PRADA(HK:01913)2022-03-24 11:18Market Transformation and Growth - The luxury goods market underwent significant transformation in 2021, driven by the pandemic, with a notable increase in the proportion of younger consumers and contributions from digital sales channels [9]. - The company achieved growth through a higher-margin sales mix, elimination of discount promotions, and a streamlined wholesale distribution strategy [9]. - The company’s e-commerce website expansion contributed significantly to growth, primarily driven by new customers [9]. - Investments in retail space and processes improved store productivity, enhancing brand recognition and customer traffic [9]. - The company completed store renovations and set up pop-up installations, which increased foot traffic and optimized retail image [9]. Digital Engagement and Innovation - The digital community engagement was expanded through effective communication campaigns, including the Prada Spring/Summer 2022 fashion show and sponsorship of the 36th America's Cup [10]. - The company joined the Aura consortium, enhancing customer experience through blockchain technology for greater transparency and traceability [10]. - A newly approved digital development blueprint will introduce new information systems, providing a competitive advantage across all distribution and communication channels [10]. Financial Performance - Net sales for the year ended December 31, 2021, reached €1,805.5 million, a 56% increase from €1,189 million in the previous year [12]. - Gross profit margin improved to 61% for the year ended December 31, 2021, up from 50% in 2020 [13]. - EBIT for the year was €460.4 million, representing a significant recovery from a loss of €5.4 million in 2020 [12]. - Net income for the year was €310.7 million, compared to a net loss of €16.2 million in the previous year, marking a substantial turnaround [12]. - Cash flow from operating activities was €460 million, while cash used in investing activities was €48 million [22]. Sustainability and Social Responsibility - The company focuses on sustainable development and social responsibility, which are increasingly important to consumers [9]. - The company communicated its sustainable growth strategy, focusing on three pillars: people, environment, and culture [11]. Corporate Governance - The board of directors consists of 11 members, including 5 executive directors, 1 non-executive director, and 5 independent non-executive directors [30]. - The board is responsible for the overall strategy and financial performance of the company, including sustainability strategies and major transactions [34]. - The board established a sustainability committee in February 2022 to address environmental, social, and governance (ESG) matters [44]. - The company has adopted written procedures regulating securities trading by directors and employees with insider information, with no violations reported in 2021 [29]. Risk Management and Internal Controls - The company has adopted procedures to identify, assess, and manage risks affecting its operations, particularly in response to the COVID-19 pandemic [62]. - The internal audit department provides independent reviews of the internal control and risk management systems, with regular updates to the risk assessment documents [62]. - No significant control deficiencies or failures were identified during the year 2021, indicating effective internal control and risk management systems [62]. Financial Position and Liabilities - As of December 31, 2021, net financial position showed a surplus of €142 million, an increase of €307 million compared to the previous reporting date [20]. - Total financial liabilities amounted to €680.6 million, up from €630.6 million in the previous year [20]. - The debt-to-equity ratio improved to -6.0% as of December 31, 2021, compared to 6.9% in the previous year [16]. - Cash and cash equivalents increased to €396.8 million from €103.3 million year-over-year [20]. Investments and Acquisitions - The acquisition of remaining stakes in two companies in Italy and Romania, along with the acquisition of Filati Biagioli spa, strengthened manufacturing activities [11]. - The company executed stock options to acquire the remaining 10% of Pelletteria Ennepì Srl and 20% of Hipic Prod Impex Srl, achieving full ownership of both companies [132]. - The company completed the acquisition of Filati Biagioli Modesto S.p.A. on June 22, 2021, enhancing its capabilities in cashmere and other fine yarns [133]. Financial Risks and Hedging - The company faces financial risks from currency and interest rate fluctuations due to its international operations [126]. - The company uses hedging contracts to manage risks related to currency and interest rates [126]. - The company has entered into interest rate swaps to hedge against interest rate fluctuations, with a notional amount of €31,167,000 at a fixed rate of 1.457% maturing in May 2030 [152]. Employee Compensation and Governance - The company's compensation policy aims to attract, reward, and retain employees, which is considered key to the group's business success [50]. - A long-term cash incentive plan has been adopted for executive directors and senior management, contingent on achieving economic targets over a three-year period [51]. - The Compensation Committee held three meetings in 2021 with a 100% attendance rate to review and recommend the total basic salary for the board of directors [49]. Financial Reporting and Compliance - Prada spa's financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) effective as of December 31, 2021 [85]. - The company has implemented new and revised IFRS standards effective from January 1, 2022, including IFRS 3 on business combinations and IAS 16 on property, plant, and equipment [88]. - The company recognizes a COVID-19 related rent concession of €5.9 million in the income statement, which is not significantly related to the revisions made in 2021 [87].