexchange rates.
In the six months ended July 31, 2014, the Church’s brand recorded net salesof Euro 35.6 million, up by 8.8% over Euro 32.7 million reported in the same
period of last year (+6.8% at constant exchange rates). The expansion was
substantially achieved through the retail network where the brand scored adouble-digit growth both as reported (+13.8%) and at constant exchange
rates (+12.4%).

Royalties
In the six months ended July 31, 2014, the Group’s licensing agreements
generated royalties for Euro 20.4 million, overall in line with the same periodof last year. The growth achieved in the eyewear business was offset by thecontraction reported in the fragrances.

Operating results
The delivery margin for the six months ended July 31, 2014, amounted toEuro 1,257.6 million, down by 0.8% compared to Euro 1,267.7 million
recorded in the same six months period of 2013. Profitability measured as a25

percentage of net revenues decreased to 71.8% from 73.4% mainly as aconsequence of the negative impact of the exchange rates.
The EBITDA for the period amounted to Euro 492.8 million, down comparedto Euro 551.1 reported for the six months ended July 31, 2013. The margin
went down to 28.1% from the 31.9% achieved in the same period of 2013. The
dilution was due to the lower gross margin level together with an increased
incidence of the selling expenses. The other expenses contributing to the
EBITDA, following the measures undertaken to operate in the current
difficult economic scenario, either kept their incidence stable or evenreduced, like the advertising and promotional expenses.
EBIT for the period totaled Euro 373.2 million compared to Euro 458.3 million
reported in the same period of six months of last year. As a percentage ofnet revenues profitability was 21.3% compared to 26.5% achieved in the six
months ended July 31, 2013. The increase in the amortization anddepreciation costs was entirely attributable to the retail investments. No
significant impairment occurred during the period.
The tax burden for the six months ended July 31, 2014, totaled Euro 113.1
million, down by Euro 17.5 million compared to the same period of last year.
The incidence was higher (from 29.5% to 31.1%) due to a different
geographical mix of consolidated net taxable income.
Finally, the Group’s net income amounted to Euro 244.8 million, or 14% as apercentage of net revenues, compared to Euro 308.2 million for the six
months ended July 31, 2013.

26

Net invested capital
The following table contains the Statement of financial position reclassified
in order to provide a better picture of the composition of the Net invested
capital.
(amounts in thousands of Euro)

as at
July 312014(unaudited)

as atJanuary 31
2014(audited)

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

2,427,553
373,848
539,042(402,673)
510,217
157,567(336,490)(178,923)(56,229)(68,760)(122,584)
172,492(75,081)2,683,766(2,666,923)(15,477)(2,682,400)(265,972)
264,606(1,366)(2,683,766)

2,225,451
308,405449,903(348,534)
409,774
132,866(291,378)(158,512)(52,660)(63,279)(113,698)
158,574(71,063)
2,405,650(2,687,554)(13,986)(2,701,540)(207,969)
503,858
295,890(2,405,650)

At July 31, 2014, Net invested capital stood at Euro 2,683.8 million, Euro
278.1 million more than the Euro 2,405.7 million reported at January 31,
2014. The increase mainly regarded non-current assets, especiallyinvestments in tangible fixed assets.
The capital expenditure for the first six months of 2014 totaled Euro 289.6
million and was mainly spent to enlarge, renovate and strengthen the retail
network; the amount also included Euro 61.5 million for the purchase of theheadquarter offices in Milan that were previously occupied under a rental
agreement. The non-current assets at July 31, 2014, include Euro 947.1
million of intangible assets, of which Euro 512.7 million relating to fixed
assets with indefinite useful life (goodwill), for those the management did
not highlight any indication of impairment. Consistently with the guidelines
of “IAS 36 Impairment of assets”, the mandatory impairment tests will be
performed at year end.
The Net operating working capital increased by some Euro 100 million, fromEuro 409.8 million at January 31, 2014, to Euro 510.2 million at July 31,
2014. The increase was essentially due to the higher value of retailinventories, mainly because of the larger number of stores and a wider
replenishment strategy deployed to better serve the retail activities. The
increases in the trade receivables and payables that occurred in the six
27months period were connected to the seasonality of the wholesale deliveries
and manufacturing processes typical of this part of the year.
Total Other net current liabilities increased from Euro 158.5 million at
January 31, 2014, to Euro 178.9 million. The variance was essentially due
to the lower fair value of derivative financial instrument for Euro 19.4
million, the higher payable for capital expenditure for Euro 48.2 million andnet of the higher current tax receivables combined with less current tax
payables for a total amount of Euro 39.1 million.
Other non-current liabilities, net, increased from Euro 71.1 million at
January 31, 2014, to Euro 75.1 million, essentially as a result of increases inliabilities for long-term employee benefits obligations and in deferred lease
income.
The Group shareholders’ equity passed from Euro 2,687.6 million at January
31, 2014, to Euro 2,666.9 million at July 31, 2014. The increase generated by
the Group’s net income for the six months ended July 31, 2014, thatamounted to Euro 244.8 million, was offset by the dividends of Euro 281.5
million distributed to the PRADA spa shareholders and other positive changes
totaling a net of Euro 16 million which were mostly contributed by the
positive changes in the translation reserve.

Net financial position surplus/(deficit)(amounts in thousands of Euro)

as at
July 312014(unaudited)

as atJanuary 31
2014(audited)Long-term debt
Obligations under finance leases(265,965)(7)(207,950)(19)

Long-term financial payables(265,972)(207,969)

Bank overdraft and short term loans
Payables to related parties
Receivables from related parties
Obligations under finance leases
Cash and cash equivalents(242,061)(3,498)11(437)
510,591(61,909)(4,130)2,008(524)
568,414

Short-term net financial surplus/(deficit)

264,606

503,859

Net financial position surplus/(deficit)(1,366)295,890

At July 31, 2014, the Net financial position was slightly negative at Euro 1.4
million. The decrease of Euro 297.3 million from the surplus of Euro 295.9
million at January 31, 2014, was due to the uses of cash to support theinvesting activities (Euro 227.7 million) and to pay dividends to PRADA spa
shareholders and Non-controlling shareholders (Euro 288.2 million), net of thefunds generated by the operating activities (Euro 209.2 million).
During the six months ended July 31, 2014, a new loan facility agreement of
GB Pound 60 million was signed by the subsidiary Kenon Limited withUnicredit Bank AG, London Branch. The loan under the facility is secured bya mortgage on the prestigious building in Old Bond street, London, home of28

one of the most important Prada stores in Europe. It has to be repaid inquarterly equal installments starting from April 2015. The loan will expire on
January 31, 2029.

Acquisitions, disinvestments and incorporation of subsidiaries
On February 1, 2014, PRADA Stores srl transferred its 100% participation inSpace sa to Prada Switzerland sa and on June 2, 2014, Space sa merged byincorporation into PRADA Switzerland sa.
On February 5, 2014, PRADA Switzerland sa acquired the 100% investment
into Burgerhaus Zurich sa (PRADA Zurich ag) to operate the retail business in
Switzerland.
On February 27, 2014, the Group set up PRM Services S. De R.L. de CV inorder to develop its commercial activities in Mexico. The Group owns the
100% of the Company.
On March 13, 2014, the Group set up Church Denmark aps in order to develop
its commercial activities in Denmark. The Group owns the 100% of theCompany.
On March 14, 2014, the Group acquired the 80% of the Marchesi Angelo srl,
owner of the historic Milanese pastry shop founded in 1824. The acquisition
was aimed at enhancing the “Pasticceria Marchesi” brand, a synonym toquality in the Italian food industry, joining it with Prada and Miu Miu brands,
leaders in the luxury goods market, within the Group’s development
worldwide.
On July 2, 2014, the Group set up PRADA Saudi Arabia in order to develop its
commercial activities in the Middle East area. The Group owns the 75% of theCompany.
On July 18, 2014, Prada China Limited has been liquidated.
Marchesi Angelo srl
On March 14, 2014, the Group acquired the 80% of the Marchesi Angelo srl,
owner of the historic Milanese pastry shop founded in 1824. The acquisition
was aimed at enhancing the “Pasticceria Marchesi” brand, a synonym toquality in the Italian food industry, joining it with Prada and Miu Miu brands,
leaders in the luxury goods market, within the Group’s development
worldwide. At the date of the preparation of the Interim condensed
consolidated financial statements, the measurement of the fair value of theconsideration was not completed, so the purchase accounting is provisional.
The net cash-out for the acquisition amounted to Euro 7.7 million andresulted as the net of the consideration paid, Euro 8.4 million, and the cash
surplus included in the net asset acquired, Euro 0.7 million.

29

fair valueof net assets acquired(amounts in Euro thousand)Cash surplus
Tangible fixed assets
Other current assets/(liabilities)
Other non current assets/(liabilities)
Net assets acquired

707
88
(53)
(210)
532

Non-controlling interests (measured at net assets)(107)

Consideration paid

8,400

Provisional Goodwill

7,975

The purchase commitments for minority interests resulting from theagreements were recognized in the Group’s equity reserves for an amountequal to Euro 2.5 million.

OutlookDespite recent trends have not shown signs of improvements, also due to thepersistent difficult economic and political conditions that are adversely
impacting consumers habits, the PRADA Group will remain focused on a
medium/long-term growth and continue investing in brands’ equity. The
Group will aim to increase sales through improvements in the merchandising
mix and with marketing activities more focused on retail and domestic
customers, as well as protect margins paying the highest attention on costs
development.
The second half of 2014 is expected to be broadly in line with the first half.
Margins will continue to be under pressure with some marginal improvements
deriving from the cost-cutting actions. Investments will be focused on
strategic locations with high potential and the maximum attention will be
kept on quality and creativity.

30

Corporate governance practices
The Company is committed to maintaining a high standard of corporate
governance practices and fulfilling its commitment to effective corporate
governance. The corporate governance model adopted by the Company
consists of a set of rules and standards with the aim of establishing efficientand transparent operations within the Group, to protect the rights of theCompany’s shareholders and to enhance shareholder value. The corporate
governance model adopted by the Company is in compliance with theapplicable regulations in Italy, as well as the principles of the Corporate
Governance Code (the “Code”) contained in Appendix 14 of the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited (the “Listing Rules”).
Corporate governance practices adopted by the Company during the six
months ended July 31, 2014, are in line with those practices set out in the
Company’s 2013 Annual Report and the Code.

Compliance with the Code
The Board has reviewed the Company’s corporate governance practices andis satisfied that the Company has been in compliance with all the applicablecode provisions set out in the Code throughout the six months ended July 31,
2014.

The Board
The Board of Directors of the Company (the “Board”) is responsible forsetting up the overall strategy as well as reviewing the operation andfinancial performance of the Company and the Group.
The Board has established the following committees with written terms ofreference, which are of no less exacting terms than those set out in the
Code:
1.

Audit Committee

2.

Remuneration Committee

3.

Nomination Committee

Audit Committee
The Company has established an Audit Committee in compliance with Rule3.21 of the Listing Rules, which at least one member possesses appropriate
professional qualifications in accounting or related financial management
expertise to discharge the responsibility of the Audit Committee. 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 theBoard in providing an independent view of the activities of the Company’s
financial reporting process and internal control and risk management
systems, to oversee the external audit process and the internal audit process
and to perform other duties and responsibilities as are assigned to the Audit
31

Committee by the Board. The Audit Committee held four meetings on
February 14, 2014, April 1, 2014, June 5, 2014, and September 19, 2014,
with an attendance rate of 100% to discuss, among others, the audit plan forthe year 2014, to meet with the external auditors, to discuss the auditing
and internal controls activities, to review the Group’s continuing connectedtransactions for 2013, the audited separate and consolidated financial
statements of the Company for the year ended January 31, 2014, theunaudited consolidated quarterly financial statements of the Company forthe three months ended April 30, 2014, and the unaudited consolidated
interim financial statements of the Company for the six months ended July
31, 2014, before recommending them to the Board for approval.

Remuneration Committee
The Company has established a Remuneration Committee in compliance with
the Code. The primary duties of the remuneration committee are to makerecommendations to the Board on the Company’s policy and structure for all
remuneration of directors and senior management and the establishment of aformal and transparent procedure for developing policy on such
remuneration. The recommendations of the Remuneration Committee arethen put forward to the Board for consideration and adoption, whereappropriate. The Remuneration Committee consists of two independent nonexecutive directors, Mr. Gian Franco Oliviero Mattei (Chairman) and Mr.
Giancarlo Forestieri and one executive director, Mr. Carlo Mazzi. The
Remuneration Committee has held one meeting on April 1, 2014, with anattendance rate of 100% to recommend certain updates to the long term
incentive plan and the increase of the overall amount of the Board’s
remuneration.

Nomination Committee
The Company has established a Nomination Committee in compliance with
the Code. The primary duties of the Nomination Committee are to makerecommendations to the Board on the structure, size and composition of theBoard itself, on the selection of new Directors and on the succession plansfor Directors. The Nomination Committee also assesses the independence ofindependent non-executive directors. The recommendations of theNomination Committee are then put forward to the Board for consideration
and adoption, where appropriate. The Nomination Committee consists of two
independent non-executive directors, Mr. Gian Franco Oliviero Mattei(Chairman) and Mr. Sing Cheong Liu and one executive director, Mr. Carlo
Mazzi. The Nomination Committee has held two meetings on February 14,
2014, and April 1, 2014, with an attendance rate of 100% to recommend theappointment of Mr. Carlo Mazzi as the Chairperson to the Board, torecommend the change of Ms. Miuccia Prada Bianchi’s role as Chief Executive
Officer and certain amendments to the powers already delegated by the
Board to the executive directors, to perform the annual review of the
independence of independent non-executive directors and to recommend theelection of Ms. Alessandra Cozzani as Director of the Company at its
shareholders’ general meeting held on May 22, 2014.

32

Supervisory Body
In compliance with Italian Legislative Decree 231 of June 8, 2001 (the“Decree”), the Company has established a supervisory body whose primary
duty is to ensure the functioning, effectiveness and enforcement of theCompany’s Model of Organization, adopted by the Company pursuant to theDecree. The supervisory body consists of three members appointed by the
Board selected among qualified and experienced individuals, including
independent non-executive director, qualified auditors, executives orexternal individuals. The supervisory body consists of Mr. David Terracina(Chairman), Mr. Gian Franco Oliviero Mattei and Mr. Franco Bertoli.

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

Dividends
The Company may distribute dividends subject to the approval of theshareholders in an ordinary shareholders’ meeting.
On April 2, 2014, the Board of the Company recommended the payment of a
final dividend of Euro/cents 11 per share in the capital of the Company,
representing a total dividend of Euro 281,470,640. The Shareholders
approved this dividend at the Shareholders’ Annual General Meeting of theCompany held on May 22, 2014. The dividend was paid on June 20, 2014.
No dividends have been declared or paid by the Company in respect of thesix months ended July 31, 2014.

Directors’ Securities Transactions
The Company has adopted written procedures governing Directors’ securities
transactions in compliance with on terms no less than the standard set out inthe Model Code for Securities Transactions by Directors of Listed Issuers as
set out in Appendix 10 of the Listing Rules (the “Model Code”). Relevant
employees who are likely to be in possession of unpublished inside
information of the Group are also subject to compliance with written
procedures. Specific written confirmations have been obtained from each
Director to confirm compliance with the Model Code for the six months
ended July 31, 2014. There was no incident of non-compliance during the six
months ended July 31, 2014.

33

Purchase, Sale, or Redemption of the Company’s Listed
Securities
Neither the Company nor any of its subsidiaries has purchased, sold orredeemed any of the Company’s listed securities during the six months ended
July 31, 2014.

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

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

Milan (Italy), September 19, 2014
As at the date of this announcement, the Company’s executive directors are Mr.
Carlo MAZZI, Ms. Miuccia PRADA BIANCHI, Mr. Patrizio BERTELLI, Mr. Donatello
GALLI and Ms. Alessandra COZZANI; the Company’s non-executive director is Mr.
Gaetano MICCICHÈ and the Company’s independent non-executive directors are Mr.
Gian Franco Oliviero MATTEI, Mr. Giancarlo FORESTIERI and Mr. Sing Cheong LIU.

34