FY 2016 Results Presentation Milan, April 12 th 2017
Agenda Presentation 14:00 – 14:30 Patrizio Bertelli – CEO • Overview Alessandra Cozzani – CFO • FY 2016 Financial Review Patrizio Bertelli – CEO • Commercial Update • Outlook Q&A Session 14:30 – 15:00 FY 2016 Results Presentation – April 12 th 2017 1
FY 2016 Pathway to sustainable growth Patrizio Bertelli CEO FY 2016 Results Presentation – April 12 th 2017 2
FY 2016 Pathway to sustainable growth 2016 has been a challenging year but our action plan delivered satisfactory economic results Built new digital team fully dedicated to rolling out e-commerce platform on a global scale in order to develop a truly omnichannel shopping experience New products launched leveraging Prada’s unique heritage and creativity, filling all strategic price points Successfull implementation of rationalization programme creating a leaner and more efficient structure Effective management of Net Working Capital and particularly inventory Positive Net Financial Position after paying dividends thanks to strong cash flow and all growth fully self financed Thanks to our actions, we have seen early signs of improving trends in H2 and in particular in Q4 FY 2016 Results Presentation – April 12 th 2017 3
2016 Financial Review Alessandra Cozzani CFO FY 2016 Results Presentation – April 12 th 2017 4
FY 2016: at a glance Successful cost reduction program stabilising margins Condendsed P&L € m FY 16 FY 15 % change Net Revenues 3,184 3,548 -10% Gross Margin 71.9% 72.4% EBITDA 653 803 -19% EBITDA Margin 20.5% 22.6% EBIT 431 503 -14% 14.2% EBIT Margin 13.5% Net Income 278 331 -16% • Industrial efficiencies supporting high gross margin • Satisfactory level of EBIT and EBITDA due to the positive impact of cost reduction program FY 2016 Results Presentation – April 12 th 2017 5
FY 2016: at a glance Strong cash flow self-financing Condensed Balance Sheet and Cash Flow € m 31 Jan 17 31 Jan 16 Non current assets 2,600 2,587 556 Net operating working capital 665 Other current assets / (liabilities), net 51 26 Other non current assets / (liabilities), net (126) (70) Net invested capital 3,081 3,208 Consolidated shareholders’ equity 3,104 3,097 (23) Net financial position (surplus)/deficit 111 3,081 3,208 Total Operating cash flow 632 368 Capital expenditure 251 337 • Efficient working capital management supporting strong operating cash flow • Capex fully self-financed • Positive cash flow after dividend payments enabling debt pay down FY 2016 Results Presentation – April 12 th 2017 6
Net sales by channel Improving trends across the year % change % change % change € m FY 16 H1 16 H2 16 same FX same FX same FX Retail 2,635 -13% 1,277 -16% 1,358 -10% Wholesale 504 +15% 252 +3% 252 +29% Total 3,139 -10% 1,529 -13% 1,610 -6% FY 16 split: Retail 16% • Sequential improvement in H2 and particularly in the last months of the year Wholesale • Excellent results from e-tailer partnerships (launch 84% on Net-a-porter.com and MyTheresa.com in July and Mrporter.com in September) Retail Wholesale FY 2016 Results Presentation – April 12 th 2017 7
Net sales by geography Most regions saw improved trends in H2 % change % change % change FY 16 H1 16 H2 16 same FX same FX same FX Europe 1,190 600 -8% 591 -5% -3% Americas 459 218 -15% 240 -12% -9% Far East 993 -12% 461 -21% 532 -3% Greater China 622 -12% 289 -22% 333 -2% Japan 389 -13% 192 -9% 197 -16% 103 56 -8% 48 Middle East -10% -13% Others 5 -15% 2 -20% 2 -8% Total 3,139 1,529 1,610 -10% -13% -6% Strong rebound in Mainland China from Q3, delivering double digit growth in Q4; trend in HK and Macau improved, particularly in Q4 Signs of recovery in Europe • Growth in UK (double-digit in H2); Russia outperformed across the year • Early signs of recovery in France Americas impacted by falling touristic flow in US • Positive performance in Canada in H2 • Latina America outperformed led by Mexico and Brazil Declining sales in Japan as stronger yen discouraged Chinese tourists FY 2016 Results Presentation – April 12 th 2017 8
Net sales by product Enrichment of offer delivering better results % change % change % change € m FY 16 H1 16 H2 16 same FX same FX same FX Leather Goods 1,804 -14% 894 -18% 910 -9% Footwear 679 -4% 344 -4% 335 -4% Ready to Wear 600 -1% 262 -7% 337 +5% Others 56 -8% 29 -12% 28 -2% Total 3,139 -10% 1,529 -13% 1,610 -6% FY 16 split: 2% Leather goods – contraction mitigated in H2 • 19% New launches broadened range of price options • Excellent market response of latest collections Footwear – slight decline 57% • Outperformance of Miu Miu, delivering growth in H2 22% Ready to wear – resuming growth in H2 • Very good reception of FW collections for both Prada and Miu Miu Leather goods Footwear RTW Others FY 2016 Results Presentation – April 12 th 2017 9
Net sales by brand Sales performance improved for all brands % change % change % change € m FY 16 H1 16 H2 16 same FX same FX same FX Prada 2,528 1,234 -14% 1,295 -10% -7% Miu Miu 515 249 -14% 266 -8% -2% Church’s 80 +6% 40 +10% 41 +2% Other 16 7 -10% 9 -6% -1% Total 3,139 1,529 1,610 -10% -13% -6% FY 16 split: 3% Prada 16% • Sales contraction mitigated in H2; resilience in Q4 Miu Miu • Sales improved in H2; turned positive in Q4 81% Church’s • Solid growth across the year Church’s Prada Miu Miu Other FY 2016 Results Presentation – April 12 th 2017 10
Operating performance Cost reduction stabilizing margins EBIT ( € m) EBIT margin: 16.1% 12.2% 13.8% 13.3% 293 217 214 210 H1 2015 H2 2015 H1 2016 H2 2016 • Excellent progress on costs, stabilising operating margins half-on-half FY 2016 Results Presentation – April 12 th 2017 11
Cost optimization Excellent results of cost control program Year-on-year change: Operating expenses -10% yoy • € 129m reduction in operating costs • € 78m reduction in D&A ( € m) Labour costs reduction 2,065 • Freezing turnover of non-operationally 1,858 221 critical staff 134 177 192 125 Systematic rent negotiations 173 Internalize of activities resulting in less consultancy and general services 1,517 1,383 Continuosly trimming G&A and indirect costs Advertising • Increasing investments in digital communication FY2015 FY2016 Selling Advertising&Promotion Product Development G&A FY 2016 Results Presentation – April 12 th 2017 12
Operating cash flow Strong operating cash flow supported by efficient inventory management Net inventories ( € m) Operating cash flow ( € m) As % of sales: 21% 20% 19% 17% 779 693 625 527 Net working capital absorbing cash 646 365 591 526 305 423 274 267 209 63 133 104 102 99 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 Jul 31, 2015 Jan 31, 2016 Jul 31, 2016 Jan 31, 2017 Raw Materials & Work in Progress Finished Products FY 2016 Results Presentation – April 12 th 2017 13
Capex Capex stabilized as focus shift from store openings to refurbishments Capex ( € m) As % of sales: 9% 8% 337 251 162 100 175 151 Corporate&Industrial Retail 2015 2016 • Capex stabilized at ~ € 250m per year • 28 openings and 26 closings in FY 2016 • ~ 40 renovation and relocation projects to keep fresh the shopping experience FY 2016 Results Presentation – April 12 th 2017 14
Net financial position Strong cash flow enabling NFP turning positive ( € m) Positive Change Negative Change 222 (229) 109 (281) 284 29 23 NFP NFP Net Income Net Operating D&A Capex Dividends Other NFP Jan-16 Jan-16 Working Capital Jan-17 (111) Note: NFP without related parties FY 2016 Results Presentation – April 12 th 2017 15
Dividend policy 307 281 281 281 230 2012 2013 2014 2015 2016 Dividend 45% 62% 85% 111% 37% payout (%) Dividend 0,12 0,11 0,11 0,11 0,09 per share ( € ) Dividend 3.1% Yield (*) (%) (*) share price as at January 31 st 2017 FY 2016 Results Presentation – April 12 th 2017 16
Commercial Update Patrizio Bertelli CEO FY 2016 Results Presentation – April 12 th 2017 17
Path to digital excellence Focused e-commerce and commercial platforms Talented hires to drive digital strategy • New team fully dedicated to develop the Group’s digital strategy • Chiara Tosato will lead the team, bringing digital and media expertise First wave of a global e-commerce platform roll-out plan • By year end: China, Korea, Australia, New Zealand and Russia. Other countries to follow in 2018 Accelerating ready-to-wear online rollout • Launch of Prada women’s and men’s RTW and Miu Miu women’s RTW collections on own e-commerce platform • All products across all brands to be available online by year end FY 2016 Results Presentation – April 12 th 2017 18
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