Company s data Corporate Governance... 23

Transcription

1 2009 ANNUAL REPORT

2 A n n u a l R e p o r t TABLE OF CONTENTS Company s data Corporate Governance bodies TOD S Group Group s organizational chart Distribution network as of December 31 st, Key consolidated financial figures Highlights of results TOD'S Group IAS/IFRS Annual Report as of December 31 s t, 2009 Report of the Board of Directors Introduction Alternative indicators of performances The Group s brands Organizational structure of the Group Foreign currency markets Principal events and operations during the period The Group s results in Research and development Reconciliation of the result for the period and net equity of the Group with the analogous values of the Parent Company Corporate Governance Significant events occurring after the end of the year Business outlook Approval of Financial Statement Financial Statements Profit & Loss Consolidated comprehensive Profit & Loss Consolidated Statement of Financial position Consolidated Statement of Cash Flows Consolidated statements of changes in equity Supplementary notes 1. General notes Financial statement formats: choice of form and classification principles Highlights of the accounting principles Segment reporting Dividends Earnings per share Assets held for sale Assets with indefinitive useful life Assets with definite useful life Property, plant and equipment Impairment losses Investiment property Equity investments Inventories Other current assets Shareholders equity Bank overdraft and financing Derivative financial instruments Hedging of financial risks (IFRS 7) Deferred tax assets and liabilities Table of contents

3 A n n u a l R e p o r t 21 Other current liabilities Provisions and potential liabilities and assets Share based payments (stock options) Reserves for employees Transaction with related parties Personnel costs Fiancial income and expenses Income taxes TOD'S S.p.A. - IAS/IFRS Annual Report as of December 31 s t, 2009 Report of the Board of Directors Introduction Alternative indicators of performances Operating performances Research and development Intercompany transactions Information on the Share Capital Personal data processing disclosure Corporate Governance Management and coordination activities Significant events occurring after the end of the fiscal year Business outlook Motion for allocation of the income for the year Financial Statements Profit & Loss Account Statement of Financial Position Statement of Cash flow Statement of changes in equity Supplementary notes 1. General notes Financial statement format: choice of form and classification principles Highlights of the accounting principles Dividends Earnings per share Assets with indefinite useful life Assets with definite useful life Property, plant and equipment Impairment losses Investiment property Investments in subsidiaries, joint ventures, and associated companies Inventories Other current assets Financial assets Shareholders equity Bank overdraft and financing Derivative financial instruments Hedging of financial risks Deferred tax assets and liabilities Other current liabilities Provisions and potential liabilities and assets Share based payments (stock options) Reserves for employees Transactions with related parties Personnel costs Table of contents

4 A n n u a l R e p o r t 26 Fiancial income and expenses Income from equity investments Income taxes Independent Auditors compensation Certification of the Separate Financial Statements of TOD S S.p.A. and the Consolidated Financial Statements of the TOD S Group pursuant to Article 81-ter of Consob Regulation no of May 14th, 1999, as amended Table of contents

5 A n n u a l R e p o r t Company s data Registered office TOD S S.p.A. Via Filippo Della Valle, Sant'Elpidio a Mare (Fermo) - Italy Tel Legal data Parent company Share capital resolved euro 64,000,000 Sahare capital subscribed and paid euro 60,961,840 Fiscal Code and registration number on Company Register of Court of Fermo: Registered with the Chamber of Commerce of Fermo under n R.E.A. Offices e Show-rooms Dusseldorf Kaistrasse, 2 Hong Kong Three Pacific Place, 1 Queen s Road East London Old Bond Street, 16 Milan - Corso Venezia, 30 Milan - Via Savona, 56 Milan - Via Serbelloni 1-4 Milan - Via della Spiga, 22 Milan - Viale Montenero 63 New York - 450, West 15 t h Street Paris Rue Royale, 20 Seoul 89-10, Cheongdam-dong, Kangnam-ku Shanghai Nanjing West Road, Plaza 66 Tower 2 Tokyo Omotesando Building, Jingumae Production facilities Comunanza (AP) - Via Merloni, 7 Comunanza (AP) - Via S.Maria, Sant'Elpidio a Mare (FM) - Via Filippo Della Valle, 1 Bagno a Ripoli, Loc. Vallina (FI) - Via del Roseto, 60 Bagno a Ripoli, Loc. Vallina (FI) - Via del Roseto, 50 Tolentino (MC) - Via Sacharov 41/43 1 Company s data

6 A n n u a l R e p o r t Corporate Governance bodies Board of directors ( 1) Diego Della Valle Chairman Andrea Della Valle Vice- Chairman Luigi Abete Maurizio Boscarato Luigi Cambri Luca Cordero di Montezemolo Emanuele Della Valle Fabrizio Della Valle Emilio Macellari Pierfrancesco Saviotti Stefano Sincini Vito Varvaro Executive Committee Diego Della Valle Chairman Andrea Della Valle Fabrizio Della Valle Emilio Macellari Stefano Sincini Vito Varvaro Compensation Luigi Abete Chairman Committee Luigi Cambri Pierfrancesco Saviotti Internal Control and Maurizio Boscarato Chairman Corporate Governance Luigi Cambri Committee Pierfrancesco Saviotti Board of statutory ( 2) Enrico Colombo Chairman Auditors Gian Mario Perugini Acting stat. auditor Fabrizio Redaelli Acting stat. auditor Massimo Foschi Substitute auditor Gilfredo Gaetani Substitute auditor Independent Auditors ( 3) Manager charged with preparing a company s financial report Deloitte & Touche S.p.A. Rodolfo Ubaldi ( 1 ) Term of the office: (resolution of the Shareholders meeting as of April 20 t h, 2009) ( 2 ) Term of the office: (resolution of the Shareholders meeting as of April 27 t h, 2007) ( 3 ) Term of the office: (resolution of the Shareholders meeting as of April 28 t h, 2006) 2 Corporate Governance bodies

7 A n n u a l R e p o r t TOD S Group TOD S S.p.A. Parent Company, owner of the TOD S, HOGAN and FAY brands and licensee of the ROGER VIVIER brand. Del.Com. S.r.l. Subholding for operation of national subsidiaries. TOD S International B.V. Subholding for operation of international subsidiaries and DOS in The Netherlands. An.Del. Usa Inc. Subholding for operation of subsidiaries in the United States. Del.Pav S.r.l. Company that operates DOS in Italy. Filangieri 29 S.r.l. Company that operates DOS in Italy. Re.Se.Del. S.r.l. Company for services. Gen.del. SA Company that operates DOS in Switzerland. TOD S Belgique S.p.r.l. Company that operates DOS in Belgium. TOD S Deutschland Gmbh Company that distributes and promotes products in Germany and manages DOS in Germany. TOD S Espana SL Company that operates DOS in Spain. TOD S France Sas Company that distributes and promotes products in France and manages DOS in France. TOD S Luxembourg S.A. Company that operates DOS in Luxembourg. TOD S Hong Kong Ltd Company that distributes and promotes products in Far East and South Pacific and manages DOS in Hong Kong. TOD S Japan KK Company that operates DOS in Japan. TOD S Korea Inc. Company that promotes products in Korea TOD S Macao Ltd Company that operates DOS in Macao. TOD S Retail India Private Ltd Company that operates DOS in India TOD S Saint Barth Sas Not operating company TOD S (Shanghai) Trading Co. Ltd Company that operates DOS in China TOD S Singapore Pte Ltd Company that operates DOS in Singapore. TOD S UK Ltd Company that operates DOS in Great Britain. Webcover Ltd Company that operates DOS in Great Britain. Cal.Del. Usa Inc. Company that operates DOS in California (USA). Colo. Del. Usa Inc. Not operating company Deva Inc. Company that distributes and promotes products in North America, and manages of DOS in New Jersey (USA). Flor. Del. Usa Inc. Company that operates DOS in Florida (USA). Hono. Del. Inc. Company that operates DOS in Hawai (USA). Il. Del. Usa Inc. Company that operates DOS in Illinois (USA). Neva. Del. Inc. Company that operates DOS in Nevada (USA). Or. Del. Usa Inc. Company that operates DOS in California (USA). TOD S Tex. Del. Usa Inc. Company that operates DOS in Texas (USA) Sandel SA Not operating company Un.Del. Kft Production company Alban.Del Sh.p.k. Production company Nota: in year 2009, the company Del.Com. S.r.l. incorporated subsidiaries Deva Mode S.r.l., Via Roma 40 S.r.l. e Spiga 22 S.r.l. 3 Composition of the Group

8 A n n u a l R e p o r t Group s organizational chart TOD S S.p.a. 100% Gen.Del. SA Zurich Switzerland S.C. Chf 200,000 TOD S International BV Amsterdam The Netherlands S.C. - Euro 2,600, % 100% 100% ALBAN.DEL Sh.p.k Tirana Albania S.C. Euro 20,000 1% 99% TOD S (Shanghai) Trading Co. Ltd Shanghai- China S.C. USD 6,000,000 10% 1% TOD S Hong Kong Ltd Hong Kong S.C. - Usd 50,000 TOD S Belgique S.p.r.l. Bruxelles - Belgium S.C. - Euro 300,000 TOD S Japan KK Tokio - Japan S.C. - Jpy 100,000,000 TOD S Saint Barth Sas Saint Barthélemy S.C. - Euro 500,000 Un.Del Kft Tata - Hungary S.C. - Huf 42,900,000 TOD S Macao Lda Macao S.C. Mop 850,000 TOD S India Retail Private Ltd Mumbai India S.C. INR 113,900, % 100% 100% 90% 99% 100% 100% 50% 1% 50% 100% 100% 100% 50% 100% Webcover Ltd London Great Britain S.C. - Gbp 1,000 TOD S UK Ltd London Great Britain S.C. - Gbp 350,000 TOD S Espana SL Madrid Spain S.C. - Euro 468, TOD S Korea Inc Seoul - Korea S.C. Won 100,000,000 TOD S Singapore Ltd Singapore S.C. - Sgd 300,000 TOD S Luxembourg S.A. Luxembourg S.C. Euro 31, Sandel SA San Marino S.C. - Euro 258, % An.Del. USA Inc. New York U.S.A. S.C. - Usd 3,700,000 Cal.Del. USA Inc. Beverly Hills, Ca U.S.A. S.C. - Usd 10, % 100% Colo.Del. USA Inc Denver, Co U.S.A. S.C. - Usd 10,000 Deva Inc. Wilmington, DE U.S.A. S.C. - Usd 500, % 100% Flor.Del. USA Inc. Tallahassee, Fl U.S.A. S.C. - Usd 10,000 Hono.Del. Inc. Honolulu, Hi U.S.A. S.C. - Usd 10, % 100% Il.Del. USA Inc. Springfield, Il U.S.A. S.C. - Usd 10,000 Neva.Del. Inc. Carson City, Nv U.S.A. S.C. - Usd 10, % 100% Or.Del. USA Inc. Sacramento, Ca U.S.A. S.C. - Usd 10,000 TOD S Tex. Del. Inc. Dallas, Tx U.S.A S.C. - Usd 10, % 100% Del.Com S.r.l. S.Elpidio a Mare - Italy S.C. - Euro 31,200 Re.Se.Del. S.r.l. S.Elpidio a Mare - Italy S.C. - Euro 25, % 50% Del.Pav. S.r.l. S.Elpidio a Mare - Italy S.C. - Euro 50, % TOD S France Sas Paris - France S.C. - Euro 780,000 50% Filangieri 29 S.r.l. S.Epidio a Mare- Italy S.C. - Euro 100, % TOD S Deutschland Gmbh Dusseldorf - Germany S.C. - Euro 153, Composition of the Group

9 A n n u a l R e p o r t Distribution network as of December 31 st, 2009 USA (D) (F) U.S.A. 14 RoW (D) (F) Baharain 2 Kuwait 2 Lebanon 2 Qatar 1 Saudi Arabia 2 United Arab E. 5 Total 14 Europe (D) (F) Italy 36 8 Belgium 1 France 11 Germany 8 Great Britain 5 1 Greece 7 Luxembourg 1 Netherlands 1 Portugal 1 Russia 2 Spain 1 1 Switzerland 3 Turkey 1 Total Asia (D) (F) Japan 28 1 China 17 6 Korea 9 8 Philippines 2 Hong Kong 8 1 India 3 Indonesia 3 Macao 1 1 Malaysia 2 Singapore 2 1 Taiwan 14 Thailandia 3 U.S.A. 1 Total (D)=DOS (F)=FRANCHISED STORES DOS, 2009 new openings Franchised stores, 2009 new openings Europe Bologna Marne la Vallée (Italy) (France) Europe Malaga Atene (Spain) (Grece) Far East Busan Seoul Yeoju Shanghai Tokyo Osaka Macao U.S.A. Miami (Korea) (Korea) (Korea) (China) (Japan) (Japanj) (Macao) (U.S.A.) Middle East Manama Manama Riyadh Dubai Taipei Taipei Far East Shenyang Kuwait (Baharain) (Baharain) (Saudi Arabia) (Unit. Arab Emirates) (Taiwan) (Taiwan) (China) (Kuwait) For a complete list of retail outlets operated by the DOS and franchising network, reference should be made to the corporate web site: 5 Distribution network

10 A n n u a l R e p o r t Key consolidated financial figures 2009 Revenues - % by brand P&L key figures (in euro mn) HOGAN 36.0% FAY 12.8% Roger Vivier 2.1% Altro 0.1% FY 09 FY 08 FY 07 Revenues EBITDA % % % EBIT % % % TOD'S 48.9% PRE TAX % % % 2009 Revenues - % by region Europe 21.1% North Am. 6.5% RoW 15.6% Key Balance Sheet figures (in euro mn) Dec. 31 st, 09 Dec. 31 st, 08 Dec. 31 st, 07 Net working capital Net fixed capital Shareholders' equity Italy 56.8% Net financial position Capital expenditures % 2009 Revenues - % by product Leather goods 15.6% Appar. 13.3% Financial key figures (in euro mn) Dec. 31 st, 09 Dec. 31 st, 08 Dec. 31 st, 07 Free cash flow (2.6) (18.5) Self financing Cash flow from operation Shoes 71.0% 6 Key consolidated financial figures

11 A n n u a l R e p o r t Highlights of results Revenues: revenues totalled million euros in FY 2009, million euros on a comparable exchange rate basis, for growth of 0.8% and 0.1%, respectively, from FY 2008 revenues. Sales by the DOS network totalled million euros (+4.1%). Revenues (in euro mn) EBITDA: this totalled million euros, up from 2008 (155.6 million euros). FY 09 comp. FY 09 FY 08 FY 07 EBITDA (in euro mn) EBIT: this totalled million euros, virtually the same as in FY Net profit: consolidated net profit for FY 2009 was 86.1 million euros (+2.7%). Net financial position (NFP): the Group had million euros in liquid assets at December 31 s t, Its net financial position was million euros at the same date. FY 09 comp. FY 09 FY 08 FY 07 EBIT (in euro mn) Capital expenditures: these totalled 21.3 million euros in FY 2009, compared with 40.8 million euros in the previous financial year. FY 09 comp. FY 09 FY 08 FY 07 Distribution network: a total of 10 new DOS were opened during the financial year. At December 31 st, 2009 the single brand distribution network comprised 149 DOS and 78 franchised stores NFP (in euro mn) free cash flow (*) FY 09 FY 08 FY 07 (*) gross of dividends 7 Key consolidated financial figures

12 A n n u a l R e p o r t Principal Stock Market indicators (in euro) Official price at Official price at Minimum price in Maximum price in Market capitalization at , Market capitalization at ,589,583,133 Dividend per share Dividend per share Number of outstanding shares 30,609,401 Earning per share (euro) Stock performance In euro FY 09 FY 08 FY January-December Group employees The Group employees FY 09 FY 08 FY 07 FY 06 BLC 32% EX 2% Year to date 2,840 2,814 2,472 2,280 Average 2,829 2,698 2,421 2,233 WHC 66% EX = executives WHC = white collar employees BLC = blue collar employees 8 Key consolidated financial figures

13 TOD S GROUP - IAS/IFRS ANNUAL REPORT AS OF DECEMBER 31 ST 2009

14 REPORT OF THE BOARD OF DIRECTORS

15 TOD S Group 2009 Annual Report Introduction The Report of the Board of Directors on Operations is based on the TOD s Group Consolidated Financial Statements at December 31 s t, 2009, prepared in accordance with IAS/IFRS (International Accounting Standards IAS, and International Financial Reporting Standards IFRS) issued by the IASB and approved by the European Union at the same date. IAS/IFRS refers also to all revised International Accounting Standards (IAS) and all interpretative documents issued by the IFRIC (International Financial Reporting Interpretations Committee), previously nomined Standing Interpretations Committee (SIC). The Consolidated Fiancial Statements have been prepared on the assumption that the Group can operate as a going concern. The Group believes that there are no asset, liability, financial or organisational indicators of material uncertainties, as defined in paragraph 25 of IAS 1 on business continuity. The Report on Operations must be read together with the Financial Statements and Notes to the Financial Statements, which are an integral part of the 2009 Consolidated Annual Report. The Report on Operations also includes the additional information required by CONSOB, pursuant to the orders issued in implementation of Article 9 of Legislative Decree 38/2005 (Resolutions and of July 27 t h, 2006 and memorandum DEM/ of July 28 t h, 2006, and most recently, with Banca d'italia/consob/isvap Document no. 4 of March 3 rd, 2010, entitled measures regarding the information to be provided in financial disclosures (2009 and 2010), impairment tests, contractual clauses for financial debts, restructuring of debt and the Hierarchy of fair value. Alternative indicators of performances In order to strip the effects of changes in exchange rates with respect to the average values for the previous year from the results for the 2009 financial year, the typical economic reference indicators (Revenues, EBITDA, and EBIT) have been recalculated by applying the average exchange rates for 2008, rendering them fully comparable with those for the previous reference period.note that on the one hand, these principles for measurement of business performance represent a key to interpretation of results not envisaged in IFRSs, and on the other hand, must not be considered as substitutes for what is set out in those standards. The Group s activity The TOD S Group operates in the luxury sector under its proprietary brands (TOD S, HOGAN, and FAY) and licensed brands ( ROGER VIVIER). It actively creates, produces and distributes shoes, 11 Report on operation

16 TOD S Group 2009 Annual Report leather goods and accessories, and apparel. The firm s mission is to offer global customers topquality products that satisfy their functional requirements and aspirations. Development of production. The Group s production structure is based on complete control of the production process, from creation of the collections to production and then distribution of the products. This approach is considered key to assuring the prestige of its brands. Shoes and leather goods are produced in Group-owned plants, with partial outsourcing to specialized workshops. All of these outsourcers are located in areas with a strong tradition of shoe and leather good production. This preference reflects the fact that an extremely high standard of professional quality is required to make these items, with a significantly high level of added value contributed to the final product by manual work. The Group relies exclusively on selected specialized outsourcers, which enables it to exploit their respective specializations in crafting the individual products sold as part of the apparel line. Distribution structure. The prestige of the Group s brands and the high degree of specialization necessary to offer the respective products to customers entails distribution through a network of similarly specialized stores. Accordingly, the Group relies principally on three channels: DOS (directly operated stores), franchised retail outlets, and a series of selected, independent multibrand stores. The Group s strategy is focused on development of the DOS and franchising networks, given that these channels offer greater control and more faithful transmission of the individual brands. It is also clear that, in particular market situations, distribution through independent multibrand stores is more efficient. This channel is of key importance to the Group. The Group s brands The TOD S brand is positioned on the luxury market and combines tradition, top quality and modernity. It offers consumers shoes, leather goods, accessories and apparel whose design is exclusive, functional and never ostentatious, interpreting timeless elegance. TOD S products embody the high quality of goods Made in Italy that are handcrafted for daily use while offering a sophisticated and elegant look. Certain products, such as the Driving Shoe or the D-Bag, beloved by celebrities and leaders around the world, have become icons representing a unique and recognisably elegant style for men and women 12 Report on operation

17 TOD S Group 2009 Annual Report The HOGAN brand is positioned in the elegant luxury sportswear market, offering consumers contemporary style shoes, leather goods, accessories and apparel with an international vision. HOGAN products, which are distinguished by their innovative character and high quality, have created a unique style, contributing to changes in the fashion habits of consumers who want a functional, comfortable, but also sporty and elegant product for everyday life. HOGAN products are trend-setters in defining an elegant and sporty look. Some of its models are best sellers, such as its Interactive shoes. This brand offers consumers a line of high-quality apparel that is distinguished by the technical treatment of fabrics, obsession for detail and extreme functionality, combining style and quality with excellence. FAY products can be worn everywhere: from the sports stadium to the office, and from the city to the countryside. In every season, the FAY collection offers innovative, recognisable products for men, women and children. Organizational structure of the Group The Group s organisational configuration in FY 2009 reflected continuity from the previous year. TOD S S.p.A. is at the heart of the Group s organisation, its parent company that owns the TOD S, HOGAN, and FAY brands, holds the licenses to the ROGER VIVIER, and manages the Group s production and distribution. Through a series of sub-holdings, the organisation is rounded out by a series of commercial companies that are delegated complete responsibility for retail distribution though the DOS network. Certain of them, strategically located on international markets, are assigned major roles in product distribution, marketing and promotion, and public relations processes along the value chain, while simultaneously guaranteeing the uniform image that Group brands must have worldwide. Foreign currency markets Analysis of average euro exchange rates against currencies outside the eurozone between January and December 2009 reveals that the common currency generally retreated from the values it reached in FY The only exceptions to this trend are the British pound and Korean WON, which continued to slide in value after slipping sharply in FY Report on operation

18 TOD S Group 2009 Annual Report Average exchange rate 2009 vs 2008 (change %) CHF GBP HKD JPY KRW SGD USD Principal events and operations during the period FY 2009 was an especially tough year for the fashion industry, which was severely impacted by the global economic crisis that hit in H This crisis did not spare the luxury goods segment, which had historically enjoyed inelastic demand that was only marginally sensitive to variations in general consumer trends. Instead, the crisis hit the entire segment hard, exposing all the weaknesses that a long period of growth had helped to conceal or remain latent: high levels of indebtedness, high working capital requirements, dilution of brand value and growth policies financed exclusively with financial leverage. Against the backdrop of these recent events, the TOD S Group has found yet further confirmation in its FY 2009 performance that strategic drivers focused on the medium-long term, which have always characterised its approach to the markets, and the flexibility that is a hallmark of its organisation, represent an appropriate growth model for guaranteeing it solid, lasting leadership on its target market. In the midst of such a challenging economic environment, the TOD S Group has seen its capital and, above all, its financial structure actually strengthen. Its net financial position at December 31 st, 2009 was million euros, with free cash flow of million euros during the period. Aside from the Group's structural capacity to generate cash, this achievement is also the result of the nimbleness with which it was able to transform its previous growth strategies into a prudent and conservative approach to the new volatility and unpredictability dominating global markets. This meant, first of all, prudent assessment of capital expenditure processes without compromising or prejudicing growth (capital expenditures totalled 21.3 million euros in FY 2009, compared with 40.8 million euros in FY 2008), and second of all, improvements in operating efficiency, through targeted measures to streamline costs and eliminate less efficient areas. 14 Report on operation

19 TOD S Group 2009 Annual Report The Group s results in 2009 The Group turned in an absolutely positive performance in FY Notwithstanding the extremely challenging global economic situation, the Group managed to improve on the results it had achieved in FY 2008, in terms of both revenues and margins. Revenues in FY 2009 totalled million euros (707.9 million euros on a comparable exchange rate basis), while EBITDA totalled million euros, up slightly from the previous year (155.6 million euros). In euro 000 s Principal economic indicators Year 09 Year 08 Change % S a l e s r e v e n u e s 7 1 3, , , E B I T D A 1 5 8, , , D e p r e c., a m o r t., w r i t e - d o w n s a n d a d v a n c e s ( 3 2, ) ( 2 9, ) ( 2, ) 8. 8 E B I T 1 2 6, , P r e - Ta x 1 2 6, , , C o n s o l i d a t e d n e t i n c o m e 8 6, , , F o r e i g n e x c h a n g e i m p a c t o n r e v e n u e s ( 5, ) A d j u s t e d S a l e s r e v e n u e s 7 0 7, , I m p a c t o n o p e r a t i n g c o s t 5, A d j u s t e d E B I T D A 1 5 8, , , F o r e i g n e x c h a n g e i m p a c t o n d e p r e c. & a m o r t A d j u s t e d E B I T 1 2 6, , E B I T D A % E B I T % A d j u s t e d E B I T D A % A d j u s t e d E B I T % Ta x r a t e % Note: The FY 2008 results have been restated following retrospective application of the amendment to IAS 38. The impact of these adjustments was 0.6 million euros for EBITDA and EBIT, and 0.7 million euros for net profit. Please see the explanatory Notes, in the section Highlights of the accounting principles, for details. 15 Report on operation

20 TOD S Group 2009 Annual Report In euro 000 s Principal Balance Sheet Indicators Change Net working capital (*) 200, ,348 (37,219) Non current assets 297, ,659 (12,292) Other current assets/liabilities (14,752) (17,247) 2,495 Net assets held for sale Invested capital 482, ,760 (47,016) Net financial position 177,189 72, ,358 Shareholders' equity 659, ,591 57,342 Capital expenditures 21,310 40,838 (19,528) Cash flow from operations 154,164 89,216 64,948 Free cash flow 102,837 (2,604) 105,441 ( * ) Trade receivables + inventories - trade payables Note: The FY 2008 figures have been restated following retrospective application of the amendment to IAS 38. Please see the explanatory Notes, in the section Highlights of the accounting principles, for detailed analysis of the effects. Revenues. The Group s consolidated revenues totalled million euros in FY 2009, up 0.8% from FY At constant exchange rates, i.e. using the same average exchange rates for FY 2008, revenues totalled million euros, virtually on par with the result for the previous year. The DOS network reported results. positive Revenues totalled million euros in FY 2009, up 4.1% from the previous year. Their was breakdown especially favourable. In Q4 2009, the propor- (In euro mn) FY 09 % FY 08 % Change % DOS WS Total WS 51.0% DOS 49.0% WS DOS WS DOS FY 09 FY 08 tion of ordinary sales made at full price as compared with promotional prices was markedly higher than in the same period of The Same Store Sales Growth (SSSG) figure, calculated as the 16 Report on operation

21 TOD S Group 2009 Annual Report worldwide average of revenue growth rates reported at the DOS existing on January 1 st, 2008 was - 0.2% for all of FY 2009, although it began to accelerate at a healthy rate in November and December. At December 31 s, 2009, the Group s distribution network was comprised by 149 DOS and 78 franchised stores, compared with 150 DOS and 71 franchised stores at December 31 st, In FY 2009, revenues to third parties totalled million euros, representing a 2.2% change from FY This was an especially positive result owing to the prudent distribution policy implemented over the course of the year in response to the global economic downturn. TOD S brand revenues totalled million euros in FY 2009, holding up well in consequence of a deliberate sales policy focused on protecting the brand and quality of distribution. The HOGAN brand confirmed the positive results repor- (In euro mn) FY 09 % FY 08 % Change % TOD'S (7.9) (2.2) HOGAN FAY (1.7) (1.7) RV (1.8) (11.0) Other (1.3) n.s. Total HOGAN 36.0% FAY 12.9% TOD'S 48.9% RV 2.1% RV FAY HOGAN TOD'S RV FAY HOGAN TOD'S FY 09 FY 08 ted during the past several seasons. Its revenues totalled million euros in FY 2009, up 7.6% from FY FAY brand revenues totalled 91.6 million euros in FY 2009, reflecting a 1.7% change from FY The brand's resilience in the face of overall market segment performance was extremely satisfactory. Finally, the ROGER VIVIER brand realised revenues of 15 million euros in FY This brand, which represents about 2.1% of the Group s revenues, continued to pursue its strategic development strategy, with highly selective distribution choices being made consistently with the policy of maintaining its exclusive cachet. In terms of product categories, the Group s core business, shoes, continued to grow, representing about 71% of consolidated sales. Revenues in FY 2009 totalled million euros, up 17 Report on operation

22 TOD S Group 2009 Annual Report 4.2% from FY Sales of leather goods at DOS held their own. However, the sales figures were also influenced by the lower unit price of certain new, successful products such as the TOD S brand fabric G-Bag. Revenues totalled million euros (In euro mn) FY 09 % FY 08 % Change % Shoes Leather goods (15.2) (12.0) Apparel Other (0.3) n.s Total Leather goods 15.6% Apparel 13.3% Shoes 71.0% APPAR. LEATH. GOODS SHOES APPAR. LEATH. GOODS SHOES FY 09 FY 08 in FY 2009, representing 15.6% of the Group s sales. Finally, apparel revenues totalled 95 million euros in FY 2009, up slightly from the previous year. This was a particularly notable achievement in light of overall market performance. Turning to the regional markets where the Group operates, it confirmed its unchallenged leadership on the Italian market, where revenues totalled million euros in FY 2009, up 5.5% from FY In the rest of Europe, the Group s sales totalled million euros in FY 2009, down 6.4% from the previous year. Revenues on the United States market totalled 46.4 million euros, accounting for 6.5% of the Group s sales. Q results con- (In euro mn) FY 09 % FY 08 % Change % Italy Europe (10.3) (6.4) North America (12.9) (21.7) RoW Total North America 6.5% Europe 21.1% RoW 15.6% Italy 56.8% RoW North Am. Europe Italy RoW North Am. Europe Italy FY 09 FY 08 firmed the positive signals that began to be received in September. The Rest of the World posted positive results: revenues in this region totalled million euros in FY 2009, up 7.5% from FY Especially good results were achieved on the Chinese market, which is growing strongly. 18 Report on operation

23 TOD S Group 2009 Annual Report Operating results. EBITDA for FY 2009 totalled million euros, representing 22.2% of consolidated revenues, with (albeit slight) growth both in absolute terms and in percentage terms as compared with FY 2008, when EBITDA reached million euros (equal to 22% of sales). Profitability is positively affected by application of the average cross rates for the previous financial year. In this case, EBITDA, which was virtually unchanged in absolute terms, would represent 22.4% of the Group s sales. The cost structure for FY 2009 reflected a slight increase in absorption of profit margins by production costs, due to cyclical sales performance at both the regional level and in each product category. The increase in rental costs was more marked, although in line with the trend that had already appeared in FY The total outlay for use of locations internationally, mainly for the directly operated store (DOS) network, was EBITDA (in euro mn) FY 09 compar. basis FY 09 FY million euros in FY 2009, reflecting a growth rate of % from the FY 2008 level (when it totalled 44.5 million euros). The percentage of these costs in terms of revenues thus rose from 6.3% in FY 2008 to 7.2% in FY The costs that drove up this final figure were mainly tied to the large number of new DOS that were opened during the previous financial year (30 new store openings), and whose costs impacted FY 2008 income for only a portion of that year. The Group s personnel costs grew in tandem with the expansion of the distribution network (for hiring of sales staff assigned to the new stores). In FY 2009 these costs totalled million euros, compared with million euros in FY 2008, translating into growth of 2.7 million euros in absolute terms. Personnel costs were equal to 15.1% in FY 2009, as compared with 14.8% in FY At December 31 st, 2009 the Group had 2,840 employees, 26 more than at the beginning of the year (when they totalled 2,814). EBIT totalled million euros in FY 2009, virtually unchanged from the 126 million euros realised in FY It represented 17.7% of the Group s sales (FY 2008: 17.8%). 2,840 2,814 GROUP EMPLOYEES 2,472 2,280 FY 09 FY 08 FY 07 FY Report on operation

24 B i l a n c i o c o n s o l i d a t o G r u p p o T O D S ( ) FY 2009 EBIT was also positive, as compared with the average exchange rates for the previous year. In this case, EBIT would have been million euros, representing 17.9% of revenues. Depreciation and amortisation of property, plant and equipment and intangible assets rose slightly, from 29.1 million euros in FY 2008 to 30.5 million euros in FY At December 31 s t, 2009 depreciation and amortisation charges were equal to 4.3% of the Group s revenues. The impact recorded during the previous year was 4.1%. Write-downs recognised for the impairment of EBIT (in euro mn) FY 09 compar. basis FY 09 FY 08 assets at certain DOS totalled 0.6 million euros, where currently forecast cash flows do not offer a reasonable expectation of recovering their carrying value. Accruals for doubtful accounts and generic risks totalled 1. 2 million euros. Financial income during the period was near the breakeven point ( at a positive 0. 1 million euros). Interest income earned on cash and cash equivalents totalled 1.3 million euros. This amount was heavily penalised by the rates of return that fell to minimum levels during FY The balance of foreign exchange gains and losses was a positive 0.2 million euros. By including the effect of exchange rate risk hedges (a negative 0.9 million euros), the total balance of foreign exchange gains and losses would have been a negative 0.7 million euros. Income taxes for FY 2009 totalled 40.4 million euros, including the effects of deferred taxes, for a tax rate of 31.9%, representing an additional improvement on the 33.1% rate reported for FY Net of direct taxes, consolidated net profit for FY 2009 was 86.1 million (+2.2 million from FY 2008). This result is equal to 12.1% of consolidated revenues, the same as in the previous year. FINANCIAL INC./EXP. (in euro mn) 0.2 Foreign exch. gains & losses 31.9% 32.8% 0.7 Net interests TAX RATE 37.8% Other % FY 09 FY 08 FY 07 FY Report on operation

25 TOD S Group 2009 Annual Report Capital expenditures. Capital expenditure in FY 2009 was lower than in previous financial years, due to the prudent approach taken by management to spending decisions during the current, and unusual, phase in development. Capital expenditures totalled 21.3 million euros, compared with 40.8 million euros in FY Tangible & Intangible assets Capital expenditures (in euro mn) FY 09 FY 08 FY 07 FY 06 FY 05 Capital expenditure on the DOS network totalled about 10.7 million euros, used to finance the new stores opened during the financial year and renovation work that is performed at existing boutiques on a rotating basis. Capital expenditure on industrial devices and equipment totalled 5.6 million euros, for normal and periodic replacement and modernisation (compared with 7.1 million euros for such expenditures in FY 2008). Major resources continued to be dedicated to information technology, with capital expenditure totalling 1.7 million euros in FY INVESTMENTS BY ALLOCATION Produc. 29% Other 17% DOS 54% Net financial position and cash flow. The Group s financial position improved markedly in FY Operations during the year generated a total of million euros in cash flow. In euro 000 s Net financial position Change Current financial assets Cash and cash equivalents 204, , ,733 Cash 204, , ,733 Current financial liabilities Current account overdraft (18,480) (18,651) 171 Current share of medium-long term financing (1,521) (1,454) (67) Current financial liabilities (20,001) (20,105) 104 Current net financial position 184,008 81, ,837 Non-current financial liabilities Financing (6,819) (8,340) 1,521 Non-current financial liabilities (6,819) (8,340) 1,521 Net financial position 177,189 72, , Report on operation

26 TOD S Group 2009 Annual Report Demand deposits and cash on hand climbed to over 200 million euros (204.0 million euros at December 31 s t, 2009), while liabilities fell slightly to 26.8 million euros, of which 6.8 million euros fall due beginning in 2011 (28.4 million euros at December 31 st, 2008). The net financial position at December 31 s t, 2009 was million euros. It was 72.8 million euros at December 31 s t, 2008, when it consisted of million euros in assets and 28.4 million euros in liabilities. The contribution made by cash flow was up slightly ( million euros in FY 2009, compared with million euros in FY 2008). The greater impulse given to the growth in cash came from the sharp reduction in working capital. Through prudent management of working capital, especially inventory (increased rotation and streamlining of supply flows to the DOS network), in order to reduce net investments, the cash flow generated by operations during the period totalled million, up 72.8% from the previous year. The reduction in capital expenditure and the 4.7 million euro recapitalisation following exercise of some of the remaining stock options granted to the Group s directors, employees and independent contractors as part of the stock options plan that was terminated in FY 2009 also had a positive impact on cash for the period (see Note 23 Stock options plan). In euro 000 s Funds flow statement FY 09 FY 08 Profit (loss) for the period of the Group 85,668 82,754 Non-cash items 37,166 33,733 Cash Flow 122, ,487 Changes in operating net working capital 31,330 (27,271) Cash Flow from operations 154,164 89,216 Cash Flow generated (used) in investment activity (20,136) (42,326) Cash Flow generated (used) in financing activity (31,191) (50,500) Cash Flow received (used) continuing operations 102,837 (3,610) Cash Flow from assets held for sale 0 1,006 Cash Flow received (used) 102,837 (2,604) Net financial position at the beginning of the period 81,171 83,775 Net financial position at the end of the period 184,008 81,171 Change in current net financial position 102,837 (2,604) When stripped of dividend payments (38.8 million euros), the total amount of cash generated by operations in FY 2009 would climb to million euros (FY 2008: 35.5 million euros). Research and development Given the particular nature of the Group s production, research and development activity consists of continuous technical/stylistic revision of models and constant improvement of the materials used to realise the product. 22 Report on operation

27 TOD S Group 2009 Annual Report Since this activity is exclusively ordinary, the associated costs are charged entirely to income in the year that they are incurred, and thus recognised as normal production costs. Research and development costs, as defined above, have assumed major importance due to operating realisation of projects connected with expansion of the existing product line with new types of merchandise that complement current ones. These will increase the number of brands offered and stimulate increased sales to end customers. Reconciliation of the result for the period and net equity of the Group with the analogous values of the Parent Company The following table illutrates the reconciliation of the result for the period and net equity of the Group with the analogous values of the Parent Company, in accordante with CONSOB memorandum DEM/ dated July 28 t h, In euro 000 s Net profit Share equity Net Profit Share equity Parent Company 71, ,874 69, ,423 Difference between book value of consolidated Companies and net equity method valuation 13,410 50,747 14,319 34,501 Goodwill from Business combination Parent Company (13,242) (13,242) Goodwill from Business combination Group 11,789 11,789 Others (*) 337 (17,517) (1,410) (18,809) Minority interest 472 5,282 1,139 4,929 Group 86, ,933 83, ,591 (*) Mainly dividends and intercompany profits. Corporate Governance The Corporate Governance system The corporate governance system of the parent company TOD S S.p.A. is based on the traditional system, or Latin model. The corporate bodies are: - the Shareholders Meeting, which has the prerogative of resolving at its ordinary and extraordinary meetings on the matters reserved to it by law or the articles of association; - the Board of Directors, which is vested with full, unlimited authority for ordinary and extraordinary management of the Company, with the right to perform all those acts that it deems appropriate to implement and realise the corporate purpose, excluding only those reserved by law to the Shareholders' Meeting; 23 Report on operation

28 TOD S Group 2009 Annual Report - the Board of Statutory Auditors, which is responsible for supervising compliance with the law, the memorandum of association and compliance with the principles of proper administration; the adequacy of the organisational structure, its internal control system and the administrative and accounting system; on the adequacy of the instructions issued to the company by the TOD S Group in regard to the information to be given for compliance with its disclosure obligations; - the Manager in charge of preparing the company financial documents. The Board of Directors has set up several internal committees: the Executive Committee, the Internal Control and Corporate Governance Committee and the Compensation Committee. The adopted corporate governance model is substantially based on the Corporate Governance Code for Listed Companies, in its latest version as prepared by the Corporate Governance Committee for Listed Companies (sponsored by Borsa Italiana S.p.A. and comprised by representatives from several of the leading Italian companies and experts in this area), whose principles have been implemented by Tod s S.p.A. with a series of Board of Directors resolutions since November 2006, as well as the reference models represented by international best practice. Disclosure pursuant to Article 123-bis of Legislative Decree 58/1998 ( TUF ) At its meeting on March 22 n d, 2010, the Board of Directors of the parent company TOD S S.p.A. approved the annual Corporate Governance Report. This report provides information about its ownership structure, pursuant to the provisions of Article 123-bis (1) TUF. Its corporate governance system is illustrated in detail according to the information required pursuant to paragraph 2 of Article 123-bis, together with the principles of governance suggested by the aforementioned Corporate Governance Code that have been implemented by TOD S S.p.A. The reader is referred to the Annual Corporate Governance Report, which is available to the public together with this Report on Operations and accounting documentation. It may be consulted in the corporate section of the website. Significant events occurring after the end of the year No significant events affecting The Group s activities occurred after the end of FY Business outlook In spite of the difficulties and disparities encountered by the Group on the various markets where it operates, it closed FY 2009 with absolutely positive results, both relatively (in comparison with its competitors) and absolutely (growth from its FY 2008 results). Operating flexibility, prompt reaction, prudent diversification of markets, solidity and the appeal of its own brands enabled the Group to overcome an extremely complex phase unscathed, without having to 24 Report on operation

29 TOD S Group 2009 Annual Report renounce or dispose of any of its strategic assets (distribution network, human resources and consolidation of brands). Together with its improved financial independence, the Group managed to increase its market share, especially in what represents its own core business: shoes. On that basis, if the market confirms the signals of recovery received during the first months of the year, the Group disposes of all the resources and capacity to increase its volumes and profitability further in FY Approval of Financial Statement The consolidated financial statements of the TOD S Group were approved by the Board of Directors on March 22 n d, Milan, March 22 n d, 2010 The Chairman of the Board of Directors Diego Della Valle 25 Report on operation

30 FINANCIAL STATEMENTS

31 TOD S Group 2009 Annual Report Profit & Loss In euro 000 s R e f e r e n c e t o n o t e s Y e a r 0 9 Y e a r 0 8 Revenues Sales revenues 713, ,553 Other revenues and income 15,454 14,772 Total revenues and income 728, ,325 Operating Costs Change in inventories of work in process and finished goods (48,111) 20,542 Cost of raw materials, supplies and material for consumption (145,998) (180,308) Costs for services (201,343) (237,097) Costs of use of third party assets 22 (51,377) (44,473) Costs of labour 26 (107,340) (104,597) Other operating charges (15,767) (20,760) Total operating costs (569,936) (566,693) EBITDA 158, ,632 Amortisation, depreciation and write-downs Amortisation of intangible assets 9 (7,242) (6,611) Depreciation of tangible assets 10 (23,237) (22,509) Other adjustments 11 (562) 242 Total amortisation,depreciation and write-downs (31,041) (28,878) Provisions (1,164) (725) EBIT 126, ,029 Financial income and charges Financial income 27 14,256 22,541 Financial charges 27 (14,159) (23,179) Total financial income (charges) 97 (638) Income (losses) from equity investments - - Profit before taxes 126, ,391 Income taxes (40,405) (41,498) Conolidated net income 86,140 83,893 Minority interests (472) (1,139) Net Income of the group 85,668 82,754 EPS (in euro) EPS diluted (in euro) N o t e : p l e a s e r e f e r t o t h e E x p l a n a t o r y N o t e s f o r d e t a i l s o f t h e e f f e c t s o n t h e s i n g l e i t e m s r e p o r t e d i n t h e F i n a n c i a l S t a t e m e n t s a n d o n t h e o p e n i n g e q u i t y b a l a n c e s r e f e r r e d t o p r o d u c e d b y a p p l y i n g r e t r o s p e c t i v e l y t h e a m e n d m e n t t o I A S Financial Statements