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Ermenegildo Zegna Group Reports Strong Fiscal Year 2021 Results

04/06/2022

Strong Overall Performance with 2021 Results One Year Ahead of Plan1
2022 Outlook confirmed: Low-teens Revenue Growth and continued improvement in Adjusted EBIT2 after exceeding own expectations in 2021

  • Full-year results for 2021 exceeded Plan1 published in July 2021, with €145 million Cash Surplus2
  • Zegna One Brand strategy in full swing; Thom Browne maintains strong momentum
  • 2022 outlook confirmed, with low-teens revenue growth expected, continued improvement to Adjusted EBIT2 over the better-than-guidance 2021 basis, and higher Cash Surplus

Ermenegildo Zegna N.V. (NYSE:ZGN) (“Zegna Group,” “the Group,” or “the Company”), the first Italian luxury fashion house listed on the New York Stock Exchange (NYSE) and owner of the Zegna and Thom Browne brands, today filed its Annual Report on Form 20-F with the U.S. Securities and Exchange Commission (“SEC”), reporting Adjusted EBIT2 of €149 million, with an incidence on revenues of 11.5%, above the guidance of “around 10%” published on February 1, 2022. Diluted Loss per share2 was €0.67 and Adjusted diluted earnings per share2 was €0.33. Adjustments from the reported Loss for the year of €128 million to the Adjusted Profit of €75 million relate to net charges of €203 million, mostly non-cash accounting adjustments, of which €205 million related to the December 2021 Business Combination3. As reported on February 1, 2022, the Group’s overall performance exceeded the Plan1 shared last year ahead of the start of public trading, with revenues up 27% year-over-year, totaling approximately €1,292 million.

Ermenegildo “Gildo” Zegna, Chairman and CEO of the Zegna Group, said: “2021 was an epic year for the Zegna Group, and I am very proud of the journey that has brought us here today. I am also especially proud that we continue to achieve significant milestones while staying true to our roots and the heritage of sustainability my grandfather instilled in the Company 111 years ago. The Zegna brand continues to strengthen its position as a global leader in the luxury industry, and our continued focus on luxury leisurewear – ca. 50% of the brand’s revenues – enhanced by the One Brand strategy, now in full swing, and by a further increase in pricing in-season, has proven to be successful with both recurring and new customers. In addition to the strength shown by our namesake brand, I am extremely pleased by the growth of Thom Browne, and the significant appeal this iconic brand has among younger consumers around the world.”

“I am deeply saddened by the tragic events in Ukraine, which all of us are following closely and with great concern. Zegna Group joined forces with the Camera Nazionale della Moda Italiana and provided a significant donation to the United Nations High Commissioner for Refugees at the onset of this tragedy. We also committed to integrate as many as 30 Ukrainian refugees in our factories beginning in April 2022.

“However,” he added, “ours is a multi-year journey and as we continue to monitor the ongoing developments of the COVID-19 pandemic around the world, especially the recent spike in China, we are already ahead of our Plan and remain positive about our growth in 2022. I am particularly excited to see our US and UAE business continue to grow while our business in Europe continues to see a post-lockdown rebound. We remain vigilant, but our 2021 results and our flexibility give me confidence that we are on the right track to reaching the targets set out in our Plan last year and the Group’s longer-term ambitions even sooner than we anticipated.”

Key Highlights from 2021

Net Revenues: For the year ended December 31, 2021, Zegna Group posted revenues of €1,292 million, up 27% from 2020. This strong performance was driven by a continued rebound of the Zegna segment, whose revenues increased 23% year-over-year to €1,035 million. The other primary driver was the exceptional performance of the Thom Browne segment, whose revenues were up 47% over 2020, reaching €264 million.

(Loss)/Profit for the year and Adjusted Profit/(Loss) 2: The Group’s 2021 Loss for the year was €128 million due to mostly non-cash accounting adjustments, including of €205 million related to the December 2021 Business Combination3. Adjusted Profit was €75 million. For additional information regarding Adjusted Profit/(Loss), which is a non-IFRS measure, please see page 4.

Adjusted EBIT 2: The Group’s Adjusted EBIT for the year was €149 million, up more than 7 times from €20 million recorded in 2020. Adjusted EBIT percentage incidence on revenues for the year exceeded the Group’s prior guidance thanks to higher full-price sales in the mix and higher realized efficiencies. Adjusted EBIT for the Zegna segment was €111 million. As a percentage of revenues, Adjusted EBIT was 10.7% compared to 7.8% in 2019. This was driven by better sales mix, cost efficiencies and positive operating leverage. For the Thom Browne segment, Adjusted EBIT2 was €38 million, more than doubled from €16 million in 2019 due to a lower pace of cost growth in the 2019-2021 period, compared to the 64% increase in sales in the same period. Compared to 2020, Adjusted EBIT in 2021 grew 31% from €29 million. As a percentage of revenues, Adjusted EBIT was 14.4%, down slightly from the level of 16.1% in 2020. The strength in Thom Browne’s top line was partly offset, as expected, by an increase in costs driven by higher volumes and growth-related expenses, including costs for expanding the direct-to-consumer store network and investments to improve central administrative functions and processes. For additional information regarding Adjusted EBIT, which is a non-IFRS measure, see page 4.

Net Financial Indebtedness/(Cash Surplus), Trade Working Capital and Capital Expenditure: Cash Surplus2 was €145 million as of December 31, 2021, with €139 million in proceeds from the Business Combination3, compared to Net Financial Indebtedness2 of €7 million as of December 31, 2020. Trade Working Capital2 at year-end was €276 million, 21% of revenues, compared to 27% on December 31, 2020. Capital expenditure for 2021 totaled €48 million4, up from €39 million in 2020, reflecting mainly investments in the store network, the IT and production areas. For additional information regarding Net Financial Indebtedness/(Cash Surplus), Trade Working Capital and Capital Expenditure, which are non-IFRS measures, see page 4.

Fiscal Year 2022 Outlook

The start of 2022 has been marked by considerable geopolitical uncertainty, adding to the volatility of the ongoing global health crisis. Assuming no further deterioration or geographic extension of the war in Ukraine, a normalization of the COVID-19 pandemic in Greater China before the summer, and no other unforeseen events, the Group is forecasting revenue growth in the low-teens. The Group also expects to continue to see improvement in its Adjusted EBIT building on the accelerated expansion achieved in 2021, when the Group delivered an Adjusted EBIT of 11.5% as a percentage of revenues, exceeding its own guidance of “around 10%”.

Annual Report on Form 20-F

The Form 20-F, including financial statements for the fiscal year ended December 31, 2021, can be downloaded from the Company’s website (www.zegnagroup.com) under the section Investors / Financials / SEC Filings, or from the SEC’s website (www.sec.gov). Shareholders may request a hard copy of complete audited financial statements contained in the Form 20-F, free of charge, through the contacts below.

Investor Day on May 17

The Company will host an investor day on May 17, 2022, at Oasi Zegna, where it expects to unveil its sustainability strategy and its medium- to long-term financial goals.

Conference Call

As previously announced, at 8:00 a.m. ET (2:00 p.m. CET), the Company plans to host a webcast and conference call. A live webcast of the conference call will also be available on the Company’s website at ir.zegnagroup.com. To participate in the call, please dial:

Italy dial-in number (Local): 39 069 450 0327
United States: 1 844 200 6205
United States (Local): 1 646 904 5544
United Kingdom (Toll Free): 44 808 189 6484
All other locations: +1 929 526 1599
Access code: 512734

An online archive of the broadcast will be available on the website shortly after the live call and will be available for twelve months. An online archive of the broadcast will be available on the website shortly after the live call and will be available for twelve months.

______________________________
1 The Zegna Group’s Plan was published at the time of the announcement of the business combination between the Company and Investindustrial Acquisition Corp. (“IIAC”). The Group’s Plan was also disclosed in the Company’s registration statement on Form F-4 filed with the SEC (File No. 333-259139), under “Certain Unaudited Zegna Prospective Financial Information”.
2 Adjusted EBIT, Adjusted Profit/(Loss), Net Financial Indebtedness/(Cash Surplus), Adjusted Basic Earnings per Share, Adjusted Diluted Earnings per Share, Trade Working Capital and Capital Expenditure are non-IFRS financial measures. See the Non-IFRS Financial Measures section starting on page 4 of this communication for the definition of such non-IFRS measures and a reconciliation of such non-IFRS measures to the most directly comparable IFRS measures.
3 “Business Combination” means the business combination between Zegna and Investindustrial Acquisition Corp., which was completed on December 17, 2021.
4 Excludes the purchase of the building in New Bond Street, London that was subsequently part of the Disposition of certain of Zegna’s businesses, completed on November 1, 2021 through the statutory demerger under Italian law to a new company owned by its then existing shareholders.

Non-IFRS Financial Measures

Zegna’s management monitors and evaluates operating and financial performance using several non-IFRS financial measures including: adjusted earnings before interest and taxes (“Adjusted EBIT”), adjusted earnings before interest, taxes, Adjusted Profit/(Loss), Adjusted Basic Earnings per Share and Adjusted Diluted Earnings Per Share, Net Financial Indebtedness/(Cash Surplus), Trade Working Capital and Capital Expenditure. Zegna’s management believes that these non-IFRS financial measures provide useful and relevant information regarding Zegna’s financial performance and financial condition, and improve the ability of management and investors to assess and compare the financial performance and financial position of Zegna with those of other companies. They also provide comparable measures that facilitate management’s ability to identify operational trends, as well as make decisions regarding future spending, resource allocations and other strategic and operational decisions. While similar measures are widely used in the industry in which Zegna operates, the financial measures that Zegna uses may not be comparable to other similarly named measures used by other companies nor are they intended to be substitutes for measures of financial performance or financial position as prepared in accordance with IFRS.

Adjusted EBIT

Adjusted EBIT is defined as profit or loss before income taxes plus financial income, financial expenses, exchange losses/(gains), result from investments accounted for using the equity method, impairments of investments accounted for using the equity method, adjusted for income and costs which are significant in nature and that management considers not reflective of underlying operating activities, including, for one or all of the years presented, costs related to the Business Combination, severance indemnities and provision for severance expenses, impairment of property, plant and equipment and right-of-use assets, certain costs related to lease agreements and certain other items.

The following table sets forth a reconciliation of (Loss)/Profit for the year to Adjusted EBIT for the periods indicated.

  (Euro thousands)   For the year ended December 31,
   

2021

 

2020

 

2019

  (Loss)/Profit for the year  

(127,661)

 

(46,540)

 

25,439

  Income taxes  

30,702

 

14,983

 

43,794

  Financial income  

(45,889)

 

(34,352)

 

(22,061)

  Financial expenses  

43,823

 

48,072

 

37,492

  Exchange losses/(gains)  

7,791

 

(13,455)

 

2,441

  Result from investments accounted for using the equity method  

(2,794)

 

4,205

 

1,534

  Impairments of investments accounted for using the equity method  

-

 

4,532

 

-

  Costs related to the Business Combination (1)  

205,059

 

-

 

-

  Costs related to lease agreements (2)  

15,512

 

3,000

 

-

  Severance indemnities and provision for severance expenses (3)  

8,996

 

12,308

 

9,777

  Impairment of property, plant and equipment and right-of-use assets (4)  

8,692

 

19,725

 

8,858

  Other (5)  

4,884

 

7,535

 

-

  Adjusted EBIT  

149,115

 

20,013

 

107,274

(1)

  Costs related to the Business Combination include:

 

 

a)

  €114,963 thousand relating to share-based payments for listing services recognized as the excess of the fair value of Zegna ordinary shares issued as part of the Business Combination and the fair value of IIAC’s identifiable net assets acquired. This amount is recorded within the line item “other operating costs” in the consolidated statement of profit and loss and it is related to Zegna segment.

 

 

b)

  €37,906 thousand for the issuance of 5,031,250 Zegna ordinary shares to the holders of IIAC class B shares to be held in escrow. The release of these shares from escrow is subject to achievement of certain targets within a seven-year period. This amount is recorded within the line item “other operating costs” in the consolidated statement of profit and loss and it is related to Zegna segment.

 

 

c)

  €34,092 thousand for transaction costs related to the Business Combination incurred by Zegna, including costs for bank services, legal advisors and other consultancy fees. This amount is recorded within the line item “purchased, outsourced and other costs” in the consolidated statement of profit and loss and it is related to Zegna segment.

 

 

d)

  €10,916 thousand for the Zegna family’s grant of a one-time €1,500 gift to each employee of the Zegna group as result of the Company’s listing on NYSE completed on December 20, 2021. This amount is recorded within the line item “personnel costs” in the consolidated statement of profit and loss and it is related to Zegna segment for €10,120 thousand and to Thom Browne segment for €796 thousand.

 

 

e)

  €5,380 thousand relating to grant of performance share units, which each represent the right to receive one Zegna ordinary share, to the Group’s Chief Executive Officer, other Zegna directors, key executives with strategic responsibilities and other employees of the Group, all subject to certain vesting conditions. This amount is recorded within the line item “personnel costs” in the consolidated statement of profit and loss and it is related to Zegna segment for €5,141 thousand and to Thom Browne segment for €239 thousand. For additional information please refer to Note 42 - Related party transactions of the Consolidated Financial Statements.

 

 

f)

  €1,236 thousand related to the fair value of private warrants issued, pursuant to the Business Combination, to certain Zegna non-executive directors. This amount is recorded within the line item “personnel costs” in the consolidated statement of profit and loss and it is related to Zegna segment.

 

 

g)

  €566 thousand related to the write-off of non-refundable prepaid premiums for directors’ and officers’ insurance. This amount is recorded within the line item “personnel costs” in the consolidated statement of profit and loss and it is related to Zegna segment.

(2)

  Costs related to lease agreements for the year ended December 31, 2021, are related to Zegna segment and include (i) €12,192 thousand of provisions relating to a lease agreement in the US following an unfavorable legal claim judgment against the Group (recorded within “write downs and other provisions” in the consolidated statement of profit and loss), (ii) €1,492 thousand of legal expenses related to a lease agreement in Italy (recorded within “other operating costs” in the consolidated statement of profit and loss) and (iii) €1,829 thousand in accrued property taxes related to a lease agreement in the UK (recorded within “write downs and other provisions” in the consolidated statement of profit and loss). Costs related to lease agreements for the year ended December 31, 2020 include €3,000 thousand for legal expenses related to a lease agreement in the UK, incurred in the second half of 2020 (recorded within the line item “write downs and other provisions” in the consolidated statement of profit and loss).

(3)

  Zegna incurred costs for severance indemnities of €8,996 thousand, €12,308 thousand and €9,777 thousand for the years ended December 31, 2021, 2020 and 2019, respectively. These amounts are recorded within the line item “personnel costs” in the consolidated statement of profit and loss and are related to Zegna segment.

(4)

  Primarily includes impairments of right-of-use assets for €5,981 thousand, €15,716 thousand and €7,980 thousand for the years ended December 31, 2021, 2020 and 2019 respectively, and impairments of property plant and equipment for €654 thousand, €4,011 thousand and €817 thousand for the years ended December 31, 2021, 2020 and 2019, respectively. In particular, the impairment of right-of-use assets and property, plant and equipment primarily relates to the impairment of DOSs of Zegna segment. Impairments were higher in 2020 as a result of the effects of the COVID-19 pandemic on the Group’s operations.

(5)

  Other adjustments for the year ended December 31, 2021 are related to Zegna segment and include €6,006 thousand related to losses incurred by Agnona subsequent to the Group’s sale of a majority stake in Agnona in January 2021, for which the Group was required to compensate the company in accordance with the terms of the related sale agreement, as well as €144 thousand relating to the write down of the Group’s remaining 30% stake in Agnona (both of which are recorded within the line item “write downs and other provisions” in the consolidated statement of profit and loss), partially offset by other income of €1,266 thousand relating to the sale of rights to build or develop airspace above a building in the United States (this amount is recorded within the line item “other income” in the consolidated statement of profit and loss). Other adjustments for the year ended December 31, 2020 are related to Zegna segment and include (i) donations of €4,482 thousand to charitable organizations in Italy and abroad to support initiatives related to the COVID-19 pandemic (this amount is recorded within the line item “other operating costs” in the consolidated statement of profit and loss), (ii) impairment on assets held for sale of €3,053 thousand in 2020, of which €988 thousand is recorded within the line item “write downs and other provisions” and €2,065 relates to the write down of inventories and is recorded within the line item “cost of raw materials and consumables” in the consolidated statement of profit

Adjusted Profit/(Loss)

Adjusted Profit/(Loss) represents profit or loss adjusted for income and costs (net of tax effects) which are significant in nature and that management considers not reflective of underlying activities, including, for one or all of the years presented, costs related to the Business Combination, severance indemnities and provision for severance expenses, impairment of property, plant and equipment and right-of-use assets, certain costs related to lease agreements, gains on the Thom Browne option realized in connection with the exercise of the option, impairment of equity method investments and certain other items (as further described below), as well as the tax effects of the adjusting items (calculated based on the applicable tax rates of the jurisdictions where the adjustments relate).

The following table sets forth a reconciliation of (Loss)/Profit for the year to Adjusted Profit for the periods indicated.

(Euro thousands)   For the year ended December 31,
 

2021

 

2020

 

2019

(Loss)/Profit for the year  

(127,661)

 

(46,540)

 

25,439

Costs related to the Business Combination (1)  

205,332

 

-

 

-

Costs related to lease agreements (2)  

15,512

 

3,000

 

-

Severance indemnities and provision for severance expenses (3)  

8,996

 

12,308

 

9,777

Impairment of property, plant and equipment and right-of-use assets (4)  

8,692

 

19,725

 

8,858

Gain on Thom Browne option (5)  

(20,675)

 

-

 

-

Impairment of investments accounted for using the equity method (6)  

-

 

4,532

 

-

Other (7)  

4,884

 

7,535

 

-

Tax effects on adjusting items (8)  

(19,758)

 

(5,312)

 

(1,027)

Adjusted Profit/(Loss)  

75,322

 

(4,752)

 

43,047

(1)

  Costs related to the Business Combination include:

 

 

a)

  €114,963 thousand relating to share-based payments for listing services recognized as the excess of the fair value of Zegna ordinary shares issued as part of the Business Combination and the fair value of IIAC’s identifiable net assets acquired.

 

 

b)

  €37,906 thousand for the issuance of 5,031,250 Zegna ordinary shares to the holders of IIAC class B shares to be held in escrow. The release of these shares from escrow is subject to achievement of certain targets within a seven-year period.

 

 

c)

  €34,092 thousand for transaction costs related to the Business Combination incurred by Zegna, including costs for bank services, legal advisors and other consultancy fees.

 

 

d)

  €10,916 thousand for the Zegna family’s grant of a one-time €1,500 gift to each employee of the Zegna group as result of the Company’s listing on NYSE completed on December 20, 2021.

 

 

e)

  €5,380 thousand relating to grant of performance share units, which each represent the right to receive one Zegna ordinary share, to the Group’s Chief Executive Officer, other Zegna directors, key executives with strategic responsibilities and other employees of the Group, all subject to certain vesting conditions. For additional information please refer to Note 42 - Related party transactions of the Consolidated Financial Statements.

 

 

f)

  €1,236 thousand related to the fair value of private warrants issued, pursuant to the Business Combination, to certain Zegna non-executive directors.

 

 

g)

  €566 thousand related to the write-off of non-refundable prepaid premiums for directors’ and officers’ insurance.

 

 

h)

  €273 thousand related to the deal contingent option entered in November 2021. The amount was recorded within the line item “foreign exchange gains/(losses)” in the consolidated statement of profit and loss.

(2)

  Costs related to lease agreements for the year ended December 31, 2021, include (i) €12,192 thousand of provisions relating to a lease agreement in the US following an unfavorable legal claim judgment against the Group (recorded within “write downs and other provisions” in the consolidated statement of profit and loss), (ii) €1,492 thousand of legal expenses related to a lease agreement in Italy (recorded within “other operating costs” in the consolidated statement of profit and loss) and (iii) €1,829 thousand in accrued property taxes related to a lease agreement in the UK (recorded within “write downs and other provisions” in the consolidated statement of profit and loss). Costs related to lease agreements for the year ended December 31, 2020 include €3,000 thousand for legal expenses related to a lease agreement in the UK, incurred in the second half of 2020 (recorded within the line item “write downs and other provisions” in the consolidated statement of profit and loss).

(3)

  Zegna incurred costs for severance indemnities of €8,996 thousand, €12,308 thousand and €9,777 thousand for the years ended December 31, 2021, 2020 and 2019, respectively. These amounts are recorded within the line item “personnel costs” in the consolidated statement of profit and loss.

(4)

  Primarily includes impairments of right-of-use assets for €5,981 thousand, €15,716 thousand and €7,980 thousand for the years ended December 31, 2021, 2020 and 2019 respectively, and impairments of property plant and equipment for €654 thousand, €4,011 thousand and €817 thousand for the years ended December 31, 2021, 2020 and 2019, respectively. In particular, the impairment of right-of-use assets and property, plant and equipment primarily relates to the impairment of DOSs. Impairments were higher in 2020 as a result of the effects of the COVID-19 pandemic on the Group’s operations.

(5)

  Reflects the financial income relating to options related to a gain of €20,675 thousand recognized following the purchase of an additional 5% of the Thom Browne Group on June 1, 2021. This amount is recorded within the line item “financial income” in the consolidated statement of profit and loss.

(6)

  Relates to an impairment of €4,532 thousand in the Group’s investment in Tom Ford, which was recognized following a reported net loss by TFI that management considered as an indication of impairment.

(7)

  Other adjustments for the year ended December 31, 2021 include €6,006 thousand related to losses incurred by Agnona subsequent to the Group’s sale of a majority stake in Agnona in January 2021, for which the Group was required to compensate the company in accordance with the terms of the related sale agreement, as well as €144 thousand relating to the write down of the Group’s remaining 30% stake in Agnona (both of which are recorded within the line item “write downs and other provisions” in the consolidated statement of profit and loss), partially offset by other income of €1,266 thousand relating to the sale of rights to build or develop airspace above a building in the United States (this amount is recorded within the line item “other income” in the consolidated statement of profit and loss). Other adjustments for the year ended December 31, 2020 includes (i) donations of €4,482 thousand to charitable organizations in Italy and abroad to support initiatives related to the COVID-19 pandemic (this amount is recorded within the line item “other operating costs” in the consolidated statement of profit and loss), (ii) impairment on assets held for sale of €3,053 thousand in 2020, of which €988 thousand is recorded within the line item “write downs and other provisions” and €2,065 relates to the write down of inventories and is recorded within the line item “cost of raw materials and consumables” in the consolidated statement of profit and loss.

(8)

  Includes the tax effects of the aforementioned adjustments.

Adjusted Basic Earnings per Share and Adjusted Diluted Earnings per Share

Adjusted Basic Earnings per Share and Adjusted Diluted Earnings per Share represent basic earnings per share and diluted earnings per share adjusted for income and costs (net of tax effects) which are significant in nature and that management considers not reflective of underlying activities, including, for one or all of the years presented, costs related to the Business Combination, severance indemnities and provision for severance expenses, impairment of property, plant and equipment and right-of-use assets, certain costs related to lease agreements, gains on the Thom Browne option realized in connection with the exercise of the option, impairment of equity method investments and certain other items (as further described below), as well as the tax effects of the adjusting items (calculated based on the applicable tax rates of the jurisdictions where the adjustments relate).

Zegna’s management uses Adjusted Basic Earnings per Share and Adjusted Diluted Earnings per Share to understand and evaluate Zegna’s underlying performance. Zegna’s management believes this non-IFRS measure is useful because it excludes items that it does not believe are indicative of its underlying performance and allows it to view operating trends, perform analytical comparisons and benchmark performance between periods. Accordingly, management believes that Adjusted Basic and Diluted Earnings per Share provides useful information to third party stakeholders in understanding and evaluating Zegna’s operating results.

For the calculation of both Adjusted Basic Earnings per Share and Adjusted Diluted Earnings per Share, basic earnings per share and diluted earnings per share the number of ordinary and potential ordinary shares outstanding for all periods reflects the share split performed as part of the Business Combination.

The following table sets forth the calculation of Adjusted Basic and Diluted Earnings per Share and provides a reconciliation of (Loss)/Profit for the year to these non-IFRS measures for the periods indicated.

(Euro thousands)   For the year ended December 31,
 

2021

 

2020

 

2019

(Loss)/Profit for the year  

(127,661)

 

(46,540)

 

25,439

Costs related to the Business Combination (1)  

205,332

 

-

 

-

Costs related to lease agreements (2)  

15,512

 

3,000

 

-

Severance indemnities and provision for severance expenses (3)  

8,996

 

12,308

 

9,777

Impairment of property, plant and equipment and right-of-use assets (4)  

8,692

 

19,725

 

8,858

Gain on Thom Browne option (5)  

(20,675)

 

-

 

-

Impairment of investments accounted for using the equity method (6)  

-

 

4,532

 

-

Other (7)  

4,884

 

7,535

 

-

Tax effects on adjusting items (8)  

(19,758)

 

(5,312)

 

(1,027)

Adjusted Profit/(Loss)  

75,322

 

(4,752)

 

43,047

Impact of non-controlling interests (9)  

8,669

 

4,063

 

3,720

Adjusted Profit/(Loss) attributable to shareholders of the Parent Company  

66,653

 

(8,815)

 

39,327

Weighted average number of shares for basic earnings per share  

203,499,933

 

201,489,100

 

201,561,100

Adjusted Basic Earnings per Share  

0.33

 

(0.04)

 

0.20

Weighted average number of shares for diluted earnings per share  

204,917,880

 

201,489,100

 

201,561,100

Adjusted Diluted Earnings per Share  

0.33

 

(0.04)

 

0.20

(1)

  Costs related to the Business Combination include:

 

 

a)

  €114,963 thousand relating to share-based payments for listing services recognized as the excess of the fair value of Zegna ordinary shares issued as part of the Business Combination and the fair value of IIAC’s identifiable net assets acquired.

 

 

b)

  €37,906 thousand for the issuance of 5,031,250 Zegna ordinary shares to the holders of IIAC class B shares to be held in escrow. The release of these shares from escrow is subject to achievement of certain targets within a seven-year period.

 

 

c)

  €34,092 thousand for transaction costs related to the Business Combination incurred by Zegna, including costs for bank services, legal advisors and other consultancy fees.

 

 

d)

  €10,916 thousand for the Zegna family’s grant of a one-time €1,500 gift to each employee of the Zegna group as result of the Company’s listing on NYSE completed on December 20, 2021.

 

 

e)

  €5,380 thousand relating to grant of performance share units, which each represent the right to receive one Zegna ordinary share, to the Group’s Chief Executive Officer, other Zegna directors, key executives with strategic responsibilities and other employees of the Group, all subject to certain vesting conditions. For additional information please refer to Note 42 - Related party transactions of the Consolidated Financial Statements.

 

 

f)

  €1,236 thousand related to the fair value of private warrants issued, pursuant to the Business Combination, to certain Zegna non-executive directors.

 

 

g)

  €566 thousand related to the write-off of non-refundable prepaid premiums for directors’ and officers’ insurance.

 

 

h)

  €273 thousand related to the deal contingent option entered in November 2021. The amount was recorded within the line item “foreign exchange gains/(losses)” in the consolidated statement of profit and loss.

(2)

  Costs related to lease agreements for the year ended December 31, 2021, include (i) €12,192 thousand of provisions relating to a lease agreement in the US following an unfavorable legal claim judgment against the Group (recorded within “write downs and other provisions” in the consolidated statement of profit and loss), (ii) €1,492 thousand of legal expenses related to a lease agreement in Italy (recorded within “other operating costs” in the consolidated statement of profit and loss) and (iii) €1,829 thousand in accrued property taxes related to a lease agreement in the UK (recorded within “write downs and other provisions” in the consolidated statement of profit and loss). Costs related to lease agreements for the year ended December 31, 2020 include €3,000 thousand for legal expenses related to a lease agreement in the UK, incurred in the second half of 2020 (recorded within the line item “write downs and other provisions” in the consolidated statement of profit and loss).

(3)

  Zegna incurred costs for severance indemnities of €8,996 thousand, €12,308 thousand and €9,777 thousand for the years ended December 31, 2021, 2020 and 2019, respectively. These amounts are recorded within the line item “personnel costs” in the consolidated statement of profit and loss.

(4)

  Primarily includes impairments of right-of-use assets for €5,981 thousand, €15,716 thousand and €7,980 thousand for the years ended December 31, 2021, 2020 and 2019 respectively, and impairments of property plant and equipment for €654 thousand, €4,011 thousand and €817 thousand for the years ended December 31, 2021, 2020 and 2019, respectively. In particular, the impairment of right-of-use assets and property, plant and equipment primarily relates to the impairment of DOSs. Impairments were higher in 2020 as a result of the effects of the COVID-19 pandemic on the Group’s operations.

(5)

  Reflects the financial income relating to options related to a gain of €20,675 thousand recognized following the purchase of an additional 5% of the Thom Browne Group on June 1, 2021. This amount is recorded within the line item “financial income” in the consolidated statement of profit and loss.

(6)

  Relates to an impairment of €4,532 thousand in the Group’s investment in Tom Ford, which was recognized following a reported net loss by TFI that management considered as an indication of impairment.

(7)

  Other adjustments for the year ended December 31, 2021 include €6,006 thousand related to losses incurred by Agnona subsequent to the Group’s sale of a majority stake in Agnona in January 2021, for which the Group was required to compensate the company in accordance with the terms of the related sale agreement, as well as €144 thousand relating to the write down of the Group’s remaining 30% stake in Agnona (both of which are recorded within the line item “write downs and other provisions” in the consolidated statement of profit and loss), partially offset by other income of €1,266 thousand relating to the sale of rights to build or develop airspace above a building in the United States (this amount is recorded within the line item “other income” in the consolidated statement of profit and loss). Other adjustments for the year ended December 31, 2020 includes (i) donations of €4,482 thousand to charitable organizations in Italy and abroad to support initiatives related to the COVID-19 pandemic (this amount is recorded within the line item “other operating costs” in the consolidated statement of profit and loss), (ii) impairment on assets held for sale of €3,053 thousand in 2020, of which €988 thousand is recorded within the line item “write downs and other provisions” and €2,065 relates to the write down of inventories and is recorded within the line item “cost of raw materials and consumables” in the consolidated statement of profit and loss.

(8)

  Includes the tax effects of the aforementioned adjustments.

(9)

  Represents the (Loss)/Profit for the year attributable to non-controlling interests plus the impact of non-controlling interests on the adjusting items.

Net Financial Indebtedness/(Cash Surplus)

Net Financial Indebtedness/(Cash Surplus) is defined as the sum of financial borrowings (current and non-current), derivative financial instruments and bonds, loans and certain other financial liabilities (recorded within other non-current financial liabilities in the consolidated statement of financial position), net of cash and cash equivalents, derivative financial instruments and certain other current financial assets.

The following table sets forth the calculation of Net Financial Indebtedness/(Cash Surplus) as of the dates indicated:

  (Euro thousands)   At December 31, 
   

2021

 

2020

  Non-current borrowings  

471,646

 

558,722

  Current borrowings  

157,292

 

106,029

  Derivative financial instruments - Liabilities  

14,138

 

13,192

  Other non-current financial liabilities (bonds and other)(*)  

7,976

 

8,065

  Total borrowings, other financial liabilities and derivatives  

651,052

 

686,008

  Cash and cash equivalents  

(459,791)

 

(317,291)

  Derivative financial instruments - Assets  

(1,786)

 

(11,848)

  Other current financial assets (securities)(**)  

(334,244)

 

(350,163)

  Total cash and cash equivalents, other current financial assets and derivatives  

(795,821)

 

(679,302)

  Net Financial Indebtedness/(Cash Surplus)  

(144,769)

 

6,706

(*)   Includes only the “bonds” and “other” components of the “Other non-current financial liabilities” line item from Zegna’s consolidated statement of financial position.
(**)   Includes only the “securities” component of the “Other current financial assets” line item from Zegna’s consolidated statement of financial position.

Trade Working Capital

Trade Working Capital is defined as current assets less current liabilities adjusted for derivative assets and liabilities, tax assets and liabilities, cash and cash equivalents, assets and liabilities held for sale, borrowings, lease liabilities, and other assets and liabilities.

The following table sets forth the calculation of Trade Working Capital at December 31, 2021 and 2020:

(Euro thousands, except percentages)   At December 31, 
 

2021

 

2020

Current assets  

1,384,531

 

1,239,156

Current liabilities   

(702,316)

 

(535,454)

Working capital  

682,215

 

703,702

Less:    
Derivative financial instruments  

1,786

 

11,848

Tax receivables  

14,966

 

15,611

Other current financial assets  

340,380

 

350,163

Other current assets  

68,773

 

66,718

Cash and cash equivalents  

459,791

 

317,291

Assets held for sale   

-

 

17,225

Current borrowings  

(157,292)

 

(106,029)

Current lease liabilities  

(106,643)

 

(92,842)

Derivative financial liabilities  

(14,138)

 

(13,192)

Other current financial liabilities  

(33,984)

 

-

Current provisions for risks and charges  

(14,093)

 

(8,325)

Tax liabilities  

(28,773)

 

(33,362)

Other current liabilities  

(124,356)

 

(76,637)

Liabilities held for sale   

-

 

(16,725)

Trade Working Capital  

275,798

 

271,958

of which trade receivables  

160,360

 

138,829

of which inventories  

338,475

 

321,471

of which trade payables and customer advances  

(223,037)

 

(188,342)

Capital Expenditure

Capital expenditure is defined as the sum of cash outflows that result in additions to property, plant and equipment and intangible assets.

The following table shows a breakdown of capital expenditure by category for each of the years ended December 31, 2021, 2020 and 2019:

(Euro thousands, except percentages)   At December 31, 
 

2021

 

2020

 

2019

Payments for property, plant and equipment  

79,699

 

27,630

 

46,113

Payments for intangible assets  

14,627

 

11,524

 

13,392

Capital expenditure  

94,326

 

39,154

 

59,505

About Ermenegildo Zegna Group

Founded in 1910 in Trivero, Italy by Ermenegildo Zegna, the Zegna Group designs, creates and distributes luxury menswear and accessories under the Zegna brand, as well as womenswear, menswear and accessories under the Thom Browne brand. Through its Luxury Textile Laboratory Platform – which works to preserve artisanal mills producing the finest Italian fabrics – the Zegna Group manufactures and distributes the highest quality fabrics and textiles. Group products are sold through over 500 stores in 80 countries around the world, of which 297 are directly operated by the Group as of December 31, 2021 (245 Zegna stores and 52 Thom Browne stores). Over the decades, Zegna Group has charted Our Road: a unique path that winds itself through era-defining milestones that have seen the Group grow from a producer of superior wool fabric to a global luxury group. Our Road has led us to New York, where the Group has been listed on the New York Stock Exchange since December 20, 2021. And while we continue to progress on Our Road to tomorrow, we remain committed to upholding our founder’s legacy – one that is based upon the principle that a business’s activities should help the environment. Today, the Zegna Group is creating a lifestyle that marches to the rhythm of modern times while continuing to nurture bonds with the natural world and with our communities that create a better present and future.

Forward Looking Statements

This communication, including the section “Outlook”, contains forward-looking statements that are based on beliefs and assumptions and on information currently available to the Company. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “target,” “seek” or the negative or plural of these words, or other similar expressions that are predictions or indicate future events or prospects, although not all forward-looking statements contain these words. Any statements that refer to expectations, projections or other characterizations of future events or circumstances, including strategies or plans, are also forward-looking statements. These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although the Company believes that it has a reasonable basis for each forward-looking statement contained in this communication, the Company cautions you that these statements are based on a combination of facts and factors currently known and projections of the future, which are inherently uncertain. In addition, risks and uncertainties are described in the Company’s filings with the SEC. These filings may identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Most of these factors are outside the Company’s control and are difficult to predict. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by the Company and its directors, officers or employees or any other person that the Company will achieve its objectives and plans in any specified time frame, or at all. The forward-looking statements in this communication represent the views of Zegna as of the date of this communication. Subsequent events and developments may cause that view to change. However, while Zegna may elect to update these forward-looking statements at some point in the future, the Company disclaims any obligation to update or revise publicly forward-looking statements. You should, therefore, not rely on these forward-looking statements as representing the views of the Company as of any date subsequent to the date of this communication.

FY 2021 Summary Tables

Ermenegildo Zegna N.V.

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

for the years ended December 31, 2021, 2020 and 2019

   

(Euro thousands)

 

For the years ended December 31,

 

 

2021

 

2020

 

2019

 

 

 

 

 

 

 

Revenues

 

1,292,402

 

1,014,733

 

1,321,327

Other income

 

8,260

 

5,373

 

7,873

Cost of raw materials and consumables

 

(309,609)

 

(250,569)

 

(309,801)

Purchased, outsourced and other costs

 

(353,629)

 

(286,926)

 

(371,697)

Personnel costs

 

(367,762)

 

(282,659)

 

(331,944)

Depreciation, amortization and impairment of assets

 

(163,367)

 

(185,930)

 

(177,068)

Write downs and other provisions

 

(19,487)

 

(6,178)

 

(1,017)

Other operating costs

 

(180,836)

 

(30,399)

 

(49,034)

Operating (Loss)/Profit

 

(94,028)

 

(22,555)

 

88,639

Financial income

 

45,889

 

34,352

 

22,061

Financial expenses

 

(43,823)

 

(48,072)

 

(37,492)

Foreign exchange (losses)/gains

 

(7,791)

 

13,455

 

(2,441)

Result from investments accounted for using the equity method

 

2,794

 

(4,205)

 

(1,534)

Impairments of investments accounted for using the equity method

 

-

 

(4,532)

 

-

(Loss)/Profit before taxes

 

(96,959)

 

(31,557)

 

69,233

Income taxes

 

(30,702)

 

(14,983)

 

(43,794)

(Loss)/Profit for the year

 

(127,661)

 

(46,540)

 

25,439

Attributable to:

 

 

 

 

 

 

Shareholders of the Parent Company

 

(136,001)

 

(50,577)

 

21,749

Non-controlling interests

 

8,340

 

4,037

 

3,690

 

 

 

 

 

 

 

Basic earnings per share in Euro

 

(0.67)

 

(0.25)

 

0.11

Diluted earnings per share in Euro

 

(0.67)

 

(0.25)

 

0.11

Ermenegildo Zegna N.V.

CONSOLIDATED CASH FLOW STATEMENT

for the years ended December 31, 2021, 2020 and 2019

   

(Euro thousands)

 

For the years ended December 31,

 

 

2021

 

2020

 

2019

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

(Loss)/Profit for the year

 

(127,661)

 

(46,540)

 

25,439

Income taxes

 

30,702

 

14,983

 

43,794

Depreciation, amortization and impairment of assets

 

163,367

 

185,930

 

177,068

Financial income

 

(45,889)

 

(34,352)

 

(22,061)

Financial costs

 

43,823

 

48,072

 

37,492

Exchange losses/(gains)

 

7,791

 

(13,455)

 

2,441

Write downs and other provisions

 

19,487

 

6,178

 

1,017

Write downs of the provision for obsolete inventory

 

29,600

 

37,735

 

6,691

Result from investments accounted for using the equity method

 

(2,794)

 

4,205

 

1,534

Impairments of investments accounted for using the equity method

 

-

 

4,532

 

-

Losses arising from the sale of fixed assets

 

1,153

 

1,091

 

970

Other non-cash expenses/(income), net

 

230,812

 

(27,698)

 

(6,420)

Change in inventories

 

(27,554)

 

(39,486)

 

(5,400)

Change in trade receivables

 

(12,294)

 

35,675

 

(8,377)

Change in trade payables including customer advances

 

31,426

 

(38,485)

 

(11,002)

Change in other operating assets and liabilities

 

19,973

 

(10,031)

 

(11,285)

Interest paid

 

(17,487)

 

(21,023)

 

(26,872)

Income taxes paid

 

(63,300)

 

(36,425)

 

(30,907)

Net cash flows from operating activities

 

281,155

 

70,906

 

174,122

Investing activities

 

 

 

 

 

 

Payments for property plant and equipment

 

(79,699)

 

(27,630)

 

(46,113)

Proceeds from disposals of property plant and equipment

 

3,791

 

1,125

 

-

Payments for intangible assets

 

(14,627)

 

(11,524)

 

(13,392)

Payments for investment property

 

-

 

-

 

(325)

Proceeds from disposals of non-current financial assets

 

1,536

 

45,979

 

-

Payments for purchases of non-current financial assets

 

(4,431)

 

-

 

(6,987)

Proceeds from disposals of current financial assets and derivative instruments

 

92,021

 

253,201

 

327,422

Payments for acquisitions of current financial assets and derivative instruments

 

(76,058)

 

(166,334)

 

(167,308)

Acquisition of Investments at equity method

 

(313)

 

-

 

-

Business combinations, net of cash acquired

 

(4,224)

 

(2,245)

 

(9,336)

Net cash flows (used in)/from investing activities

 

(82,004)

 

92,572

 

83,961

Financing activities

 

 

 

 

 

 

Proceeds from borrowings

 

123,570

 

265,352

 

130,841

Repayments of borrowings

 

(160,210)

 

(221,029)

 

(272,851)

Repayments of non-current financial liabilities

 

(4,287)

 

-

 

-

Payments of lease liabilities

 

(100,611)

 

(90,699)

 

(110,460)

Purchase of own shares from Monterubello

 

(455,000)

 

-

 

-

Proceeds from issuance of ordinary shares upon Business Combination

 

310,739

 

-

 

-

Proceeds from issuance of ordinary shares to PIPE Investors

 

331,385

 

-

 

-

Payments of transaction costs related to the Business Combination

 

(48,475)

 

-

 

-

Cash distributed as part of the Disposition

 

(26,272)

 

-

 

-

Payments for acquisition of non-controlling interests

 

(40,253)

 

-

 

-

Sale of shares held in treasury/(Purchase of own shares)

 

5,959

 

(945)

 

(94)

Dividends paid to non-controlling interests

 

(548)

 

(1,731)

 

(14,922)

Dividends to owners of the parent

 

(102)

 

-

 

-

Net cash flows used in financing activities

 

(64,105)

 

(49,052)

 

(267,486)

 

 

 

 

 

 

 

Effects of exchange rate changes on cash and cash equivalents

 

7,454

 

(7,761)

 

1,698

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

142,500

 

106,665

 

(7,705)

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the year

 

317,291

 

210,626

 

218,331

Cash and cash equivalents at the end of the year

 

459,791

 

317,291

 

210,626

Ermenegildo Zegna N.V.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at December 31, 2021 and 2020

   

(Euro thousands)

 

At December 31

 

 

2021

 

2020

 

 

 

 

 

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

 

425,220

 

387,847

Property, plant and equipment

 

111,474

 

244,127

Right-of-use assets

 

370,470

 

351,646

Investments at equity method

 

22,447

 

21,360

Deferred tax assets

 

108,210

 

71,901

Investment property

 

-

 

49,754

Other non-current financial assets

 

35,372

 

49,263

Total non-current assets

 

1,073,193

 

1,175,898

Current assets

 

 

 

 

Inventories

 

338,475

 

321,471

Trade receivables

 

160,360

 

138,829

Derivative financial instruments

 

1,786

 

11,848

Tax receivables

 

14,966

 

15,611

Other current financial assets

 

340,380

 

350,163

Other current assets

 

68,773

 

66,718

Cash and cash equivalents

 

459,791

 

317,291

 

 

1,384,531

 

1,221,931

Assets held for sale

 

-

 

17,225

Total current assets

 

1,384,531

 

1,239,156

Total assets

 

2,457,724

 

2,415,054

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Share capital

 

5,939

 

4,300

Retained earnings

 

498,592

 

893,236

Other reserves

 

96,679

 

(295,772)

Equity attributable to shareholders of the Parent Company

 

601,210

 

601,764

Equity attributable to non-controlling interest

 

43,094

 

43,270

Total equity

 

644,304

 

645,034

Non-current liabilities

 

 

 

 

Non-current borrowings

 

471,646

 

558,722

Other non-current financial liabilities

 

167,387

 

220,968

Non-current lease liabilities

 

331,409

 

314,845

Non-current provisions for risks and charges

 

44,555

 

39,956

Employee benefits

 

42,263

 

29,347

Deferred tax liabilities

 

53,844

 

70,728

Total non-current liabilities

 

1,111,104

 

1,234,566

Current liabilities

 

 

 

 

Current borrowings

 

157,292

 

106,029

Other current financial liabilities

 

33,984

 

-

Current lease liabilities

 

106,643

 

92,842

Derivative financial instruments

 

14,138

 

13,192

Current provisions for risks and charges

 

14,093

 

8,325

Trade payables and customer advances

 

223,037

 

188,342

Tax liabilities

 

28,773

 

33,362

Other current liabilities

 

124,356

 

76,637

 

 

702,316

 

518,729

Liabilities held for sale

 

-

 

16,725

Total current liabilities

 

702,316

 

535,454

Total equity and liabilities

 

2,457,724

 

2,415,054

 

Investor Relations
Francesca Di Pasquantonio
francesca.dipasquantonio@zegna.com
+39 335 5837669

Media
Ermenegildo Zegna Group
Domenico Galluccio
domenico.galluccio@zegna.com
+39 335 538 7288

Brunswick Group
Brendan Riley / Lidia Fornasiero / Marie Jensen
briley@brunswickgroup.com / lfornasiero@brunswickgroup.com / mjensen@brunswickgroup.com
+1 (917) 755-1454 / +39 335 718 7205 / +33 (0) 6 49 09 39 54

Source: Zegna Group

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