Annual Report 2020
PRADA spa
(Hong Kong Stock code: 1913)
A N N U A L R E P O R T 2 0 2 0
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T A B L E O F C O N T E N T S
The PRADA Group
Financial Review
Directors and Senior Management
Directors’ Repor t
Corporate Governance
Consolidated Financial Statements
PRADA spa Separate Financial Statements
Notes to the Consolidated Financial Statements
Independent Auditors’ Repor ts
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The first Prada store
Galleria Vittorio Emanuele II, Milan
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T H E P R A D A G R O U P
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PRADA Group Annual Report 2020 - The PRADA Group Miuccia Prada and Patrizio Ber telli
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P R E S E N T A T I O N
Pioneer of a vision that transcends fashion, the Prada Group inquisitively observes
contemporary society and its interactions with very diverse and apparently distant
cultural spheres.
A fluid perspective that becomes the Group’s manifesto, suggesting a unique
approach to doing business by placing at the core of ethical and action principles
essential values such as freedom of creative expression, reinterpretation of what
already exists, preservation of know-how and enhancement of people’s work.
The Prada Group is a contemporary interpreter of changing scenarios. In a three-
dimensional temporal dialogue that combines the identity heritage of the past with
demands and dynamics of the present and future perspectives, creativity molds
ideas that transcend the boundaries of the ordinary and create an innovative vision
of tomorrow.
“ Thorough observation and curiosity for the world around us have always been at
the hear t of the creativity and modernity of the Prada Group. In society, and thus
in fashion, which is somehow a reflection of it, the only constant is change. The
transformation and innovation of aesthetic codes, at the core of any evolution,
has led us to interact with different cultural disciplines, at times apparently far
from our own, allowing us to capture and anticipate the spirit of the times. Today
this is no longer enough: we must be the agents of change, with the flexibility
required to translate the demands of the market and society into tangible actions
that inform our way to do business”.
Miuccia Prada and Patrizio Ber telli
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PRADA Group Annual Report 2020 - The PRADA Group
Mario Prada
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P R A D A G R O U P H I S T O R Y
The Prada brand dates back to the beginning of the last century: in 1913, Mario
Prada opened an exclusive store in the Galleria Vittorio Emanuele II, Milan, selling
handbags, travel trunks, beauty cases, tasteful accessories, jewelry and other
luxury items. Thanks to the innovative design of its goods, created using fine
materials and sophisticated techniques, Prada rapidly acquired wide popularity
across Europe.
In 1919 Prada became an official supplier to the Italian royal family; since then
Prada has been able to display the House of Savoy coat of arms and knotted rope
design in its trademark logo.
The turning point for the Group came at the end of the 1970s when Miuccia
Prada, Mario Prada’s granddaughter, par tnered with Tuscan entrepreneur Patrizio
Ber telli to combine creativity with business acumen and lay the foundations for
the ensuing international expansion.
Patrizio Ber telli broke new ground in the luxury goods sector by introducing a
business model based on direct control over all processes and applying strict
quality criteria to the entire production cycle. Miuccia Prada’s creative talent
attracted international attention due to her innovative approach, inspired by an
unconventional outlook on society, enabling her to anticipate and often influence
new fashion and design trends.
In 1977 Patrizio Ber telli founded IPI spa, where he concentrated the production
resources he had built up over ten years in the leather goods industry. In the same
year, IPI spa obtained a license from Miuccia Prada for the exclusive production
and distribution of Prada brand leather goods. In the following years the two
family businesses gradually merged into a single Group.
In 1983 the Prada family opened a second store in prestigious Via della Spiga in
Milan, one of Europe’s key shopping destinations. The store showcased the new
brand image by pairing traditional elements with modern, innovative architecture,
thereby revolutionizing and setting a new standard for luxury retail.
In response to the growing appreciation of the products, the Prada leather goods
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PRADA Group Annual Report 2020 - The PRADA Group range was expanded to include the first women’s footwear collection in 1979. The
first women’s clothing collection was launched in Milan in 1988. At the same time
the internationalization process began, with the first store openings in New York
and Madrid, followed by London, Paris and Tokyo.
In 1993 Prada made its debut in menswear with its first men’s clothing and
footwear collection. That same year, Miuccia Prada’s creative inspiration led to
the establishment of a new brand, Miu Miu, conceived for sophisticated, stylish
women who love to stay ahead of fashion trends. Miu Miu now creates women’s
ready-to-wear apparel, handbags, accessories, footwear, eyewear and fragrances,
and accounts for a significant share of the Group’s sales.
In 1993 Miuccia Prada and Patrizio Ber telli created “Milano Prada Ar te”, which
subsequently became “Fondazione Prada”, to pursue their interests and passions
in the world of ar t and culture.
In 1997 Patrizio Ber telli organized the Prada Challenge sailing team to compete
for the 2000 America’s Cup and in the same year Prada launched its leisurewear
range featuring the “Linea Rossa” (red line).
In 1999, the Prada Group acquired the classic brand Church’s, founded in 1873 in
Nor thampton, England. The brand, specialized in high-end handcrafted footwear,
is a universally recognized symbol of British tradition and sophisticated elegance.
In 2001, the Prada “Epicenter ” store, designed by Rem Koolhaas, was opened
on Broadway in New York City. This was the first store of the Epicenters project,
whose purpose was to redefine the shopping concept and try out inventive ways to
interact with customers. A second Epicenter store was opened in Aoyama, Tokyo,
followed by a third one on Rodeo Drive, Beverly Hills, in 2004. During the same
year, Prada acquired control of Car Shoe, a classic Italian brand renowned for its
exclusive driving moccasins.
In 2003 Prada entered into a licensing agreement with Italian eyewear manufacturer
Luxottica, a global industry leader which currently produces and distributes
eyewear with the Prada and Miu Miu brands. Also in 2003, a new par tnership was
established which led to the release of the first fragrance, Amber, in 2004.
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PRADA Group Annual Report 2020 - The PRADA Group Prada Epicenter concept store Broadway, New York
by architect Rem Koolhaas and Studio OMA
Prada Epicenter concept store Los Angeles, Beverly Hills
by architect Rem Koolhaas and Studio OMA
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Prada Epicenter concept store
Aoyama, Tokyo by architects Herzog & de Meuron
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In 2006, Miu Miu moved its fashion show venue to Paris to better represent its
brand identity.
The Prada phone by LG, the world’s first touchscreen cellphone, made its debut in
March 2007. The LG/Prada par tnership achieved fur ther success with new releases
in 2008 and 2011.
On June 24, 2011, Prada was successfully listed on the Main Board of the Hong
Kong Stock Exchange.
In March 2014, Prada spa acquired control of Angelo Marchesi srl, the historical
Milanese patisserie founded in 1824, thus entering the food industry.
In 2015 the Prada Group and Coty Inc. introduced the first Miu Miu fragrance.
In September of that year the Marchesi 1824 brand was developed on the market
with the opening of a patisserie in via Montenapoleone, Milan.
2016 featured impor tant manufacturing investments, all of which were made
to achieve sustainable production growth respectful of the environment: a new
leather goods factory was inaugurated and five factories in Tuscany and Umbria
were renovated. The first construction phase of the new logistics hub for finished
products was completed in Tuscany. The second phase was completed in 2018.
In 2017, the impor tant restyling plan for Prada and Miu Miu stores was coupled
with an extensive program of pop-up events to fur ther suppor t retail activities.
In the same year, the Prada Group was admitted to the Cooperative Compliance
regime with the Italian tax authorities, introduced with Italian Law Decree 128 of
2015. In November the first edition of the “Shaping a Future” conference cycle
takes place at the Headquar ters in Milan. O ther editions will follow in 2018 again
in Milan, in 2019 in New York and in 2020 in Venice.
In 2018 the Group added to its customary Milan and Paris fashion shows two
impor tant events to present pre-collections: Miu Miu Croisière in Paris and Prada
Resor t in New York.
In 2019 the Diversity & Inclusion Advisory Council was established; assisted
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PRADA Group Annual Report 2020 - The PRADA Group by leading personalities of authoritative international academic and cultural
institutions, it will guide the Group on matters of social sustainability. In October
of the same year, the Prada Group obtained full control of the retail network by
acquiring Fratelli Prada spa, the long-standing franchisee of Prada monobrand
stores in Milan.
In December, Prada spa and L’Oréal announced the stipulation of a long-term
licensing agreement, effective from January 1, 2021, for the creation, development
and distribution of Prada brand luxury cosmetic products.
In 2020, a year disrupted by the Covid-19 pandemic, Raf Simons became the
Creative Co-Director of Prada and other impor tant managers joined the team,
with a view to fostering long-term growth regardless of the uncer tainties arising
from the public health emergency. In July of the same year Prada spa obtained
“AEO Full” (Authorized Economic Operator) cer tification from the Italian Customs
Agency, becoming one of very few taxpayers in Italy to hold simultaneously this
qualification and par ticipate in the Cooperative Compliance regime with the Italian
Revenue Agency.
Among the par ticularly successful marketing and communication initiatives, it’s
wor th mentioning the sponsorship of Luna Rossa and Prada Cup. In December the
preliminary races of the 36 th America’s Cup presented by Prada got underway and
the challengers include the Luna Rossa sailing team sponsored by Prada which in
February 2021 will win the Prada Cup (i.e. the selection among the challengers),
and therefore the right to compete with the defender of the prestigious sailing
race.
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PRADA Group Annual Report 2020 - The PRADA Group T H E G R O U P ' S B R A N D S
The Prada Group is synonymous with innovation, transformation and independence.
Under such principles it offers its brands a shared vision in which they may identify
their essence. The complexity of visions has broadened the horizons of luxury,
without fear of facing contradictions, modifications and passions.
The Prada Group owns and manages some of the most prestigious luxury brands in
the world and works constantly to enhance their value by increasing their visibility,
recognition and appeal. The Group’s brands are one of its most impor tant assets.
PRADA
The Prada label has become one of the leading brands in the fashion and luxury
goods industry. Prada is synonymous with best of Italy’s design and manufacturing
tradition, sophisticated style and outstanding quality. As one of the most innovative
fashion brands, it is capable of redefining the norm by anticipating and setting
new trends. This is because Prada constantly applies its creative approach not
only to design development, but also to the most novel production techniques, to
communications and to its distribution network.
Miuccia Prada has always been a sophisticated interpreter of her times who has
stayed ahead of styles and trends. The Prada brand, with its collections of men’s
and women’s leather goods, clothing, footwear, eyewear, and fragrances, targets
an international clientele that is modern, sophisticated, fashion-conscious and
appreciative of the highest quality craftsmanship.
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Prada “Dialogues”
advertising campaign S/S 2021
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Prada “Dialogues”
advertising campaign S/S 2021
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MIU MIU
Miu Miu is the most free-spirited representation of Miuccia Prada’s creativity.
Intentionally distant from classic aesthetic expressions, the brand reflects an
emancipated and discerning woman.
Miu Miu was created in 1993 from Miuccia Prada’s independent and unconventional
spirit. It soon evolved into one of the leading fashion brands in the world by
successfully embodying the same creativity, quality and culture of innovation
on which all the Group’s activities are based. Miu Miu is known for its fashion-
forward, sensual and provocative style, which seeks to evoke a sense of freedom
and intimacy, along with attention to detail and quality. Miu Miu targets fashion
conscious women driven by a modern spirit of exploration and experimentation in
their fashion choices. The independent identity of the Miu Miu brand is enhanced
by its ties with Paris, where the fashion shows have been held for several years
now.
Right page
Miu Miu “Mind Mapping”
adver tising campaign S/S 2021
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CHURCH’S
Church’s has challenged the most formal rules of style throughout its history.
Church’s expresses contemporary luxury, keeping a centuries-old tradition. It
began its distinctive journey when, thanks to a family heritage of handcrafted
shoemaking experience dating back to 1675, the first Church’s brand shoe factory
was opened in 1873 at 30 Maple Street in Nor thampton, England.
Over time, Church’s turned a small cordwainer ’s workshop into a leading luxury
footwear company.
With its creations, Church’s has become synonymous with an impeccable style
that remains faithful to the British look yet explores new design areas, playing
with the combination of three primary elements: the finest leather, classic style
and excellent craftsmanship. Church’s dedicates meticulous attention and care to
every detail: approximately 250 manual steps and 8 weeks of labor are necessary
to make a single pair of shoes.
Left page
Church’s adver tising campaign S/S 2021
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CAR SHOE
Small rubber studs set on a deconstructed sole have characterized the iconic
Car Shoe loafer since 1963. Originating from a passion for race cars and fine
shoes, this timeless accessory has become par t of the imagery involving travel and
motors. The Car Shoe brand is a symbol of an exclusive, relaxed lifestyle, inspired
by luxury. Par ticularly suited for leisure time and informal occasions, the Car Shoe
collections are targeted to a casual, well-dressed male and female clientele.
MARCHESI 1824
In keeping with its history and tradition, Marchesi 1824 is one of the oldest and
most famous pastry shops in Milan, synonymous with excellence due to its products
offered, par ticularly chocolate and Panettone, the typical Milanese cake.
Left page
Car Shoe adver tising campaign F/W 2020
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PRADA Group Annual Report 2020 - The PRADA Group Pasticceria Marchesi 1824
Galleria Vittorio Emanuele II, Milan
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B U S I N E S S M O D E L
The success of the Group’s brands is based on a business model that combines
skilled craftsmanship with industrial manufacturing processes. This integration
enables the Group to translate its innovative fashion concepts into viable
commercial products while retaining flexible capacity and technical control over
know-how, quality standards and production costs.
Fashi on
Shows
Showroom
Presentation
SOURCING
STYLE & DESIGN
AND PRODUCT DEVELOPMENT
COLLECTION
OF ORDERS
Quality Control
Worker Safety
DISTRIBUTION
Buying
Session
(Ret ai l)
Sales
Campaign
( W ho l e sal e)
PRODUCTION
AND LOGISTICS
CREATIVIT Y
Creativity is at the hear t of the manufacturing process.
Miuccia Prada has the talent to combine intellectual curiosity, the pursuit of new
and unconventional ideas, and cultural and social interests with a strong sense of
fashion. This has made it possible to establish a genuine design culture, based on
method and discipline, which guides everyone who works in the creative process.
With this unique approach Prada anticipates trends and often influences them, while
continually experimenting with new designs, fabrics and production techniques.
Experimentation and idea-sharing are the essential components of the design
process throughout the Group. The time spent at the drawing board and in the
testing room on design research and development is fundamental to formulating
each collection so that the clothing, footwear and accessories complement each
other and create a well-defined image reflecting the brands.
Prada’s flair and the strong appeal of its tradition and corporate quality standards
continue to attract talented people from all over the world who want to share the
creative experience. This results in teams involved at all stages of the creative
process: from fashion design to manufacture, from architecture to communication
and photography, from store interior design to all the unique and special projects
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PRADA Group Annual Report 2020 - The PRADA Group in which the Prada Group is involved.
In 2020 the British Fashion Council selected Miuccia Prada as an Honoree at
“Fashion Awards 2020” in the Creativity category. Creative Co-Directors Miuccia
Prada and Raf Simons were honored for promoting positive change within the
fashion industry, and for demonstrating the power of creativity and the impor tance
of communication with the first fashion show designed together in September of
the same year.
RAW MATERIALS AND THE PRODUCTION PROCESS
Prada’s approach to manufacturing is based on two key principles: the constant
quest for innovation, ensuring the continuous evolution of skills and exper tise,
and a vocation for craftsmanship, which is an essential asset for production and a
unique distinction for every brand.
Raw materials are an essential par t of product quality and are of primary impor tance
for all the Prada Group’s brands. In many cases the fabrics and leather are made
especially for the Group, according to stringent technical and style specifications
that guarantee excellence and highlight the exclusive nature of the products. Raw
materials undergo strict quality controls by internal inspectors and exper ts.
Prada products are made at 23 manufacturing facilities owned by the Group (20
in Italy, 1 in the United Kingdom, 1 in France and 1 in Romania) and through
a network of contract manufacturers which undergo thorough controls and are
supplied with internally made raw materials, patterns and prototypes. This system,
which enables close oversight of each step of the process and ensures high-quality
workmanship, emphasizes the manufacturing excellence of each facility and
guarantees significant flexibility in the organization of production.
Most of the production employees have been working for the Prada Group for
an average of 20 years; this ensures an extremely high level of specialization as
well as in-depth knowledge and harmony with the Group’s unique concept. In
recent years, Prada has been investing heavily in the seamless transmission of
manufacturing techniques and core values to younger generations, both through
the Prada Academy and the strengthening of technical skills at the Italian industrial
sites.
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PRADA Group Annual Report 2020 - The PRADA Group Prada store
Miyashita Park, Tokyo
Prada store
Miyashita Park, Tokyo
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Miu Miu store
Faubourg, Paris
Miu Miu store
Soho, New York
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DISTRIBUTION
Over the years, the Group has expanded its distribution network to 633 Directly
Operated Stores (“DOS”) in the most prestigious locations of the major international
shopping destinations, consistent with the image, heritage and exclusivity of each
brand. This extensive network, the subject of continuous research and renovation,
is a true asset for the Group as it showcases the new collections and is the
fulcrum of the omnichannel strategy. The DOS serve as more than a primary sales
function as they are also an impor tant means of communication: they are the true
ambassadors of the brand, conveying the image of each brand consistently and
categorically. The DOS are integrated with the e-commerce strategy and allow the
Group to monitor in real time the sales per formance of the various markets for
each brand and product category.
The wholesale channel (depar tment stores, multi-brand stores and franchisees)
provides additional venues selected on the basis of their prestigious location and
enables direct, immediate comparison with the competition. The Group’s recent
significant developments in the digital world have solidified impor tant par tnerships
with top online retailers (“e-tailers”).
The retail channel generates 88.5% of the Prada Group’s consolidated sales, and
the wholesale channel accounts for the remaining 11.5%.
IMAGE AND COMMUNICATIONS
Sharing information with stakeholders allows to be involved in the brands’ value
system, which transcends purely commercial goals. Effective communications are
key to building and transmitting a strong image for the brands consistent with
their identity.
From impeccably executed fashion shows rich in content to award-winning
adver tising campaigns, Prada and all the Group’s brands continue to create a
captivating, stylish image that is valued par ticularly by a high-end, international
clientele and by the strictest, most demanding observers and critics.
The primary impor tance that the Prada Group attaches to innovation is apparent
in the continuous development of communications content and channels. In
recent years the digital sphere has gradually gained ground, consistently with
the implementation of the omnichannel strategy. Through social media accounts,
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PRADA Group Annual Report 2020 - The PRADA Group brand e-commerce websites, corporate website and digital platforms in general,
the Group fosters close and immediate contact with the audience to enhance the
interest in its brands and values, offering a fluid perspective of content distinguished
by creative freedom and intellectual curiosity.
Meanwhile, as the media continues to showcase the Group’s products on hundreds
of covers of the world’s leading fashion magazines and in the most influential dailies
and weeklies, the visibility of the brands keeps on growing. Special events also
help promote brand profiles and boost awareness of the most recent collections in
local markets, especially in large cosmopolitan cities.
HUMAN RESOURCES
The Prada Group puts the human factor and the universe of cultures, talents
and identities that compose it at the center of its work. This variety is a source
of inspiration for creativity and innovation, and an essential tool for rapidly
understanding changes in society and in the market.
At December 31, 2020 the Group has 12,858 employees from 104 countries, with
women making up 62% of the total workforce.
The Group, which works in a constantly evolving global market, encourages a culture
of diversity, equity and inclusion within its own ranks and along its entire sphere
of influence. The interest in elevating minorities led to the establishment in 2019
of the Diversity & Inclusion Advisory Council in the U.S.A., which brings together
illustrious activists and exper ts. The Council, autonomously and independently
from any form of Group governance, serves to raise management’s awareness of
the social aspects of sustainability, par ticularly those related to diversity.
In order to step up its effectiveness, in 2020 a Chief Diversity, Equity and Inclusion
Officer was appointed who, in close contact with the Council and with the Group’s
top management, is responsible for developing strategies, policies and programs
to help ensure representation of diverse cultures and perspectives at all levels of
the company.
From the outset, Prada has encouraged and rewarded workplace skills, results
orientation and teamwork. The passion and skills of the employees, and of the
ar tisans in par ticular, are essential for product innovation and quality, for which
the Group pursues excellence in all its endeavors and relationships. It cultivates a
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PRADA Group Annual Report 2020 - The PRADA Group mindset that leads people to strive for per fection in their work.
Prada Academy is the Group’s training hub designed to cultivate talent and ensure
the Group’s future through the sharing of knowledge, techniques, and ideas.
Prada Academy is based on a global digital platform and a team dedicated to the
implementation and continuous updating of training plans for each of the three
macro areas: Industrial, Retail and Corporate.
Educational paths relating to industrial production take place at the Craftsmanship
School through courses dedicated to acquisition of theoretical and practical know-
how in the areas of ready-to-wear, footwear and leather goods. The goal is to
conserve the heritage of knowledge and exper tise that has always characterized
the generations of ar tisans who work for the Prada Group.
In the area of retail training, in addition to the daily suppor t of experienced
personnel, the activities conceived for store staff include institutional training
courses designed to strengthen key skills, product knowledge and the focus on the
customer.
The professional training for members of the corporate team centers on the
enhancement of technical skills and behavioral aspects, and aims to improve the
handling of operational complexities.
The extensive, merit-based compensation and benefits system ensures fair and
equal treatment in terms of gender, title and seniority, and makes the Prada Group
a true equal oppor tunity employer. The Group’s remuneration policy seeks to
attract, reward and retain skilled personnel and exper t managers, while bringing
the interests of management into line with the primary objective of creating value
for the long-term future.
The Remuneration Committee oversees the compensation packages of top
management, taking into consideration roles and responsibilities, as well as market
standards for similar positions in a panel of companies comparable to Prada in
terms of size and complexity.
The Group is committed to demonstrating its full respect for the value of the
individual and of the human rights, especially of workers, recognized in Italian
and international agreements and statements such as the United Nations Universal
Declaration of Human Rights, the ILO Declaration on Fundamental Principles and
Rights at Work and the OECD Guidelines for Multinational Enterprises, as noted
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PRADA Group Annual Report 2020 - The PRADA Group in the Sustainability Policy approved by the Board of Directors on March 15, 2019.
Internal policies safeguard the health and safety of the employees at all the
premises in accordance with the highest standards and in full compliance with
local and international regulations and with the strictest public health emergency
protocols, such as during the Covid-19 pandemic in 2020. In most locations
(offices, warehouses and stores), these risks are limited. Manufacturing facilities
present the greatest risk in terms of health and safety, although still to a limited
degree. Safety training and refresher courses, with an emphasis on industrial
facilities, helped keep the number of accidents very low in 2020, as well as in
previous years.
The Prada Group collaborates with trade unions to continuously improve the
working conditions of its employees and to foster the medium/long-term well-
being of its employees and respective communities. In par ticular, on the occasion
of the Covid-19 pandemic, the Group was among the first operators in Italy to
establish rigorous protocols for the protection of employee safety which allowed
the reopening of production plants during the most acute phase of the lockdown
in Italy. Over the years the Group has stipulated many supplementary agreements,
especially in Italy, the United Kingdom and France, whereby it offers better benefits
than those already in the local collective bargaining agreements. Thanks to the
respect, dialogue and cooperation with trade unions, no labor strikes occurred in
the year, just as none had occurred in recent years.
With regard to the working conditions of employees throughout the supply chain,
the Company has identified some industrial supplier risks, for which it has adopted
a Qualified Vendor List (QVL) procedure. This tool defines the responsibilities and
operational behaviors required in the assessment of the ethical, technical and
financial reliability of the suppliers. Specifically for ethical issues, the accreditation
and subsequent maintenance of a supplier ’s qualification is based on compliance
with Group’s Code of Ethics and the collection of documents, statements and
self-cer tifications that ensure compliance with the law on remuneration, social
security, taxation, occupational health and safety, the environment, privacy and
the governance model. During recent years the Group launched an audit plan at
the manufacturing locations of the suppliers in order to fur ther control risks of
human rights violations and inadequate working conditions.
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PRADA Group Annual Report 2020 - The PRADA Group ENVIRONMENT AND LOCAL AREAS
The Prada Group believes it has a responsibility to engage in and cultivate
vir tuous behaviors that contribute to the sustainable growth of its business and
are examples of good practice within its industry. Prada is committed to reducing
its environmental impact not only within the organization but also by raising the
awareness of its stakeholders and par tnering with qualified third par ties.
Fighting climate change and conserving the places where it operates are ways the
Group intends reduce its ecological footprint with the greatest priority.
The reduction of greenhouse gas emissions is suppor ted by an impor tant energy-
efficiency action plan implemented recently that has achieved many results,
including the construction of 10 large photovoltaic power stations, the gradual
replacement of all air conditioning and cooling systems with those equipped with
latest-generation technology, a campaign for the complete, definitive coverage of
all lit spaces with low-energy LED lamps, and the installation of technologies to
improve the recording and consequential optimization of energy consumption.
As of December 31, 2020, these measures have earned the Group 58 cer tifications
from LEED (Leadership in Energy and Environmental Design, the world’s most
widely used system for green building assessment) for its stores and factories (20
new cer tifications in 2020).
Respect for the places where its facilities are located has been a guiding principle
for the Prada Group from the star t. Reducing land take, renovating existing
structures and working toward building requalification have inspired the decisions
made in more than thir ty years of industrial development.
Prada’s manufacturing and storage facilities are an excellent example of its
responsible relationship with the environment. These buildings occupy more than
200,000 m2, and almost all are located in Italy. Five of them are new constructions,
three are the products of industrial archeology projects, and many more have been
conver ted from sites long abandoned and in obvious disrepair.
For four of its largest industrial projects, Prada hired architect Guido Canali,
Italy’s leading proponent of sustainable architecture. This relationship, initiated
in the 1990s and still underway in a new, impor tant phase, was developed while
business ethics were being introduced voluntarily and spontaneously at a time in
history in which the significance of adopting such values had not been realized
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PRADA Group Annual Report 2020 - The PRADA Group Prada industrial Headquar ter
Valvigna, Terranuova Bracciolini (AR)
by architect Guido Canali
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yet. The Prada Valvigna factory, as well as the new logistic hub in Levanella, both
in Tuscany, represent the synthesis of these principles: a structure that fits in well
with the local environment, is capable of generating sustainable efficiency, and
whose design is harmonious with its natural surroundings.
With respect to protecting biodiversity, the decision to adopt a fur-free policy and
the launch of Prada Re-Nylon are the most significant recent expressions of the
Group’s commitment to this impor tant area of environmental sustainability. The
Prada Re-Nylon campaign, initiated in 2019 with the ambitious goal of fully replacing
the use of virgin nylon with that of regenerated nylon, progressed according to
plan with the extension of the use of Prada’s iconic fabric to a significant share of
the clothing and leather goods collections.
In 2020, for World Oceans Day, the Prada Group inaugurated the international
educational program “Sea Beyond” in par tnership with UNESCO. The project
involves students of various countries throughout the world to spread awareness
of how impor tant the oceans are for the future of the planet and it harnesses the
energy and creativity of young generations for activities intended to build a more
sustainable society. Due to the pandemic and the closing of many of the schools
involved, Prada and the Intergovernmental Oceanographic Commission of UNESCO
decided to postpone to 2021 the initiatives initially planned for 2020.
Par ticipation in the Fashion Pact, which was signed on August 23, 2019 at the
G7 Meeting in France, was a unique oppor tunity to accelerate the Group’s
commitment to environmental sustainability and capitalize its effor ts with those
of more than 60 leading fashion and textile companies. In 2020 the Fashion Pact
set up a flexible yet effective governance, signed on exper t technical par tners
and star ted an extensive project to share knowledge among par ticipants in order
to achieve the challenging objectives of the plan: contrasting climate change,
restoring biodiversity and protecting the oceans.
Left page
Prada Group and UNESCO educational programme “Sea Beyond”
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PRADA Group Annual Report 2020 - The PRADA Group SPECIAL PROJECTS
Ar t, philosophy, architecture, literature and film are the main cultural disciplines
that represent continuous sources of inspiration for the Group. The network of
connections broadens horizons, subver ting norms, boldly challenging expectations
and shaping scenarios that deviate from the ordinary. Interaction with these
apparently distant cultural spheres has led to a number of special projects that,
over the years, have helped define the many facets of the Prada world.
Prada’s interest in architecture has always been evident in its cutting-edge
manufacturing sites, with the requalification and conversion of former factories
into showrooms and offices, and the development of revolutionary retail concepts
thanks to prestigious par tnerships with some of the most influential architectural
firms in the world.
In 2015 Herzog & de Meuron, winners of the Prit zker Architecture Prize, worked
with the Group on the Miu Miu flagship store in the Aoyama district of Tokyo,
the core of the brand’s Japanese operations. A few years earlier, from 2000 to
2004, Herzog & de Meuron and another Prit zker Prize winner, Rem Koolhaas, had
par tnered with Prada on the Epicenter Concept Stores in New York, Los Angeles
and Tokyo. These Epicenters, still key for the Group’s image, are the result of
innovative thinking about the shopping concept, revisited and reinvented in order
to create unique stores, where luxury goods, technology, design and architecture
combine seamlessly with a vast range of exclusive services and sensory and digital
experiences. On occasion, the Epicenters host movie screenings, exhibitions,
debates and other cultural events.
The restoration of Rong Zhai, a historic residence in downtown Shanghai, was
completed in 2017 after a scrupulous, six-year refurbishment. Rong Zhai, yet
another example of the Prada Group’s interest in the restoration of historical
landmarks, is the result of a fruitful par tnership with architects, historians, and
ar tisans and is now the center of the Group’s cultural events in China.
The interests and the passions of Miuccia Prada and Patrizio Ber telli have inspired
the Prada Group to suppor t the activities of Fondazione Prada, created in 1993
in Milan to develop contemporary ar t exhibitions along with architecture, cinema,
philosophy and per forming ar ts projects. The sponsorship of Fondazione Prada
makes it possible to observe changes in society from a culural perspective,
contributing significantly to the inspiration of the creative activities. The Group
associates the success of Fondazione Prada with its image and shares the related
38
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PRADA Group Annual Report 2020 - The PRADA Group value with all stakeholders interested in this form of cultural engagement. Since
2010 Fondazione Prada has presented twenty-four exhibitions in Milan dedicated
to impor tant international ar tists, as well as other activities in the field of cinema,
architecture and philosophy in Italy and abroad.
Since 2011, Fondazione has also been operating from its Venetian venue, Ca’ Corner
della Regina, an eighteenth-century building that has hosted seven ar t exhibitions,
an experimental platform dedicated to cinema, and a large retrospective devoted
to Jannis Kounellis.
In 2020, Fondazione Prada’s headquar ters in Milan, inaugurated in 2015 and
designed by the architectural firm OMA, had a program of three exhibitions: “ The
Porcelain Room”, curated by Jorge Welsh and Luísa Vinhais, “Storytelling” by Liu
Ye, conceived by Udo Kittelmann, and “K”, a project curated by Udo Kittelmann.
Still in 2020, in response to the temporary closure of the exhibition spaces due
to the health emergency, Fondazione Prada expanded and reinvented its digital
presence.
With the aim of transforming a period of crisis into an oppor tunity for study and
analysis, it experimented new ways of communicating that led to the transformation
of its website (fondazioneprada.org) and social media channels into a laboratory
of ideas, a platform in which to test new formats and codes.
During the temporary closure of exhibition spaces, new ways of using the Cinema
projects, the workshops of Accademia dei bambini and the editorial activities were
developed.
In addition, Fondazione Prada presented two digital projects: “Love Stories” and
“Finite Rants”.
In 2020, Fondazione Prada star ted “Human Brains,” a global project of exhibitions,
scientific debates, public meetings, and publishing activities dedicated to brain
studies. The project, which will run until 2022, aims to attract public interest
in neuroscience and create a forum to facilitate exchanges between scientists,
philosophers and scholars.
Projects at Prada Rong Zhai in Shanghai included the site-specific event of Alex
Da Cor te, presented by the Prada Group with the suppor t of Fondazione Prada in
November 2020.
Finally, in September 2020 Fondazione Prada helped promote the charity campaign
under taken by Damien Hirst suppor ting the Save The Children education program
in Italy, “Riscriviamo il Futuro.” Through the sale of four limited edition prints by
the British ar tist, the campaign raised a total of Euro 3.3 million.
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“ The Porcelain Room” at Fondazione Prada, Milano.
Photo: DSL Studio
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Miuccia Prada’s personal interest in cinema as a contemporary form of ar t has led
to other invaluable collaborations such as the shor t films entitled “ The Miu Miu
Women’s Tales”, of which the last two episodes – “In My Room”, directed by Mati
Diop and “Nightwalk“, directed by Małgorzata Szumowska – were shown at the
2020 Venice Film Festival as par t of the Giornate degli Autori program. The film
series, which consists of twenty films produced up to December 2020, calls upon
directors of international fame and diverse intellectual backgrounds to explore the
world of women.
Interaction with the world of cinema has created various other par tnerships with
internationally renowned film directors, such as “ The Delivery Man” (2018),
created and directed by Ryan Hope and interpreted by Academy Award winner J.K.
Simmons, “Past Forward” (2016) by Academy Award winner David O. Russell and
“ Thunder Per fect Mind” (2006) by Jordan and Ridley Scott.
Left page
The Miu Miu Women’s Tales “Nightwalk”
BTS image shot by Ph Brigitte Lacombe,
featuring actors Raffey Cassidy and Filip Rutkowski.
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Last, but not least, in the area of high-profile spor ts, the Luna Rossa team sponsored
by the Prada Group was a challenger in the America’s Cup sailing yacht races of
2000, 2003, 2007, 2013 and 2021, winning the challenger selection regattas in
2000 and 2021 and reaching the finals in 2007 and 2013.
Having benefited from this experience, which made a huge contribution to the
commercial success of the lifestyle clothing and footwear, as well as eyewear
and fragrances, lines and promoted the Prada brand visibility around the world,
the Group par ticipated in the latest edition of America’s Cup in the role of main
sponsor of the Luna Rossa sailing team and Title and Presenting Sponsor of the
event. The 36 th edition of the oldest competition in existence, held from December
2020 to March 2021 in Auckland with the names “Prada Cup” and “America’s
Cup presented by Prada”, has been organized with the objective to become the
most broadcasted and most viewed one, assisted by coverage in 195 territories by
broadcasters and webcasts.
Left page
Luna Rossa Prada Pirelli Team
Winner of the Prada Cup
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PRADA Group Annual Report 2020 - The PRADA Group P R A D A G R O U P S T R U C T U R E
PRADA spa
Milan
Holding/Manufacturing/distribution/services
100%
Church & Co ltd
Northampton
Manufacturing/
distribution/services
100%
IPI Logistica srl
Milan
services
100%
PRADA Canada Corp
Toronto
distribution/retail
100%
PRADA Australia pty ltd
Sydney
retail
100%
Church & Co (Footwear) ltd
Northampton
tradeMarks
66.7%
Artisans Shoes srl
Montegranaro
Production
100%
Post Development Corp
New York
real estate
100%
PRADA Korea llc
Seoul
retail
100%
Church UK Retail ltd
Northampton
retail
40%
Les Femmes srl
Porto S. Elpidio
Production
100%
PRADA USA Corp
New York
distribution/services/retail
100%
PRADA Singapore pte ltd
Singapore
retail
100%
Church’s English Shoes sa
Brussels
retail
60% Tannerie Limoges sas
Isle
Production
TRS Hawaii Ilc
Honolulu
dfs
55%
100%
PRADA Retail
Malaysia sdn bhd
Kuala Lumpur
retail
100%
100%
Church France sas
Paris
retail
Church Spain sl
Madrid
retail
100%
Church Ireland Retail ltd
Dublin
retail
100%
Church Austria gmbh
Vienna
retail
100%
Church Netherlands bv
Amsterdam
retail
100%
Church Footwear ab
Stockholm
retail
100%
Church Denmark aps
Copenhagen
retail
100%
Church Germany gmbh
Münich
retail
100%
100%
Church’s English Shoes
Switzerland sa
Lugano
retail
Church Italia srl
Milan
retail
100%
Church & Co (USA) ltd
New York
retail
100%
Church Hong Kong
Retail ltd
Hong Kong
retail
100%
Church Japan Company ltd
Tokyo
retail
100%
Church Singapore pte ltd
Singapore
retail
100%
100%
Church Footwear
(Shanghai) Co ltd
Shanghai
retail
Church Korea llc
Seoul
retail
90%
80%
100%
Pelletteria Ennepi srl
Figline e
Incisa Valdarno
Production
Hipic Prod Impex srl
Sibiu
Production
Figline srl
Milan
Production
100%
Pelletteria Figline srl
Figline Incisa
Valdarno
Production
TRS Guam Partnership
Guam
dfs
PRADA Retail Mexico
S. de R.L. de C.V.
Mexico City
retail
55%
100%
PRADA Japan Co ltd
Tokyo
retail
100%
55%
Travel Retail Shops
Okinawa kk
Tokyo
dfs
100%
100%
100%
PRADA Brasil
Importação e Comércio
de Artigos de Luxo ltda
São Paulo
retail
PRM Services
S. de R.L. de C.V.
Mexico City
services
PRADA Panama sa
Panama
retail
100%
PRADA Retail Aruba nv
Aruba
retail
100%
PRADA Saint
Barthelemy sarl
Gustavia
retail
100%
PRADA Maroc Sarlau
Casablanca
under liquidation
Maroc Branch
Marrakech
under liquidation
100%
PRADA (Thailand) Co ltd
Bangkok
retail
100%
PRADA New Zealand ltd
Wellington
retail
100%
PRADA Vietnam Limited
Liability Company
Hanoi
retail
55%
TRS Saipan Partnership
Saipan
dfs
55%
TRS Hong Kong ltd
Hong Kong
dfs
Macau Branch
Macau
dfs
55%
TRS Singapore pte ltd
Singapore
dfs
100%
PRADA Asia Pacific ltd
Hong Kong
services/retail
PRADA Taiwan ltd
Hong Kong
retail
100%
Taipei Branch
Taipei
retail
PRADA Trading
(Shanghai) Co ltd
Shanghai
dorMant
100%
PRADA Fashion Commerce
(Shanghai) Co ltd
Shanghai
retail
100%
PRADA Macau Co ltd
Macau
retail
100%
PRADA Dongguan
Trading Co ltd
Dongguan
services
100%
46
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60%
PRADA Middle East fzco
Jebel Ali Free Zone-Dubai
distribution/services
100%
PRADA Retail France sas
100%
Marchesi 1824 srl
100%
Milan
food&beverage
UK Branch
London
PRADA sa
Luxembourg
tradeMark
Swiss Branch
Lugano
services
100%
PRADA Company sa
Luxembourg
services
49%
PRADA Emirates llc
100%
PRADA Monte-Carlo sam
Dubai
retail
49%
PRADA Kuwait wll
Kuwait City
retail
100%
PRADA Belgium sprl
100%
PRADA Retail wll
100%
PRADA Germany gmbh
Munich
retail/services
75%
PRADA Saudi Arabia ltd
100%
PRADA Austria gmbh
100%
PRADA Retail
South Africa (pty) ltd
Sandton
under liquidation
100%
PRADA Czech Republic sro
100%
PRADA Rus llc
100%
PRADA Netherlands bv
Amsterdam
retail
100%
PRADA Ukraine llc
100%
PRADA Switzerland sa
Doha
retail
Jeddah
retail
Moscow
retail
Kiev
retail
Almaty
retail
100%
PRADA Kazakhstan llp
100%
PRADA Spain sl
Paris
retail
Monaco
retail
Brussels
retail
Vienna
retail
Prague
retail
Lugano
retail
Madrid
retail
Lisbon
retail
Istanbul
retail
London
retail
100%
PRADA Portugal
Unipessoal lda
100%
PRADA Hellas
Sole Partner llc
Athens
retail
100%
PRADA Bosphorus Deri
Mamüller ltd Sirketi
100%
PRADA Retail UK ltd
Ireland Branch
Dublin
retail
100%
PRADA Denmark aps
Copenhagen
retail
100%
PRADA Sweden ab
100%
Stockholm
retail
Kenon ltd
London
real estate
PRADA Group Annual Report 2020 - The PRADA Group PRADA spa
Milan
Holding/Manufacturing/distribution/services
100%
Church & Co ltd
Northampton
Manufacturing/
distribution/services
100%
IPI Logistica srl
100%
Milan
services
PRADA Canada Corp
Toronto
distribution/retail
100%
PRADA Australia pty ltd
100%
Church & Co (Footwear) ltd
66.7%
100%
Post Development Corp
100%
PRADA Korea llc
Artisans Shoes srl
Montegranaro
Production
New York
real estate
100%
Church UK Retail ltd
40%
Les Femmes srl
Porto S. Elpidio
Production
100%
PRADA USA Corp
New York
distribution/services/retail
100%
PRADA Singapore pte ltd
Singapore
retail
100%
Church’s English Shoes sa
60% Tannerie Limoges sas
TRS Hawaii Ilc
Honolulu
dfs
55%
100%
PRADA Retail
Malaysia sdn bhd
Kuala Lumpur
retail
100%
Church France sas
90%
TRS Guam Partnership
55%
100%
PRADA Japan Co ltd
100%
Church Spain sl
80%
Hipic Prod Impex srl
55%
Travel Retail Shops
Okinawa kk
Guam
dfs
PRADA Retail Mexico
S. de R.L. de C.V.
Mexico City
retail
100%
100%
Church Ireland Retail ltd
100%
100%
PRADA (Thailand) Co ltd
Isle
Production
Pelletteria Ennepi srl
Figline e
Incisa Valdarno
Production
Sibiu
Production
Figline srl
Milan
Production
100%
Pelletteria Figline srl
Figline Incisa
Valdarno
Production
100%
PRADA Brasil
Importação e Comércio
de Artigos de Luxo ltda
100%
São Paulo
retail
PRM Services
S. de R.L. de C.V.
Mexico City
services
100%
PRADA New Zealand ltd
Wellington
retail
100%
PRADA Vietnam Limited
Liability Company
100%
PRADA Panama sa
55%
TRS Saipan Partnership
100%
PRADA Retail Aruba nv
55%
TRS Hong Kong ltd
Hong Kong
dfs
Sydney
retail
Seoul
retail
Tokyo
retail
Tokyo
dfs
Bangkok
retail
Hanoi
retail
Saipan
dfs
Panama
retail
Aruba
retail
100%
PRADA Saint
Barthelemy sarl
Gustavia
retail
100%
PRADA Maroc Sarlau
Casablanca
under liquidation
Maroc Branch
Marrakech
under liquidation
Northampton
tradeMarks
Northampton
retail
Brussels
retail
Paris
retail
Madrid
retail
Dublin
retail
Vienna
retail
100%
Church Austria gmbh
100%
Church Netherlands bv
Amsterdam
retail
100%
Church Footwear ab
Stockholm
retail
100%
Church Denmark aps
Copenhagen
retail
100%
Church Germany gmbh
100%
Church’s English Shoes
Switzerland sa
100%
Church Italia srl
100%
Church & Co (USA) ltd
100%
Church Hong Kong
Münich
retail
Lugano
retail
Milan
retail
New York
retail
Retail ltd
Hong Kong
retail
Tokyo
retail
100%
Church Japan Company ltd
100%
Church Singapore pte ltd
Singapore
retail
100%
Church Footwear
(Shanghai) Co ltd
Shanghai
retail
100%
Church Korea llc
Seoul
retail
Macau Branch
Macau
dfs
55%
TRS Singapore pte ltd
Singapore
dfs
100%
PRADA Asia Pacific ltd
Hong Kong
services/retail
PRADA Taiwan ltd
Hong Kong
retail
100%
Taipei Branch
Taipei
retail
PRADA Trading
(Shanghai) Co ltd
Shanghai
dorMant
100%
PRADA Fashion Commerce
(Shanghai) Co ltd
100%
Shanghai
retail
Macau
retail
PRADA Macau Co ltd
100%
PRADA Dongguan
Trading Co ltd
Dongguan
services
100%
60%
PRADA Middle East fzco
Jebel Ali Free Zone-Dubai
distribution/services
100%
PRADA Retail France sas
Paris
retail
100%
Marchesi 1824 srl
Milan
food&beverage
100%
PRADA sa
Luxembourg
tradeMark
49%
49%
PRADA Emirates llc
Dubai
retail
100%
PRADA Monte-Carlo sam
Monaco
retail
UK Branch
London
Swiss Branch
Lugano
services
PRADA Kuwait wll
Kuwait City
retail
100%
PRADA Belgium sprl
Brussels
retail
100%
PRADA Company sa
Luxembourg
services
100%
PRADA Retail wll
Doha
retail
100%
PRADA Germany gmbh
Munich
retail/services
75%
PRADA Saudi Arabia ltd
Jeddah
retail
100%
PRADA Austria gmbh
Vienna
retail
100%
100%
100%
PRADA Retail
South Africa (pty) ltd
Sandton
under liquidation
100%
PRADA Czech Republic sro
Prague
retail
PRADA Rus llc
Moscow
retail
100%
PRADA Netherlands bv
Amsterdam
retail
PRADA Ukraine llc
Kiev
retail
100%
PRADA Switzerland sa
Lugano
retail
100%
PRADA Kazakhstan llp
Almaty
retail
100%
100%
100%
100%
PRADA Spain sl
Madrid
retail
PRADA Portugal
Unipessoal lda
Lisbon
retail
PRADA Hellas
Sole Partner llc
Athens
retail
PRADA Bosphorus Deri
Mamüller ltd Sirketi
Istanbul
retail
100%
PRADA Retail UK ltd
London
retail
Ireland Branch
Dublin
retail
100%
PRADA Denmark aps
Copenhagen
retail
100%
100%
PRADA Sweden ab
Stockholm
retail
Kenon ltd
London
real estate
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PRADA Group Annual Report 2020 - The PRADA Group P R A D A S . P. A . C O R P O R A T E I N F O R M A T I O N
Registered Office
Head Office
Via A. Fogazzaro, 28
20135 Milan, Italy
Via A. Fogazzaro, 28
20135 Milan, Italy
Place of business in Hong Kong
registered under Par t 16
of the Hong Kong Companies
Ordinance
8th Floor, One Taikoo Place
979 King’s Road
Quarry Bay, Hong Kong S.A.R. (P.R.C.)
Company Corporate web site
www.pradagroup.com
Hong Kong Stock Exchange
Identification Number
1913
Share Capital
Board of Directors
Audit Committee
Euro 255,882,400
(represented by 2,558,824,000
shares of Euro 0.10 each)
Carlo Mazzi (Chairman & Executive
Director)
Miuccia Prada Bianchi (Chief Executive
Officer & Executive Director)
Patrizio Ber telli (Chief Executive Officer
& Executive Director)
Alessandra Cozzani (Chief Financial
Officer & Executive Director)
Stefano Simontacchi
(Non-Executive Director)
Maurizio Cereda
(Independent Non-Executive Director)
Gian Franco Oliviero Mattei
(Independent Non-Executive Director)
Giancarlo Forestieri
(Independent Non-Executive Director)
Sing Cheong Liu
(Independent Non-Executive Director)
Gian Franco Oliviero Mattei (Chairman)
Giancarlo Forestieri
Maurizio Cereda
Remuneration Committee
Maurizio Cereda (Chairman)
Carlo Mazzi
Gian Franco Oliviero Mattei
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PRADA Group Annual Report 2020 - The PRADA Group Nomination Committee
Board of Statutor y Auditors
Gian Franco Oliviero Mattei (Chairman)
Carlo Mazzi
Sing Cheong Liu
Antonino Parisi (Chairman)
Rober to Spada (Standing member)
David Terracina (Standing member)
Supervisor y Board
(Italian Leg. Decr. 231/2001)
David Terracina (Chairman)
Gian Franco Oliviero Mattei
Gianluca Andriani
Main Shareholder
Joint Company Secretaries
PRADA Holding S.p.A.
Via A. Fogazzaro, 28
20135 Milan, Italy
Patrizia Albano
Via A. Fogazzaro, 28
20135 Milan, Italy
Ying-Kwai Yuen (Fellow member, HKICS)
8th Floor, One Taikoo Place
979 King’s Road
Quarry Bay, Hong Kong S.A.R. (P.R.C.)
Authorized Representatives
in Hong Kong S.A.R.
Carlo Mazzi
Via A. Fogazzaro, 28
20135 Milan, Italy
Alternate Authorized Representative
to Carlo Mazzi in Hong Kong S.A.R.
Hong Kong Share Registrar
Auditor
Ying-Kwai Yuen (Fellow member, HKICS)
8th Floor, One Taikoo Place
979 King’s Road
Quarry Bay, Hong Kong S.A.R. (P.R.C.)
Sing Cheong Liu
Flat A, 17/F
Park Haven
38 Haven Street
Causeway Bay, Hong Kong S.A.R.
(P.R.C.)
Computershare Hong Kong Investor
Services Limited
Shops 1712-1716
17th Floor, Hopewell Centre
183 Queen’s Road East
Wanchai, Hong Kong S.A.R. (P.R.C.)
Deloitte & Touche S.p.A.
Via Tor tona, 25
20144 Milan, Italy
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F I N A N C I A L R E V I E W
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PRADA Group Annual Report 2020 - Financial Review F I N A N C I A L R E V I E W B A S I S O F P R E P A R A T I O N
The Board of Director ’s Financial Review refers to the group of companies
controlled by PRADA spa (the “Company”), the parent company of the PRADA
Group (the “Group”). This Financial Review should be read in conjunction with the
Consolidated Financial Statements and the related Notes, which are an integral
par t thereof.
The tables repor ted in the Financial Review have been prepared in accordance
with the International Financial Repor ting Standards (“IFRSs”) issued by the
International Accounting Standards Board (“IASB”) and adopted by the European
Union. Some “non-IFRS measures” are also used within the Financial Review in
order to represent some economic and financial aspects of the period from a
management perspective.
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PRADA Group Annual Report 2020 - Financial Review CONSOLIDATED STATEMENT OF PROFIT OR LOSS
(amounts in thousands of Euro)
Net Sales
Royalties
Net revenues
Cost of goods sold
Gross margin
Product design and development costs
Advertising and promotion expenses
Selling costs
General and administrative expenses
Operating expenses
twelve months
period ended
December
31, 2020
%
on net
revenues
twelve months
period ended
December
31, 2019
2,390,866
31,873
2,422,739
98.7%
1.3%
100%
3,183,339
42,255
3,225,594
%
on net
revenues
98.7%
1.3%
100%
(679,361)
-28.0%
(905,982)
-28.1%
1,743,378
72.0%
2,319,612
71.9%
(102,232)
(206,848)
(1,143,994)
(154,410)
(1,607,484)
-4.2%
-8.5%
(127,378)
(231,011)
-47.2%
(1,470,101)
-6.4%
(184,343)
-66.3%
(2,012,833)
-3.9%
-7.2%
-45.6%
-5.7%
-62.4%
Selling expenses of the closed stores during the lockdowns (*)
Total operating expenses
(115,833)
(1,723,317)
-4.8%
-
-
-71.1%
(2,012,833)
-62.4%
EBIT
20,061
0.8%
306,779
9.5%
Interest and other financial income / (expenses), net
Interest expenses on Lease Liability
Dividends from investments
Total financial income/(expenses)
(29,480)
(42,670)
277
(71,873)
-1.2%
-1.8%
0.0%
-3.0%
(25,174)
(48,980)
2,135
(72,019)
Income / (loss) before taxation
(51,812)
-2.1%
234,760
Taxation
(2,556)
-0.1%
22,964
Net income / (loss) for the period
(54,368)
-2.2%
257,724
Net income / (loss) - Non-controlling interests
(229)
0.0%
1,936
Net income / (loss) - Group
(54,139)
-2.2%
255,788
-0.8%
-1.5%
0.1%
-2.2%
7.3%
0.7%
8.0%
0.1%
7.9%
Basic and diluted earnings / (losses) per share (in Euro per share)
(0.021)
0.100
(*) Non-IFRS measures
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PRADA Group Annual Report 2020 - Financial Review
KEY FINANCIAL INFORMATION
Key economic figures
(amounts in thousands of Euro)
Net revenues
EBIT
% Incidence on net revenues
EBIT excluding Selling expenses of the closed stores during the lockdowns
% Incidence on net revenues
Net income / (loss) of the Group
Earnings / (losses) per share (Euro)
Average number of employees (in unit)
Net Operating Cash Flows (**)
twelve months
ended
December 31
2020
twelve months
ended
December 31
2019
2,422,739
20,061
0.8%
135,894 (*)
5.6%
(54,139)
(0.021)
13,331
262,100
3,225,594
306,779
9.5%
-
-
255,788
0.100
13,779
362,365
(*) The “Selling expenses of the closed stores during the lockdowns”, a non-IFRS measure, include the direct costs per taining to
the stores that could not operate following the closure periods related to the pandemic in the various countries around the world
(**) N on- IFRS measure equal to Net Cash Flows from operating activities less repayments of lease liability
Key indicators
(amounts in thousands of Euro)
Net operating working capital
Net invested capital (Right of Use assets included)
Net financial surplus / (deficit)
Group shareholders’ equity
2 0 2 0 H I G H L I G H T S
December 31
2020
December 31
2019
667,024
5,296,489
(311,357)
2,832,057
702,835
5,809,417
(405,544)
2,967,158
The year 2020 was disrupted by the Covid-19 pandemic, which had dramatic
health, social and economic consequences on a global scale, still enduring in the
initial months of 2021. The restrictions on individuals’ free movement imposed
by governments and the general distress caused by the spread of the pandemic
had a significant impact on luxury spending. The elimination of tourism flows
resulted in a considerable drop in the demand, but at the same time fostered
local consumptions. In addition, changes previously underway accelerated, like
for example the growth of digital communication and on-line sales along with the
expansion of the share of young consumers.
The pandemic had the greatest effect on the Group’s business in the first half of
the year, although with different trends across countries. Sales picked up gradually
towards the end of the first half of the year, practically everywhere, to the point
of full retail recovery in October and December compared to the same months of
2019, despite a new wave of lockdowns, mainly in Europe.
Overall, the Prada Group operated in the twelve months of 2020 with an average
of 18% of stores closed (27% in the first half and 9% in the second), which peaked
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PRADA Group Annual Report 2020 - Financial Review at 70% in April 2020. At December 31, 2020, 22% of the stores were still closed
due to the pandemic.
The Group’s reaction to the emergency was immediate, decisive and far-reaching.
Each business function revised its activities and adapted the workforce, prioritizing
employee safety and customer centrality.
Prada’s business model, which is deeply rooted in Italy and features strict controls
over all the productive processes, along with full collaboration with government
authorities and the flexibility of the Group’s craft workers, enabled limiting the
production shutdown to merely five weeks. This ensured some supply continuity
to the stores. The ability to readily reallocate finished products within the retail
network helped the assor tment in stores that stayed open and the growth of the
direct e-commerce channel, thus preventing excessive inventories. The retail
personnel kept contacts with customers alive during the various closure periods,
whereas all the other functions ensured operational continuity in a context of
severe cost containment, especially in the first half of the year.
Operating expenses were reduced thanks in par t to rent discounts obtained and wage
supplements where the Group’ subsidiaries were eligible to access. In addition, the
investment program was revised during the year as some renovation and relocation
projects for the retail network were postponed. Some marketing initiatives were
canceled or postponed too and discretionary expenses were trimmed. At the same
time, at the reopening of the stores in the various countries, an impor tant plan
of pop-ups and special installations in the retail spaces was implemented, fully
integrating it with a dedicated communication strategy.
The objective of enhancing the value of the Group over the long-term led to the
appointment during the year of Raf Simons as Prada’s new Creative Co-Director and
the addition of new top positions in the Industrial, Marketing and Communication
areas.
The pandemic spurred the digital evolution reinforcing the Prada Group’s vision
of expanding the omnichannel strategy, which during the year made additional
progress: an impor tant plan to update the back-end technological and organizational
structures was established, the prada.com and miumiu.com customer experiences
were redesigned on an international scale, new e-commerce markets were opened,
content was localized and customized, and the digital communication strategy
was strengthened through full use of social media channels, in various areas of
the world. Sales from the e-commerce channel tripled from 2019 levels and the
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PRADA Group Annual Report 2020 - Financial Review Group’s brand relevance in the digital world showed considerable improvements.
The 2021 Spring/Summer Prada and Miu Miu fashion shows were presented digitally,
and gained visibility for their originality and impeccable per formance, even in the
new format. Miuccia Prada’s and Raf Simons’ co-management of the creative work
made its debut at the Prada Womenswear show in September, paving the way for
an impor tant par tnership between the two designers and representing an example
of change in creativity leadership models for the entire fashion industry.
In the year of the pandemic, the focus on sustainability in the Group’s business led
to numerous initiatives aimed at offering wide-ranging suppor t in the society: from
the conversion of the Torgiano plant in Umbria, Italy for the production of personal
protective equipment and scrubs to be donated to hospitals and employees, to
suppor t scientific research on the novel coronavirus, not to mention the numerous
donations. One of these led to allocating the proceeds from the Tools of Memory
auction to suppor t UNESCO’s “Keeping Girls in the Picture” campaign, to contrast
social abuses relating to the public health emergency.
On the environmental front, the campaign to transition from the use of virgin
nylon to regenerated nylon (“Prada Re-Nylon”) proceeded according to plan thanks
to the use of the new version of the iconic fabric for the production of a complete
collection including clothing and footwear.
The agenda of the Fashion Pact, a coalition of 60 leading international fashion
companies of which Prada was one of the first par ticipants, made large steps
forward in taking concrete action to contrast climate change, restore biodiversity
and protect the oceans.
In December 2020, the adventure officially began in Auckland for the Luna Rossa
sailing team, sponsored by the Group and one of the protagonists of the Prada
Cup and 36th America’s Cup presented by Prada. The prestigious competition, the
oldest still played, has been planned to achieve extraordinary media exposure to
the brand thanks to a global coverage with 195 territories involved.
Last, but not least, in order to optimize the retail presence in Milan and to profitably
realize no longer useful real estate assets, in December 2020 the Prada Group sold
its commercial proper ty in Via della Spiga, occupied until March by a Prada store
that closed during the pandemic and never reopened, as described in Note 15. The
transaction generated an extraordinary income amounting to Euro 27 million, net
of tax.
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PRADA Group Annual Report 2020 - Financial Review The Group, thanks to a disciplined cost containment program, a limited amount
of investments and the withdrawal of dividends on 2019 results, enabled to keep
the debt under strict control. The year-end net financial deficit is Euro 94 million
less than at December 31, 2019, providing the basis for the applications needed
to relaunch the business activities.
ANALYSIS OF NET REVENUES
(amounts in thousands of Euro)
Net Sales by geographical area
Europe
Asia Pacific
Americas
Japan
Middle East and Other countries
Total Net Sales
Net Sales by brand
Prada
Miu Miu
Church's
Other
Total Net Sales
Net Sales by product line
Leather goods
Clothing
Footwear
Other
Total Net Sales
Net Sales by channel
Net Sales of direct operated stores (DOS)
Sales to independent customers and franchisees
Total Net Sales
Net Revenues
Net Sales
Royalties
Total Net Revenues
DISTRIBUTION CHANNELS
twelve months
ended
December 31
2020
twelve months
ended
December 31
2019
% change
741,131
963,845
324,479
280,232
81,179
2,390,866
2,012,620
329,497
36,964
11,785
2,390,866
1,310,938
604,571
442,792
32,565
2,390,866
2,115,370
275,496
2,390,866
2,390,866
31,873
2,422,739
31.0%
40.3%
13.6%
11.7%
3.4%
100%
84.2%
13.8%
1.5%
0.5%
100%
54.8%
25.3%
18.5%
1.4%
100%
88.5%
11.5%
100%
98.7%
1.3%
100%
1,228,437
1,017,593
455,402
386,066
95,841
3,183,339
2,643,348
450,491
69,801
19,699
3,183,339
1,765,799
729,350
627,576
60,614
3,183,339
2,636,097
547,242
3,183,339
3,183,339
42,255
3,225,594
38.6%
32.0%
14.3%
12.1%
3.0%
100%
83.0%
14.2%
2.2%
0.6%
100%
55.5%
22.9%
19.7%
1.9%
100%
82.8%
17.2%
100%
98.7%
1.3%
100%
-39.7%
-5.3%
-28.7%
-27.4%
-15.3%
-24.9%
-23.9%
-26.9%
-47.0%
-40.2%
-24.9%
-25.8%
-17.1%
-29.4%
-46.3%
-24.9%
-19.8%
-49.7%
-24.9%
-24.9%
-24.6%
-24.9%
Total net sales for the twelve months ended December 31, 2020 were some Euro
2,391 million, down by 23.6% at constant exchange rates (down by 24.9% at
current exchange rates) compared with approximately Euro 3,183 million of the
same period of 2019: the contraction at constant exchange rates was 18.2% for
the retail channel (-19.8% at current exchange rates) and 49.5% for the wholesale
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PRADA Group Annual Report 2020 - Financial Review channel (almost equal at current exchange rates).
The retail channel, that star ted the year with double-digit growth in Europe, the
Americas and the Middle East, began to show a decline in February, at the height
of the public health emergency in China. The subsequent global spread led to the
closing of stores in nearly all countries: from February to May the Prada Group
operated with an average of 40% of stores closed, which peaked at 70% in April.
When the stores were reopened, and compatibly with the market environment
influenced by the health measures introduced and the absence of tourists, net
retail sales rallied, and the contraction at constant exchange rate narrowed from
32.5% for the first half of the year to 5.7% for the second half. In more detail, the
retail sales recovery in the four th quar ter was stronger than in the third quar ter,
notwithstanding the reinstatement of the restrictions in Europe to counter a
resurgence of the pandemic.
There are 633 stores at December 31, 2020, after twelve new store openings and
twenty closings. At the repor ting date, 140 stores are still closed to the public due
to the pandemic.
The distress of physical stores was compensated for in par t by direct e-commerce
sales, which tripled in value compared with 2019 and had triple-digit growth rates
throughout the whole period.
The wholesale channel presented a 49.5% decline from 2019 at constant exchange
rates. The pandemic undoubtedly affected the shipping volumes in 2020, but a
large share of the contraction compared with the prior year was substantially
attributable to the decision to rationalize the network of independent customers
with the objective of protecting brand image and ensuring additional retail growth.
On the whole, the retail channel accounted for 88.5% of the Prada Group’s net
sales in 2020, versus 82.8% in 2019.
MARKETS
Asia Pacific was the first market to suffer the effects of the pandemic, but also
the first to show impor tant signs of recovery. Retail net sales for the year ended
December 31, 2020 were substantially in line with those of 2019 (up by 0.7% at
constant exchange rates, down by 1.1% at current exchange rates). During the
year they showed significant recovery: in the first half of the year they posted
a decrease of 18.3% at constant exchange rates compared with the first half of
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PRADA Group Annual Report 2020 - Financial Review 2019, while in the second half of 2020 the showed an increase of 19% at constant
exchange rates compared with the same period of 2019. Significant double-digit
growth in mainland China, South Korea and Taiwan offset the revenue reduction
in other countries, par ticularly Hong Kong S.A.R. and Macau S.A.R., which were
severely impacted by the lack of tourism flows.
The absence of travelers, par ticularly in the duty free channel, was also responsible
for the decline in wholesale sales, but for China where the channel in the second
half of the year posted a significant growth compared to the second half of 2019.
In Europe, the effects of repeated, prolonged lockdown periods were aggravated
by the restrictions imposed on the movement of individuals, considering the
significance of tourism flows for this market.
After double-digit growth in January and February, the retail net sales of the
region fell considerably, bottoming out between March and June; the annual
contraction was 35.1% at constant exchange rates (-36.3% at current exchange
rates) compared with 2019. However, the positive response of local customers to
the reopening of the stores and the direct e-commerce channel enabled to mitigate
the effects of the missing tourism flows. In the first half of 2020 the region posted
at constant exchange rates a contraction of 40.7% compared to the same period
of 2019, while in the second half of the year the difference compared to the
same period of the last year was 30.8%. Fur thermore, the results of the European
market benefited from the par ticularly favorable per formance of Russia.
Europe, the main market for the wholesale channel, was the region hit the most by
the aforementioned strategic decision to select the independent accounts.
The American retail channel, after a double-digit growth until the end of February,
experienced a drastic decrease at the time of the outbreak, posting a turnaround
in the second half of the year. In America, the sales recovery when the stores
reopened was stronger because local customers represent a structurally larger
share than do tourists. The 41.9% contraction at constant exchange rate of the
first half of 2020 compared with the same period of 2019 shrank to 16.6% on a
twelve-month basis (-19.8% at current exchange rates), thanks to a second half
with results up by 4.3% compared to the same period of 2019.
The decline in the wholesale of this region, although not material for the entire
channel, was steeper than in other regions due to the struggles of some depar tment
stores.
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PRADA Group Annual Report 2020 - Financial Review The Japanese market repor ted net retail sales down by 28.2% at constant
exchange rates compared with the twelve months of 2019 (same contraction at
current exchange rates). The lack of tourism flows in Japan and the prolonged
shutdowns in Hawaii, Guam and Saipan was par tially offset by positive trends in
local consumption.
Retail sales in the Middle East area contracted by 11.7% for the year at constant
exchange rates (down by 13.6% at current exchange rates), with a double-digit
growth in the second half of 2020 (up by 26.5 at constant exchange rates) sustained
by local consumers, that was able to offset much of the 43.8% decline of the first
six months of 2020.
PRODUCTS
All product categories showed a decrease in the retail channel compared to the
same twelve months of 2019: clothing -11.6% at constant exchange rates (-13.3%
at current exchange rates), leather goods -18.6% (-20% at current exchange rates)
and footwear -22.7% (-24.5% at current exchange rates).
All categories benefited from recovery in the second par t of the year, par ticularly
clothing, whose sales in the second half of 2020 were in line with those of the same
period of 2019. Leather goods have found positive responses from the markets
both on the occasion of the launch of new products and when iconic items have
been reinterpreted, as was the case for the Re-edition bag. The same dynamics
also occurred for the footwear segment, in par ticular for the newness related to
lifestyle collections.
The wholesale decrease, because of the aforementioned rationalization policy,
impacted similarly all the three categories.
BRANDS
The retail sales of the Prada and Miu Miu brands fell by 16.6% and 22.5%
respectively at constant exchange rates compared with the twelve months ended
December 31, 2019 (down by 18.2% and 23.8% at current exchange rates), with
both brands showing rapid recovery in the second par t of the year. The wholesale
channel had similar trends.
The Church’s brand experienced a more severe drop (down by 47.4% at constant
exchange rates) due to its dominant presence in Europe and the larger weight of
the wholesale channel.
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PRADA Group Annual Report 2020 - Financial Review ROYALTIES
Licensed businesses generated 24.6% less royalty income compared with the same
twelve-month period of 2019; eyewear and fragrance segments presented similar
trends.
NUMBER OF STORES
Prada
Miu Miu
Church's
Car Shoe
Marchesi 1824 and others
Total
Europe
Americas
Asia Pacific
Japan
Middle East
Total
December 31, 2020
December 31, 2019
December 31, 2018
Owned
Franchises
Owned
Franchises
Owned
Franchises
410
152
62
3
6
633
20
6
-
-
-
26
410
160
62
3
6
641
19
6
-
-
-
25
398
166
63
4
5
636
25
9
-
-
-
34
December 31, 2020
December 31, 2019
December 31, 2018
Owned
Franchises
Owned
Franchises
Owned
Franchises
222
108
194
88
21
633
-
-
21
-
5
26
229
107
198
85
22
641
-
-
20
-
5
25
226
111
195
81
23
636
4
-
25
-
5
34
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PRADA Group Annual Report 2020 - Financial Review
O P E R A T I N G R E S U L T S
The gross margin of the twelve months ended December 31, 2020 corresponded to
72% of net revenues, substantially in line with the 2019 incidence of 71.9%. The
favorable sales mix in terms of channel and geographical area enabled to offset
the dilution of the initial months of the year caused by reduced economies of scale
in the manufacturing division.
The total operating expenses, including the operating costs of stores closed during
the lockdown periods, were Euro 1,723.3 million, down by Euro 289.5 million
from the comparative period. Approximately half of the reduction was attributable
to rent discounts obtained and governments subsidies supplementing earned
income, of which the Group benefited, especially Europe. The remainder was due
to reduced discretionary expenses, greater real estate capital gains in 2020 and
lower variable costs associated with sales.
Adver tising and communications costs, Euro 206.8 million in the twelve months
ended December 31, 2020, fell by Euro 24.2 million from the same period of
2019; a significant por tion of the expenses incurred was allocated to digital
communication that proved to be key to strengthen customers’ relationships in the
given circumstances.
The product design and development costs of Euro 102.2 million in the twelve
months ended December 31, 2020 were Euro 25.1 million lower than in the same
period of 2019, largely as a result of curbing the resources spent on product
development activities.
General and administrative costs, Euro 154.4 million in the twelve months ended
December 31, 2020, showed a decrease of Euro 29.9 million. This costs category
included the capital gain on the sale of the building in via Spiga 18, Milan.
The EBIT was Euro 20.1 million.
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PRADA Group Annual Report 2020 - Financial Review The amounts commented on above include the operating expenses of the stores
shut down during the lockdown periods, detailed hereunder:
(amounts in thousands of Euro)
Depreciation of the Rights of Use assets, net of related Covid lease discounts
Cost of labor, net of related government subsidies
Depreciation of tangible fixed assets
Other expenses
Total Selling expenses of the closed stores during the lockdown
twelve months
ended December 31
2020
45,519
35,453
27,744
7,117
115,833
F I N A N C I A L E X P E N S E S A N D T A X A T I O N
The net finance costs of Euro 71.9 million were substantially consistent with those
of 2019 (Euro 72 million).
Interest expense on the lease liability fell by Euro 6.3 million compared with the
previous year as a result of a lower amount and shor ter time horizon of the liability.
That effect was offset by greater net bank interest expense, mainly following lower
interest income on surplus funds, and foreign exchange losses associated with the
revaluation of foreign-currency liabilities.
The income tax expense, net was Euro 2.6 million against a pre-tax loss of Euro 51.8
million. The income tax calculation was affected by permanent upward differences
to the pre-taxable result as well as to the prudence adopted in the recognition of
deferred tax assets.
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PRADA Group Annual Report 2020 - Financial Review A N A L Y S I S O F T H E S T A T E M E N T O F F I N A N C I A L P O S I T I O N
NET INVESTED CAPITAL
The following table reclassifies the Statement of Financial Position to provide a
better view of net invested capital:
(amounts in thousands of Euro)
December 31
2020
December 31
2019
Right of Use assets
Non-current assets (excluding deferred tax assets)
Trade receivables, net
Inventories, net
Trade payables
Net operating working capital
Other current assets (excluding items of financial position)
Other current liabilities (excluding items of financial position)
Other current assets/(liabilities), net
Provision for risks
Post-employment benefits
Other long-term liabilities
Deferred taxation, net
Other non-current assets/(liabilities)
Net invested capital
Shareholder's equity – Group
Shareholder's equity – Non-controlling interests
Total Consolidated shareholders' equity
Long-term financial, net surplus/(deficit)
Short-term financial, net surplus/(deficit)
Net financial deficit
Net financial deficit to Consolidated shareholders’ equity ratio
Long-term Lease Liability
Short-term Lease Liability
Total Lease Liability
Net financial deficit, including Lease Liability
Shareholders’ equity and net financial deficit
2,054,338
2,507,244
290,380
666,222
(289,578)
667,024
246,914
(221,421)
25,493
(45,416)
(73,256)
(61,576)
222,638
42,390
2,362,841
2,670,839
317,554
712,611
(327,330)
702,835
244,341
(250,090)
(5,749)
(49,484)
(63,519)
(23,215)
214,869
78,651
5,296,489
5,809,417
(2,832,057)
(19,663)
(2,851,720)
(450,075)
138,718
(311,357)
10.9%
(1,729,819)
(403,593)
(2,133,412)
(2,444,769)
(5,296,489)
(2,967,158)
(21,417)
(2,988,575)
(583,766)
178,222
(405,544)
13.6%
(2,005,761)
(409,537)
(2,415,298)
(2,820,842)
(5,809,417)
The net invested capital at December 31, 2020 amounts to Euro 5,296 million,
financed by net bank borrowings of Euro 311.4 million, the lease liability of Euro
2,133 million and the Group’s equity of Euro 2,851 million.
The right-of-use asset decreased by Euro 308.5 million on account of the
depreciation charge of Euro 443.9 million and foreign exchange losses of Euro
98 million, net of the increase due to new leases and remeasurements of existing
ones, equal to approximately Euro 255 million.
The non-current assets (net), excluding deferred tax, fell by Euro 164 million
compared with December 31, 2019, from Euro 2,671 million at December 31,
2019 to Euro 2,507 million. The decrease was explained by the Euro 225 million
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PRADA Group Annual Report 2020 - Financial Review
depreciation and amor tization for the year and foreign exchange devaluation
of Euro 40 million, net of capital expenditures of Euro 121.7 million. Capital
expenditures of the year are detailed as follows:
(amounts in thousands of Euro)
Retail
Real estate
Production, Logistics and Corporate
Total
twelve months ended
December 31
2020
twelve months ended
December 31
2019
61,056
-
60,686
121,919
60,351
119,460
121,742
301,730
In response to the public health emergency caused by the pandemic, the Group
slowed down the implementation of its investments, prioritizing those most
strategic. Notably, the technological and digital evolution projects moved forward
according to plan.
The net operating working capital at December 31, 2020 is Euro 667 million,
down by approximately Euro 36 million compared with 2019. The difference was
almost entirely attributable to an inventory reduction following the reallocation
of the inventories of the closed stores to the benefit of those operating and the
e-commerce, as well as, an efficient replanning of production activities.
The net other current liabilities shown as Euro 5.7 million in the net invested
capital at December 31, 2019 are now net assets of Euro 25.5 million, essentially
as a result of the reduced debt for investments (Euro 20.9 million), collection of
other receivables (Euro 12 million) and the recognition of a shor t-term receivable
arising on the sale of the building at Via Spiga 18 in Milan (Euro 20 million).
The net other non-current assets are equal to Euro 42.4 million at December 31,
2020, down by Euro 36.3 million compared with December 31, 2019 as a result of
a deferral relating to a long-term business agreement (Euro 64 million), net of the
payment for the acquisition of Fratelli Prada spa (Euro 20.7 million).
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PRADA Group Annual Report 2020 - Financial Review NET FINANCIAL POSITION
The following table provides details of the net financial position:
(amounts in thousands of Euro)
December 31
2020
December 31
2019
Bank borrowing – non-current
(451,200)
(584,141)
Financial payables and bank overdrafts - current
Payables to related parties - current
Total financial payables – current
Total financial payables
Cash and cash equivalents
Financial receivables from related parties - non-current
Financial receivables from related parties - current
(300,577)
(3,097)
(303,674)
(241,464)
(3,387)
(244,851)
(754,874)
(828,992)
442,392
1,125
-
421,069
375
2,004
Total Financial receivables and Cash and cash equivalents
443,517
423,448
Net financial deficit
(311,357)
(405,544)
The net operating cash flow for the twelve-month period, after lease payments
(Euro 373 million), was positive for Euro 262 million and enabled to finance
the investing activities, equal to approximately Euro 150 million, in addition to
contributing to the improvement of the net bank exposure.
Moreover, the net financial deficit also benefitted from the postponement of the
dividend distribution of 2019 results.
During the period, the Group repaid current por tion of the long-term borrowings of
Euro 205.6 million, stipulated new long-term loans for a total amount of Euro 175
million and obtained additional financial flexibility by stipulating a new revolving
credit facility of Euro 300 million (undrawn at December 31, 2020).
The total amount of undrawn lines of credit as at December 31, 2020 is Euro
1,009 million, out of which Euro 600 million of committed lines and Euro 409
million of uncommitted.
All financial covenants at year-end were fully complied.
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PRADA Group Annual Report 2020 - Financial Review The following table sets for th the Lease Liability:
(amounts in thousands of Euro)
Short-term Lease Liability
Long-term Lease Liability
Total Lease Liability
December 31
2020
December 31
2019
403,593
1,729,819
409,537
2,005,761
2,133,412
2,415,298
The Lease Liability decreased from Euro 2,415 million at December 31, 2019
to Euro 2,133 million as a result of the payments made in the period (Euro 373
million), net of re-measurements to reflect lease renewals or modifications (Euro
254.3 million) and interest recognized to adjust the present value of the liability
(Euro 42.7 million).
The Lease Liability is concentrated mainly in Japan, U.S.A. and Italy.
The net financial indebtedness, including the Lease Liability, is Euro 2,444 million
at December 31, 2020.
Fur ther information on the Group’s debt maturities and obligations, currency and
interest rate management, commitments and contingent liabilities is provided in
Notes 21, 26 and 28 of the Notes to the Consolidated Financial Statements.
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PRADA Group Annual Report 2020 - Financial Review R I S K F A C T O R S
RISK FACTORS REGARDING THE INTERNATIONAL LUXURY GOODS MARKET
ECONOMIC RISKS AND INTERNATIONAL BUSINESS RISKS
The per formance of the luxury goods market is influenced by individuals’ propensity
to consume and by the general economy. Accordingly, the Group’s financial and
business per formance is exposed to global social and macroeconomic risks due
to its international scale. An unfavorable economy in one or more of the main
countries where the Group operates, as well as on a global level, could adversely
affect the propensity to spend on luxury goods and have a negative impact on the
Group’s operations, results, cash flows and financial condition.
Moreover, a substantial por tion of sales originates from purchases of products by
customers on trips abroad. Therefore, unfavorable economic conditions, social,
health or geopolitical situations leading to instability, adverse natural events or
government restrictions on movement could negatively impact the Group’s sales
operations, results, cash flows and general financial condition.
The Group believes that full control over the value chain, a well-balanced physical
retail presence in the global market accompanied by an omnichannel strategy with
closely integrated sales and communication channels, and a sufficiently diversified
product range enable to mitigate the risk that adverse conditions such as these
could influence significantly the business per formance.
RISKS REGARDING IMAGE AND BRAND RECOGNITION
The Group’s success in the international luxury goods business is linked to the
image and distinct character of its brands. These features depend on many factors,
such as the style and design of the products, the quality of the materials used
and production techniques, the image and locations of DOS, careful selection of
licensees, communications activities and the general corporate profile.
Preserving the image and prestige acquired by its brands is a primary objective of
the Prada Group, pursued by monitoring constantly the Company and its changes,
including through close collaboration with the world of ar t and culture, and by
continuously seeking innovation in styles, products and communications in order
to convey messages that are always consistent with the strong brand identities.
Meanwhile, monitoring meticulously each internal and external phase of the value
chain reduces considerably the risk that inappropriate per formance could affect
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PRADA Group Annual Report 2020 - Financial Review the image and therefore the value of the brands.
RISKS REGARDING ABILIT Y TO ANTICIPATE TRENDS AND REACT TO SHIF TS IN
CONSUMER TASTES
The Group’s success is reliant on its ability to create and define fashion and product
trends, and to anticipate shifts in consumer tastes and luxury market trends in a
timely manner.
Miuccia Prada, assisted by a qualified team of stylists and designers, is capable
of combining intellectual curiosity, the pursuit of new and unconventional ideas,
and cultural and social interests with a strong sense of fashion. This has made it
possible to establish a genuine design culture, based on method and discipline,
which guides everyone who works in the creative process. The recent appointment
of a Creative Co-Director for the Prada brand enables the Group to benefit from
dialogue between two designers widely acknowledged as among the most impor tant
and influential of our times – Miuccia Prada and Raf Simons – emphasizing the
impor tance and power of creativity while challenging the idea of individuality in
creative authorship, in a constantly evolving cultural landscape.
Approximately one thousand individuals work in the design and product development
depar tments. In the design area, a mix of different nationalities, cultures and
talents contribute to creativity; in the development area, craft skills combined
with solid manufacturing processes enable the Group to keep abreast of emerging
consumer trends and lifestyles and to continue to be a major player in the industry.
INTELLECTUAL PROPERT Y RISKS
The Prada Group’s brands have always been associated with beauty, creativity,
tradition and excellent quality. Prada’s ability to protect its brands and other
intellectual proper ty rights means safeguarding these fundamental assets that are
responsible for the success of the brands and the brand positioning.
The Group protects its brands, designs, patents and websites by registering them
and obtaining legal protection for them in all countries throughout the world.
The Group actively opposes all forms of counter feiting and intellectual proper ty
infringement by adopting strong, systematic measures worldwide. The wholesale,
retail, online and offline markets are monitored daily in close collaboration with
the Italian and international customs authorities, tax authorities and police.
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PRADA Group Annual Report 2020 - Financial Review RISKS SPECIFIC TO THE PRADA GROUP
STRATEGIC RISKS
The possibility for the Group to improve its financial and business per formance
depends on successful implementation of its commercial strategy for each brand,
which is achieved through the continuous suppor t and development of retail sales
and the constant recognition of the brands as reference points in the industry.
The Group provides suppor t to the retail network by offering leather goods,
clothing and footwear that reflect the brand positioning accompanied by a unique
buying experience distinguished by careful revision of the physical and digital
store concepts and layouts and by constant enrichment of customer services. The
per formance of the retail channel is suppor ted by marketing initiatives intended to
enhance the identity of the brands in the specific markets, emphasizing the unique
features that distinguish the style and craftsmanship of the products.
Moreover, the implementation of the omnichannel strategy has paved the way
for long-term business development based on product quality, strong innovation
and interconnection of distribution and communication channels in line with the
evolving demands of consumers.
RISKS REGARDING THE IMPORTANCE OF KEY PERSONNEL
The Group’s success depends on the contribution of key individuals who have played
an essential role in the Group’s expansion and who have substantial experience in
the fashion and luxury goods business. Its success also depends on Prada’s ability
to attract and retain people who are qualified in the design, product development,
marketing, merchandising and corporate and merchandising functions. Another
factor for the Group’ success is the capacity to attract and train new generations
of ar tisans.
The Group considers its management structure to be capable of ensuring business
continuity, and has recently implemented a long-term incentive plan to retain key
resources so that they will continue to cover the roles essential to the achievement
of the challenging objectives that the Group constantly sets itself.
RISKS REGARDING THE OUTSOURCING OF MANUFACTURING ACTIVITIES
The Prada Group’s products are made at 23 manufacturing facilities owned in
Europe (20 in Italy, 1 in France, 1 in the United Kingdom and 1 in Romania) and
through a network of contract manufacturers carefully selected on the basis of
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PRADA Group Annual Report 2020 - Financial Review competence, quality and reliability. Nearly all the prototypes and samples and some
finished products are made at the Group’s own manufacturing facilities, and the
most sensitive phases of production, such as the cutting of hides and the controls
over all raw materials (including those to be sent to contract manufacturers) and
semi-finished goods take place there as well.
All stages of the production process are checked by the Prada Group’s technical
staff to ensure that the products meet the quality standards and that the entire
supply chain complies with Prada Spa’s Code of Ethics, which must be signed
before any business relationship is entered into.
A key par t of the strategy is to establish long-term business relationships with
suppliers based on mutual trust and transparency. The Prada Group works with
approximately 1,000 raw material suppliers and contract manufacturers, 80% of
which are located in Italy. The Group has implemented a strict quality control process
for all outsourced production and contractually requires its contract manufacturers
to comply with all regulations on brand ownership and other intellectual proper ty
rights. Moreover, the Group demands compliance with applicable regulations
concerning labor law, social security and occupational health and safety, and
monitors such compliance with a process that uses document controls and, since
2019, audit activities at the suppliers’ premises.
CREDIT RISK
Credit risk is defined as the risk of financial loss caused by the failure of a
counterpar ty to meet its contractual obligations. The maximum risk to which
an entity is exposed is represented by all the financial assets recognized in the
financial statements. The Group considers its credit risk to involve primarily trade
receivables generated from the wholesale channel and liquid assets. The Group
manages credit risk and mitigates the related effects through its business and
financial strategies, which are based on the monitoring of the creditwor thiness
and solvency of customers, the stipulation of insurance contracts and the use of
safe solutions such as advance payments.
Concerning liquid assets, the risk of default substantially relates to bank deposits,
which represent the Group’s most widely-used financial product for investing
surplus operating cash flows. Default risk is mitigated by the allocation of cash
holdings to bank deposits that are diversified in terms of counterpar ties (always
investment grade), country and currency, and by the consistently shor t-term
period. The residual por tion of liquid assets consists of cash and bank accounts.
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PRADA Group Annual Report 2020 - Financial Review The Group considers no significant risk to exist on these kinds of liquid assets
given that they are used for operating activities and business processes and,
consequently, the number of independent par ties involved is fragmented.
LIQUIDIT Y RISK
Liquidity risk refers to difficulty that the Group could have in meeting its financial
obligations. The Directors are responsible for managing liquidity risk, whereas
the Corporate Finance management, which repor ts to the CFO, is responsible for
optimizing financial resources.
The Directors consider the currently available funds and lines of credit, in addition
to the funding that will be generated by operating and financing activities, to be
sufficient for enabling the Group to meet its requirements resulting from working
capital management, investing activities, punctual loan repayment and the payment
of any dividends as planned.
TAX RISKS
The Prada Group’s tax strategy is based on the prevention of tax risks and on tax
cer tainty, both of which are pursued through ongoing dialogue and long-term,
principled interaction with the tax authorities in the countries where it operates.
The Group’s tax risks, which could arise from compliance errors or incorrect
interpretation of regulations, are constantly monitored within the scope of an
extensive internal control system, and are managed specifically within the tax
control framework. The effectiveness of the tax risk management system has made
Prada spa eligible to par ticipate in the Cooperative Compliance Tax Regime in Italy
(under Italian Legislative Decree 128/2015).
Within such regime, the Group has expanded a systematic, open communication
channel with the Italian tax authorities based on reciprocal transparency and trust,
with the purpose of minimizing the level of uncer tainty about potentially risky
situations.
After the inclusion in the regime, the Italian tax authorities invited some companies
of the Group to join the International Compliance Assurance Programme (“ICAP”)
promoted by the Organisation for Economic Co-operation and Development
(“OECD”).
The program star ted with a pilot in 2018 that ended in the first half of 2019,
followed by a second pilot, “ICAP 2.0”, in which the Group formally confirmed
its par ticipation in December 2019. As par t of the first ICAP pilot, the Group’s
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PRADA Group Annual Report 2020 - Financial Review par ticipating companies shared extensive information with the tax authorities of
the countries where they reside (Italy, the U.S.A., the U.K., Canada and Australia).
At the end of the assessment, the respective tax authorities assigned the status of
“low-risk taxpayer ” to those companies. The companies residing in Italy, Germany
and the Netherlands are currently par ticipating in ICAP 2.0.
LEGAL AND REGUL ATORY RISKS
The Prada Group operates in a complex regulatory environment and so it is exposed
to the following legal and regulatory risks:
― risks associated with non-compliance with the Rules Governing the Listing of
Securities on the Stock Exchange of Hong Kong Limited or with other laws or
regulations in force in Hong Kong S.A.R. that the Company must observe as it
is listed on the Stock Exchange of Hong Kong Limited;
― risks associated with occupational health and safety under Italian Legislative
Decree 81/08 and equivalent regulations in force in other countries;
― possible legal penalties for wrongful acts pursuant to Italian Law 231/2001, as
subsequently amended;
― possible events that could adversely affect the accuracy of the annual financial
statements and the protection of assets;
― possible manufacturing compliance risks regarding Italian and international
laws and regulations for finished goods distributed and raw materials and
consumables used. In 2020 Prada spa obtained “AEO Full” (Authorized Economic
Operator) cer tification from the Italian Customs Agency for its handling of
goods, becoming one of very few taxpayers in Italy to hold simultaneously
this qualification and par ticipate in the Cooperative Compliance regime with
the Italian Revenue Agency. The AEO Full status enables the Group to reduce
considerably the average transfer time for raw materials and finished products
through the reduction of physical and document controls, thus improving
operational and economic efficiency. In addition, it enhances Prada spa’s
standing with public authorities and institutions.
The Group involves various divisions and uses external exper ts as necessary to
keep its processes and procedures constantly updated in order to comply with
changing rules and regulations in a timely manner, thereby reducing the risk of
non-compliance to an acceptable level.
Monitoring activities are per formed by the divisional managers, auditors, and
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PRADA Group Annual Report 2020 - Financial Review special entities and committees such as the Supervisory Board and the Internal
Control Committee.
FOREIGN EXCHANGE RISK
The Group has a vast international presence, and therefore is exposed to the risk
that changes in currency exchange rates could adversely impact revenue, expenses,
margins and profit. In order to hedge the foreign exchange risk, the Group enters
into derivative contracts designed to fix the value in Euro (or other functional
currency) of identified future cash flows. The future cash flows consist primarily
of inflows of trade and financial receivables and outflows of trade payables. They
refer mainly to PRADA spa, the Group’s parent company and worldwide distributor
of Prada and Miu Miu brand products.
The management of foreign exchange risk is described in more detail in the Notes
to the Consolidated Financial Statements.
INTEREST RATE RISK
Interest rate risk is the risk that future cash flows could be affected by interest
rate fluctuation. In order to hedge this risk, which refers mainly to PRADA spa, the
Group uses derivatives (such as interest rate swaps) to conver t variable-rate debt
into fixed-rate debt or debt at rates within a specified range.
The management of interest rate risk is described in more detail in the Notes to
the Consolidated Financial Statements.
DATA PROCESSING RISK
Data is processed using information systems whose governance model ensures
that:
― information is adequately protected against the risk of unauthorized access and
disclosure (including with means to protect personal privacy and proprietary
information), improper information modification or destruction (including
accidental loss), and use that is incompatible with the job assigned;
― data is processed in accordance with the applicable laws and regulations.
In accordance with the specific legislative and regulatory developments on this
matter, the Group has set up organizational and operational controls to adapt
processes and procedures in order to adopt effective security measures to minimize
the risks of non-compliance.
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INFORMATION ON REL ATED-PART Y TRANSACTIONS
Information on the Group’s transactions and balances with related par ties is
provided in the Notes to the Consolidated Financial Statements insofar as required
by IFRSs, and in the Corporate Governance Repor t and within this Financial Review
insofar as required by the Hong Kong Stock Exchange Listing Rules.
NON-IFRS MEASURES
The Group uses cer tain financial measures (“non-IFRS measures”) to assess its
business per formance and to help readers understand and analyze the results of
its operations and its financial position. Although they are used by the Group’s
management, such measures are not universally or legally defined and are not
regulated by the IFRS adopted to prepare these Consolidated Financial Statements.
O ther companies operating in the luxury goods industry might use the same
measures, but with different calculation criteria. For this reason, non-IFRS
measures should always be read in conjunction with the related notes, and may
not be directly comparable with those used by other companies.
In addition to the non-IFRS measures already adopted in the 2019 Annual Repor t,
the Group introduced a new non-IFRS measure, “Selling expenses of the closed
stores during the lockdowns”, in order to distinguish the por tion of selling operating
expenses that could not generate revenues following the constraints imposed by
the pandemic.
By including this non-IFRS measure, the Group would like to provide additional
quantitative information to improve the reader ’s understanding about the impacts
of the Covid-19 pandemic on the business, while helping also the comparison with
last year.
The caption “Selling expenses of the closed stores during the lockdowns”, Euro
115.8 million for the twelve months ended December 31, 2020, included the main
direct costs per taining to the retail network during the closure periods related to
the pandemic, which prevented the stores from operating.
The most significant caption were for Euro 45.5 million the depreciation of rights
of use assets, net of Covid-related lease discounts obtained from lessors, for
Euro 35.4 million the labor costs, net of government subsidies, and for Euro 27.7
million the depreciation of tangible fixed assets.
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PRADA Group Annual Report 2020 - Financial Review In this Annual Repor t the Prada Group used the following non-IFRS measures:
EBIT: Earnings before Interest and Taxation, i.e. “Consolidated net result for the
period” adjusted to exclude “ Total financial income/(expenses)” and “ Taxation”.
EBITDA: Earnings before Interest, Taxation, Depreciation and Amor tization, i.e.
“Consolidated net result for the period”, adjusted to exclude “ Total financial
income/(expenses)”, “ Taxation” and “ Total depreciation, amor tization and
impairment (included the Depreciation of the Right of Use assets)”.
Markdown sales: Net sales of Group’s Directly Operated Stores of end of season
products at promotional prices.
Full-price sales (or “regular sales”): Net sales of Group’s Directly Operated Stores
excluding Markdown sales.
The following sets for th the EBIT and the EBITDA, both excluding and including
the “Selling expenses of the closed stores during the lockdowns”:
(amounts in thousands of Euro)
twelve months
ended
December 31
2020
%
on net
revenues
twelve months
ended
December 31
2019
%
on net
revenues
EBIT
20,061
0.8%
306,779
9.5%
Selling expenses of the closed stores during the lockdowns
115,833
4.8%
-
-
EBIT excluding Selling expenses of the closed stores during the lockdowns
135,894
5.6%
306,779
9.5%
Depreciation, amortization and impairment on tangible and intangible fixed assets
Depreciation and write-downs of the Right of Use assets (*)
Total depreciation, amortization and impairment
225,014
443,910
668,924
9.3%
18.3%
27.6%
233,759
456,310
690,069
7.2%
14.1%
21.4%
EBITDA
688,985
28.4%
996,848
30.9%
EBITDA excluding Selling expenses of the closed stores during the lockdowns
803,737
33.2%
996,848
30.9%
(*) shown without the impact of Covid-related discounts
Net financial position surplus/(deficit): Shor t-term and
long-term financial
payables due to third par ties and related par ties, net of cash and cash equivalents
and shor t-term and long-term financial receivables due from third par ties and
related par ties.
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PRADA Group Annual Report 2020 - Financial Review Net financial position surplus/(deficit), including Lease Liability: Net Financial
Position including Lease Liability (current and non-current).
(amounts in thousands of Euro)
December 31
2020
December 31
2019
Net financial position surplus/(deficit)
(311,357)
(405,544)
Short-term Lease Liability
Long-term Lease Liability
Total Lease Liability
(403,593)
(1,729,819)
(409,537)
(2,005,761)
(2,133,412)
(2,415,298)
Net financial position surplus/(deficit), including Lease Liability
(2,444,769)
(2,820,842)
Net Operating Cash Flow: Net Cash Flow generated by operating activities, less
the repayment of Lease Liability.
Free cash flow: Net Operating Cash Flow after the net cash flows used for the
investing activities.
(amounts in thousands of Euro)
December 31
2020
December 31
2019
Cash Flow from operating activities
691,013
895,573
Cost of net financial debt: interest paid
Lease Liability: interest paid
Tax Paid
(11,704)
(42,670)
(44,220)
(10,338)
(49,214)
(26,126)
Net Cash Flow from operating activities
592,419
809,895
Repayment of Lease Liability
Net Operating Cash Flow
(330,319)
(447,530)
262,100
362,365
Net cash flow utilized by investing activities
(149,910)
(302,261)
Free Cash Flow
112,190
60,104
RESEARCH AND DEVELOPMENT ACTIVITIES
Research and development activities are described within section “ The Prada
Group” of this Annual Repor t, especially in the paragraph on creativity. The design
and product development costs for the 2020 twelve-month period, as repor ted in
the Consolidated Profit or Loss statement by destination prepared in accordance
with IFRSs, amounted to Euro 102.2 million.
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PRADA Group Annual Report 2020 - Financial Review TREASURY SHARES
At December 31, 2020 the Group does not hold treasury shares, as repor ted in the
section relating to the Repor t on Corporate Governance.
EVENTS AF TER THE REPORTING DATE
No significant events to be repor ted.
OUTLOOK
The Prada Group successfully withstood the unprecedented challenges of the
pandemic, while continuing to drive forward strategy.
Continuous investment in people, products and customers relationships delivered
resilience and rapid recovery in sales. At the same time, the direct control of
manufacturing and distribution, combined with brand equity and focus on digital
communications, are the pillars of the Group’s future positive prospects.
In an environment that is still uncer tain, the fundamentals of the luxury sector
remain strong and the Prada Group is well positioned to capture long term growth.
The star t of the year 2021 shows encouraging retail sales trend in spite of enduring
Covid-related restrictions.
Milan, March 10, 2021
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PRADA Group Annual Report 2020 - Financial Review D I R E C T O R S A N D S E N I O R M A N A G E M E N T
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PRADA Group Annual Report 2020 - Directors and Senior Management DIRECTORS
Our Board consists of nine Directors, of whom four are executive Directors, one is
a non-executive Director and four are independent non-executive Directors. The
Board of Directors is appointed for a term of three years.
CHAIRMAN
MAZZI, Carlo, aged 74, is the Chairman of the Board, first appointed on February
14, 2014 and most recently re-elected on April 27, 2018. He was first appointed to
the Board in 2004 – who served mainly as Vice Chairman – until his appointment as
Chairman of the Board. Mr. Mazzi holds directorships in subsidiaries of the Company.
He holds directorships in Prada Holding S.p.A., Bellatrix S.p.A. and Ludo S.p.A.,
which are substantial shareholders of the Company. Mr. Mazzi obtained a degree
“cum laude” (with praise) in Mechanical Engineering from the Bologna University
of Italy in 1971 and obtained a master ’s degree in Business Administration from
Bocconi University of Milan in 1976. Mr. Mazzi worked as a Manager of the Large
Corporate depar tment of IMI and San Paolo IMI Bank from 1994 to 2000. He was a
board 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 ar t. 106 TUB) from 2000 to 2004. He
is currently a board member of Chora S.r.l. - Milan (a service company) and an
independent board member of Banca Profilo S.p.A. (a bank listed on the Italian
Stock Exchange) since April, 2018 and Board member of Sammontana S.p.A. since
May, 2019. He was previously a board member of IMI-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). He is a member of the Remuneration Committee
and Nomination Committee. Save as disclosed herein, Mr. Mazzi is not and has not
been a director of any other listed companies in Hong Kong S.A.R., P.R.C. (“Hong
Kong”) or overseas in the past three years.
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PRADA Group Annual Report 2020 - Directors and Senior Management EXECUTIVE DIRECTORS
PRADA BIANCHI, Miuccia, aged 72, is a Chief Executive Officer of the Company.
She was first appointed as the Chairperson of the Board on November 20, 2003
until February 14, 2014 and she was most recently re-elected as Executive Director
on April 27, 2018. Ms. Prada holds directorships in Prada Holding S.p.A., Bellatrix
S.p.A. and Ludo S.p.A., which are substantial shareholders of the Company. Ms.
Prada received an Honorary Doctorate from the Royal College of Ar t (London) in
2000. Ms. Prada is a co-founder of our Group along with Mr. Patrizio Ber telli. Ms.
Prada is the wife of Mr. Ber telli, one of our Chief Executive Officers, and is the
mother of Mr. Lorenzo Ber telli. Ms. Prada is not and has not been a director of any
other listed companies in Hong Kong or overseas in the past three years.
BERTELLI, Patrizio, aged 74, is a Chief Executive Officer of the Company. He was
first appointed to the Board on November 20, 2003 and was most recently re-
elected as Executive Director on April 27, 2018. Mr. Ber telli holds directorships
in subsidiaries of the Company. He holds directorship in PA BE 1 S.r.l., which
is a substantial shareholder of the Company. Mr. Ber telli received an honorary
degree in Business Economics from the University of Florence in October, 2000.
Mr. Ber telli is a co-founder of our Group along with Ms. Miuccia Prada Bianchi.
Mr. Ber telli is the husband of Ms. Prada, one of our Chief Executive Officers, and
is the father of Mr. Lorenzo Ber telli. Mr. Ber telli is not and has not been a director
of any other listed companies in Hong Kong or overseas in the past three years.
COZZANI, Alessandra, aged 58, is the Chief Financial Officer of the Company.
She was first appointed to the Board as Executive Director on December 20,
2013 and she was most recently re-elected on April 27, 2018. She has been our
Investor Relations Director since July 2010, responsible for managing financial
communication and for relationships with investment community, and was fur ther
appointed as Chief Financial Officer on February 19, 2016. Ms. Cozzani holds
directorships in subsidiaries of the Company. Ms. Cozzani joined our Group in
2000 and has covered different managerial roles within the Finance depar tment.
In 2003, she was appointed as Group Financial Repor ts Director. Ms. Cozzani
obtained a degree “cum laude” (with praise) in Business Administration from
the University of Genoa (Italy) in 1988. She star ted her career as an auditor at
Coopers & Lybrand (1989 to 1995). Prior to joining our Group, she worked in
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PRADA Group Annual Report 2020 - Directors and Senior Management Castelletti International Transpor ts, the Italian subsidiary of an international
logistic company (now Schenker Group) for five years, most of the time as 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.
NON-EXECUTIVE DIRECTORS
SIMONTACCHI, Stefano, aged 50, has been appointed as Non-Executive Director of
the Company on April 8, 2016 and most recently re-elected on April 27, 2018. On
December 2018 Mr. Simontacchi has been appointed as President of BonelliErede
Law Firm, a leading law firm in Italy, after being Managing Par tner from 2013
to 2018. He has been on the firm’s board since 2010. His practice focuses on
international taxation, transfer pricing, tax planning, private equity, and tax
aspects related to real-estate transactions, real-estate and equity funds, M&A and
reorganisations. In addition, Mr. Simontacchi is a member of the EU Joint Transfer
Pricing Forum (which assists and advises the European Commission on transfer
pricing tax matters) and has authored widely on tax law, including for Il Sole 24
Ore (a leading, daily business newspaper). Mr. Simontacchi obtained a degree with
praise (cum laude) in business administration from L. Bocconi University of Milan
in 1995. In 2000, he obtained an Adv. LLM with praise (cum laude) in International
Taxation from Leiden University. In January 2007, Mr. Simontacchi obtained his
PhD in International Taxation from the Faculty of Law of Leiden University. In
April 2015, Mr. Simontacchi was appointed as board member of RCS MediaGroup
S.p.A., an Italian listed company, leader in the newspaper sector. In addition,
he has been serving as board member of Cabara Insurance Broker S.r.l. since
2010, as Chairman of the Fondazione Ospedale Buzzi since July 2015 and as
board member of Assoedilizia Servizi S.r.l. since 2017. On November 2018 he has
been appointed as board member of Fattorie Osella S.p.A. and in 2020 as board
member of Cordusio Sim S.p.A. Save as disclosed herein, Mr. Simontacchi has not
held any directorship in other listed companies in Hong Kong or overseas in the
last three years.
INDEPENDENT NON-EXECUTIVE DIRECTORS
MATTEI, Gian Franco Oliviero, aged 75, was first appointed as Independent
Non-Executive Director on May 28, 2009 and was most recently re-elected on
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PRADA Group Annual Report 2020 - Directors and Senior Management April 27, 2018. Mr. Mattei obtained a degree in Economics from The Sapienza
University of Rome (Italy) in 1970 and became a Public Char tered Accountant
(member of the Registro dei Revisori Legali) 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 of Investment Banking at Sanpaolo IMI and Chairman of Banca IMI and was
previously Head of the Finance Depar tment at the Istituto Mobiliare Italiano IMI.
Mr. Mattei has also been a Board Member of Borsa Italiana. He is Deputy Chairman
of Officine CST - Consulting Services & Technology - S.p.A.. Mr. Mattei is the
Chairman of the Audit Committee and the Nomination Committee and a member
of the Remuneration Committee. Mr. Mattei is not and has not been a director of
any other listed companies in Hong Kong or overseas in the past three years.
FORESTIERI, Giancarlo, aged 74, was appointed to the Board first on May 31,
2007 and was most recently re-elected as Independent Non-Executive Director on
April 27, 2018. Mr. Forestieri obtained a degree in Economics and Banking from
the University of Siena (Italy) in 1970 and obtained a Specialization in Corporate
Finance from the Scuola Mattei - ENI in 1971. From 1988 to 2016, Mr. Forestieri
was 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 2013
as the chairman of the board). Mr. Forestieri is a member of the Italian Scientific
Societies in the Fields of Finance and Management. Mr. Forestieri is a member of
the Audit 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 65, was first appointed as Independent Non-Executive
Director on May 9, 2011 and was most recently re-elected on April 27, 2018. He is
the Chairman of My Top Home (China) Holdings Limited. He has been Director of HKS
Education Fund Limited (“HKSEF”) since 2005 (HKSEF is a charitable institution
which holds cer tain percentage of shares in Hongkong Sales (International) Limited
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PRADA Group Annual Report 2020 - Directors and Senior Management (“HKSI”), an investment holding, knitwear manufacturing company), Non-executive
Director of HKSI since 2005 and Non-Executive Chairman of Grosvenor Asia
Pacific Limited since Nov 8, 2018, all of which are private companies. He served
as an independent non-executive director of Swire Proper ties Limited from April,
2010 to May, 2019 (Swire Proper ties Limited was listed on the Stock Exchange
of Hong Kong on January 18, 2012). 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 the Royal Institution of Char tered
Surveyors since 1994. Mr. Liu is a member of the Nomination Committee. Save
as disclosed above, Mr. Liu is not and has not been a director of any other listed
companies in Hong Kong or overseas in the past three years.
CEREDA, Maurizio, aged 57, has been appointed as Independent Non-Executive
Director of the Company on April 27, 2018 and previously has been a Non-
Executive Director since May 24, 2016. Mr. Cereda’s practice focuses on providing
consultancy services to entrepreneurs, family offices, companies and financial
institutions. Since 2015, he has also been founding par tner and board member of
FIEE (Fondo Italiano per l’Efficienza Energetica) Sgr S.p.A.. Mr. Cereda obtained
a degree in business economics from L. Bocconi University of Milan in 1989. Mr.
Cereda has been serving as board member of various companies listed on the Italian
Stock Exchange including Technogym S.p.A. (since 2016), and Enervit S.p.A. (since
2007). Mr. Cereda star ted his career as an analyst in the equity capital markets
division in Rasfin S.p.A. and then he worked fifteen years at Mediobanca S.p.A.,
untill his appointment as deputy general manager and head of corporate finance
covering large corporate clients, a role that he covered from 2007 to 2015. From
2007 to 2014, he was a board member of Mediobanca S.p.A., and from 2006 to
2014, he was also a board member of Ansaldo STS S.p.A., both companies listed
on the Italian Stock Exchange. Mr. Cereda is the Chairman of the Renumeration
Committee and a member of the Audit Committee. Save as disclosed herein, Mr.
Maurizio Cereda has not held any directorship in any other listed companies in
Hong Kong or overseas in the last three years.
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PRADA Group Annual Report 2020 - Directors and Senior Management SENIOR MANAGEMENT
Our senior management is responsible for the day-to-day management of the
business of the Group.
ANDRIANI, Gianluca, aged 46, has been appointed as Group Internal Audit and
Risk Management Director in February 2020. He is primarily responsible for the
appropriateness of the control systems and the application of procedures, to
ensure protection against risks at Group level. Mr. Andriani obtained a degree in
Economics and Management. He joined our Group in 2008, first as Fiscal Manager,
then as Latin America and Caribbean Accounting, Finance and Controlling Director.
Prior to joining Prada, he worked in Ernst & Young as Senior Auditor and in Erg
Group as Financial Statement Senior Analyst.
BERTELLI, Lorenzo, aged 32, has been Group Marketing Director since 2019 and
Head of Corporate Social Responsibility since 2020. Mr. Lorenzo Ber telli is primarily
responsible for the Group’s communication strategy and for the development,
innovation and sales analysis of the retail channel, for all the Group’s brands.
Mr. Lorenzo Ber telli obtained a degree in Philosophy at San Raffaele University
in Milan in 2008. He joined the Group in 2017 to oversee the development of
the food and beverage activities carried out by the Group through the Pasticceria
Marchesi brand. He was appointed as Head of Marketing and Communication in
2018 and he has been Director of Prada Holding S.p.A. since 2015. Mr. Lorenzo
Ber telli is the son of Ms. Miuccia Prada Bianchi and Mr. Patrizio Ber telli, the Chief
Executive Officers of the Company.
BERTONCINI, Francesca, aged 50, has been appointed as Nor th Europe Regional
Director in December 2019. Ms. Ber toncini is primarily responsible for overseeing
the Group’s operations in United Kingdom, Ireland, Denmark and Sweden, where
she covers several managerial roles at the Company’s subsidiaries. She joined
the Group in 2001 and covered, until 2018, different managerial roles in product
development, collection and retail merchandising, until being appointed as
Worldwide Prada Woman Shoes Collection/Retail Merchandising Director. From
2018 to 2019 she worked as Senior Vice President Global Merchandising and
Product Development for Stuar t Weit zman in New York.
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PRADA Group Annual Report 2020 - Directors and Senior Management BUGG, Christopher Aaron, aged 38, has been appointed Group Communication
Director in 2021. During 2020 he had a strategic communication role in the Asia
region. He is responsible for media and communication strategies, public relations
and promotional activities of all the Group brands. Mr. Bugg obtained a Bachelor
Degree in Mass Communication at University of Evansville in 2004. After the
graduation, he worked as Account Executive in different media communication
agencies based in New York. From 2008 to 2016, he was Vice President Global
Digital Marketing at Calvin Klein. Prior to joining the Prada Group he was Director
of Global Digital Communication at Louis Vuitton.
CAROLA, Pablo, aged 53, has been Middle East Regional Director since 2017. Mr.
Carola is primarily responsible for overseeing the Group’s commercial operations
in the Middle East area, where he covers several managerial roles at the Company’s
subsidiaries. Mr. Carola obtained a University degree in Business Administration
at Universidad de Politecnica de Catalunya (Spain). He joined the Group in 2011
to manage human resources of both Miu Miu and Prada stores worldwide and from
2013 to 2017 he was Regional Director for Iberian Peninsula and Nor th Africa.
Prior to joining our Group he worked for almost twelve years as human resources
director at Louis Vuitton.
CHAN, Li Sa, aged 49, has been South East Asia General Manager since 2017.
She is primarily responsible for overseeing the Group’s commercial operations in
Singapore, Malaysia and Thailand. Ms. Chan obtained a Master degree in Business
Administration at the University of Stirling (UK). She joined Prada first in 2008
as Retail Merchandising Manager for Prada after spending a few years as Brand
Manager in a number of brands in Singapore. In 2013, she was appointed as Retail
Director for Miu Miu responsible for the retail merchandising, retail operations
and visual merchandising of the brand in the South East Asia. From 2016 to 2017,
she worked for Valentino as General Manager in Singapore.
CHOI, Moonyoung, aged 58, has been Prada Korea General Manager since 2007.
She is primarily responsible for overseeing the Group’s commercial operations in
Korea. She star ted her career at Louis Vuitton, as the first Louis Vuitton Store
Manager in Korea (1991 – 1999). From 1999 to 2007 Ms. Choi worked at Celine
Korea, LVMH Group, as Retail Manager, subsequently becoming Country Manager
for Korea.
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PRADA Group Annual Report 2020 - Directors and Senior Management CLARK, Sophie, aged 48, has been Prada Australia General Manager since 2016.
She is primarily responsible for overseeing the Group’s commercial operations in
Australia and New Zealand. Ms. Clark graduated from Sydney’s exclusive Kincoppal-
Rose Bay School. Ms. Clark had an extensive career at leading Depar tment store
David Jones in Sydney (1999 – 2016) where she most recently held the position of
General Manager Womenswear. Ms. Clark was elected as a judge for the prestigious
International Woolmark Fashion Awards in Milan 2014, Bejing 2015 and New York
2016.
COVIELLO, Letizia, aged 53, has been Group Tax Director since 2016. She is
primarily responsible for overseeing all Group strategic tax matters. Ms. Coviello
obtained a Degree in Economics from the University La Sapienza in Rome in 1991
followed by a Tax Specialization Master at Ipsoa in Milan. Before joining the Group
in 1998 she worked for a Legal Firm, Studio Simonelli e Associati in Milan and
afterwards as Tax Senior Assistant in the Fiscal Depar tment at Eni Spa, in Milan.
CROSO, Carlo, aged 40, joined the Group in July 2019 as Director of Retail
Innovation and E-Commerce. Mr. Croso is responsible for the Group’s customer
strategy, digital transformation and omnichannel initiatives while also overseeing
the development of the e-commerce channels. After obtaining a Bachelor ’s Degree
in Industrial Engineering and a Master ’s Degree in Business Administration from the
Politecnico of Milan, Mr. Croso worked several years covering different industries
for Bain & Company. Before joining the Group, since 2014 Mr. Croso has been
globally in charge of business-to-consumer distribution and digital, holding the
position of Senior Vice President of Direct Business for Royal Caribbean Group’s
luxury cruise company Silversea.
LOUIS, Marie Celine Florence, aged 41, has been appointed as General Manager
for France, Belgium and Principality of Monaco in September 2018. She is primarily
responsible for overseeing the Group’s commercial activities in France, Belgium
and Principality of Monaco. Ms. Louis joined our Group in 2015 as General Manager
for Hong Kong. After the Master Degree at the EDHEC Business School in France,
she joined the Christian Dior Couture as management trainee and then became the
Retail Manager in Australia and also in China (2002 – 2009). In 2009, Ms. Louis
moved to Chanel Fashion China as Retail Manager and in 2011 she joined Prada
China as Retail Operations Manager where she stayed until 2014. From 2014 to
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PRADA Group Annual Report 2020 - Directors and Senior Management 2015 she worked for Saint Laurent China as General Manager.
MANZATTO, Denni, aged 36, has been appointed Group Commercial Director
in September 2019. He is responsible for the commercial development of the
wholesale and marketplace channels of the Prada, Miu Miu and Car Shoe brands.
He directly manages Prada wholesale channel as well as the eyewear and fragrance
licenses for both Prada and Miu Miu. Moreover, he is also responsible for leading
Group and brand-level business development oppor tunities, strategic par tnerships
and collaborations. Mr. Manzatto obtained an Executive Master in Business
Administration at INSEAD and Tsinghua University in 2018. He joined our Group
in 2013 and, before being appointed to his current position, he covered different
roles in retail/collection merchandising, marketing and e-commerce.
MARSICOLA, Alessandra, aged 61, has been appointed as Prada Retail Director
in January 2020. She is primarily responsible for overseeing worldwide Prada
retail functions and strategy of Prada Brand. Ms. Marsicola joined our Group in
1991 and before being appointed to her current position she covered different
managerial roles in the commercial area, including Regional Director Nor th West
Europe, Retail Development Director for Japan and Asia, Chief Executive Officer
of Prada Fashion Commerce (Shanghai), Prada Worldwide Store Operation Director
and Prada Retail Director for Prada Japan. From 2006 to 2009, she worked first
as Sales Director for La Rinascente then as Asia Pacific Retail Director for Fendi.
NOSCHESE, Marcelo, aged 56, has been Latin America Regional Director since
2017 and has been appointed as Nor th America Regional Director in 2020 . He
is primarily responsible for overseeing the Group’s operations in Nor th America,
Central America, South America and Caribbean area. Mr. Noschese obtained a
master ’s degree in Business Administration from INSEAD, Fontainebleau, France,
in 1992 and graduated in Business Administration in Getúlio Vargas Foundation
São Paulo, Brazil. He star ted his career at L’Oréal, as International Development
Manager for the Fine Fragrances Division, and then was appointed as General
Manager for the Travel Retail Division in Nor th and South America (1992 – 1998).
Prior to joining our Group in 2011 as Regional Director for South America, he
worked for LVMH – Moët Hennessy Louis Vuitton as Country Manager for Brazil
(2001 – 2004) and for Salvatore Ferragamo S.p.A., as Regional Development
Director for South America (2007 – 2011).
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PRADA Group Annual Report 2020 - Directors and Senior Management PETRUZZO, Benedetta aged 35, has been appointed Miu Miu General Manager in
February 2020. She is responsible for overseeing the worldwide retail and wholesale
operations of the brand and for the overall strategy and development of Miu Miu.
Before joining the Prada Group, she was Executive Vice President for the Nor th
America at Kering Eyewear, where she worked for five years, holding different
management positions. After obtaining a degree in Business Administration and a
Master of Science in Management at Bocconi University, she star ted her career first
in the finance sector. Afterwards, she joined Bain & Company, where she worked
several years in the retail and luxury practices of the management-consulting firm.
RASTRELLI, Stefano, aged 58, has been Group Human Resources Director since
2013. Mr. Rastrelli obtained a degree in Law, from the University of Naples. He first
joined the PRADA Group in 2007 to manage the human resources of the Industrial
Depar tments and subsequently extended also to the Commercial Depar tments.
Prior to joining our Group he worked for almost twenty years for the Fiat Group,
covering different managerial roles within the Fiat Group for different branches in
Italy and abroad (Argentina, Brazil). From 2005 to 2007 Mr. Rastrelli was in Spain
as Human Resources Director for GKN Driveline.
ROMANO, Anthony, aged 54, has been Church Group Chief Executive Officer since
2017. Mr. Romano is primarily responsible for overseeing worldwide operations
and strategy of the Church Group and the Car Shoe brand. He joined the Group
in 2013 as Regional Director for the South East Mediterranean area. After his
bachelor ’s degree in Business in New Zealand, he was employed at Deloitte &
Touche and then at Timberland Europe before working for almost ten years for
Calvın Kleın Europe (1995 – 2004) where he became C.E.O. and Managing Director.
From 2004 to 2007, he was General Manager and Company Director of Luna Rossa
Challenge for the 2007 America’s Cup. He was par tner of ADR – fashion and spor t
strategic consultancy company, from 2008 to 2013.
SESIA, Davide, aged 53, has been Japan and Hawaii Regional Director since
February 2004. He is primarily responsible for overseeing the Group’s operations
in Japan, Guam, Saipan and Hawaii area, where he covers several managerial
roles at the Company’s subsidiaries. Mr. Sesia obtained a degree in Business
Administration from the University Cattolica del Sacro Cuore of Milan in 1991. He
joined our Group in 2000 as Representative Director and Chief Financial Officer
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PRADA Group Annual Report 2020 - Directors and Senior Management 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).
SIMONS, Raf, aged 53, has been appointed as co-creative director for Prada in
April 2020, working in par tnership with Mrs Miuccia Prada Bianchi. He launched
his own menswear label in 1995. He was creative director at Jil Sander from 2005
to 2012,in Christian Dior from 2012 to 2015 and in Calvin Klein from 2016 to
2018. He contributes to the conception, preparation and development of the Prada
brand products, coordinating also the image. He par ticipates in the development of
creative strategies of marketing, adver tising and branding campaigns. Mr. Simons
graduated in Industrial Design at SHIVKV in Genk in 1991.
TAO, Yu Hua Irene, aged 54, has been Prada Taiwan General Manager since 2017.
She is primarily responsible for overseeing the Group’s commercial operations
in Taiwan. Ms. Tao obtained the degree in Japanese Language at the Soochow
University (Taiwan). Prior to joining the Group, she worked for almost 11 years at
Louis Vuitton in Taiwan. Then she held the Retail Operations positions in Fendi
and Car tier from 2007 to 2013 and became the General Manager at Chloe Taiwan
from 2014 to 2017.
TOLOMELLI, Armando, aged 54, has been Asia Pacific Regional Director since
2012. Mr. Tolomelli is primarily responsible for overseeing the Group’s operations
in the Asia Pacific region, where he covers several managerial roles at the
Company’s subsidiaries. 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 four teen years working for the Barilla Group, covering various
roles including Financing Office Manager, Divisional Business Controller, Business
Controller for South Eastern Europe, Group Controller of Wasa in Stockholm,
Sweden (1999 to 2001), Finance Manager International Business Development
of the Bakery Division (2001) and Corporate Controlling Director of Kamps in
Düsseldor f, Germany (2002 to 2005). He graduated in business economics from
University of Parma (Italy) in 1989.
VIAN, Massimo, aged 48, has been appointed Group Industrial Director in 2020. He
is responsible for industrial divisions. Mr. Vian obtained a degree in Engineering
Management from the University of Padua in 1999 and an Executive Development
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PRADA Group Annual Report 2020 - Directors and Senior Management Program in 2008 from the Kellogg Business School, Nor th-Western University of
Chicago. He gained his professional experience first in the automotive sector, and
then he joined the Luxottica Group in 2005 covering several managerial roles, in
Italy and abroad (China), where he became C.E.O. Product and Operations. In
March 2019, he joined the Calzedonia Group as C.E.O. of the Falconeri brand.
WANG, Chen-Chen, aged 48, has been China General Manager since 2019. She
is primarily responsible for overseeing the Group’s commercial operations in
China, where she covers several managerial roles at the Company’s subsidiaries.
She joined our Group in 2015 as Miu Miu Retail Director. Ms. Wang obtained
a Masters Degree in Science from Auburn University. She star ted her career at
Guilford Mills New York (1 997–2000); then she worked at SilverStream Software
New York (2000– 2002). Before joining our Group, she was Merchandising Director
at Christian Dior China (2011 -2015).
ZAMBERNARDI, Fabio, aged 58, has been Group Design Director 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 suppor ting the strategic brands image
communication of both Prada and Miu Miu brands. He has been collaborating with
the Group since 1981. He was promoted Shoe Design Director in 1997 and Design
Fashion Coordinator in 1999.
ZENKOVSKAYA, Vera, aged 44, has been Russian area Regional Director since 2013.
Ms. Zenkovskaya is primarily responsible for overseeing the Group operations in
Russia, Kazakhstan and Ukraine, where she covers several managerial roles at the
Company’s subsidiaries. Ms. Zenkovskaya obtained a Foreign Languages Degree at
Language University of Kazakhstan. Prior to joining our Group in 2011 as Russia
Country Manager, she worked within the beauty sector (L’Oreal, Temtrade) in
marketing and retail areas. From 2006 to 2011, she covered several managerial
roles in Russia and Ukraine for Louis Vuitton.
ZHU, Liang Jimmy, aged 35, has been General Manager for Hong Kong and Macau
S.A.R., P.R.C. (“Macau”) since 2018. He is primarily responsible for overseeing
the Group’s commercial operations in Hong Kong and Macau. Mr. ZHU obtained a
degree in Commerce at the Macquarie University (Australia). He worked in Japan
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PRADA Group Annual Report 2020 - Directors and Senior Management and Taiwan from 2004 to 2007 and then moved to Australia to star t his career as
Brand Manager at Giorgio Armani. Then he moved to Taiwan in 2013 to join Prada
Taiwan as Retail Operations Manager for Prada and Miu Miu. In 2016, he became
the Country Manager of Macau.
None of the Group’s senior management listed above is or has been a director of
any listed companies in Hong Kong or overseas in the past three years.
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PRADA Group Annual Report 2020 - Directors and Senior Management COMPANY SECRETARY
ALBANO, Patrizia, aged 67, is the joint company secretary of the Company. Ms.
Patrizia Albano has been the Head of Corporate Affairs since September 2008 and
is responsible for monitoring general legal compliance. Ms. Albano obtained a
degree in 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 star ted her
career as an in-house legal advisor at the Istituto Mobiliare Italiano S.p.A. from
1981 to 1999 and then 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. and Fincasa S.p.A., both of which are listed companies
on the Italian Stock Exchange. In 2002, Ms. Albano became the General Counsel
and Company Secretary of a private company active in services provision, proper ty
and facility management and renewable energy. She then worked at an Italian law
firm, Studio Legale Carbonetti, from 2003 to 2007, and also founded her own
private practice law firm in 2007 before joining our Company in 2008. Ms. Albano
has been Chairman of the Board of Statutory Auditors of Ar temide Italia S.r.l., a
member of the Board of Statutory Auditors in Ar temide Group S.p.A. and Ar temide
S.p.A. since May 2014. In 2017 she was appointed as Board member of FinecoBank
S.p.A. and in April 2018 she was appointed as Independent Board member of
Piaggio & C. S.p.A., both companies listed on the Italian Stock Exchange. Ms.
Albano also served as board member of Cassa di Risparmio di Rimini S.p.A. from
April to November 2015, of Mediacontech S.p.A. from June to December 2016
and as Chairman of Gruppo Moda, Design e Arredo of Assolombarda (Association
of Industrial provinces of Milan, Lodi, Monza and Brianza) from February 2015 to
December 2017. Ms. Albano is the wife of Mr. Carlo Mazzi, the Chairman of the
Board of our Company. Save as disclosed herein, Ms. Albano is not and has not
been a director of any other listed companies in Hong Kong or overseas in the past
three years.
YUEN, Ying-kwai, aged 54, is the joint company secretary of the Company. She is
responsible for corporate secretarial duties. Ms. Yuen joined our Group and was
appointed joint company secretary in May 2011. Ms. Yuen has over 25 years of
working experience in the corporate secretariat and compliance areas of sizeable
organizations and professional firms. Prior to joining our Group, she worked
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PRADA Group Annual Report 2020 - Directors and Senior Management 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 and appointed as group company secretary in
2000. Ms. Yuen was the company secretary of Integrated Distribution Services
Group Limited (member of Li & Fung Group) between 2004 and 2011. Ms. Yuen
received an Honours Diploma in Company Secretaryship and Administration from
Lingnan College (now Lingnan University) in 1988. Ms. Yuen holds a master ’s
degree in Business Administration (Executive) from City University of Hong Kong,
awarded in 2003. Ms. Yuen has been a fellow of both the Hong Kong Institute of
Char tered Secretaries (“HKICS”) and the Institute of Char tered Secretaries and
Administrators (now The Char tered Governance Institute), UK since 2001. Ms.
Yuen was the past member of each of the Membership Committee of HKICS (2016
- 2019) and the Company Secretaries Panel of HKICS (2012 – 2015). 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.
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PRADA Group Annual Report 2020 - Directors and Senior Management D I R E C T O R S ’ R E P O R T
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PRADA Group Annual Report 2020 - Directors’ Report PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
PRADA S.p.A. (the “Company”), together with its subsidiaries (the “Group”), is a
leading global luxury group in the design, production and distribution of high-end
leather goods, handbags, footwear, apparel and accessories, as well as operates,
under licensing agreements, in the eyewear and fragrance sectors. Through its
Directly Operated Stores network (the “DOS”), franchise stores and a selected
number of luxury depar tment stores and independent retailers, the Group operates
in all major international markets.
The Company is a joint-stock company with limited liability, incorporated and
domiciled in Italy. Its registered office is in Via A. Fogazzaro 28, Milan 20135,
Italy.
Fur ther discussion and analysis of these activities as required by section 388(2)
and Schedule 5 to the Hong Kong Companies Ordinance, including a review of the
business of the Company, a discussion and analysis of the Group’s per formance
during the year ended December 31, 2020 (the “Reviewed Period”) and the material
factors underlying its results and financial position, a description of the risks and
uncer tainties facing the Group, and the future development of the business of
the Company, is set out in the Financial Review section of this annual repor t.
Par ticulars of impor tant events affecting the Company that have occurred since
the end of the repor ting period is set out in note 44 to the Consolidated financial
statements. These discussions form par t of this directors’ repor t.
COMPLIANCE WITH THE RELEVANT LAWS AND REGULATIONS
A key ethical value fundamental to the Group is the compliance with legislative
and regulatory provisions in all countries in which the Group operates. Compliance
procedures are in place to ensure adherence to applicable laws, rules and regulations
in par ticular, those that have a significant impact on the Group.
The Group’s products are distributed and sold across 70 countries; therefore
they have to comply with all applicable laws, standards and regulations in each
of these countries. To properly address this matter, the Group established an
Industrial Compliance Committee in 2010 to constantly oversee the Group’s
products compliance with international and local legislative requirements of the
manufacturing and distribution process at a worldwide level.
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PRADA Group Annual Report 2020 - Directors’ Report
A detailed analysis of the legal and regulatory risks to which the Group is exposed
is set out in the paragraph headed “Legal and regulatory risks” of the Financial
Review section of this annual repor t, which forms par t of this directors’ repor t.
ENVIRONMENTAL POLICIES AND PERFORMANCE
The Group aims to achieve a continuous improvement in creating value for its
stakeholders by combining economic profitability with employee and customer
satisfaction, as well as respecting ethical and environmental values and maintaining
a high standard of sustainability.
Environmental protection is one of the interests of the Group, which feels
responsible for engaging in and cultivating vir tuous behaviors that contribute to its
sustainable growth and are examples of good practices within the entire industry.
Commitment to environmental respect is a key element of the Code of Ethics,
applied both within the organization, by constantly raising staff awareness, and to
third par ties working with the Group.
The main direct impact of the Group’s business originates from the use of energy
for offices, factories, logistics centers and stores in the various par ts of the world.
The objective is to reach ever-higher levels of energy efficiency, waste reduction
and responsible use of natural resources.
Fur ther analysis on the environmental policies and per formances is set out in “ The
PRADA Group” section to this annual repor t.
RELATIONSHIPS WITH KEY STAKEHOLDERS
The Group’s success also depends on the suppor t from key stakeholders such as
employees, customers, suppliers and shareholders.
EMPLOYEES
The Group is built on people. The Group has always considered human capital to
be the key to its competitive edge and makes every effor t to promote and reward
productivity, professional skills and teamwork, with an emphasis on results. The
employees’ enthusiasm, craft skills and intellectual curiosity are the indispensable
elements which underpin the innovation and quality of the Group’s products. The
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PRADA Group Annual Report 2020 - Directors’ Report Company searches for people that can combine these exceptional qualities with
the values of the Group.
As of December 31, 2020 the Group had 12,858 employees (headcount), of whom
39.2% working in Italy and with women making up 62% of the total workforce,
showing for the first time in ten years a 8% decrease compared to the previous
financial year mainly due to the non-replacement of depar ted retail staff with new
hires.
The Group’s remuneration policy aims to attract, reward and retain skilled
personnel and exper t managers, while bringing the interests of the management in
line with the primary objective of creating value over the medium and long term.
Fur ther analysis on the value of human resources of the Group is set out in the
“ The PRADA Group” section to this annual repor t, while fur ther analysis on the
remuneration policy of the Group is set out in the “Corporate Governance” section
of this annual repor t, both of which form par t of this directors’ repor t.
CUSTOMERS
The Group believes that it has a reputation for being a leader in style, maker of
outstanding products and providing excellent customer service.
The distinctive features and the prestige of the Group, derived from an original
management of the creative and industrial processes, places the Group itself
in a position to offer customers around the world with unique products, which
represent an inimitable synthesis of creativity, quality and exclusivity. In addition,
the Group believes that an effective communication is crucial to build and convey
an image of strong and consistent brand identity.
The result of the Group’s approach to its customers is the unique relationship
between each customer and the Group’s brands, its products and its stores.
SUPPLIERS
The Group regards its relationship with its suppliers - built up through years
of day-to-day collaboration and directed towards continuous improvement - as
fundamental to it. The Group has a diverse range of raw materials suppliers and
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PRADA Group Annual Report 2020 - Directors’ Report external manufacturers. About 92% of them are located in the European Union,
the vast majority of which in Italy.
Raw materials are a key component of the quality of the Group’s products and
therefore constitute a primary focus for the Group itself. Their procurement process,
impor t, use and expor t are carried out in compliance with the most stringent
international and local regulations. Every raw material used in the manufacturing
process has a cer tificate of origin that attests its geographical origin. In addition,
raw materials undergo extreme quality controls by the Group’s inspectors and
exper ts.
In fact, the Group has always intended to act as a stimulus for its suppliers, not
only in terms of the excellent quality level required, but also through the promotion
of a culture and modus operandi, which comply with the highest ethical standards.
The Group thus requires that its suppliers act in a responsible manner and that
each of them under takes and acknowledges the Group’s Code of Ethics, which
expresses the inalienable rights of employees, proper working conditions, equal
oppor tunity, freedom of association, health insurance coverage and protection of
the environment in the collection of the materials and in the production processes.
In order to achieve the highest quality standards, the Group undergoes a strict
process in selecting and maintaining its suppliers with the aim of establishing
long-term relationships.
SHAREHOLDERS
One of the corporate goals of the Group is to enhance corporate value to its
shareholders by granting dividend payouts, taking into account the liquidity
positions and business expansion needs of the Group. Details of the Group’s
communication with its shareholders are set out in the “Corporate Governance”
section of this annual repor t, which forms par t of this directors’ repor t.
An analysis of the Group’s environmental policies and per formance and of
the relationships with key stakeholders (employees, customers, suppliers and
shareholders) will be included in the Group’s Social Responsibility Repor t 2020,
which will be published in due course.
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PRADA Group Annual Report 2020 - Directors’ Report RESULTS AND DIVIDENDS
The results of the Group for the Reviewed Period are set out in the Consolidated
Statement of Profit or Loss.
Taking into account on one hand the withdrawn distribution of the dividends of
the previous year as a conservative measure and, on the other hand, the positive
trends in sales of the second half of the year, continued also in the first months
of 2021, the Board recommends for the Reviewed Period the distribution of a final
dividend of Euro 89,558,840 (Euro 0.035 per share). The payments shall be made:
(i)
in E uro to the shareholders recorded in the section of the Company’s
shareholders register kept by the Company at its registered office in Milan
(Italy), and
(ii) in H ong Kong dollars to the shareholders recorded in the section of the
Company’s shareholders register kept in Hong Kong S.A.R., P.R.C. (“Hong
Kong”). The relevant exchange rate will be the opening buying T/ T rate of
Hong Kong dollars to Euros as announced by the Hong Kong Association of
Banks (www.hkab.org.hk) on the day the final dividend is approved by the
shareholders.
The final dividend will be subject to approval by the shareholders at the for thcoming
shareholders’ general meeting of the Company to be held on Thursday, May 27,
2021. The shareholders recorded on the Company’s shareholders register on
Tuesday, May 25, 2021, will be allowed to attend and vote at the shareholders’
general meeting of the Company.
In order to qualify to attend and vote at the shareholders’ general meeting of the
Company, all transfers accompanied by the relevant share cer tificate(s) must be
lodged with:
(i)
t he 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, if the transfer concerns shares registered
in the section of the Company’s shareholders register kept by the Company’s
Hong Kong share registrar itself, or
(ii)
t he Company’s registered office in Milan (Italy), Via A. Fogazzaro, 28, if
the transfer concerns shares registered in the section of the Company’s
shareholders register kept by the Company itself,
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PRADA Group Annual Report 2020 - Directors’ Report in any case, no later than 4:30 p.m. (Hong Kong time)/10:30 a.m. (CET time)
on Monday, May 24, 2021. The Company’s shareholders register (both sections)
will be closed from Tuesday, May 25, 2021 to Thursday, May 27, 2021, both days
inclusive, during which period no share transfer can be registered.
Subject to the shareholders’ approving the recommended final dividend, such
dividend will be paid on Wednesday, June 30, 2021.
The final dividend will be paid to shareholders recorded on the Company’s
shareholders register on Friday, June 4, 2021.
In order to qualify for the payment of the final dividend, all transfers accompanied
by the relevant share cer tificate(s) must be lodged with:
(i)
t he 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, if the transfer concerns shares registered
in the section of the Company’s shareholders register kept by the Company’s
Hong Kong share registrar, or
(ii) t he Company’s registered office in Milan (Italy), Via A. Fogazzaro, 28, if
the transfer concerns shares registered in the section of the Company’s
shareholders register kept by the Company,
in any case, no later than 4:30 p.m. (Hong Kong time)/10:30 a.m. (CET time) on
Thursday, June 3, 2021. The Company’s shareholders register (both sections) will
be closed on Friday, June 4, 2021, during which no share transfer can be registered.
The dividend will be paid net of Italian withholding tax, where applicable. The
current rate of Italian withholding tax applied to applicable dividend payments is
26%.
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 both the Group and the Company
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PRADA Group Annual Report 2020 - Directors’ Report during the Reviewed Period are set out in the Consolidated Statement of Changes
in Shareholders’ Equity and in the Statement of Changes in PRADA S.p.A. Equity.
DISTRIBUTABLE RESERVES
As at December 31, 2020, the Company’s reserves available for distribution to
shareholders in accordance with the Company’s by-laws amounted to Euro 1,625
million (gross of the loss for the year), including Euro 51.2 million allocated to
Extraordinary reserve following the Annual General Meeting of the Company held
on May 26, 2020.
PROPERT Y, PLANT AND EQUIPMENT
Details of the movements in the proper ty, plant and equipment of the Group
during the Reviewed Period are set out in Note 15 to the Consolidated financial
statements.
PRE-EMPTIVE RIGHTS
The Company’s by-laws do not provide for pre-emptive rights.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES
Neither the Company nor any of its subsidiaries has purchased, sold or redeemed
any of the Company’s listed securities during the Reviewed Period.
CAPITAL GAINS TAX IN ITALY
Capital gains realized from the sale in an Italian company by shareholders resident
in Hong Kong are not subject to taxation in Italy.
Fur ther details on Italian capital gains taxation have already been repor ted in the
Tax Booklet available on the Company’s website www.pradagroup.com.
SUBSIDIARIES
Details of the Company’s subsidiaries as at December 31, 2020, are set out in Note
42 to the Consolidated financial statements.
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PRADA Group Annual Report 2020 - Directors’ Report DIRECTORS
The Directors of the Company during the Reviewed Period and up to the date of
this annual repor t are:
EXECUTIVE DIRECTORS
Mr. Carlo MAZZI (Chairman of the Board)
Ms. Miuccia PRADA BIANCHI (Chief Executive Officer)
Mr. Patrizio BERTELLI (Chief Executive Officer)
Ms. Alessandra COZZANI (Chief Financial Officer)
NON-EXECUTIVE DIRECTOR
Mr. Stefano SIMONTACCHI
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. Gian Franco Oliviero MATTEI
Mr. Giancarlo FORESTIERI
Mr. Sing Cheong LIU
Mr. Maurizio CEREDA
In accordance with the by-laws of the Company, the Board of Directors was
appointed by the shareholders’ general meeting on April 27, 2018 for a period
of three financial years. Therefore, the Board’s mandate will lapse on the date
of the for thcoming shareholders’ general meeting called to approve the financial
statements for the Reviewed Period. The Directors may be reappointed.
BIOGRAPHICAL INFORMATION OF DIRECTORS
A brief biography on each of the Directors of the Company is set out in the
“Directors and Senior Management” section of this annual repor t.
DIRECTORS’ PERMIT TED INDEMNIT Y
There is no permitted indemnity provision in a contract entered into by the
Company or any of its associated corporation that is or was in force during the
Reviewed Period and until the date when this directors’ repor t is approved by the
Board, which is required to be disclosed under section 470 of the Hong Kong
Companies Ordinance.
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PRADA Group Annual Report 2020 - Directors’ Report
MANAGEMENT CONTRACT
No contract concerning the management and administration of the whole or any
substantial par t of any business of the Company, that is not a contract of service
with any Director or any person engaged in full-time employment of the Company,
to which the Company or any of its subsidiaries was par t, was entered into or
existed during the Reviewed Period.
DIRECTORS’ SERVICE CONTRACTS
None of the Directors of the Company has or is proposed to have a service contract
with any member of the Group that cannot be terminated within one year without
payment of compensation, other than statutory compensation.
DIRECTORS’ INTERESTS IN COMPETING BUSINESS
During the Reviewed Period, none of the Directors of the Company, held any
interest in a business which competes, or is likely to compete, either directly, or
indirectly, with the business of the Company or the Group.
DIRECTORS’ INTERESTS AND SHORT POSITIONS IN SECURITIES
As at December 31, 2020, the Directors (including the Chief Executive Officers)
of the Company held the following interests in the shares, underlying shares and
debentures of the Company and its associated corporations (within the meaning
of Par t XV of the Securities and Futures Ordinance (the “SFO”)) as recorded in the
register required to be kept by the Company under Section 352 of the SFO or as
otherwise notified to the Company and The Stock Exchange of Hong Kong Limited
(the “Stock Exchange”) pursuant to the Model Code for Securities Transactions by
Directors of Listed Companies (the “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
Mr. Patrizio Bertelli
2,046,470,760
(Notes 1 and 2)
2,046,470,760
(Notes 1 and 3)
Interest of Controlled
corporation
Interest of Controlled
corporation
80%
80%
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PRADA Group Annual Report 2020 - Directors’ Report Notes:
1. Prada Holding S.p.A. owns approximately 80% of the issued capital in the
Company and is therefore the holding company of the Company.
2. Ms. Miuccia Prada Bianchi, owns indirectly through Ludo S.p.A. (formerly known
as Ludo S.r.l.), 53.8% (comprised of 438,460 ordinary shares and 100,000
preference shares) of the capital in Bellatrix S.p.A., which in turn owns 65%
(comprised of 1,650 ordinary shares and 300 preference shares) of the capital
in Prada Holding S.p.A.. Ms. Miuccia Prada Bianchi is therefore deemed under
the SFO to be interested in all the shares registered in the name of Prada
Holding S.p.A. Ms. Miuccia Prada Bianchi is also a director of Prada Holding
S.p.A., Bellatrix S.p.A. and Ludo S.p.A..
3. Mr. Patrizio Ber telli owns, indirectly through PA BE 1 S.r.l., 35% (comprised of
750 ordinary shares and 300 preference shares) of the capital in Prada Holding
S.p.A.. Mr. Patrizio Ber telli is therefore deemed under the SFO to be interested
in all the shares registered in the name of Prada Holding S.p.A.. Mr. Patrizio
Ber telli is also a director of PA BE 1 S.r.l..
The interests of Ms. Miuccia Prada Bianchi and Mr. Patrizio Ber telli in the shares
of the Company as at December 31, 2020 are summarized in the following char t:
Patrizio Bertelli
100%
Miuccia Prada
Bianchi
100%
Ludo S.p.A.
53.8%
PA BE 1 S.r.l.
Bellatrix S.p.A.
35%
65%
Prada Holding S.p.A.
80%
PRADA S.p.A.
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PRADA Group Annual Report 2020 - Directors’ Report (b) Long positions in shares and underlying shares of associated corporations:
Name of Director
Name of associated corporations
Class of shares
Number
of shares
Ms. Miuccia Prada Bianchi
Prada Holding S.p.A.
Ordinary Shares
1,650
Prada Holding S.p.A.
Prapar Corporation
Preference Shares 300
Common Shares
50
1
MFH Munich Fashion Holding GmbH
Registered Share
Bellatrix S.p.A.
Bellatrix S.p.A.
Ludo S.p.A.
Ordinary Shares
438,460
Preference Shares 100,000
Class A shares
Class B shares
5,066,000
4,965,100
Nature
of Interests
Controlled
Corporation
As above
As above
As above
As above
As above
Approximate
percentage
of Interests
68.75%
50%
100%
100%
49.83%
83.34%
Beneficial Owner
100%
C.I.D. – Cosmetics International
Distribution Corp.
Common Shares
1
Controlled
Corporation
PH-RE LLC
Orexis S.r.l.
Capital
Contribution (JPY)
1,000,000
As above
Participation
quota (Euro)
1
As above
100%
100%
100%
Mr. Patrizio Bertelli
Prada Holding S.p.A.
Ordinary Shares
750
Controlled
Corporation
31.25%
Prada Holding S.p.A.
Prapar Corporation
Preference Shares 300
Common Shares
50
MFH Munich Fashion Holding GmbH
Registered Share
As above
As above
As above
As above
1
1
Common Shares
Capital
Contribution (JPY)
1,000,000
As above
Participation
quota (Euro)
1
As above
50%
100%
100%
100%
100%
100%
C.I.D. – Cosmetics International
Distribution Corp.
PH-RE LLC
Orexis S.r.l.
Save as disclosed above, as at December 31, 2020, none of the Directors of the
Company or their associates held any interest or shor t position in the shares,
underlying shares and/or debentures of the Company or any of its associated
corporations (within the meaning of Par t 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.
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PRADA Group Annual Report 2020 - Directors’ Report SUBSTANTIAL SHAREHOLDERS’
INTERESTS AND SHORT POSITIONS
IN
SECURITIES
As at December 31, 2020, other than the interests of the Directors of the Company
as disclosed above, the following persons held interests or shor t positions in the
shares or underlying shares of the Company which were recorded in the register
required to be kept by the Company under Section 336 of the SFO:
Name of Shareholder
Capacity
Number of Shares
Approximate percentage
of issued capital
Long Positions
Prada Holding S.p.A.
Bellatrix S.p.A.
Ludo S.p.A.
PA BE 1 S.r.l.
Legal and beneficial
owner
Interest of controlled
corporation
Interest of controlled
corporation
Interest of controlled
corporation
2,046,470,760
2,046,470,760
2,046,470,760
2,046,470,760
80%
80%
80%
80%
Invesco Advisor Inc.
Investment manager
137,700,330
5.38%
Note:
Prada Holding S.p.A. owns approximately 80% of the issued capital in the Company.
As Ludo S.p.A. owns 53.8% of Bellatrix S.p.A. which in turn owns 65% of Prada
Holding S.p.A. and PA BE 1 S.r.l. owns 35% of Prada Holding S.p.A., Bellatrix
S.p.A., Ludo S.p.A. and PA BE 1 S.r.l. are all deemed to be interested in the
2,046,470,760 shares of the Company held by Prada Holding S.p.A..
SHARE CAPITAL
Details of the share capital of the Company during the Reviewed Period are set out
in both the Consolidated Statement of Changes in Shareholders’ Equity and Note
30 to the Consolidated financial statements.
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PRADA Group Annual Report 2020 - Directors’ Report MATERIAL INTERESTS OF DIRECTORS AND ENTITIES CONNECTED WITH A
DIRECTOR IN TRANSACTIONS, ARRANGEMENTS AND CONTRACTS
Save for those contracts disclosed under the section on Continuing Connected
Transactions below and in Consolidated financial statements Note 40, Transactions
with Related Par ties, and Note 39, Remuneration of the Board of Directors, in the
opinion of the Directors, no transaction, arrangement or contract of significance to
the Company or the Group subsists as at December 31, 2020, or in fact subsisted
during the Reviewed Period in relation to the Company or the Group’s business in
which the direct or indirect interest of a Director or an entity connected with a
Director is or was material.
During the Reviewed Period, there were no arrangements to which the Company
or any of the Company’s subsidiaries or holding companies or a subsidiary of any
of the Company’s holding companies is a par ty, these being arrangements whose
objects are, or one of whose objects is, to enable the Directors of the Company
to acquire benefits by means of the acquisition of shares in, or debentures of, the
Company.
ISSUANCE OF DEBT SECURITIES
Neither the Company nor any of its subsidiaries issued any debt securities during
the Reviewed Period.
CONTINUING CONNECTED TRANSACTIONS
During the Reviewed Period, the Group had the following non-exempt continuing
connected transactions, details of which were disclosed
in the Company’s
announcements dated July 15, 2015, May 26, 2017, December 1, 2017, March 1,
2020 and November 20, 2020 respectively:
(a) L una Rossa sponsorship agreement
On December 1, 2017 the Company has entered into a sponsorship agreement
with Luna Rossa Challenge S.r.l., a company which is indirectly controlled by Mr.
Patrizio Ber telli, who is a Chief Executive Officer, an Executive Director and a
substantial shareholder of the Company, for the par ticipation of the Luna Rossa
sailing team in the XXXVI edition of the America’s Cup, which will be held in
New Zealand in 2021. The payment to be made by the Company to Luna Rossa
Challenge S.r.l. according to the terms of the new sponsorship agreement will
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PRADA Group Annual Report 2020 - Directors’ Report be due over the period from January 2018 to June 2021, as disclosed in the
Company’s announcement dated December 1, 2017 (the “Luna Rossa Sponsorship
Agreement”).
The annual cap of the sponsorship contribution paid by the Company to Luna Rossa
Challenge S.r.l. under the Luna Rossa Sponsorship Agreement for the Reviewed
Period was Euro 25 million.
As disclosed in the Company’s announcement dated November 20, 2020, the Luna
Rossa Sponsorship Agreement was amended to grant an additional sponsorship
contribution of Euro 10 million to be paid to Luna Rossa Challenge S.r.l. (the
“Amended Sponsorship Agreement”) for the period from November 20, 2020 to
June 30, 2021.
The annual cap of the sponsorship contribution paid by the Company to Luna Rossa
Challenge S.r.l. under the Luna Rossa Sponsorship Agreement as amended by the
Amended Sponsorship Agreement for the Reviewed Period was Euro 35 million.
(b) C OR 36 Sponsorship Agreement
As disclosed in the Company’s announcement dated March 1, 2020, the Company
has entered into a sponsorship agreement (“COR36 Sponsorship Agreement”)
with Challenger of Record 36 S.r.l. (“COR36”), a company wholly owned by Luna
Rossa Challenge S.r.l., thus indirectly controlled by Mr. Patrizio Ber telli, who is
a Chief Executive Officer, an Executive Director and a substantial shareholder of
the Company, for the sponsorship of the management and organization by COR36
of the preliminary regattas, the related event, and the selection of the challenger
to the 36 th edition of the America’s Cup, named “Prada Cup”. The term of COR36
Sponsorship Agreement is from March 1, 2020 to June 30, 2021.
The annual cap of this sponsorship contribution paid by the Company to COR36
under the COR36 Sponsorship Agreement for the Reviewed Period was Euro 23
million.
(c) L ease Agreement and Guarantee for Prada Aoyama Building in Japan
On July 15, 2015, PH-RE LLC purchased a building in Minami-Aoyama, Tokyo,
Japan (“the Aoyama Building”). Prada Japan Co. Ltd (“Prada Japan”), a wholly
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PRADA Group Annual Report 2020 - Directors’ Report owned subsidiary of the Company, has been leasing the Aoyama Building for use
as its flagship store in Tokyo since 2004.
On May 25, 2015, Prada Japan, as lessee, and the former lessor, renewed the lease
of the Aoyama Building by entering into a lease agreement for a term of 20 years
(the “Lease Agreement”). On the same date, the Company granted a guarantee in
favour of the former lessor to guarantee the punctual per formance by Prada Japan
of all its obligations under the Lease Agreement (the “Guarantee”).
As a result of purchasing the Aoyama Building, PH-RE LLC, a connected person
of the Company, has become the lessor under the Lease Agreement and the
beneficiary of the Guarantee granted by the Company in favour of the former
lessor. Accordingly, the Lease Agreement and the Guarantee, which were continuing
transactions of the Group, have become continuing connected transactions of the
Group under Chapter 14A of the Listing Rules.
On April 28, 2017 PH-RE LLC, which was previously a wholly owned subsidiary
of PA BE 1 S.r.l., became a wholly owned subsidiary of Prada Holding S.p.A., a
substantial shareholder of the Company. Both Ms. Miuccia Prada Bianchi and Mr.
Patrizio Ber telli - Chief Executive Officers, Executive Directors and substantial
shareholders (as defined in the Listing Rules) of the Company - are indirect
shareholders of Prada Holding S.p.A..
As a consequence of this transaction, the Lease Agreement and the Guarantee
remained as subsequent continuing connected transaction of the Group with no
variation of their terms.
The annual cap for the Reviewed Period for the rent paid to PH-RE LLC, or
accrued by the Company in accordance with applicable accounting rules, under
the Lease Agreement and the Guarantee was JPY 2,040,703,000, as disclosed in
the Company’s announcement dated May 26, 2017.
(d) L ease Agreement and Guarantee for Miu Miu Aoyama Building in Japan
On May 26, 2017, PH-RE LLC, formerly known as PABE-RE LLC, purchased a
building in Minami-Aoyama, Tokyo, Japan (“the MM Aoyama Building”). Prada
Japan has been leasing the MM Aoyama Building for use as flagship store for the
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PRADA Group Annual Report 2020 - Directors’ Report Miu Miu brand in Tokyo since 2015 under a lease agreement entered into with the
former owner of the MM Aoyama Building (the “MM Lease Agreement”). In the
context of the MM Lease Agreement, the Company granted a guarantee in favour
of the former owner to secure the punctual per formance by Prada Japan of all its
obligations under the MM Lease Agreement (the “MM Guarantee”).
As a result of purchasing the MM Aoyama Building, PH-RE LLC has become the
lessor under the MM Lease Agreement and the beneficiary of the MM Guarantee
granted by the Company in favour of the former owner.
PH-RE LLC is a wholly owned subsidiary of Prada Holding S.p.A., a substantial
shareholder (as defined in the Listing Rules) of the Company. Both Ms. Miuccia
Prada Bianchi and Mr. Patrizio Ber telli - Chief Executive Officers, Executive
Directors and substantial shareholders (as defined in the Listing Rules) of the
Company - are indirect shareholders of Prada Holding S.p.A..
In this context, the MM Lease Agreement and the MM Guarantee, which were
continuing transactions of the Group, have become subsequent continuing
connected transactions of the Group under Chapter 14A of the Listing Rules.
The annual cap for the Reviewed Period for the rent paid to PH-RE LLC, or accrued
by the Company in accordance with applicable accounting rules, under the MM
Lease Agreement and the MM Guarantee was JPY 630,000,000.
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PRADA Group Annual Report 2020 - Directors’ Report Below is a table setting out the aggregate value for each of the non-exempt
continuing connected transactions for the Reviewed Period:
Continuing
Connected
Transaction
(“CCT”)
Accounting adjustment
to the CCT following
the application of “IAS 1
Presentation of Financial
Statements”
Impact on the profit or
loss for the year ended
December 31, 2020
(a) Luna Rossa Sponsorship Agreement as amended in 2020
Euro million
Euro million
Euro million
Sponsorship contribution
26.3
(5)
21.3
(b) COR 36 Sponsorship Agreement
Sponsorship contribution
Euro million
Euro million
Euro million
18
(6.5)
11.5
(c) Lease Agreement and Guarantee for Prada Aoyama Building
Depreciation of the Right of Use assets and Interest expenses on
Lease Liability
Japanese Yen
million
Japanese Yen
million
Japanese Yen
million
2,040.7
114.7
2,155.4
(d) Lease Agreement and Guarantee for Miu Miu Aoyama Building
Depreciation of the Right of Use assets and Interest expenses on
Lease Liability
Japanese Yen
million
Japanese Yen
million
Japanese Yen
million
630
(7)
623
The Independent Non-Executive Directors have reviewed the above non-exempt
continuing connected transactions and confirmed that these have been entered
into:
(i)
in t he ordinary and usual course of business of the Group;
(ii) eit her on normal commercial terms or better; and
(iii) in ac cordance with the relevant agreement governing them on terms that are
considered fair and reasonable and in the interests of the shareholders of the
Company as a whole.
The Directors of the Company have engaged the auditors to review the above
non-exempt continuing connected transactions. The auditors have, based on the
work per formed, provided a letter to the Directors of the Company (with a copy
provided to the Stock Exchange) to confirm that nothing has come to their attention
that causes them to believe that the continuing connected transactions:
(i) ha ve not been approved by the Company’s Board of Directors;
(ii) w ere not, in all material respects, in accordance with the pricing policies of
the Group if the transaction involved the provision of goods or services by the
Group;
(iii) w ere not entered into, in all material respects, in accordance with the terms
of the relevant agreements governing such transactions; and
(iv) ha ve exceeded the relevant annual
limits set out
in the Company’s
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PRADA Group Annual Report 2020 - Directors’ Report announcements dated July 15, 2015, May 26, 2017, December 1, 2017, March
1, 2020 and November 20, 2020 as applicable.
Save as disclosed above, none of the transactions disclosed as related par ty
transaction in note 40 to the consolidated financial statements is a connected
transaction or continuing connected transaction which is subject to the repor ting or
disclosure requirements under the Listing Rules. The Company has complied with
the disclosure requirements governing “connected transactions” or “continuing
connected transactions” in accordance with Chapter 14A of the Listing Rules.
CONNECTED TRANSACTION
On December 29, 2020, the Company disposed of a proper ty at Via Della Spiga,
Milan (previously operated as a Prada store) to Orexis S.r.l., a company wholly
owned by Prada Holding S.p.A. which holds approximately 80% of the total issued
share capital of the Company at a consideration of Euro 40 million based on a
valuation repor t by an independent real estate exper t.
BANK LOANS AND OTHER BORROWINGS
Details of the Group’s bank loans and other borrowings as at December 31, 2020
are set out in Notes 21 and 26 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 less
than 30% of the total sales or purchases and the Directors do not consider any one
customer or supplier to have an influence on the Group.
RETIREMENT BENEFIT SCHEMES
Details of the retirement benefit schemes of the Group are set out in Note 27 to
the Consolidated financial statements.
MODEL CODE FOR SECURITIES TRANSACTIONS
The Company has adopted the Model Code. Having made specific enquiries to all
Directors, all have confirmed that they have complied with the standard set out in
the Model Code throughout the Reviewed Period.
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PRADA Group Annual Report 2020 - Directors’ Report EVENTS AF TER THE REPORTING PERIOD – IF APPLICABLE
Details of significant events occurring after the repor ting date – if any - are set out
in Note 44 to the Consolidated financial statements.
COMMITMENTS AND CONTINGENCIES
Details of capital commitments and contingent liabilities of the Group as at
December 31, 2020 are set out in Note 28 to the Consolidated financial statements.
SUFFICIENCY OF PUBLIC FLOAT
At the time the Company was listed, the Stock Exchange granted a waiver from
strict compliance with Rule 8.08(1) of the Listing Rules (the “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 available to the
Company and within the knowledge of the Directors, the Company has maintained
an amount of public float as approved by the Stock Exchange and as permitted
under the Listing Rules as at the date of this annual repor t.
DIRECTORS’ RESPONSIBILITIES FOR THE CONSOLIDATED FINANCIAL
STATEMENTS
The Directors are responsible for the preparation of the Consolidated financial
statements for the year ended December 31, 2020, with a view to ensuring such
Consolidated financial statements give a true and fair view of the state of affairs
of the Group. In preparing these Consolidated financial statements, the Directors
have selected suitable accounting policies, made judgments and estimates that
are prudent and reasonable, and prepared the Consolidated financial statements
on a going concern basis and in accordance with International Financial Repor ting
Standards issued by the International Accounting Standards Board as adopted by
the European Union. The Directors are responsible for keeping proper accounting
records for safeguarding the assets of the Company and the Group.
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PRADA Group Annual Report 2020 - Directors’ Report AUDITOR
The Consolidated financial statements and the Separate financial statements of
the Company are audited by Deloitte & Touche S.p.A.. Under Italian company law,
the auditor is appointed and its remuneration is resolved every three years by the
shareholders of the Company in a general meeting, on the basis of a proposal from
the Board of statutory auditors.
On April 13, 2012, the Stock Exchange granted to the Company a waiver from strict
compliance with Rule 13.88 of the Listing Rules, which requires the appointment
of an auditor at each annual general meeting to hold office until the next annual
general meeting. As a consequence, the Company’s auditor is appointed and its
remuneration determined every three years at the shareholders’ general meeting
of the Company under the applicable Italian laws.
On March 15, 2019, the Board resolved, in accordance with the recommendations
received from the Board of statutory auditors and the Audit Committee, to propose
a resolution at the shareholders’ general meeting of the Company on April 30,
2019 (the “2019 AGM”) to reappoint Deloitte & Touche S.p.A. as the auditor of the
Company for a term of three financial years and to fix its remuneration.
At the 2019 AGM, it was resolved to appoint Deloitte & Touche S.p.A. as the auditor
of the Company for a term of three financial years. Accordingly, the auditor ’s
mandate will expire at the shareholders’ general meeting to be convened for the
approval of the financial statements of the Company for the year ending December
31, 2021.
By order of the Board
Carlo Mazzi
Chairman
March 10, 2021
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C O R P O R A T E G O V E R N A N C E
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PRADA Group Annual Report 2020 - Corporate Governance CORPORATE GOVERNANCE PRACTICES
The Company is seamlessly engaged in maintaining a high standard of corporate
governance practices as par t of its commitment to effective corporate governance.
The corporate governance model adopted by the Company consists of a set of
rules and standards aimed toward establishing efficient and transparent operations
within the Group, to protect the rights of the Company’s shareholders, to enhance
shareholder value and to uphold the Group’s credibility and reputation. The
corporate governance model adopted by the Company is in compliance with the
applicable regulations in Italy, where the Company has its legal seat, as well as the
principles of the Corporate Governance Code (the “Code”) contained in Appendix
14 of the Listing Rules.
COMPLIANCE WITH THE CODE
The Board has reviewed the Company’s corporate governance practices and is
satisfied that such practices have complied with the code provisions set out in the
Code, for the entire Reviewed Period (i.e. the year ended December 31, 2020).
This Corporate Governance repor t summarizes the way in which the Company has
applied the principles and implemented the code provisions contained in the Code
for the duration of the Reviewed Period.
DIRECTORS’ SECURITIES TRANSACTIONS
The Company has adopted written procedures governing Directors’ securities
transactions on terms no less exacting than the required standard set out in the
Model Code. Specific written acknowledgments have been obtained from each
Director to confirm his/her compliance with the required standard set out in the
Model Code and the Company’s relevant procedures regarding directors’ securities
transactions for the duration of the Reviewed Period. There were no incidents of
non-compliance during the Reviewed Period.
The Company has also adopted written procedures governing securities transactions
carried out by the relevant employees who are likely to possess inside information
in relation to the Company and its securities. The terms of these procedures are
no less exacting than the standard set out in the Model Code.
Directors’ interests as at December 31, 2020, in the shares of the Company and
its associated corporations (within the meaning of Par t XV of the SFO) are set out
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PRADA Group Annual Report 2020 - Corporate Governance in the Directors’ Repor t.
BOARD OF DIRECTORS
A. BO ARD COMPOSITION
The Board is currently composed of nine Directors, of which four are Executive
Directors, one is Non-Executive Director and four are Independent Non-Executive
Directors. All Directors have distinguished themselves in their field of exper tise
and have advised the Board in the area of their respective specialty, where this is
relevant to the Group’s business activities and strategic development. Biographical
details of the Directors and their relationships, where applicable, are set out in the
Directors and Senior Management section of this annual repor t. The Company has
maintained both on its own website and on the website of the Stock Exchange an
updated list of its Directors, identifying their respective roles and functions, also
specifying if they are an Independent Non-Executive Director.
B. BO ARD MEETINGS
During the Reviewed Period, the Board held six meetings to discuss the Group’s
overall corporate strategic direction and objectives, assess its operational and
financial per formance (including the annual budget, as well as the annual and
interim results) and to approve connected transactions and the Group’s main
investments and corporate reorganization plans. The average attendance rate of
the Directors for these six meetings through electronic means was 88.9%.
Minutes of the Board meetings are kept by the Group Corporate Affairs Director
and Joint Company Secretary, Ms. Patrizia Albano. Minutes of the Board meetings
and all Board Committee meetings are available for inspection by any Director by
giving reasonable notice.
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PRADA Group Annual Report 2020 - Corporate Governance C. BO ARD AT TENDANCE
The details of attendance at Board meetings, Committee meetings and shareholders’
general meeting held during the Reviewed Period are set out in the following table:
Directors
Executive Directors
Mr. Carlo MAZZI
(Chairman)
Ms. Miuccia PRADA BIANCHI
(Chief Executive Officer)
Mr. Patrizio BERTELLI
(Chief Executive Officer)
Ms. Alessandra COZZANI
(Chief Financial Officer)
Non-Executive Director
Mr. Stefano SIMONTACCHI
Independent Non-Executive Directors
Mr. Gian Franco Oliviero MATTEI 1
Mr. Maurizio CEREDA 2
Mr. Giancarlo FORESTIERI 3
Mr. Sing Cheong LIU 4
Statutory Auditors
Mr. Antonino PARISI (Chairman)
Mr. Roberto SPADA
Mr. David TERRACINA
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Shareholders’
Meeting
6/6
2/6
6/6
6/6
5/6
6/6
6/6
6/6
5/6
6/6
6/6
5/6
2/2
1/1
7/7
7/7
7/7
2/2
2/2
1/1
1/1
1/1
0/1
0/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
Date(s) of Meeting
Mar18, 2020
Feb 18, 2020
Feb 20, 2020
Mar 18, 2020
May 26, 2020
Apr 22, 2020
Mar 4, 2020
Sep 24, 2020
Jun 22, 2020
Mar 17, 2020
Jul 29, 2020
Jul 9, 2020
Nov 19, 2020
Jul 29, 2020
Dec 21, 2020
Oct 12, 2020
Nov 18, 2020
Average Attendance Rate of Directors
88.9%
100%
100%
100%
77.8%
Notes:
1. Chairman of Audit Committee and Nomination Committee and member of Remuneration Committee
2. Chairman of Remuneration Committee and member of Audit Committee
3. Member of Audit Committee
4. Member of Nomination Committee
D. R OLES AND RESPONSIBILITIES
The Board is vested with full powers for the ordinary and extraordinary management
of the Company. The Board has the power to per form all acts it deems advisable
for the successful implementation and attainment of the Company’s corporate
purposes, except for those acts reserved by laws or by the By-laws for resolution at
a shareholders’ general meeting. In par ticular, the Board is responsible for setting
up the overall strategy as well as reviewing the operation and financial per formance
of the Company and the Group. As a consequence, the Board reserves for its
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PRADA Group Annual Report 2020 - Corporate Governance own consideration and decision all matters concerning the overall Group strategy
including the sustainability strategy, the Group’s strategic objectives, annual
budgets, as well as annual and interim results, approval of major transactions,
connected transactions (including major acquisitions and disposals) and any other
significant operational and financial matters. The Board is also responsible for
evaluating the effectiveness of the risk management and internal control systems
on an ongoing basis.
During the Reviewed Period, all Board members have been provided with monthly
updates prepared by the Executive Directors with the suppor t of the management
in order to give a balanced and comprehensive assessment of the per formance,
position and prospects of both the Company and the Group, in sufficient detail
to enable the Board as a whole and each Director to discharge his/her duties. In
addition, due to the uncer tainty at a worldwide level created by the surge of the
Covid-19 pandemic, the meetings of the Board held during the Reviewed Period
devoted additional time to discuss the actual situation of the business as well as
the measures adopted by the Company and the Group to boost its business.
The Executive Directors are responsible for the day-to-day management of the
Company and to make operational and business decisions within the control and
delegation framework of the Company.
The types of decisions delegated by the Board to the management include:
― the preparation of annual and interim results for the approval of the Board
prior to publication;
― execution of business strategy and other initiatives adopted by the Board;
― monitoring of operating budgets adopted by the Board;
― designing, implementing and monitoring the risk management and the internal
controls systems; and
― compliance with relevant statutory requirements, rules and regulations.
E. NON -EXECUTIVE DIRECTORS
The Non-Executive Directors, including the Independent Non-Executive Directors,
provide the Company with diversified skills, exper tise, qualifications as well as
varied backgrounds and perspectives. They par ticipate in the Board and Board
Committees meetings to bring independent and objective opinions, advice and
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PRADA Group Annual Report 2020 - Corporate Governance judgment on impor tant issues relating to the Company’s strategy, policy, financial
per formance, and take the lead on matters where potential conflicts of interests
arise. They also attend the shareholders’ general meetings of the Company to
understand the views of the shareholders. They make a positive contribution
to the development of the Company’s strategy and policy through independent,
constructive and informed comments.
F.
IND EPENDENT NON-EXECUTIVE DIRECTORS
The independence of the Independent Non-Executive Directors has been assessed
in accordance with the applicable Listing Rules. Each Independent Non-Executive
Director meets the independence guidelines set out in Rule 3.13 of the Listing Rules
and provided the Company with the annual confirmation as to his independence.
The independence of the Independent Non-Executive Directors was fur ther
confirmed by the review of the Nomination Committee made on February 26,
2021. None of the Independent Non-Executive Directors of the Company has any
business or financial interest in the Company or its subsidiaries.
G. LIABILIT Y INSURANCE FOR THE DIRECTORS
The Company has arranged appropriate liability insurance to indemnify its Directors
for their liabilities arising out of all corporate activities. The insurance coverage is
reviewed on an annual basis.
H. D IRECTORS’ TRAINING
Each Director, after his/her appointment, is provided with a comprehensive, formal
and tailored induction program to ensure that he/she has a proper understanding
of the key areas of business operations and practices of the Company, as well as
his/her responsibilities under the relevant laws, rules and regulations.
The Directors (namely, Mr. Carlo Mazzi, Ms. Miuccia Prada Bianchi, Mr. Patrizio
Ber telli, Ms. Alessandra Cozzani, Mr. Stefano Simontacchi, Mr. Gian Franco Oliviero
Mattei, Mr. Giancarlo Forestieri, Mr. Sing Cheong Liu and Mr. Maurizio Cereda)
have par ticipated in continuous professional training to develop and refresh their
knowledge and skills during the Reviewed Period, through for example, receiving
regular updates on changes to and developments of the Group’s business and on
the latest development of the laws, rules and/or regulations relating to Directors’
duties and responsibilities. These initiatives are aimed at ensuring the Directors’
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PRADA Group Annual Report 2020 - Corporate Governance awareness of the latest corporate governance practices and that their contribution
to the Board remains informed and relevant.
Directors are requested to provide records of the continuous training they have
received during the Reviewed Period to the Group Corporate Affairs Director and
Joint Company Secretary, Ms. Patrizia Albano.
CHAIRMAN AND CHIEF EXECUTIVE OFFICERS
The Chairman is Mr. Carlo Mazzi and the Chief Executive Officers are Ms. Miuccia
Prada Bianchi and Mr. Patrizio Ber telli. The role of the Chairman is separate from
that of the Chief Executive Officers. The Chairman is vested with the power to
represent the Company and is responsible for ensuring that the Board is functioning
properly and adhering to good corporate governance practices and procedures. The
Chief Executive Officers, suppor ted by the other Executive Directors and senior
management, are responsible for managing the Company’s business, including the
implementation of major strategies and other initiatives adopted by the Board.
The Chief Executive Officers are husband and wife.
APPOINTMENT OF DIRECTORS
At the shareholders’ general meeting of the Company held on April 27, 2018
(“2018 AGM”), the Board (including the Non-Executive Directors) was appointed
for a term of three financial years. The mandate of all the current Directors will
lapse on the date of the for thcoming shareholders’ general meeting to be called to
approve the financial statements of the Company for the Reviewed Period.
Under the Company’s By-laws, the Directors may be re-appointed.
CORPORATE GOVERNANCE FUNCTIONS OF THE BOARD
The Board is responsible for determining and supervising the application of the
Company’s appropriate corporate governance policies and ensuring its compliance
with the provisions of the Code. The Board’s role in this regard is:
(i)
t o develop and review the Company’s policies and practices on corporate
governance;
(ii)
t o review and monitor the training and continuous professional development
of directors and senior management;
(iii) t o review and monitor the Company’s policies and practices regarding
compliance with legal and regulatory requirements;
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PRADA Group Annual Report 2020 - Corporate Governance (iv) t o develop, review and monitor the Code of Ethics, the Organisation,
Management and Control Model (adopted pursuant to Italian Legislative
Decree no. 231 of June 8, 2001) and the Company’s procedures applicable to
employees and directors;
(v)
t o review the Environmental, Social and Governance (“ESG”) matters;
(vi) t o review the Company’s compliance with the Code and disclosure of such in
the Corporate Governance repor t; and
(vii) t o per form any other corporate governance duties and functions set out
by the Listing Rules or other applicable rules, for which the Board shall be
responsible.
During the Reviewed Period, the Board considered the following corporate
governance matters:
(i)
r eviewed and approved connected transactions of the Company;
(ii) r eviewed the level of compliance with the Code;
(iii) r eviewed the effectiveness of the internal control and risk management
systems of the Company through the Internal Control Depar tment and the
Audit Committee;
(iv) r eviewed and approved the corporate social responsibility repor t; and
(v) appr oved the Group’s main transactions and corporate reorganization plans.
BOARD COMMIT TEES
The Board has established the Audit Committee, the Remuneration Committee
and the Nomination Committee, each chaired by an Independent Non-Executive
Director. Each of the Committees’ terms of reference is available on both the
website of the Company and the Stock Exchange. The terms of reference in respect
of each Committee are of no less exacting than those terms set out in the Code.
In addition, the Board has established a supervisory body under the Italian
Legislative Decree no. 231 of June 8, 2001.
A. A UDIT COMMIT TEE
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 possesses related financial management exper tise
to discharge the responsibility of the Audit Committee. The membership of the
Audit Committee consists of three Independent Non-Executive Directors, namely,
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PRADA Group Annual Report 2020 - Corporate Governance Mr. Gian Franco Oliviero Mattei (Chairman), Mr. Giancarlo Forestieri and Mr.
Maurizio Cereda. The primary duties of the Audit Committee are to assist the
Board in providing an independent view of the effectiveness of the Company’s
financial repor ting process and its internal control and risk management systems, to
oversee the external audit process, the internal audit process, the implementation
of the Company’s risk management functions and to per form any other duties and
responsibilities as are assigned to it by the Board.
During the Reviewed Period, the Audit Committee held seven meetings (with an
attendance rate of 100%) mainly to review with senior management, the Group’s
internal and external auditor and the board of statutory auditors, the significant
internal and external audit findings and financial matters as required under the
Audit Committee’s terms of reference and make relevant recommendations to the
Board. The Audit Committee’s review covered the audit plan for the year 2020,
the findings of both the internal and the external auditors, internal controls, risk
assessment, annual review of the continuing connected transactions of the Group
for 2019, tax and legal updates and the financial repor ting matters (including the
annual results for the year ended December 31, 2019 and the interim financial
results as at June 30, 2020), before recommending them to the Board for approval.
The Audit Committee has also held one meeting on March 8, 2021, to review the
Group results for the Reviewed Period, before recommending it to the Board for
approval.
AUDITOR’S COMPENSATION
The total fees and expenses accrued in favor of Deloitte & Touche S.p.A. and its
network for the audit of the financial statements for the Reviewed Period and
for the year ended December 31, 2019, together with non-audit services, are
illustrated below (amounts in thousands of Euro):
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PRADA Group Annual Report 2020 - Corporate Governance Type of service
Audit Firm
Provided to
Audit services
Audit services
Audit services
Deloitte & Touche spa
PRADA spa
Deloitte & Touche spa
Subsidiaries
Deloitte Network
Subsidiaries
Total audit fees to Deloitte Network
Other advisory services
Other advisory services
Deloitte & Touche spa
PRADA spa
Deloitte Network
Subsidiaries
Total non-audit fees to Deloitte Network
twelve months
ended
December 31
2020
twelve months
ended
December 31
2019
450
106
1,066
1,622
31
111
142
500
137
1,166
1,803
214
83
297
Total compensation to Deloitte Network
1,764
2,100
B. REMUNERATION COMMIT TEE
The Company has established a Remuneration Committee in compliance with
the Code. The primary duties of the Remuneration Committee are to make
recommendations to the Board on the Company’s policy and structure for the
remuneration package of Directors and senior management and the establishment
of a formal and transparent procedure for developing policies on such remuneration.
The recommendations of the Remuneration Committee are then put forward to
the Board for consideration and adoption, where appropriate. The Remuneration
Committee consists of two Independent Non-Executive Directors, Mr. Maurizio
Cereda (Chairman), Mr. Gian Franco Oliviero Mattei and the Chairman of the
Board, Mr. Carlo Mazzi.
During the Reviewed Period, the Remuneration Committee held two meetings (with
an attendance rate of 100%) to review and recommend the remuneration package
for cer tain executives with strategic responsibilities cer tain updates to the long
term incentive plan and to the management by objectives plans for executives.
REMUNERATION POLICY
The Group’s compensation policy is aimed at attracting, rewarding and protecting
its personnel, who are considered to be the key to the success of the Group’s
business. This ‘Human Capital’ is preserved with constant monitoring actions in
order to maintain engagement with the Company and an equal remuneration policy
with the internal practice and the market.
The Group’s remuneration policy is designed to reward and retain highly professional
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PRADA Group Annual Report 2020 - Corporate Governance staff and skilled managers, newly graduates and workers, with the cer tainty that
the creation of value is achieved in the medium and long term through constant
organizational learning and the consolidation of collaborators’ experiences and
skills.
The policy features a balanced combination of components that are fixed and
variable, direct and deferred, tailored to the position and professional qualifications,
and consistent with the needs of the various geographical areas.
The Group has an incentive system that links compensation with the annual
per formance of the Group itself, taking into account the Group’s objectives in net
sales, as well as the objectives of each depar tment.
The Group has adopted long term cash incentive plans for senior managers and
key managers for retention purposes, under which the benefit of a senior manager
or a key manager under the incentive plan would vest subject to the achievement
by the Group of one or more economic objectives and his/her presence within the
Group at the end of a three-year period.
O ther 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 following
the development of a seasonal collection. The aggregate basic remuneration of
the Board is approved by the shareholders in a general meeting. The additional
remuneration of each Director vested with special authorities (that is to the
Executive Directors and members of the Board’s Committees) is determined by the
Board - having considered the recommendation of the Remuneration Committee
and the opinion of the Board of Statutory Auditors.
Under the current compensation arrangements, the Executive Directors receive
compensation in the form of fees, salaries and other benefits, discretionary bonuses
and/or other incentives, including non-monetary benefits and other allowances
and contributions such as to retirement benefits schemes. The Non-Executive
Directors (including Independent Non-Executive Directors) receive compensation
in the form of fees and contributions to retirement benefits scheme, as the case
may be. No Director is allowed to approve his/her own remuneration.
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PRADA Group Annual Report 2020 - Corporate Governance C. NOMINATION COMMIT TEE
The Company has established a Nomination Committee in compliance with the
Code. The primary duties of the Nomination Committee are to determine the
policy for the nomination of Directors and to make recommendations to the
Board for consideration and, where appropriate, adoption on the structure, size
and composition of the Board itself, on the selection of new Directors and on
the succession plans for Directors. The Nomination Committee consists of two
Independent Non-Executive Directors, Mr. Gian Franco Oliviero Mattei (Chairman)
and Mr. Sing Cheong Liu and the Chairman of the Board of Directors, Mr. Carlo Mazzi.
During the Reviewed Period, the Nomination Committee held one meeting on
March 18, 2020 (with an attendance rate of 100%), to per form the annual review
of the independence of the Independent Non-Executive Directors of the Company
for the 2019 financial year.
The Nomination Committee held one meeting on February 26, 2021 to assess
and confirm the independence of the Independent Non-Executive Directors of
the Company for the Reviewed Period and to recommend to the shareholders the
structure of the Board and the election and appointment of nine directors in total
at the for thcoming shareholders’ general meeting.
In discharging its duties, the Nomination Committee has considered and proposed
to the Board for adoption, the Board diversity policy in 2013 and the Director
nomination policy in 2019.
With a view to achieving a sustainable and balanced development, the Company
has viewed diversity at the Board level as an essential element in suppor ting the
attainment of its strategic objectives and its development. The Board diversity
policy has been considered and adopted by the Board in September 2013 (the
“Board Diversity Policy”). According to the principles included in the Board
Diversity Policy, all Board appointments are based on meritocracy and candidates
are proposed and selected based on objective criteria, with due regard for the
benefits of diversity within the Board. Diversity in this sense encompasses a wide
range of factors, including but not limited to gender, age, cultural and educational
background, professional experience, skills and knowledge. The final selection
is based on merit and the contribution which the candidates can bring to the
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PRADA Group Annual Report 2020 - Corporate Governance
Board. The Nomination Committee has been delegated the overall responsibility
for implementing and monitoring the application of the Board Diversity Policy.
The Nomination Committee will discuss any revisions that may be required to
ensure the effectiveness of the board diversity policy and will recommend any such
revisions to the Board for its consideration and approval.
On March 15, 2019, the Board has adopted the nomination policy for Directorship
(“Director Nomination Policy”), which provides guidance in relation to the proposal
for the appointment or re-appointment of Directors or to fill casual vacancies
and sets out the processes and criteria for the nomination of a candidate for
directorship in the Company. The Company adopted the Director Nomination Policy
to ensure that all nominations of Board members are fair and transparent in order
to facilitate the constitution of the Board with a balance of skills, experience and
diversity of perspectives that is appropriate to the requirements of the Company’s
business.
The Director Nomination Policy contains a number of factors in assessing the
suitability of a proposed candidate which includes the high ethical character
and reputation for integrity, professional qualifications, skills, knowledge and
experience and diversity aspects under the Board Diversity Policy which may
be relevant to the Company’s business and strategic direction, commitment in
respect of available time, merit and potential contributions to the Board, and the
independence criteria under the Listing Rules, if the candidate is proposed to be
appointed as an independent non-executive director. The policy also lays down the
nomination process on appointment or re-appointment of directors.
The Nomination Committee will review and endorse the candidates proposed by
shareholders for new directorship or for re-election and make recommendations to
the Board for consideration. The Board will then make a decision as to whether the
nominated candidate shall be eligible to be appointed or re-appointed, as the case
may be, as a director of the Company and will in turn recommend to shareholders
to vote in favor of the relevant resolutions to be proposed at the shareholders
general meeting of the Company.
D. S UPERVISORY BODY
In compliance with Italian Legislative Decree no. 231 of June 8, 2001, the Company
has established a supervisory body whose primary duty is to ensure the functioning,
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PRADA Group Annual Report 2020 - Corporate Governance 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 Independent Non-Executive Directors, qualified auditors,
executives or external individuals. The supervisory body consists of Mr. David
Terracina (Chairman), Mr. Gian Franco Oliviero Mattei and Mr. Gianluca Andriani.
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 to supervise the Company on its compliance with the applicable
laws, regulations and the By-laws, as well as compliance with the principles of
proper management and, in par ticular, on the adequacy of the organizational,
administrative and accounting structure adopted by the Company and
its
functioning.
At the shareholders’ general meeting of the Company held on April 27, 2018,
the board of statutory auditors (including the alternate statutory auditors) was
appointed for a term of three financial years. The mandate of the current Board
of Statutory Auditors will expire at the for thcoming shareholders’ general meeting
to be called to approve the financial statements of the Company for the Reviewed
Period.
The board of statutory auditors of the Company consists of Mr. Antonino Parisi
(Chairman), Mr. Rober to Spada and Mr. David Terracina. The alternate statutory
auditors are Ms. Stefania Bettoni and Mr. Cristiano Proserpio.
DIRECTORS’ RESPONSIBILIT Y AND AUDITORS’ RESPONSIBILIT Y FOR
CONSOLIDATED FINANCIAL STATEMENTS
The Directors are responsible for preparing the Consolidated financial statements
of the Company for the year ended December 31, 2020 with a view to ensuring
such Consolidated financial statements give a true and fair view of the state of
affairs of the Group. In preparing these Consolidated financial statements, the
Directors have selected suitable accounting policies and made judgments and
estimates that are prudent and reasonable. The Consolidated financial statements
have been prepared on a going concern basis and in accordance with International
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PRADA Group Annual Report 2020 - Corporate Governance Financial Repor ting Standards issued by the International Accounting Standards
Board as adopted by the European Union.
In addition, the Board is generally satisfied of the adequacy of resources, staff
qualifications and experience, training program and budget of the Company’s
accounting and financial repor ting function during the Reviewed Period.
As regards the auditor of the Company, its responsibilities are stated in the auditor ’s
repor ts on the Consolidated financial statements.
INTERNAL CONTROL AND RISK MANAGEMENT
The Group’s internal control system has mainly been designed to safeguard the
assets of the Group itself, to maintain proper accounting standards, to ensure that
appropriate authority has been given for the per formance of acts by the Company,
and to comply with the relevant laws and regulations.
To better control its activities in moving toward the achievement of the established
objectives, the Group has adopted procedures to identify, evaluate and manage
the specific risks arising out of the continuous changes which affect the regulatory
framework and the Group’s operations.
The Board places great impor tance on maintaining a sound and effective system of
risk management and internal control to safeguard the shareholders’ investment
and the Company’s assets.
The Board has acknowledged its responsibility for the risk management and
internal control systems - including financial, operational and compliance controls
functions - and for the ongoing monitoring and review of their effectiveness. Such
systems are designed to manage rather than eliminate risks and are aimed at
providing reasonable and not absolute assurance against material misstatement
or loss.
The management with the suppor t of the Internal Audit Depar tment has been
granted by the Board with the responsibility on the process to identify, evaluate
and manage the risk factors that may affect the Group’s operations and to resolve
material internal control defects in the event such defects arise.
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PRADA Group Annual Report 2020 - Corporate Governance In par ticular, the measures adopted by the Group to contrast and contain the
impacts of the spread of the Covid-19 pandemic on the Company’s activities,
aimed at mitigating the health and safety risk at work, have been continuously
assessed during the Reviewed Period.
The Internal Audit Depar tment provides an independent review of the adequacy
and effectiveness of the internal control and the risk management systems. The
audit plan is discussed and agreed every year by the Audit Committee and then
submitted to the Board for approval. In addition to its agreed annual schedule of
work, the Internal Audit Depar tment conducts other special reviews as required.
The risk assessment documents are periodically updated by the Internal Audit
Depar tment - with the suppor t of the management - then reviewed by the Audit
Committee and submitted to the Board for the relevant approval.
The Board has received a specific confirmation from the relevant management
of the Company on the effectiveness of the Company’s risk management and the
internal control systems throughout the Reviewed Period.
During the Reviewed Period, no significant control failings or weaknesses were
identified.
The Board - also through the suppor t of the Audit Committee – has been reviewing
on an ongoing basis (with the same frequency as regular Board meetings were
held) and is generally satisfied that the internal control and the risk management
systems have functioned effectively and have been adequate for the Group as a
whole, throughout the Reviewed Period.
Moreover, the Board is generally satisfied of the adequacy of resources, staff
qualifications and experience, training program and budget of the Company’s
internal audit and risk management function during the Reviewed Period.
INSIDE INFORMATION
The Company handles and disseminates inside information in accordance with the
requirements of the Securities and Futures Ordinance and the Listing Rules.
With regard to the procedures and internal controls for the handling and
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PRADA Group Annual Report 2020 - Corporate Governance dissemination of inside information, the Company:
― has adopted cer tain policies to ensure potential inside information is captured
and confidentiality is maintained until timely and proper disclosure is made
(the “Policy on Inside Information”);
― has made available on the Company’s intranet the Policy on Inside Information
in order to ensure immediate access to it by the entire Group’s staff;
― has included in the procedures governing Directors and relevant employees a
prohibition on dealing in the Company’s shares whilst in possession of inside
information; and
― has authorized only the Executive Directors and few selected members of
management to act as spokespersons and respond to external enquiries.
In addition, the Board has established an Inside Information Committee, which
comprises the Chairman, the Chief Executive Officer, Mr. Patrizio Ber telli, and
the Chairman of the Audit Committee. The Inside Information Committee has been
delegated with the power to assess, if necessary, any potential inside information,
and to keep all other Directors timely informed about its decisions.
JOINT COMPANY SECRETARIES
The Company has appointed Ms. Patrizia Albano and Ms. Yuen Ying Kwai as
joint company secretaries. Given that the headquar ter of the Company is located
outside Hong Kong S.A.R., P.R.C. (“Hong Kong”) and the Company is incorporated
in Italy, the Company is of the view that it is in the best interests of the Company
and is of good corporate governance to maintain Ms. Patrizia Albano and Ms. Yuen
Ying Kwai as the joint company secretaries. During the Reviewed Period, each
of Ms. Patrizia Albano and Ms. Yuen Ying Kwai, respectively, under took over 15
hours of relevant professional training to update their skills and knowledge. Their
biographies are set out in the Directors and Senior Management section.
SHAREHOLDERS’ RIGHTS
A. C ONVENING OF THE SHAREHOLDERS’ GENERAL MEETING AT THE
SHAREHOLDERS’ REQUEST
Pursuant to Ar ticle 14.2 of the Company’s By-Laws, a shareholders’ general meeting
has to be called by the Board when requested by shareholders representing at least
one-twentieth of the Company’s share capital, provided that the request mentions
the item(s) to be discussed at the meeting. If there is an unjustified delay in calling
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PRADA Group Annual Report 2020 - Corporate Governance the meeting by the Board, action will be taken by the board of statutory auditors.
B. P UT TING FORWARD PROPOSALS AT SHAREHOLDERS’ GENERAL MEETING
Pursuant to Ar ticles 14.4 and 14.5 of the Company’s By-Laws, shareholders who,
individually or jointly, own or control at least one-for tieth of the Company’s share
capital may request in writing for additions to be made to the list of items on the
agenda, within ten days from the notice of call for a shareholders’ general meeting,
by setting out the proposed additions (five days in advance in the circumstances
indicated under the second paragraph of Ar ticle 14.4). The proposals should be
directed to the Group Corporate Affairs Director and Joint Company Secretary by
email at corporateaffairs@pradagroup.com.
C. MAKING AN ENQUIRY TO THE BOARD
Enquiries about matters to be put forward to the Board should be directed to
the Group Corporate Affairs Director and Joint Company Secretary Ms. Patrizia
Albano by email at corporateaffairs@pradagroup.com. The Company will not
normally deal with verbal or anonymous enquiries.
D. P ROCEDURES FOR SHAREHOLDERS’ TO PROPOSE A PERSON FOR ELECTION
AS DIRECTOR
The procedures for a shareholder to nominate a person for election as a Director
of the Company are set out in Ar ticles 19.3 and 19.4 of the Company’s By-laws,
details of which have been disclosed in the Company’s announcement dated March
30, 2012.
CONSTITUTIONAL DOCUMENTS
During the Reviewed Period, there was no change to the Company’s constitutional
document.
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PRADA Group Annual Report 2020 - Corporate Governance COMMUNICATION WITH SHAREHOLDERS
A. D IVIDEND POLICY
On March 15, 2019, the Board has formalized and adopted a Dividend Policy to set
out the framework that the Company has put in place in relation to dividend payout to
shareholders. The Company aims to provide its shareholders a sustainable dividend
stream, taking into account financial results, cash flow situation, working capital
requirements, capital expenditures, investment requirements, future operations
and earnings, business conditions and strategies, interests of shareholders and any
statutory or regulatory restrictions on payment of dividends including applicable
provisions under the Italian law and the Company’s By-laws.
The Board will review the Dividend Policy from time to time and may adopt changes
as appropriate, at the relevant time to ensure the effectiveness of the Dividend
Policy.
During the Reviewed Period, the Company did not distributed dividend for the
financial year 2019 as a conservative measure in the context of uncer tainty created
by the spread of the Covid-19 pandemic. Therefore, the whole net income of
the Company for the financial year 2019 amounting to Euro 249,027,388.00 was
allocated to the reserves of the Company.
B.
INVESTOR REL ATIONS AND COMMUNICATIONS
The Company endeavors to maintain a high level of transparency when communicating
with the shareholders and the financial community in general. The Company has
maintained regular dialogue and fair disclosure with institutional shareholders,
fund managers, research analysts and the finance media. Investor/analysts
briefings and one-on-one meetings, investor conferences and results briefings are
conducted on a regular basis in order to facilitate communication between the
Company, shareholders and the investment community. The Company strives to
ensure effective and timely dissemination of information to shareholders and the
investment community at all times and will regularly review the arrangements to
ensure its effectiveness.
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
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PRADA Group Annual Report 2020 - Corporate Governance available electronically and on a timely basis. This includes extensive information
about the Group’s per formance and activities via the annual repor t, interim
repor t, social responsibility repor t, press releases, presentations, announcements,
circulars to shareholders and notices of general meetings, etc.
C. SHAREHOLDERS’ MEETINGS
The Company strives to maintain an on-going dialogue with its shareholders.
Shareholders are encouraged to par ticipate in general meetings either in person or
through appointed proxies to attend and vote at meetings for and on their behalf
if they are unable to attend such meetings. The process of the Company’s general
meeting is monitored and reviewed on a regular basis.
The Company uses the shareholders’ general meeting as one of the main channels
for communicating with the shareholders and to ensure that shareholders’ views
are communicated to the Board. At the shareholders’ general meeting, each
substantially separate issue is proposed and considered by a separate resolution
(including the election of individual directors).
In order to mitigate the risks connected with the Covid-19 pandemic, a shareholders’
general meeting of the Company was held on May 26, 2020 exclusively by way of
electronic means and attended by an exclusive proxyholder of all shareholders
(Slaughter and May) (the “2020 AGM”). The Directors, including the Chairman of
the Board, the Chairman of the Board Committees, the Joint Company Secretaries,
the auditor of the Company, Deloitte & Touche S.p.A., the statutory auditors and
the scrutineer, attended the 2020 AGM.
Separate resolutions were proposed at the 2020 AGM relating to each issue and
the voting results of such resolutions were disclosed in the announcement of
the Company dated May 26, 2020. The number of votes cast in favour of each
resolution (and the corresponding percentage level) are set out below:
Brief summary of the Ordinary Resolutions passed at the 2020 AGM
1. To approve the Audited Separate Financial Statements which show a net income of Euro 249,027,388 and the Audited
Consolidated Financial Statements of the Company for year ended December 31, 2019 together with the Reports of
the Board of Directors, the Board of Statutory Auditors and the Independent Auditors
2. To approve the allocation of the net income of the Company, for the year ended December 31, 2019, as follows: (i)
Euro 51,176,480 to the extraordinary reserves of the Company, and (ii) Euro 197,850,908 to the retained earnings of
the Company
Number of Votes
cast in favour (%)
2,462,582,602
(99.986%)
2,462,935,296
(100%)
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PRADA Group Annual Report 2020 - Corporate Governance All resolutions put to the shareholders at the 2020 AGM were duly passed.
Computershare Hong Kong Investor Services Limited, the Company’s Hong Kong
share registrar, acted as scrutineer for the vote taking at the 2020 AGM.
D. C ORPORATE COMMUNICATIONS
In order to increase efficiency in communication with shareholders and to contribute
to environmental protection, the Company has made arrangements from September
2011 to ascer tain how its shareholders wish to receive corporate communications.
Shareholders have the right to choose the language, either in English or Chinese,
or both, and means of receipt of the corporate communications, in printed form
or by electronic means through the Company’s website at www.pradagroup.com.
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C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
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PRADA Group Annual Report 2020 - Consolidated Financial Statements CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(amounts in thousands of Euro)
Assets
Current assets
Cash and cash equivalents
Trade receivables, net
Inventories, net
Derivative financial instruments – current
Receivables from, and advance payments to, related parties - current
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Right of Use assets
Investments in equity instruments
Deferred tax assets
Other non-current assets
Receivables from, and advance payments to, related parties - non-current
Total non-current assets
Total Assets
Liabilities and Shareholders’ Equity
Current liabilities
Short-term lease liability
Short-term financial payables and bank overdraft
Payables to related parties – current
Trade payables
Tax payables
Derivative financial instruments - current
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term lease liability
Long-term financial payables
Long-term employee benefits
Provision for risks and charges
Deferred tax liabilities
Other non-current liabilities
Derivative financial instruments non-current
Payables to related parties – non-current
Total non-current liabilities
Total Liabilities
Share capital
Total other reserves
Translation reserve
Net income / (loss) for the period
Net Equity attributable to owners of the Group
Net Equity attributable to Non-controlling interests
Total Net Equity
Note
December 31
2020
December 31
2019
9
10
11
12
13
14
15
16
17
18
36
19
13
20
21
22
23
24
12
25
20
26
27
28
36
29
12
22
30
31
442,392
290,380
666,222
10,691
51,035
194,188
1,654,908
1,506,011
832,445
2,054,338
66,191
251,888
142,712
19,434
4,873,019
6,527,927
403,593
300,577
3,481
289,578
68,863
7,789
153,382
1,227,263
1,729,819
451,200
73,256
45,416
29,250
110,754
9,249
-
2,448,944
3,676,207
255,882
2,633,673
(3,359)
(54,139)
2,832,057
19,663
2,851,720
421,069
317,554
712,611
3,315
21,553
221,476
1,697,578
1,642,480
843,830
2,362,841
81,448
244,206
165,372
684
5,340,861
7,038,439
409,537
241,464
26,057
327,330
83,809
11,317
132,294
1,231,808
2,005,761
584,141
63,519
49,484
29,337
56,365
8,789
20,660
2,818,056
4,049,864
255,882
2,394,051
61,437
255,788
2,967,158
21,417
2,988,575
Total Liabilities and Total Net Equity
6,527,927
7,038,439
Net current assets
Total Assets less current Liabilities
427,645
5,300,664
465,770
5,806,631
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PRADA Group Annual Report 2020 - Consolidated Financial Statements CONSOLIDATED STATEMENT OF PROFIT OR LOSS
(amounts in thousands of Euro)
Note
Net revenues
Cost of goods sold
Gross margin
Operating expenses
EBIT
Interest and other financial income/(expenses), net
Interest expenses on Lease Liability
Dividends from investments
Total financial income/(expenses)
Income / (loss) before taxation
Taxation
Net income / (loss) for the period
Net income / (loss) - Non-controlling interests
Net income / (loss) - Group
Basic and diluted earnings / (losses) per share
(in Euro per share)
32
33
34
35
36
31
30
37
twelve months
ended
December 31
2020
%
on net
revenues
twelve months
ended
December 31
2019
2,422,739
(679,361)
100%
-28.0%
3,225,594
(905,982)
%
on net
revenues
100%
-28.1%
1,743,378
72.0%
2,319,612
71.9%
(1,723,317)
-71.1%
(2,012,833)
-62.4%
20,061
0.8%
306,779
(29,479)
(42,670)
277
(71,873)
-1.2%
-1.8%
0.0%
-3.0%
(25,174)
(48,980)
2,135
(72,019)
(51,812)
-2.1%
234,760
(2,556)
-0.1%
22,964
(54,368)
-2.2%
257,724
(229)
0.0%
1,936
(54,139)
-2.2%
255,788
(0.021)
0.100
9.5%
-0.8%
-1.5%
0.1%
-2.2%
7.3%
0.7%
8.0%
0.1%
7.9%
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141
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PRADA Group Annual Report 2020 - Consolidated Financial Statements CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(amounts in thousands of Euro)
twelve months ended
December 31
2020
twelve months ended
December 31
2019
Net income / (loss) for the period – Consolidated
(54,368)
257,724
A) Items recyclable to P&L:
Change in Translation reserve
Tax impact
Change in Translation reserve less tax impact
Change in Cash Flow Hedge reserve
Tax impact
Change in Cash Flow Hedge reserve less tax impact
B) Item not recyclable to P&L:
Change in Fair Value Investments in equity instruments reserve
Tax impact
Change in Fair Value Investments in equity instruments reserve less tax impact
Change in Actuarial reserve
Tax impact
Change in Actuarial reserve less tax impact
(66,321)
-
(66,321)
4,402
(1,727)
2,675
(15,206)
-
(15,206)
(4,676)
1,041
(3,635)
28,911
-
28,911
2,730
(579)
2,151
59
-
59
614
(344)
270
Consolidated comprehensive income / (loss) for the period
(136,855)
289,115
Comprehensive income / (loss) for the period - Non Controlling Interests
(1,754)
2,317
Comprehensive income / (loss) for the period - Group
(135,101)
286,798
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PRADA Group Annual Report 2020 - Consolidated Financial Statements CONSOLIDATED STATEMENT OF CASH FLOWS
(amounts in thousands of Euro)
Income / (loss) before taxation
Profit or loss adjustments
Depreciation and write-downs of the Right of Use assets
Depreciation and amortization of property, plant and equipment and intangible assets
Impairment of property, plant and equipment and intangible assets
Non-monetary financial (income) expenses
Gain on disposal of fixed assets
Interest expenses on Lease Liability
Other non-monetary (income) expenses
Balance Sheet changes
Other non-current assets and liabilities
Trade receivables, net
Inventories, net
Trade payables
Other current assets and liabilities
Cash flows from operating activities
Interest paid (net), including interest paid of Lease Liability
Taxes paid
Net cash flows from operating activities
Purchases of property, plant and equipment and intangible assets
Disposals of property, plant and equipment and intangible assets
Dividends from investments
Disposals of investments
Acquisition of additional shares from Non-Controlling Interests
Financial investments
Business combination (purchase of Fratelli Prada spa)
Net cash flow utilized by investing activities
Dividends paid to shareholders of PRADA spa
Dividends paid to Non-Controlling shareholders
Repayment of Lease Liability
Repayment of current portion of long-term borrowings - third parties
Arrangement of long-term borrowings – third parties
Change in short-term borrowings – third parties
Repayment of loans form related parties
Loans to related parties
Net cash flows generated/(utilized) by financing activities
Change in cash and cash equivalents, net of bank overdrafts
Foreign exchange differences
Opening cash and cash equivalents, net of bank overdraft
Closing cash and cash equivalents, net of bank overdraft
Cash and cash equivalents, net of bank overdraft
Closing cash and cash equivalents, net of bank overdraft
twelve months ended
December 31
2020
twelve months ended
December 31
2019
(51,812)
234,760
443,910
203,720
21,294
36,700
(36,942)
42,670
(74,598)
59,210
16,186
9,134
(34,894)
56,435
691,013
(54,374)
(44,220)
592,419
456,310
222,309
11,450
24,108
-
48,980
6,089
(14,189)
1,077
(60,719)
(15,735)
(18,867)
895,573
(59,552)
(26,126)
809,895
(109,557)
(310,957)
2,320
277
-
-
-
(42,950)
(149,910)
-
-
(330,319)
(205,593)
175,000
(35,608)
(2,000)
(750)
(395,270)
47,239
(25,916)
421,069
442,392
442,392
442,392
1,779
2,135
28,074
(400)
(4,993)
(17,899)
(302,261)
(153,529)
(1,113)
(447,530)
(268,940)
200,000
(19,004)
-
(2,375)
(692,491)
(184,857)
6,105
599,821
421,069
421,069
421,069
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PRADA Group Annual Report 2020 - Consolidated Financial Statements CONSOLIDATED STATEMENT OF CHANGES IN EQUIT Y
(AMOUNTS IN THOUSANDS OF EURO, EXCEPT NUMBER OF SHARES)
(amounts in
thousands of
Euro)
Number of
shares
Share
Capital
Tran-
slation
reserve
Share
premium
reserve
Cash
flow
hedge
reserve
Actua-
rial
reser-
ve
Fair Value
Invest-
ments
in equity
instru-
ments
Reserve
Other
reserves
Total other
reserves
Net result
for the
period
Net Equity
attribu-
table to
owners of
the Group
Equity
Net
Equity at-
tributable
Non-con-
trolling
interests
Total
Net
Equity
2,558,824,000 255,882
32,941 410,047 (10,620)
(4,822) (12,276) 2,001,391 2,383,720
205,443 2,877,986
19,083 2,897,069
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
28,496
-
2,151
-
-
-
-
-
-
-
-
-
-
-
-
(48,630)
(48,630)
2,235
2,298
4,533
205,443
205,443 (205,443)
-
-
-
(153,529)
(153,529)
- (153,529)
(1,113)
(154,642)
-
-
-
-
1,130
1,130
(48,630)
4,533
-
-
(48,630)
4,533
-
-
2,151
255,788
286,435
2,353
288,788
-
-
-
-
306
59
(2)
363
-
363
(36)
327
2,558,824,000 255,882
61,437 410,047 (8,469)
(4,516)
(9,982) 2,006,971 2,394,051
255,788 2,967,158
21,417 2,988,575
-
-
-
-
-
-
-
-
-
-
-
-
- (64,796)
-
2,675
-
-
-
-
-
-
204,612
204,612 (204,612)
51,176
51,176
(51,176)
-
-
-
-
-
-
-
2,675
(54,139)
(116,260)
(1,755)
(118,015)
-
-
-
- (3,635) (15,206)
-
(18,841)
-
(18,841)
1
(18,840)
2,558,824,000 255,882
(3,359) 410,047 (5,794)
(8,151) (25,188) 2,262,759 2,633,673
(54,139) 2,832,057
19,663 2,851,720
Balance at
December 31,
2018
Allocation of
2018 net income
Dividends
Share capital
increase
Acquisition of
Fratelli Prada spa
Gain/(losses)
from the disposal
of equity instru-
ments
Comprehensive
income/(loss)
for the period
(recyclable to
P&L)
Comprehensive
income/(loss)
for the period
(not recyclable
to P&L
Balance at
December 31,
2019
Allocation of
2019 net income
- retained
earnings
Allocation of
2019 net income
- extraordinary
reserves
Comprehensive
income/(loss)
for the period
(recyclable to
P&L)
Comprehensive
income/(loss)
for the period
(not recyclable
to P&L
Balance at
December 31,
2020
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PRADA Group Annual Report 2020 - Consolidated Financial Statements P R A D A S P A S E P A R A T E F I N A N C I A L S T A T E M E N T S
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PRADA Group Annual Report 2020 - PRADA spa Separate Financial Statements PRADA SPA STATEMENT OF FINANCIAL POSITION
(amounts in thousands of Euro)
Assets
Current assets
Cash and cash equivalents
Trade receivables, net
Inventories, net
Derivative financial instruments - current
Financial receivables and other receivables from parent company,
subsidiaries, associates and related parties - current
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Right of Use assets
Investments
Deferred tax assets
Other non-current assets
Derivative financial instruments - non-current
Financial receivables and other receivables from parent company,
subsidiaries, associates and related parties - non-current
Total non-current assets
Total Assets
Liabilities and Shareholders' equity
Current liabilities
Short-term lease liability
Short-term financial payables and bank overdraft
Financial payables and other payables to parent company,
subsidiaries, associates and related parties - current
Trade payables
Tax payables
Derivative financial instruments - current
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term lease liability
Long-term financial payables
Long-term employee benefits
Provisions for risks and charges
Deferred tax liabilities
Other non-current liabilities
Derivative financial instruments - non-current
Financial payables and other payables to parent company,
subsidiaries, associates and related parties - non-current
Total non-current liabilities
Total Liabilities
Share capital
Total other reserves
Net income / (loss) for the period
Total Net Equity
December 31
2020
December 31
2019
103,295
526,652
295,694
12,445
265,627
143,154
1,346,867
791,076
200,497
294,420
903,272
43,923
74,457
6,768
201,298
2,515,711
3,862,578
42,146
177,787
63,801
635,002
24,124
7,789
145,773
1,096,422
275,612
385,868
35,704
1,581
1,711
104,000
9,249
13,878
827,603
1,924,025
255,882
1,698,847
(16,176)
1,938,553
70,696
776,685
319,433
4,750
250,527
143,950
1,566,041
805,676
194,608
274,318
978,436
30,834
80,802
6,103
201,510
2,572,287
4,138,328
39,467
122,678
74,653
865,380
19,462
11,306
128,231
1,261,177
264,616
488,108
25,049
4,675
1,535
47,294
8,789
20,660
860,726
2,121,903
255,882
1,511,516
249,027
2,016,425
Total Liabilities and Total Net Equity
3,862,578
4,138,328
146
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PRADA Group Annual Report 2020 - PRADA spa Separate Financial Statements
PRADA SPA STATEMENT OF PROFIT OR LOSS
(amounts in thousands of Euro)
Net revenues
Cost of goods sold
Gross Margin
Operating expenses
twelve months ended
December 31
2020
twelve months ended
December 31
2019
1,188,628
(598,424)
1,822,823
(841,844)
590,204
980,979
(595,638)
(774,134)
Operating income / (loss) - EBIT
(5,434)
206,845
Interest and other financial income / (expenses), net
Interest expenses on Lease Liability
Dividends from investments
Total financial income/(expenses)
Income / (loss) before taxation
Taxation
Net income / (loss) for the period
(52,856)
(2,952)
37,014
(18,794)
(52,214)
(2,910)
48,741
(6,383)
(24,228)
200,462
8,052
48,565
(16,176)
249,027
PRADA SPA STATEMENT OF COMPREHENSIVE INCOME
(amounts in thousands of Euro)
Net income / (loss) for the period
A) Items recyclable to P&L:
Change in Cash Flow Hedge reserve
Tax impact
Change in Cash Flow Hedge reserve less tax impact
B) Items not recyclable to P&L:
Change in Fair Value Investments in equity instruments reserve
Tax impact
Change in Fair Value Investments in equity instruments reserve less tax impact
Change in Actuarial reserve
Tax impact
Change in Actuarial reserve less tax impact
twelve months ended
December 31
2020
twelve months ended
December 31
2019
(16,176)
249,027
5,809
(1,394)
4,415
(15,206)
-
(15,206)
(346)
405
59
3,783
(908)
2,875
58
-
58
(1,531)
-
(1,531)
Comprehensive income / (loss) for the period
(26,908)
250,429
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PRADA Group Annual Report 2020 - PRADA spa Separate Financial Statements
PRADA SPA STATEMENT OF CASH FLOWS
(amounts in thousands of Euro)
Income before taxation
Profit of loss adjustments
Depreciation and write-downs of the Right of Use assets
Depreciation and amortization of property, plant and equipment and intangible assets
Impairment of property, plant and equipment and intangible assets
Losses/(gains) on disposal of non-current assets
Impairment of investments
Interest expenses on Lease Liability
Non-monetary financial (income) expenses
Other non-monetary (income) expenses
Balance sheet changes
Trade receivables, net
Inventories, net
Trade payables
Other current assets and liabilities
Other non-current assets and liabilities
Cash flows from operating activities
Interest paid (net), including interest paid of Lease Liability
Taxes paid
Net cash flows from operating activities
Purchase of property, plant and equipment and intangible assets
Disposal of property, plant and equipment and intangible assets
Investments in subsidiaries
Financial investments
Dividends from investments
Net cash flow utilized by investing activities
Dividends paid to shareholders
Change in short-term borrowing - third parties
Change in intercompany loans
Loans repaid by subsidiaries
Repayment of Lease Liability
Loans made to subsidiaries
Repayment of short-term portion of long-term borrowings - third parties
Arrangement of long-term borrowings - third parties
Net cash flows utilized by financing activities
Change in cash and cash equivalents, net of bank overdraft
Fratelli Prada spa - Opening cash and cash equivalents, net of bank overdraft
Opening cash and cash equivalents, net of bank overdraft
Closing cash and cash equivalents, net of bank overdraft
Cash and cash equivalents, net of bank overdraft
Closing cash and cash equivalents, net of bank overdraft
twelve months ended
December 31
2020
twelve months ended
December 31
2019
(24,228)
200,462
43,561
65,242
515
(36,748)
40,353
2,952
(34,537)
24,087
224,162
31,769
(230,123)
19,222
7,591
133,818
(2,814)
(4,159)
126,845
(49,054)
2,320
(6,614)
-
37,014
(16,334)
-
(45,000)
27,563
14,052
(53,728)
(23,486)
(177,889)
175,000
(83,488)
27,023
5,574
70,696
103,293
103,293
103,293
39,346
61,706
1
(559)
32,661
2,910
(48,741)
8,384
(95,815)
(15,173)
57,556
(49,304)
7,916
201,350
(143)
-
201,207
(112,231)
720
(23,101)
23,131
48,741
(62,740)
(153,529)
(42,000)
(8,851)
41,885
(43,003)
(111,160)
(250,000)
200,000
(366,658)
(228,191)
-
298,887
70,696
70,696
70,696
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PRADA Group Annual Report 2020 - PRADA spa Separate Financial Statements
PRADA S.P.A. STATEMENT OF CHANGES IN EQUIT Y
(AMOUNTS IN THOUSANDS OF EURO, EXCEPT NUMBER OF SHARES)
(amounts in thousands
of Euro)
Number of
shares
Share
capital
Share
premium
reserve
Legal
reserve
Other
reserves
Retained
earnings
Cash
flow
hedge
reserve
Fair Value
Invest-
ments in
equity in-
struments
Reserve
Total
other
reserves
Net
result
for the
period
Total
equity
Balance at December
31 2018
Allocation of 2018 net
income
Gain/(losses) from
the disposal of equity
instruments
Dividends
Comprehensive income/
(loss)
for the period (recyclable
to P&L)
Comprehensive inco-
me/(loss)
for the period (not
recyclable to P&L
Balance at December
31 2019
Allocation of 2019 net
income
- retained earnings
Allocation of 2019 net
income - extraordinary
reserves
Merger of
F.lli Prada spa
Comprehensive income/
(loss)
for the period (recyclable
to P&L)
Comprehensive inco-
me/(loss)
for the period (not
recyclable to P&L
Balance at December
31 2020
2,558,824,000 255,882 410,047 51,176 182,899
325,300 (6,585)
(12,275)
950,562 708,548 1,914,992
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
708,548
2,298
- (153,529)
-
-
-
-
708,548 (708,548)
-
2,235
4,533
- (153,529)
-
-
4,533
(153,529)
-
-
-
2,875
-
2,875 249,027
251,902
(1,531)
-
58
(1,473)
-
(1,473)
2,558,824,000 255,882 410,047 51,176 182,899
881,086 (3,710)
(9,982) 1,511,516 249,027 2,016,425
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
197,851
51,176
-
(50,965)
-
-
-
-
4,415
-
-
-
-
197,851 (197,851)
51,176 (51,176)
-
-
(50,965)
-
(50,965)
4,415 (16,176)
(11,761)
60
-
(15,206)
(15,146)
-
(15,146)
2,558,824,000 255,882 410,047 51,176 234,075 1,028,032
705
(25,188) 1,698,847 (16,176) 1,938,553
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 1. GENERAL INFORMATION
PRADA spa (the “Company” or “Parent Company”), together with its subsidiaries
(collectively the “Group”), is listed on the Hong Kong Stock Exchange (HKSE code:
1913). The Prada Group is a leading player in the luxury goods industry, where
it operates with the Prada, Miu Miu, Church’s and Car Shoe brands producing
and distributing leather goods, footwear and apparel. It also operates in the food
sector with Marchesi 1824 and in the eyewear and fragrance industries under
licensing agreements.
It owns 23 production facilities (20 in Italy, 1 in the United Kingdom, 1 in France
and 1 in Romania) and its products are sold in 70 countries worldwide mainly
through its directly operated stores, which numbered 633 at December 31, 2020.
The Prada Group’s products are also sold via e-commerce, in selected prestigious
depar tment stores, by independent retailers in very exclusive locations, and by
impor tant e-tailers.
The Company is a joint-stock company with limited liability, registered and domiciled
in Italy. Its registered office is at via Fogazzaro 28, Milan. At the repor ting date of
these Consolidated Financial Statements, 79.98% of the share capital was owned
by PRADA Holding spa, a company domiciled in Italy, and the remainder consisted
of floating shares on the Main Board of the Hong Kong Stock Exchange.
These Consolidated Financial Statements were approved and authorized for issue
by the Board of Directors of PRADA spa on March 10, 2021.
2. B ASIS OF PREPARATION
The Consolidated Financial Statements of the Prada Group as at December 31,
2020, which consist of the “Consolidated Statement of Financial Position”, the
“Consolidated Statement of Profit or Loss” for the twelve months ended December
31, 2020, the “Consolidated Statement of Comprehensive Income” for the twelve
months ended December 31, 2020, the “Consolidated Statement of Cash Flows”
for the twelve months ended December 31, 2020, the “Consolidated Statement
of Changes in Shareholders’ Equity” and the “Notes to the Consolidated Financial
Statements”, have been prepared in accordance with the International Financial
Repor ting Standards (“IFRSs”) issued by the International Accounting Standards
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements Board (“IASB”) and endorsed by the European Union.
At the date of presentation of these Consolidated Financial Statements, there were
no differences between the IFRSs endorsed by the European Union and applicable
to the PRADA Group and those issued by the IASB.
IFRS also refers to all International Accounting Standards (“IAS”) and all
interpretations of the International Financial Repor ting Interpretations Committee
(“IFRIC”), previously called the Standing Interpretations Committee (“SIC”).
The Group has prepared the Consolidated Statement of Financial Position
presenting separately the current and non-current assets and liabilities. All details
needed for accurate and complete disclosure are provided in the Notes to the
Consolidated Financial Statements. Consolidated Statement of Profit or Loss items
are classified by destination. The Consolidated Statement of Cash Flows has been
prepared with the indirect method. The Consolidated Financial Statements are
presented in Euro, the functional currency of PRADA spa.
The Consolidated Financial Statements have been prepared on a going concern
basis.
3. NE W IFRS AND AMENDMENTS TO IFRS
New Standards and Amendments issued by the IASB, endorsed by the European
Union and applicable to the Prada Group from Januar y 1, 2020.
New IFRS Standards and Amendments to existing standards
Effective date for
Prada Group
EU endorsement dates
Amendments to IFRS 9, IAS 39 and IFRS7: Interest Rate Benchmark Reform
January 1, 2020
Endorsed in January 2020
Amendments to IFRS 3 Business Combinations
Covid-Related Rent Concessions: Amendment to IFRS 16
IAS 1 and IAS 8: definition of material
January 1, 2020
Endorsed in April 2020
January 1, 2020
Endorsed in October 2020
January 1, 2020
Endorsed in November 2019
Amendments to References to the Conceptual Framework in IFRS Standards
January 1, 2020
Endorsed in November 2019
Among the New IFRSs and Amendments above, only the “Covid-Related Rent
Concession: Amendment to IFRS 16” had a significant impact on the Group Annual
Repor t, the details of which are explained below.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements New Standards and Amendments issued by the IASB, endorsed by the European
Union, but not yet applicable to the Prada Group as effective for financial years
beginning on Januar y 1, 2021.
New IFRS Standards and Amendments to existing standards
Effective date for
Prada Group
EU endorsement status
Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9
January 1, 2021
Endorsed in December 2020
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16:
Interest Rate Benchmark Reform - Phase 2
January 1, 2021
Endorsed in January 2021
New Standards, Amendments to existing Standards and operational guidelines
issued by the IASB, but not yet endorsed by the European Union at the date of
approval of these Consolidated Financial Statements.
New IFRS Standards and Amendments to existing standards
IFRS 17 Insurance Contracts
Amendment to IAS 1 Presentation of Financial Statements
in IFRS Standards
Amendments to:
-IFRS 3 Business Combinations;
-IAS 16 Property, Plant and Equipment;
-IAS 37 Provisions, Contingent Liabilities and Contingent Assets;
-Annual Improvements 2018-2020
Effective date for
Prada Group
EU endorsement status
January 1, 2023
Not endorsed yet
January 1, 2023
Not endorsed yet
January 1, 2022
Not endorsed yet
AMENDEMENT TO IFRS 16 FOR COVID-RELATED RENT CONCESSIONS
On May 28, 2020, the International Accounting Standard Board (“IASB”) approved
the possibility of providing lessees with a practical expedient for the immediate
recognition in the profit or loss of Covid-related rental discounts.
Based on this practical expedient, the lessees are not required to assess whether
the Covid-related rent reductions obtained by the lessors are lease modifications;
therefore, the lessees can book such rent reductions as if they were not lease
modifications according to the provisions of IFRS 16, thus giving the possibility to
the lessees to recognize the entire economic benefit of such discounts immediately
through profit or loss.
Rent discounts are eligible for the practical expedient if they occur as a direct
consequence of the Covid-19 pandemic and if all of the following criteria are met:
― any rent reduction affects only payments originally due on or before June 30,
2021;
― there is no substantive change to the other terms and conditions of the lease;
― the change in lease payments results in revised consideration for the lease
that is substantially the same as, or less than, the consideration for the lease
immediately preceding the change.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements On October 12, 2020, the European Commission completed the endorsement
process of the amendment to IFRS 16 for Covid-Related Rent Concessions. The
application of such amendment is valid for financial statements star ting from June
1, 2020, with early adoption allowed for financial years star ting from January 1,
2020. The Prada Group opted for the early adoption thus recognizing the Covid-
related rent discounts from January 2020, when the health emergency began to
significantly affect the Group’s activities in China.
As a result of the above, the Consolidated Statement of Profit or Loss for the
twelve months ended December 31, 2020 includes a total of Euro 87.6 million of
Covid-related rent discounts within the Operating expenses.
As at the date of these Consolidated Financial Statements, the Directors have
not yet completed the analysis necessary to assess the impacts of the above new
standards and interpretations not yet applicable to the Prada Group, both in
terms of those already endorsed by the European Union and those undergoing the
endorsement.
4. S COPE OF CONSOLIDATION
The consolidated financial information comprises the accounts of PRADA spa and
the Italian and foreign companies over which the Company has the right to exercise
control either directly or indirectly.
An investor controls an investee when it is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee.
The companies in which the Group has more than 50% of the voting rights or that
are controlled by the Group in some other way are consolidated on a line-by-line
basis from the date on which the Group acquires control until the date on which
that control ends.
Associated under takings are companies in which the Group has significant influence
but does not exercise control and are consolidated using the equity method.
Significant influence is defined as the power to par ticipate in the financial and
operating policy decisions of the investee without having control or joint control.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements The companies included in the Consolidated Financial Statements are listed in
Note 42.
5. B ASIS OF CONSOLIDATION
The main consolidation criteria applied to prepare these Consolidated Financial
Statements are as follows:
― the separate financial statements of PRADA spa (“holding company”) 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 the repor ting date;
― assets and liabilities, costs and revenues of controlled companies are fully
included on a line-by-line basis 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 por tion of shareholders’ equity of the companies in which the
interest is held;
― for companies consolidated on a line-by-line basis that are not 100% owned
by the holding company, the share of the net equity and net results for the
year of non-controlling interests are disclosed as “Shareholders’ equity - Non-
controlling interests” in the Consolidated statement of financial position and
“Net result - Non-controlling interests” in the Consolidated statement of Profit
or Loss;
― on business combinations, the difference between the acquisition cost of
investments acquired and the corresponding share of shareholders’ equity
at the date of acquisition is allocated, if positive, to the identifiable assets
acquired and liabilities assumed based on their fair value at the date of
acquisition. Any residual positive amount is accounted for as goodwill while
any negative amount is charged to the profit or loss 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
reserves; in business combinations achieved in stages, the Group remeasures
its previously held equity interest in the acquiree at its acquisition date fair
value and recognizes the resulting gain or loss, if any, in profit or loss. Business
combinations of entities controlled by the same person (business combinations
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements under common control) require the recognition through equity of the difference,
in any, between the purchase price and the corresponding por tion of the equity
acquired.
― the acquisition cost of an investment or an activity which does not constitute
a business, and which therefore does not constitute a business combination,
is allocated to the individual assets acquired and liabilities assumed based on
their fair value at the acquisition date;
― profits and losses, assets and liabilities of associated under takings are
accounted for using the equity method. According to this method, investments
in associated under takings are recognized in 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 the holding company are recognized only
if the Group has under taken an obligation to cover them. The excess of the
acquisition cost of the investment over the interest of the holding company in
the net fair value of acquired assets and liabilities assumed is recognized as
goodwill. Goodwill is included in the book value of the investment and tested
for impairment. If the cost is lower than the holding company’s interest in
the fair value of identifiable assets, liabilities and contingent liabilities, the
difference is recognized in the profit or loss 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. Unrealized gains or losses generated by transactions
between the Group’s consolidated companies and included in inventories
at the balance sheet date are also eliminated, if any. 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 profit
or loss 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 profit or loss is translated using the
average exchange rate for the year. When the translation of a transaction is not
properly represented by the average exchange rate of the period, the prevailing
exchange rate at the date of such transaction is used to translate its impacts in the
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements profit or loss of the Consolidated Financial Statements. Translation differences
arising on conversion of the statement of financial position, using the exchange
rate at the star t of the period and the exchange rate at the end of the period,
and translation differences arising on conversion of the profit or loss using
the average rate for the period (or other exchange rate as explained above)
and the rate at the end of the period are recognized as a translation reserve
in the consolidated shareholder ’s equity until disposal of the investment. The
translation reserve in consolidated shareholder ’s equity represents translation
differences recognized as from first time application on January 1, 2004.
When preparing the Consolidated statement of cash flows, the cash flows of
subsidiary companies are translated using the average rate for the period.
Exchange differences arising on a monetary item qualified as a net investment
in a foreign operation are initially recognized in the currency translation reserve
and released to profit or loss upon disposal of the investment;
― the repor ting currency used to prepare the Consolidated financial statements is
the Euro. All amounts are stated in thousands of Euro unless otherwise stated.
6. 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 shor t-term maturity.
For the purposes of the cash flow statement only, cash and cash equivalents
comprise cash on hand, bank accounts and deposit accounts. In the statement
of financial position, bank overdrafts and current por tions of payables to banks
for medium and long-term loans are included in Bank overdrafts and shor t-term
loans.
TRADE RECEIVABLES AND PAYABLES
Trade receivables are recognized at their nominal value net of the bad debt provision
determined on the basis of the requirements set by IFRS 9. According to this
standard, receivables are written off following the application of the “expected loss”
impairment method together with, if necessary, fur ther impairments recognized
upon specific doubtful conditions on the single credit positions.
Trade accounts payable are recorded at nominal amount.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements Transactions denominated in foreign currency are recognized at the exchange rate
as at the date of the transaction. At the repor ting date, transactions denominated in
foreign currencies are translated using the exchange rate as at the repor ting date.
Gains and losses arising from the translation are reflected in the profit or loss.
INVENTORIES
Raw materials, work in progress and finished products are recognized at the lower
of acquisition cost, production cost and net realizable value. Cost comprises
direct production costs and those indirect that have been incurred in bringing the
inventories to their present location and condition. Acquisition or production cost
is determined on a weighted average basis.
Provisions, adjusting the value of the inventories, are made for slow moving,
obsolete inventories or if, in the end, the estimated selling price or realizable
value is reasonably expected to be lower than the cost.
PROPERT Y, PLANT AND EQUIPMENT
Proper ty, plant and equipment are recognized 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.
Ordinary maintenance expenses are charged in full to the profit or loss for the
year they are incurred. Extraordinary maintenance expenses are capitalized if they
increase the value or useful life of the related asset.
The costs included under leasehold improvements relate to refurbishment works
carried out on premises, mainly commercial, not owned by the Group.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 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
Land
Buildings and construction
Production plant and equipment
Improvements to leased retail premises
Improvements to leased industrial and corporate premises
Furniture and fixture retail
Furniture and fixture corporate and industrial
Other tangible fixed assets
not depreciated
2.5% - 10%
4% - 25%
Shorter of lease term (*) and useful life
Shorter of lease term (*) and useful life
Shorter of lease term (*) and useful life
7% - 20%
4% - 50%
(*) the lease term includes the renewal period when the exercise of the option is deemed reasonably certain
When assets are sold or disposed of, their cost and accumulated depreciation are
eliminated from the financial statements and any gains or losses are recognized in
the profit or loss.
If the term of a rental agreement is terminated in advance, the useful life of fixed
assets related to such premise is adjusted consistently.
The value of land is stated separately from the value of buildings. Depreciation is
only charged on the value of buildings.
Every year-end, a valuation aimed at monitoring indications of impairment over
the value of proper ty, plant and equipment is per formed. If any such indications
are found, an impairment test is used to estimate the recoverable amount of the
asset. The impairment loss is determined by comparing the carrying value of the
asset with its recoverable value, which means 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
amount that could be obtained from the disposal of the asset at the repor ting date.
Value in use is an estimate of the present value of future cash flows expected
to derive from the asset tested for impairment. Impairment losses are recorded
immediately in the profit or loss.
INTANGIBLE ASSETS
Only identifiable assets, controlled by the Group 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.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 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.
The caption trademark also includes other intellectual proper ty rights which useful
life is determinated in accordance with the relevant contracts.
Store lease acquisition costs (or key money) represent expenditures incurred to
enter into or take over retail store lease agreements. When the lease contracts
fall under the application of IFRS 16 Leases, the store lease acquisition is included
within the initial direct costs that contribute to the formation of the Right of Use
assets. O therwise, the store lease acquisition is an intangible assets.
Intangible assets with a definite useful life are amor tized on a straight-line basis
at the following rates:
Category of intangible assets
Amortization rate or period
Trademarks and other intellectual property rights
Store lease acquisition costs
Software
Development costs and other intangible assets
Shorter of lease term (*) and useful life
2.5% - 25%
10% - 33%
10% - 33%
(*) the lease term includes the renewal period when the exercise of the option is deemed reasonably certain
Goodwill, an asset that produces future economic benefits, but which is not
individually identified and separately measured, is initially recognized at cost.
Goodwill is not amor tized 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 per formed more
frequently.
For impairment test purposes, goodwill acquired in a business combination shall
be, from the acquisition date, 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 the relevant assets. The Prada Group’s Cash Generating Units
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 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 unit is compared with their recoverable
amount.
The carrying amount of CGUs tested for impairment for consolidation purposes is
represented by the net invested capital, which means the net equity adjusted by
the net financial position including the Lease Liability.
Recoverable amount is the higher of fair value less costs to sell and value in use, as
calculated 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, forecast and on long-term predictions (generally five years) prepared
by the management.
An impairment loss is recognized in the profit or loss for the period whenever the
recoverable amount of the cash generating unit is lower than its book value. An
impairment loss recognized for goodwill is never reversed in subsequent years.
RIGHT OF USE ASSETS AND LEASE LIABILIT Y
Right of Use and Lease Liabilities are regulated by IFRS 16 Leases which apply to
all lease contracts that provide for the payment of fixed rents, including those
indexed and those that set a guaranteed minimum.
The Group recognize the Right of Use assets and the Lease Liability at the
commencement date of the lease and based on the lease term.
The identification of a lease term is very impor tant, especially in the field of
real estate, because the form, legislation and common business practice can vary
considerably from one jurisdiction to another. The Group determines the lease
term as the non-cancellable period of a lease, together with the periods covered
by an option to extend or to terminate the lease under the control of the Company.
The management evaluates the exercise of the option if it’s considered “reasonably
cer tain” based on several factors and circumstances that create an incentive for the
lessee to exercise, or not to exercise the option, including any expected changes
in facts and circumstances from the commencement date until the exercise date
of the option.
The lease term begins on the ‘commencement date’ of the lease. This is defined
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements as the date on which the lessor makes an underlying asset available for use by a
lessee. It is the date on which the lessee initially recognises and measures Right of
Use assets and lease liabilities.
The commencement date is not necessarily the date on which star t the depreciation
of the Right of Use. For retail premises, the asset leased is ready for use when
works on premises are completed and, therefore, the depreciation of Right of Use
shall begin after the completion of works necessary to bring a store to its working
condition according to the management instructions (consistently with the IAS 16
requirements).
The Right of Use assets is measured at cost, identified as the initial measurement
of the lease liability, increased by any initial direct costs incurred by the lessee
(key money, legal fees, agent fees or other other incremental costs incurred to
conclude the contract) or by any dismantling cost necessary to bring back the
premises to its original condition. The Right of use Assets is depreciated over the
Lease term.
The Lease Liability is measured at the present value of the lease payments that
are not paid at that date. The lease payments are discounted using an incremental
borrowing rate calculated at Group level. The profit or loss caption “Interest
expenses IFRS 16” represent the adjustment of the present value of the Lease
Liability. Since most leases stipulated by the Group do not have an interest rate
implicit in the lease, the discount rate applicable to future lease payments is
determined as the risk-free rate of each country in which the leases are stipulated,
with payment dates based on the terms of the specific lease, increased by the
parent company’s credit spread.
A lease modification occurs when there is a change in the scope of a lease, or the
consideration for a lease, that was not par t of the original terms and conditions
of the lease (for example, adding or terminating the right to use one or more
underlying assets, or extending or shor tening the contractual lease term). The
effective date of the modification is defined as “the date when both par ties agree
to a lease modification”. When this occur, the Right of use and the lease liability
are updated accordingly. If a lease is terminated before the original lease term
date defined at the commencement date, both Right of Use assets and the lease
liability are remeasured, impacting also the profit of loss statement.
In addition, the options for the extension and early termination of the lease
agreements are re-evaluated and re-considered when a significant event or a change
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements occurs in the circumstances that are under the control of the Group and this will
influence the assessment of the reasonable cer tainty of the exercise options.
Low value contracts (the price of the asset, when new and recognized on a single-
component basis approach, is less than Euro 5,000) and leases whose lease term
is shor ter than 12 months are not in the scope of “IFRS 16 Leases”, so they are
recognized through profit or loss on a straight-line basis over the lease term.
Purely variable rent, typically linked to sales without a guaranteed minimum, are
excluded too from the scope of application of such standard.
Based on the practical expedient set by the “Amendment to IFRS16: Covid-Related
Rent Concession”, a lessee is not required to assess whether the Covid-related
rent reductions obtained by the lessors are lease modifications. Therefore, the
lessee can book such rent reduction as if they were not lease modifications, thus
recognizing the entire economic benefit of such discounts immediately through
profit or loss. Rent discounts are eligible for the practical expedient if they occur
as a direct consequence of the Covid-19 pandemic and if all of the following
criteria are met:
― any rent reduction affects only payments originally due on or before June 30,
2021;
― there is no substantive change to the other terms and conditions of the lease;
― the change in lease payments results in revised consideration for the lease
that is substantially the same as, or less than, the consideration for the lease
immediately preceding the change.
A lessee is expected to make judgement about whether other changes are
substantive based on its understanding of those changes and based on how
they were historically managed by the Group. As a result, in the Group’s view
a modification of the contract such as a renewal or the extension of the lease
term is to be considered substantive only when it is not consistent with the usual
practices applied by the Group and in the industry as a whole. For example, a
contract renewal might be signed up a few years ahead of the formal expiration of
the contract under negotiation, as it also occurred in 2020 when cer tain contract
renewals or lease-term extension overlapped, only in terms of timing and without
any substantial modifications to other terms and conditions, with the negotiations
for the Covid-related rental discounts.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements INVESTMENTS IN EQUIT Y INSTRUMENTS
The initial recognition of Investments in equity instruments (previously “available
for sale”) is at purchase cost, increased by any directly attributable transaction
costs. The Group evaluates these instruments at fair value and the related changes
are recorded in a specific equity reserve. This change (Fair Value through O ther
Comprehensive Income) is also included in the statement of comprehensive income
as “items not recyclable to profit or loss”, therefore only dividends received will be
recorded in the statement of profit or loss of the Group. IFRS 9 also provides for
an alternative treatment that allows the recognition of fair value changes directly
to profit or loss (Fair Value Through Profit or Loss). The choice of this accounting
treatment (FV TPL or FVOCI) has to be done for each investment and has to be
considered irrevocable once adopted. Any exceptions to the initial recognition will
be repor ted in the Notes to the Consolidated financial statements.
In the case of securities listed on active markets, the fair value is the price
recorded at the end of the trading day of the period under review. For investments
for which there is no an active market, the fair value is determined based on the
price of recent transactions between independent par ts of substantially similar
instruments, or by using other valuation techniques such as, for example, income
assessments or based on flow analysis discounted financial figures.
DEFERRED TAX ASSETS
Deferred tax assets are amounts of income taxes recoverable in future periods
in relation to deductible temporary differences and carryforward of unused tax
losses.
Deductible temporary differences are differences between the carrying amount of
an 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
that taxable 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) that have
been enacted or substantively enacted at the repor ting date.
Deferred tax assets are not discounted.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements Deferred tax assets are recognized through the profit or loss unless the tax amount
is generated from a transaction or an event directly recognized in equity or from
a business combination.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments that hedge interest rate risk and exchange rate
risk exposure are recognized at the fair value based on hedge accounting rules.
According to these rules, within the framework of IFRS 9, future cash flow hedging
contracts such as those listed above are qualified as cash flow hedges. Hedge
accounting treatment is allowed 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 probable transaction which could affect profit or loss. In
this case, the change in fair value of the hedging instrument is recognized in
shareholders’ equity. Accumulated gains or losses are reversed from shareholders’
equity and recognized in the profit or loss for the period in which the profit or loss
effect of the hedged operation is recognized.
Any gain or loss on a hedging instrument (or por tion thereof ) which is no longer
effective as a cash flow hedge is immediately recognized in the profit or loss. If
the hedged transaction is no longer expected to take place, any related cumulative
gain or loss outstanding in equity will be recognized in the profit or loss.
NON-CURRENT FINANCIAL LIABILITIES
Non-current financial liabilities include payables to banks for medium and long-
term loans.
Non-current financial liabilities are initially recorded at fair value on the transaction
date less transaction costs which are directly attributable to the acquisition. After
initial recognition, non-current financial liabilities are valued at amor tized cost,
which means at the initial amount less principal repayments already made plus
or minus the amor tization (using the effective interest method) of any difference
between that initial amount and the maturity amount.
POST-EMPLOYMENT BENEFITS
Defined benefit plans are recognized using actuarial techniques to estimate the
amount of the obligations resulting from employee service in the current and
past periods and discounting it to determine the present value of the Group’s
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements obligations.
The present value of the obligations is determined by an independent actuary
using the Projected Unit Credit Method.
Actuarial gains and losses are recognized directly in equity, net of the tax effect.
O ther long-term employee benefits are recognized among non-current liabilities
and their value corresponds to the present value of the defined benefit obligation at
the repor ting date, adjusted according to the period of the underlying agreement.
Like defined benefit plans, other long-term benefits are also valued using the
Projected Unit Credit Method. Unlike defined benefits plans the actuarial gains
and losses of other long-term benefits are recognized though profit or loss rather
then through net equity.
PROVISIONS FOR RISKS AND CHARGES AND CONTINGENT ASSETS
Provisions for risks and charges cover costs of a known nature, that were cer tain or
probable but whose amount or due date was uncer tain at year end. Provisions are
recognized following a legal or constructive obligation as a result of past events
and when it is probable that an outflow of resources will be required.
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 vir tually cer tain.
DEFERRED TAX LIABILITIES
Deferred tax liabilities are amounts of income taxes due in future periods in respect
of taxable 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 when
liability is generated by the initial recognition of goodwill or the initial recognition
of an asset or liability in a transaction other than a business combination that does
not affect the accounting result or the tax result at the transaction date.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements Deferred tax liabilities are measured at the tax rates which are expected to apply
to the period when the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the repor ting date.
Deferred tax liabilities are not discounted.
Deferred tax liabilities are recognized through the profit or loss unless the tax
amount is generated from a transaction or an event directly recognized in equity
or from a business combination.
REVENUE RECOGNITION AND COST RECOGNITION
Revenues from the sale of goods are recognized in the profit or loss when all of the
following criteria have been satisfied:
― identification of the contract (in writing, orally or in accordance with other
customary business practices) with a customer;
― identification of the per formance obligations in the contract;
― determination of the transaction selling price for each per formance obligations;
― the amount of revenue (transaction selling price) can be measured reliably;
― the significant risks and rewards of ownership are transferred to the buyer;
― all control over the goods sold has ceased;
― the economic benefits generated by the transaction will probably be enjoyed
by the Group;
― the costs per taining to the transaction can be reliably measured;
― each per formance obligation has been satisfied.
Royalties are accounted for based on sales made by the licensees and the terms of
the contracts.
Financial discounts are recognized as financial expenses.
Costs are recognized on an accrual basis. In par ticular, a cost is immediately
recognized in the profit or loss when:
― an expense does not generate any future economic benefit;
― the future economic benefits do not qualify or cease to qualify as assets for
recognition in the statement of financial position;
― a liability is incurred and no asset has been recognized.
PRE-OPENING RENTS
Costs incurred during the pre-opening period of new or refurbished retail stores
are charged to the profit or loss when incurred, except for the suspension of the
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements depreciation of the Right of Use assets.
INTEREST EXPENSES
Interest expenses might include interest on bank overdrafts, on shor t and long
term loans, financial charges related to the adjustments of the present value of the
Lease Liability, amor tization of initial costs of loan operations, changes in the fair
value of derivatives – insofar as chargeable to the profit or loss –, annual interest
maturing on the present value of post-employment benefits and interests on late
payments.
TAXATION
The provision for taxation is determined based on a realistic estimate of the tax
charge of each consolidated entity, in accordance with the tax rates (and tax laws)
that have been enacted or substantially enacted in each country at the repor ting
date.
Current taxes are recognized in the profit or loss as an expense. This is except for
taxes deriving from transactions or events directly recognized through shareholders’
equity which are directly charged to equity.
EARNINGS OR LOSSES PER SHARE
Earnings or losses per share are calculated by dividing the net result attributable
to the holding company by the weighted average number of ordinary shares in
issue.
CHANGES OF ACCOUNTING POLICIES, ERRORS AND CHANGES OF ESTIMATES
The accounting policies adopted change from one year to the next only if the
change is required by an accounting standard or if it helps provide more reliable
and meaningful information on the impact of operations on the entity’s statement
of financial position, profit or loss or cash flows.
Changes of accounting policy are accounted for retroactively with the effect
allocated to the opening equity of the earliest of the periods presented. The other
comparative amounts repor ted for each prior period are also adjusted as if the
new policy had been applied from the outset. A prospective approach is adopted
only when it would be impracticable to restate the comparative information.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements The application of a new or amended accounting standard is accounted for as
requested by the standard itself. If the standard does not regulate the transition
method, the change is accounted for on a retroactive basis or, if impracticable, on
a prospective basis.
Material errors are treated on the same basis as changes of accounting policy as
described above. Non-material errors are corrected through the profit or loss for
the period in which the error was identified.
Changes of accounting estimates are accounted for prospectively in the profit or
loss for the year in which the change is made if it only affects the profit or loss for
that year, or in the profit or loss for the year in which the change is made and in
subsequent periods if they are also affected by the change.
USE OF ESTIMATES
In accordance with IFRS, preparation of these Consolidated financial statements
requires the use of estimates and assumptions when determining cer tain types of
assets, liabilities, revenues and costs and when assessing contingent assets and
liabilities.
These assumptions refer, first of all, to operations and events not settled at the
end of the period. Therefore, upon payment, the actual outcome may differ from
the estimated amounts. Estimates and assumptions are reviewed periodically and
the effects of each change are immediately recognized in the profit or loss.
Estimates are used also for impairment tests, when determining provisions for risks
and charges, the provision for bad debts, the inventory obsolescence provision,
post-employment benefits, the tax computation, measurement of derivatives, the
lease term of contracts with renewal options and the useful life of proper ty, plant
and equipment and intangible assets.
IMPACT OF CLIMATE CHANGE-RELATED MAT TERS ON FINANCIAL STATEMENTS
The management estimates that the effects of climate change on the criteria for
the preparation of these consolidated financial statements are negligible, as it
does not identify par ticular items of assets and liabilities subject to estimation
processes that can be significantly influenced by environmental issues.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 7. MER GERS AND ACQUISITIONS
On April 22, 2020, with the aim of rationalize and simplify the Prada Group
structure, the Board of Directors of PRADA spa approved the plan of merger by
incorporation of Fratelli Prada spa, a wholly owned subsidiary acquired by the
Parent Company from related par ties on October 29, 2019. On October 7, 2020
the merger agreement was signed, with legal effect on the same date and tax and
accounting effect on January 1, 2020.
PELLET TERIA FIGLINE srl
In September 2020, the bankruptcy proceedings related to the reorganization plan
of Eurobags srl, a former Group’s leather goods supplier, was completed (pursuant
to the Ar ticle 182 bis of the Italian Bankruptcy Law). On September 30, 2020, as
a result of such procedure, the production branch of the aforementioned company
was transferred through an extraordinary demerger operation into the newco
Pelletteria Figline srl, which was then entirely purchased by PRADA spa through
its direct subsidiary Figline srl.
No consideration was paid, but net liabilities of Euro 7.1 million were acquired.
As defined by IFRS 3, Business combination, the Group allocated the value resulting
from the first consolidation at fair value of the assets and liabilities acquired
and, residually, to goodwill. For this reason an amount of Euro 4.7 million was
allocated to the Land and buildings category, Euro 3.7 million as Goodwill and
Euro 1.3 million as Deferred tax liabilities (calculated on the value of the Land and
Buildings allocation).
(amounts in thousands of Euro)
Property, plant and equipment/intangible assets
Other current assets/(liabilities)
Other non-current assets/(liabilities)
Net liabilities acquired
Consideration paid
Allocation to land and buildings
Allocation to deferred tax liabilities
Residual value to goodwill
Fair value of
net assets/(liabilities) acquired
56
(5,499)
(1,705)
(7,148)
-
4,726
(1,318)
3,740
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8. OP ERATING SEGMENTS
IFRS 8, “Operating Segments”, requires that detailed information be provided for
each operating segment that makes up the business. An operating segment is
defined as a business division whose operating results are regularly reviewed by
top management in order to allocate appropriate resources to the segment and
assess its per formance.
Because of the Group’s matrix-based organizational structure (whereby responsibility
is assigned cross-functionally
in relation to brands, products, distribution
channels and geographical areas), the complementary nature of the various
brands’ production processes and the many relationships between the different
business divisions, it is not possible to designate operating segments as defined by
IFRS 8 since the top management is only provided with the financial per formance
solely on a Group-wide level. For this reason, the business is considered a single
operating segment, as it better represents the specific characteristics of the Prada
Group business model.
NET REVENUES
Detailed information on net revenues by distribution channel, brand, geographical
area and product are provided in the Financial Review together with additional
comments.
GEOGRAPHICAL INFORMATION
The following table repor ts the carrying amount of the Group’s non-current assets
by geographical area, as requested by “IFRS 8 Operating Segments” for entities,
like the Prada Group, that have a single repor table segment:
(amounts in thousands of Euro)
Europe
Americas
Asia Pacific
Japan
Middle East and Africa
Total
December 31
2020
December 31
2019
3,016,375
3,189,262
515,662
533,832
477,799
66,181
609,186
650,515
536,287
95,775
4,609,849
5,081,025
The total amount of Euro 4,610 million (Euro 5,081 million at December 31, 2019)
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relates to the Group’s non-current assets. Consistently with IFRS 8, the table does
not include in both periods derivative financial instruments, deferred tax assets
and the pension fund surplus.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
9. C ASH AND CASH EQUIVALENTS
Cash and cash equivalents are detailed as follow:
(amounts in thousands of Euro)
Cash on hand
Bank deposit accounts
Bank current accounts
Total
December 31
2020
December 31
2019
25,818
120,563
296,011
55,432
130,444
235,193
442,392
421,069
As of December 31, 2020, interest income of between 0% and 2.1% per year is
accrued on bank accounts and deposits (between 0% and 3% at December 31,
2019).
10. TRADE RECEIVABLES, NET
Trade receivables are detailed below:
(amounts in thousands of Euro)
Trade receivables – third parties
Allowance for bad and doubtful debts
Trade receivables – related parties
Total
December 31
2020
December 31
2019
297,953
(11,979)
4,406
322,005
(9,354)
4,903
290,380
317,554
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Movements during the period in the allowance for bad and doubtful debts are as
follows:
(amounts in thousands of Euro)
Opening balance
Exchange differences
Increases
Reversals
Utilization
Closing balance
December 31
2020
December 31
2019
9,354
(317)
4,135
(109)
(1,084)
11,979
8,821
44
2,374
(1,207)
(678)
9,354
Both the utilization and the increase in the period mainly refer to wholesale bad
debts in the U.S.A..
11. INVENTORIES, NET
Inventories can be broken down as follows:
(amounts in thousands of Euro)
Raw materials
Work in progress
Finished products
Return assets
Allowance for obsolete, slow-moving inventories and return assets
December 31
2020
December 31
2019
99,827
20,386
586,917
6,974
(47,882)
110,054
30,539
608,672
4,199
(40,853)
Total
666,222
712,611
The Inventories, net decreased by Euro 46.4 million from December 31, 2019,
mainly as a result of the reallocation of the inventories of the closed stores
to the benefit of those operating and the e-commerce as well as a meticulous
reprogramming of production activities.
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Movements during the period in the Allowance for obsolete and slow-moving raw
materials and the allowance for finished products and return assets are as follows:
(amounts in thousands of Euro)
Opening balance
Exchange differences
Increases
Utilization
Reversal
Closing balance
Raw
materials
Finished
products and
return assets
Total
allowance for
obsolete, slow-
moving inventories
and return assets
20,656
20,197
40,853
(8)
4,000
(199)
-
(274)
7,922
(4,265)
(147)
(282)
11,922
(4,464)
(147)
24,449
23,433
47,882
12. DERIVATIVE FINANCIAL INSTRUMENTS:
A SSETS AND LIABILITIES
Derivative financial instruments: assets and liabilities, current and non-current
por tions:
(amounts in thousands of Euro)
Financial assets regarding derivative instruments - current
Financial assets regarding derivative instruments – non-current
Total Financial Assets - Derivative financial instruments
Financial liabilities regarding derivative instruments – current
Financial liabilities regarding derivative instruments – non-current
December 31
2020
December 31
2019
10,691
-
10,691
(7,789)
(9,249)
3,315
-
3,315
(11,317)
(8,789)
Total Financial Liabilities - Derivative financial instruments
(17,038)
(20,106)
Net carrying amount – current and non-current portion
(6,347)
(16,791)
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
The net carrying amount of derivatives, both the current and the non-current
por tion, has the following composition:
(amounts in thousands of Euro)
December 31
2020
December 31
2019
Forward contracts
Options
Interest rate swaps
Positive fair value
Forward contracts
Options
Interest rate swaps
Negative fair value
7,770
2,921
-
10,691
(3,006)
(2,030)
(12,002)
1,956
1,359
-
3,315
(7,112)
(1,334)
(11,660)
(17,038)
(20,106)
IFRS7
Category
Level II
Level II
Level II
Level II
Level II
Level II
Net carrying amount – current and non-current
(6,347)
(16,791)
All of the above derivative instruments are classifiable as Level II in the fair value
hierarchy. The Group has not entered into any derivative contracts that could be
qualified as Level I or III.
The fair values of derivatives arranged to hedge interest rate risks (interest rate
swaps, “IRS”) and of derivatives arranged to hedge foreign exchange risks (forward
contracts and options) were determined by using one of the most widely used
valuation platforms on the financial market and are based on the interest rate
curves and on spot and forward exchange rates at the repor ting date.
The Group entered into the derivative contracts in the course of its risk management
activities, in order to hedge financial risks stemming from exchange and interest
rate fluctuation.
FOREIGN EXCHANGE RATE TRANSACTIONS
The cash flows resulting from the Group’s international activities are exposed
to exchange rate volatility. In order to hedge this risk, the Group enters into
options and forward sale and purchase agreements, so as to guarantee the value
of identified cash flows in Euro (or in other currencies used locally). The projected
future cash flows mainly regard the collection of trade receivables, the settlement
of trade payables and financial cash flows.
At the repor ting date, the notional amounts of the derivative contracts designated
as foreign exchange risk hedges (translated at the European Central Bank exchange
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
rate as at December 31, 2020, repor ted in Note 38) are as stated below.
Contracts in effect as of December 31, 2020 to hedge projected future trade cash
flows:
(amounts in thousands of Euro)
Currency
Chinese Renminbi
US Dollar
Japanese Yen
GB Pound
Korean Won
Canadian Dollar
Hong Kong Dollar
Swiss Franc
Russian Ruble
Taiwan Dollar
Malaysia Ringgit
Other currencies
Total
Options
Forward sale
contracts
December 31
2020
64,319
53,133
39,608
24,660
37,912
-
3,857
-
-
4,294
-
16,347
181,739
61,527
58,661
45,571
48,353
20,585
15,006
14,229
12,174
10,981
10,022
30,016
246,058
114,660
98,269
70,231
86,265
20,585
18,863
14,229
12,174
15,275
10,022
46,363
244,130
508,864
752,994
Contracts in effect as of December 31, 2020 to hedge projected future financial
cash flows:
(amounts in thousands of Euro)
Currency
Swiss Franc
GB Pound
Malaysia Ringgit
US Dollar
Other currencies
Total
Forward sale
contracts
December 31
2020
49,528
24,193
5,067
2,445
5,217
49,528
24,193
5,067
2,445
5,217
86,450
86,450
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
Contracts in effect as of December 31, 2019 to hedge projected future trade cash
flows.
(amounts in thousands of Euro)
Currency
US Dollar
Chinese Renminbi
Japanese Yen
GB Pound
Hong Kong Dollar
Korean Won
Singapore Dollar
Canadian Dollar
Russian Ruble
Swiss Franc
Australian Dollar
Other currencies
Total
Options
Forward sale
contracts
December 31
2019
75,841
117,128
52,895
29,149
22,864
7,406
-
-
-
-
-
4,631
67,118
118,535
77,497
37,612
41,841
61,175
21,706
22,880
15,710
16,003
10,535
43,819
142,959
235,663
130,392
66,761
64,705
68,581
21,706
22,880
15,710
16,003
10,535
48,450
309,914
534,431
844,345
Contracts in effect as of December 31, 2019 to hedge projected future financial
cash flows.
(amounts in thousands of Euro)
Currency
US Dollar
Japanese Yen
GB Pound
Swiss Franc
Singapore Dollar
Australian Dollar
Other currencies
Total
Forward sale
contracts
December 31
2019
5,675
-
24,389
52,515
15,221
10,003
18,544
5,675
-
24,389
52,515
15,221
10,003
18,544
126,347
126,347
All contracts in place at December 31, 2020 have a maturity shor ter than twelve
months.
All contracts in place at the repor ting date were entered into with major financial
institutions, and no counterpar ties are expected to default. A liquidity analysis
of the derivative contracts maturities is provided in the financial risks section of
these Notes.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
INTEREST RATE TRANSACTIONS
The Group enters into IRS contracts in order to hedge the risk of interest rate
fluctuations on bank loans. The key features of the IRS agreements in place as at
December 31, 2020 and December 31, 2019 are summarized below:
Interest Rate Swap (IRS) Agreement
Hedged loan
Contract
Currency
Notional
amount
Interest
rate
Maturity
date
December
31, 2020
Currency
Type of
debt
Amount
Expiry
1.457% May-2030
(3,197)
Euro/000
Term Loan
34,833 May-2030
Euro/000
Euro/000
Euro/000
34,833
58,500
90,000
-0.094%
Feb-2022
0.013%
Feb-2021
Euro/000
100,000
0.252%
Jun-2021
(313)
(3)
(125)
Euro/000
Term Loan
58,500
Feb-2022
Euro/000
Term Loan
90,000
Feb-2021
Euro/000
Term Loan
100,000
Jun-2024
GBP/000
48,975
2.778%
Jan-2029
(8,364)
GBP/000
Term Loan
51,600
Jan-2029
Total fair value (amounts in thousands of Euro)
(12,002)
Interest Rate Swap (IRS) Agreement
Hedged loan
Contract
Currency
Notional
amount
Interest
rate
Maturity
date
December
31, 2019
Currency
Type of
debt
Amount
Expiry
1.457% May-2030
(2,991)
Euro/000
Term Loan
38,500 May-2030
Euro/000
Euro/000
Euro/000
38,500
75,500
90,000
-0.094%
Feb-2022
0.013%
Feb-2021
Euro/000
100,000
0.252%
Jun-2021
(267)
(362)
(683)
Euro/000
Term Loan
75,500
Feb-2022
Euro/000
Term Loan
90,000
Feb-2021
Euro/000
Term Loan
100,000
Jun-2021
GBP/000
51,600
2.778%
Jan-2029
(7,347)
GBP/000
Term Loan
51,600
Jan-2029
Yen/000
300,000
1.360% Mar-2020
(10)
Yen/000
Term Loan
300,000 Mar-2020
IRS
IRS
IRS
IRS
IRS
IRS
IRS
IRS
IRS
IRS
IRS
Total fair value (amounts in thousands of Euro)
(11,660)
The IRS conver t variable interest rates on bank loans into fixed interest rates.
They have been arranged with major financial institutions, and no counterpar ties
are expected to default.
INFORMATION ON FINANCIAL RISKS
CAPITAL MANAGEMENT
The Group’s capital management strategy is intended to safeguard its ability to
guarantee a return to shareholders, protect the interests of other stakeholders
and comply with loan covenants, while maintaining a viable and balanced capital
structure.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements CATEGORIES OF FINANCIAL ASSETS AND LIABILITIES ACCORDING TO IFRS 7
FINANCIAL ASSETS
(amounts in thousands of Euro)
Cash and cash equivalents
Trade receivables, net
Derivative financial instruments
Investments in equity instruments
Other Investments
Financial receivables,
trade receivables and
financial investments
Derivative financial
instruments
Total
Note
442,392
290,380
-
64,203
1,988
-
-
10,691
-
-
442,392
290,380
10,691
64,203
1,988
9
10
12
18
18
Total at December 31, 2020
798,963
10,691
809,654
(amounts in thousands of Euro)
Cash and cash equivalents
Trade receivables, net
Derivative financial instruments
Investments in equity instruments
Other Investments
Financial receivables,
trade receivables and
financial investments
Derivative financial
instruments
Total
Note
421,069
317,554
-
79,408
2,040
-
-
3,315
-
-
421,069
317,554
3,315
79,408
2,040
9
10
12
18
18
Total at December 31, 2019
820,071
3,315
823,386
FINANCIAL LIABILITIES
(amounts in thousands of Euro)
Financial payables
Trade payables
Derivative financial instruments
Lease Liability
Loans and
payables
Derivative financial
instruments
Total
Note
754,878
289,578
-
2,133,412
-
-
17,038
-
754,878
289,578
17,038
2,133,412
21,22,26
23
12
20
Total at December 31, 2020
3,177,868
17,038
3,194,906
(amounts in thousands of Euro)
Financial payables
Trade payables
Derivative financial instruments
Financial lease
Loans and
payables
Derivative financial
instruments
Total
Note
828,992
327,330
-
2,415,298
-
-
20,106
-
828,992
327,330
20,106
2,415,298
21,22,26
23
12
20
Total at December 31, 2019
3,571,620
20,106
3,591,726
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements FAIR VALUE
The repor ted amount of derivative instruments, whether assets or liabilities,
reflects their fair value, as explained in this Note 12.
The carrying amount of Cash and cash equivalents, Financial receivables and Trade
receivables, as adjusted for impairment where necessary as required by IFRS 9,
approximates their estimated realizable value and, hence, their fair value.
The repor ted amount of Investments in equity instruments corresponds to its fair
value (Level I), as explained in Note 18.
Lease Liability is repor ted at the present value, while all of the other financial
liabilities are carried at approximately their fair value.
CREDIT RISK
Credit risk is defined as the risk of financial loss caused by the failure of a
counterpar ty to meet its contractual obligations. The maximum risk to which
an entity is exposed is represented by all the financial assets recognized in the
financial statements. Management considers its credit risk to regard primarily the
trade receivables generated from the wholesale channel and its cash holding, and
mitigates the related effects through specific commercial and financial strategies.
With regards trade receivables, the credit risk management is carried out by
monitoring the reliability and solvency of customers, as well as through insurance
agreements, as explained also in the section describing risk factors in the Financial
Review.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements TRADE RECEIVABLES
The following table contains a summary, by due date, of Trade receivables before
the Allowance for bad and doubtful debts at the repor ting date:
(amounts in thousands of Euro)
December
31, 2020
Not
overdue
Overdue (in days)
1 30
31 60
61 90
91 120
> 120
Trade receivables
302,359
265,763
6,157
12,724
1,492
895
15,328
Total at December 31, 2020
302,359
265,763
6,157
12,724
1,492
895
15,328
(amounts in thousands of Euro)
December
31, 2019
Not
overdue
Overdue (in days)
1 30
31 60
61 90
91 120
> 120
Trade receivables
326,908
292,879
13,845
6,092
1,006
1,326
11,760
Total at December 31, 2019
326,908
292,879
13,845
6,092
1,006
1,326
11,760
The following table contains a summary, by due date, of Trade receivables less the
Allowance for bad and doubtful debts at the repor ting date:
(amounts in thousands of Euro)
December
31, 2020
Not
overdue
Overdue (in days)
1 30
31 60
61 90
91 120
> 120
Trade receivables less allowance
for doubtful accounts
290,380
263,358
6,094
12,720
1,492
854
5,862
Total at December 31, 2020
290,380
263,358
6,094
12,720
1,492
854
5,862
(amounts in thousands of Euro)
December
31, 2019
Not
overdue
Overdue (in days)
1 30
31 60
61 90
91 120
> 120
Trade receivables less allowance
for doubtful accounts
317,554
291,847
13,761
6,078
997
1,324
3,547
Total at December 31, 2019
317,554
291,847
13,761
6,078
997
1,324
3,547
As of the repor ting date, the expected loss on receivables is fully covered by the
allowance for doubtful debts. The changes in that allowance are presented in Note 10.
BANK CURRENT ACCOUNTS AND DEPOSITS
Bank deposits accounts are broken down by currency as follows:
(amounts in thousands of Euro)
Hong Kong Dollar
Chinese Renmimbi
Other Currencies
Total bank deposit accounts
182
December 31
2020
December 31
2019
62,305
37,606
20,652
66,752
47,143
16,549
120,563
130,444
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
The Group aims to reduce the default risk on bank deposits by allocating the
available funds to multiple accounts that differ by currency, country and bank
(always investment grade); such investments are always shor t-term.
Bank current accounts are broken down by currency as follows:
(amounts in thousands of Euro)
Euro
US Dollar
GB Pound
Hong Kong Dollar
Korean Won
Other Currencies
December 31
2020
December 31
2019
108,877
76,925
10,953
6,439
5,027
87,790
68,079
92,617
12,410
10,170
3,032
48,885
Total bank current accounts
296,011
235,193
The Group considers no significant risk to exist on bank accounts given that their
use is strictly connected with operating activities and business processes and,
therefore, they are spread over a large number of banks.
LIQUIDIT Y RISK
Liquidity risk refers to the difficulty the Group could have in meeting its financial
obligations. The Directors are responsible for managing liquidity risk, while the
Chief Financial Office (“CFO”) is in charge of optimizing the management of
financial resources.
According to management, the funds and credit lines currently available, in
addition to those that will be generated by operating and financing activities,
will enable the Group to meet its financial requirement arising from investing
activities, working capital management, punctual loan repayment and dividends
payments as planned.
As of December 31, 2020, the Group has undrawn cash credit lines of Euro 1,009
million (Euro 717 million as of December 31, 2019) available at banks (Euro 600
million of committed loans and Euro 409 million of uncommitted ones).
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
The following table summarized trade payables by maturity date:
(amounts in thousands of Euro)
December
31, 2020
Not
overdue
Overdue (days)
1 30
31 60
61 90
91 120
> 120
Trade payables
289,578
262,158
10,830
2,725
1,139
652
12,074
Total at December 31, 2020
289,578
262,158
10,830
2,725
1,139
652
12,074
(amounts in thousands of Euro)
December
31, 2019
Not
overdue
Overdue (days)
1 30
31 60
61 90
91 120
> 120
Trade payables
327,330
305,620
7,222
2,353
Total at December 31, 2019
327,330
305,620
7,222
2,353
982
982
599
10,554
599
10,554
FINANCIAL LIABILITIES UNDER DERIVATIVE FINANCIAL
INSTRUMENTS
(FORWARD CONTRACTS AND OPTIONS)
The maturities of the financial liabilities according to the earliest date on which
the Group could be required to pay (worst-case scenario) are presented in the
following tables.
As required by IFRS 7, the following tables show the financial liabilities under
forward contracts and options designated as cash flow hedges where a negative
cash flow is expected at the repor ting date:
(amounts in thousands of Euro)
Future
contractual
cash flows at
Dec. 31, 2020
6 mths
or less
6 to 12
mths
1 to 2
years
2 to 3
years
3 to 4
years
more than
4 years
Net cash flows (outflows/inflows) of forward
contracts
(2,931)
(2,351)
Net cash flows (outflows/inflows) of options
(2,045)
(860)
(580)
(619)
-
-
(355)
(135)
-
(70)
Net amount
(4,976)
(3,211)
(1,199)
(355)
(135)
(70)
-
(6)
(6)
(amounts in thousands of Euro)
Future
contractual
cash flows at
Dec. 31, 2019
6 mths
or less
6 to 12
mths
1 to 2
years
2 to 3
years
3 to 4
years
more than
4 years
Net cash flows (outflows/inflows) of forward
contracts
(7,112)
(5,196)
(1,916)
-
-
Net cash flows (outflows/inflows) of options
(1,382)
(419)
(308)
(395)
(174)
-
(61)
-
(25)
Net amount
(8,494)
(5,615)
(2,224)
(395)
(174)
(61)
(25)
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
FINANCIAL LIABILITIES UNDER DERIVATIVE FINANCIAL
INSTRUMENTS
(INTEREST RATE SWAPS)
As required by IFRS 7, the following tables show interest rate swaps where a
negative cash flow is expected at the repor ting date:
(amounts in thousands of Euro)
Future
contractual
cash flows at
Dec. 31, 2020
6 mths
or less
6 to 12
mths
1 to 2
years
2 to 3
years
3 to 4
years
more than
4 years
Interest rate swap cash flow hedge
(11,790)
(1,081)
(1,047)
(2,314)
(1,762)
(1,532)
(4,054)
Net amount
(11,790)
(1,081)
(1,047)
(2,314)
(1,762)
(1,532)
(4,054)
(amounts in thousands of Euro)
Future
contractual
cash flows at
Dec. 31, 2019
6 mths
or less
6 to 12
mths
1 to 2
years
2 to 3
years
3 to 4
years
more than
4 years
Interest rate swap cash flow hedge
(11,467)
(1,057)
(1,470)
(2,140)
(1,643)
(1,281)
(3,876)
Net amount
(11,467)
(1,057)
(1,470)
(2,140)
(1,643)
(1,281)
(3,876)
FINANCIAL LIABILITIES
(amounts in thousands of Euro)
Carrying
amount at
Dec. 31,
2020
Future
contractual
cash flows at
Dec. 31,
2020
on
demand
6 mths
or less
6 to 12
mths
1 to 2
years
2 to 3
years
3 to 4
years
more
than 4
years
Lease Liability (IFRS 16)
2,133,412
2,271,858
- 227,342
204,518
370,768 294,191
257,501
917,538
Financial liabilities – third parties
(without deferred costs on loans)
752,673
763,809
- 248,205
55,265
185,442
59,984
48,891
166,022
Financial liabilities – related parties
3,097
3,097
-
-
3,097
-
-
-
-
Total
2,889,182
3,038,764
475,547
262,880
556,210 354,175
306,392 1,083,560
(amounts in thousands of Euro)
Carrying
amount at
Dec. 31,
2019
Future
contractual
cash flows at
Dec. 31,
2019
on
demand
6 mths
or less
6 to 12
mths
1 to 2
years
2 to 3
years
3 to 4
years
more
than 4
years
Lease Liability (IFRS 16)
2,415,298
2,583,747
Financial liabilities – third parties
(without deferred costs on loans)
827,060
847,224
Financial liabilities – related parties
3,387
3,387
-
-
-
248,048 212,012 394,243
359,236
281,000 1,089,208
193,104 53,244 200,892 258,920
42,680
98,384
-
3,387
-
-
-
-
Total
3,245,745
3,434,358
-
441,152 268,643 595,135
618,156
323,680 1,187,592
Some of the above financial liabilities contain loan covenants, as described in Note
26.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
SENSITIVIT Y ON EXCHANGE RATE RISK
The exchange rate risk to which the Group is exposed is concentrated largely with
PRADA spa and results from fluctuation of foreign currencies against the Euro.
For PRADA spa, the foreign exchange risk substantially consists of the risk that
cash flows from retail and distribution activities could fluctuate as a result of
changes in exchange rates. In terms of exposure, the most impor tant currencies
for the Group are the U.S. Dollar, Hong Kong Dollar, Japanese Yen, British Pound
and Chinese Renminbi.
The following table shows the sensitivity of the consolidated net income and equity
to a range of hypothetical fluctuations in the main foreign currencies against the
Euro, based on the statement of financial position of the Group’s companies as of
December 31, 2020:
(amounts in thousands of Euro)
Euro strengthens by 5%
Euro weakens by 5%
Impact on net result
Impact on net equity
Impact on net result
Impact on net equity
GP Pound
Hong Kong Dollar
Japanese Yen
US Dollar
Chinese Renminbi
Other currencies
Total
(1,655)
1,868
1,738
6,048
(2,386)
(4,129)
912
2,618
5,840
10,148
5,093
3,701
1,786
(2,047)
(1,918)
(6,535)
2,202
4,384
(1,177)
(2,827)
(5,827)
(10,868)
(6,896)
(4,401)
1,485
28,312
(2,129)
(31,996)
The total impact on equity (positive for Euro 28.3 million and negative for Euro 32
million) is the sum of the theoretical effect on the statement of profit or loss and
on the cash flow hedge reserve of a hypothetical appreciation/depreciation of the
Euro against the other currencies.
The effects on the financial statement items are presented above before taxes. The
sensitivity analysis is based on currency exposure at the end of the period, which
might not reflect the actual exposure during the period. For this reason it is purely
indicative.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements SENSITIVIT Y ON INTEREST RATE RISK
The Prada Group is exposed to interest rate fluctuations mainly with regard to
interest expense on the medium/long-term debt of the parent company, PRADA
spa, and of some of its subsidiaries. Managing this risk falls within the scope of
the risk management activities carried out by the CFO.
The following table shows the sensitivity of the consolidated net income and equity
to a hypothetical shift in the interest rate curve based on the financial position of
the Group’s companies at December 31, 2020:
(amounts in thousands of Euro)
+0.50%
-0.50%
Impact on net result
Impact on net equity
Impact on net result
Impact on net equity
Interest rate curve shift
Euro
GB Pound
Hong Kong Dollar
Japanese Yen
US Dollar
Other currencies
Total
(2,273)
(217)
344
(556)
345
677
(1,682)
(1,180)
1,361
344
(556)
345
677
989
2,273
217
(344)
556
(345)
(677)
1,682
1,142
(1,361)
(344)
556
(345)
(677)
(1,027)
The total impact on equity (positive and negative for Euro 1 million) is the sum
of the theoretical effect on the statement of profit or loss and on the cash flow
hedge reserve of a hypothetical shift in the interest rate curve. The effects on the
financial statement items are presented above before taxes.
The sensitivity analysis is based on the net financial position at the end of the
period, which might not reflect the actual exposure to interest rate risk during the
period. For this reason it is purely indicative.
OTHER RISKS
Risks factors affecting the international luxury goods market and those specific
to the Prada Group other than the risks repor ted above (liquidity risk, credit risk,
foreign exchange risk and interest rate risk) are disclosed in the Financial Review.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 13. RE CEIVABLES FROM, AND ADVANCE PAYMENTS TO, RELATED
P ARTIES – CURRENT AND NON-CURRENT
The current Receivables and advances from related par ties are detailed as follows:
(amounts in thousands of Euro)
Prepaid sponsorship
Other receivables and advances
Financial receivables
Receivables from and advances to related parties - current
December 31
2020
December 31
2019
25,032
26,003
-
51,035
13,522
6,027
2,004
21,553
The Prepaid sponsorship at December 31, 2020 regards the contract in place
between PRADA spa and Challenger of Record 36 srl, under the sponsorship
agreement for the management of the 36 th America’s Cup events, and the contract
in place between PRADA spa and Luna Rossa Challenge srl, under the sponsorship
agreement for the par ticipation of the sailing team in the aforementioned
competition.
In the O ther receivables and advances Euro 20 million refer to the shor t-term par t
of the receivable for the sale of the proper ty in Via della Spiga 18 in Milan.
The non-current Receivables and advances from related par ties are detailed as
follows:
(amounts in thousands of Euro)
Other receivables and advances
Financial receivables
Receivables from and advances to related parties - non-current
December 31
2020
December 31
2019
18,309
1,125
19,434
309
375
684
The O ther receivables and advances essentially refer to the long-term par t of the
receivable for the sale of the proper ty in via della Spiga 18 in Milan.
Additional information on related par ty transactions is provided in Note 40.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
14. O THER CURRENT ASSETS
The O ther current assets are set for th below:
(amounts in thousands of Euro)
VAT
Taxation and other tax receivables
Other assets
Prepayments
Deposits
Total
OTHER ASSETS
The O ther assets are detailed as follows:
(amounts in thousands of Euro)
Advances to suppliers
Incentives for retail investments
Other receivables
Total
December 31
2020
December 31
2019
34,677
100,406
4,605
48,319
6,181
59,610
87,372
20,486
43,290
10,718
194,188
221,476
December 31
2020
December 31
2019
1,250
20
3,335
4,605
3,287
43
17,156
20,486
The decrease in the O ther receivables relates to the collection of receivables
relating to the sale of lease contracts for commercial space.
PREPAYMENTS
The Prepayments are detailed as follows:
(amounts in thousands of Euro)
Rental costs
Insurance
Design costs
Fashion shows and advances on advertising campaigns
Other
Total
December 31
2020
December 31
2019
1,689
1,957
21,198
6,911
16,564
48,319
3,400
1,944
11,631
12,045
14,270
43,290
The prepaid design costs consist primarily of costs incurred to design collections
that will generate revenue after the repor ting period.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
DEPOSITS
The guarantee deposit refers primarily to security deposits paid under retail leases.
The Group’s receivable relating to security deposits from commercial leases,
both classified as shor t-term and long-term, is reduced compared to December
31, 2019 due to some renegotiations that have made it possible to conver t this
liquidity commitment into bank guarantees.
15. P ROPERT Y, PLANT AND EQUIPMENT
The Historical cost and Accumulated depreciation of the past two years are set
for th below:
(amounts in thousands of Euro)
Land and
buildings
Production
plant and
machinery
Leasehold
improve-
ments
Furniture
& fittings
Other
tangibles
Assets
under
construction
Total
Historical cost
Accumulated depreciation
926,471
220,975
1,400,858
619,105
180,540
41,487
3,389,436
(141,406)
(157,352)
(1,011,315)
(325,534)
(111,349)
-
(1,746,956)
Net carrying amount at December 31, 2019
785,065
63,623
389,543
293,571
69,191
41,487
1,642,480
Historical cost
Accumulated depreciation
917,519
230,663
1,309,080
599,787
178,915
38,332
3,274,296
(155,018)
(171,987)
(991,399)
(333,605)
(116,276)
-
(1,768,285)
Net carrying amount at December 31, 2020
762,501
58,676
317,681
266,182
62,639
38,332
1,506,011
The changes in the Net book value for the year are as follows:
(amounts in thousands of Euro)
Land and
buildings
Production
plant and
machinery
Leasehold
improve-
ments
Furniture
& fittings
Other
tangibles
Assets
under
construction
Total net
carrying
amount
Opening balance
785,065
63,623
389,543
293,571
69,191
41,487
1,642,480
Change in the consolidation area
Additions
Depreciation
Disposals
Exchange differences
Other movements
Impairment
4,726
1,440
31
-
22
1
-
4,780
6,169
36,019
19,004
5,539
18,432
86,603
(17,564)
(11,778)
(94,888)
(37,959)
(10,324)
(2,521)
(12,084)
3,439
-
(410)
(117)
1,182
(24)
(253)
(15,779)
8,373
(5,334)
(154)
(8,060)
4,169
(4,411)
(40)
(413)
-
-
(172,513)
(3,378)
(582)
(37,035)
(1,274)
(17,919)
(2,030)
(41)
(3,086)
(12,896)
Closing balance
762,501
58,676
317,681
266,182
62,639
38,332
1,506,011
The change in the consolidation area referred to the acquisition of Pelletteria
Figline srl, as described in Note 7.
The disposals under Land and buildings referred to the sale of the real estate
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements used to operate the Prada store in via della Spiga 18 in Milan, which closed in
March 2020 following the pandemic and never reopened. On December 29, 2020,
with a view to profitably realize no longer strategic assets, PRADA spa sold the
aforementioned proper ty to the related par ty Orexis srl for a consideration of Euro
40 million. This value was suppor ted by an independent appraisal, as repor ted
in the Announcement published the same day of the transaction following the
application of the HK Stock exchange Listing Rules. The consideration, apar t from
the amount of Euro 2 million received immediately, will be collected for Euro 20
million in 2021 and for Euro 18 million in 2022 (Note 40).
The increases in Furniture and fittings and in Leasehold improvements relate to
projects for the restyling and relocation of commercial spaces which, despite the
emergency context linked to the pandemic, were considered a priority.
Assets under construction at the end of the period mainly refer to projects to be
completed in the industrial and retail sectors.
The impairment for the period, equal to Euro 12.9 million, essentially refer to the
write-down of store assets due to closures or renovations.
16. INTANGIBLE ASSETS
The Historical cost and Accumulated amor tization of the past two years are set
for th below:
(amounts in thousands of Euro)
Trade-
marks and
intellectual
property
rightss
Goodwill
Store Lease
Acquisitions
Software
Other
intangibles
Assets in
progress
Total
Historical cost
Accumulated amortization
407,921
(182,672)
548,931
(30,228)
55,131
164,583
63,102
33,277
1,272,945
(53,975)
(106,359)
(55,881)
-
(429,115)
Net carrying amount at December 31, 2019
225,249
518,703
1,156
58,224
7,221
33,277
843,830
Historical cost
Accumulated amortization
404,261
(193,856)
551,217
(37,731)
54,445
201,677
63,620
20,985
1,296,205
(53,675)
(120,709)
(57,789)
-
(463,760)
Net carrying amount at December 31, 2020
210,405
513,486
770
80,968
5,831
20,985
832,445
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements The changes in the Net book value for the year are as follows:
(amounts in thousands of Euro)
Trade-
marks and
intellectual
property
rights
Goodwill
Store Lease
Acquisitions
Software
Other
intangibles
Assets in
progress
Total net
carrying
amount
Opening balance
225,249
518,703
1,156
58,224
7,221
33,277
843,830
Change in the consolidation area
Additions
Amortization
Exchange differences
Other movements
Impairment
-
451
(13,160)
(2,135)
-
-
3,663
-
-
(480)
-
(8,400)
-
3
-
23,937
-
346
(393)
(15,646)
(2,008)
(6)
10
-
(41)
14,494
-
(4)
276
-
-
2,757
-
1
(15,050)
-
3,663
27,494
(31,207)
(2,665)
(270)
(8,400)
Closing balance
210,405
513,486
770
80,968
5,831
20,985
832,445
The Net book value of Trademarks and intellectual proper ty rights at the repor ting
date is broken down in the following table:
(amounts in thousands of Euro)
Miu Miu
Church's
Prada
Other trademarks and other intellectual property rights
Total
December 31
2020
December 31
2019
127,362
70,757
5,141
7,145
132,921
76,679
5,351
10,298
210,405
225,249
No impairment was recognized for the Group’s trademarks during the year.
The change in the consolidation area referred to the acquisition of Pelletteria
Figline srl as described in Note 7.
The investments classified under Software refer to numerous technological and
digital evolution projects in the retail, manufacturing and corporate sectors.
The impairment of the period, equal to Euro 8.4 million, refers to the devaluation
of the Goodwill of the Church’s Group as better described below.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
The total capital expenditure for Tangibles and Intangibles fixed assets in the
twelve months ended December 31, 2020 was Euro 121.7 million, as broken down
below:
(amounts in thousands of Euro)
Retail
Real Estate
Production, Logistics and Corporate
Total
IMPAIRMENT TEST
twelve months ended
December 31
2020
twelve months ended
December 31
2019
61,056
-
60,686
121,919
60,351
119,460
121,742
301,730
As required by IAS 36, “Impairment of Assets,” intangible assets with indefinite
useful lives are not amor tized, but are tested for impairment at least once per
year. The Group does not repor t intangible assets with indefinite useful lives other
than goodwill. As December 31, 2020, goodwill amounted to Euro 513.5 million,
detailed by Cash Generating Unit (“CGU”) as follows:
(amounts in thousands of Euro)
Italy Wholesale
Asia Pacific and Japan Retail
Italy Retail
Germany and Austria Retail
United Kingdom Retail
Spain Retail
France and Montecarlo Retail
North America Retail and wholesale
Production Division
Church's
Pasticceria Marchesi 1824
Total
December 31
2020
December 31
2019
78,355
311,936
25,850
5,064
9,300
1,400
11,700
48,000
13,906
-
7,975
78,355
311,936
25,850
5,064
9,300
1,400
11,700
48,000
10,169
8,954
7,975
513,486
518,703
IAS 36 requires an entity to assess at each annual repor ting date whether there
are indications of impairment for any other asset recognized in the Statement of
Financial Position. Due to the Covid-19 pandemic, which constitutes an indicator
of impairment because of its effects on the entire luxury goods industry and
the persisting uncer tainties at the repor ting date, impairment testing was also
conducted on the Miu Miu and Church’s brands, being significant intangible asset
values (respectively equal to Euro 127.4 million and Euro 70.8 million at December
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 31, 2020), and on the net invested capital of some CGUs relating to the retail
activity.
The method used to identify the recoverable amount (value in use) of all the
aforementioned CGUs, except for the brands, consisted of discounting the
projected cash flows (Discounted Cash Flow) generated by the activities directly
attributable to the segment to which the intangible asset or net invested capital
has been assigned (CGU). Value in use was the sum of the present value of future
cash flows expected from the business plan projections prepared for each CGU
and the present value of the related operating activities at the end of the period
(terminal value).
In response to planning difficulties arising from the public health emergency,
future retail and wholesale revenues were projected on the basis of par ticularly
conservative scenarios, predicting a gradual return to pre-Covid sales volumes
with growth in line with the most recent industry forecasts published by third-par ty
exper ts. Fur thermore, the rent concessions and government subsidies obtained in
2020 were not projected in the plans. Finally, no significant improvement in the
per formance of the assets existing at December 31, 2020 was projected.
The rate used to discount cash flows was calculated using the weighted average
cost of capital (“WACC). For the year ended December 31, 2020, the WACC used
for discounting purposes ranged between 3.8% and 14.5% (between 4.2% and
12.6% at December 31, 2019).
The WACC was calculated ad hoc for each CGU subject to impairment, considering
the parameters specific to the geographical area: market risk premium and
sovereign bond yield. For the latter data, the observation period for determining
the risk-free rate was extended in some cases to five years in order to minimize the
dilutive effect on rates of the expansionary monetary policies adopted by central
banks to cope with the public health emergency.
The “g” rate of growth used to calculate the terminal value ranged between 1.5%
and 13%, according to different inflation and GDP outlooks in the various markets.
However, the prevalent growth rate was 2%, which can be considered prudent
given the average growth expected for the luxury goods market in general and the
specific growth rate projected for the Prada Group at the repor ting date.
Except for the Church’s Group, classified as a single CGU, the impairment tests did
not identify any impairment losses. For the English Group, the test resulted in an
impairment loss of Euro 8.4 million, representing the writedown of the remaining
goodwill in the accounts, considered difficult to realize by the Directors within the
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements context of the emergency situation caused by the pandemic. This CGU was valuated
by comparing the carrying amount of net invested capital items with the fair value
(less costs to sell) of such items, deemed the best approach for expressing the
value of the centenarian Group in the current uncer tain situation. In the specific
case of the trademark (equal to Euro 70.8 million at December 31, 2020), the fair
value was measured by using the royalty relief method. According to such method,
the Group estimated the cash flows obtainable from an hypothetical licensing of
the asset, assuming to earn a 9% royalty income, in line with comparable market
practices. The remainder of the net invested capital, amounting to Euro 90 million
(out of which Euro 50 million for Rights of Use of assets and Euro 24.1 million for
net operating working capital), was considered to be approximately its realizable
value.
In order to ensure that the changes to the main assumptions did not significantly
affect the results of the impairment tests, sensitivity analyzes were conducted on
90% of the goodwill recognized in the Statement of the financial position. With
these stress tests, the growth rate “g” for the terminal period was reduced by
up to 50 basis points, while the WACC rate was increased up to 50 basis points,
continuing to show significant coverage.
However, since values in use and fair values are measured on the basis of estimates
and assumptions, management cannot guarantee that the value of goodwill or of
other tangible or intangible assets will not be subject to impairment in the future.
17. RIGHT OF USE ASSETS
The changes in the Net book value of the Right of Use assets for the period ended
December 31, 2020 are shown below:
(amounts in thousands of Euro)
Real Estate
Vehicles
Hardware
Plant and
machinery
Total net
carrying amount
Opening balance
2,358,995
1,692
Change in the consolidation area
New contracts, initial direct costs and remeasurements
Depreciation
Contracts termination
Exchange differences
2,954
253,200
(441,988)
(24,408)
(97,985)
10
545
(1,073)
(7)
(4)
Closing balance
2,050,768
1,163
237
-
91
(84)
1
(17)
228
1,917
2,362,841
-
1,029
(765)
-
(2)
2,964
254,865
(443,910)
(24,414)
(98,008)
2,179
2,054,338
The change in the consolidation perimeter refers to the Group’s acquisition of
Pelletteria Figline srl in September 2020 as described in Note 7.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements The increase for New leases, initial direct costs and remeasurements was attributable
to lease renewals (mainly in Asia Pacific and the U.S.A.) and the remeasurement
of the liability to adjust to indexes commonly used in the real estate industry
(primarily the consumer price index).
Lease terminations amounted to Euro 24 million for the period and referred mainly
to leases in Europe.
The exchange differences of the period impacted significantly the Right to Use
assets, as a consequence of the Euro currency revaluation against all the main
currencies of the countries in which the Group operates.
18. INVESTMENTS IN EQUIT Y INSTRUMENTS
(amounts in thousands of Euro)
Investments in equity instruments
Other investments
Total
December 31
2020
December 31
2019
64,203
1,988
66,191
79,408
2,040
81,448
The Group, after appropriate evaluation by the respective corporate bodies, invests
surplus liquidity in highly rated equity securities listed on the most impor tant
stock markets in the world. The decrease for the year referred to the changes in
the fair value, recognized through a specific equity reserve.
19. O THER NON-CURRENT ASSETS
The O ther non-current assets are detailed as follows:
(amounts in thousands of Euro)
Guarantee Deposits
Deferred rental income
Pension fund surplus (Note 27)
Prepayments for commercial agreements
Other long-term assets
December 31
2020
December 31
2019
60,051
533
11,277
58,427
12,424
70,732
968
15,315
62,600
15,757
Total
142,712
165,372
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements The Guarantee deposits are set for th below by nature and maturity:
(amounts in thousands of Euro)
December 31
2020
December 31
2019
Nature:
Stores
Offices
Warehouses
Other
Total
(amounts in thousands of Euro)
Maturity:
between one to two years
between two to five years
After more than five years
Total
53,637
3,847
123
2,444
60,051
64,981
3,850
134
1,767
70,732
December 31
2020
4,187
19,364
36,500
60,051
The guarantee deposits refer primarily to security deposits paid under retail leases.
Prepayments for commercial agreements, equal to Euro 58.4 million at December
31, 2020, refer to a contract signed in 2019 and for which the related benefits are
expected star ting from January 1, 2021. The reduction compared to December
31, 2019 referred exclusively to the shor t-term por tion scheduled for the next 12
months.
20. LEASE LIABILIT Y
The following table sets for th the Lease Liability:
(amounts in thousands of Euro)
Short-term Lease Liability
Long-term Lease Liability
Total
December 31
2020
December 31
2019
403,593
1,729,819
409,537
2,005,761
2,133,412
2,415,298
The Lease Liability decreased by approximately Euro 282 million compared to
December 31, 2019 mainly due to payments for the period (Euro 373 million),
to discounts obtained on rents and to the favorable effect of the differences
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements exchange. The new contracts and the remeasurements, net of the closures for the
period, instead led to an increase in the Lease Liability for approximately Euro 230
million.
The Lease Liability is concentrated mainly in Japan, U.S.A. and Italy.
21. SHORT-TERM FINANCIAL PAYABLES AND BANK OVERDRAF TS
(amounts in thousands of Euro)
Short-term bank loans
Current portion of long-term loans
Deferred costs on loans
Total
December 31
2020
December 31
2019
97,115
203,861
(399)
136,093
106,017
(646)
300,577
241,464
The Shor t-term bank loans as at December 31, 2020 consist substantially of
the use of credit lines by PRADA Japan co ltd for Euro 96.5 million. Some of
these credit lines contain covenants based on the results of PRADA Japan co ltd’s
financial statements, all of which were met as at December 31, 2020.
Shor t-term bank loans are broken down by currency below:
(amounts in thousands of Euro)
Euro
Japanese Yen
Other currencies
Total
December 31
2020
December 31
2019
576
96,462
77
97,115
45,000
90,207
886
136,093
The Group generally borrows at variable interest rates, as explained in Note 26,
and manages the risk of interest rate fluctuations by using hedging agreements, as
explained in Note 12.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 22. P AYABLES TO RELATED PARTIES – CURRENT AND NON-CURRENT
The current Payables to related par ties are shown below:
(amounts in thousands of Euro)
Financial payables
Other payables
Payables to related parties - current
December 31
2020
December 31
2019
3,101
380
3,481
3,387
22,670
26,057
The non-current Payables to related par ties are shown below:
(amounts in thousands of Euro)
Other payables
Payables to related parties - non-current
December 31
2020
December 31
2019
-
-
20,660
20,660
The current Financial payables due to related par ties regard two interest-free
loans granted by non-controlling shareholders of the Group’s subsidiaries in the
Middle East.
At December 31, 2019 the O ther payables (current and non-current) related to
the residual debt for the acquisition of Fratelli Prada spa, paid in the current year.
The payables due to related par ties are analyzed in Note 40.
23. TRADE PAYABLES
The Trade payables are detailed as follows:
(amounts in thousands of Euro)
Trade payables – third parties
Trade payables – related parties
Total
December 31
2020
December 31
2019
286,653
2,925
322,105
5,225
289,578
327,330
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 24. TAX PAYABLES
The tax payables are detailed hereunder:
(amounts in thousands of Euro)
Current taxation
VAT and other taxes
Total
December 31
2020
December 31
2019
15,691
53,172
68,863
35,065
48,744
83,809
The Group recognizes current tax liabilities of Euro 15.7 million at December 31,
2020 (Euro 35.1 million at December 31, 2019) against tax receivables of Euro
100.4 million (Euro 87.4 million at December 31, 2019), as repor ted in Note 14.
25. O THER CURRENT LIABILITIES
The O ther current liabilities are detailed as follows:
(amounts in thousands of Euro)
Payables for capital expenditure
Accrued expenses and deferred income
Other payables
Total
December 31
2020
December 31
2019
39,958
24,944
88,480
38,588
18,098
75,608
153,382
132,294
The Accrued expenses and deferred income increased due to the shor t-term
reclassification of trade agreements, the effects of which will begin to impact from
January 1, 2021.
The O ther payables are detailed as follows:
(amounts in thousands of Euro)
Short-term benefits for employees and other personnel
Customer advances
Returns from customers
Other
Total
December 31
2020
December 31
2019
55,525
16,980
14,006
1,969
88,480
55,158
9,553
7,838
3,059
75,608
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 26. L ONG-TERM FINANCIAL PAYABLES
The Long-term financial payables are as follows:
(amounts in thousands of Euro)
Long-term bank borrowings
Deferred costs on loans
Total
December 31
2020
December 31
2019
451,695
(495)
584,950
(809)
451,200
584,141
In January 2020 PRADA spa took out a new sustainability-linked bank loan of
Euro 75 million. Like the previous such loan stipulated in 2019, it provides for an
adjustment of the annual interest based on the achievement of sustainability goals
regarding the number of Leadership in Energy and Environmental Design (LEED)
cer tifications, the use of regenerated nylon and the number of training hours for
employees.
In April 2020 PRADA spa took out a 5-year bullet bank loan of Euro 100 million.
PRADA spa’s loans covenants were fully complied at December 31, 2020.
In 2020, PRADA spa and other Group companies repaid current por tions of long-
term loans for an amount of Euro 205.6 million.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements The Long-term bank borrowings as at December 31, 2020, excluding amor tized
costs, are set for th below:
Type
of loan
Currency
Expiry
date
Interest
rate (1)
Current
Portion
(Euro
thousands)
Non-current
Portion
(Euro
thousands)
Pledge
Borrower
PRADA spa
PRADA spa
PRADA spa
PRADA spa
PRADA spa
PRADA spa
PRADA spa
PRADA spa
PRADA spa
Amount in
thousands
of Euro
58,500
50,000
34,834
40,000
100,000
37,500
90,000
77,778
75,000
Term-loan
Term-loan
Term-loan
Term-loan
Term-loan
Term-loan
Term-loan
Term-loan
Term-loan
PRADA Japan Co.Ltd
13,834
Syndicate loan
PRADA Japan Co.Ltd
13,834
Syndicate loan
Kenon Ltd
Prada Middle East
Tannerie Limoges sas
Hipic Prod Impex srl
54,475
5,094
1,875
2,832
Term-loan
Term-loan
Term-loan
Term-loan
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
JPY
JPY
GBP
USD
EUR
RON
02/2022
06/2022
05/2030
10/2024
04/2025
06/2022
02/2021
06/2024
01/2025
09/2022
09/2022
01/2029
02/2022
07/2024
11/2021
1.056%
0.750%
2.737%
1.030%
0.387%
0.480%
1.613%
0.367%
0.708%
0.479%
0.479%
4.477%
2.350%
1.200%
3.990%
8,500
-
3,667
10,000
-
25,000
90,000
22,222
18,000
7,906
7,906
3,253
4,075
500
2,832
50,000
50,000
-
-
31,167 Mortgage ioan
30,000
100,000
12,500
-
55,556
57,000
5,928
5,928
-
-
-
-
-
-
-
-
51,222 Mortgage ioan
1,019
-
1,375 Mortgage ioan
-
-
Total
655,556
203,861
451,695
(1) the interest rates include the effect of any interest rate risk hedges
PRADA spa’s mor tgage loan is secured by the building in Milan used for the Group’s
headquar ters, and Kenon ltd’s mor tgage loan is secured by the building on Old
Bond Street, London, used for one of the most prestigious Prada stores in Europe.
The loan to Tannerie Limoges sas is secured by such company’s factory building.
The Group generally borrows at variable interest rates and manages the risk of
interest rate fluctuations through hedging agreements, as described in Note 12.
The financial payables are set for th hereunder by their por tions with fixed and
variable interest rates:
December 31, 2020
December 31, 2019
variable
interest rates
fixed
interest rates
variable
interest rates
fixed
interest rates
Short-term financial payables
Long-term financial payables
65%
71%
35%
29%
89%
42%
11%
58%
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 27. LONG-TERM EMPLOYEE BENEFITS
(amounts in thousands of Euro)
Post-employment benefits
Other long-term employee benefits
Total liabilities for long-term benefits
Pension plan surplus (note 18)
Net liabilities for long-term benefits
December 31
2020
December 31
2019
54,160
19,096
73,256
52,882
10,637
63,519
(11,277)
(15,316)
61,979
48,203
POST-EMPLOYMENT BENEFITS
The net balance of Long-term employee benefits as at December 31, 2020 is a
liability of Euro 62 million (Euro 48.3 million as of December 31, 2019) and all the
benefits are classified as defined benefit plans.
The Post-employment benefits consist of Euro 28.1 million (Euro 26.2 million at
December 31, 2019) in liabilities accounted for by Italian companies and Euro
26.1 million by the foreign subsidiaries (Euro 26.6 million in at December 31,
2019). The Italian liabilities regard the “ Trattamento di Fine Rappor to” (“ TFR”, or
staff leaving indemnities), a deferred benefit for employees that is mandatory for
Italian businesses and is based on the employees’ length of service and pay. The
present value of the liability recognized was determined by projecting the amount
accrued as of December 31, 2020 under Italian law to the estimated future date of
employment termination, discounting it to the present value at the same repor ting
date using the projected unit credit method (“PUCM”).
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements The following table presents the changes in long-term employee benefits as at
December 31, 2020:
(amounts in thousands of Euro)
Defined
Benefit Plans in
Italy (TFR)
Defined Benefit
Plans in other
countries
(including Japan)
Pension
Funds in UK
Other
long-term
employee benefits
Total
Opening balance
26,235
26,647
(15,316)
10,637
48,203
Change in the consolidation area
Current service cost
Interest expenses (income)
Actuarial (gains)/losses
Benefits paid
Contributions
Exchange differences
795
882
(61)
2,033
(1,834)
-
-
-
3,985
112
(804)
(2,745)
-
(1,084)
-
295
(297)
3,447
-
(192)
786
-
7,759
34
1,234
(190)
-
(379)
795
12,921
(212)
5,910
(4,769)
(192)
(677)
Closing balance
28,050
26,111
(11,277)
19,095
61,979
The actuarial gains and losses are as follows:
(amounts in thousands of Euro)
Actuarial adjustments due to
(a) Changes in financial assumptions
(b) Changes in other assumptions
(e.g. demographic assumptions, remuneration increases)
Defined
Benefit Plans in
Italy (TFR)
Defined Benefit
Plans in Other
Countries
(including Japan)
Pension
Funds in UK
2,988
(955)
(195)
(609)
(5,945)
9,392
Actuarial (gains)/losses
2,033
(804)
3,447
The current service cost and interest expense/(income) are recognized in the
statement of profit or loss. The actuarial differences for O ther long-term employee
benefits are also recognized in the statement of profit or loss.
The TFR liability was measured on the basis of an independent appraisal by
Federica Zappari, an Italian actuary, member (n. 1134) of the Ordine Nazionale
degli Attuari (Italian Society of Actuaries). The technical basis was processed
using statistical data, whereas the demographic assumptions used variables such
as probability of death, probabilities of retirement and resignations, probability
of dismissals, contract expiration, leaving indemnity advances and supplementary
pension schemes.
The Post-employment benefits are stated net of the pension plan surplus attributable
to Group companies operating in the United Kingdom that supply pension services
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
to their employees. As at December 31, 2020, the fair value of such pension plans
is a surplus of Euro 11.3 million (Euro 15.3 million as of December 31, 2019). The
fair value of the plan assets was determined by the independent actuary Mercer
Limited. It is detailed below:
(amounts in thousands of Euro)
Fair value of plan assets
Fair value of plan liabilities
Pension plan surplus
December 31
2020
December 31
2019
72,009
(60,732)
70,088
(54,772)
11,277
15,316
The composition of the main plan assets on the repor ting date is as follows:
(amounts in thousands of Euro)
Equities
Alternatives
Bonds
Cash
Other
Total
December 31
2020
December 31
2019
24,819
5,860
34,515
5,919
896
27,876
7,628
31,244
3,340
57
72,009
70,145
The main actuarial assumptions used as at December 31, 2020 are as follows:
Average duration of plan (years)
Average increase in remuneration
Rate of inflation
Defined Benefit
Plans in Italy (TFR)
Pension
Funds in UK
Defined Benefit Plans
in Japan
11.8
1.30%
1.50%
15
2.60%
2.60%
13.8
3.37%
N/A
The main actuarial assumptions used as of December 31, 2019 were as follows:
Average duration of plan (years)
Average increase in remuneration
Rate of inflation
Defined Benefit
Plans in Italy (TFR)
Pension
Funds in UK
Defined Benefit Plans
in Japan
11.1
1.30%
1.50%
15
1.87%
1.87%
13.4
3.37%
N/A
The discount rate used to measure defined benefit plans was determined on the
basis of yields on bonds with an AA rating and a maturity date similar to that of
the plans.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements With respect to the December 31, 2020 liability, a sensitivity analysis was per formed
on the main actuarial variables such as discount rate, salary changes and inflation
rate. The analysis did not lead to significant changes in the liability, except for
the sensitivity analysis conducted on the interest rate curve, according to which
a 50 basis point increase or decrease would cause an increase or decrease in the
Group’s total defined benefit obligation (“DBO”) up to Euro 7 million.
OTHER LONG-TERM EMPLOYEE BENEFITS
The O ther long-term employee benefits meet the IAS 19 definition of long-term
employee benefits and refer to retention and per formance-based programs for
key-figures of the Group. Their actuarial valuation as of December 31, 2020 under
the PUCM methodology resulted in Euro 19.1 million (Euro 10.6 million as at
December 31, 2019), according to an independent actuarial appraisal.
28. P ROVISIONS FOR RISKS AND CHARGES
The changes in the Provisions for risks and charges are as follows:
(amounts in thousands of Euro)
Provision
for litigation
Provision for
tax disputes
Other
provisions
Total
Opening balance
Exchange differences
Reversals
Utilized
Increases
Closing balance
518
(3)
(115)
(105)
94
389
2,347
(66)
(470)
(689)
736
1,858
46,619
49,484
(1,640)
(612)
(6,191)
4,993
(1,709)
(1,197)
(6,985)
5,823
43,169
45,416
The Provisions for risks and charges represent management’s best estimate of the
maximum amount of potential liabilities. In the Directors’ opinion, based on the
information available to them, the total amount allocated for risks and charges at
the repor ting date is adequate in respect of the liabilities that could arise from
them.
TAX DISPUTES
The Group’s main tax disputes at the repor ting date are described hereunder.
The dispute filed by PRADA spa following an audit initiated in 2012 by the Italian
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements Customs Agency for the tax years from 2007 to 2011 to determine the customs
value of the products consists of three legal actions regarding the 2010 tax year,
all of which are currently pending at the Supreme Cour t due to the appeals filed by
the Company in 2019 and 2020, and for which the Company has already paid the
amount due while pending. The Company is awaiting notification of the hearing
for all three cases.
IIn addition to the aforementioned disputes, and consistently with the transparent
and collaborative approach adopted toward tax authorities, PRADA spa initiated
the process of obtaining the Authorized Economic Operator status, which was
granted by the Italian Customs Agency at the highest level (AEO Full) in June
2020. At the end of the process, the Company established, in agreement with
the Italian Customs Agency, an appropriate method for measuring the value of
impor ted products star ting from May 2020 with retroactive effectiveness for the
assessable years. The application of such method led to the estimate of an end-
of-period liability of Euro 0.6 million.
With respect to the audit of Prada Korea ltd, initiated in 2019 by the Korean
National Tax Service for the tax periods from 2014 to 2017, a finding about the
direct tax treatment of intercompany transactions between PRADA spa and PRADA
Korea ltd under the related licensing agreement amounting to some Euro 2.8
million is pending. After the pre-litigation phase concluded unfavorably, in 2020
PRADA Korea ltd initiated the actual dispute, still pending at the repor ting date,
while retaining the possibility of initiating a Mutual Agreement Procedure (MAP)
between the competent Italian and Korean authorities.
In the first half of 2020 the tax audit of PRADA Austria gmbh ended; it had begun in
2018 with assessment notices issued for the 2011 and 2012 tax periods, regarding
registration tax due on store leases. On January 28, 2020 the Company discussed
the appeals with an unfavorable outcome and, on the basis of the most recent legal
guidance, it decided not to continue with the dispute and settled it by paying Euro
0.7 million in additional tax and interest.
During 2020 the Prada Group and the tax authorities of the countries where it
operates continued to exchange views to preventively manage tax risk. Accordingly,
Prada spa and the Italian Revenue Agency continued to discuss specific topics
within the scope of the Cooperative Compliance tax regime (to which the Company
was admitted in 2017). Moreover, PRADA spa and other affiliates of the Group
continued their discussions with Italian and foreign tax authorities within the
context of the International Compliance Assurance Programme (“ICAP”), to which
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements the Prada Group was invited to par ticipate at the end of the pilot phase, which
concluded successfully in 2019.
LEGAL DISPUTES
The Euro 0.4 million Provision for litigation as at December 31, 2020 refers
primarily to pending labor disputes.
OTHER RISK PROVISIONS
The O ther risk provisions amount to Euro 43.2 million as at December 31, 2020 and
refer primarily to contractual obligations to restore leased commercial proper ties
to their original condition.
29. O THER NON-CURRENT LIABILITIES
(amounts in thousands of Euro)
Deferred costs for lease payments
Deferred income for commercial agreements
Other non-current liabilities
Total
December 31
2020
December 31
2019
4,362
104,000
2,392
110,754
7,190
40,000
9,175
56,365
Deferred income for commercial agreements increased by Euro 64 million compared
to December 31, 2019 due to amounts received in the period following commercial
agreements whose economic effects are expected beyond 12 months.
30. E QUIT Y AT TRIBUTABLE TO THE OWNERS OF THE GROUP
The equity attributable to owners of the Group is set for th below:
(amounts in thousands of Euro)
Share Capital
Share premium reserve
Other reserves
Actuarial reserve
Fair value Investments in equity instruments reserve
Cash flow hedge reserve
Translation reserve
Net income/(loss) for the period
Total
208
December 31
2020
December 31
2019
255,882
410,047
2,262,759
(8,151)
(25,188)
(5,794)
(3,359)
(54,139)
255,882
410,047
2,006,971
(4,516)
(9,982)
(8,469)
61,437
255,788
2,832,057
2,967,158
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements SHARE CAPITAL
As at December 31, 2020, approximately 80% of PRADA spa’s Share capital is
owned by PRADA Holding spa and the remainder is listed on the Main Board of the
Hong Kong Stock Exchange.
SHARE PREMIUM RESERVE
The Share premium reserve of Euro 410 million did not change from that of
December 31, 2019.
TRANSLATION RESERVE
The changes in this reserve result from the translation into Euro of the foreign
currency financial statements of the consolidated companies. The reserve decreased
from Euro 61.4 million at December 31, 2019 to Euro -3.4 million.
OTHER RESERVES
The O ther reserves amount to Euro 2,262 million as at December 31, 2020, showing
an increase of Euro 255.7 million compared to December 31, 2019 exclusively for
the allocation of the 2019 profit.
NET RESULT FOR THE PERIOD
The Group’s net result for the twelve months ended December 31, 2020 was a loss
of Euro 54.1 million (a profit of Euro 255.8 million for the twelve months ended
December 31, 2019).
CAPITAL GAINS TAX IN ITALY
Capital gains realized from the sale of shares of an Italian company by shareholders
resident in Hong Kong S.A.R. have not been subject to taxation in Italy. Additional
information on Italian capital gains tax is provided in the Tax Booklet available on
the Company’s website (www.pradagroup.com).
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 31. E QUIT Y AT TRIBUTABLE TO NON-CONTROLLING INTERESTS
The following table shows the changes in the Non-controlling interests during the
periods ended December 31, 2020 and December 31, 2019:
(amounts in thousands of Euro)
Opening balance
Translation differences
Dividends
Net income/(loss) for the period
Actuarial reserve
Capital injection in subsidiaries
Closing balance
December 31
2020
December 31
2019
21,417
(1,526)
-
(229)
1
-
19,663
19,083
417
(1,113)
1,936
(36)
1,130
21,417
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For a better understanding of the economical and operating per formances of 2020,
reference is made to the Financial Review.
32. NET REVENUES
The consolidated Net revenues are produced primarily by sales of finished products
and are stated net of returns and discounts.
(amounts in thousands of Euro)
Net sales
Royalties
Total
twelve months
ended December 31
2020
twelve months
ended December 31
2019
2,390,866
31,873
3,183,339
42,255
2,422,739
3,225,594
The Financial Review describes the Net sales by distribution channel, geographical
area, brand and product.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
33. C OST OF GOODS SOLD
The Cost of goods sold has the following composition:
(amounts in thousands of Euro)
Purchases of raw materials and manufactoring services
Depreciation, amortization and impairment on tangible and intangible fixed assets
Depreciation and write-downs of the Right of Use assets
Labor cost
Short-term and low value lease (IFRS 16)
Logistics costs, duties and insurance
Change in inventories
twelve months
ended December 31
2020
twelve months
ended December 31
2019
417,119
17,025
3,035
117,702
597
103,808
20,075
681,908
17,397
2,963
128,208
678
136,049
(61,221)
Total
679,361
905,982
The incidence of the cost of good sold on net revenues for the twelve months
ended December 31, 2020 was equal to 28%, substantially in line with that of
the corresponding period of 2019 (28.1%). During the first par t of the year the
incidence of the cost of good sold on net revenues increased as a result of the
reduced economies of scale in the manufacturing division, to return, in the second
par t of the year, to values in line with the comparative period thanks to the recovery
of sales.
34. OPERATING EXPENSES
The Operating costs are detailed below:
(amounts in thousands of Euro)
Product design and development costs
Advertising and communications costs
Selling costs
General and administrative costs
twelve months
ended December 31
2020
% of net revenues
twelve months
ended December 31
2019
% of net revenues
102,232
206,848
1,259,827
154,410
4.2%
8.5%
52.0%
6.4%
127,378
231,011
1,470,101
184,343
3.9%
7.2%
45.6%
5.7%
62.4%
Total
1,723,317
71.1%
2,012,833
The total Operating expenses, including the operating costs of stores closed during
the lockdown periods, were Euro 1,723.3 million, down by Euro 289.5 million from
the comparative period. Approximately half of the reduction was attributable to
rent discounts obtained and governments subsidies supplementing earned income,
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements of which the Group benefited in nearly all the geographical areas, especially
Europe. The remainder was due to reduced discretionary expenses, greater real
estate capital gains in 2020 and lower variable costs associated with sales.
The following table sets for th depreciation, amor tization, impairment, cost of
labor and rent expense included within the operating expenses in accordance with
the requirements of IAS 1.
(amounts in thousands of Euro)
Depreciation, amortization and impairment on tangible and intangible fixed assets
Depreciation and write-downs of the Right of Use assets (*)
Labor cost
Pure variable lease (IFRS 16)
Short term and low value lease (IFRS 16)
(*) shown without the impact of Covid-related discounts
35. FINANCIAL INCOME / (EXPENSE)
twelve months
ended December 31
2020
twelve months
ended December 31
2019
207,989
440,875
585,616
127,830
9,028
216,362
453,198
624,229
144,968
8,390
The Net financial income/(expense) are presented below:
(amounts in thousands of Euro)
Interest expenses on borrowings
Interest income
Interest income / (expenses) IAS 19
Exchange gains / (losses) – realized
Exchange gains / (losses) – unrealized
Other financial income / (expenses)
Interest and other financial income / (expenses), net
Interest expenses on Lease Liability
Dividends from investments
Total financial expenses
twelve months
ended December 31
2020
twelve months
ended December 31
2019
(10,239)
1,954
212
(2,501)
(16,318)
(2,586)
(29,478)
(10,217)
4,135
173
(15,993)
(1,272)
(2,000)
(25,174)
(42,670)
(48,980)
277
2,135
(71,871)
(72,019)
The net finance costs of Euro 71.9 million were substantially consistent with those
of 2019 (Euro 72 million).
Interest expense on the lease liability fell by Euro 6.3 million compared with the
previous year as a result of a lower amount and shor ter time horizon of the liability.
That effect was offset by greater net bank interest expense, mainly following lower
interest income on surplus funds, and foreign exchange losses associated with the
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements revaluation of foreign-currency liabilities.
36. TAXATION
Income taxes have the following composition:
(amounts in thousands of Euro)
Current taxation
Deferred taxation
Total
twelve months
ended December 31
2020
twelve months
ended December 31
2019
22,636
(20,080)
951
(23,915)
2,556
(22,964)
The income tax expense, net was Euro 2.6 million against a pre-tax loss of Euro 51.8
million. The income tax calculation was affected by permanent upward differences
to the pre-taxable result as well as to the prudence adopted in the recognition of
deferred tax assets.
The reconciliation between the Group’s theoretical tax rate and its effective tax
rate is presented in the table below:
(amounts in thousands of Euro)
Group’s weighted theoretical tax rate (calculated in absolute values on the basis of subsidiaries’ pre-taxable income/loss)
Effect of the pre-taxable losses
Non deductible expenses, net of not taxable income
Write-off of the deferred tax asset and utilization of tax losses carried forward
Tax losses generated in the year on which no deferred tax assets were recognized
Prior year taxes adjustments
Withholding and other income taxes
Effective tax rate of the Group
twelve months
ended December 31
2020
22.9%
-3.5%
-7.5%
-2.1%
-12.0%
4.5%
-7.1%
-4.9%
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements The changes in Deferred tax assets and liabilities are set for th below:
(amounts in thousands of Euro)
Opening balance
Exchange differences
Deferred taxes on acquisition
Deferred taxes on derivative instruments recorded in equity (cash flow hedges)
Deferred taxes on post-employment benefits recorded in equity (reserve for actuarial differences)
Other movements
Deferred taxes for the period in profit or loss
twelve months
ended December 31
2020
twelve months
ended December 31
2019
214,869
187,054
(10,888)
(1,318)
(1,727)
1,034
590
20,079
3,383
1,475
(579)
(358)
(21)
23,915
Closing balance
222,638
214,869
Deferred tax assets and liabilities are classified by nature hereunder:
(amounts in thousands of Euro)
Inventories
Receivables and other assets
Useful life of non-current assets
Deferred taxes due to acquisitions
Provision for risks / accrued expenses
Non-deductible / taxable charges/income
Deferred tax assets on rental contracts
Tax loss carryforwards
Derivative financial instruments
Long term employee benefits
Other
Total
December 31, 2020
December 31, 2019
Deferred tax
assets
Deferred tax
liabilities
Deferred tax
assets
Deferred tax
liabilities
123.078
1.177
34.975
-
13.135
6.148
40.630
12.189
1.508
10.911
8.137
-
1.548
8.447
12.699
429
1.639
504
-
222
2.262
1.500
128,968
1,186
41,997
-
13,495
5,640
33,965
3,122
2,497
10,203
3,133
-
1,538
7,808
13,814
112
1,364
533
-
-
2,723
1,445
251.888
29.250
244,206
29,337
Tax loss carryforwards as of December 31, 2020, including those already recognized
in the Group’s financial statements, are detailed below:
(amounts in thousands of Euro)
Expiring within 5 years
Expiring after 5 years
Available for carryforward with no time limit
Total tax loss carryforwards
December 31
2020
15,542
10,340
98,810
124,692
The Group’s management updated the deferred tax assets recognized on tax loss
carryforwards taking into consideration, for their recoverability, the macroeconomic
scenario and the business developments of each of the Group’s companies.
214
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
37. EARNINGS AND DIVIDENDS PER SHARE
EARNINGS PER SHARE BASIC AND DILUTED
Earnings (losses) per share are calculated by dividing the net result of the Profit
or Loss of the period attributable to the Group’s shareholders by the weighted
average number of ordinary shares in issue.
Group net income / (loss) in Euro
Weighted average number of ordinary shares in issue
twelve months
ended December 31
2020
twelve months
ended December 31
2019
(54,138,620)
255,787,505
2,558,824,000
2,558,824,000
Basic and diluted earnings / (losses) per share in Euro, calculated on weighted average number of
shares
(0.021)
0.100
DIVIDENDS PER SHARE
The Board of Directors, taking into account on one hand the withdrawn distribution
of the dividends of previous year as a conservative measure and, on the other hand,
the positive trend in sales of the second half of the year, confirmed also in the first
months of 2021, proposed to the Shareholders’ Meeting to distribute a dividend
of Euro 0.035 per share, for a total of Euro 89,558,840. Last, but not least the
proposal of dividends distribution relies on the well-balanced Net financial position
at period end. Such dividends can be drawn from the distributable reserves of
PRADA spa, which amount to Euro 1,625 million.
During the period of twelve months ended December 31, 2020 the Group did not
distributed dividends.
At the meeting held on March 18, 2020 the Board of Directors proposed, on the
basis of the results closed as at December 31, 2019, the distribution of a final
dividend for a total amount of Euro 51,176,480 (Euro 0.02 per share).
Following the outbreak of the Covid-19 pandemic, on April 22, 2020, the Board of
Directors revised its previous recommendation, suggesting the General Meeting of
Shareholders to approve the allocation of the 2019 net income to retained earnings
and extraordinary reserve, without the distribution of any dividend. Accordingly,
with the aim of providing the Group with additional resources to suppor t the rapid
recovery of the previous activity paces, on May 26, 2020 the General Meeting of
Shareholders approved the suggestion made on April 22, 2020.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements The dividends paid in the past three years are detailed hereunder:
Financial statements
ended December 31
2019
Financial statements
ended December 31
2018
Financial statements
ended December 31
2017
-
-
26/05/2020
-
153,529,440
191,911,800
0.06
30/04/2019
May 2019
0.075
27/04/2018
May 2018
Total dividends paid (Euro)
Dividends per Share (Euro)
Date of approval by Shareholders’ Meeting
Date of payment
38. ADDITIONAL INFORMATION
NUMBER OF EMPLOYEES
The average number of employees by business division is presented below:
(number of employees)
Production
Product design and development
Advertising and Communications
Selling
General and administrative services
Total
twelve months
ended December 31
2020
twelve months
ended December 31
2019
3,017
1,016
165
8,166
967
3,089
1,035
167
8,479
1,009
13,331
13,779
EMPLOYEE REMUNERATION
The employee remuneration by business division, net of government subsidies for
Covid-19 pandemic, is presented below:
(amounts in thousands of Euro)
Production
Product design and development
Advertising and Communications
Selling
General and administrative services
Total
twelve months
ended December 31
2020
twelve months
ended December 31
2019
109,296
56,335
15,444
390,218
85,882
128,011
67,992
16,085
452,362
87,599
657,175
752,049
216
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements The types of employee remuneration are presented below:
(amounts in thousands of Euro)
Wages and salaries
Post-employment benefits and other long-term benefits
Social contributions
Other
Total
twelve months
ended December 31
2020
twelve months
ended December 31
2019
492,529
34,368
102,828
27,450
572,507
32,725
118,849
27,968
657,175
752,049
DISTRIBUTABLE RESERVES OF THE PARENT COMPANY, PRADA SPA
(amounts in thousands of Euro)
December 31
2020
Possible
utilization
Distributable
amount
Share Capital
Share premium reserve
Legal reserve
Extraordinary reserve
Other reserves
Retained earnings
Fair Value reserve
Time Value reserve
Intrinsic Value reserve
Distributable amount
A share capital increase
B coverage of losses
C distributable to shareholders
255,882
410,047
51,176
51,176
182,899
1,028,032
(25,187)
(1,168)
1,871
-
-
A, B, C
B
A, B, C
A, B, C
A, B, C
-
-
-
-
-
410,047
-
51,176
182,899
981,161
-
-
-
1,625,283
Summary of utilization
in the last three years
Coverage of
losses
Distribution of
dividends
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
652,500
-
-
-
652,500
Under Italian Civil Code Ar ticle 2431, the share premium reserve is fully
distributable since the amount of the legal reserve is equal to or exceeds 20%
of share capital. Under Italian Legislative Decree 38/2005, Ar ticle 7, Euro 20.5
million of the retained earnings is not distributable. Subject to Annual General
Meeting approval, the loss of the year shall be included in the retained earnings.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements EXCHANGE RATES
The exchange rates against the Euro used for consolidation of the statements of
financial position and statements of profit or loss whose presentation currency
differed from that of the consolidated financial statements as at December 31,
2020 and December 31, 2019 are listed hereunder.
(amounts in thousands of Euro)
Average rate
December 31
2020
Average rate
December 31
2019
Closing rate
December 31
2020
Closing rate
December 31
2019
UAE Dirham
Australian Dollar
Brazilian Real
Canadian Dollar
Swiss Franc
Czech Koruna
Danish Kronor
GB Pound
Hong Kong Dollar
Japanese Yen
Korean Won
Kuwait Dinar
Kazakhstani Tenge
Moroccan Dirham
Macau Pataca
Mexican Peso
Malaysian Ringgit
New Zealand Dollar
Qatari Riyal
Chinese Renminbi
Romanian Leu
Russian Ruble
Saudi Riyal
Swedish Kronor
Singapore Dollar
Thai Baht
Turkish Lira
Taiwan Dollar
Ukrainian Hryvna
US Dollar
Vietnamese Dong
South African Rand
4.191
1.656
5.882
1.529
1.070
26.451
7.455
0.889
8.850
4.113
1.610
4.413
1.486
1.113
25.669
7.466
0.877
8.773
4.507
1.590
6.374
1.563
1.080
26.242
7.441
0.899
9.514
4.126
1.600
4.516
1.460
1.085
25.408
7.472
0.851
8.747
121.773
122.095
126.490
121.940
1,344.894
1,304.460
1,336.000
1,296.280
0.350
469.976
10.822
9.117
24.513
4.792
1.756
4.192
7.870
4.838
82.598
4.282
10.491
1.573
35.686
8.033
33.605
30.808
1.141
0.340
428.652
10.768
9.038
21.561
4.637
1.699
4.097
7.734
4.745
72.481
4.199
10.583
1.527
34.771
6.354
34.612
28.957
1.120
0.373
516.790
10.882
9.792
24.416
4.934
1.698
4.535
8.023
4.868
91.467
4.603
10.034
1.622
36.727
9.113
34.468
34.740
1.227
0.340
429.000
10.744
9.011
21.220
4.595
1.665
4.109
7.821
4.783
69.956
4.215
10.447
1.511
33.415
6.684
33.689
26.422
1.123
26,478.377
25,760.165
28,469.000
25,954.500
18.758
16.160
18.022
15.777
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements AUDITOR’S COMPENSATION
The total fees and expenses recognized to Deloitte & Touche spa and its network
for auditing the financial statements of the periods ended December 31, 2020
and December 31, 2019 and providing non-audit services, are presented below
(amounts in thousands of Euro):
Type of service
Audit Firm
Provided to
Audit services
Audit services
Audit services
Deloitte & Touche spa
Deloitte & Touche spa
Deloitte Network
PRADA spa
Subsidiaries
Subsidiaries
Total audit fees to Deloitte Network
Other advisory services
Other advisory services
Deloitte Network
Deloitte Network
PRADA spa
Subsidiaries
Total non-audit fees to Deloitte Network
twelve months
ended
December 31
2020
twelve months
ended
December 31
2019
450
106
1,066
1,622
31
111
142
500
137
1,166
1,803
214
83
297
Total compensation to Deloitte Network
1,764
2,100
39. REMUNERATION OF BOARD OF DIRECTORS, FIVE HIGHEST
P AID INDIVIDUALS AND SENIOR MANAGERS
Remuneration of PRADA spa Board of Directors for period ended December 31, 2020
(amounts in thousands of Euro)
Directors’ fees
Remuneration
Bonuses and
other incentives
Benefits
in kind
Carlo Mazzi
Miuccia Prada Bianchi
Patrizio Bertelli
Alessandra Cozzani
Stefano Simontacchi
Maurizio Cereda
Gian Franco Oliviero Mattei
Giancarlo Forestieri
Sing Cheong Liu
766
9,088
9,088
50
35
72
98
42
42
-
-
-
294
-
-
-
-
-
-
27
27
204
-
-
-
-
-
73
-
-
12
-
-
-
-
-
Pension,
healthcare
and TFR
contributions
21
24
24
181
1
2
13
10
14
Total
860
9,139
9,139
741
36
74
111
52
56
Total
19,281
294
258
85
290
20,208
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
Remuneration of PRADA spa Board of Directors for fiscal year ended December 31, 2019
(amounts in thousands of Euro)
Directors’ fees
Remuneration
Bonuses and
other incentives
Benefits
in kind
Carlo Mazzi
Miuccia Prada Bianchi
Patrizio Bertelli
Alessandra Cozzani
Stefano Simontacchi
Maurizio Cereda
Gian Franco Oliviero Mattei
Giancarlo Forestieri
Sing Cheong Liu
1,020
12,000
12,000
50
50
80
140
60
60
-
-
-
293
-
-
-
-
-
-
551
551
138
-
-
-
-
-
73
-
-
11
-
-
-
-
-
Pension,
healthcare
and TFR
contributions
22
23
23
148
2
3
13
10
14
Total
1,115
12,574
12,574
640
52
83
153
70
74
Total
25,460
293
1,240
84
258
27,335
REMUNERATION OF FIVE HIGHEST PAID INDIVIDUALS
The Group’s five highest paid individuals included three Board of Director members
for 2020 and three Board Members for 2019. The total remuneration of the
remaining two highest paid individuals in the twelve months ended December 31,
2020 and the remaining two highest paid individuals in the twelve months ended
December 31, 2019 is set for th below:
(amounts in thousands of Euro)
Remuneration and other benefits
Bonuses and other incentives
Non-monetary benefits
Pension/social security, healthcare and TFR contributions
Total
twelve months
ended
December 31
2020
twelve months
ended
December 31
2019
19,800
8,250
-
28
28,078
10,819
1,293
340
80
12,532
Excluding the remuneration of the Board of Directors’ members the remuneration
range of the highest paid individuals is as follows:
Less than HKD 8,000,000
Between HKD 8,000,000 and HKD 20,000,000
Between HKD 20,000,000 and HKD 50,000,000
More than HKD 50,000,000
Total individuals
220
twelve months
ended
December 31
2020
twelve months
ended
December 31
2019
-
-
-
2
2
-
1
-
1
2
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements SENIOR MANAGERS REMUNERATION
The remuneration of the Senior Managers is as follows:
(amounts in thousands of Euro)
Remuneration and other benefits
Bonuses and other incentives
Non-monetary benefits
Pension/social security, healthcare and TFR contributions
Total
twelve months
ended
December 31
2020
twelve months
ended
December 31
2019
27,018
9,894
1,976
1,600
40,488
18,229
3,759
2,524
2,298
26,810
There were 25 Senior Managers as of December 31, 2020, and 28 Senior Managers
as of December 31, 2019.
The remuneration range of the Senior Managers is as follows:
Less than HKD 4,000,000
between HKD 4,000,000 and HKD 8,000,000
between HKD 8,000,000 and HKD 16,000,000
between HKD 16,000,000 and HKD 50,000,000
more than HKD 50,000,000
Total individuals
twelve months
ended
December 31
2020
twelve months
ended
December 31
2019
13
7
3
-
2
25
14
9
4
-
1
28
40. REL ATED PART Y TRANSACTIONS
The Group carries out transactions with companies classifiable as related par ties
according to IAS 24, “Related Par ty Disclosures”. In the twelve months ended
December 31, 2020, these transactions referred primarily to the purchase or sale
of finished and semi-finished products and raw materials, the supply of services,
loans, sponsorships, leases and the sale of commercial proper ty.
The following tables present the effect of related-par ty transactions on the
consolidated financial statements in terms of Statement of Financial Position
balances at the repor ting date and total transactions affecting the Statement of
Profit or Loss.
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements STATEMENT OF FINANCIAL POSITION BALANCES AS OF DECEMBER 31, 2020
Trade
receivables
Receivables
from, and
advances to,
related parties
– current
Receivables
from, and
advances to,
related parties
– non-current
Right of
Use assets
Trade
payables
Payables to
related parties
– current
Lease
Liability
Other
Liabilities
(amounts in thousands of Euro)
Les Femmes srl
CECCO BRUNA 2011 srl
Luna Rossa Challenge 2013 NZ ltd
COR 36 srl New Zeland Branch
DFS Hawaii
DFS Cotai limitada
DFS Guam LP
DFS Saipan Ltd
DFS Okinawa
SPELM SA
Rubaiyat Modern Lux.Pr.Co.Ltd
LUDO DUE S.R.L.
Orexis S.r.l.
Progetto Prada Arte srl
331
-
228
856
-
188
-
-
-
-
-
-
-
3
Luna Rossa Challenge 2013 srl
2,152
-
-
-
1
-
46
-
596
-
-
5
-
-
Chora Srl
Peschiera Immobiliare srl
Premiata srl
Conceria Superior spa
Perseo srl
COR 36 srl
Al Tayer Group llc
Al Tayer Insignia llc
Danzas llc
Al Sanam Rent a Car llc
PRADA HOLDING spa
BELLATRIX spa
PH-RE
Members of the Board of Directors
of PRADA spa
Relatives of members of the Board
of Directors
-
-
-
-
-
-
-
-
-
-
-
-
1,125
-
-
-
-
-
-
-
-
-
-
-
20,000
18,000
-
18,532
5,848
-
-
-
-
6,500
-
-
-
-
-
-
155
-
-
-
-
-
-
-
-
-
-
309
-
-
-
-
-
10
-
-
-
960
(54)
-
-
3
5,673
355
87
12
31
4,524
-
4,671
-
-
-
-
3,820
-
-
-
-
-
-
-
-
-
-
257,496
-
-
-
-
-
-
-
-
-
403
38
125
661
330
-
8
45
50
1
-
-
-
-
6
-
-
-
7,347
144
24
92
4,560
-
5,154
-
-
-
-
4,384
-
-
-
-
-
-
-
-
-
-
280,168
-
-
-
-
-
-
-
-
-
-
917
-
-
-
-
-
-
-
-
-
-
-
2,184
-
-
-
-
-
380 (*)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
234
-
-
-
-
2,206
471
Total at December 31, 2020
4,406
51,035
19,434
276,324
2,925
3,481
301,879
2,911
(*) Payables for the acquisition of Fratelli Prada spa
222
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements STATEMENT OF FINANCIAL POSITION BALANCES AS OF DECEMBER 31, 2019
Receivables
from, and
advances to,
related parties
– current
375
-
-
-
-
-
-
-
-
-
13,522
5,848
18
-
-
-
2,004
-
-
309
-
-
-
-
-
-
1
(amounts in thousands of Euro)
Trade
receivables
Les Femmes srl
CECCO BRUNA 2011 srl
COR 36 srl New Zeland Branch
DFS Hawaii
DFS Venture Singapore (Pte) Limited
DFS Cotai limitada
SPELM SA
Rubaiyat Modern Lux.Pr.Co.Ltd
LUDO DUE S.R.L.
Progetto Prada Arte srl
391
-
290
-
-
371
-
-
-
3
Luna Rossa Challenge 2013 srl
1,422
Chora Srl
Peschiera Immobiliare srl
Premiata srl
Conceria Superior spa
Perseo srl
COR 36 srl
Al Tayer Group llc
Al Tayer Insignia llc
Danzas llc
Al Tayer Motors
Al Sanam Rent a Car llc
TRS New Zealand Pty. Ltd
Prapar Corporation
PRADA HOLDING spa
BELLATRIX spa
LUDO srl
PH-RE
Members of the Board of Directors
of PRADA spa
Relatives of members of the Board
of Directors
-
-
-
16
1
1,766
-
452
-
-
-
-
-
191
-
-
-
-
-
Right of
Use assets
Trade
payables
Payables to
related parties
– current
Payables to
related parties
– non-current
Lease
Liability
Other
Liabilities
-
-
-
-
-
9,408
5,032
-
5,787
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,448
12
-
494
28
1,326
-
-
-
-
-
355
(25)
562
533
411
-
18
12
59
(13)
1
2
3
-
-
-
-
-
-
-
-
-
-
-
-
-
1,001
-
-
-
-
-
-
-
-
-
-
2,386
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,253
20,280
-
-
-
-
-
-
-
-
-
11,082
5,051
-
6,351
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
307,141
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
417(*)
380 (*)
-
-
-
-
2,125
296
160
287,169
-
-
-
-
Total at December 31, 2019
4,903
22,237
307,396
5,226
26,057
20,660
329,625
2,421
(*) Payables for the acquisition of Fratelli Prada spa
Annual Report 2020_MASTER_160421 with bleed.indd 223
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223
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements STATEMENT OF PROFIT OR LOSS TRANSACTIONS FOR THE T WELVE MONTHS
ENDED DECEMBER 31, 2020
(amounts in thousands of Euro)
Les Femmes srl
CECCO BRUNA 2011 srl
Luna Rossa Challenge 2013 NZ ltd
COR 36 S.r.l. New Zeland Branch
DFS Hawaii
DFS Venture Singapore (Pte) Limited
DFS Cotai limitada
SPELM SA
LUDO DUE srl
Orexis S.r.l.
Net
revenues
Cost of
goods sold
General,
admin.
& selling costs
(income)
Interest
income
Interest
expenses
-
-
-
197
-
-
-
-
-
-
2,960
99
-
-
-
-
-
-
-
-
114
294
6,807
836
-
-
(228)
(383)
587
22
1,581
537
1,123
(36,942)
21,143
1,711
530
521
82
-
-
11,414
65
85
137
125
1
10
(14)
(3)
1
-
20,093
1,041
9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9
-
-
-
-
-
-
122
-
-
-
-
-
-
-
-
321
41
49
-
-
(1)
47
-
-
-
-
-
-
-
-
-
-
-
2,724
Luna Rossa Challenge 2013 srl
455
(1)
Chora Srl
Peschiera Immobiliare srl
Premiata srl
Conceria Superior spa
Perseo srl
COR 36 srl
Al Tayer Group LLC
Al Tayer Insignia LLC
Danzas LLC
Al Tayer Motors
Al Sanam Rent a Car LLC
PRADA HOLDING spa
BELLATRIX S.P.A.
LUDO Spa
PH - RE
Relatives of members of the Board of Directors
-
-
-
284
-
25
-
1,217
-
-
-
-
-
-
-
Total at December 31, 2020
2,178
11,174
23,174
140
3,181
224
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements STATEMENT OF PROFIT OR LOSS TRANSACTIONS FOR THE T WELVE MONTHS
ENDED DECEMBER 31, 2019
Net
revenues
Cost of
goods sold
General,
admin.
& selling costs
(income)
Royalties
income
Interest
income
Interest
expenses
(amounts in thousands of Euro)
Les Femmes srl
CECCO BRUNA 2011 srl
COR 36 S.r.l. New Zeland Branch
DFS Hawaii
DFS Venture Singapore (Pte) Limited
DFS Cotai limitada
SPELM SA
LUDO DUE srl
Ludo Tre srl
Luna Rossa Challenge 2013 srl
Chora Srl
Peschiera Immobiliare srl
Premiata srl
Conceria Superior spa
Perseo srl
COR 36 srl
Al Tayer Group LLC
Al Tayer Insignia LLC
Danzas LLC
Al Tayer Motors
Al Sanam Rent a Car LLC
FRATELLI Prada spa
PRADA HOLDING spa
PH-RE
Relatives of members of the Board of Directors
-
-
290
-
-
-
-
-
-
154
-
-
-
25
-
46
-
1,265
-
-
-
17,626
-
-
-
4,418
70
-
-
-
-
-
-
-
(1)
-
33
1,125
19,861
1,350
-
-
-
22
-
-
188
-
-
-
3
-
-
3,061
181
3,839
473
903
(3)
15,919
2,032
21
632
109
-
(11)
114
147
67
1
11
1,101
(30)
18,134
963
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
--
-
-
-
-
-
530
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4
-
-
-
-
-
1
-
-
-
5
-
-
-
-
-
275
40
46
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,923
-
2,284
Total at December 31, 2019
19,406
27,066
47,667
530
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225
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements
The foregoing tables repor t information on transactions with related par ties
in accordance with IAS 24, “Related Par ty Disclosures”, while the following
transactions fall also within the scope of application of the Hong Kong Stock
Exchange Listing Rules.
The transactions with related par ty PH-RE llc (formerly PABE-RE llc) refer to
the transaction between such company and PRADA Japan co ltd in relation to
the lease for the two Aoyama Buildings in Tokyo for Prada and Miu Miu stores.
The transactions repor ted for the twelve months ended December 31, 2020
are regulated by Chapter 14A of the Listing Rules because they are considered
continuing connected transactions subject to disclosure, but they are exempt from
the independent shareholders’ approval requirement. As required by the Listing
Rules, comprehensive disclosure of those continuing connected transactions is
contained in PRADA spa’s Announcements dated, respectively, July 15, 2015
(“Prada Aoyama”) and May 26, 2017 (“Miu Miu Aoyama”).
The transactions with related par ty Luna Rossa Challenge srl for the twelve
months ended December 31, 2020 are regulated by Chapter 14A of the Listing
Rules because they are considered continuing connected transactions subject
to disclosure, but they are exempt from the independent shareholders’ approval
requirement. As required by the Listing Rules, comprehensive disclosure of those
continuing connected transactions is contained in PRADA spa’s Announcements
dated, respectively, December 1, 2017 (“Sponsorship Agreement”) and November
20, 2020 (“Amendment to Sponsorship Agreement”). In fact, during the repor ting
period PRADA spa stipulated with Luna Rossa Challenge srl an amendment to the
sponsorship agreement, regarding an additional contribution to the one originally
agreed upon.
The sponsorship agreement with related par ty Challenger of Record 36 srl, effective
from March 1, 2020, is regulated by Chapter 14A of the Listing Rules because it
is considered a continuing connected transaction subject to disclosure, but it is
exempt from the independent shareholders’ approval requirement. As required by
the Listing Rules, comprehensive disclosure of the continuing connected transaction
is contained in PRADA spa’s Announcement dated March 1, 2020.
On December 29, 2020 PRADA spa stipulated with related par ty Orexis srl a real
226
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements estate agreement under which the Company sold and Orexis srl purchased the
building at Via della Spiga 18 in Milan. This transaction is regulated by Chapter
14A of the Listing Rules because it is considered a connected transaction subject
to disclosure, but it is exempt from the independent shareholders’ approval
requirement. As required by the Listing Rules, comprehensive disclosure of the
connected transaction is contained in PRADA spa’s Announcement dated December
29, 2020.
Apar t from the non-exempt continuing connected transactions and non-exempt
connected transactions repor ted above, no other transaction repor ted in the 2020
consolidated financial statements meets the definition of “connected transaction”
or “continuing connected transaction” contained in Chapter 14A of the Hong
Kong Stock Exchange Listing Rules or, if it does meet the definition of “connected
transaction” or “continuing connected transaction” according to Chapter 14A,
it is exempt from the announcement, disclosure and independent shareholders’
approval requirements laid down in Chapter 14A.
41. FINANCIAL TREND
(amounts in thousands of Euro)
December 31
2020
December 31
2019
December 31
2018
December 31
2017 (*)
January 31
2017
Net revenues
Gross margin
Operating income (EBIT)
Group net income
Total assets
Total liabilities
Total Group shareholders’ equity
(*) eleven-month statement of profit or loss
2,422,739
1,743,378
20,061
(54,139)
6,527,927
3,676,207
2,832,057
3,225,594
2,319,612
306,779
255,788
7,038,439
4,049,864
2,967,158
3,142,148
2,262,594
323,846
205,443
4,678,812
1,781,743
2,877,986
2,741,095
2,030,696
315,878
217,721
4,739,375
1,873,204
2,844,652
3,184,069
2,289,112
431,181
278,329
4,656,929
1,552,399
3,080,502
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227
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements 42. CONSOLIDATED COMPANIES
Company
Italy
Local
currency
Share
capital
(000s of local
currency)
%
Interest
Registered office
Principal place of
operation
Date of
incorporation/
establishment
(MM/DD/YYYY)
Main Business
PRADA Spa
EUR
255,882
Milan
Artisans Shoes Srl (*)
IPI Logistica Srl (*)
Pelletteria Ennepì Srl (*)
Church Italia Srl
Marchesi 1824 Srl (*)
Figline Srl (*)
Pelletteria Figline Srl
Europe
PRADA Retail UK Ltd (*)
PRADA Germany Gmbh (*)
PRADA Austria Gmbh (*)
PRADA Spain Sl (*)
PRADA Retail France Sas (*)
PRADA Hellas Sole Partner Llc (*)
PRADA Monte-Carlo Sam (*)
PRADA Sa (*)
PRADA Company Sa
PRADA Netherlands Bv (*)
Church Denmark Aps
Church France Sas
Church UK Retail Ltd
Church’s English Shoes Switzerland Sa
Church & Co. Ltd (*)
Church & Co. (Footwear) Ltd
Church English Shoes Sa
PRADA Czech Republic Sro (*)
PRADA Portugal Unipessoal Lda (*)
PRADA Rus Llc (*)
Church Spain Sl
PRADA Bosphorus Deri Mamuller Ltd
Sirketi (*)
PRADA Ukraine Llc (*)
Church Netherlands Bv
Church Ireland Retail Ltd
Church Austria Gmbh
Prada Sweden Ab (*)
Church Footwear Ab
Prada Switzerland Sa (*)
Prada Kazakhstan Llp (*)
Kenon Ltd (*)
Tannerie Limoges Sas (*)
Prada Denmark Aps (*)
Prada Belgium Sprl (*)
Hipic Prod Impex Srl (*)
Church Germany Gmbh
EUR
EUR
EUR
EUR
EUR
EUR
EUR
GBP
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
DKK
EUR
GBP
CHF
GBP
GBP
EUR
CZK
EUR
RUB
EUR
TRY
UAH
EUR
EUR
EUR
SEK
SEK
CHF
KZT
GBP
EUR
DKK
EUR
RON
EUR
1,000 66.7
Montegranaro
600
100
Milan
93
51
1,000
10
20
90
100
100
100
100
Figline e Incisa
Valdarno
Milan
Milan
Milan
Figline e Incisa
Valdarno
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Group Holding/
Manufacturing/
Distribution/
Retail
02/09/1977 Manufacturing
01/26/1999 Services
12/01/2016 Manufacturing
01/31/1992 Retail/Services
07/10/2013 Food&Beverage
07/24/2019 Manufacturing
09/30/2020 Manufacturing
5,000
215
100
100
London
Munich
40
100 Wien
240
4,000
2,850
2,000
100
100
100
100
Madrid
Paris
Athens
Monaco
U.K.
Germany
Austria
Spain
France
Greece
01/07/1997 Retail
03/20/1995 Retail/Services
03/14/1996 Retail
05/14/1986 Retail
10/10/1984 Retail
12/19/2007 Retail
Principality of Monaco
05/25/1999 Retail
31
100
Luxembourg
Switzerland
07/29/1994
Trademarks/
Services
3,204
20
50
2,856
1,021
100
100
100
100
100
100
100
Luxembourg
Amsterdam
Luxembourg
Netherlands
04/12/1999 Services
03/27/2000 Retail
Copenhagen
Denmark
03/13/2014 Retail
Paris
Northampton
France
U.K.
06/01/1955 Retail
07/16/1987 Retail
Lugano
Switzerland
12/29/2000 Retail
2,811
100
Northampton
U.K.
01/16/1926
Sub-Holding/
Manufacturing/
Distribution
Northampton
U.K.
03/06/1954 Trademarks
Amsterdam
Netherlands
07/07/2011 Retail
44
75
2,500
5
250
3
100
100
100
100
100
100
Brussels
Prague
Lisbon
Moscow
Madrid
73,000
100
Istanbul
240,000
18
50
35
500
100
24,000
500,000
84,000
600
26,000
4,000
200
200
100
100
100
Kiev
Dublin
100 Wien
100
100
100
100
100
60
100
100
80
100
Stockholm
Stockholm
Lugano
Almaty
London
Isle
Copenhagen
Brussels
Sibiu
Munich
Belgium
02/25/1963 Retail
Czech Republic
06/25/2008 Retail
Portugal
08/07/2008 Retail
Russian Federation
11/07/2008 Retail
Spain
Turkey
Ukraine
05/06/2009 Retail
02/26/2009 Retail
10/14/2011 Retail
Ireland
Austria
Sweden
Stweden
Switzerland
Kazakhstan
U.K.
France
Denmark
Belgium
Romania
Germany
11/20/2011 Retail
01/17/2012 Retail
12/18/2012 Retail
12/18/2012 Retail
09/28/2012 Retail
06/24/2013 Retail
02/07/2013 Real Estate
08/19/2014 Manufacturing
05/19/2015 Retail
12/04/2015 Retail
04/15/2016 Manufacturing
09/18/2018 Retail
228
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements Company
Americas
Local
currency
Share
capital
(000s of local
currency)
%
Interest
Registered office
Principal place of
operation
Date of
incorporation/
establishment
(MM/DD/YYYY)
Main Business
PRADA USA Corp. (*)
USD
152,211
100
New York
U.S.A.
10/25/1993
TRS Hawaii Llc
PRADA Canada Corp. (*)
Church & Co. (USA) Ltd
Post Development Corp (*)
PRADA Retail Mexico, S. de R.L. de
C.V.
PRADA Brasil Importação e Comércio
de Artigos de Luxo Ltda (*)
PRM Services S. de R.L. de C.V. (*)
PRADA Panama Sa (*)
PRADA Retail Aruba Nv (*)
PRADA St. Barthelemy Sarl (*)
Asia-Pacific and Japan
PRADA Asia Pacific Ltd (*)
PRADA Taiwan Ltd
PRADA Retail Malaysia Sdn. Bhd. (*)
TRS Hong Kong Ltd (*)
PRADA Singapore Pte Ltd (*)
TRS Singapore Pte Ltd (*)
PRADA Korea Llc (*)
PRADA (Thailand) Co. Ltd (*)
PRADA Japan Co. Ltd (*)
TRS Guam Partnership
TRS Saipan Partnership (*)
PRADA Australia Pty Ltd (*)
USD
CAD
USD
USD
MXN
BRL
MXN
USD
USD
EUR
HKD
TWD
MYR
HKD
SGD
SGD
KRW
THB
JPY
USD
USD
AUD
TRS Okinawa KK
PRADA Fashion Commerce (Shanghai)
Co. Ltd (***)
Church Japan Company Ltd
Church Hong Kong Retail Ltd
Church Singapore Pte Ltd
Prada Dongguan Trading Co. Ltd (***)
Church Footwear (Shanghai) Co. Ltd (***)
Prada New Zealand Ltd (*)
PRADA Vietnam Limited Liability
Company (*)
PRADA Macau Co. Ltd
Church Korea Llc
JPY
RMB
JPY
HKD
SGD
RMB
RMB
NZD
VND
MOP
KRW
Distribution/
Services/
Retail
Duty-Free
Stores
Distribution/
Retail
400
55
Honolulu
U.S.A.
11/17/1999
300
100
Toronto
85
45,138
100
100
New York
New York
Canada
U.S.A.
U.S.A.
05/01/1998
09/08/1930 Retail
02/18/1997 Real Estate
269,140
100
Mexico City
Mexico
07/12/2011 Retail
335,000
100
Sao Paulo
Brazil
04/12/2011 Retail
7,203
30
2,011
1,600
100
100
100
100
Mexico City
Panama
Oranjestad
Gustavia
Mexico
Panama
Aruba
02/27/2014 Services
09/15/2014 Retail
09/25/2014 Retail
St. Barthelemy
04/01/2016 Retail
3,000
100
Hong Kong
Hong Kong
S.A.R., P.R.C.
09/12/1997 Retail/Services
3,800
1,000
100
100
Hong Kong
Taiwan
09/16/1993 Retail
Kuala Lumpur
Malaysia
01/23/2002 Retail
500
55
Hong Kong
Macau S.A.R.,
P.R.C.
02/23/2001
Duty-Free
Stores
1,000
100
Singapore
Singapore
10/31/1992 Retail
500
55
Singapore
Singapore
08/08/2002
Duty-Free
Stores
8,125,000
372,000
1,200,000
100
100
100
Seoul
Bangkok
Tokyo
1,095
55
Guam
1,405
55
Saipan
South Korea
11/27/1995 Retail
Thailand
06/19/1997 Retail
Japan
Guam
Saipan
03/01/1991 Retail
07/01/1999
07/01/1999
Duty-Free
Stores
Duty-Free
Stores
13,500
100
Sydney
Australia
04/21/1997 Retail
10,000
55
Tokyo
624,950
100
Shanghai
100,000
100
Tokyo
29,004
100
Hong Kong
7,752
8,500
31,900
100
100
100
Singapore
Dongguan
Shanghai
P.R.C.
Japan
P.R.C.
Japan
Hong Kong
S.A.R., P.R.C.
02/09/2004
01/21/2005
Retail/Dor-
mant
Duty-Free
Stores
10/31/2005 Retail
04/17/1992 Retail
06/04/2004 Retail
Singapore
08/18/2009 Retail
P.R.C.
P.R.C.
11/28/2012 Services
12/05/2012 Retail
3,500
100 Wellington
New Zealand
07/05/2013 Retail
66,606,570
100
Hanoi
Vietnam
09/09/2014 Retail
25
100
Macau
Macau S.A.R.,
P.R.C.
01/22/2015 Retail
650,000
100
Seoul
South Korea
09/03/2018 Retail
PRADA Trading (Shanghai) Co. Ltd (***)
RMB
1,653
100
Shanghai
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229
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements Company
Middle East
PRADA Middle East Fzco (*)
PRADA Emirates Llc (**)
PRADA Kuwait Wll (**)
PRADA Retail Wll (*)
PRADA Saudi Arabia Ltd (*)
Other countries
Local
currency
Share
capital
(000s of local
currency)
%
Interest
Registered office
Principal place of
operation
Date of
incorporation/
establishment
(MM/DD/YYYY)
Main Business
AED
AED
KWD
QAR
SAR
18,000
60
Jebel Ali Free
Zone
300 29.4
Dubai
50 29.4
Kuwait City
15,000
100
Doha
U.A.E.
U.A.E.
Kuwait
Qatar
05/25/2011
Distribution/
Services
08/04/2011 Retail
09/18/2012 Retail
02/03/2013 Retail
26,666
75
Jeddah
Saudi Arabia
07/02/2014 Retail
PRADA Maroc Sarlau (*)
MAD
95,000
100
Casablanca
Morocco
11/11/2011
PRADA Retail South Africa (pty) ltd (*)
ZAR
50,000
100
Sandton
South Africa
06/09/2014
Under liqui-
dation
Under liqui-
dation
(*) Company owned directly by PRADA spa
(**) Company consolidated based on definition of control per IFRS 10
(***) Wholly foreign owned enterprises
43. DIS CLOSURES REGARDING NON-CONTROLLING INTERESTS
The financial information of companies not entirely controlled by the Group
is provided below, as required by IFRS 12. The amounts are stated before the
consolidation adjustments.
December 31, 2020 financial statements (amounts in thousands of Euro):
Company
Artisans Shoes srl
TRS Hawaii llc
TRS Hong Kong
TRS Singapore
TRS Guam Partnership
TRS Saipan Partnership
TRS Okinawa KK
TRS Hong Kong branch in Macau
S.A.R.
PRADA Emirates llc
PRADA Middle East fzco
Prada Kuwait Wll
PRADA Saudi Arabia ltd
Tannerie Limoges sas
Hipic Prod Impex srl
Pelletteria Ennepì srl
Group's
percentage
interest
Local
currency
Total
assets
Total
equity
Net
revenues
Net
income/ (loss)
Dividends
paid to non-
controlling
shareholders
66.7
55
55
55
55
55
55
55
29.4
60
29.4
75
60
80
90
EUR
USD
HKD
SGD
USD
USD
JPY
MOP
AED
AED
KWD
SAR
EUR
RON
EUR
26,530
1,875
53
778
3,125
2,528
6,812
18,498
75,426
75,658
14,778
16,262
9,410
4,644
5,771
7,751
(1,151)
44
716
2,504
2,427
5,336
7,864
(14,437)
40,035
1,754
4,380
146
(1,333)
1,898
48,879
1,824
-
153
2,041
356
4,677
7,594
35,141
7,160
19,557
12,330
4,961
400
-
1
(3,399)
(7)
(306)
(1,158)
(508)
(972)
(3,897)
577
(43)
529
(451)
(331)
(1,410)
(615)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
230
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PRADA Group Annual Report 2020 - Notes to the Consolidated Financial Statements December 31, 2019 financial statements (amounts in thousands of Euro):
Company
Artisans Shoes srl
TRS Hawaii llc
TRS Hong Kong
TRS Singapore
TRS Guam Partnership
TRS Saipan Partnership
TRS Okinawa KK
TRS Hong Kong branch in Macau
S.A.R.
PRADA Emirates llc
PRADA Middle East fzco
Prada Kuwait Wll
PRADA Saudi Arabia ltd
Tannerie Limoges sas
Hipic Prod Impex srl
Pelletteria Ennepì srl
Group's
percentage
interest
Local
currency
Total
assets
Total
equity
Net
revenues
Net
income/ (loss)
Dividends
paid to non-
controlling
shareholders
66.7
55
55
55
55
55
55
55
29.4
60
29.4
75
60
80
90
EUR
USD
HKD
SGD
USD
USD
JPY
MOP
AED
AED
KWD
SAR
EUR
RON
EUR
35,721
5,688
61
1,338
6,066
3,762
8,830
7,750
2,195
54
1,087
3,911
3,167
6,461
29,221
12,475
105,252
97,150
22,471
22,191
10,872
4,481
6,354
(16,356)
43,774
1,379
5,241
477
70
2,513
68,495
9,800
-
1,365
9,487
2,071
8,198
24,181
44,204
8,589
18,675
14,716
10,851
621
-
788
(935)
(7)
25
807
(287)
872
1,572
894
(361)
380
(1,291)
(7)
(67)
98
(310)
-
-
-
(803)
-
-
-
-
-
-
-
-
-
-
There are no significant restrictions on the Group’s ability to access or use assets
and settle liabilities as at the repor ting period.
In 2011, PRADA spa and Al Tayer Insignia llc (“Al Tayer ”) stipulated a shareholder
agreement to develop the Prada and Miu Miu brands in the Middle East retail business
(the “joint venture”). That agreement, which is going to expire on December 31,
2021, gave PRADA spa a call option exercisable on the PRADA Middle East Fzco’s
share capital owned by Al Tayer. At the repor ting date, PRADA spa and Al Tayer are
negotiating the terms to extend the life of the joint venture up to 2026, confirming
the current shareholding structure. The management estimates that this scenario
does not trigger any recognition of assets or liabilities to represent the Prada’s
rights and obligations over the non-controlling interest of Prada Middle East Fzco.
44. E VENTS AF TER THE REPORTING DATE
No significant events to be repor ted.
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I N D E P E N D E N T A U D I T O R S ’ R E P O R T S
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PRADA Group Annual Report 2020 - Independent Auditors’ Reports INDEPENDENT AUDITORS’ REPORTS
The Independent Auditor ’s Repor ts included in this Annual Repor t are in two different
formats taking into account the differences between the International Auditing
Standards (ISAs) issued by the International Auditing and Assurance Standard
Boards (IAASB) and the auditing standards adopted in the Italian jurisdiction (ISA
Italia). Specifically, in accordance to the regulations applicable in Hong Kong,
where the Company’s shares are listed on the Main Board of the Hong Kong Stock
Exchange, the Independent Auditors’ repor t is issued in accordance with ISAs,
while in Italy, where the Company is domiciled, the Independent Auditor ’s repor t
is issued for statutory purposes in accordance with ISA Italia pursuant to ar t. 14
of Italian Legislative Decree no 39 of January 27, 2010.
234
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235
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