Poltrona Frau S.p.A. · PDF filenemo s.r.l. 49%. poltrona frau s.p.a. _____annual financial...

Poltrona Frau S.p.A.

Annual Financial Report as at 31 December 2013


Annual Financial Report as at 31 December 2013

These financial statements are available on the Company‟s

website www.poltronafraugroup.com,

in the Investor Relations section


Registered office: Turin, Via Vincenzo Vela no. 42

Operational and administrative offices: Tolentino (MC), Via Sandro Pertini, 22

Share capital: Euro 35,068,789.75 fully paid

Tax Code and VAT Number: 05079060017

Registered with the Turin Chamber of Commerce – R.E.A. no. 682039

http://www.poltronafraugroup.com/

CONTENTS

Annual Financial Report

SUMMARY DATA AND GENERAL INFORMATION 6

Corporate bodies 6

Summarised financial statements of Poltrona Frau Group 7

Summarised financial statements of Poltrona Frau S.p.A 9

Group operating companies as at 31 December 2013 11

Ownership and shares held by directors and

statutory auditors 12

Stock ratings during the year and financial

communications 14

MANAGEMENT REPORT 17

Poltrona Frau Group profile 19

Analysis of annual revenues of the Group by business

segment and geographical area 26

Comment on key items in the income statement and

statement of financial position of the Poltrona Frau Group 28

Comment on key items in the income statement and

statement of financial position of Poltrona Frau S.p.A. 33

Reconciliation between the result for the period and

Group shareholders' equity of Poltrona Frau S.p.A. 37 Business outlook 39 Subsequent events 40 Corporate Social Responsibility 43 Corporate Governance System 76

POLTRONA FRAU GROUP CONSOLIDATED FINANCIAL

STATEMENTS AS AT 31 DECEMBER 2013 81

Consolidated Statement of Financial Position 83

Consolidated Income Statement 85

Consolidated Statement of Comprehensive Income 86

Consolidated Statement of Cash Flows 87

Consolidated Statement of Changes in Equity 88

Notes to the Financial Statements 89

Accounting principles and policies 91

Subsequent events 158

Attestation on the consolidated financial statements

pursuant to Article 81-ter of Consob Regulations no. 11971

of 14 May 1999, as amended and supplemented 159

Independent auditors‟ report 160

POLTRONA FRAU S.P.A. FINANCIAL STATEMENTS AS AT 31

DECEMBER 2013 163

Statement of financial position 165

Income Statement 166

Statement of Comprehensive Income 167

Statement of Cash Flows 168

Statement of Changes in Equity 169

Notes to the Financial Statements 170

Accounting principles and policies 171

Information pusruant to Article 149-duodecies of the

Consob Issuers' Regulation 210

Share-based payment 211

Report of the Board of Statutory Auditors 215

Attestation on the separate financial statements pursuant

to Article 81-ter of Consob Regulation no. 11971 of 14 May

1999, as amended and supplemented 218

Independent auditors‟ report 219

Financial statements as at 31 December 2013 - proposed

resolution 221

POLTRONA FRAU S.P.A.

____________________________________________________________________ANNUAL FINANCIAL REPORT AS AT 31 DECEMBER 2013

3

NOTICE OF CALL TO THE GENERAL

SHAREHOLDERS‟ MEETING



4



5



6

SUMMARY DATA AND GENERAL INFORMATION

CORPORATE BODIES

Board of Directors (1)

Chairman Franco Moschini

Deputy Chairman Matteo Cordero di Montezemolo

Chief Executive Officer Dario Rinero

Directors Tommaso Beolchini (2)

Innocenzo Cipolletta (2) (3)

Luca Cordero di Montezemolo (2)

Libero Milone (2) (3)

Mario Paolo Moiso (2)

Lorenzo Romani (2) (5)

Luigi Sala (2)

Irene Tinagli (2) (3)

Board of Statutory Auditors (1)

Chairman Mario Stefano Luigi Ravaccia

Standing Auditors Alfonso Donadio

Barbara Zanardi

Alternate Auditors Nazareno Minnozzi

Gianluca Settepani

Independent auditors (4) Reconta Ernst & Young S.p.A.

Committees Internal Control and Corporate Governance Committee

Libero Milone (2) (3) – Chairman

Mario Paolo Moiso (2)

Innocenzo Cipolletta (2) (3)

Compensation Committee

Innocenzo Cipolletta (2) (3) – Chairman

Tommaso Beolchini (2)


Related Party Transactions Committee

Innocenzo Cipolletta (2) (3) – Chairman

Irene Tinagli (2) (3)


Lead Independent Director Innocenzo Cipolletta (2) (3)

(1) Appointed by the Shareholders‟ Meeting of 27 April 2012 and in office until approval of the financial statements of the Parent Poltrona Frau S.p.A. for the

year ending 31 December 2014

(2) Non-executive director

(3) Independent director pursuant to the Corporate Governance Code

(4) Remains in office until approval of the financial statements of the Parent Poltrona Frau S.p.A. for the year ending 31 December 2014

(5) On 4 February 2014, and following the resignation of Lorenzo Romani, Mr. Matteo Facoetti was co-opted until the next shareholders‟ meeting

SUMMARISED FINANCIAL STATEMENTS OF THE POLTRONA FRAU GROUP (*)



7

Consolidated Income Statement

(in thousands of Euro) Year 2013 Year 2012

Sales revenue 265,359 238,497

Other revenues and income 7,485 8,491

Revenues 272,844 246,988

Costs for raw materials and consumable (194,588) (175,453)

Personnel costs (46,239) (45,503)

EBITDA (1) 32,017 26,032

EBITDA % 11.7% 10.5%

Non-recurring costs (4,171) (3,906)

Amortization, depreciation, provisions and impairment (7,587) (6,593)

Operating Income 20,259 15,533

Operating Income % 7.4% 6.3%

Financial charges, net and gains/losses from investments (8,527) (6,674)

Income before taxes 11,732 8,859

Income before taxes % 4.3% 3.6%

Current, prepaid and deferred taxes (7,199) (4,060)

Profit (or Loss) from continuing operations 4,533 4,799

Profit (or Loss) from discontinuing operations - (3,675)

Profit (loss) for the year 4,533 1,124

(1) EBITDA represents operating income before amortisation, depreciation, allocations, impairment and non-recurring

costs. Identified in this way EBITDA is not an IFRS accounting measure and accordingly the criterion used by the

Poltrona Frau Group to calculate this item is not necessarily the same as that used by other companies and is

therefore not comparable.

(*) In the Annual Financial Report, the values as at 31 December 2012 were restated to ensure their alignment and

comparability with those of the current year following the application of the new IAS 19 on the part of the Group.



8

Statement of consolidated invested capital

(in thousands of Euro) 31 December

2013

31 December

2012

Applications

Net working capital 24,552 32,727

Fixed assets and other non-current assets 151,948 149,935

Non-current liabilities (33,287) (33,279)

Assets/(liabilities) held for sale - 500

Net invested capital 143,213 149,883

Sources

Net financial position 69,340 79,073

Shareholders‟ equty 73,873 70,810

Total souces of funds 143,213 149,883

Key consolidated financial statement ratios

Year 2013 Year2012

Economic and financial ratios

Third party funds / own funds ratio 0.94 1.12

Financial leverage ratio (1) 2.17 3.04

Net financial position as a percentage of revenues 25.4% 32.0%

Net working capital as a percentage of revenues 9.0% 13.3%

ROI (2) 14.1% 10.4%

ROE (3) (5) 6.1% 1.6%

Tax rate (4) (5) 61.4% 45.8%

Growth ratios

Revenues 10.5% (1.8%)

EBITDA 23.0% 1.7%

Operation income 30.4% (17.5%)

Income before taxes (5) 32.4% (24.1%)

Profit for the year (5) 303.3% (75.8%)

(1) Ratio between net financial position and EBITDA.

(2) Ratio between operating income and net invested capital.

(3) Ratio between profit for the year and shareholders‟ equity.

(4) Ratio between current, prepaid and deferred tax and income before tax.

(5) The ratios relative to 31 December 2012 have been re-stated in order to render them homogeneous and comparable

with that reported during the current year following the application of the new IAS 19 on the part of the Group.



9

SUMMARISED FINANCIAL STATEMENTS OF POLTRONA FRAU S.P.A. (*)

Income Statement - separate financial statements

(in thousands of Euro) Year 2013 Year 2012

Sales revenue 135,025 106,202

Other revenues and income 9,660 11,478

Revenues 144,685 117,680

Costs for raw materials and consumable (105,277) (84,678)

Personnel costs (23,211) (22,379)

EBITDA (1) 16,197 10,623

EBITDA % 11.2% 9.0%

Non-recurring costs (4,171) (1,924)

Amortization, depreciation, provisions and impairment (4,241) (3,821)

Operating Income 7,785 4,878

Operating Income % 5.4% 4.1%

Financial charges, net and gains/losses from investments (4,633) (5,873)

Income before taxes 3,152 (995)

Income before taxes % 2.2% (0.8%)

Current, prepaid and deferred taxes (2,961) (1,005)

Profit (loss) for the year 191 (2,000)

(1) EBITDA represents operating income before amortisation, depreciation, allocations, impairment and non-recurring

costs. Identified in this way EBITDA is not an IFRS accounting measure and accordingly the criterion used by Poltrona

Frau to calculate this item is not necessarily the same as that used by other companies and is therefore not

comparable.

(*) In the Annual Financial Report, the values as at 31 December 2012 were restated to ensure their alignment and

comparability with those of the current year following the application of the new IAS 19 on the part of the Group.



10

Statement of invested capital - separate financial statements


2013

31 December

2012

Applications

Net working capital 21,364 13,963

Fixed assets and other non-current assets 91,683 96,182

Non-current liabilities (7,620) (7,742)

Net invested capital 105,427 102,403

Sources

Net financial position 67,268 62,809

Shareholders‟ equty 38,159 39,594

Total souces of funds 105,427 102,403

Key separate financial statement ratios

Year 2013 Year2012

Economic and financial ratios

Third party funds / own funds ratio 1.76 1.59

Financial leverage ratio (1) 4.15 5.91

Net financial position as a percentage of revenues 46.5% 53.4%

Net working capital as a percentage of revenues 14.8% 11.9%

ROI (2) 7.4% 4.8%

ROE (3) (5) 0.5% n/a

Tax rate (4) (5) (6) 93.9% n/a

Growth ratios

Revenues 22.9% (3.4%)

EBITDA 52.5% (3.0%)

Operation income 59.6% 33.3%

Income before taxes (5) (6) n/a n/a

Profit for the year (5) (6) n/a n/a

(1) Ratio between net financial position and EBITDA.

(2) Ratio between operating income and net invested capital.

(3) Ratio between profit for the year and shareholders‟ equity.

(4) Ratio between current, prepaid and deferred tax and income before tax.

(5) This ratio is not calculated if the income figure is negative or is not representative of the trend in the ratio.

(6) The ratios relative to 31 December 2012 have been re-stated in order to render them homogeneous and comparable

with that reported during the current year following the application of the new IAS 19 on the part of the Group.



11

GROUP OPERATING COMPANIES AS AT 31 DECEMBER 2013


Cap Design S.p.A.100%

Diecidieci S.r.l.100%

Cassina S.p.A.100%

Cassina France S.A.

100%

Cassina Shanghai Trading Co. Ltd.

100%

Frau France S.a.r.l.100%

Poltrona Frau UK Ltd.

100%

PF Deutschland GmbH100%

Meno Warehandels GmbH 60%

Zhejiang Casanova Furn.

Ltd. 49%

Poltrona Frau (Asia Pacific) PTE

Ltd. 100%

PFG North America Inc.

100%

Cassina Pacific Ltd.

100%

PF Emirates Interiors LLC

49%

KBR Sarl 20%

Casa Décor Private Ltd.

50%

Artelux S.A.100%

Cassina IXC Ltd.12%

Frau USA Corp.83%

Spazio Washington LLC

100%

Alias S.p.A.49%

Nemo S.r.l.49%



12

OWNERSHIP AND SHARES HELD BY DIRECTORS AND STATUTORY AUDITORS

The investments in Poltrona Frau S.p.A., as stated in the Members‟ Register and based on any notifications received,

were as follows at 31 December 2013.

Direct Shareholder Nationality Number of

shares

% ordinary

share capital

Charme Investments S.C.A. (1) (2) Luxembourg 71,895,074 51.3%

Moschini S.r.l. (3) Italy 10,285,626 7.3%

DIVERSITA sarl Luxembourg 5,621,474 4.0%

Invesco Ltd. U.K. 3,345,440 2.4%

Treasury shares 1,858,231 1.3%

Other shareholders with holdings of less than 2% of the capital 47,269,314 33.7%

Total 140,275,159 100.0%

(1) Charme Investments S.C.A. is a partnership limited by shares subject to Luxembourg law and having registered office in 18

Rue de l'Eau L-1449, Luxembourg, whose sole general partner, and hence controlling member, is Charme Management S.r.l.,

having registered office in Via Santa Margherita 4, Milan. At 31 December 2013 no natural or legal person controlled Charme

Management S.r.l., whose capital is owned indirectly (50%) by Luca Cordero di Montezemolo and by Matteo Cordero di

Montezemolo, with the remaining 50% owned by a company registered under Luxembourg law owned by three international

businessmen.

(2) At 31 December 2013 the share capital of Charme Investments S.C.A. was owned directly and indirectly by Luca Cordero di

Montezemolo (14.5%), Matteo Cordero di Montezemolo (13.4%), Franco Moschini (15.7%), Charme Management S.r.l.

(10.0%) and other minority shareholders with a holding of 46.4%.

(3) A company controlled by Franco Moschini, Chairman of the Board of Directors of Poltrona Frau S.p.A., who holds 95% of its

capital.

51%

7%

4% 3%

1%

34%

Charme InvestmentsS.C.A.

Moschini S.r.l.

DIVERSITA Sarl

Invesco Ltd.

Treasury shares

Other shareholders withholdings of less than 2%of the capital



13

It is hereby noted, pursuant to article 79 of the “Regolamento Emittenti” (Issuers‟ Regulations) relating to the shares

of Poltrona Frau S.p.A. and its subsidiaries held by members of the management and control bodies, by managers

with strategic responsibilities and by non legally separated spouses and underage children, directly or through

subsidiaries, trust companies or intermediaries, that Mr. Franco Moschini owns approximately 7.3% of the shares of

Poltrona Frau S.p.A. through Moschini S.r.l., of whose capital he holds 95%; he additionally owns 15.7% of Charme

Investments S.C.A. As regards other members of the Board of Directors, as at 31 December 2013, Mr. Dario Rinero

owned 855,777 shares, equal to 0.61% of capital, Mr. Matteo di Montezemolo owned 50,000 shares, equal to 0.04%

of share capital and Luca di Montezemolo owned 45,000 shares, a stake of 0.03%.



14

STOCK RATINGS DURING THE YEAR AND FINANCIAL COMMUNICATIONS

Poltrona Frau is a joint stock Italian company having its registered office in via Vincenzo Vela 42, Turin. It has a fully

subscribed and paid-up share capital of Euro 35.1 million consisting of 140,275,159 ordinary shares with a nominal

value Euro 0.25 each. The Parent Poltrona Frau S.p.A. has been listed on the STAR segment of the Borsa Italiana

Electronic Stock Market (code ISIN IT 0004114846) since the middle of November 2006.

The following table sets out the market performance of the Poltrona Frau share in 2013.

A. 14 March. Publication of FY2012 financial results.

B. 14 May. Publication of 1Q 2013 financial results.

C. 06 August. Publication of 1H 2013 financial results.

D. 04 November. Publication of 9M 2013 financial results.

E. 05 February 2014. Press release relative to the acquisition by Haworth of 58.6% of the share capital of


The average volume of shares traded on the market in all of 2013 was around 238,000 shares per day. The market

capitalisation of the Poltrona Frau Group - based on the average share price recorded at the beginning of March,

equal to Euro 2.94 - is approximately Euro 412 million.



15

Chester manufacturing, Poltrona Frau



16

Chester manufacturing, Poltrona Frau



17


Management Report

as at 31 December 2013



18



19

POLTRONA FRAU GROUP PROFILE

Mission and values

Mission

To guarantee the excellence and quality of our

products through ongoing research and innovation in

all phases of the production process, concordant with

our vocation as designers that understand Italian

tradition and style.

Values

In 2009, the Group formalised the seven key values

that guide the activities of the Poltrona Frau Group‟s

companies and employees.

Sense of responsibility – Work to maintain the

promises and commitments we have made and inspire

a sense of responsibility in individuals as we strive to

meet our goals.

Leadership - Display leadership in every role and

mission to satisfy the requirements and promote the

interests of the stakeholders (shareholders, clients,

suppliers, institutions, environment), guarantee the

development of collaborators and respect for the

communities involved.

Quality and design – Focus on the total quality of

materials, products and services to guarantee the

highest canons of beauty, luxury and perfection,

synonymous with the finest Italian traditions.

Focus on people - Create a pleasant and peaceful

working environment, respect and motivate people

offering them training and development

opportunities.

Integrity – Pursue and maintain high ethical

standards, openly and honestly expressing our ideas.

Focus on safety and the environment to guarantee

sustainable growth.

Teamwork – Work with team spirit, share both our

successes and the errors we have committed to

ensure continuous improvement and effective

communication at all levels.

Change and innovation – Work with passion, always

finding better and innovative solutions, and be ready

to face new challenges and promote change.

History

A story that goes back to 1912 with the founding of

Poltrona Frau, and which continued with the creation

of Cassina in 1927 and Cappellini in 1946.

2005 saw the birth of the Poltrona Frau Group,

international leader in the high-end furnishings

sector, which includes Poltrona Frau, Cassina and

Cappellini. Over the years Poltrona Frau Group has

confirmed its ability to interpret, but above all to

anticipate, the evolution of contemporary living.

Thanks to the far-sightedness of entrepreneurs and

managers who, down the years, have understood the

importance of being bold, of continuous experiment,

and of challenging the rules, the Group is now a point

of reference in the high-end furniture market for the

most important international designers and

architects.

1912 Founding of Poltrona Frau

Renzo Frau files the trademark at the Chambers of

Commerce in Turin. This year also saw the launch of

the historic Chester model which, with its “plissé”

processing, still symbolises the unique handcrafting

expertise of Poltrona Frau to this day.

1927 Founding of Cassina

Cassina, founded in Meda by Cesare and Umberto

Cassina in 1927, introduced Italy to industrial design

in the 1950‟s. Acting as a genuine trailblazer, at this

complex time rich in creative ferment Cassina was the

first company to focus on research and innovation,

envisaging new forms together with important

architects and designers.

1946 Founding of Cappellini

Founded in 1946, and currently considered a symbol

of avant-garde contemporary design as well as a

launching pad for the greatest international

designers, Cappellini produces innovative furnishings

of very high quality.

1962 Franco Moschini joins Poltrona Frau

Poltrona Frau is purchased by Nazareno Gabrielli and

managed by Franco Moschini, the current chairman.

1963 Poltrona Frau moves from Turin to Tolentino

with 6 craftsmen

1984 Creation of the Car – Luxury in Motion division

Poltrona Frau designs the interiors of the Thema 8:32

with Ferrari engine.

1984 Creation of the Contract – Luxury Interiors

division

Poltrona Frau furnishes Spoleto theatre hall.



20

1990 Franco Moschini acquires 100% of Poltrona

Frau

2003 The Charme fund acquires 30% of Poltrona Frau

October 2004 Charme increases its stake to 60%

The new strategic development industrial plan is

presented with the Montezemolo family‟s Charme

fund increasing its stake to 60%.

December 2004 Poltrona Frau acquires 100% of

Cappellini

Poltrona Frau acquires 100% of Cappellini, a company

known throughout the world for its innovation and

talent in launching some of the best-known designers

in the world, such as Tom Dixon, Jasper Morrison and

Marc Newson.

2005 Poltrona Frau acquires 80% of Cassina

Poltrona Frau acquires Cassina, the company which,

thanks to its incredible design expertise, has done

most to make Italian contemporary design famous

across the world.

July 2006 Charme increases its stake in Poltrona Frau

to 75%

November 2006 Poltrona Frau Group, IPO in the Star

segment of Borsa Italiana

Poltrona Frau becomes the Poltrona Frau Group and is

listed on Borsa Italiana attracting around Euro 2

billion of demand following an offering of Euro 150

million.

2007 Joint venture PF Emirates

Launch of PF Emirates, a joint venture between PFG

and Mubadala in the United Arab Emirates, and the

opening of the first Group flagship store in Abu Dhabi.

2008 Joint venture Casa Décor

Launch of Casa Decor, a joint venture between

Poltrona Frau Group and Tata Group in India, leading

to the opening of the first Group flagship store in

2010 in Mumbai.

2009 Launch of Milano Design Village at the Fuori

Salone, which welcomes over 50,000 visits.

2010 Photovoltaic in Tolentino

Launch of the new 18,000-module photovoltaic plant

with a 1.4 megawatt capacity at the Tolentino plants,

which today produces around 1,680,000 k/h per year.

December 2010 Cassina becomes 100% owned by

PFG

May 2011 Strategic agreement signed with Haworth

for the US

2012 Centenary of Poltrona Frau

April 2013 Poltrona Frau Group returns to the Salone

del Mobile Rho Fiera

June 2013 Acquisition of the brand Simon

Poltrona Frau Group, through Cassina S.p.A., acquires

the Simon Gavina brand from Estel S.r.l.



21

Business model and strategy

Business Model

The organization of the Poltrona Frau Group is

characterized by an organisational structure which

aims to guarantee a high level of independence and

autonomy for the three brands (Poltrona Frau, Cassina

e Cappellini) as well as the three business divisions

(Residential, Luxury in Motion and Luxury Interiors) as

well as by a management team composed of the CEO

and top executives whose task is to guide the Group

towards the attainment of the objectives of the

industrial plan. More specifically, the structure is

made up of the following roles:

– Residential Brand Directors for the Poltrona

Frau, Cassina and Cappellini brands who

primarily oversee the development process of

new products, worldwide marketing and

promotional initiatives and as well as

management of the Italy and EMEA (Europe,

Middle East and Africa) markets;

– Overseas Residential Market Directors, who

are responsible for commercial development

in three distinct areas: Americas, Asia and

Oceania, Greater China and India;

– Luxury in Motion and Luxury Interiors

Directors who manage the worldwide

development of their respective business

divisions.

The activities of the above figures are supported by a

centralised structure at Group level, overseen by:

– Chief Corporate Officer (CCO) for staff

activities transversal to the company, such as

administration, finance and control, human

resources, legal and general affairs and IT

services;

– Chief Operating Officer (COO) for activities of

a business nature, such as purchases,

production, logistics and quality for all the

Group plants.

–

Competitive strategy

The Group is the result of a strategic programme that

was established with the shareholders in late 2003

and implemented by the Poltrona Frau management,

which has developed through the strengthening and

the greater internationalisation of the company‟s

activities, the acquisition of Cappellini in December

2004, assuming control of Cassina in June 2005, and

the listing of Parent Poltrona Frau on the Borsa di

Milano in late 2006.

With the development of this programme Poltrona

Frau has implemented, with notable advantages in

terms of timing, a different competitive model to

those pursued by its competitors until now, acting as

an aggregating entity in a highly fragmented sector

and launching an innovative development process. In

particular, the development of the above programme

has enabled the Group to:

- have the use of three highly prestigious

brands (Poltrona Frau, Cassina and

Cappellini), each with a clear identity, which

allow the Group to cover the various product

styles (classical, modern and innovative) in

the high-end furnishing segment without

any overlapping;

- benefit, in the Residential segment, from the

thoroughness of its range (sofas, armchairs,

furniture, chairs, tables, beds and office

furniture), with a relevant presence of iconic

designer products (including Poltrona Frau‟s

Vanity Fair, the Cassina LC4 chaise-longue by

Le Corbusier, Pierre Jeanneret, Charlotte

Perriand, the S Chair by Tom Dixon produced

by Cappellini) which constitute a base of

long sellers that has no equal in the target

market;

- develop a strong area presence across the

world with around 70 mono-brand and

multi-brand Group stores opened with

selected partners and 24 DOS, or Directly

Owned Stores in prime locations in major

Italian and international cities;

- maintain consolidated long-term commercial

relations with a select network of multi-

brand distributors at world level, thus

ensuring a direct and distinctive presence in

the main world markets;

- strengthen its role as a leading global

operator in the Luxury Interiors division and

to boast an expert organisation that is able

to compete at international level for

prestigious contracts, designing the interiors

of important architectural works, hotels and

the showrooms of some of the most

prestigious fashion labels;

- acquire the right to use some of the most

significant designs of ingenious designers –

such as Le Corbusier, Charles Rennie

Mackintosh, Gio Ponti, Vico Magistretti,

Gaetano Pesce, Philippe Starck, Jasper

Morrison, Tom Dixon, Piero Lissoni, Pierluigi



22

Cerri and Giulio Cappellini - and architects –

such as Renzo Piano, Norman Foster, Herzog

& de Meuron, Santiago Calatrava and Frank

O. Gehry – which represent the history of

design and architecture at world level, as

well as its present and future. This has made

it possible to create a particularly broad

catalogue of products that can respond to

the most advanced aesthetic and

technological trends of the market;

- expand the company‟s know-how –

combining specific artisanal expertise,

product development expertise, knowledge of

industrialisation and distinctive material

expertise – and therefore become a

privileged contact for the most prominent

designers and architects at global level, and

a creator of exclusive products with strong

experiential content.

In 2009, following an important change in top

management and the arrival of the new CEO, Dario

Rinero, a reorganisation and strategic plan was

developed in two separate phases.

The first phase, carried out in 2009-2010, made it

possible to reduce and streamline costs, create

synergies and simplify the structure of the Group, in

order to improve its profitability.

During this phase, designed to support the growth of

turnover, a new operational model was introduced,

new distribution channels were opened, and the

Luxury Interiors and Luxury in Motion divisions were

further developed. With the ultimate goal of

improving margins, the structure of the supply chain

was reviewed, fixed costs were reduced and

purchasing and logistics activities were centralised.

Lastly, the restructuring of Cappellini and the

centralisation of all Group support figures, together

with a series of interventions regarding the cost of

personnel and the elimination of activities not strictly

related to the core business, made it possible to

improve efficiency and reduce costs for the entire

Group.

The second phase, which began in 2011, focused on

the growth and development of the Top Line in the

various Business segments and on continuous

improvement of the margin.

The strong growth in 2012-2013 of the Luxury in

Motion division, along with the positive performance

of the Luxury Interiors division, was a great

satisfaction that rewarded the efforts and

organizational decisions that were adopted by the

Group. In 2013, the Residential segment also began to

grow due to careful sales policies which aimed to

increase the number of sales points and, in particular,

the presence of products of the three brands within

the most distant markets that have the highest

growth potential (in particular the area of Greater

China).

Management‟s priority remains the ongoing

improvement of margins, leveraging a reduction in

the cost of production in the Residential segment,

and focusing Luxury Interiors activities on contracts

with higher margins and better risk management. The

Group therefore tends to prefer smaller but highly

prestigious contracts such as development of the

international retail network for luxury brands or

luxury boutique hotels, theatres and auditoriums.



23

Photo by Karl Lagerfeld of LC2 armchairs by Le Corbusier, Pierre Jeanneret, Charlotte Perriand



24

Treasury shares and shares or quotas of controlling companies

At 31 December 2013 the Company held 1,858,231 treasury shares, equal to approximately 1.3% of share capital as

follows:

Number of

treasury shares

Average

purchase/sale

price

Value (in

Euro/000)

Treasury shares at 1 January 2013 1,036,671 0.890 923

Shares sold during the year (966,668) 0.876 (846)

Shares bought during the year 1,788,228 1.311 2,344

Treasury shares as at 31 December 2013 1,858,231 1.303 2,421

Stock option plans

Please refer to the Annex to the Annual Financial

Report.

Scope of consolidation

In addition to carrying out significant production and

marketing activities Poltrona Frau S.p.A. is an

investment holding company, also carrying out the

strategic direction and coordination of the Group and

the activities conducted by the companies it controls.

The consolidated financial statements for 2013

include the financial statements of the Parent

Poltrona Frau S.p.A. and those of the companies in

which it has direct or indirect control as defined by

IAS 27 Consolidated and Separate Financial

Statements.

In relation to the comparison between the scope of

consolidation as at 31 December 2013 and that at 31

December 2012, the following should be noted:

a) The entry of Nemo S.r.l., a company that is 49%

controlled by Cassina S.p.A. following the

conferment in February 2013 of the investment

of Artelux S.A. - owned by Cassina – into Nemo

S.r.l.. By means of this operation, the transfer

operation for the light division of the Group,

initiated in 2012, was completed;

b) In the month of June, the liquidation process for

the subsidiary Beijing Casanova Furniture Design

Co. Ltd. was completed;

c) Transfer of 51% of the Chinese subsidiary

Zheijang Casanova Furniture Ltd. to the Chinese

company Wenzhou Opal Furniture Co. Ltd..

Following this operation, the company was

consolidated with the equity method;

d) Acquisition - on the part of the subsidiary

Poltrona Frau Group North America Inc. – of the

remaining 70% of the company Spazio

Washington LLC from Variant Inc.

The subsidiaries included in the scope of consolidation

at 31 December 2013 are as follows:



25

(*)Company placed under liquidation

Company name Registered office Direct parent % held

% held

by

Group

Cap Design S.p.A. Meda, Milan – I Poltrona Frau S.p.A. 100% 100%

Cassina S.p.A. Meda, Milan – I Poltrona Frau S.p.A. 100% 100%

Cassina France S.A. Paris – France Cassina S.p.A. 100% 100%

Cassina Pacific Ltd Hong Kong – People‟ s

Rep. of China Cassina S.p.A. 100% 100%

Cassina Shanghai Trading Co. Ltd Shanghai – People‟ s Rep.

of China Cassina S.p.A. 100% 100%

DieciDieci S.r.l. Bologna – I Poltrona Frau S.p.A. 100% 100%

Frau U.S.A. Corporation New York - USA Poltrona Frau S.p.A. 83% 83%

Frau France S.a.r.l. Paris . F Poltrona Frau S.p.A. 100% 100%

Meno Warehandels GmbH (*) Vienna – Austria Poltrona Frau S.p.A. 60% 60%

Poltrona Frau Deutschland GmbH Munich – Germany Poltrona Frau S.p.A. 100% 100%

Poltrona Frau Group North America Inc. New York – USA Cassina S.p.A. 100% 100%

Poltrona Frau PTE Ltd. Singapore – S Poltrona Frau S.p.A. 100% 100%

Poltrona Frau UK Ltd. London – UK Poltrona Frau S.p.A. 100% 100%

Spazio Washington LLC Washington - USA Poltrona Frau Group

North America Inc 100% 100%



26

ANALYSIS OF ANNUAL REVENUES OF THE GROUP BY

BUSINESS SEGMENT AND GEOGRAPHICAL AREA

The business segments through which the Group

works have been determined on the basis of the

reporting used by the Group‟s Chief Executive Officer

to take strategic decisions. This reporting, which

reflects the Group‟s current organisational and

corporate structure, is based on business segments

distinguished by the brands through which the Group,

by means of its companies, characterises its products

and manages its activities. Each brand benefits from

a highly specific product/market relationship with its

own strong features highly distinct from the others,

strictly connected with their individual history and

values, which responds to the need to diversify by

having a range of products which, while all belonging

to the luxury furnishing sector, have markets with

characteristics which are completely autonomous and

distinctive. More specifically, three main segments

have been identified (Poltrona Frau, Cassina and

Cappellini).

Sector of activity

(in thousands of Euro) 2013

Incidence %

on total

revenues

2012

Incidence %

on total

revenues

Variations Variations %

Poltrona Frau 159,243 58.4% 131,624 53.4% 27,619 21.0%

Cassina 110,400 40.5% 110,274 44.6% 126 0.1%

Cappellini 11,663 4.3% 12,877 5.2% (1,214) (9.4%)

Eliminations (8,462) (3.2%) (7,787) (3.2%) (675) 8.7%

Total revenues 272,844 100.0% 246,988 100.0% 25,856 10.5%

The Group believes that it is also useful to provide additional information regarding the three business segments in

which it works (Residential, Luxury in Motion1 and Luxury Interiors2) as well as revenues by geographical area. In

further detail, four main geographical areas have been identified: Italy, EMEA (which includes all the European

countries - with the exception of Italy - and Middle Eastern and African countries), the Americas (mostly the United

States) and Asia and Oceania

Geographic Segment


Incidence %

on total

revenues

2012

Incidence %

on total

revenues


Italy 109,961 40.4% 91,186 36.9% 18,775 20.6%

EMEA 102,968 37.7% 92,564 37.5% 10,404 11.2%

Americas 26,788 9.8% 34,180 13.8% (7,392) (21.6%)

Asia and Oceania 33,127 12.1% 29,058 11.8% 4,069 14.0%

Total revenues 272,844 100.0% 246,988 100.0% 25,856 10,5%

Business segment


Incidence %

on total

revenues

2012

Incidence %

on total

revenues


Residential 150,606 55.2% 143,205 58.0% 7,401 5.2%

Luxury Interiors 52,663 19.3% 50,813 20.6% 1,850 3.6%

Luxury in Motion 69,575 25.5% 52,970 21.4% 16,605 31.3%

Total revenues 272,844 100.0% 246,988 100.0% 25,856 10.5%

1 The Interiors segment is now called Luxury in Motion.

2 The Contract segment is now called Luxury Interiors.



27

Some comments are shown below regarding sales

revenues developed in 2013 by sectors of activity, the

geographical areas and the business segments as per

above.

Poltrona Frau Segment

2013 revenues showed a 21.0% increase compared to

the previous year, due to the combined effect of the

increase recorded in the three segments (Luxury in

Motion: +31.4%, Luxury Interiors: +21.1% and

Residential: +12.0%).

The Luxury Interiors segment highlighted important

growth due to the acquisition and initiation of

important job orders; the Luxury in Motion segment

continues to report significant growth, in line with

the growth of past quarters and primarily due to the

contribution of certain important customers (Maserati

and the Jaguar- Land Rover Group); the increase

reported in the Residential segment, in particular,

benefited from the positive trend of the domestic

market and in certain major European countries, the

strong growth in the Greater China and India regions

as well as the sales of standard catalogue products

led by the Luxury Interiors segment.

Cassina Segment

The increase in revenues of circa 0.1% in 2013 with

respect to the same period of the previous year was

primarily due to the growth of revenues in residential

business (+4.0%) while the Luxury Interiors segment

reported lower revenues with respect to 2012

following different stages of progress in the primary

job orders.

The increase reported in the Cassina Residential

segment during 2013 was particularly significant; this

was primarily due to significant growth in Asia

(+19%) and the positive result of Italy (+7%).

Cappellini Segment

2013 revenues recorded a decrease of 9.4% with

respect to the same period of the previous year,

attributable entirely to the Residential segment given

that Cappellini does not operate in other segments.

This result was primarily due to lower sales generated

in the EMEA region.



28

COMMENT ON KEY ITEMS IN THE INCOME STATEMENT AND STATEMENT OF FINANCIAL POSITION OF THE POLTRONA

FRAU GROUP

Revenues

In 2013, the Group recorded a 10.5% increase in revenues, following the excellent performance of the Luxury in

Motion segment (31.3%) and the positive performances within the Residential (+5.2%) and Luxury Interiors (+3.6%)

segments.

Further details by individual business sector may be found in the paragraph “Analysis of annual revenues of the

Group by business segment and geographical area”.

EBITDA

The increase in EBITDA – from Euro 26.0 million in 2012 to Euro 32.0 million in 2013 – is due to the following

effects.

(millions of Euro)

EBITDA 2012 26.0

Effect of sales volumes 7.3

Effect of contribution margin (0.5)

Effect of discretionary costs (S&M) (2.3)

Effect of fixed, structu andral costs 1.5

EBITDA 2013 32.0

The effect of sales volumes, positive by approximately Euro 7.3 million, is primarily due to the important increase

which was recorded in the Residential segment (for Euro 3.9 million) and in the Luxury in Motion segment (for Euro

3.0 million) as well in the Luxury Interiors segment (for Euro 0.4 million).

The negative contribution margin effect, amounting to approximately Euro 0.5 million, is primarily due to Luxury in

Motion segment (negative by circa Euro 1.1 million); this was primarily due to a different sales mix which was

partially compensation by the positive margin of the Luxury Interiors segment, a further confirmation of the careful

policy of selection of the job orders.

Discretionary costs increased by circa Euro 2.3 million following major investments in marketing expenses in support

of revenue growth.

Fixed and structural costs decreased by circa Euro 1.5 million with respect to 2012; this was primarily due to the

continual search for synergies and efficiencies in order to decrease basic structural costs of the Group.



29

The following table summarises EBITDA by business segment:

Sector of activity


Incidence %

on revenues

in the

segment

2012

Incidence %

on revenues

in the

segment

Variations Variations

%

Poltrona Frau 15,725 9.9% 10,968 8.3% 4,757 43.4%

Cassina 16,391 14.8% 14,788 13.4% 1,603 10.8%

Cappellini (99) (0.9%) 276 2.1% (375) (135.9%)

EBITDA 32,017 11.7% 26,032 10.5% 5,985 23.0%

The increase in EBITDA in the Poltrona Frau segment is mainly attributable to higher sales volumes generated in the

three business segments and the decreased fixed and structural costs; these effects were partially offset by an

increase in marketing investments (which increased by Euro 0.4 million).

The improvement in Cassina‟s profitability is mostly the result of greater sales volumes in the Residential segment

and better profitability recorded in both the Residential and Luxury Interiors segments; these positive effects were

partially absorbed by the increase in marketing investments (which increased by Euro 1.8 million).

The negative profitability of Cappellini is entirely attributable to the decrease in volumes recorded during the course

of 2013.

Operating income

The operating result improved from Euro 15.5 in 2012 to Euro 20.3 million in 2013; this was primarily due to the

significant improvement in EBITDA described above; in addition, increased amortization equal to Euro 1.8 million and

primarily related to investments realized in 2013, as well as write-downs for Euro 0.2 million relative to the closing

of the Naples store of Poltrona Frau S.p.A., should also be noted.

As of 31 December 2013, an item of non-recurring nature – equal to circa Euro 4.2 million,–and ascribable to the

variable compensation due to the CEO - was booked according to international accounting principle IFRS 2; this was

related to the operation for transfer of the Group, as described in full detail in the paragraph “Subsequent events”.

As of 31 December 2012, the item included the charges sustained for the restructuring operation, totalling Euro 3.9

million.

Income before taxes

The 2013 income before taxes was around Euro 11.7 million, compared to roughly Euro 8.9 million profit achieved in

2012. The increase is attributable to the factors described above.

During the course of 2013, write-downs were implemented in affiliated companies and joint ventures; this was due

to the valuation of the investments using the equity method for an amount totalling Euro 3.6 million.

Profit/(Loss) for the year

The 2013 profit for the year was around Euro 4.5 million, compared to roughly Euro 1.1 million achieved in 2012. As

of 31 December 2013, taxes amounted to Euro 7.2 million compared to Euro 4.1 million in the previous year.



30

Comments on changes in net assets and financial items

Net working capital

(In thousands of Euro) 31 december

2013

31 december

2012 variation

Trade receivables 54,628 52,110 2,518

Inventory 65,572 53,989 11,583

Trade payables (70,857) (59,197) (11,660)

Other current assets/(liabilities) (24,791) (14,175) (10,616)

Net working capital 24,552 32,727 (8,175)

The increase in trade receivables – totalling Euro 2.5 million – is primarily due to an increase reported in all business

segments as of 31 December 2013 and lower, in percentage terms, to the double digit increase of revenues due to a

careful credit management policy.

The increase in inventories as of 31 December 2013 and with respect to 31 December 2012 was equal to Euro 11.6

million; this increase is almost exclusively due to the increase in revenues within the Luxury in Motion segment.

The increase in trade payables as at 31 December 2013 is due to a stronger focus on payment terms to suppliers and

to higher purchasing volumes linked to the revenue growth.

Other current assets/(liabilities) increased, primarily as a result of increased liabilities booked in the financial

statements and ascribable to increased tax payables (totalling Euro 3 million), the current payable relative to the

payment for the acquisition of the Simon trademark (totalling Euro 2.1 million) and the variable compensation

booked on the basis of the previously illustrated IFRS 2 (Euro 4.2 million).

Fixed assets and other long-term assets


2013

31 december

2012 variation

Intangible assets 89,037 86,127 2,910

Tangible fixed assets 39,480 40,214 (734)

Other non-current assets 23,431 23,594 (163)

Fixed assets and other long-term assets 151,948 149,935 2,013

Intangible fixed assets include the balances of the financial statement items "goodwill", "trademarks with indefinite

useful lifetimes", and "other intangible assets". The increase is primarily due to the acquisition of the Simon brand

which occurred during the course of 2013 at a contractually defined price (Euro 2.3 million) as well as the booking

of the goodwill resulting from the operation itself (Euro 0.7 million).

The decrease in intangible assets with respect to 31 December 2012 is primarily due to the effects deriving from the

de-consolidation of the Chinese subsidiary Zhejiang Casanova Furniture Ltd., as well as the amortization of the year;

these effects were partially compensated by the investments made during the year and pertaining to improvements

in the plant of Lentate sul Seveso (MB) – where the Cassina and Cappellini research centres were transferred – as

well as by the realization of exhibition centres used for the Salone Internazionale del Mobile (International Furniture

Fair) of Rho Fiera which were considered light constructions.

The “Other non-current assets” illustrated above are reported net of the financial items re-classified within the Net

Financial Position; these decreased, with respect to 31 December 2012, primarily as a result of the write-downs

booked in affiliated companies, joint ventures and in other investments following the valuation of these investments



31

with the equity method; this was partially compensated by the revaluation of the minority investment in Cassina IXC

Ltd. which was booked in the financial statements.

Long-term liabilities


2013

31 december

2012 variation

Employee benefits 5,778 5,450 328

Provisions for risks and charges 3,756 5,092 (1,336)

Deferred tax liabilities 22,395 22,183 212

Other non-current liabilities 1,358 554 804

Long-term liabilities 33,287 33,279 8

Provisions for risks and charges primarily decreased as a result of the implementation of the restructuring plan which

affected the Parent Poltrona Frau S.p.A. and other companies of the Group, as illustrated in detail in the Annual

Financial Report of 31 December 2012.

The increase in “Other non-current liabilities” is primarily ascribable to the booking – as stipulated in the company

branch sales contract undersigned in 2013 between Estel Group S.r.l. and Cassina S.p.A. – of the variable price quota

that is proportional to the revenues generated in the next five years by the Simon brand.

Shareholders‟ equity


2013

31 december

2012 variation

Share capital 34,604 34,810 (206)

Reserves and Profits (losses) of previous year 35,048 35,016 32

Profit of the year 4,582 1,250 3,332

Total Group shareholders' equity 74,234 71,076 3,158

Minority interest (361) (266) (95)

Shareholders‟ equity 73,873 70,810 3,063

The increase in shareholders‟ equity is primarily due to the positive result of 2013.



32

Net financial position


2013

31 december

2012 variation

Current payables to banks (34,794) (32,755) (2,039)

Current portion of medium-long term borrowings (16,686) (13,082) (3,604)

Other financial liabilities (690) (1,360) 670

Current payables (52,170) (47,197) (4,973)

Medium-long-term financial borrowings (39,134) (46,263) 7,129

Total debt, gross (91,304) (93,460) 2,156

Cash and cash equivalents 20,638 9,068 11,570

Other financial assets 1,326 5,319 (3,993)

Net financial position (69,340) (79,073) 9,733

The net financial position recorded improvement of around Euro 9.7 million compared to 31 December 2012 as a

result of contrasting elements, which may be summarised as follows:

(i) with a plus sign:

potential cash flow (EBITDA) for the period of Euro 32 million;

a benefit of Euro 2.4 million deriving from the application of the method of consolidation by the

equity method following the transfer of 51% of the Chinese subsidiary Zhejiang Casanova

Furniture Ltd.;

a reduction in net operating working capital of around Euro 4 million (an amount not including the

non-recurring component of Euro 4.2 million);

other changes totalling Euro 0.3 million.

(ii) with a minus sign:

the payment of compensation to Group employees following the launch of the restructuring plan,

agency indemnities and other payments totalling Euro 2.0 million;

net investments in fixed assets for the year amounting to Euro 12.5 million;

net financial charges and taxes booked within the income statements for a total of Euro 12.1

million Euro;

investments in shareholdings of Euro 0.9 million relating to share capital increases;

the acquisition of treasury shares during the year for a total of Euro 1.5 million.



33

COMMENT ON KEY ITEMS IN THE INCOME STATEMENT AND STATEMENT OF FINANCIAL POSITION OF POLTRONA

FRAU S.P.A.

Revenues

The year just ended showed an approximate 22.9% increase in revenues with respect to 2012; this increase is

primarily due to the strong growth in the Luxury in Motion (+42.3%) as well as the positive trend in the other two

business segments: Residential (+11.2%) and Luxury Interiors (+7.8%).

Two summary tables below show the breakdown of revenues by geographical area and by business segment:


Incidence %

on total

revenues

2012

Incidence %

on total

revenues


Italy 79,635 55.1% 67,949 57.7% 11,686 17.2%

EMEA 47,299 32.7% 31,907 27.1% 15,392 48.2%

Americas 7,267 5.0% 7,970 6.8% (703) (8.8)%

Asia and Oceania 10,484 7.2% 9,854 8.4% 630 6.4%

Total revenues 144,685 100.0% 117,680 100.0% 27,005 22.9%


Incidence %

on total

revenues

2012

Incidence

% on total

revenues

Variations Variations

%

Residential 65,339 45.1% 58,782 50.0% 6,557 11.2%

Luxury in Motion 65,366 45.2% 45,931 39.0% 19,435 42.3%

Luxury Interiors 13,980 9.7% 12,967 11.0% 1,013 7.8%

Total revenues 144,685 100.0% 117,680 100.0% 27,005 22.9%

The year 2013 reported growth in the Residential segment in many geographical areas: the increase in the EMEA

area was particularly significant (+19.2%) as well as that of Italy which still represents more than 50% of revenues

in the Residential segment. This performance went against the trend of the general Italian furnishings market which

reported a decrease in sales of 0.1% with a national market that decreased by 3.2% compared to the 2.4% increase

in exports (Source: Centro StudiCosmit/FederLegno).

The positive trend of sales realized in the Luxury in Motion and Luxury Interiors segments allowed the year to close

with an overall significant level of growth.

EBITDA

The increase in EBITDA – from Euro 10.6 million in 2012 to Euro 16.2 million in 2013 – is due to the following

effects:



34

(millions of Euro)

EBITDA 2012 10.6

Effect of sales volumes 6.9

Effect of contribution margin (1.5)

Effect of discretionary costs (S&M) (0.3)

Effect of fixed and structural costs 0.5

EBITDA 2013 16.2

The effect of sales volumes, positive by approximately Euro 6.9 million, is primarily due to the important increase

which was recorded in the Luxury in Motion segment (for Euro 3.4 million) and in the Residential segment (for Euro

3.2 million) as well in the Luxury Interiors segment (for Euro 0.3 million).

The negative contribution margin effect, amounting to approximately Euro 1.5 million, was primarily due to a

worsening in the Residential segment as a result of a less favourable sales mix and the presence of certain important

supplies characterized by a lower level of profitability.

Discretionary costs increased by circa Euro 0.3 million following major investments in marketing expenses in support

of revenue growth.

Fixed and structural costs decreased by circa Euro 0.5 million with respect to 2012; this was primarily due to the

continual search for synergies and efficiencies in order to decrease basic structural costs.

Operating income

The operating result reported net income of Euro 7.8 million compared to a positive result of Euro 4.9 million

reported in 2012. It should be noted that the 2013 result is penalized by costs of non-recurring nature linked to the

variable compensation of the CEO, as described above and totalling Euro 4.2 million.

As of 31 December 2012, a non-recurring amount of Euro 3.9 million should be noted in connection with a

restructuring operation implemented the past year.

Income before taxes

Income before taxes recorded a positive result of Euro 3.2 million, compared to a negative result of Euro 1 million in

2012. In 2013, charges on investments showed a net result of Euro 3.2 million, compared to Euro 2.7 million in 2012.

Profit/(Loss) for the year

There was a profit of Euro 0.2 million in 2013 compared to a loss of Euro 2 million in 2012. Income taxes came to

Euro 3.0 million, compared to Euro 1.0 million as at 31 December 2012.



35

Comments on changes in net assets and financial items

Net working capital


2013

31 december

2012 variation

Trade receivables 37,008 31,322 5,686

Inventory 37,540 24,501 13,039

Trade payables (41,556) (35,001) (6,555)

Other current assets/(liabilities) (11,628) (6,859) (4,769)

Net working capital 21,364 13,963 7,401

The increase in trade receivables is almost entirely due to the increase in revenues during 2013.

The increase in inventories of Euro 13 million is almost exclusively due to the increase in revenues within the Luxury

in Motion segment during 2013 (Euro 10,1 million).

The increase in trade payables is primarily due to higher volumes realized during the year as well as greater focus on

payment terms with suppliers.

Other current assets/(liabilities) include the balances of the financial statement items “other current assets”, “tax

payables” and “other current liabilities”. The increase is primarily linked to the variable compensation booked on the

basis of the previously illustrated IFRS 2.

The incidence of net working capital with respect to annual revenues, as of 31 December 2013, amounted to around

14.8% compared to roughly 11.9% at the end of 2012.

Fixed assets and other long-term assets


2013

31 december

2012 variation

Intangible assets 6,110 6,088 22

Tangible fixed assets 25,558 25,676 (118)

Other non-current assets 60,015 64,418 (4,403)

Fixed assets and other long-term assets 91,683 96,182 (4,499)

Intangible assets include the balances of the financial statement items "goodwill" and " intangible fixed assets". It

should be noted that intangible assets include the trademark “Frau”, owned by the company and whose value is

equal to Euro 3.3 million.

The item “Other non-current assets” primarily decreased as a result of write-downs of the investments held by the

Parent following impairment tests.



36

Long-term liabilities


2013

31 december

2012 variation

Employee benefits 3,050 2,824 226

Provisions for risks and charges 2,141 2,305 (164)

Deferred tax liabilities 1,964 2,104 (140)

Other non-current liabilities 465 509 (44)

Long-term liabilities 7,620 7,742 (122)

Provisions for risks and charges primarily decreased as a result of the implementation of the restructuring plan which

affected the Parent Poltrona Frau S.p.A. and other companies of the Group, as illustrated in detail in the Annual

Financial Report of 31 December 2012.

Shareholders‟ equity


2013

31 december

2012 variation

Share capital 34,604 34,810 (206)

Reserves 6,199 7,619 (1,420)

Profits (losses) of previous year (2,835) (835) (2,000)

Profits of the year 191 (2,000) 2.191

Shareholders‟ equity 38,159 39,594 (1,435)

Net financial position


2013

31 december

2012 variation

Current payables to banks (15,671) (17,299) 1,628

Current portion of medium-long term borrowings (7,249) (5,388) (1,861)

Other financial liabilities (41,476) (24,582) (16,894)

Current payables (64,396) (47,269) (17,127)

Medium-long-term financial borrowings (20,987) (24,392) 3,405

Total debt, gross (85,383) (71,661) (13,722)


Other financial assets 4,823 5,561 (738)

Net financial position (67,268) (62,809) (4,459)

The net financial position worsened by circa Euro 4.5 million compared to 31 December 2012 as a result of

contrasting elements, which may be summarised as follows:


potential cash flow (EBITDA) for the period of Euro 16.2 million;

financing granted in 2013 to companies of the Group and totalling Euro 3.4 million;

Dividends collected from the company Poltrona Frau PTE Ltd. for Euro 1.9 million;



37


the increase of circa Euro 11.6 million in net working capital (amount decreased by a non-recurring

item totalling Euro 4.2 million);

the payment of compensation to Parent's employees following the launch of the restructuring plan,

agency indemnities and other payments totalling Euro 0.7 million;

net investments in fixed assets for the year amounting to Euro 4.2 million;

investments in shareholdings of Euro 1.3 million relating to share capital increases

net financial charges and taxes booked within the income statements for a total of Euro 6.3

million;

the purchase of treasury shares during the year for a total of Euro 1.5 million;

other changes totalling Euro 0.4 million.

RECONCILIATION BETWEEN THE RESULT FOR THE PERIOD AND GROUP SHAREHOLDERS‟ EQUITY OF POLTRONA FRAU

S.P.A.

(in thousands of Euro)

Shareholders‟

equity at 31

December

2013

Profit (Loss)

for the year

2013

Shareholders‟

equity at 31

December

2012 (*)

Profit (Loss)

for the year

2012 (*)

Shareholders‟ equity of Poltrona Frau S.p.A. 38,159 191 39,594 (2,000)

Portion of the profit (loss) of investments 11,861 3,292 8,569 761

Elimination of intra-Group dividends (6,265) (1,900) (4,365) -

Elimination of intra-Group profits and losses included in

inventories (1,553) (211) (1,342) (263)

Write-down of investments in subsidiaries 38,953 3,091 35,862 2,921

Impairment of consolidation goodwill (1,902) - (1,902) -

Impairment of IUL intangibles held for sale (2,960) - (2,960) -

Net merger surplus (deficit) 2,676 - 2,676 -

Reserve – adjustment to fair value of AFS financial assets (5,800) - (6,554) -

Reserve arising from purchase of subsidiaries 1,838 - 1,838 -

Actuarial profits /(Loss) from definite benefits plans in

subsidiaries (204) - (37) -

Other minor adjustments (569) 119 (303) (169)

Total Group shareholders‟ equity 74,234 4,582 71,076 1,250

Total minority interest (361) (49) (266) (126)

Total consolidated shareholders‟ equity 73,873 4,533 70,810 1,124

(*) Values as at 31 December 2012 were restated to ensure their alignment and comparability with those of the

current year following the application of the new IAS 19 on the part of the Group.



38

Significant, non-recurring, abnormal and/or unusual transactions

Pursuant to Consob Resolution no. 15519 of 27 July 2006 concerning the format of financial statements, the costs

linked to the variable compensation of the CEO, totalling Euro 4.2 million, are recorded in relation to the effects

resulting from events or transactions which are non-recurring or from transactions or facts which do not occur

frequently as part of normal operations.

Further details relative to that reported as of 31 December 2012, refer to note 33 “Restructuring costs”.

Going concern, risks and uncertainties

The consolidated financial statements have been prepared on the assumption that the Group will continue trading as

a going concern given the excellent economic/financial trend of 2013 and because, despite the economic context

remains weak and uncertain, the Group believes that there are no material uncertainties relating to its ability to

continue operating for the foreseeable future, also by virtue of the operating directions identified earlier, currently

being put into practice, to adapt to the changed trend in demand and to the industrial and financial flexibility of the

Group itself.

Financial risk management

Please see the paragraph in the Notes to the Consolidated Financial Statements, “Main risks and uncertainties to

which Poltrona Frau S.p.A. and the Group are exposed”.



39

BUSINESS OUTLOOK

It is the intention of the Poltrona Frau Group to maintain and strengthen even further its position as leader in the

top range furnishing market for the home, for the office, for travel and for places of hospitality and leisure; in order

to attain this objective, it initiated, during the course of 2013, a process of organizational change which aimed to

refocus the commercial networks within the most mature geographical areas (Italy and EMEA) by brand and no

longer by area. On the other hand, the previous organization was maintained in the Americas and in the Asian

continent since it was deemed the most suitable for attaining the growth objectives.

On 20 June 2013, an agreement for the acquisition of the historical brand Simon, a part of the Estel S.r.l. Group, was

undersigned with effectiveness as of 1 July 2013; this brand has become part of the Cassina collection, thereby

expanding the latter‟s collection through a portfolio of excellent products by designers and architects such as Carlo

Scarpa, Marcel Breuer and Kazuhide Takahama which will reinforce certain product series such as tables, containers,

tables and office furnishings.

Cassina is aiming – through its integration with Simon products, whose production will remain in Italy – for

revenues of Euro 15 million over the next five years, with an increasing contribution beginning even from the current

year. The price paid for the acquisition of the brand was Euro 2.1 million plus a variable portion linked to revenues

generated in the next five years.

On 5 November 2013, the remaining 70% of the company Spazio Washington LLC was acquired from Variant Inc. at

a price equal to the Net Equity Value on 31 October 2013 plus goodwill equal to USD 40 thousand. The company

manages the Group DOS of Washington.

The year 2013 reported signs of recovery in the Residential segment, even if still not across all geographical areas.

The domestic market reported growth of 9.7%; this was also due to sales of residential products in special Luxury

Interiors projects; positive growth was also reported in the Asia and Oceania market (+12.4%), particularly in the

Chinese market; despite several quarters of difficulties, the "EMEA" department also reported a return of growth

(+6.2%).

The objective of the Luxury Interiors segment is to maintain sustainable growth in the medium-term, reduce risks

and improve the overall profitability of the business, thanks to the position of international leadership now held by

the Group. In particular, the decision to refocus on significantly developing the furnishing business at top level retail

sale points for the most important international fashion groups is perfectly in line with the above objectives. The

results of 2013 confirmed this strategy, reporting an increase in revenues of circa 3.6% as well as a significant

improvement in profit margins.

The Luxury in Motion segment, however, continues its highly extensive penetration of the global market, though the

project times are rather long. The 31.3% growth recorded in 2013, following on from the already significant increase

achieved the previous year, confirms that the strategic decisions taken during the last few years were in the right

direction and also offer a future outlook of significant growth.

Group management actions, strategies and the results delivered are the subject of constant analysis, calculations and

updates in order to take account of the rapid evolution taking place in the macroeconomic situation. The 2013

results of the Poltrona Frau Group are very positive and there are no elements at present which may prevent the

Group from achieving even better economic-financial results in 2014.



40

SUBSEQUENT EVENTS

On 4 February 2014 - a closing date for the Italian stock exchange – the contract for the acquisition, on the part of

Haworth, of 58.6% of the share capital of Poltrona Frau S.p.A. held by the shareholders Charme Investments e

Moschini S.r.l..

Haworth, with a registered office in Holland (Michigan, USA), was founded in 1948 by the Haworth family which still

retains 100% of its capital. Haworth is the global leader in the planning and production of flexible and sustainable

work environments, with product lines that include moveable walls, furnishing systems, seating systems, floating

floors and communication technologies. With more than 1.4 billion USD in revenues in 2013, as well as 6,000

employees and more than 600 dealers across the world, the company, as of 2011, has already been the partner of

Poltrona Frau Group for distribution within its official channel in North America. Haworth is headed by the Italian

citizen Franco Bianchi, President and CEO as of 2005.

Completion of this operation – forecasted for the end of April 2014 is conditional upon the approval of the German

anti-trust authorities.

Following the completion of the operation, Haworth – either directly or through a fully owned Italian company – will

promote a mandatory total tender offer on the remaining portion of the share capital of Poltrona Frau S.p.A., in

accordance with Article 106 of Legislative Decree no. 58 of 1998 (the “Offer”), at a price of Euro 2.96 per share; this

corresponds to the price which will be paid to the shareholders of reference Charme Investments and Moschini S.r.l..

Haworth intends to pursue the delisting of the shares of Poltrona Frau S.p.A..

In connection with the completion of the operation, Charme Investments and Moschini S.r.l. have granted Haworth a

sales option (the “Option”), which can be exercised at the end of the tender offer, and on the basis of which Haworth

will retain the right, but not the obligation, to sell - to each of the two selling shareholders - a share quota in the

company of 4.2% (and therefore overall 8.4%) of the share capital, and at the same price per share paid by Haworth

during the tender offer (€ 2.96).

As part of the Operation, Haworth will also acquire –from the shareholders - 98% of the share capital of the

company owning the Meda plants which were leased to the Group; the overall price will be circa Euro 1.9 million,

equal to the book value of the investment itself and less than the value of the real estate properties valuated by

independent experts, net of payables.



41

Poltrona Frau stand – Salone del Mobile 2013

Cassina stand – Salone del Mobile 2013



42

Cappellini stand – Salone del Mobile 2013



43

CORPORATE SOCIAL RESPONSIBILITY

The brands and business segments

Group brands: Poltrona Frau, Cassina, Cappellini

The creation of the Group was inspired by a strategy

based on the desire to preserve the distinctive value

of each brand, each of which benefits from a highly

specific product/market relationship, strictly

connected with its history and values. The Poltrona

Frau Group brands - Poltrona Frau, Cassina and

Cappellini - also have distinctive philosophies and

approaches to the market.

Poltrona Frau: Luxury, heritage, craftwork, exclusive

raw materials, historical archive, style and glamour:

modern craftwork.

Cassina: History of design, craftwork combined with

industry, catalogue of primary historical and modern

designers: industrialisation of design.

Cappellini: Modern design, aesthetic research and

innovation, innovative materials: cutting edge of

design.

The Residential segment comprises the design,

production and distribution of standard high-end

furniture catalogue products (sofas, armchairs,

furniture, chairs, tables, beds and furnishings) aimed

at retail customers and a select business clientele.

Residential - Poltrona Frau

Poltrona Frau, among the leaders in the top range

furnishing sector, is a highly traditional brand

founded in Italy in 1912. Poltrona Frau produces and

distributes exclusive high-quality products (of both

classic and contemporary design), with a strong retail

presence (more than 40 monobrand stores in Italy and

overseas, 7 of which directly managed – DOS – in

prime locations in Milan, Rome, Bologna, Tolentino,

Paris, New York and Los Angeles) and direct control

over the entire production cycle, which involves

numerous handicraft phases. The Poltrona Frau brand

is distinguished by its high content of style and

glamour, combined with a considerable respect for

tradition and a historical archive created from 1912

onwards. Classical products and modern products live

side by side in Poltrona Frau, satisfying the needs of

an exclusive international set of customers who put

the values of durability, elegance and recognition at

the heart of their selection criteria. Poltrona Frau has

always been known for its high degree of

craftsmanship, attention to detail and the use of

high-quality materials.

Poltrona Frau‟s historical collection consists of

products created between 1912 and 1934. These

include classic pieces of furniture such as the Vanity

Fair armchair (1930) and the Chester sofa (1912),

long sellers with which the company is identified at

international level. The historic collection is joined by

a wide range of contemporary products with greater

design content. Poltrona Frau is also active in the

production and distribution of high-end office

furniture.

Over time Poltrona Frau has developed specific skills

in the processing of leather, for which it has

established its own quality standard, agreed upon and

shared with its select group of suppliers and

identified with the “Pelle Frau®”, trademark, a

guarantee of top quality and durability. The company

uses full grain leather in more than 120 colours.

In March 2013, following the conclusion of the

initiatives relative to the Centennial celebrated in

2012, the Poltrona Frau Museum was inaugurated in

Tolentino. The company exhibition area, designed by

Michele De Lucchi, is part of an industrial building of

Poltrona Frau in Tolentino. It includes a collection of

original materials and documents which illustrate the

history and growth of the company. A museum which

represents a homage to the territory where

leatherworking is a consolidated tradition.

Residential – Cassina

Founded by Cesare and Umberto Cassina in 1927,

Cassina inaugurated industrial design in Italy in the

1950‟s.

Cassina, as a true trail blazer, was the first company –

in that complex and agitated period - to adopt an

attitude of research and innovation by involving

important architects and designers in imagining new

forms and, in particular, transforming their intuitions

into reality, a characteristic which still characterizes

the company. The identify of Cassina, true to itself, is

an original combination of technological attitude that

is closely related to a long-standing handicraft



44

tradition. The company, in fact, retains its historical

heart, carpentry, and spreads its executive excellence

throughout the work while continuing to be the

centre of all processing.

Cassina has received four Compasso d‟Oro awards,

one of which in 1991 for its contribution to industrial

design. In 1964, through the acquisition of the rights

to reproduction of four models designed by Le

Corbusier (still living) along with Pierre Jeanneret and

Charlotte Perriand, the Cassina “I Maestri” Collection

was started; in subsequent years, it retained

worldwide exclusivity - by working in close contact

with heirs and official foundations – of the

furnishings of some of the most famous architects of

the 20th century (Gerrit T. Rietveld, Charles R.

Mackintosh, E. Gunnar Asplund, Frank Lloyd Wright,

Charlotte Perriand and Franco Albini). A passionate

historical reconstruction which manages to reach the

innovative heart of each project and give it value,

even in light of the most advanced technological

solutions.

There are many Italian and international architects

and designers who collaborated, and collaborate, with

the company for the Cassina I Contemporary

Collection, including Gaetano Pesce, Vico Magistretti,

Gio Ponti, Mario Bellini, Rodolfo Dordoni, Philippe

Starck and Piero Lissoni. A tension of stimulating

ideas from which Cassina always extracts the best.

With a transversal culture of absolute quality which

renders each Cassina piece unique.

The Cassina brand has a strong retail presence

worldwide with its DOS (Directly Owned Stores) in

Milano, Meda, Paris, London and New York (2).

In June 2013, Poltrona Frau Group announced the

acquisition – through the company Cassina – of

Simon, a historical Italian design brand founded by

Dino Gavina and Maria Simoncini, from Estel S.r.l.: a

positive story for the valorisation of the Italian design

industry. A combination which tells the industrial

story of two companies and pioneering entrepreneurs

that today share an experimental spirit and represent

the expression of a relationship between culture and

production. The catalogue of excellent of

SimonCollezione, included within the Cassina I

Contemporary Collection, includes important

designers such as Carlo Scarpa, Marcel Breuer and

Kazuhide Takahama.

Residential – Cappellini

Cappellini began its activities in 1946 and today is a

high-profile business in the luxury furnishing sector,

thanks to its important catalogue of international

designers and its production of pieces of great state-

of-the-art creativity, reputation and fame. Over the

past 30 years the company has taken an attentive

approach towards seeking out and selecting young

high-potential emerging designers, in effect acting as

a springboard for significant international talent in

modern design. The company‟s image is closely linked

to the world of experimentation and design research;

factors which have made the Cappellini brand an

ever-present household name across the globe.

Cappellini has a selective but important presence in

the DOS in Milan, Paris and New York and in a

number of monobrand stores in some of the leading

cities in the world (e.g. Brussels and Manila), as well

as a widespread presence in the best multibrand

design stores. Some of its products are displayed in

the most important museums in the world, for

example the MoMA in New York, the Centre

Pompidou in Paris and the V&A in London.

Cappellini is one of the most representative brands of

contemporary design, and pays special attention to

aesthetic research and innovation, which are pursued

by surveying new trends in living and the use of

innovative materials.

The Residential segment is further divided into the

“Collezione” and “Sistemi” catalogues, which

represent an organic set of products covering the

needs of modern living in a broad and detailed

manner.

The “Collezione” catalogue contains sofas, armchairs,

chairs, tables, beds, wardrobes and cupboards,

bookcases, shelving and small cabinets: extremely

well-known and easily recognisable products (such as

Tom Dixon‟s S-Chair) as well as products for daily use.

Certain products in the “Collezione” catalogue are

also realised in limited editions and are presented at

international fairs. These limited series enable the

reputation of the Cappellini brand to grow

throughout the world and also act as products sought

out by customers and collectors due to the potential

increase in their value over time.

The “Sistemi” catalogue gathers together a wide

variety of furnishing solutions for domestic use and

for office projects or other arrangements of furniture

for the supply segment - cabinets, wardrobes and

cupboards, bookcases and shelving systems. The

quality of the products, the constant innovation of

content and design, the versatility of the products

and the variety of finishes represent the most

distinctive features of the “Sistemi” catalogue:



45

constant research aimed at proposing an innovative

and complete furnishing project to the market.

Cappellini‟s activities in the Residential segment have

made its collaboration with emerging designers a

distinctive element in its pursuit of the innovation of

shapes and materials in the furnishing sector. Many

of the designers who started out work by

collaborating with Cappellini today represent the

cutting edge in architecture and international design

and constitute a creative heritage and one also of

image, with positive commercial repercussions for the

company.

The term Luxury Interiors denotes the supply of high-

quality made-to-measure furniture for public spaces

and the general public (theatres, auditoriums,

cinemas, hotels, restaurants and airports).

In fact the Luxury Interiors division provides

comprehensive assistance and offers turnkey solutions

for interior decorating projects with services that

range from planning and technical planning

assistance, technical designs, production and logistics,

right through to installation and quality controls

throughout the entire process. Operating in various

parts of the world, the Luxury Interiors division

develops, designs and produces every element of an

interior design: made-to-measure furnishings (FF&E),

windows and doors, masonry and glass constructions,

flooring, lighting and customised finishes. This

division of the Group is also responsible for

supervising the entire project, logistics, services and

customers formalities, installation of the furnishings

and the after-sales service.

The Group‟s Luxury Interiors segment covers two core

businesses, the first connected with the Poltrona Frau

world, one of the world‟s leading manufacturers of

seating with work under contract for theatres,

concert halls, interiors for aircraft and cruise ships,

buildings, embassies, luxury hotels and many other

public and private communal spaces. The second,

associated with Cassina, mainly produces made-to-

measure designs for turnkey interiors projects. The

company is consolidated in particular in the

hospitality and retail sectors.

Luxury Interiors – Poltrona Frau

The Poltrona Frau Luxury Interiors division, flanked by

designers from all over the world to jointly develop

special furnishings for theatres, auditoriums,

museums, airports, hotels and restaurants. Its all-

round skills are the result of strong crafting

experience and expert use of innovative materials and

technologies. A high-level company, founded on the

great tradition of “made-to-measure” that dates back

to the 1930s when Poltrona Frau was the furnishings

supplier for round-trip and transatlantic cruise ships.

Today, an international partner par excellence,

Poltrona Frau‟s Luxury Interiors division is capable of

pursuing the architect‟s personal design philosophy

and responding to all product, service and regulatory

requirements. Over 500 projects in more than 20

countries, with 20 collections of customisable small

armchairs, 1,200 compliance certifications, to match

the dreams, ideas and challenges of the most

demanding international architects.

Luxury Interiors – Cassina

Cassina‟s Luxury Interiors segment was established

between the 1950s and 1960s as a venture that led to

the creation of furnishings for other celebrated cruise

ships such as the Andrea Doria, Raffaello and

Michelangelo. In this period, as a true pioneer in

interiors for communal areas, Cassina Luxury Interiors

fine-tuned the made-to-measure design concept. An

approach that combines craftsmen‟s expert hands and

attention to detail with production processes and

technologies on an industrial scale. Hundreds of

hotels, bars, restaurants and residences. A division

was created in the 1990s, as part of the Luxury

Interiors segment, which is dedicated to providing

design and realisation services for the furnishing of

top level retail sales points. Today the division

expertly covers multiple sectors. From retail to

museums, the offices of government institutions to

hospitality. A presence consolidated in venues ranging

from art and culture, politics and enterprise, to travel

and lifestyle. With the capacity to intervene in

historic contexts of long-standing tradition, but also

in the most advanced, experimental and futuristic

architectural projects.

Lastly, with reference to the Luxury in Motion

segment, in recent decades Poltrona Frau has

developed considerable know-how in fitting out

leather interiors for top range cars, yachts, trains and

helicopters and for the first class section of leading

airlines.

Poltrona Frau entered the Car-Luxury in Motion

segment in 1984 with the design of the leather

interior of the Lancia Thema 8:32. In terms of its



46

partnership with Ferrari the key year was 1998, a year

in which Poltrona Frau produced the interiors of the

new 456M model developed by the Maranello

manufacturers.

So, from the Residential setting the leather has

subsequently been used for cars, trains, airlines and

ships. One of its strengths is the way it lends itself to

co-design projects, which combine innovation and

hand craftsmanship, a capacity that encourages

technological partnerships and research and

development.

The Luxury in Motion segment of Poltrona Frau works

on the development, production and marketing of

products, almost exclusively in leather, which are

mainly used for interiors in the automotive sector.

In recent years the Luxury in Motion division has

established partnerships with some of the leading

manufacturers in the sector such as: Ferrari, Bugatti,

Maserati, Lancia, BMW, Mini, Alfa Romeo, Fiat,

Volkswagen Group, Chrysler. Poltrona Frau‟s

partnerships also involve other sectors such as

yachting (the Ferretti Group, with companies such as

Pershing and Riva), trains (Nuovo Trasporto

Viaggiatori - NTV) and helicopters for some of the

most important names in the world in the various

sectors. The division is also involved in “in the air”

projects, comprising the fitting out of the first-class

cabins on the world‟s leading airlines (Etihad, the

flagship airline of the United Arab Emirates).

The Poltrona Frau Luxury in Motion division is

headquartered exclusively in the Tolentino plants,

where the co-design and production offices are to be

found, and in Detroit, where Poltrona Frau produces

interiors for Chrysler.

Pelle Frau® leather is the key factor in the Luxury in

Motion production, the primary ingredient. It

represents much more than a mere design material:

skins and leather are “material icons” to be used as a

symbol of elegance, prestige and quality. Poltrona

Frau‟s Luxury in Motion division has gradually

developed exclusive processing of bovine skins in a

constant exchange of ideas and experiences with the

furnishing sector. The feel, colours and atmospheres

of a living room have also been transferred to travel,

in compliance with expected use, regulations and the

most demanding technical specifications of car

manufacturers.

Only leather able to guarantee waterproof, moisture

transmission, wear resistant and stain resistant

characteristics are defined as Pelle Frau®.

The Luxury in Motion division is a development of the

Poltrona Frau brand to another business segment. This

has offered the opportunity to increase brand

awareness, especially in emerging countries (e.g.

China) where luxury car interiors are directly

associated with the brand itself.

The Group is active in various countries across the

world both through the sales network and thanks to

the joint ventures and commercial agreements it has

established over the years.

More specifically, the Group‟s two joint ventures are:

PF Emirates: established in April 2007 with

Mubadala Development Company PJSG, it has

enabled the retail sector to open the first

Poltrona Frau Group multibrand store in Abu

Dhabi in November 2008, followed in 2012 by the

opening of the Group‟s first multi-brand store in

Dubai; as regards the Luxury Interiors division,

the agreement made it possible to act as the

exclusive supplier for high-profile contract

projects developed in the Emirates;

Casa Décor: this company, founded in 2008 and

the result of a joint venture between the Poltrona

Frau Group and the Indian Group TATA, aims on

the one hand to be an exclusive vehicle for the

development of the Group‟s brands on the Indian

market and, on the other hand, to develop

industrial partnerships with the TATA Group. This

has allowed the opening of two Group multi-

brand stores, the first in Mumbai in 2010 and the

second in New Delhi in 2012

The Group also stipulated important commercial

agreements, in particular that signed with Haworth in

2011, a world leader in the design and production of

flexible and sustainable working environments for the

office segment in the US, with over 600 dealers. This

agreement has the objective to enable further

development of the geographical presence in the US,

thanks to the comprehensive distribution network of

the American brand which adds its own office

products to those of the Poltrona Frau Group.

Research and development

Research and development acts as the main source of

technological and stylistic innovation for the product

range of Group companies.

More specifically, the research and development

carried out by each company of the Group, fully



47

consistent with its respective business model,

concentrates on the following activities:

- definition of the product development plan;

- realisation of the style models, internally and

in conjunction with designers;

- design and industrialisation of the products in

respect of the defined forms of style and cost

and time targets assigned.

New products are developed in compliance with the

requisites of quality and in accordance with the

international standards for the sector.

The aim of the resources invested in the research and

development process is to provide a constant

improvement of the Group‟s specific skills, a means by

which the Group can distinguish itself from its

competitors, in particular:

- a direct and complementary relationship with

leading designers, a factor which enables the

Group to bring engineering activities forward

to the stage at which the style models are

realised;

- craftsmanship in working and in the use of

materials (leather, fabric, wood);

- ability to combine the working of top quality

products with constant technological and

processing innovation, using technologies and

computer tools which are on the cutting edge

on the market (such as 3D modelling, rapid

prototyping, injection, aesthetic finishing).

In addition, research and development activities make

use of an internal testing laboratory of the highest

level, which uses dedicated tools and resources for

laboratory tests carried out on materials, semi-

finished goods and finished goods (performance

testing, dynamic and static stress testing,

temperature testing, etc.).

The collaboration already established or being

established with certain Italian universities provides a

contribution to keeping the process of exchange with

the research and innovation sectors at a high level,

especially as far as the following are concerned:

- stylistic and formal research;

- new ways of modelling and 3D structural

analysis;

- research and testing of new materials;

- research and testing of new technologies and

production processes.

All the activities have the aim, besides that of testing

new materials and technologies, of also optimising

the time-scale required for the development cycle of

new products in order to maintain a competitive

advantage over competitors in terms of time-to-

market.

The external costs of research and development

recognised in the income statement in 2013

amounted to Euro 144 thousand, while development

costs capitalised during the year totalled Euro 1,682

thousand.

CSR ACTIVITIES

CSR governance

The Poltrona Frau Group three-year Corporate

Responsibility plan identifies four main action areas:

the pursuit of excellence and product innovation;

making the environment a part of the business

culture;

playing an active role in the development of the

local communities;

working as a team and developing talent.

In 2012, the Poltrona Frau Group performed a specific

assessment on the issues of Corporate Responsibility,

aimed at strengthening its monitoring of the four

main areas identified in the plan.

In accordance with the three-year Corporate

Responsibility plan, the Group completed an

assessment in line with the ISO 26000 Guidelines

which support organisations in the phases of

integration, implementation and promotion of socially

responsible conduct. The guidelines classify social

responsibility issues into seven categories and, for

each one, defines „issues‟ and “action required”. The

assessment made it possible to carry out a gap

analysis to identify the improvement actions required

also as regards the updating of the Corporate

Responsibility plan.

The Group has also continued with its process of

system certification.

To date Poltrona Frau holds the certifications ISO

9001, ISO 14001, OHSAS 18001, ISO/TS 16949;

Cassina holds the certifications ISO 9001, ISO 14001

and OHSAS 18001; Cappellini holds the certifications

ISO 9001 and ISO 14001.



48

Stakeholder mapping

The Poltrona Frau Group interacts with its

stakeholders on a daily basis, who can be classified

into four groups:

• Governance: managing bodies; shareholders

including the Charme fund, majority shareholder;

• Market: suppliers of raw materials, foundations

and third parties; clients, including general

contractors, resellers and end customers;

designers and architects; trade associations;

banks;

• Community: public entities, including local

authorities; media; national and international

institutions;

• Collaborators: employees; agents; unions.

For the various stakeholders with whom the Group

interacts, a series of initiatives has been launched

that will be outlined in greater detail in the chapters

Profits, Planet and People.

Related party transactions

Group companies conduct intragroup and related

party transactions for goods and services under

normal market terms and conditions. This trading

relates mainly to transactions of a commercial nature,

as well as to administrative, financial and general

services.

Details may be found in note 42 “Related party

transactions” to the consolidated financial

statements.



49

GranTorino, designer: Jean-Marie Massaud, Poltrona Frau

Dalia, designer: Marcel Wanders, Cappellini



50

MyWorld by Philippe Starck, Cassina I Contemporanei Collection

Oblong System, designer: Jasper Morrison, Cappellini



51

THE MARKET

Activities and business segments -

Results and projects

In 2013 the Group earned 55.2% of its consolidated

revenues in the Residential segment, 19.3% in the

Luxury Interiors segment and the remaining 25.5% in

the Luxury in Motion segment.

The commercial structure of Group companies covers

all the main geographical markets and over 65

countries, with a network of more than 70 single

brand stores and more than 1,000 multi-brand

dealers.

As at 31 December 2013, the Group had 889

employees. The Group‟s manufacturing structure

consists of two main facilities in Italy: one in the

Marche region at the Parent‟s site in Tolentino (MC)

and one in the Brianza district at the historic site of

Cassina in Meda (MB). It also has one facility in

Detroit (USA).

Residential

During the year the Group‟s three main brands

presented their Residential market products at the

Salone del Mobile (International Furniture Fair) of Rho

Fiera. Poltrona Frau Group has decided to return to

the fair as a sign of commitment to its partners and

to present new collections to a qualified public in

both consolidated as well as emerging markets.

This also demonstrated the Group‟s intention to

“support the system” and actively support the Italian

furnishings and design industry.

The public had the opportunity to discover an area

organized as a Campus: three unique and different

buildings which reflect the identity of each brand as

well as a common lounge area that reflects the

significant facets of each.

Below is a description of the most prominent

products marketed by the three Group brands.

Antohn: Jean-Marie Massaud designs a comfortable

sofa which speaks of elegance and relaxation. Broad

and generous cushions. A thick padding and soft

covering in leather. A significant sofa and the same

time light in frame. Almost suspended from the

ground by means of its thin T-shaped aluminium

supports which, located in the central area of the

structure, are invisible to the eye.

GranTorino: Incisive in effect, compact volumes, light

structure. Jean-Marie Massaud is inspired by the

world of saddlery and designs GranTorino. Great

freedom of expression. A sofa system which, in its

most original and valuable version, combines Cuoio

Saddle® Extra and cloth. The leather, cut and moulded

by hand, closely follows the lines and geometries of

the seating.

Letizia: Elegance, style, 1950‟s atmosphere. A project

which triggers and incorporates the creative ferment

of an age. Designed in 1954 by Gastone Rinaldi with

the name of DU55P, Letizia has currently been re-

edited by Poltrona Frau. Empty and full, sensual and

soft lines. The seating is welcoming and comfortable.

The back acquires new elasticity. The supports, slim

and streamlines, are well calibrated with the

bodywork.

Mamy Blue: An armchair to read, dream, meditate.

Snug and sensual as a song, Mamy Blue was designed

for relaxation and reading. The round and springy

forms evoke the dynamic and sophisticated design of

Carlo Mollino. Roberto Lazzeroni valorises them with

the wise use of materials.

MyWorld: “We live in a schizophrenic world. Let‟s

assume that MyWorld is a cocoon, a nest, a world

where we can be egocentric and comfortably

commune with our shadow or collect some snatches

of news from the world, that is said to be real.”

Philippe Starck. MyWorld is a living system, an

invitation to comfort and, at the same time, a call for

connection, a challenge which reflects the needs and

habits of a world that is constantly changing and in

which work and free time play an essential role.

P22: Patrick Norguet debuts in his first collaboration

with Cassina and presents a contemporary lounge

armchair which stands out for its comfort. P22 is a

contemporary interpretation of the classic bergère

and becomes a modern tribute to what the Cassina

brand represents.

Motek: The technology of the car industry in an

innovative chair which evokes the elegance of

Japanese origami. Luca Nichetto continues his

partnership with Cassina and designs a chair with

marked lines, for the home or the office, and which

draws inspiration from the Orient.

TL3 table: The vertical raiser as the recurring theme in

the poetics of Franco Albini. The design of the original

table – created by Albini in 1953 – is the origin of the



52

new edition of a series of tables that are proposed

with different forms, sizes and finishings.

Dalia: Designed by Marcel Wanders, Dalia is a poetic

and contemporary armchair which evokes the form of

the colourful flower of its name. Of small size, it

offers a pleasing comfort from its padding and

turnable base.

Oblong System: A series of chairs created by Jasper

Morrison that are free and which can be assembled,

providing the possibility of creating bifacial

compositions. With respect to the previous

Superoblong, it has no zippers and is enriched by

numerous modules that are capable of composing

countless and highly colourful compositions.

Candy Shelf: An evolution of the Candy mini tables,

Candy Collection – presented by Sylvain Willenz –

explores the beauty and simplicity of the construction

materials on a small scale. These libraries make clear

reference to the furniture of the 1960‟s through the

use of a structure of suspended tables with opposing

finishings and colours.

TREZ: An armchair of Zanini de Zanine, it is a highly

graphical design that is inspired from Brazilian

culture. A re-interpretation of the work of two great

artists of reference within the plastic arts world. A

courageous and eclectic mix, a striking and original

sculptural form.

Luxury Interiors

The main aim of the division is to maintain a

sustainable growth in the mid-term, improving

margins and improving risk management. For this

reason the division has decided to once again closely

focus on developing the business of furnishing high-

level retail stores for the most important international

fashion groups, as well as focusing on the

development of luxury hotel boutiques. The Luxury

Interiors division‟s main projects in 2013 included:

Hospitality: Cassina Luxury Interiors supplied all the

furnishing for the rooms and suites of the Peninsula

Hotel of Hong Kong, as part of a program for

relaunching the facilities by presenting a new concept

for a hotel room which is characterized by avant-

garde design and technology. This prestigious chain

therefore inaugurated a new era of customized

accommodations: the rooms present distinctive

elements of classic modernity, partaking in the design

principles of simplicity and elegance with ample use

of refined materials. Cassina Luxury Interiors was

selected as the sole supplier due to its handicraft

know-how and its capacity to transfer an aesthetic

combining design and practicality within its

furnishings.

Retail: the famous fashion brand Versace celebrates a

new concept for its mono-brand stores and does so by

choosing Cassina Luxury Interiors.

The first store of the new avenue was opened in Paris,

in Avenue Montaigne, and which, as a domino,

initiates the restyling of the other Versace boutique

stores across the globe.

Tradition, opulence, dynamism and contemporeaneity

characterize this new Versace concept which, in Paris,

covers a space of 350 sq.m. with marble mosaics,

brass and perspex.

In October 2013, the new concept store in Rome was

inaugurated within the worldly Piazza di Spagna. The

boutique has mosaic flooring which is inspired from

the Byzantine churches of the 19th century,

contrasting with the surrounding plastic and metallic

materials. Cassina Luxury Interiors will partner with

the Versace brand during new openings for 2014.

Auditorium: The restructuring of the Kimbell Museum,

located in Texas, was the work of several planners.

Within the pavilion that was re-designed by the

architect Renzo Piano, there is an auditorium with

300 seats, custom-sized, and realized by Poltrona

Frau Luxury Interiors. Located in the western part of

the building, the pavilion doubles the surface area of

the museum and is consistent with the form of the

original structure which contains the permanent

collection. Glass, cement and wood are the materials

which characterize the structure of the Plan and

which, surrounded by elms and red oaks, is an

expression of simplicity and lightness.

Theatre: The National Theatre of Bahrain resurrects

the typical architecture of Arab palaces: it is

organized around a central empty area and built near

the sea. The internal patio is majestic and includes a

majestic auditorium with 750 seats. Poltrona Frau

Luxury Interiors has been selected to realize the seats

which are specifically designed by AS Architecture

Studio Paris in order to offer greater visibility and

encircle the stage, thereby bringing the audience

closer to the performance. Conceived as a functional



53

space, the theatre will be used for conferences,

theatre shows, rehearsals and official ceremonies.

Special Projects: Restoration of the prestigious Park

Avenue Armory involved the historic armory that was

entirely built in 1881. This building, located in the

heart of Manhattan and covering 16,000 square

meters, will be prepared and customized in order to

host a unique exhibition area within the city of New

York. Cassina Luxury Interiors is involved in the

transformation of 18 rooms, creating customized

furnishings that were designed by the innovative

Swiss architects Jacques Herzog and Pierre de Meuron

of Herzog & de Meuron. When the ambitious

restructuring project is complete, New York will serve

as a cultural centre that is unique around the world

and capable of bringing together history and design.

Finally, during the week of the “Salone del Mobile” in

Milan, Luxury Interiors was the protagonist of the

event “Multiplicities by Zaha Hadid”, an

event/installation where sounds, forms and colours

are multiplied. The exhibition includes the Array chair

designed by Zaha Hadid for Poltrona Frau Contract

and the Zephyr sofa created by Cassina Luxury

Interiors for the famous designer, as well as the Liquid

Glacial and Mercuric collections of tables by Zaha

Hadid Architects.

Luxury in Motion

For thirty years the Luxury in Motion division of

Poltrona Frau has worked with clients that lead the

way in their respective sectors - Ferrari, Maserati,

BMW, Fiat, Lancia and Alfa Romeo in the car

segment, the Ferretti Group in the yachting segment,

Singapore Airline and Etihad in the aeronautics sector

and NTV in the railway industry.

In 2013 the partnership with Chrysler - which began

in 2011 - was consolidated by producing the

dashboard, interiors and seats of the new Chrysler

300 Luxury Series.

The Poltrona Frau Group was also chosen, at the start

of 2012, by Volkswagen for the fitting out of the

Phaeton Exclusive concept car with Pelle Frau®. The

seats are covered in Beige Silkway leather, as are the

door inserts, hat rack and the central armrest

between the front seats. A model which, in the month

of June 2013, Volskswagen Import China launched in

the Chinese market at the 2013 International Auto

Show in Shenzhen-Honk Kong-Macao.

This important agreement joins the deal signed with

the Fiat-Chrysler Group for overseas platforms and

the partnership initiated in 2009 with Jaguar Land

Rover, owned by Indian group Tata, for whom

Poltrona Frau has produced leather interiors for the

Jaguar XK, X152 coupé and spider as well as for the

new Range Rover.

During the year, the collaboration with the

Volkswagen Group continued (with the trademarks

VW, Audi and Porsche) in addition to the one with

Maserati. Luxury in Motion is the supplier of Pelle

Frau® for the latter‟s new Quattroporte and Ghibli.

In yachting, the collaboration with the Ferretti Group

evolved in 2013 with the production of a line of

suitcases and items for the Riva brand.



54

Peninsula Hotel, Hong Kong



55

Kimbell Museum, Texas

Showroom Versace, Avenue Montaigne - Paris



56

Maserati Quattroporte

Ethiad



57

Support for the sales network

In 2013, 9 showrooms were opened, 4 of which in China.

Shanghai

DOS - Meda

GroupWashington

Beijing

Beijing

Wien

Group Group

San FranciscoDoha



58

Initiatives and projects in support of the market

During the course of 2013, many initiatives were

implemented by the three Brands with respect to the

market. The most significant ones are reported below.

Cassina kicked off the year 2013 with the launch of

the prestigious artistic project Karl Lagerfeld

photographie Cassina. This was the first time that Karl

Lagerfeld has chosen to carry out a photographic

project for a furniture brand. A great lover of design

and one of the most influential aesthetes of our time,

he approached the theme thanks to the artistic

project assigned by Cassina, letting his favourite

objects parade in front of the lense. The partnership

with Cassina was a natural development of his

passion for beautiful and timeless furniture. Cassina

has chosen to share the backstage of this exceptional

photographic shoot as well as the passion of Karl

Lagerfeld for the collections of Cassina in a video

which is made available on the dedicate website

(which at the end of the year attained close to

350,000 page views).

At the end of January, the showroom of Cassina in

Paris was transformed into an art gallery and

presented the authentic photographic tableaux of

Karl Lagerfeld, “gigantic portraits” of the Cassina

furniture. Paris marked the first step of a series of

cultural activities for 2013 with the opening of this

eagerly awaited exhibition. In April – at the time of

the Salone del Mobile - Karl Lagerfeld realized

scenery which animated the historical showroom of

Via Durini.

Again at the time of the Salone del Mobile, the first

floor of the Cassina showroom was transformed into

an experimental laboratory through the collaboration

with carlorattiassociati, an architectural firm which

operates between Turin and Boston.

The Our Universe project brought together seven

conceptual furniture prototypes which were

developed in order to investigate and narrate the

impact of digital and technological progress on design

furniture for the home. The interaction with Cassina

involves responding to this new way of living,

exploring and experimenting further in order to

produce this furniture in the future, in collaboration

with carlorattiassociati.

In addition, in the month of September, the

showroom of Milan hosted the global presentation of

the acquisition of the historical brand Simon on the

part of Cassina. The event included a cultural

exhibition for the design community as well as a press

conference and a series of meetings with the

commercial network.

Cassina shares its passion with Louis Vuitton for

Charlotte Perriand, one of the most pioneering

architects from the 20th Century, with a

comprehensive project which kicked off in Miami

during Design Miami/Art Basel Miami Beach 2013

with the exhibition “Charlotte Perriand – A Modernist

Pioneer, from Avant-garde Design to Photography”:

an encounter which combined furnishings, fashion

and photography to honour this magnificent

contemporary legend.

At the same time, a limited edition (1000 pieces) of

the LC4 CP chaise-longue of Le Corbusier, Pierre

Jeanneret, Charlotte Perriand, as an homage of

Cassina to Charlotte Perriand for the occasion of the

2014 Louis Vuitton Icôns Collection of.

The LC4 CP is highly innovative thanks to the

workmanship of the self-supporting mattress which

has been developed using Cassina‟s industrial know-

how and Louis Vuitton‟s expertise in saddler

craftsmanship: the natural cow hide leather supplied

by Louis Vuitton‟s tannery is attached directly to the

structure, and the contrasting dark brown saddle-

leather has been applied for the foot and headrest.

Characteristic Louis Vuitton details can be particularly

recognised in the yellow stitching of the natural

saddle leather and the elegant leather headrest straps

which recall the workmanship of the Louis Vuitton

signature handbags.

In the month of June, Poltrona Frau presented “Pausa

di Luce” in its showroom in Milan: the new project

between Luce della Vite e Poltrona Frau for “Casa di

Luce”.

“Pausa di Luce” is the armchair created by Poltrona

Frau for Casa di Luce, a project created by Lamberto

Frescobaldi in 2009 in order to celebrate the exclusive

and elegant style of this great wine with creations

that are rigorously Made in Italy and which are

inspired by Luce and strengthen its personality,

uniqueness and prestige.

The armchair “Pausa di Luce” was made available only

upon request for a selected number of Poltrona Frau

showrooms in Italy (Milan and Rome), in Asia (Tokyo,

Taipei, Hong Kong and Shanghai) and the US (New

York, Miami and San Francisco).

Luce and Poltrona Frau were ambassadors for Italian

excellence in the world, even with an international

road show where “Pausa di Luce” was the protagonist



59

of a series of events which were held between

October and November within the primary Poltrona

Frau showrooms in the world. The month of

November was the opportunity for a visit of the

primary Italian retailers of Poltrona Frau at the Luce

delle Vite estate in Montalcino.

During the design week in New York, in May, Poltrona

Frau presented two important projects within the

showroom in Wooster Street in Soho.

- “Barrique: the third life of wood”, in

collaboration with San Patrignano, resulted in a

collection of furnishings and accessories

designed by famous Italian and international

designers that were realized by the young

members of the San Patrignano community.

- The second project, “Wasteless”, is the result of

the collaboration – for the third consecutive year

– with the Parsons School of New York and with

the 15 students of the Product Design class. The

focus provided to students was to create objects

and small furnishing accessories by utilizing

portions of Pelle Frau® that were rejected by the

production process.

Two projects which confirmed the commitment of

Poltrona Frau to the issues of social responsibility and

sustainability. Intelligence of the hands by valorising

the handicrafts excellence and the involvement of

youth in the creation of design objects.

The Asian market was an important stage of the Jean-

Marie Massaud World Tour Design Exhibition. During

the course of the Asian tour, which included the cities

of Singapore and Taiwan, events were organized in

collaboration with local partners within the

showrooms of Poltrona Frau for the presentation of

the Archibald Special Edition. Designed by Poltrona

Frau in collaboration with the designer and

exclusively for the Asian market.

Luft is the new armchair of Walter Maria de Silva, the

director of the Design Volkswagen Group, in

collaboration with Audi design. A rigorous rendering

and balanced synthesis between high level

handicrafts and the tradition of Poltrona Frau with

the technology and innovation that characterizes

Audi design. Luft is the synthesis of two approaches,

even in the processing which integrates techniques of

the Residential segment with those of Luxury in

Motion.

The Luft armchair was presented in the month of

November within the showroom of Milan and in the

presence of numerous important guests.

During the course of the year, Poltrona Frau has

implemented a series of initiatives which aim to

valorise and optimally support its sales channels, such

as:

- "Excellent Shop” initiatives targeting the Italian

Frau Centres and Spaces-. A competition between the

Italian Frau Centres and Spaces which aimed to

award excellence in the preparation and presentation

of brands.

- The sales initiative “Essence of beauty” launched in

Italy and within the primary countries of the EMEA

region through the presentation of a Vanity Fair with

two “naked” structures of the same armchair for the

purposes of highlighting the unique and exclusive

peculiarities of the handicrafts processing of Poltrona

Frau.

- The opening of three new "Frau Spaces" (shops in

branded shops within multi-brand stores) in Italy

(Forlì, Bologna, Rome) and four in Europe.

Finally, a true partnership was established between

the Marangoni Institute and Cappellini. Excellent in

the schools of fashion and excellence in the world of

international design. The Marangoni Institute chose

Cappellini and the artistic direction of Giulio

Cappellini in order to furnish spaces for their students

from around the world, ranging from classrooms to

lounge areas: the comfortable Pebble sofas, the Inout

benches, the rigorous Fronzoni tables, the Julie, Lotus

and Crossoft mini-armchairs, the Sunset armchairs

and the Tate chairs and stools. Up until this point, the

affected centres were Milan, London, Paris, New York,

Shanghai, Mumbai and Chongqing.

During the Designer Days in Paris, in the month of

June, Cappellini presented the installation

“Metaforma” by Matali Crasset in its showroom.

The web and advertising campaigns

In 2013 the Poltrona Frau Group confirmed the two

advertising campaigns for Poltrona Frau and Cassina,

and its commitment to increasingly strategic digital

communications.

During 2013 Poltrona Frau continued its press

advertising campaign produced by Saffirio Tortelli

Vigoriti, entitled: “Poltrona Frau, l‟intelligenza nelle

mani” (“Poltrona Frau, the intelligence in our hands”)

which was started in 2011.

The stars of the campaign were the sewings,

finishings, stitching, details, folds and wrinkles of the



60

leather. The photo camera entered into the product in

order to narrate the knowledge and culture which lies

behind each individual detail. It is in these details, in

fact, that one recognizes the top Italian quality.

The 2013 campaign included six parties, each

dedicated to a model: Vanity Fair, Archibald, John-

John, Ginger, Lelit, Pillow. Sofas, armchairs, beds:

undisputed renditions of a brand and of values which

overall express craftsmanship, design, tradition and

innovation.

The campaign photographs were produced by

photographer Giovanni Gastel.

Cassina continued with the advertising campaign “il

design prima di tutto” (“design first”). The 2013

campaign focused on five products: the LC4 chaise-

longue and the LC2 armchair by Le Corbusier, Pierre

Jeanneret and Charlotte Perriand, which highlights

the new range of colours, the Maralunga sofa by Vico

Magistretti, and the Toot and Moov sofas designed by

Piero Lissoni. The campaign depicts the two products

in homes that are undergoing renovation, underlining

how they will be the main attractions of the future

home, with everything else of secondary importance.

Again for Cassina, the significant collaboration with

Karl Lagerfeld resulted in an important integrated

promotional project in France which included the

following: a photographic exhibition within the Paris

showroom, advertising within the newspapers Le

Figaro and Le Monde with ad hoc visuals, a web plan

on Youtube and on Le Figaro.it in order to make the

video of the backstage of the photographic service of

Karl Lagerfeld go viral.

During 2013 the Group strategy of increasing its

presence in digital channels continued.

The presence of the Group within the various Digital

channels has continued to grow, both in terms of

visitors as well as fans, thereby representing the most

rapid way to communicate.

The web sites have now reached 3 million page views,

which the Youtube channels recorded 450,000

visitors; ever since the Apps were created, they have

been downloaded 50,000 times and Facebook-Twitter

and Pinterest now count more than 50,000 followers,

thereby reaching more than 15 million potential

customers.

For the purposes of updating both the technologies

and the communication style, Poltrona Frau Group

has initiated a project to change the web platform

and completely restyle the websites.

In order to meet the demand of the expanded number

of connectivity devices, a responsive design

technology was adopted: the web sites will respond

by adapting themselves to the devices which are

being used by the visitors. There will therefore be an

optimal visualization for connections via PC, tablet or

smartphone.

The new structure will allow for more rapid Web

surfing due to both the conceptual re-designing of

the web sites as well as international tools for

accelerated viewing (CDN); all of this is implemented

in order to more effectively meet the informational

needs of both potential customers as well as sector

professionals and employees.

The product sheet has also been re-designed in order

to allow for simple conversion into a pdf format that

contains all the primary information. This tool is

particularly useful in the showrooms since it reduces

the use of printed brochures and the product sheet

can be sent by email or printed if necessary but

without useful accumulations of pre-printed

documentation.

The first site that went live was Cappellini and, in the

first months of 2014, the sites of Poltrona Frau,

Cassina and of the Group will go live.

Finally, in support of the opening of the Poltrona Frau

Museum, a dedicated website was created in order to

narrate the emotional story of the last 100 years. Not

only is logistical information provided but there is

also the opportunity to visit a part of the exhibition

area through a virtual tour. Videos and images

complete the offer of emotional contents linked to

the initiative.

Awards

Poltrona Frau won the Wallpaper* Design Award 2014

with the GranTorino by Jean-Marie Massaud. In

London, an extremely select panel comprising the

editorial team of Wallpaper*, Victoria Beckham, Spike

Jonze, Thaddaeus Ropac, Michael Chow, Ron Gilad

and Thom Mayne, awarded the GranTorino sofa

designed by Jean-Marie Massaud, the prestigious

Wallpaper* Design Award 2014 for the category “Best

Room Mates”.

Each January sees the magazine Wallpaper, an

authoritative international point of reference in the

design, fashion and lifestyle segment, assign the

Design Awards, namely the "best of" of design,

architecture and fashion, evaluating the very best



61

creativity has to offer for the previous twelve months

and thereby decreeing the products and designs that

will set the trend worldwide.

Combating counterfeits

The Poltrona Frau Group continued with the activities

it launched in 2012 to defend designs against

counterfeiting, with particular reference to the

Poltrona Frau and Cassina brands, which own the

reproduction rights for some of the most important

architects of modern design.

Legal action continued in 2013 both in Europe (where

reference regulations and legal theory on this issue is

now consolidated) and in Italy, awaiting the 2014

deadline (result of the “Mille Proroghe” Decree of

2012) when the European directive on design

copyright will finally enter into force.

Actions for the seizure and destruction of counterfeit

furniture took place in Europe with the aim of

protecting copyright and safeguarding the Group‟s

products against counterfeiting.

On 18 April 2013, the Court of Appeals of Milan,

following up on the sentence of the Court of Bologna

of 2012, newly and definitively recognized, for all

legal purposes, the protection of copyright and

intellectual property rights of creative nature, even

with regard to design works. The rights of Cassina, the

Le Corbusier foundation and the heirs of the co-

authors were recognized with respect to a renowned

Tuscan manufacturer which operates throughout

Europe and who was reproducing the most iconic

pieces of the famous Swiss, and naturalized French,

architect and designer.

Following the presentation of the document

“Manifesto” to the institutions during a concluding

convention which brought together all the best ideas

which emerged from the project Be Original of Elle

Decor Italia, the second half of 2013 witnessed the

launch of the second phase of the initiative. The

project‟s objective is to act as the spokesperson of all

parties in Italy interested in the protection of

creativity and originality and well as in the combat of

counterfeiting of industrial design: institutions,

companies, designers and the entire Italian furniture

sector.

From 21 to 28 October 2013, the companies of the

Poltrona Frau Group were featured – along with the

primary furniture companies that are most affected

by counterfeiting – within the shop windows of La

Rinascente of Milan – Cassina with the iconic

Maralunga sofa of Vico Magistretti and Cappellini S-

Chair of Tom Dixon. At the same time, an online

catalogue dedicated to design icons was launched,

serving as a tool through which the consumer can

become informed on the identity and originality of a

product.

The US market is also fully involved in the defence

against counterfeiting with targeted market

initiatives.



62

Poltrona Frau Showroom, Beijing

Cassina Showroom, Beijing



63

Poltrona Frau Group Showroom, Doha



64

THE ENVIRONMENT

In 2013 the Poltrona Frau Group continued with its

commitment to reducing its environmental impact,

focusing particularly on reducing its carbon dioxide

emissions through the production of renewable

energy, streamlining the logistics system and

minimising the car journeys made by its employees.

Production and energy consumption

The 2010 installation of the photovoltaic plant at the

Tolentino site produced 1,433,605 kWh of electricity

in 2013 (compared to a nominal installation capacity

of 2,100,000 kWh), avoiding the atmospheric

emission of 900 tonnes of CO2. Comprising 18,000

photovoltaic modules, the plant is perfectly

integrated with the roofs of the production site to

reduce landscape impact to a minimum. Consumption

at the Meda site decreased compared to 2012, using

1,780,752 kWh during 2013. The data for the Detroit

plant are in line with those recorded in 2012.

Electricity consumption (kWh) 2011 2012 2013

Tolentino 1,500,000 1,599,064 1,881,000

Meda 2,012,606 2,099,258 1,780,752

Detroit n/a 726,960* 746,000

* activities relating to the period April-December 2012

At the Meda plant the replacement of the diesel fuel

boilers with more efficient condensation boilers

fuelled by natural gas became effective in 2013; this

decision brought CO2 emissions to zero, a process that

began in 2011. As illustrated in the table below, the

consumption of diesel fuel – which had fallen by 65%

between 2012 and 2011 – is equal to zero. At the

same time, following the activation of the new

boilers, there were increases in natural gas

consumption at the Meda site.

* activities relating to the period April-December 2012. Adjusted

figure

Over the last year, natural gas consumption at the

Tolentino site increased considerably compared to

2012.

This was due to the installation of the heating system

within the new Historical Museum inaugurated at the

end of 2012. As described above, the increase in gas

consumption recorded at the Meda site was linked to

the replacement of the diesel fuel boilers.

Natural gas consumption (m3) 2011 2012 2013

Tolentino 384,799 346,536 382,000

Meda 181,962 246,528 283,304

Detroit* n/a 203,825 110,153

* activities relating to the period April-December 2012. Adjusted figure

Diesel fuel consumption (lt.) 2011 2012 2013

Meda 81,000 28,000 0

Detroit* n/a 0* 0



65

Production of waste

The production of non-hazardous waste at the

Group‟s Italian production sites has increased in the

last year.

At the Meda site, and following a particularly onerous

2012 whose causes are due to the initiation of certain

important activities (Logistics for Luxury Interiors,

R&D prototypes office, Engineering Services offices of

Cassina and Cap Design, Lighting Divisions Office)

within the Lentate site sul Seveso site, resulting in the

disposal – during the woryard and installation

activities – of significant quantities of materials and

semi-processed products, normal levels were restored

in 2013.

Production of non-hazardous waste at the Tolentino

site increased by approximately 15%, from 298

tonnes in 2012 to 350 tonnes in 2013. This increase is

largely associated with the growth of the Luxury in

Motion division.

Non-hazardous waste (Tonnes) 2011 2012 2013

Tolentino 249 298 350

Meda 601 671 469

Detroit n/a 431* 62


In 2011 the reason for the increase in hazardous

waste at the Meda site was due to reorganisation of

the plant, which led to the disposal of large quantities

of semi-processed and stored materials. The 2012 and

2013 figures shows that the situation has returned to

normal, in line with previous years.

At the Tolentino site, the hazardous waste produced

in 2013 decreased considerably compared to the

previous year, largely due to the important R&D work

which led to the replacement of solvent-based

adhesives with water-based products that are not

dangerous. The increase in the figure for the Detroit

plant is linked to waste disposal activities for non-

compliant materials (specifically glue).

Hazardous waste (Tonnes) 2011 2012 2013

Tolentino 9.70 11.9 8.7

Meda 5 1.07 1.02

Detroit n/a 0.5* 13


Water consumption

The Tolentino site maintained its consumption levels

of the previous two years. The Meda site, however,

increased its water consumption by circa 13%. On the

contrary, the Detroit site reduced its consumption by

circa 40%.

Water consumption (m3) 2011 2012 2013

Tolentino 6,500 6,600 6,600

Meda 5,625 5,438 6,313

Detroit n/a 3,341* 1,869

* activities relating to the period April-December 2012. Adjusted figure.



66

Poltrona Frau Archive



67

As part of its logistics activities, the Poltrona Frau

Group initiated two important initiatives during the

course of 2013, the first at the Group level and the

second focused on the production site of Meda.

Bringing the logistics hub closer

The closer distance of the logistics hub to the

transportation carriers led to an energy “savings” that

can be quantified as 45,000 km less that are travelled

each year by transportation vehicles which transport

our products to the sorting hub. These activities were

initiated in September and the estimated impact for

2013 is therefore equal to 15,000 km less.

Insourcing of contractors

During the course of 2013, the insourcing of

contractors for Meda was implemented for the

Cassina plant. By identifying a contractor which has

begun to directly operate within one of our

production plants, it is possible to save an additional

2,000 km/year (the estimate was made by comparing

the previously optimized data of 2012).

Streamlining logistics

In 2013 the project - launched in 2011 - to

streamline the process of the delivery of the products

to the Group (inbound logistics) by leather suppliers,

important partners for the entire Group, continued. By

a process that involved listening to the requirements

of its suppliers, the Group took control of inbound

logistics, previously managed by each single supplier

using their own means, and centralised it.

Using a single carrier led to a reduction in costs for

both suppliers and the Group, and at the same time a

reduction in environmental impact, optimising

transport deliveries.

Both in 2012 and 2011, this process led to a

reduction in the number of journeys made, the

equivalent of 60,000 km, corresponding to a 53-tonne

reduction in CO2.

Minimising the amount of car journeys made by

employees

The expansion of the videoconferencing infrastructure

and related incentive scheme even in 2013 further

contributed to reducing carbon dioxide emissions.

As well as generating savings from an economic point

of view, linked to the elimination of travel costs,

using this technology also prevented the atmospheric

emission of around 800 tonnes of CO2 in 2013 (in

2012 the total was 700 tonnes).

The use of videoconferencing also reduces the risks

that are intrinsically linked to travel, particularly by

car, increases the quality of the work and makes it

easier for employees to reconcile work with their

private lives.

Sustainable paper consumption

The Poltrona Frau Group has already initiated, as of

2012, a project to encourage a “sustainable paper

consumption environment”. In particular:

- It has encouraged its staff to use digital

means - “read, send and archive documents

digitally”

- It has eliminated “single function” devices,

adopting only “multipurpose” devices and at

the same time reducing the quantity of

equipment on Company premises

- It has chosen ENERGY STAR® devices

- It has chosen devices that use solid ink

cartridge technology.

In particular, the solid ink technology used (Xerox-

ColorQube) eliminates the use of toner, typical of

classic multipurpose laser machines, adopting tank-

free wax cartridges.

The environmental impact calculated in terms of the

“Total waste produce from printing 22,000 sheets per

month over 4 years” equals 90% less waste compared

to a multipurpose colour-equivalent laser (37 kg vs.

370 kg).

New “green” Data Center of Poltrona Frau

During the course of 2013, Poltrona Frau initiated a

project for restructuring the Data Center in Tolentino.

The project also took in account, in particular,

consumption in addition to elements of continuity

and security.

A decision was therefore made to utilize closets that

are capable of optimizing the flow of air generated by

the “air conditioners” within the closet itself. The

system aspirates the hot air produced by the servers

in the back, then cools it and discharges it to the

front of the servers in order for it to be collected by

the cooling fans of the servers themselves.

The uninterrupted power suppliers were also renewed

by integrating and optimizing them within the

solution.

In connection with these activities, a strategy of

consolidation of the servers themselves was

implemented though virtualization.



68

This strongly contributed to improving the efficiency

of the Tolentino Data Center, both from an energetic

and a management/operational perspective.

The consolidation of the servers, along with the use of

more efficient devices which regulate operations and

start-up based on the real needs of the Data Center,

will allow for 40% savings in kWh/year and in CO2

consumption.

HR Portal

As part of a strategy to reduce the use of paper, the

Group has introduced an HR Platform that is used to

not only manage payrolls and attendance but also -

for e.g. - manages the flow of authorizations and

publishes payslips, W-2 forms, forms in general and

company communications. This led to the following:

- A more efficient and rapid process

- No more need to print and fill out printed

forms for justifications which, within the

authorization process, could also be printed

multiple times per request

- No more need to print payslips, W-2 forms,

and forms in general.

Certifications

The Poltrona Frau Group has also continued the

process of certification in 2013.

The certifications obtained by the Group guarantee

improved organization and performance –

objectifying production methods, prerequisites and

qualitative standards - and are synonymous of the

commitment to the environment and to the health

and safety of its employees.

The Poltrona Frau Group obtained, and commits to

maintaining, the following system certifications over

the years.

Poltrona Frau has the complete set of certifications:

QUALITY Management System Certification

pursuant to norm UNI EN ISO 9001 for the

Residential, Luxury Interiors and Luxury in Motion

segments

QUALITY Management System Certification for

the AUTOMOTIVE SECTOR pursuant to norm

ISO/TS 16949 for the Luxury in Motion segment

ENVIRONMENTAL Management System

Certification pursuant to norm UNI EN ISO 14001

for the Residential, Luxury Interiors and Luxury in

Motion segments

WORKPLACE HEALTH AND SAFETY Management

System Certification pursuant to international

norm BS OHSAS 18001 for the Residential,

Luxury Interiors and Luxury in Motion segments

Poltrona Frau, having obtained and effectively

integrated the certification of its Quality,

Environment and Safety Systems, constantly and

carefully pursues its goal of constant improvement of

its activities. This objective is a distinctive element

and competitive edge for the Organisation itself.

The company obtained - in September 2012 , the

centennial anniversary of its founding – a

certification relative to the Worker Health and Safety

Management System pursuant to OHSAS 18001.

This was the last step in a process which began in the

1990‟s and in which, as of the 2000‟s, TUV Italia

confirmed or assigned the complete set of

certifications to the company.

During the course of 2013, Cassina also obtained the

complete set of certifications:



Residential and Luxury Interiors segments



for the Residential and Luxury Interiors segments

WORKPLACE HEALTH AND SAFETY Management

System Certification pursuant to international

norm BS OHSAS 18001 for the Residential and

Luxury Interiors segments

Following the attainment – during the course of 2013

– of the BS OHSAS 18001 certification, in October

Cassina S.p.A. was awarded with the Certificate for

Excellence, created by Certiquality, a Certification

Institute which follows and assesses the company

during this significant growth period.

This important recognition awards those

organizations which, after obtaining and efficiently

integrating the certifications for the Quality,

Environment and Safety Systems, constantly and

carefully pursue the goal of constant improvement of

operational activities. This objective is a distinctive

element and competitive edge for the Organisation

itself.

Delivery of the Certificate for Excellence for Cassina

S.p.A. serves as a stimulus for continuous

improvement for the company.



69

Cappellini, as of today‟s date, has obtained the

following certifications:



Residential segment



for the Residential segment

Both certifications were obtained in 2012.

As of 2011, Cappellini has decided to initiate an

important process of certification of the Greenguard

product.

Greenguard is a program of voluntary certification for

controlling emissions which is based on the most

rigorous standards in the world.

The Greenguard certification trademark is recognized

by more than 400 codes, programs and international

rating systems, including LEED® - Leadership in

Energy and Environmental Design – a system for

certification of buildings which is applied in more

than 140 countries in the world.

The program requires the execution of testing on a

quarterly basis on certified products and materials.

The tests include both the control of total emissions

as well as the auditing of emissions of more than 350

individual compounds.

Companies which select Greenguard select to offer

their customers maximum guarantees in relation to

the control of emissions as well as products designed

with maximum attention to health and wellbeing.

At this time, the Cappellini products which are

Greenguard certified are as follows:

Tate color, Lotus, Wanders Tulip, Dalia, Capo, Hi pad,

Low pad, Sunset, Supersoft, Elan, Gambetta.

Finally, and with regard to the production site in

Detroit, Poltrona Frau plans to obtain the ISO/TS

16949 certification for May 2014.



70



71

PEOPLE

The Poltrona Frau Group focuses close attention on

people, represented by its employees and the

communities in which it works. During the year the

Group launched various initiatives focused on its staff

and the company, promoting the creation of a design

culture and supporting local or humanitarian

initiatives.

Employees

At international level, the number of Group employees

has decreased significantly from 972 in 2012 to 889

in 2013. This decrease is mainly attributable to the

fact that the Shengzhou site is no within the scope of

consolidation in addition to being due to the decrease

in volumes in the last months of the year of the

Detroit plant.

In Italy, the Group‟s workforce has remained

essentially unchanged over the last three years, from

723 staff in 2011 to 733 in 2012, reaching 740

employees at the end of 2013, up 1% on the previous

year.

Group composition at global level

2011 2012 2013

No. Women % Men % No. Women % Men % No. Women % Men %

Executives 37 0 0% 37 100% 29 0 0% 29 100% 28 1 4% 27 96%

Middle

managers

394

158

40%

236

60% 71 21 30% 50 70% 70 18 26% 52 74%

White-

collar

workers

338 176 52% 162 48% 338 175 52% 163 48%

Blue-collar

workers 485 155 32% 330 68% 534 168 31% 366 69% 453 138 30% 315 70%

Total 916 313 34% 603 66% 972 365 38% 607 62% 889 332 37% 557 63%

Group composition at national level

2011 2012 2013

No. Women % Men % No. Women % Men % No. Women % Men %

Executives 28 0 0% 28 100% 23 0 0% 23 100% 23 1 4% 22 96%

Middle

managers 53 15 28% 38 72% 49 14 29% 35 71% 50 12 24% 38 76%

White-

collar

workers

253 122 48% 131 52% 252 136 54% 116 46% 252 135 54% 117 46%

Blue-collar

workers 389 107 28% 282 73% 409 112 27% 297 73% 415 115 28% 300 72%

Total 723 244 34% 479 66% 733 262 36% 471 64% 740 263 36% 477 64%



72

As regards Italy, the restructuring and re-

organizational process, which began in January and

continued throughout 2013, affected the company

organization, particularly the sales structures of the

Group without significantly affecting, however, the

historical trend in turnover.

The company turnover rate, calculated as the

algebraic sum of the number of people joining and

leaving during the year divided by the average

number of employees, was in fact lower compared to

the previous two years.

In 2011 the turnover was 14%, in line with the

14.4% of the subsequent year 2012 while during

2013 the company turnover rate slightly decreased to

10.3%.

The number of years‟ service with the company

remains unchanged compared to 2012, standing at 13

years in 2013. There has been a slight increase in the

number of employees hired with permanent contracts

compared with 2012, standing at 97.3% compared to

95.1% the year before. Likewise, the average age of

employees increased from 41.5 in 2012 to 43 in 2013.

The staff composition by gender in 2013 was 36%

women and 64% men, exactly in line with the

percentages of the previous year.

The number of hours of strikes in Italy during 2013

was 1,270, approximately 1.7 hours per employee.

The number of hours used from the temporary

unemployment scheme in 2013 was 22,407.05, or

approximately 3.8 working days per employee.

Accidents, although not serious in nature, drastically

decreased during 2013 in the Tolentino site due to

the commitment and growing focus placed on

training and communication while they increased in

the Meda site due to the timing linked to deliveries of

orders for the sector.

With regard to the Detroit site, the reporting of the

last two years highlights the fact that no accidents

occurred in either 2012 or 2013

Accident indices for Meda site

Meda site 2011 2012 2013

Frequency index [1] 15.8 4.69 27.20

Severity index [2] 0.16 0.14 0.19

Occurrence rate [3] 2.5 0.74 4.23

Number of accidents 7 2 11

Accident indices for Tolentino site

Tolentino site 2011 2012 2013

Frequency index [1] 10.82 14.87 5.04

Severity index [2] 0.15 0.46 0.05

Occurrence rate [3] 1.7 2.51 0.89

Number of accidents 8 12 4

[1] Frequency index: this index represents the ratio between the number of accidents, excluding those while travelling, occurring in a year and

the total number of workable hours in that year. This figure is then multiplied by 1,000,000 to make it more comprehensible.

[2] Severity index: this is the ratio between the number of days of absence from work in a year, excluding those due to accidents occurring while

travelling, and the total number of workable hours in that year. This figure is then multiplied by 1,000 to make it more comprehensible.

[3] Occurrence rate: this is the ratio between the annual number of accidents, excluding those while travelling, and the number of employees.

The result is then multiplied by 100.

The process launched in recent years of the

Performance Management & Development, the tool

that makes it possible to develop a business culture

targeted at performance and which provides the input

for enhancing and improving the skills of the

company population, has continued. The Group also

strengthened its compensation system, developing a

stronger connection between the performance of



73

each employee and the bonuses granted to them

through the MBO process.

Finally, various initiatives were launched that involved

the entire company population, such as the

implementation of workflow management to manage

and approve attendance as well as to justify absences

as well as an increase in job posting initiatives

dedicated to internal staff.

With regard to training and the specific theme

pertaining to “Safety training” which deals with the

mandatory basic themes of “Personnel training” and

“First Aid”, it is hereby reported that the hours

dedicated in 2013 were 5,662 for a total of 673

participations while in 2012 they totalled 2,565 for a

total of 670 participations.

Technical/managerial training included topics such as

foreign languages, MS Office, Time Management and

the management of organizational behaviours; in

2013, it involved 105 participants for a total of 1510

hours of disbursed training, an increase with respect

to 2012.

Lastly, as confirmation of the close bond between

Poltrona Frau and the Marche region, the agreement

signed between Poltrona Frau and the IPIA Institute

(Professional Institute for Industry and Craft) - in

honour of Renzo Frau with a ceremony in December

2012 - also continued in 2013; IPIA has centres in

Sarnano, Tolentino and San Ginesio - the agreement

concerns the company‟s plan to host students as part

of the alternating study/work training courses.

This will allow students to gain experience in the

company‟s working environment and to better

understand the production mechanisms. The company

aims to play an active role in the training of future

craftsmen, supporting a project able to promote the

trades and in particular enhance the skills of young

people.

Internal communications

The Poltrona Frau Group utilizes different tools in

order to guarantee communications within the

company and between departments and across levels.

Even during the course of 2013, the meetings

established by the Group during the course of the

previous years continued. First of all, the contact

meetings – half-yearly appointments in which the

entire company population of Meda and Tolentino

directly meet with the CEO in order to be updated on

company trends and on the relevant issues of the

Group. Secondly, the management meetings, annual

meetings dedicated to all of company management

and where mid-level managers and executives

exchange information on the progress o the Group

and on future company strategies.

Social and solidarity initiatives

Again in 2013 various activities were completed in

support of the culture of design, aiming to preserve

and promote the creations of designers past and

present.

Cassina was actively involved in cultural initiatives to

promote the authentic value of design and to reveal

its creative history.

In the month of March, the Company participated as

a sponsor in the exhibition “Charlotte Perriand et le

Japon”, within the Musée d‟Art Moderne di Saint

Etienne. A few models were lent and certain

furnishing elements were reconstructed.

The historical exhibition, “Proposition d‟une synthèse

des arts Le Corbusier, Fernand Léger, Charlotte

Perriand” was reconstructed for the first time due to

the contribution of Cassina, presented in Tokyo in

1955 by Charlotte Perriand. A 400 sq.m.

reconstruction which occupied the central area of the

Musée d‟Art Moderne.

Cassina has continued to promote the cultural values

of furniture by means of the partnership with the

Triennale Design Museum, now in its sixth edition, at

the time of the exhibition “The influenza syndrome”.

Upon invitation from the Triennale to the leading

companies of Italian design, Cassina created the

installation “An extraordinary anomaly” which was

entrusted to the architect Mario Bellini: a cube of 3

sq.m. completely filled with 30 abstract white LC2

armchairs of Le Corbusier, Pierre Jeanneret. Charlotte

Perriand illustrated the visionary productive strategy

of Cassina when, in 1964, it acquired the exclusive

global rights of the production and distribution of

these masterpieces of modernity. Mario Bellini

emphasized the modernity of the new creativity of Le

Corbusier and the co-authors, beginning with the

ideological force of the original project and its

application as a constant representation of the Italian

production process. Small models of iconic products,

positions amongst the LC2 armchairs, were utilized as

references for the production of Cassina which

instinctively followed the great intuition of Le

Corbusier.



74

In the month of April, during the Salone del Mobile,

the travelling exhibition “Bracciodiferro”, Gaetano

Pesce – Alessandro Mendini, 1971 – 1975, was held.

The exhibition was hosted initially in the 15th century

Library of Santa Maria Incoronata in Milan, managed

by Anty Pansera in collaboration with Maria Teresa

Chirico, and promoted by Fragile with the support of

Cassina. The exhibited pieces from the Historical

Archive of Cassina included: the Golgotha chair of

Gaetano Pesce, the Terra chair and the Monumentino

da Casa chair of Alessandro Mendini.

In June, Cassina had the honour of witnessing the

first authentic reconstruction of the Cabanon, the

summer house designed by Le Corbusier, and

exhibited within the Le Corbusier exhibit: “An Atlas of

Modern Landscapes” managed by The Museum of

Modern Art di New York. The Cabanon arrived at the

MoMA as a loan from Cassina in order to highlight

the efforts of the brand in preserving the assets of the

great architectural masters.

Cassina was a partner in the exhibition Le Corbusier

et la question du brutalisme at the J1 during the

event “Marseille European Capital of Culture 2013”.

The Company lent a series of furnishing from the Le

Corbusier, Pierre Jeanneret, and Charlotte Perriand

collections for the common areas of the exhibition.

Poltrona Frau has always been active in supporting

cultural and training initiatives. During the course of

2013, it supported, in particular, the following: the

NEMETRIA training centre of Foligno, which each year

organizes the Ethics and Economics Conference, as

well as the Festival Armonie della Sera, managed by

the Marche Music Association of Maestro Marco

Sollini. In addition, it was a technical sponsor for the

“Giornate Internazionali del Pio Manzù” (International

Days of Pio Manzù) in Rimini as well as the “Festival

dei Due Mondi” (Festival of Two Worlds) in Spoleto.

In particular, in the month of May, Poltrona Frau

participated in the “Notte dei Musei” (Museum

Night), with the extraordinary nighttime opening of

the Poltrona Frau Museum. The project of Michele De

Lucchi narrates the history of the company and the

product through videos, furnishings, materials and

archived documents.

Finally, Cappellini participated as a sponsor of the

exhibition “Warhol” in Milan within Palazzo Reale. A

greater monographic exhibition dedicated to Andy

Warhol. Five InOut sofa‟s of Jean-Marie Massaud and

ten Mr B. chairs of Francois Azambourg were the

protagonists of the exhibition and were usable by

visitors. Their lucid lacquered colours and accentuated

forms clearly refer to the distinctive elements of

American Pop Art.

During the course of the year, the Poltrona Frau

Group supported different solidarity initiatives; in

particular, the companies of the Group participated,

by supplying their products, in the sixth edition of

Love Design, a charity event in Milan in November.

Love Design is an important fund-raising event which

was created in 2003 and sponsored by Airc

(Associazione Italiana per la Ricerca Cancro, “Italian

Association for Cancer Research”) and Adi

(Associazione per il Disegno Industriale, “Association

for Industrial Design”), for the best in Italian

oncological research. The 2013 edition reported

23,000 visitors.

The Group is also careful in selecting suppliers that

are sensitive to the issue of sustainability. For e.g., at

Christmas, was selected a partner which collaborated

with ActionAid, the international NGO which combats

poverty and hunger in the most marginalized

communities, in the project “I DONI CON IL CUORE”

(GIFTS OF THE HEART). Each Christmas gift contained

a heart-shaped card with a description of the project:

guaranteeing, for six months, a daily meal to children

between the ages of 6 and 36 months and resident in

the villages of Paudi Bhuyan in eastern India.



75



76

THE CORPORATE GOVERNANCE SYSTEM

Poltrona Frau S.p.A. is an issuer of shares listed on

the STAR segment of the Borsa Italiana S.p.A.

electronic stock market. The complete framework of

the company‟s corporate governance system is

analytically described in the “Report on corporate

governance and ownership structures” prepared in

accordance with Art. 123-bis of Legislative Decree

no. 58/1998 (hereinafter also “Consolidated

Finance Act”) and approved by Poltrona Frau‟s

Board of Directors on 14 March 2013.

The information shown below intends to provide a

summary of the report, taking into account the

minimum content required by the aforementioned

regulation and recommendations provided by the

Borsa Italiana Corporate Governance Code, with

which Poltrona Frau complies.

The Report on corporate governance and ownership

structures, published together with management‟s

report on operations, is available from the Investor

Relations / Governance section on the company‟s

website:

http://www.poltronafraugroup.com.

Compliance with the Borsa Italiana S.p.A. Corporate

Governance Code and Poltrona Frau S.p.A.‟s Code of

Ethics.

In line with the values confirmed in the Code of

Ethics are the principles which Poltrona Frau

pursues in outlining an administrative and control

structure suited to its dimensions and the

complexity of its operating structure, in adopting

an adequate and effective internal control system,

in communicating with shareholders and other

stakeholders, taking particular care to update

available information on the company‟s website.

The Poltrona Frau Report on Corporate Governance

acknowledges the recommendations of the Borsa

Italiana Regulations, adapting them to the

company, interpreting them in terms of

organisational and dimension-related issues, and

enhancing them at the same time. Following the

adoption of the provisions outlined by the

Regulations, the Board of Directors introduced a

series of principles designed to strengthen the

provisions laid down by the Regulations, and more

specifically:

(i) the Board of Directors maintains a

position of absolute centrality in the

company‟s Corporate Governance

system, with broad expertise, also in

terms of the organisation of the

company and the Group and the

internal control system;

(ii) the most relevant transactions of the

company and its subsidiaries are

subject to the approval of the Board,

which pays particular attention to

situations in which directors have a

direct or indirect interest, and

operations with related parties;

(iii) a central role has been reserved to the

Board of Directors as regards the

definition of sustainability policies, to

whom, among other things, the

Sustainability Report is submitted for

approval

The Corporate Governance structure

Poltrona Frau‟s Corporate Governance structure is

based on the traditional model, which - with the

role of the Shareholders‟ Meeting unchanged –

assigns the management of the business to the

Board of Directors, supervisory functions to the

Board of Statutory Auditors and the legal auditing

of the accounts to the Independent Auditors hired

by the Shareholders‟ Meeting.

The Board of Directors, appointed by the

shareholders in an ordinary general meeting on 27

April 2012, is made up of 11 members, three of

whom are independent directors in accordance

with the requirements of the Corporate Governance

Code and the Borsa Italiana Regulations.

The model also clearly distinguishes between the

functions of the Chairman, the Vice Chairman and

the CEO who, as established by the Articles of

Association, are responsible for representing the

Company.

The Board has created three internal committees

which have consultancy and proposal functions:

the Internal Control and Corporate Governance

Committee, the Appointments and Compensation

Committee and the Related Party Transactions

Committee.

As well as being able to offer the Board

consultancy and proposals with regard to the

internal control system, the Internal Control and

http://www.poltronafraugroup.com/



77

Corporate Governance Committee must also

supervise the observance and periodic updating of

the corporate governance rules and the respect for

any codes of conduct adopted by the company and

its subsidiaries. The Appointments and

Compensation Committee carries out consultancy

and proposal functions. More specifically, it makes

proposals to the Board of Directors regarding the

appointment and remuneration of the Chief

Executive Officers and other directors with specific

titles, periodically evaluates the criteria adopted for

the remuneration of directors with strategic

responsibilities, and provides the Board of Directors

with recommendations regarding the use of stock

option plans and other incentive systems based on

shares, remuneration policy in general and the

annual remuneration report.

The Related Party Transactions Committee has

consultancy, proposal and supervisory functions

with regard to Transactions with Related Parties, in

accordance with Consob Regulation no. 17221 of

12 March 2010, as amended. During the year the

three committees met six times, three times and

once, respectively.

Internal Audit activities were assigned to the

independent auditing company Protiviti S.r.l as of

the month of January 2013. The Board of Directors

appointed – following approval from the Internal

Control and Corporate Governance Committee –

Mr. Giacomo Galli, Managing Director of Protiviti,

as the Internal Audit Manager.

During the year of reference of the report, and as of

the date of his appointment, the Internal Audit

Manager:

• had direct access to all information that

could be useful for implementing his task;

• reported on his work periodically to the

Internal Control and Corporate Governance

Committee as well as the Board of Statutory

Auditors.

During the course of 2013, in particular, the

Internal Audit Manager:

• planned the auditing activities in relation

to the adequacy and effectiveness of the internal

control and corporate governance system in

addition to drafting the Audit Plan approved by the


Committee on 5 March 2013;

• reported on the outcomes of all auditing

operations which were implemented through the

delivery of auditing reports to the members of the


Committee;

• periodically reported on his activities as

well as on defined action plans; provided an

evaluation – for those processes subject to auditing

activities – on the suitability of the internal control

system and sent them to the Internal Control and

Corporate Governance Committee as well as the

Director entrusted with the internal control system

and to the Supervisory Body for the auditing

operations that are relevant on the basis of

Legislative Decree 231/2001;

• supported the executive entrusted with the

reporting of administrative/accounting processes -

as well as during the implementation of auditing

and monitoring activities for the Internal Control

System that are correlated to financial reporting –

in order to meet the financial statement

certification requirements pursuant to Law

262/2005.

As regards the Organisational Model pursuant to

Leg. Decree 231/01, until now applied exclusively

to Poltrona Frau S.p.A., it was subject to a review

and integration process which ended in November

2013. Again in 2013 the training and updating of

company staff was initiated. The application of the

Organisational Model is also expected to be

extended to the two main subsidiaries: Cassina

S.p.A. and Cap Design S.p.A. within the first half-

year of 2014.

The figure below shows the company‟s governance

structure as at 13 March 2014 in graph form:



78



79

Disclosures pursuant to the privacy law

It is hereby confirmed that pursuant to Legislative Decree no. 196 of 30 June 2003, as amended, the data

security plan has been voluntarily updated and lodged at the Company‟s administrative offices.



80



81


CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2013



82

Living area with Cappellini novelties for 2013



83

Consolidated Statement of Financial Position

ASSETS (thousands of Euro)

Note 31 december

2013

31 december

2012 (*)

NON-CURRENT ASSETS

Goodwill 1 18,121 17,465

Brands with indefinite useful life 2 66,120 63,820

Other intangible assets 3 4,796 4,842

Tangible fixed assets 4 39,480 40,214

Investments in associates and joint venture companies 5 9,782 10,380

Other investments 6 3 136

Financial assets available for sale 7 2,133 1,344

Other non-current assets 8 9,055 7,443

of which from related parties 42 6,390 3,600

Deferred tax assets 9 6,472 6,457

TOTAL NON-CURRENT ASSETS 155,962 152,101

CURRENT ASSETS

Inventory 10 65,572 53,989

Trade receivables 11 54,628 52,110


Other current assets 12 7,743 14,264

of which from related parties 42 977 4,942

Derivative financial instruments 13 46 15

Cash and cash equivalents 14 20,638 9,068

TOTAL CURRENT ASSETS 148,627 129,446

Assets held for sale 15 - 1,072

TOTAL ASSETS 304,589 282,619

(*) In the Annual Financial Report, the values as at 31 December 2012 were restated to ensure their alignment and comparability

with those of the current year following the application of the new IAS 19 on the part of the Group.



84

Consolidated Statement of Financial Position

LIABILITIES (thousands of Euro)

Note 31 december

2013

31 december

2012 (*)

Share capital

34,604 34,810

Share premium reserve

1,238 2,530

Fair value reserve

1,213 459

Other reserves

5,927 6,607

Profits (losses) of previous year

26,670 25,420

Group's share of profit/(loss) 4,582 1,250

TOTAL GROUP SHAREHOLDERS' EQUITY 74,234 71,076

MINORITY INTEREST

Minority interest's share of capital and reserves

(312) (140)

Minority interest's share of profit/(loss) (49) (126)

TOTAL MINORITY INTEREST (361) (266)

TOTAL SHAREHOLDERS' EQUITY 16 73,873 70,810

NON-CURRENT LIABILITIES

Medium-long term borrowings 17 43,148 48,429

Employee benefits 18 5,778 5,450

Provisions for risks and charges 19 3,756 5,092

Deferred tax liabilities 20 22,395 22,183

Other non-current liabilities 21 1,358 554

TOTAL NON-CURRENT LIABILITIES 76,435 81,708

CURRENT LIABILITIES

Trade payables 22 70,857 59,197

of which from related parties 42 1,481 973

Due to banks and other loans 23 51,480 45,837

Tax payables 24 5,557 2,513

Derivative financial instruments 25 690 1,360

Other current liabilities 26 25,697 20,622

of which from related parties 42 4,828 132

TOTAL CURRENT LIABILITIES 154,281 129,529

Liabilities held for sale 27 - 572

TOTAL LIABILITIES 230,716 211,809

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 304,589 282,619





85

Consolidated Income Statement Note

31 december

2013

31 december

2012 (*) (thousands of Euro)

Revenues fron sales

265,359 238,497


Other revenues and income

7,485 8,491


REVENUES 28 272,844 246,988

Costs of raw material and consumables 29 (113,845) (96,340)

Costs for services 30 (83,810) (78,270)

of which from related parties 42 (2,793) (1,503)

of which non-recurring from related parties (4,171) -

Personnel costs 31 (46,239) (45,503)

Other operating costs 32 (1,104) (843)

Restructuring costs 33 - (3,906)

of which non-recurring

- (3,906)

Amortization or depreciation 34 (7,587) (6,568)

Adjustment of asset of value and other provisions 35 - (25)

TOTAL OPERATING COSTS (252,585) (231,455)

OPERATING INCOME 20,259 15,533

Interest in profit (loss) of associates and joint venture companies accounted for by using the

equity method 36 (3,628) (858)

Financial charges 37 (6,374) (7,303)

Financial income 37 1,475 1,487

INCOME BEFORE TAXES 11,732 8,859

Income taxes 38 (7,199) (4,060)

PROFIT / (LOSS) FROM CONTINUING OPERATIONS 4,533 4,799

Profit / (loss) from discontinued operations 39 - (3,675)

PROFIT / (LOSS) FOR THE YEAR 4,533 1,124

Profit/loss for the year attributable to:

Owners of the company

4,582 1,250

Minority interests (49) (126)

Earnings (loss) per share (Euro) 40 0.03 0.01

Diluted earnings (loss) per share (Euro) 40 0.03 0.01





86

Consolidated Statement of Comprehensive Income Note

31 december

2013

31 december

2012 (*) (thousands of Euro)

PROFIT FOR THE YEAR 4,533 1,124

Items that may be reclassified subsequently to profit and loss

Profit / (loss) on fair value of available-for-sale financing assets

754 (38)

Profit / (loss) on exchange differences on translating foreign operations

(381) (258)

Total items that may be reclassified subsequently to profit and loss, net of taxes 373 (296)

Items that will not be reclassified subsequently to profit and loss

Remeasurements of post-employment benefit obligations

(382) (238)

Total items that will not be reclassified subsequently to profit and loss, net of taxes (382) (238)

TOTAL ITEMS OF COMPREHENSIVE INCOME, NET OF TAXES (9) (534)

TOTAL COMPREHENSIVE INCOME 4,524 590

Of which attributable to:

Owners of company

4,573 716

Minority interests (49) (126)





87

Consolidated Cash Flow Statement (thosands of Euro)

Note 31 december

2013

31 december

2012 (*)

NET CASH FLOW FROM OPERATING ACTIVITIES

Profit / (loss) for the year

4,533 1,124

Adjustments to reconcile profit (loss) for the year with the cash flow generated (used in )

by operationg activities:

Amortization or depreciation 34 7,338 6,568

Provisions and write-downs

4,425 456

Change in fair value of financial instruments 13/25 (701) 218

Allocations to provisions for personnel 18/19 246 2,623

Payments relating to employee severance indemnity 18 (445) (486)

Payments relating to other provisions and incentives 19 (1,129) (137)

Capital loss (gains) on sale of non-current assets

(7) (124)

Change in deferred tax assets and liabilities 9/20 307 361

Taxes paid in the year

(2,152) (5,956)

Change in operative assets and liabilities

Change in trade receivables 11 (2,518) 6,810

Change in inventory 10 (11,583) 4,217

Change in trade payables 22 11,660 542

Other - net

11,166 1,480

NET CASH FLOW GENERATED (USE IN) BY OPERATING ACTIVITIES (A) 21,140 17,696

CASH FLOW FROM INVESTMENT ACTIVITIES

Sale of tangible and intangible fixed assets

33 195

Purchase of tangible fixed assets 4 (6,727) (8,713)

Purchase of intangible assets 1/2/3 (5,743) (3,759)

Change in scope of consolidation tangible and intangible fixed assets 3/4 2,561 -

Change in scope of consolidation investments in associated and joint venture companies 5 (699) -

Investments acquisition/capital increase in associated and joint venture companies 5 (927) (725)

Net change in other non-current assets/liabilities

1,040 146

NET CASH FLOW GENERATED (USED IN) BY INVESTMENT ACTIVITIES (B) (10,462) (12,856)

CASH FLOW FROM FINANCING ACTIVITIES

Medium-long-term borrowings 17 12,300 3,000

Repayment of medium-long-term borrowings 17 (14,169) (13,127)

Interest paid in the year 37 (3,390) (3,877)

Interest earned in the year 37 6 70

Net change in other short/medium-term financial liabilities

7,791 6,359

Sale of treasury shares 16 846 957

Purchase of treasury shares 16 (2,344) (1,026)

NET CASH FLOW GENERATED (USED IN) BY FINANCING ATIVITIES (C) 1,040 (7,644)

TOTAL CASH FLOWS (D=A+B+C) 11,718 (2,804)

TRANSLATION EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENT (E) (148) (50)

NET CASH AND CASH EQUIVALENTS FROM ASSETS AVAILABLE FOR SALE (F) - 114

NET CASH AND CASH EQUIVALENTS AT THE BEGINNIG OF YEAR (G) 9,068 12,036

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR (H=D+E-F+G) 20,638 9,068





88

Consolidated Statement of Changes in Equity

(thousand of Euro) Share

capital

Share

premium

reserve

Retained

earning

(*)

Translation

reserve

Fair Value

Reserve

Other

reserve

(*)

Total Minority

Interest

Total

Sharesholde

rs' Equity

Balance at 31 December 2011 34,816 2,593 25,420 483 497 8,215 72,024 (1,627) 70,397

Increase in share capital

Allocation of loss for the prior year

Dividend distribution

Purchase of treasury shares (273) (753)

(1,026)

(1,026)

Sale of treasury shares 267 690

957

957

Recognition of stock option plan

costs 140 140

140

Change in scope of consolidation

Other changes

(1,735) (1,735) 1,487 (248)

Total comprehensive income

1,250 (258) (38) (238) 716 (126) 590

Balance at 31 December 2012 34,810 2,530 26,670 225 459 6,382 71,076 (266) 70,810




Purchase of treasury shares (447) (1,897)

(2,344)

(2,344)

Sale of treasury shares 241 605

846

846

Recognition of stock option plan

costs 86 86

86

Change in scope of consolidation

Other changes

(3) (3) (46) (49)


4,582 (381) 754 (382) 4,573 (49) 4,524

Balance at 31 December 2013 34,604 1,238 31,252 (156) 1.213 6,083 74,234 (361) 73,873

(*) In the Annual Financial Report, the values as at 31 December 2012 were restated to ensure their alignment and comparability with those of the

current year following the application of the new IAS 19 on the part of the Group.



89

NOTES TO THE FINANCIAL STATEMENTS

FORMAT AND CONTENT

Poltrona Frau S.p.A., founded in 1912, is one of the main Italian groups and international leader in the design

and top range furnishing sectors, which has created around its historical furnishing brand a genuine “Design

hub”, having the aim of combining the autonomy and specificity of each of the brands and respective business

histories which make up the Group with a unitary vision of growth and penetration abroad, promotion and

commercial strategies.

The Board of Directors of the Company approved the publication of the consolidated financial statements of

Poltrona Frau S.p.A. for the year ended 31 December 2013 within the meaning of IAS 10 on 13 March 2014.

The Company has its registered offices in Via Vincenzo Vela 42, Turin.

The consolidated financial statements of the Poltrona Frau Group for the year ended 31 December 2013 have

been prepared in accordance with the International Financial Reporting Standards (hereafter also “IFRS”) issued

by the International Accounting Standards Board (“IASB”) and adopted by the European Union in accordance

with the procedure stated in article 6 of Regulation (EC) no. 1606/2002 of the European Parliament and of the

Council of 19 July 2002 and the provisions issued to implement article 9 of Legislative Decree no. 38/2005.

The Group applied the same accounting principles as for the previous year except for the classification of

actuarial profits/losses deriving from the calculation of Employee benefits. These actuarial profits/losses are

now booked under “Other items of the Statement of Comprehensive Income”, in accordance with the provisions

of the new IAS 19. For more details, refer to that specified in the subsequent paragraph “New accounting

principles and amendments as well as interpretations effective as of 1 January 2013 and adopted by the

Group”.

A summary statement of the changes applied to the data relative to 31 December 2012, and linked to the entry

into force of IAS 19, are summarized below:

Consolidated statement of financial position 31.12.2012

(restated) 31.12.2012 variation

Share capital 34,810 34,810 -

Share premium reserve 2,530 2,530 -

Reserve for fair value adjustment of financial assets available for sale 459 459 -

Other reserves 6,607 6,748 (141)

Profit / (loss) of previous years 25,420 25,517 (97)

Profit / (loss) of the Group 1,250 1,012 238

Shareholders‟ equity of the Group 71,076 71,076 -

Minority interest‟s capital and reserves (140) (140) -

Monority interest‟s Profit / (loss) (126) (126) -

Shareholders‟ equity of minority interests (266) (266) -

Shareholders‟ equity 70,810 70,810 -

Consolidated income statement 31.12.2012

(restated) 31.12.2012 variation

Financial charges (7,303) (7,631) 328

Income before taxes 8,859 8,531 328

Income taxes (4,060) (3,970) (90)

Profit (or loss) of the year 1,250 1,012 238



90

The consolidated financial statements have been prepared on a cost basis, with the exception of derivative

financial assets and “available-for-sale financial assets” which are measured at fair value. The consolidated

financial statements have been prepared on the going concern assumption, since despite the difficult economic

and financial situation the Group believes that there are no material uncertainties relating to its ability to

continue operating for the foreseeable future, also by virtue of the steps being taken to adapt to the changed

trend in demand and to the industrial and financial flexibility of the Group itself.

No exceptions were made to the application of IFRS in the preparation of these consolidated financial

statements.

The consolidated income statement is presented using a classification based on the nature of expenses; as of 31

December 2012 it includes the item “restructuring costs”, in which costs of a non-recurring nature connected

with the project for reorganising the Poltrona Frau Group are classified in order to achieve a better

understanding and measurability of the actual performance of ordinary operations. The Consolidated Statement

of Financial Position is classified into current/non-current assets and liabilities, while the consolidated cash

flow statement is presenting using the indirect method.

The consolidated financial statements are presented in Euro and all amounts are rounded to thousands of Euro

unless otherwise stated.

Lastly, with reference to Consob Regulation no. 15519 of 27 July 2006 concerning the format of financial

statements the following sub-items have been presented if material: in the consolidated statement of financial

position, the consolidated income statement and the consolidated cash flow statement the amounts of any

balances or transactions with related parties; in the consolidated income statement any income or expense

(positive and/or negative) deriving from events or transactions which are non-recurring or from transactions or

facts which do not occur frequently in the course of normal operations. These latter items are presented under

the income or expense items to which they refer.



91

ACCOUNTING PRINCIPLES AND POLICIES

Principles of consolidation

The financial position of the Poltrona Frau Group includes that of Poltrona Frau S.p.A. and of the companies

over which it exercises control. The definition of control is not based solely on the concept of legal ownership.

Control exists when the Group has the direct or indirect power to govern the financial and operating policies of

an entity so as to obtain benefits from its activities. In general, control is presumed to exist when the Group

has a direct or indirect holding of more than half the voting rights, also taking into account those that are

potentially exercisable immediately. The financial statements of the subsidiaries are included in the

consolidated financial statements with effect from the date on which control is assumed and up to the date on

which such control ceases to exist. The portions of shareholders‟ equity and the result attributable to minority

interests are indicated separately, respectively in the Statement of Financial Position, Consolidated Income

Statement and Consolidated Statement of Comprehensive Income.

The main consolidation criteria adopted were as follows:

for investments consolidated according to the line-by-line method, the book value of individual

consolidated investments is eliminated with a balancing entry in the related shareholders‟ equity on

takeover of the assets, liabilities, costs and revenues of the subsidiaries, regardless of the extent of the

investment, and the percentage of capital and reserves of minority interests in the subsidiaries and the

minority interests share of profit or loss for the year of subsidiaries are identified separately in the

consolidated statement of financial position and consolidated income statement;

all balances and significant transactions between group companies are netted, as are profits and losses

(the latter if they do not represent a value actually lower than that of the asset sold), deriving from

intragroup trading or financial transactions not yet realised with regard to third parties;

increases/decreases in shareholders‟ equity of consolidated companies that are attributable to results

achieved after the date of acquisition of the investment are recognised to a specific shareholders‟

equity reserve, “Retained profit (loss)”, at the time of netting;

dividends distributed by the Group companies are eliminated from the income statement at the time of

consolidation.

Consolidation of foreign operations

The financial statements of each Group company are prepared in the currency of the country in which

they operate (the operating currency);

all assets and liabilities of foreign operations recorded in currency other than the Euro and included in

the scope of consolidation are translated at the exchange rate as at the financial reporting date (the

current exchange rate method). Income and costs are translated at the average exchange rate for the

year. Translation differences resulting from the application of this method are recognised under Other

items of the Statement of Comprehensive Income, and accrued in a specific reserve under shareholders‟

equity until disposal of the investment.



92

INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

This item includes investments in associates and joint ventures. Investments are accounted for using the equity

method.

The consolidated financial statements include the Group‟s share of the results of investments in associates and

joint ventures, accounted for using the equity method, with effect from the date on which significant influence

or joint control begins until the moment in which such significant influence or joint control ceases to exist.

Intragroup profits not yet realised with regard to third parties are eliminated to the extent of the Group‟s

percentage investment. Intragroup losses not yet realised with regard to third parties are also eliminated if they

do not represent a value actually lower than that of the asset sold.

Any losses exceeding the shareholders‟ equity are recognised to the financial statements to the extent that the

investing company is committed to compliance with legal or implicit obligations of the investee or in any event

to covering its losses.

Associates

Associates are companies in which the Group exercises significant influence, but not control or joint control,

over the financial and operating policies.

Joint ventures

Companies in which the Group‟s governance powers over the operating and financial policies call for

unanimous consent of other parties exercising common control are considered joint ventures. Investments in

joint ventures are consolidated according to the equity method, adopting accounting principles standardised to

those of the Group.

BUSINESS COMBINATIONS

Business combinations are recognised using the acquisition method. Under this method, the consideration

transferred in a business combination is measured at fair value, which is calculated as the sum of the

acquisition-date fair values of the assets transferred and the liabilities incurred by the Group and the equity

interests issued in exchange for control of the acquired business. Any accessory costs of acquisition are

generally recognised as an expense as incurred.

As at the date of acquisition, assets identifiable as acquired and liabilities assumed are recognised at their fair

value at the acquisition date.

Goodwill is calculated as the sum of amounts transferred to the business combination, the value of the

shareholders‟ equity pertaining to minority interests and the fair value of any investment previously held in the

acquired company, less the fair value of the net assets acquired and liabilities assumed as at the acquisition

date. If the value of assets acquired and liabilities assumed as at the acquisition date exceeds the sum of

amounts transferred, the value of shareholders‟ equity pertaining to minority interests and the fair value of any

investment previously held in the acquired company, this excess is recognised immediately to the income

statement as income deriving from the completed transaction.

The portions of shareholders‟ equity pertaining to minority interests as at the acquisition date can be measured

at fair value or pro rata on the value of the net assets recognised for the acquired company. The choice of

measurement method is decided on a transaction-by-transaction basis.

Any amounts subject to conditions envisaged in the business combination agreement are measured at fair value

as at the date of acquisition and included in the value of amounts transferred to the business combination for

the purpose of calculating goodwill. Any subsequent changes in this fair value are recognised to the Income

Statement.



93

Scope of consolidation

In relation to the comparison between the scope of consolidation as at 31 December 2013 and that at 31

December 2012, the following should be noted:

a) The entry of Nemo S.r.l., a company 49% owned by Cassina S.p.A., and founded as part of the operation for

transfer of the light division of the Group and which was initiated in 2012 and completed in the first

quarter of 2013 with the transfer - in February 2013 – of the investment of Artelux S.A. in Nemo S.r.l. on

the part of Cassina S.p.A.;

b) In the month of June, the process for liquidation of the subsidiary Beijing Casanova Furniture Design Co.

Ltd. was completed;

c) Transfer of 51% of the Chinese subsidiary Zheijang Casanova Furniture Ltd. to the Chinese company

Wenzhou Opal Furniture Co. Ltd.. Following this operation, the company was consolidated with the equity

method;

d) Acquisition – on the part of the subsidiary Poltrona Frau Group North America Inc. – of the remaining 70%

of the company Spazio Washington LLC from Variant Inc.;

e) During the course of 2013, the change in the majority quota held in the company Frau U.S.A. Corporation –

from 67% to 83%, following the underwriting of a share capital increase on the part of only Poltrona Frau

S.p.A.. - should be noted.

The subsidiaries included in the scope of consolidation at 31 December 2013 are as follows:

Company name Registered office Curren

cy

Share capital

(in currency

units)

Direct Parent % held % held by

Group

Cap Design S.p.A. Meda, Milan – I Euro 4,000,000 Poltrona Frau S.p.A. 100% 100%

Cassina S.p.A. Meda, Milan – I Euro 15,975,422 Poltrona Frau S.p.A. 100% 100%

Cassina France S.A. Paris – F Euro 400,000 Cassina S.p.A. 100% 100%

Cassina Pacific Ltd. Hong Kong – People's

Rep. of China HKD 1,000,000 Cassina S.p.A. 100% 100%

Cassina Shanghai Trading Co. Ltd Shanghai - People's

Rep. of China RMB 950,760 Cassina S.p.A. 100% 100%

DieciDieci S.r.l. Bologna – I Euro 91,800 Poltrona Frau S.p.A. 100% 100%

Frau U.S.A. Corporation New York – USA USD 100 Poltrona Frau S.p.A. 83% 83%

Frau France S.a.r.l. Paris – F Euro 920,960 Poltrona Frau S.p.A. 100% 100%

Meno Warehandels GmbH(*) Vienna – A Euro 35,000 Poltrona Frau S.p.A. 60% 60%

Poltrona Frau UK Ltd. London– UK GBP 2,100,000 Poltrona Frau S.p.A. 100% 100%

Poltrona Frau PTE Ltd. Singapore – S SGD 174,142 Poltrona Frau S.p.A. 100% 100%

Poltrona Frau Group North America Inc. New York – USA USD 102,000 Cassina S.p.A. 100% 100%

Poltrona Frau Deutschland GmbH Munich– G Euro 60,000 Poltrona Frau S.p.A. 100% 100%

Spazio Washington LLC Washington - USA USD 230,888 Poltrona Frau Group

North America Inc. 100% 100%

(*)Company placed under liquidation



94

Investments in associates and joint ventures, accounted for using the equity method, and in other companies

accounted for at cost or fair value are the following:

Company name Registered office Currency

Share capital

(in currency

units)

Investing company % held

% held

by

Group

INVESTMENTS IN ASSOCIATES

K.B.R. S.a.r.l. Tunis – Tunisia TND 18,000 Poltrona Frau S.p.A. 20% 20%

Alias S.p.A. Grumello del Monte – I Euro 510,308 Cassina S.p.A. 49% 49%

Nemo S.r.l. Milan – I Euro 100,000 Cassina S.p.A. 49% 49%

INVESTMENTS IN JOINT VENTURES

PF Emirates Interiors LLC Abu Dhabi – UAE AED 10,000,000 Poltrona Frau S.p.A. 49% 49%

Casa Décor Private Ltd. Mumbai – India INR 273,377,660 Poltrona Frau S.p.A. 50% 50%

Zhejiang Casanova Furniture Co. Ltd. (*) Zhejiang – People's Rep. of

China RMB 41,295,502 Poltrona Frau S.p.A. 49% 49%

INVESTMENTS IN OTHER COMPANIES MEASURED AT COST (CELI AND FONDAZIONE) AND AT FAIR VALUE (CASSINA IXC)

Celi S.p.A. (**) Stroncone – I Euro 2,363,837 Poltrona Frau S.p.A. 5% 5%

Cassina IXC Ltd. Tokyo – J Yen 400,294 Cassina S.p.A. 12% 12%

Fondazione Studio – Museo Vico Magistretti Milan – Italy Euro 248,500 Cassina S.p.A. 0.4% 0.4%

(*)Company accounted for using the equity method from 2013

(**)Company placed under liquidation

The accounting principles used in the preparation of the consolidated financial statements for the year ended

31 December 2013 are consistent with those used for the previous year, other than the matters reported in the

paragraph “Accounting principles, amendments and interpretations effective as of 1 January 2013” which

follows after the summary of the main accounting policies adopted by the Group set out below.

Goodwill

The goodwill arising on the acquisition of subsidiaries or associates or joint ventures is initially recognised at

cost, representing the excess of the purchase cost over the share pertaining to the acquiree of the fair value of

the identifiable assets acquired and the liabilities and contingent liabilities assumed of the companies

purchased. Any negative difference (“negative goodwill”) is recognised in profit or loss immediately on

acquisition.

The goodwill relating to investments in associates and joint ventures is included in the carrying value of those

investments.

After initial recognition goodwill is reduced for any impairment losses; impairment testing is carried out once a

year and more frequently if any events or changes occur which could lead to impairment losses arising.

For the purpose of impairment testing the goodwill acquired in business combinations is allocated at the

acquisition date to each of the Group‟s cash-generating units (or groups of units) which are considered to be

the beneficiaries of the synergic effects of the acquisition, irrespective of the allocation of other assets or

liabilities to these units (or groups of units).

If goodwill is allocated to a cash-generating unit (or group of units) part of whose assets are disposed of, the

goodwill associated with the assets disposed of is taken into consideration in the calculation of any gain or loss



95

on disposal. In these cases the goodwill disposed of is measured as the proportion of the amounts relating to

the assets disposed of compared to the assets still held with reference to the same unit.

On first-time application of IFRS the Group elected not to apply IFRS 3 Business Combinations retrospectively

to acquisitions of companies occurring prior to 1 January 2004; as a consequence, the goodwill arising from

acquisitions occurring before the date of transition to IFRS was kept at the previous value determined in

accordance with Italian accounting principles, subject to impairment testing and the recognition of any

impairment losses.

Other intangible assets

Separately acquired intangible assets are recognised as such at cost if it is probable that the use of the assets

will generate future economic benefits and if the cost of the asset can be measured reliably. Intangible assets

acquired in business combinations are recognised at their fair value at the acquisition date if this can be

measured reliably.

Internally generated intangible assets, excluding development costs, are not capitalised and are recognised as

an expense in the period they are incurred.

Intangible assets may have finite useful lives or indefinite useful lives. The Group has the following classes of

intangible assets whose useful lives are determined as follows:

– brands with indefinite useful life

– development costs with finite useful life

– industrial patents and intellectual property rights with finite useful life

– concessions, licences and similar rights with finite useful life

After initial recognition, intangible assets with finite useful lives are recognised at cost less accumulated

amortisation and impairment losses. The amortisation period and method used are reviewed at the end of each

financial year or more frequently if necessary.

The amortisation periods used for intangible assets with finite useful lives are as follows:

– development costs 5 years

– industrial patents and intellectual property rights 10 years

– concessions, licences and similar rights 3 years

In addition to undergoing this process of amortisation over their useful lives, intangible assets with finite useful

lives are also subject to impairment testing if there are indications that they may be impaired.

After initial recognition, intangible assets with indefinite useful lives are not amortised and are recognised at

cost less any accumulated impairment losses. Intangible assets with indefinite useful lives undergo impairment

testing once a year and more frequently at an individual level or at cash-generating unit level if any events or

changes occur which could lead to impairment losses arising.

Research and development expenditure

Expenditure on research is recognised directly as an expense in the period it is incurred.

Development costs incurred in connection with a specific project are only capitalised if the Group can

demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or

sale, its intention to complete the intangible asset and use or sell it to third parties, how it will generate

probable future economic benefits, the availability of technical, financial or other resources to complete the



96

development, its ability to measure reliably the expenditure attributable to the intangible asset during its

development and the existence of a market for the goods and services deriving as an output from the intangible

asset or if it is to be used internally the usefulness of the intangible asset. The development costs capitalised

comprise only the expenditure that is directly attributable to the development process.

After initial recognition capitalised development expenditure is recognised at cost less accumulated

amortisation and any impairment losses determined by the means described for intangible assets with finite

useful lives.

Tangible fixed assets

Tangible fixed assets are stated at acquisition cost less accumulated depreciation and any accumulated

impairment losses. Depreciation is charged on a straight line basis over the estimated useful life of an asset.

Depreciation of an asset begins when it is available for use, namely when it enters the Group‟s production cycle,

and is charged on a straight line basis over the estimated useful life of the asset, taking account of its residual

value. The depreciation periods used, which reflect the useful lives generally attributable to the various classes

of assets and which are unchanged compared to the previous year, are as follows:

– buildings from 10 to 33 years

– plant and machinery 8 years

– industrial and commercial equipment 4 years

– other from 4 to 8 years

Land is not depreciated as it has an unlimited useful life.

The carrying amount of tangible fixed assets is subject to impairment testing if events or changes indicate that

the carrying amount may not be recoverable according to the established depreciation plan. If indications of

this nature exist and if the carrying amount exceeds estimated realisable value, the assets or the cash-

generating units to which the assets have been allocated are written down to reflect their realisable value.

The residual value of an asset, its useful life and the methods used are reviewed on an annual basis and

adjusted if necessary at the end of each year.

Assets acquired under finance and operating leases

Finance leases, which transfer substantially all the risks and rewards incidental to ownership of the leased asset

to the Group, are capitalised as part of tangible fixed assets, starting from the initial date of the lease, and

recognised at the fair value of the leased asset or, if lower, the present value of the lease payments. A liability

of the same amount is also recognised, which is gradually reduced on the basis of the repayment plan by the

capital portion included in the contractual instalments.

Lease instalments are divided between a capital portion and an interest portion in order to obtain a constant

interest rate on the balance of the residual liability (the capital portion). The interest portion is recognised in

the income statement. Assets are depreciated using the criteria and useful lives described in the previous

paragraph “Tangible fixed assets”.

Leases where the lessor keeps substantially all the typical risks and rewards of ownership are accounted for as

operating leases. Operating lease payments are recognised as an expense over the lease term.

Any sale and leaseback transactions where the “repurchase” of the originally owned asset - by means of a lease

arrangement - is carried out under a finance lease are recognised for accounting purposes as a financing

transaction. The assets involved in this transaction remain in the Group‟s balance sheet with continuity of



97

accounting treatment and a liability is recognised as a counter-entry to the cash flows arising from the sale.

Any gain arising on sale is recognised in profit or loss on an accrual basis. This leads to the recognition of

deferred income and the gradual release of the balance to income over the lease term.

Impairment

At each reporting date the Group reviews the book value of its tangible and intangible assets with a finite

useful life to determine whether there are any impairment indicators. If there are any such indicators,

impairment testing is performed on the total recoverable amount of the assets concerned is estimated the

extent of impairment. Where the recoverable value of an asset cannot be estimated individually, the Group

estimates the recoverable value of the cash generating unit in which the asset is included.

The total recoverable amount equals the higher between the fair value less costs to sell and the value in use. In

the absence of a binding agreement to sell, the fair value is estimated on the basis of the values quoted on an

active market, recent transactions or the best information available to reflect the amount that the company

could receive from sale of the asset.

In the assessment of value in use, the estimated future cash flows are discounted at the current value using a

rate net of taxes that reflects the current market assessment of the value of money and the asset-specific risks.

If the recoverable amount of an asset (or cash generating unit) is estimated as lower than the book value, the

book value of the asset is reduced to the lower recoverable value. The impairment amount is recognised to the

income statement.

If there is no longer any reason for the write-down to be continued, the book value of the asset (or cash

generating unit) is increased to the new book value deriving from an estimation of its recoverable value, but

not beyond the net carrying amount that would have applied to the asset had no impairment been recognised.

The restored value is recognised to the income statement.

Goodwill and infinite-life intangible assets are impairment tested each year, or more frequently if there should

be any indication that the asset is impaired.

Available for sale financial assets

Available-for-sale financial assets are financial instruments specifically designated to this category, or which

cannot be classified under any of the previous categories, included among non-current assets unless

management intends to sell them in the twelve months following the closing date of the financial statements.

The available-for-sale financial assets, comprising investments in other companies and other non-current

financial assets, are recognised at fair value with the effects recorded in shareholders‟ equity. If there is any

objective sign of persistent or significant impairment, the impairment loss must be recognised to the income

statement even if the financial asset has not been sold. When the fair value cannot be reliably measured, the

investments are accounted for at cost, adjusted for any impairment.

Other non-current assets

Loans and receivables classifies as non-current assets are measured at amortised cost. Receivables due after

more than one year, non-interest bearing receivables and receivables bearing interest below market rates are

discounted using market rates.



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Inventories

Inventories are measured at the lower of purchase or production cost and net realisable value, which is the

amount that the Group expects to obtain from a sale in the ordinary course of business. The weighted average

cost formula is used. The weighted average cost includes the attributable accessory costs for purchases of the

period. The measurement of inventories includes the direct cost of materials and labour and production

overheads. Provisions are recognised for materials, finished goods, spare parts and other items considered

obsolete or slow-moving, taking account of their expected future use and realisable value.

Contract work is measured on the basis of the percentage of completion, which is determined as the ratio

between the costs for the contract incurred at the balance sheet date and total estimated costs, and is stated

net of any on-account payments billed to customers. Losses on such contracts are fully recognised as an

expense as soon as they become known.

Trade receivables

Trade receivables are measured at fair value identified as nominal value less any impairment losses, accounted

for by providing an allowance for doubtful accounts. Trade receivables due beyond normal commercial terms

and which do not bear interest are discounted. Receivables subject to non-recourse factoring are removed from

the financial statements when all risks related to the transfer of the receivable fall on the factoring company.

Cash and cash equivalents

Cash and cash equivalents are measured at nominal value or amortised cost depending on their nature.

Assets held for sale

Assets held for sale include assets (or disposal groups) whose carrying amount will be recovered principally

through a sale transaction rather than through continuing use. Assets held for sale are measured at the lower

of their carrying amount and fair value less costs to sell.

Long-term borrowings

Long-term borrowings are initially recognised at fair value plus transaction costs; they are subsequently

measured at amortised cost, being their initial amount less any repayments of principal, adjusted (up or down)

on the basis of the amortisation (using the effective interest method) of any differences between their initial

amount and their value at due date.

Employee benefits

Benefits ensured to employees which are paid on or after the completion of employment by means of defined

benefit plans (the employees‟ leaving entitlement - trattamento fine rapporto - for Italian employees) are

recognised in the period when the rights vest.



99

Liabilities arising from defined benefit plans, net of any plan assets, are calculated on the basis of actuarial

assumptions and are recognised on an accrual basis consistent with the service which needs to be provided to

obtain the benefits; the valuation of liabilities is performed by independent actuaries.

As previously reported, actuarial gains/losses as of 1 January 2013 are booked under “Other items of the

Statement of Comprehensive Income”, in accordance with the provisions of the new IAS 19.

Other employee benefits

As required by IFRS 2 (Share-based Payment) stock options granted to employees are measured at their fair

value at the grant date using certain models which take into account factors and elements (the exercise price

of the option, the life of the option, the current price of the underlying shares, the risk-free interest rate for an

investment for the life of the option) in force at the grant date.

If the right becomes exercisable after a certain period and/or on the occurrence of certain performance

conditions (the vesting period) then the total value of the options is allocated on a temporal basis over this

period and recognised in a specific item of equity with counter-entry “Personnel costs” in the income statement

(being a payment in kind to the employee having the aim of creating loyalty and encouraging business

performance).

At the end of each year the previously calculated fair value of each option is not revised or updated but

remains acquired in equity on a definitive basis; an updating is however made at that date of the estimate of

the number of options which will vest until expiry (and hence the number of employees who will be entitled to

exercise those options). The changes in estimate are recognised as increases or decreases of the equity account

with a counter-entry being made to “Personnel costs” in the income statement.

On the expiry of an option the amount stated in the equity account is reclassified in the following way: the

portion of the equity account relating to exercised options is reclassified to the “Share premium reserve” while

the portion relating to unexercised options is reclassified to the account “Retained profit (loss)”.

Cash-settled share-based payment plans for employees are initially recognised at fair value at the grant date

using an actuarial calculation and taking account of the formula for determining the resale price to the

company and the terms and conditions which govern the granting of the instrument. This fair value is expensed

over the vesting period with the recognition of a corresponding liability. The liability is remeasured at each

reporting date until and including the date of settlement, with any changes in fair value recognised in profit or

loss.

The Group has elected to use the exemptions provided in paragraph 25B of IFRS 1 and has therefore not applied

IFRS 2 to stock option plans granted before 7 November 2002, also in consideration of the fact that there have

been no changes to the terms and conditions of these plans.

Provisions for risks and charges

Provisions for risks and charges regard costs and charges of a determinate nature whose existence is certain or

probable but whose amount or date of occurrence is uncertain at the balance sheet date. Provisions are

recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable

that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the

amount of the obligation.

Provisions are measured as the best estimate of the expenditure that the Group would have to pay to settle the

obligation or transfer it to third parties at the balance sheet date. Where the time value of money is material,

the amount of a provision is the present value of the expected future cash flows discounted using a pre-tax



100

rate that reflects current market assessments of the time value of money. When a present value calculation is

performed, the increase in the provision arising from the passage of time is recognised as a financial charge.

Trade payables and other current liabilities other than financial instruments

Trade payables whose due date is within normal commercial terms are initially recognised at cost (identified as

their nominal value) and are not discounted.

Derivative financial instruments

The Group uses derivative financial instruments such as interest rate swaps and forward currency contracts to

hedge the risks resulting mainly from fluctuations in interest rates and foreign exchange rates. These derivative

financial instruments are initially recognised at fair value at the date on which the contract is entered; the fair

value is then subsequently periodically remeasured. Instruments are classified as assets when fair value is

positive and as liabilities when it is negative.

Any gains or losses arising from changes in the fair value of derivatives which do not qualify for hedge

accounting are recognised directly in profit or loss for the period.

The fair value of forward currency contracts is calculated by referring to current forward foreign exchange rates

included in contracts having a similar maturity profile. The fair value of interest rate swap contracts is

calculated by referring to the market value of similar instruments.

Revenue recognition

Revenues are recognised to the extent that it is probable that economic benefits will flow to the Group and the

amount of revenue can be measured reliably. The following specific policies must be satisfied before revenue

may be recognised in the income statement:

Sale of goods

Revenues from the sale of goods are recognised in the income statement when the risks and rewards of ownership of the goods have transferred to the buyer; this generally occurs on the despatch of the goods. Revenues are stated net of discounts and allowances.

Provision of services

Revenues from the rendering of services are recognised as the services are provided.

Financial income

Financial income is recognised by accruing interest income relating to the period (carried out using the

effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash

flows through the expected life of the financial instrument to the net carrying amount of the financial asset).



101

Dividends

Dividends are recognised when the shareholders‟ right to receive payment has vested.

Financial charges and income

Borrowing costs incurred for investments in assets which normally take a determinate period of time to get

ready for their intended use or sale are capitalised and depreciated over the useful life of the class of assets to

which they refer.

All other financial charges are recognised as an expense in the period in which they are incurred.

Income taxes

Current taxes

Current tax assets and liabilities for the current year or for previous years represent the amount that the Group

expects to recover from or pay to the tax authorities. The rates and tax laws used for calculating these amounts

are those enacted at the balance sheet date.

Deferred taxes

Deferred tax assets and liabilities are calculated using the liability method on the temporary differences

between the carrying amount of an asset or liability in the balance sheet and its tax base. Deferred tax assets

are also recognised for unused tax losses.

Deferred tax liabilities are recognised for all taxable temporary differences except in the following cases:

– when deferred tax liabilities arise from the initial recognition of goodwill or an asset or liability in a

transaction which is not a business combination and which, at the time of the transaction, affects neither

accounting profit nor taxable profit or loss;

– for taxable temporary differences associated with investments in subsidiaries, associates or joint ventures,

where the reversal of the temporary differences can be controlled and it is probable that the temporary

difference will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences and for the carry forward of unused

tax losses to the extent that it is probable that future taxable profit will be available against which the

deductible temporary difference and unused tax losses can be utilised except in the following cases:

– when deferred tax assets connected with deductible temporary difference arise from the initial recognition

of an asset or liability in a transaction which is not a business combination and which, at the time of the

transaction, affects neither accounting profit nor taxable profit or loss;

– for deductible temporary differences associated with investments in subsidiaries, associates or joint

ventures, deferred tax assets are recognised to the extent that it is probable that the deductible temporary

differences will reverse in the foreseeable future and taxable profit will be available against which the

temporary differences can be utilised.



102

Deferred tax assets are recognised when their recovery is considered probable on the basis of the expected

future availability of taxable profit sufficient to realise the deferred tax assets. The recoverability of deferred

tax assets is reviewed at each reporting date.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when

the asset is realised or the liability is settled, based on current tax rates and those that have been enacted or

substantively enacted by the balance sheet date.

Income taxes relating to items that are recognised directly in equity are themselves recognised directly in

equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset if there is a legally enforceable right to offset current

tax assets against current tax liabilities and if the deferred tax assets and deferred tax liabilities relate to

income taxes levied by the same taxation authority on the same taxable entity.

Translation of items in foreign currency

The Group has adopted the Euro as its functional and presentation currency. Transactions in foreign currency

are initially recognised at the exchange rate at the date of the transaction.

Monetary assets and liabilities denominated in foreign currency are translated to the functional currency at the

exchange rate at the balance sheet date.

Any exchange differences are recognised in profit or loss other than exchange differences arising on a monetary

item that forms part of a net investment in a foreign operation. These differences are initially recognised in the

statement of comprehensive income and then recognised in profit or loss on the disposal of the net investment.

Taxes and tax credits attributable to exchange differences on monetary items are also recognised in the

statement of comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the

exchange rate at the date of the initial recognition of the transaction. Non-monetary items that are measured

at fair value are translated using the exchange rate at the date when the fair value was determined.

Treasury shares

Treasury shares are stated as a deduction from equity. More specifically, the nominal value of own shares is

accounted for as a deduction from issued share capital while any excess of the purchase amount over the

nominal value is accounted for as a deduction from “Other reserves”.

Derecognition of financial instruments

Financial instruments are derecognised when the Group no longer holds the contractual rights to the

instruments. This usually occurs when the instrument is sold or when the cash flows generated by the

instrument pass through an independent third party.

Specific estimates and assumptions

The preparation of financial statements and related notes in accordance with IFRS requires the Company to

make estimates and assumptions that affect the amounts of assets and liabilities in the financial statements

and the disclosure of contingent assets and liabilities at the date of those statements. The estimates and

assumptions used are based on experience and other factors considered significant. The actual results could

however deviate from these estimates.



103

Estimates are used to calculate the allowance for doubtful accounts receivable, inventory obsolescence,

depreciation, amortisation, impairment losses, employee benefits, restructuring provisions, taxation, other

allocations, provisions and valuations of derivative instruments.

Estimates and assumptions are reviewed periodically and the effects of any changes are recognised immediately

in the income statement in the year in which the estimate is reviewed if the review affects that year only, or

also in subsequent years if the review affects both the current year and future years. In this context, the

situation resulting from the current economic and financial crisis has led to the need to make going outlook

assumptions that are characterised by significant uncertainty, and therefore it cannot be excluded that, next

year, the results could be different from those forecast, with an impact that cannot be foreseen today but

which could prove significant on the book value of the related items, compared to that represented in this

report.

There were no estimates which include an elevated risk that – within the subsequent year – significant value

adjustments to assets within the financial statements will occur.

Earnings per share

Earnings per share are calculated by dividing the profit for the year attributable to the Company‟s ordinary

shareholders by the weighted average number of ordinary shares outstanding during the period.

For the purpose of calculating diluted earnings per share the weighted number of ordinary shares outstanding

is adjusted for the effects of all dilutive potential ordinary shares. The Group‟s profit or loss is also adjusted for

the effects of the conversion of these shares net of the tax effect.

New accounting principles, amendments and interpretations effective as of 1 January 2013 and adopted by the

Group

Amendments to IAS 1 - Presentation of Financial Statements. On 16 June 2011, the IASB published this

amendment which requires the grouping of all items presented within the statement of comprehensive

income depending on whether they can be subsequently booked within the income statement. This

amendment was also incorporated by FASB in order to obtain comparability between international

accounting principles (IFRS) and US accounting principles (US GAAP). The adoption of this amendment

had limited effects on information relative to Other overall profits/(losses) reported in these financial

statements;

IAS 12 – Deferred Tax - Recovery of Underlying Assets. This amendment clarifies the calculation of

deferred taxes on real estate assets measured at fair value. The amendment introduces the rebuttable

assumption that the book value of a real estate investment - measured at fair value according to IAS

40 - will be recovered through a sale and, as a result, the relative deferred taxation should be valuated

on a sale basis. This assumption refuted if the real estate investment can be depreciated and held with

the objective of substantially utilizing over time all the benefits which are derived from the real estate

investment itself rather than realizing these benefits through a sale. The amendment had no effect on

the financial position or on the results or financial reporting of the Group;

Amendments to IAS 19 - Employee Benefits. On 16 June 2011, the IASB published the amended version

of IAS 19. The most important changes concerned the elimination of the option known as the “corridor

method” for the recording of actuarial profits and losses (not utilized by the Poltrona Frau Group), the

presentation of changes in assets and liabilities deriving from defined-benefit plans - including their

re-determination within the statement of comprehensive income – and a greater request for



104

information relative to the characteristics and risks of defined benefit plans for companies. The

amendments aim to supply the reader of financial statements with a clearer picture of the company‟s

obligations in relation to defined benefit plans and how the latter can influence future economic

performance, cash flows and the net financial position of the Group. In accordance with the transition

rules pursuant to IAS 19 under paragraph 173, the Group has applied this amendment to IAS 19 in a

retrospective manner as of 1 January 2013 by adjusting the opening values of the statement of

financial position of 1 January 2012 and 31 December 2012 as well as the economic values of 2012, as

if the amendment had always been applicable;

IFRS 13 – Fair value measurement. On 12 May 2011, IASB issued, in accordance with FASB, a guide for

fair value measurements. It was concluded that the adoption of this new principle does not involve

significant effects on the financial statements;

IFRS 7 – Financial Instruments - Disclosures. On 16 December 2011, IASB and FASB issued joint

provisions on disclosures that must be provided in the case of compensation of financial assets with

financial liabilities. The requested information must be supplied retroactively. It was concluded that the

adoption of this new principle does not involve significant effects on the financial statements.

On 17 May 2012 the IASB issued a series of amendment to the IFRS (“Annual Improvements to IFRSs -

2009-2011 Cycle”); those which are applicable to the Group are cited below while also not considering

those which only resulted in terminological changes and with minimum effects on accounting:

IAS 1 – Presentation of Financial Statements: this amendment clarifies the modalities of presentation

of comparative information in the case that a company modifies its accounting principles and

implements a retrospective restatement of items or a re-classification, as well as in cases where the

company supplies additional reports on financial situations compared to that required by the principle.

This amendment was applied at the time of the retrospective restatement of financial data in reference

to the application of the amendment to IAS 19;

IAS 16 – Property, Plant and Equipment: the amendment clarifies that spare parts and substitute

equipment must only be capitalized if they comply with the definition of "Property, plant and

equipment”, otherwise they must be classified as Inventories;

IAS 32 – Financial instruments: Presentation: this amendment eliminates the inconsistency between

IAS 12 – Income Taxes and IAS 32 in relation to the booking of taxes derived from distributions to

shareholders by stating that the latter must be booked within the income statement to the extent that

the distribution refers to proceeds generated from operations that were originally booked within the

income statement.

IFRS and IFRIC accounting principles, amendments and interpretations that have been ratified by the EU but

which are not yet applicable except through early adoption

On 12 May 2011, the IASB issued IFRS 10 - Consolidated Financial Statements, which replaces SIC 12 -

Consolidation - Special Purpose Entities and parts of IAS 27 - Consolidated and Separate Financial

Statements, which will be renamed “Separate Financial Statements” and will govern the accounting of

investments in the separate financial statements. The competent bodies of the European Union have

completed the process of ratification of this principle, postponing the date of its application to 1

January 2014, but allowing, in any case, and early adoption as of 1 January 2013. The Group is

evaluating the effects of adopting this new principle;

On 12 May 2011 the IASB issued IFRS 11 - Joint Arrangements, which replaces IAS 31 - Interests in

Joint Ventures and SIC 13 - Jointly-controlled Entities: Non-monetary Contributions by Venturers. The

new standard – without prejudice to the criteria for identifying the presence of joint control – supplies

criteria for the accounting of joint venture agreements that are based on the rights and obligations



105

deriving from these agreements rather than on their legal form, and also establishes the equity method

as the only method for booking investments in joint ventures within the consolidated financial

statements. The competent bodies of the European Union have completed the process of ratification of

this principle, postponing the date of its application to 1 January 2014, but allowing, in any case, an

early adoption as of 1 January 2013. The Group is evaluating the effects of adopting this new principle,

and which are not expected to be significant;

On 12 May 2011 the IASB issued IFRS 12 - Disclosure of Interests in Other Entities, a new and

complete standard on the additional information to be provided for each type of investment, including

in subsidiaries, joint ventures, associates, special purpose entities and other companies not

consolidated. The competent bodies of the European Union have completed the process of ratification

of this principle, postponing the date of its application to 1 January 2014;

On 16 December 2011 the IASB issued a number of amendments to IAS 32 - Financial Instruments:

Presentation, to clarify the application of certain criteria for the offsetting of financial assets and

liabilities included in IAS 32. The amendments must be applied from financial years beginning on or

after 1 January 2014, with effects backdated.

As of the date of these financial statements, the competent bodies of the European Union had not yet

completed the ratification process which is necessary for the adoption of the following accounting principles

and amendments:

On 12 November 2009, the IASB published IFRS 9 – Financial instruments; the same principle was

subsequently amended. This principle – which must be applied as of 1 January 2015 in a retrospective

manner – represents the first part of a process in phases whose purpose is to entirely replace IAS 39

and introduce new criteria for the classification and valuation of financial assets and liabilities. In

particular, and with regard to financial assets, the new principle utilizes a single approach that is based

on the modalities for managing financial instruments as well as on the characteristics of the

contractual cash flows of the financial assets themselves in order to determine their valuation

criterion, thereby replacing the different rules pursuant to IAS 39. With regard to financial liabilities,

on the other hand, the primary modification which occurred concerned the accounting treatment of

changes in fair value of a financial liability which was designed as valuated at fair value through the

income statement, and in the case that these changes were due to a change in the credit rating of the

liability itself. According to the new principle, these changes must be booked under Other

comprehensive income / (losses) and will no longer be applied within the income statement;

On 20 May 2013, the IASB issued IFRIC 21 – Levies, an interpretation of IAS 37 - Provisions,

Contingent Liabilities and Contingent Assets. IFRIC 21 clarifies when an entity should book a liability

for the payment of taxes imposed by the government, with the exception of those already regulated by

other principles (e.g. IAS 12 – Income Taxes). IAS 37 establishes the criteria for recognition of a

liability, one of which is the existence of a current obligation for the company as the result of a past

event (known as the binding event). The interpretation clarifies that the binding event, which results in

a liability for the payment of a tax, is described in the regulations of reference from which the payment

is derived. IFRIC 21 is effective for years starting on 1 January 2014;

On 29 May 2013, IASB issued an amendment to IAS 36 - Recoverable Amount Disclosures for Non-

Financial Assets, which regulates disclosures on the recoverable amounts of assets which were subject

to impairment if this amount is based on the fair value net of sales costs. The amendments must be

applied retroactively as of the years starting on 1 January 2014. Early adoption is allowed for periods in

which the entity has already applied IFRS 13;

On 27 June 2013, IASB issued certain minor amendments relative to IAS 39 – Financial instruments:

Recognition and Measurement, titled “Novation of Derivatives and Continuation of Hedge Accounting”.

These amendments allow for the continuation of hedge accounting in the case that a derivative

financial instrument, designated as a hedging instrument, is novated following the application of the



106

law or regulations in order to replace the original counterparty and guarantee the fulfilment of the

assumed obligation if certain conditions are met. The same amendment will also be included in IFRS 9

- Financial instruments. The amendments must be applied retroactively as of the years starting on 1

January 2014;

IAS 28 (2011) Investments in Associates and Joint Ventures. Following the new IFRS 11 Joint

arrangements and IFRS 12 - Disclosure of Interests in Other Entities, IAS 28 was renamed Investments

in associates and joint ventures; it describes the application of the equity method for investments in

joint ventures and associates. The amendments are effective for the years starting on 1 January 2014

or later.



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MAIN RISKS AND UNCERTAINTIES TO WHICH POLTRONA FRAU S.P.A. AND THE GROUP ARE EXPOSED

The operational management of all cash flows connected with the application of the “guidelines for financial

risk management” approved by the Board of Directors of Poltrona Frau S.p.A. is the exclusive responsibility of

the Group‟s Central Treasury, located in the Parent, for all Italian subsidiaries. For the foreign subsidiaries of

Poltrona Frau S.p.A. the financial requirements and the relative risks are managed by the individual companies

on the basis of guidelines established by the Group‟s administration, finance and control manager and approved

by the Chief Executive Officer.

The objective of the financial management guidelines of the Poltrona Frau Group is to identify the reference

ambit of financial instrument operations, ensure there is the required segregation between operating and

control functions and enable the main financial risks to be measured and monitored. The following are

therefore defined in this context:

the delegated powers and the general orientation of financial management of the Group: the financial

instruments negotiable by the Finance Area are determined together with the respective system of

operating limits;

the organisational structure for financial operations and the mission and responsibilities of the

organisational units involved.

To this end, it is the duty of the AF&C Area to align the management and control of the main financial risks to

which the Group is exposed, arising from normal business operations, to the business objectives as established

in the budget plan and medium-long term plan approved by the Board of Directors. These risks are as follows:

Liquidity Risk is defined as the risk of the lack of funds to sufficient to settle financial obligations

punctually and economically at their due dates.

Interest Rate Risk is defined as the risk that changes in the interest rate curve may lead to changes (i)

in results and cash flows, (ii) the value of assets and liabilities and, (iii) in the last instance, the value of

the business.

Currency Risk is defined as the risk that changes in foreign exchange rates may cause changes in

results and cash flows, the value of assets and liabilities.

Financial Counterparty Risk is defined as the risk that the creditworthiness of a financial counterparty

may deteriorate or that the counterparty may become insolvent.

The main financial instruments used are the following:

medium and long term funding with multi-year repayment plans to hedge investments in fixed assets;

short term funding, subject to collection advances on the trade receivables portfolio and with-recourse

sales of trade receivables to fund working capital.

The average cost of debt is generally linked to trends in the 3M and 6M EURIBOR rate plus a spread which

mainly depends on the type of financial instrument used. In general the margins applied are in line with best

market practices.



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In relation to financial instruments booked within the statement of financial position at fair value, IFRS 7

requires that these values must be classified on the basis of a hierarchy of levels which reflect the significance

of the inputs utilized in determining the fair value. The following levels can be distinguished:

Level 1 – quotes from an active market for the assets or liabilities subject to valuation;

Level 2 – inputs other than the quotes pursuant to the previous point, and which are directly observable (prices)

or indirectly observable in the market (derived from prices);

Level 3 – inputs which are not based on observable market data.

The following table highlights the financial instruments for the separate financial statements and for the

consolidated financial instruments which are valuated at fair value as of 31 December 2013 and 31 December

2012 on the basis of the hierarchic level of fair value valuation.

31 December 2013

Separate financial statements (in thousands of Euro) Level 1 Level 2 Level 3

Financial assets at fair value booked within the income statement

Derivative financial instruments - 25 -

Total assets - 25 -

Financial liabilities at fair value booked within the income statement


Total Liabilities - 299 -

31 December 2012

Separate financial statements (in thousands of Euro) Level 1 Level 2 Level 3



Total assets - 15 -






109

31 December 2013

Consolidated financial statements (in thousands of Euro) Level 1 Level 2 Level 3

Financial assets available for sale

Investments valuated at FV with contra-entry as comprehensive profits /

(losses) 2,133 - -



Total assets 2,133 46 -




31 December 2012

Consolidated financial statements (in thousands of Euro) Level 1 Level 2 Level 3


Investments valuated at FV with contra-entry as comprehensive profits /

(losses) 1,344 - -



Total assets 1,344 15 -


Derivative financial instruments - 1,360 -

Total Liabilities - 1,360 -



110

Management of interest rate risk

The interest rate risk to which Group companies is exposed has its origin in its net debt with the banking

industry, which also includes debt due to lessors under finance lease contracts outstanding at the balance sheet

date.

The Group‟s policy is to hedge cash flow risk on interest rates with reference exclusively to medium/long-term

loans. Hedging is carried out by means of derivate contracts having simple structures, typically using interest

rate swaps (“plain vanilla derivatives”) or caps, which convert floating rate to fixed rate. When it is believed

that interest rates will tend to fall significantly in the short term, the inclusion of other variables is considered

(the introduction of thresholds) to reduce the fixed rate. Please refer to notes 13 and 25 for details of hedging

contracts in place as at 31 December 2013.

The short-term portion due to banks, which is used mainly to fund working capital needs, is not hedged against

interest rate risk.

Total interest expense is therefore affected by changes in interest rates. The following table sets out the

potential impact on consolidated interest expense of changes in the average reference rate represented by 3M

EURIBOR rate, with respect to the average rate for 2013, with all the other variables remaining unchanged.

Interest rate

Change

3M EURIBOR

Effect on consolidated

interest expense

(millions of Euro)

EURIBOR (0.2%) 0.13

0.0% 0.0

0.2% (0.13)

The figures relating to the prior year are as follows:

Interest rate

Change

3M EURIBOR

Effect on consolidated

interest expense

(millions of Euro)

EURIBOR (0.2%) 0.13

0.0% 0.0

0.2% (0.13)

The following table sets out the potential impact on interest expense in the separate Financial Statements of

changes in the average reference rate represented by the 3M EURIBOR rate, with respect to the average rate for

2013, with all the other variables remaining unchanged.

Interest rate

Change

3M EURIBOR

Effect on separate interest

expense

(millions of Euro)

EURIBOR

(0.2%) 0.13

0.0% 0.0

0.2% (0.13)



111

The figures relating to the prior year are as follows:

Interest rate

Change

3M EURIBOR

Effect on separate interest

expense

(millions of Euro)

EURIBOR (0.2%) 0.12

0.0% 0.0

0.2% (0.13)

Management of credit risk

The Group deals with a selected clientele for the residential segment consisting mainly of single brand

distributors (who only sell Group products) and multi-brand dealers, principally located in leading Italian and

international cities, and for the Luxury Interiors segment consisting of large contractors and public bodies

(embassies, ministries, museums, certain prestigious automobile constructors). As things currently stand

customers are only required to provide collateral as a guarantee in a limited number of cases.

The credit management department has made it possible to more accurately monitor the critical factors that

emerged following the credit restrictions recorded in the financial markets. This allowed the Group to minimise

losses on receivables and cut past due credit positions.

In the event of the insolvency of the counterparty the maximum credit risk for the Group‟s other financial

assets, which consist of cash and cash equivalents, available-for-sale financial assets and certain derivative

instruments, is equal to the carrying amount of these assets.

Lastly, note that as at the closing date of the financial statements the past due position accounts for 22.8% of

total exposure to customers, in line with the figures reported in the previous year. This percentage was

essentially unchanged with respect to the past year despite the growth in overall exposure. The incidence of

past due amounts is primarily due to certain Luxury Interiors receivables which, as a result of their nature, have

collection times subject to specific issues attributable to management of the contract and are therefore not

easily predictable.

Risks related to the presence of the Group in emerging markets

The Group does business in various emerging countries through joint ventures and agreements of a commercial

nature. The Group‟s exposure to trends in these countries has increased recently, in particular regarding the

joint venture PF Emirates LCC which operates in the United Arab Emirates. The occurrence of unfavourable

political or economic developments in this area, including economic crises or political instability, could in the

future affect the Group‟s business prospects, as well as its results and/or financial situation.

Management of liquidity risk

A part of the revenues earned by the Group has a high level of seasonality, with contracts being completed

mostly in the second half of the year. This revenue seasonality, associated with a greater concentration of

communication and marketing costs in the first half of the year (connected in particular with the Salone

Internazionale del Mobile of Milan), usually causes the absorption of funds in the first three quarters of the

year and a considerable generation of cash only in the fourth quarter.



112

The Group manages liquidity by the controlling the elements making up operational working capital and in

particular customer receivables and supplier payables. The Parent also uses the non-recourse sale of receivables

in the Luxury In Motion sector (in particular those arising from sales of leather upholstery for the automotive

sector) and those arising with primary Luxury Interiors customers, as a means of increasing cash and reducing

bank exposure. In addition, the negotiation of payment terms with suppliers allows the duration of the

absorption of funds to be partially reduced.

The Group obtains credit facilities with banks to deal with the need for cash for managing working capital.

These facilities can be used for cash, are good until cancelled and are available mostly in the form of umbrella

facilities for mixed use, including the issue of guarantees. The Group also has credit facilities for the issuing of

commercial guarantees. At 31 December 2013 the Group‟s use of these facilities, including guarantees, was

around 35%.

Given the matters discussed above it is considered that the Group‟s liquidity risk is currently modest.

Management of currency risk

The Group develops around 31.9% of its revenues in countries outside the Euro area and a portion of these

revenues is denominated in US dollars or local currencies tied to trends in the US dollar. On the other hand the

Group is only marginally exposed to movements in foreign currencies other than the US dollar.

The Group covers its Euro/dollar exchange risk exposure to the US subsidiaries by entering into forward

contracts or FX collars. If the Luxury Interiors segment has contracts with fees of significant amounts expressed

in foreign currency, then the use of hedging contracts is assessed on each occasion, according to whether or

not any contract costs are denominated in foreign currency (natural hedging). The consolidated financial

statements are accordingly not significantly affected by changes in the Euro/dollar exchange rate.

The following table provides a summary of the potential effect on the profit before taxes in 2013 in the

consolidated and separate financial statements of changes in the Euro/dollar exchange rate, calculated on the

net average exposure of financial assets and liabilities expressed in said currency. Figures are stated in millions

of Euro.

Currency Euro/dollar exchange rate Effect on consolidated

income before taxes

USD 1.28 0.23

1.33 0.0

1.38 (0.21)

Currency Euro/dollar exchange rate Effect on separate

income before taxes

USD 1.28 0.16

1.33 0.0

1.38 (0.15)



113

Capital management

The Group‟s primary objective is to ensure that a constant balance is maintained between profitability ratios

(the Group‟s ability to generate profits), liquidity ratios (the Group‟s ability to convert the profits generated into

cash flows), solidity ratios (the Group‟s ability to maintain a liability structure consistent with the asset

structure) and growth ratios (the Group‟s ability to ensure constant growth of revenues without causing the

overall capital solidity to deteriorate).

With reference to capital management in particular, the Group believes that it is fundamental to maintain a

high level of capital solidity to maximise its credit rating and therefore be able to obtain short and medium-

long term credit facilities to support its growth plans under the best economic conditions.

The Group manages its capital structure and amends it on the basis of changes in economic conditions - those

of the Group and those of the market - and the objectives set in budgets and the three year plan. To maintain

or adjust its capital structure the Group may revise its dividend policy, sell treasury shares or issue new equity

instruments.

No changes were made to objectives, policies or procedures in 2012 or 2013.

The Group constantly verifies its capital solidity by means of the debt ratio (the ratio between interest-bearing

debt and equity) and the financial leverage ratio (the ratio between interest-bearing debt and the EBITDA of

the previous 12 months). The Group‟s policy is designed to keep the former ratio in a range between 1 and 1.5

and the latter in a range between 2 and 3, consistent with the consolidated three year plan approved by the

Board of Directors.

The Group includes in net debt all its exposures - short or medium-long term - towards the banking world,

including leasing companies, net of cash and other financial assets. Equity consists of all items in shareholders‟

equity pertaining to the Parent.



114

Separate Financial Statements (in thousands of Euro) 31 December 2013 31 December 2012

Interest-bearing debt, gross 85,383 71,661

Cash and other financial assets (18,115) (8,852)

Net debt 67,268 62,809

Share capital 34,604 34,810

Reserves and profit or loss for the year 3,555 4,784

Shareholders‟ equity 38,159 39,594

Debt ratio (net debt / Shareholders‟ equity) 1.76 1.59

Financial leverage ratio (net debt / EBITDA) 4.15 5.91

Consolidated Financial Statements (in thousands of Euro) 31 December 2013 31 December 2012

Interest-bearing debt, gross 91,304 93,460

Cash and other financial assets (21,964) (14,387)

Net debt 69,340 79,073

Share capital 34,604 34,810

Reserves and profit or loss for the year 39,630 36,266

Group shareholders‟ equity 74,234 71,076

Debt ratio (net debt / Group shareholders‟ equity) 0.93 1.11

Financial leverage ratio (net debt / EBITDA) 2.17 3.04

Risks and pending disputes

On 3 October 2011, Cassina S.p.A. received a communication from BNL S.p.A. regarding a request made by PEO

for enforcement of a performance bond for Rial (Qatar) 23,382,148 (amounting to approximately Euro 4.7

million) issued by the Commercial Bank of Qatar in favour of PEO on behalf of Cassina, and counter-guaranteed

by BNL.

Cassina deemed this enforcement to be wholly illegitimate given that, inter alia, the contract to which the

guarantee refers was terminated by mutual consent in March 2010. Cassina S.p.A. promptly submitted an

urgent appeal to the Court of Monza to prevent any compensation claims against the company. The Court

suspended the payment and the claim. As a result of this enforcement order - later confirmed in favour of the

company, also in appeal - Cassina S.p.A. started the relevant legal proceedings against PEO before the Court of

Desio (MB), to obtain full settlement of the price of the works performed. Subsequently, in January 2012, the

PEO launched legal proceedings at the Court of Doha against the Commercial Bank of Qatar and against

Cassina S.p.A. as the guaranteed party. In the meantime, by final sentence dated 30 January 2013, the Court of

Desio announced: (i) its own lack of jurisdiction in the legal proceedings instigated by Cassina; (ii) its

jurisdiction to decide the ancillary proceedings brought against BNL for pronouncement that all performance

bonds were extinguished along with all related obligation to pay commissions. It is expected that the sentence

regarding relations with BNL will be issued not earlier than 2015. As regards the case based in Qatar, Cassina‟s

defence lawyers in Qatar are unable to express a plausible indication of when the dispute will end, as from

January 2012 to date the proceedings have been subject to mere technical adjournments to allow for the

frequency of international notifications, without ever discussing the merits of the case.



115

On 26 July 2010 Cassina S.p.A. was served two assessment notices in respect of IRAP, VAT and IRES in relation

to findings for the 2006 fiscal year. The only significant point arising in the assessment report regards the

management fee charged to the Company by Poltrona Frau S.p.A.; a challenge has been made on the question

whether an amount of Euro 2.3 million pertains to the company and is reasonable, and hence whether it can be

charged against taxable income. In the light of the considerable factors it has available to defend this fiscal

treatment, the company filed an appeal against the two assessment notices on 7 February 2011. The Provincial

Tax Commissions of Milan and Turin upheld these appeals, accepting the company‟s defence arguments in full.

The Revenue Office has filed appeals. The appeals filed with reference to the sentences of the Provincial Tax

Commission of Milan were admitted by the Regional Tax Commission of Milan. The Company will appeal to the

Court of Cassation. The date of the hearings for the appeal filed by the Revenue Office and relative to the

sentence of the Provincial Tax Commission of Turin has not yet been set.



116

BUSINESS COMBINATIONS

With regard to business combinations arranged during the year, see note 1 of this report.

SEGMENT REPORTING

The business segments through which the Group works have been determined on the basis of the reporting

used by the Group‟s Chief Executive Officer to take strategic decisions. This reporting, which reflects the

Group‟s current organisational and corporate structure, is based on business segments distinguished by the

brands through which the Group, by means of its companies, characterises its products and manages its

activities. Each brand benefits from a highly specific product/market relationship with its own strong features

highly distinct from the others, strictly connected with their individual history and values, which responds to

the need to diversify by having a range of products which, while all belonging to the luxury furnishing sector,

have markets with characteristics which are completely autonomous and distinctive.

Certain information on these segments is as follows:

Poltrona Frau: the Parent‟s brand, which does business in the top range furnishing sector, produces and

distributes products of exceptional quality, distinguished mainly by their classical style. Poltrona Frau

activities are divided into three main segments: (i) Residential, i.e. the creation, production and distribution

of top range furnishing products for selected customers for use in the home and the office, and (ii) Luxury

Interiors, which consists of the supply of quality furnishings for public and common spaces (“furnishings”),

and (iii) Luxury in Motion, i.e. the fitting out of the interiors of top range cars, aircraft, helicopters and

boats.

Cassina: a company acquired by Poltrona Frau in June 2005, it produces and sells sofas, divans, tables,

chairs, cabinets and beds, for both the residential and office world. Cassina represents an important

element of diversification within the Group, thanks to its catalogue of extraordinary products bearing the

names of some of the most important historical and modern designers. Cassina is also considered a

reference point for the realisation of Luxury Interiors concerning the environment (including showrooms

and hotels) and, where specifically requested, yachts and cruise liners.

Cappellini: the company joined the Group in December 2004; it operates in the residential segment, with

products of contemporary and cutting edge design distinguished by the constant search for innovative

materials.

The following tables provide disclosures for 2013 and 2012 relating to the above-mentioned operating

segments.



117

2013 (thousands of Euro) Poltrona Frau Cassina Cappellini Cancellations

Consolidated

total

Revenues

Total Revenues 159,243 110,400 11,663 (8,462) 272,844

Results

Segment costs (152,317) (96,210) (12,520) 8,462 (252,585)

Segment results 6,926 14,190 (857) - 20,259

Net financial income (charges) (2,411) (2,406) (82) - (4,899)

Profit /(loss) from associates and JV accounted for by using the

equity method (3,628) - - - (3,628)

Income before taxes 887 11,784 (939) - 11,732

Income taxes (7,199)

Net result 4,533

2013 (thousands of Euro) Poltrona Frau Cassina Cappellini

Consolidated

total

Total segment assets 137,297 140,375 26,917 304,589

Total segment liabilities 118,459 105,561 6,696 230,716

Investments in

· Tangible fixed assets 3,247 3,116 364 6,727

· Intangible fixed assets 1,378 4,164 201 5,743

Amortisation/depreciation and write-downs (4,628) (2,201) (758) (7,587)

Costs of non-recurring nature (4,171) (4,171)



118

2012 (thousands of Euro) Poltrona Frau Cassina Cappellini Cancellations Consolidated

total

Revenues

Total Revenues 131,624 110,274 12,877 (7,787) 246,988

Results

Segment costs (126,894) (98,903) (13,445) 7,787 (231,455)

Segment results 4,730 11,371 (568) - 15,533

Net financial income (charges) (3,404) (2,383) (29) (5,816)

Profit /(loss) from associates accounted for by using the equity

method (858) - - - (858)

Income before taxes 468 8,988 (597) - 8,859

Income taxes (4,060)

Net result from functioning assets 4,799

Net result from assets held for sale (3,675)

Net Result 1,124

2012 (thousands of Euro) Poltrona Frau Cassina Cappellini

Assets/ liabilities

held for sale

Consolidated

total

Total segment assets 121,261 144,362 15,924 1,072 282,619

Total segment liabilities 103,874 102,979 4,384 572 211,809

Investments in

· Tangible fixed assets 1,914 1,036 283 - 3,233

· Intangible fixed assets 4,692 3,925 96 - 8,713

Amortisation/depreciation and write-downs (4,290) (1,542) (736) - (6,568)

Restructuring costs (1,923) (1,875) (108) - (3,906)

Value losses (25) - - - (25)

Further details of the above data can be found in the paragraph “Analysis of annual revenues of the Group by

business segment and geographical area” in the Management Report.



119

COMMENTS ON ITEMS IN THE STATEMENT OF FINANCIAL POSITION

The values as at 31 December 2012 were restated to ensure their consistency and comparability with those of

the current year. This restatement was required due to the classification of actuarial profit/loss resulting from

the calculation of Employee benefits. These actuarial profits /losses are now recognised under "Other items of

the Statement of Comprehensive Income", pursuant to provisions set out by new IAS 19 standard.

1. GOODWILL

This item may be analysed as follows at 31 December 2013 and 31 December 2012:


2013

31 December

2012 change

Acquisition of the Cassina Group – portion allocated to the Cassina

segment 15,398 15,398 -

Other goodwill 2,723 2,067 656

Total Goodwill 18,121 17,465 656

On 20 June 2013, an agreement was signed, effective from 1 July 2013, for the acquisition of the Simon brand

Business Unit, a company of the Estel Group, which became part of the Cassina collection. With this

acquisition, Cassina expanded its collection thanks to a portfolio of excellent products by such reputed

designers and architects as Carlo Scarpa, Marcel Breuer and Kazuhide Takahama. These products will enhance a

number of product ranges, for example tables, container units, seating and office furniture.

The acquisition price for the Business Unit was agreed upon by the parties divided in a fixed amount, added

with the amount for the valuation of inventories, and a variable amount, which will be determined according to

turnover generated by the sale of products under the Simon brand over the 5 years after 1 July 2013, the

effective date.

This transaction falls within the definition of a business combination according to the provisions of IFRS 3

“Business Combinations”, and as such was accounted for using the purchase price allocation. This transaction is

analysed hereunder:


Purchase cost 3,158

Fair value of assets acquired 2,479

Positive goodwill 679

The positive goodwill, resulting from the difference between the business combination cost and fair value of

the acquired assets at the acquisition date, amounting to Euro 679 thousand, was recognised in the assets of

the Consolidated Statement of Financial Position under item Goodwill.

Impairment test

Intangible fixed assets with indefinite useful life, represented by the goodwill and the Group‟s brands which are

classified in the respective balance sheet captions, underwent impairment testing at 31 December 2013.



120

The Group identified cash-generating units with the business sectors for which disclosures are required as

primary segments, which correspond to the “Poltrona Frau”, “Cassina” and “Cappellini” brands. For the purpose

of impairment testing, a portion of the value of intangible fixed assets with indefinite useful life was then

allocated to each segment/cash-generating unit.

In operational terms impairment testing was conducted on the carrying amount of each cash-generating unit

by referring to the net invested capital of each unit, which corresponds to its operating assets less operating

liabilities.

The recoverability of the values recognised was verified by comparing the net book value of each cash-

generating unit against the current value of cash flows estimated as deriving from continuous use of the assets

that make up those cash-generating units and their attributable end value. The only exception is the

"Cappellini" CGU, where net book value was compared with fair value less cost to sell, by reason of the fact

that the latter is higher than the value in use.

The main assumptions used to calculate the recoverable value (value in use) refer to:

a) estimated future cash flows from operations;

b) the discount rate;

c) the final growth rate.

With regard to point a), the Group made an assumption of the likely business outlook, for impairment testing

purposes only, for 2014-2016, presented at the Board of Directors‟ meeting held on 13 March 2014.

The discount rates used represent current market assessments of the time value of money and the risks specific

to the business‟s specific activities. In response to the above, in particular, in relation to the phase of recession

affecting the domestic market, it should be noted that said rates also include a country risk premium calculated

analytically for each of the three cash-generating units, taking into account the geographical breakdown of the

volume of business realised by said units. In particular, the following discount rates representative of the

unlevered cost of risk capital were used:

CGU “Poltrona Frau segments”: 9.7%;

CGU “Cassina segment”: 9.7%;

CGU “Cappellini segment” 11.3%;

In the impairment test the end value was determined using a “g rate” of 1%.

The main assumptions used for the "Cappellini Segment" to calculate the recoverable value (fair value less cost

to sell) relate to:

a) the estimate of future revenues attributable to the brand;

b) the discount rate;

c) the final growth rate;

d) Royalties rate (4.7%).

With regard to point a), the Group made an assumption of the likely future revenue, for impairment testing

purposes only, for 2014-2016, presented at the Board of Directors‟ meeting held on 13 March 2014.

The discount rate used represents current market assessments of the time value of money and the risks specific

to the business‟s specific activities. In response to the above, in particular, in relation to the phase of recession

affecting the domestic market, it should be noted that said rate also includes a country risk premium calculated

analytically for the cash-generating unit, taking into account both the geographical breakdown of the volume



121

of business realised by said unit and an additional risk equal to 0.5%. In particular, the following discount rate

representative of the unlevered cost of risk capital was used:

CGU “Cappellini segment” 11.8%.


In the absence of both a binding sell and buy agreement and an active market, the CGU was valued according

to a generic market participant. In particular, the "Cappellini Segment" is mainly composed of the brand and

only performs activities connected with projects and design. In this context, a market participant would

recognise that the price of the Cappellini segment is the brand fair value calculated according to the income

approach, with the Royalties method (i.e. the discount of the flows of royalties that the market would have

been willing to pay to the owner of the brand) as well as the accounting value of the other assets and

liabilities.

The recoverable value of the "Cappellini Segment", estimated as fair value less cost to sell, is higher than the

value in use.

The impairment testing of all goodwill at 31 December 2013 confirmed the carrying amounts. As at 31

December 2013, there were no accumulated losses on goodwill recorded in the financial statements.

In addition, also based on indications in the Bank of Italy-Consob-ISVAP joint document no. 4 of 4 March 2010,

the Group arranged the preparation of a sensitivity analysis of the test results against the changes in basic

assumptions affecting the value in use of the cash-generating units, though no further impairment indicators

emerged.

Given that the recoverable value was determined on the basis of estimates, the Group cannot guarantee that -

in view of the uncertainty regarding developments in the current global crisis - no need will arise in the future

to review these estimates. The Group will maintain a constant watch over developments in the situation in

order to review the assumptions underlying the estimates made if appropriate.

2. BRANDS WITH INDEFINITE USEFUL LIFE

Brands with indefinite useful life may be analysed as follows at 31 December 2013 and at the end of the

previous year:


2013

31 December

2012 change

Frau 3,316 3,316 -

Cassina 56,000 56,000 -

Cappellini 4,504 4,504 -

Simon 2,300 - 2,300

Total Brands with indefinite useful life 66,120 63,820 2,300

Appraisals were conducted by independent third parties of the brands Frau, Cassina and Cappellini as support

for the assessments made by the Company‟s directors and impairment testing was performed as at 31

December 2013 on the carrying amounts to identify any impairment losses.

Compared to reports for 2012, it is worth noting that in 2013 the Simon brand was acquired at a price finalised

under contract.

As at 31 December 2013, there were no accumulated losses on brands with an indefinite life recorded in the

financial statements.



122

3. OTHER INTANGIBLE ASSETS

Other intangible fixed assets may be analysed as follows at 31 December 2013 and 31 December 2012:


31 December

2013

31 December

2012 change

Development costs 3,139 2,719 420

Industrial patents and intellectual property rights 1,117 1,163 (46)

Concessions, licences and similar rights 366 242 124

Others 174 718 (544)

Total Other intangible fixed assets 4,796 4,842 (46)

Changes during the year in the items making up other intangible fixed assets were as follows:


Capitalised

development

costs

Industrial

patents

Concessions,

licences and

similar rights

Others Total

Net book value as at 31 December 2012 2,719 1,163 242 718 4,842

Purchases 1,682 942 117 23 2,764

Amortisation or depreciation (1,088) (1,162) (10) (106) (2,366)

Reclassifications (175) 192 - - 17

Exchange differences and other movements 1 (18) 17 (461) (461)

Net book value as at 31 December 2013 3,139 1,117 366 174 4,796

The increase of "Capitalised development costs" and "Industrial patents and intellectual property rights" relates

to investments made by the Parent and the major subsidiaries over the year for the creation of prototypes of

new products and expenditure incurred to protect and register patents, as well as costs connected with the

purchase and implementation of management software.

The item “Exchange differences and other movements” includes the effects of application of the equity method

for consolidation following the disposal of 51% of the Chinese subsidiary Zhejiang Casanova Furniture Ltd..

4. TANGIBLE FIXED ASSETS

Tangible fixed assets may be analysed as follows at 31 December 2013 and 31 December 2012:


2013

31 December

2012 change

Land and buildings 24,984 26,225 (1,241)

Plant and machinery 9,812 9,913 (101)

Industrial and commercial equipment 1,848 974 874

Others 2,697 2,887 (190)

Assets under construction and advances 139 215 (76)

Total Tangible fixed assets 39,480 40,214 (734)

The following table provides details of the historical cost and accumulated depreciation of tangible fixed assets

at 31 December 2013 and 31 December 2012:



123

(in thousands of Euro) Land and

buildings

Plant and

machinery

Industrial

and

commercial

equipment

Other assets

Assets

under

constr. and

advances

Total

Cost at 31 December 2012 39,269 22,981 14,974 12,682 215 90,121

Acc. depreciation at 31 December 2012 (13,044) (13,068) (14,000) (9,795) - (49,907)

Net book value as at 31 December 2012 26,225 9,913 974 2,887 215 40,214

Cost at 31 December 2013 38,581 24,366 16,109 13,106 139 92,301


Net book value as at 31 December 2013 24,984 9,812 1,848 2,697 139 39,480

Changes during the year ended 31 December 2013 in tangible fixed assets were as follows:


buildings

Plant and

machinery

Industrial

and

commercial

equipment

Other assets

Assets

under

constr. and

advances

Total

Net book value as at 31 December 2012 26,225 9,913 974 2,887 215 40,214

Purchases 2,518 1,594 1,382 901 332 6,727

Disposals (26) (26)

Amortisation or depreciation (1,715) (1,659) (527) (1,071) (4,972)

Write-downs (249) (249)

Reclassifications (87) 146 180 127 (383) (17)

Exchange differences and other movements (1,708) (182) (161) (121) (25) (2,197)

Net book value as at 31 December 2013 24,984 9,812 1,848 2,697 139 39,480

The increase in “Land and Buildings” refers to improvements at the Lentate sul Seveso (MB) building, to which

the Cassina and Cappellini engineering research centres were transferred, and partly to the creation of

exhibition stands at the Salone Internazionale del Mobile held at Rho Fiera and considered light constructions.

The increases, recorded in 2013, in the other items of tangible fixed assets relate to operating investments.

The item “Exchange differences and other movements” includes the effects of application of the equity method

for consolidation following the disposal of 51% of the Chinese subsidiary Zhejiang Casanova Furniture Ltd.



124

5. INVESTMENTS IN SUBSIDIARIES AND JV

Changes in "Investments in subsidiaries and joint ventures", in the year ended 31 December 2013, were as

follows:


31

December

2012

Capital

increases

Revaluations

(Write-downs)

Change in the

scope of

consolidation

31

December

2013

Associates

Alias S.p.A. 4,000 - - - 4,000

Spazio Washington LLC 40 - - (40) -

Nemo S.r.l. - - 345 500 845

Total Associates 4,040 - 345 460 4,845

Joint ventures

PF Emirates Interiors LLC 5,890 - (1,365) - 4,525

Casa Décor Private Ltd. 450 374 (824) - -

Zhejiang Casanova Furniture Co. Ltd. - 553 (880) 739 412

Total Joint Ventures 6,340 927 (3,069) 739 4,937

Investments in subsidiaries and JV 10,380 927 (2,724) 1,199 9,782

The following table provides the figures for shareholders‟ equity and profit (loss) for the year as stated in the

most recently approved financial statements of investee companies as at 31 December 2012, or as at 31

December 2013 if available because already approved by the competent management body, with a comparison

with their carrying amounts in the consolidated financial statements at 31 December 2013:

(in thousands of Euro) % holding Shareholders‟

equity

Group‟s portion

of shareholders‟

equity

Value as at

31 December

2013

Higher (lower)

shareholders‟

equity value

Associates

Alias S.p.A. 49% 917 449 4,000 (3,551)

Nemo S.r.l. 49% 1,725 845 845 -

Total Associates 4,845

Joint ventures

PF Emirates Interiors LLC 49% 9,234 4,525 4,525 -

Casa Décor Private Ltd. 50% (1,541) (771) - (771)

Zhejiang Casanova Furniture Co. Ltd. 49% 840 412 412 -

Total joint ventures 4,937

Investments in subsidiaries and JV 9,782

Revaluations and write-downs of investments in associates and joint ventures arise from the effect of using the

equity method of accounting and reflect the results of these companies.

Nemo S.r.l. was included starting from the 2013 financial year. It is 49% owned by Cassina S.p.A. and

established as part of the disposal of the Group lighting division carried out with the transfer of the investment

in Artelux S.A. by Cassina S.p.A. to Nemo S.r.l. in February 2013.

Furthermore, as part of the streamlining and reorganisation of the Group, in February 2013, 51% of the Chinese

subsidiary Zhejiang Casanova Furniture Ltd. was sold to the Chinese company Wenzhou Opal Furniture Co. Ltd.

Following this transaction the company was consolidated using the equity method.



125

Lastly, it should be noted that the subsidiary Poltrona Frau Group North America Inc. acquired 70% of the

company Spazio Washington LLC from Variant Inc. at a price equal to the Net Equity Value on 31 October 2013

added by a goodwill of around USD 40 thousand. The company Spazio Washington LLC is now consolidated by

using the line-by-line method.

The higher carrying amount of the investment in Alias over the Group‟s share of its equity, calculated on the

basis of Italian accounting principles, is supported by contractual agreements reached with Akron Design S.r.l.

on the sale of the majority holding. In particular, taking into account the losses of the last two years and the

difficult economic context characterised by the phase of recession affecting Italy and various other European

countries, in which the company‟s business developed considerably, the book value of the investment at 31

December 2013 remained the same as that recorded in 2012, retaining alignment with the minimum value of

the put option, i.e. without taking into account the earn-out in consideration of a business plan which was

revised significantly downward, envisaged contractually in favour of the subsidiary Cassina S.p.A. and

exercisable in 2015.

The higher value compared to the shareholders' equity of the investment in the joint venture Casa Décor Private

Ltd., equal to Euro 0.8 million, relates to the adjustment of this company according to the equity method. As at

31 December 2013, the portion of the equity account relating to the joint venture is negative and the related

amount was allocated to a special provision for risks. Reference should also be made to note 19 “Provisions for

risks and charges”.

6. OTHER INVESTMENTS

Changes in Other investments in the year ended 31 December 2013 were as follows:


31

December

2012

Acquisitions -

Share capital

increases

Revaluations

(Write-downs)

Change in the

scope of

consolidation

31

December

2013

Other investments

Celi S.p.A. 133 - (133) - -

Fondazione Vico Magistretti 3 - - - 3

Other investments 136 - (133) - 3

During 2013, by reason of losses incurred, the company Celi S.p.A. filed in a creditors' arrangement at the Court

of Terni and the investment cost was fully written-down.

7. AVAILABLE FOR SALE FINANCIAL ASSETS

“Available for sale financial assets” includes in investment in Cassina IXC (listed on the JASDAQ, Tokyo). In

accordance with the requirements of IAS 39, the change in the Euro/yen exchange rate during the year and its

adjustment to the share price have been credited to an appropriate shareholders‟ equity reserve.



126

8. OTHER NON-CURRENT ASSETS

Details of receivables from others due after 12 months at 31 December 2013 and 31 December 2012 are as

follows:


2013

31 December

2012 change

Guarantee deposits 5,041 5,277 (236)

Other items 4,014 2,166 1,848

Total other non-current assets 9,055 7,443 1,612

“Guarantee deposits” include a deposit of Euro 3,600 thousand paid in January 2006 by the subsidiary Cassina

S.p.A. to the affiliate PF Real Estate S.r.l., as discussed in note 42 “Related party transactions”. The remainder of

the item relates mainly to guarantee deposits paid in respect of leases for stores in New York managed by US

subsidiaries.

Compared with 31 December 2012, “Other items” increased mainly as a result of the financial receivable due to

the Parent Poltrona Frau S.p.A. from the company Zhejiang Casanova Furniture Ltd. (Euro 2.1 million). This

position was no longer eliminated following the disposal of 51% of the subsidiary to the Chinese company

Wenzhou Opal Furniture Co. Ltd.

This item includes the financial receivable of roughly Euro 0.8 million arising on the sale of the subsidiary IL

America Inc. and the financial receivable of Euro 0.4 million paid to Milano Progetti S.r.l. following the

enforcement of a surety of this amount by the Court of Como in relation to the closing of the creditors‟

arrangement of Cappellini S.p.A., of which Cap Design S.p.A. was the guarantor. In addition, this item includes

the financial receivable of Euro 700 thousand due from Nemo S.r.l. following the sale of the Nemo business

unit finalised by Cassina S.p.A. in December 2012.

9. DEFERRED TAX ASSETS

The following table provides the balance and composition by nature of deferred tax assets at 31 December

2013 and 31 December 2012:


2013

31 December

2012 change

Taxed provisions 2,755 3,103 (348)

Amortisation or depreciation 377 366 11

Fair value of derivative contracts 246 246 -

Margins in inventory 903 1,049 (146)

Valuation exchange difference 72 138 (66)

Loss carry forwards in foreign subsidiaries 1,707 1,437 270

Other items 412 118 294

Total deferred tax assets 6,472 6,457 15

“Taxed provisions” relate to accruals to the allowance for doubtful accounts, the inventory obsolescence

provision and the provisions for risks and charges which are not deductible for fiscal purposes.

“Amortisation or depreciation” consists mainly of deferred tax assets recognised for temporary differences

between the carrying amount of intangible assets for fiscal purposes which are capitalised and then deducted

from income as amortisation over a period of years and their nil carrying amount in the financial statements



127

prepared for IFRS purposes in which they are fully expensed in the year in which the expenditure is incurred.

The item also includes deferred tax assets relating to temporary differences arising from the use of different

amortisation rates for tax purposes and in the consolidated financial statements.

“Fair value of derivative contracts” relates to the effects of accounting in profit or loss for the fair value of

derivatives contracts entered into by the Parent and the subsidiary Cassina S.p.A.

“Margins in inventory” consists of the deferred tax effect arising from the reversal of margins in inventory

arising from intragroup transactions.

“Loss carry forwards in foreign subsidiaries” partly refer to the tax losses recordable by the foreign subsidiaries

for an unlimited period and to deferred tax assets recognised by the subsidiary Poltrona Frau Group North

America Inc. as a result of the temporary differences arising from the costs incurred for the opening of DOS

operating in the US market.

“Other items” consists mainly of deferred tax assets recognised on differences arising on the translation of

items in foreign currency and balances for entertainment expenses.

10. INVENTORIES

Inventories may be analysed as follows at 31 December 2013 and 31 December 2012:


2013

31 December

2012 change

Raw materials 30,674 20,191 10,483

Semi-finished goods 6,137 5,336 801

Finished goods 21,295 19,027 2,268

Contract work in progress 7,063 8,045 (982)

Advances 403 1,390 (987)

Total Inventories 65,572 53,989 11,583

The increase in inventories as at 31 December 2013, compared to prior year, amounts to around Euro 11.6

million. This increase is almost entirely due to the increased inventories in the Luxury in Motion segment (Euro

11.1 million).

Set out below is the balance of inventories together with the amount of the provision for obsolescence

allocated in the financial statements at 31 December 2013, in order to adjust the value of inventories to

presumed recoverable value:


2013

31 December

2012 change

Inventories, gross 69,652 57,344 12,308

Provision for obsolescence (4,080) (3,355) (725)


Changes in the provision for obsolescence over the year ended 31 December 2013 compared to the previous

year are as follows:



128


31 December 2012 3,355

Accrual 1,056

Utilisation (189)

Reclassifications (135)

Exchange differences and other movements (7)

31 December 2013 4,080

The accrual for the year is the result of a careful policy in assessing the risk of the need to write-down raw

materials and finished goods having particularly low rotation indices, also taking the current market situation

into consideration.

The utilisation is primarily attributable to the subsidiary Cassina S.p.A., due to the disposal of obsolete goods

covered by the provision.

11. TRADE RECEIVABLES

Trade receivables may be analysed as follows at 31 December 2013 and at 31 December 2012:


2013

31 December

2012 change

Due from third party customers 52,598 50,793 1,805

Due from associates and JV 2,030 1,317 713

Total Trade receivables 54,628 52,110 2,518

The increase in trade receivables is mainly due to the higher revenues recorded by all the business sectors at 31

December 2013, particularly in the Luxury in Motion segment. Note that at the end of the year non-recourse

factoring totalled around EUR 24.1 million, compared to Euro 19.8 million as at 31 December 2012.

Set out below is the balance of trade receivables at 31 December 2013 together with the allowance for

doubtful accounts at this date, which has been made to adjust the nominal value of receivables to their

estimated realisable value:


2013

31 December

2012 change

Due from customers 57,593 55,225 2,368

Allowance for doubtful accounts (2,965) (3,115) 150


Changes in the allowance for doubtful accounts in 2013 are as follows:



129


31 December 2012 3,115

Accrual 399

Utilisation (546)

Exchange effect (3)

31 December 2013 2,965

The accrual for the year is the result of careful analysis by the Credit Management Department in assessing

insolvency risk, promptly applied on the basis of each credit position and taking the current market situation

into consideration.

The utilisation primarily relates to the Parent for the final closure of positions provisioned in previous years, as

well as to the company Cassina S.p.A., due to the write-off of disputed receivables.

There are no receivables whose contractual term exceeds 5 years.

12. OTHER CURRENT ASSETS

"Other current assets" may be analysed as follows:


2013

31 December

2012 change

Tax receivables 2,839 5,385 (2,546)

Other assets 4,904 8,879 (3,975)

Total Other current assets 7,743 14,264 (6,521)

"Tax receivables" may be analysed as follows:


2013

31 December

2012 change

VAT receivables 200 1,064 (864)

Foreign tax receivables 768 584 184

Other receivables 1,871 3,737 (1,866)

Total tax receivables 2,839 5,385 (2,546)

The change in VAT receivables mainly refers to Cassina S.p.A..

The change in Other receivables primarily relates to IRES tax receivables resulting from the tax consolidation

recognised as at 31 December 2012, and amounting to Euro 1.7 million.

“Other assets” may be analysed as follows:


2013

31 December

2012 change

Advances to suppliers for services 690 1,731 (1,041)

Prepayments and accrued income 1,536 529 1,007

Current financial receivables 1,280 5,304 (4,024)

Others 1,398 1,315 83

Total Other current assets 4,904 8,879 (3,975)



130

The item "Current financial receivables" mainly includes the short-term loan disbursed by the Parent to the PF

Emirates joint venture, equal to roughly Euro 0.9 million (Euro 4.9 million as at 31 December 2012) and the

reclassification of the short-term portion of the loans to IL America Inc. and Milano Progetti S.r.l.

“Others” refers to various types of minor receivables referring mainly to the Parent and to Cassina S.p.A.

13. DERIVATIVE INSTRUMENTS

Derivative instruments, amounting to Euro 46 thousand at 31 December 2013, include the fair value of

contracts hedging Euro v. US Dollar exchange rate risk with respect to trade flows deriving from the American

market.

From an accounting standpoint the gains or losses arising on the measurement at fair value of these derivative

financial instruments are recognised directly in profit or loss.

Details are shown below of outstanding contracts at 31 December 2013 and 31 December 2012, (amounts are

stated in thousands of Euro):

(in thousands of Euro) 31 December 2013 31 December 2012

Held in the name of Type Expiry date Notional Fair value Notional Fair value

Poltrona Frau S.p.A. Collar Export (Cassa di Risparmio Fabriano

and Cupramontana) 28/06/2013

- - 38 15

Poltrona Frau S.p.A. Collar Export (Veneto Banca) 28/05/2014 363 25 - -

Cassina S.p.A. Collar Export (Goldman Sachs) 28/05/2014 363 21 - -

726 46 38 15

Reference should also be made to note 25 “Derivative instruments”.

14. CASH AND CASH EQUIVALENTS

The balance on this item represents cash in hand and cash equivalents at the balance sheet date.


2013

31 December

2012 change

Bank deposits 20,424 8,988 11,436

Cash in hand and valuables 214 80 134

CASH AND CASH EQUIVALENTS 20,638 9,068 11,570

Reference should be made to the consolidated cash flow statement for details of the sources and applications

which have given rise to the change in this balance as at 31 December 2013. The increase reported over the

year is primarily related to significant proceeds collected in the last days of the year.

15. ASSETS HELD FOR SALE

This item relates to all assets and liabilities connected with the company Artelux S.A., with reference to the

disposal of the "Nemo" BU occurred in 2012.



131

The disposal transaction of the Group lighting division was completed in the first quarter of 2013 with the

transfer, by Cassina S.p.A., of the investment in Artelux S.A. to Nemo S.r.l. in February 2013.

16. SHAREHOLDERS' EQUITY



2013

31 December

2012 change

Share capital 34,604 34,810 (206)

Share premium reserve 1,238 2,530 (1,292)

Fair value reserve 1,213 459 754


Profit (loss) of previous periods 26,670 25,420 1,250

Group‟s share of profit/(loss) 4,582 1,250 3,332

Total Group shareholders‟ equity 74,234 71,076 3,158

Minority interest‟s share of capital and reserves (312) (140) (172)

Minority interest‟s share of profit/(loss) (49) (126) 77

Total minority interest (361) (266) (95)

TOTAL SHAREHOLDERS‟ EQUITY 73,873 70,810 3,063

The share capital consists of 140,275,159 ordinary shares with a nominal value of Euro 0.25 each. As resolved

by the Shareholders‟ Meeting of the Parent, held on 22 April 2013, the loss for the year, amounting to Euro

2,159,787, was carried forward.

The decrease in share capital and share premium reserve is the result of the purchase/sale of treasury shares,

including the part to service the exercise of stock option rights, totalling Euro 1,498 thousand.

The change in the fair value reserve, in which adjustments to the fair value of available-for-sale financial assets

are recognised, regards the change in the fair value of the minority interest in Cassina IXC Ltd.

The change in negative item "Minority interest‟s share of capital and reserves" is due to the increase in the

consolidation percentage of Frau U.S.A.. Corporation, from 67% as at 31 December 2012 to 83% as at 31

December 2013, results from the subscription of a capital increase by the only Company Poltrona Frau S.p.A..

Other reserves may be analysed as follows:



132


2013

31 December

2012 change

Legal reserve 571 571 -

Extraordinary reserve 3,535 3,535 -

Consolidation profits (losses) brought forward 2,776 2,776 -

Stock option reserve 663 577 86

Translation reserve (156) 225 (381)

First-time adoption of IFRS reserve (294) (294) -

Provision for remeasurement of post-employment benefit obligations (523) (141) (382)

Others (645) (642) (3)

Total Other reserves 5,927 6,607 (680)

In accordance with IFRS 2, the stock option plan reserve consists of the corresponding entry in equity of the

cost, equal to the fair value of the options at grant date, which is recognised in profit or loss over the period in

which the exercising conditions vest.

The translation reserve, which includes exchange differences arising from the translation of assets and

liabilities at different exchange rates, through shareholders‟ equity and the income statement, fell mainly due

to the performance of the EUR/USD exchange rate.

The item Provision for remeasurement of post-employment benefit obligations include the actuarial gains and

losses resulting from the calculation of post-employment benefits according to provisions set forth by the new

IAS 19.

Reference should be made to the consolidated Statement of changes in equity for details of such changes

during the periods ended 31 December 2013 and 31 December 2012.

The tax effect related to the components in the Statement of comprehensive income is reported hereunder:

31 December 2013 31 December 2012


Gross

amount

(Charge)/

Tax

benefit

Net

amount

Gross

amount

(Charge)/

Tax

benefit

Net

amount

Profit / (loss) on fair value of available-for-sale financial

assets 789 (35) 754 (46) 8 (38)

Profit / (loss) on exchange differences on translating

foreign operations (381) - (381) (258) - (258)

Actuarial profit (loss) on defined benefit plans (527) 145 (382) (328) 90 (238)

17. MEDIUM/LONG-TERM BORROWINGS

Medium-long-term borrowings, which amounted to Euro 43,148 thousand as at 31 December 2013 (Euro

48,429 as at 31 December 2012), consist of the non-current portion of loans from banks and financial

institutions and amounts due to other lenders recognised in the consolidated financial statements as the result

of using the financial method to account for lease arrangements.

Medium-long term borrowings may be analysed as follows:



133

Ref. (in thousands of Euro)

31 December

2013

31 December

2012

a) Banca delle Marche loan to Poltrona Frau S.p.A. - 393

b) Banca Popolare di Ancona loan to Cap Design S.p.A. - 1,070

c) Syndicated loan to Poltrona Frau S.p.A. 11,175 14,380

d) Syndicated loan to Cassina S.p.A. 23,522 30,050

e) Carilo loan to Poltrona Frau S.p.A. 334 537

f) Banco Popolare loan to Poltrona Frau S.p.A. 1,236 2,250

g) Centrobanca loan to Cassina S.p.A. 4,270 -

h) Banca Popolare di Sondrio loan to Poltrona Frau S.p.A. 1,903 -

i) Carilo loan to Poltrona Frau S.p.A. 284 -

j) Unicredit loan to Poltrona Frau S.p.A. 4,963 -

Bank loans 47,687 48,680

Finance leases 12,147 12,831

Total medium-long term borrowings 59,834 61,511

Less current portion (16,686) (13,082)

Non-current portion of medium-long-term loans 43,148 48,429

The decrease in the item Bank loans relates to portions repaid, in the year in question, of loans in place as at 31

December 2012. This decrease is partly offset by other loans supplied by various banks.

Details of bank loans to Group companies are as follows:

a) a loan made to the Parent by Banca delle Marche expiring on 30 June 2013;

b) a loan disbursed to Cap Design S.p.A. in December 2008 expiring on 31 December 2013, used to finance

the purchase of industrial machinery;

c, d) with the aim of rescheduling the repayment dates of medium-term debt and consolidating a large part

of short term credit lines, in July 2010 the Group signed two syndicated loan agreements, with the funds

being disbursed to the Parent and Cassina S.p.A., for a total of Euro59 million, with BNL (as agent bank),

Unicredit, Intesa Sanpaolo, Popolare di Sondrio, UGF and Banca Popolare di Verona. By entering these

agreements the Group was able to make early settlement of the outstanding loans with these banks.

These loans, which are repayable on a six-monthly basis from June 2011 to 30 June 2016, are unsecured,

and accordingly not supported by any guarantees, and provide for certain specific financial ratios to be

observed, such as that between the consolidated net financial position and consolidated equity and that

between the consolidated net financial position and consolidated EBITDA, which are calculated and

checked on annually on the basis of the figures stated in the consolidated financial statements. In

addition, as is normal for transactions of this nature, the agreements provide for restrictions and

commitments including limits on granting guarantees (negative pledges), on the sale of strategic assets,

on making investments and on extraordinary financial transactions.

These ratios, restrictions and commitments had all been observed at the balance sheet date.

e) in July 2010, Cassa di Risparmio di Loreto disbursed a loan of Euro 1 million to the Parent which is

repayable in monthly instalments and expires on 27 July 2015;

f) in March 2012, Banco Popolare disbursed a loan to the Parent for Euro 3 million, expiring on 31 March

2015, with a 70% counter-guarantee from Sace since the loan is for the promotion of group brands on

the international market and development of the Middle East market;

g) in June, Centrobanca disbursed a loan to Cassina S.p.A. for Euro 5,000 thousand, expiring on 15

September 2016. This is an unsecured loan and accordingly not supported by any guarantees, and it is

subject to specific covenants based on the consolidated debt/equity ratio and the consolidated

debt/EBITDA ratio, audited annually.

At the reporting date, compliance with these ratios were fulfilled.



134

h) in March, Banca Popolare di Sondrio disbursed a loan to Poltrona Frau S.p.A. for Euro 2,000 thousand,

expiring on 30 April 2018. This is an unsecured loan and accordingly not supported by any guarantees;

i) in November 2013, Cassa di Risparmio di Loreto disbursed a loan of Euro 300 thousand to the Parent

which is repayable in monthly instalments and expires on 21 May 2015;

j) in December, Unicredit disbursed a loan to Poltrona Frau S.p.A. for Euro 5,000 thousand, expiring on 31

December 2018. This is an unsecured loans and accordingly not supported by any guarantees, and it is

subject to specific covenants based on the consolidated debt/equity ratio and the consolidated

debt/EBITDA ratio, audited annually.

At the reporting date, compliance with these ratios were fulfilled.

Reference should also be made to note 23 “Due to banks and other lenders”.

The amounts due as lease payments arise from the use of the financial method to account for assets acquired

under lease arrangements and represent the remaining liability to leasing companies at the balance sheet date.

These liabilities relate mainly to lease agreements entered into by the Parent for the construction of a

photovoltaic plant in 2010 on the roof of the facility in Tolentino (MC), and industrial buildings in Tolentino,

including plant and machinery, which were completed during 2009 and which have enabled the Group to

combine at one single production site activities and deposits previously located externally; these are intended

for use as the warehouse of the residential segment, the production department and warehouse of the Luxury

in Motion segment and the production department, warehouse and offices of the Luxury Interiors segment.

18. EMPLOYEE BENEFITS

The following changes took place during the year ended 31 December 2013 in Employee benefits:


Actuarial valuation of “Employee benefits” at 31 December 2012 5,450

Service Cost

Interest Cost 184

Benefits paid (445)

Actuarial gains (losses) 527

Actuarial valuation of “Employee benefits” as at 31 December 2013 5,716

Other staff provisions 62

Total provisions for staff as at 31 December 2013 5,778

With regard to the TFR (Italian employees‟ leaving entitlement), as a result of legislative changes in previous

years that affected this benefit, the Group continued to record the obligation on amounts accrued as at 31

December 2006 in accordance with the rules for defined benefit plans, whilst the obligation on amounts

accrued from 1 January 2007 and payable to the supplementary benefits plan or to the INPS Treasury Fund

were recorded on the basis of contributions due for the period.

Employees‟ leaving entitlement falls under defined benefit plans. This liability was calculated using the

Projected Unit Cost Method, under which the liability for the acquired benefits reflects the expected date of

leaving employment and is discounted to present value. The economic-financial assumptions underlying the

actuarial evaluations can be summarised as follows: expected rate of inflation 2%, discount rate 2.5%, future

salary increases 3% and annual frequency of resignations/dismissals 3%.



135

The decrease in provisions for personnel is mainly due to the benefits paid during the year as a result of normal

staff turnover.

Disclosures are provided below as required under the new international accounting standard IAS 19, in

particular the results of the sensitivity analysis performed on each actuarial assumption at year end, with an

indication of the effects that would have resulted from changes in the actuarial assumptions that might

reasonably have been made at that date, in absolute terms.

Sensitivity analysis of the main actuarial benchmarks on

figures as at 31 December 2013 (in thousands of Euro)

Poltrona Frau

S.p.A.

Cap Design

S.p.A. Cassina S.p.A. Group

+1% on the turnover rate 3,047 153 2,512 5,712

-1% on the turnover rate 3,053 154 2,515 5,722

+1/4% on the annual inflation rate 3,095 156 2,544 5,795

-1/4% on the annual inflation rate 3,006 151 2,483 5,640

+1/4% on the annual discount rate 2,985 150 2,468 5,603

-1/4% on the annual discount rate 3,118 158 2,560 5,836

Details are provided below of the contribution for the next period (Service cost) with an indication of the

average financial duration of the commitment for defined benefit plans.

Poltrona Frau

S.p.A.

Cap Design

S.p.A. Cassina S.p.A. Group

Service Cost - - - -

Plan duration 9.5 11.4 8.1 8.9

19. PROVISIONS FOR RISKS AND CHARGES

The balance of Euro 3,756 thousand at 31 December 2013 (Euro 5,092 thousand at 31 December 2012) may be

analysed as follows:


2013

31 December

2012 change

Agents‟ indemnity 1,468 1,653 (185)

Restructuring provision 490 2,396 (1,906)

Other provisions 1,798 1,043 755

Total Provisions for risks and charges 3,756 5,092 (1,336)

Changes in the provisions during 2013 were as follows:



136

(in thousands of Euro) Agents‟

indemnity

Restructuring

provision Other provisions Total

Balance as at 31 December 2012 1,653 2,396 1,043 5,092

Accrual 222 - 1,011 1,233

Utilisation (407) (577) (145) (1,129)

Redemption - (1,045) (13) (1,058)

Reclassifications - (284) (98) (382)

Balance as at 31 December 2013 1,468 490 1,798 3,756

The provisions for risks and charges consist mainly of the following categories of accrual:

the agents‟ indemnity is accrued annually on the basis of the commissions payable to the agents of the

Parent and other consolidated companies and calculated in accordance with prevailing legislation;

the restructuring provision decreased as a result of implementation of the restructuring plan that mainly

affected the Parent and the subsidiary Cassina S.p.A., as already extensively discussed in the Annual

Financial Report as at 31 December 2012.

The item "Other provisions" increased primarily due to the allocation of Euro 0.8 million related to the

adjustment to shareholders' equity of the joint venture Casa Décor Private Ltd. The remaining portion,

amounting to Euro 0.2 million, is attributable to potential tax liabilities incurred during 2013.

20. DEFERRED TAX LIABILITIES

The following table sets out the balances at 31 December 2013 and 31 December 2012 analysed by the nature

of the underlying temporary differences:


2013

31 December

2012 change

Purchase accounting 17,584 17,584 -

Finance leases 889 953 (64)

Reversal of the amortisation of goodwill and trademarks and the

depreciation of land 3,266 3,223 43

Accelerated amortisation/depreciation 19 24 (5)

Actuarial valuation of the TFR 57 219 (162)

Others 580 180 400

Total Deferred tax liabilities 22,395 22,183 212

The balance at 31 December 2013 consists mainly of the following items:

“purchase accounting”. The balance relates to the deferred taxation calculated on the difference

between the carrying amount at fair value of the net assets acquired in business combinations and

their tax base;

“finance leases”. This item relates to the tax effect arising from accounting for assets acquired in

leasing using the financial method;

“reversal of depreciation and amortisation”. This balance regards the reversal on preparing the

consolidated financial statements of the depreciation of tangible fixed assets and the amortisation of

intangible fixed assets recorded in the annual financial statements and recognised for fiscal purposes;



137

“accelerated amortisation/depreciation”. In this case deferred taxation arises from accelerated

depreciation not recognised for accounting purposes and recorded solely in income tax returns;

“actuarial evaluation of TFR (Italian employees‟ leaving entitlement) ”. As discussed earlier, for the

purposes of IFRS, in the consolidated financial statements TFR is measured by calculating the liability

to employees using actuarial assumptions and then discounting that liability. This accounting

treatment gives rise to differences with respect to the amounts recognised for tax purposes, requiring

in turn the recognition of deferred taxation.

21. OTHER NON-CURRENT LIABILITIES

Other non-current liabilities may be analysed as follows at 31 December 2013 and 31 December 2012:


2013

31 December

2012 change

Long-term deferred income 464 509 (45)

Other minor items 894 45 849

Total Other non-current liabilities 1,358 554 804

“Long-term deferred income” pertains to the reversal of the capital gain realised by the Parent on the sale of a

piece of land intended to be used for the extension of the factory in Tolentino and the construction of an office

building, the subject of a leaseback agreement entered into by the Parent in December 2007, for which work

began in 2008 and was completed in June 2009.

Other minor items reported an increase of Euro 849 thousand, which is mainly due to the recognition, as

specified in the BU sale and purchase agreement signed in 2013 between Estel Group S.r.l. and Cassina S.p.A.,

of the price variable amount proportioned to the turnover which will reported in the next five years by the

Simon brand.

22. TRADE PAYABLES

Trade payables of Euro 70,857 thousand as at 31 December 2013 (Euro 59,197 thousand as at 31 December

2012) consist of payables of a commercial nature arising from transactions with suppliers. These balances are

stated net of any trade discounts and billing adjustments (returns and/or allowances) to the extent these have

been defined with the other party.

This increase, recorded over the year, results from higher purchase volumes.

23. DUE TO BANKS AND OTHER LENDERS

“Due to banks and other lenders” consist of bank overdrafts, advances received from banks, short term

financing and the current portion of medium-long term borrowings.




138


2013

31 December

2012 change

Use of short-term credit facilities 34,794 32,755 2,039

Current portion of medium-long term borrowings 16,686 13,082 3,604

Total due to banks and other lenders 51,480 45,837 5,643

In respect of the line item “Use of short-term credit facilities”, the main instruments used by the Group are

represented by advances given on the presentation of trade bills for collection and export advances, regulated

by market rates applied when the transaction is initiated.

It is worth noting that the increase in the current portion of medium/long-term borrowings, compared to 31

December 2012, is due to new loans granted by various banks to Group companies, which are offset, to a

limited extent, by repayments of portions of some medium/long-term loans falling due.

Further details may be found in note 17 “Medium-long-term borrowings”.

The short-term exposure regarding the utilisation of credit facilities amounting in total to Euro 34,794

thousand as at 31 December 2013 (Euro 32,755 thousand as at 31 December 2012) relates to the following

Group companies:


2013

31 December

2012 change

Cassina S.p.A. 17,104 14,223 2,881

Cassina France S.A. 1 - 1

Cap Design S.p.A. 1,013 794 219

Diecidieci S.r.l. 905 - 905

Frau France S.a.r.l. 1 - 1

Poltrona Frau S.p.A. 15,670 17,299 (1,629)

Poltrona Frau UK Ltd. 10 52 (42)

Spazio Washington LLC 90 - 90

Zhejiang Casanova Furniture Co. Ltd. - 387 (387)

Total Uses of short-term credit facilities 34,794 32,755 2,039

The short-term portion of medium-long term borrowings refers to the following:


Portion falling

due within 12

months

Syndicated loan to Poltrona Frau S.p.A. 3,810

Syndicated loan to Cassina S.p.A. 8,017

Carilo loan to Poltrona Frau S.p.A. 209

Banco Popolare loan to Poltrona Frau S.p.A. 987

Centrobanca loan to Cassina S.p.A. 1,420

Banca Popolare di Sondrio loan to Poltrona Frau S.p.A. 392

Carilo loan to Poltrona Frau S.p.A. 199

Unicredit loan to Poltrona Frau S.p.A. 987

Financial lease – Poltrona Frau S.p.A. 665

Total current portion of medium-long term loans 16,686

Reference should be made to note 17 “Medium-long term borrowings” for details of the individual medium-

long term borrowing transactions.



139

24. TAX PAYABLES

This item consists mainly of amounts due to the tax authorities for tax withheld on payments to employees or

collaborators, VAT payables and income tax payables relating to the year. The item may be analysed as follows

at 31 December 2013 and 31 December 2012:


2013

31 December

2012 change

Income tax payables 3,809 706 3,103

Other tax payables 1,748 1,807 (59)

Total Tax payables 5,557 2,513 3,044

Other tax payables mainly refer to withholding tax on employee salaries and wages.

The Parent has elected to use the national tax consolidation and the consolidation scope in this respect for the

2013 tax year was unchanged compared to that for the previous year.





Held in the name of Type

Maturity

date Notional Fair value Notional Fair value

Poltrona Frau S.p.A. Interest Rate Swap (Banca Nazionale del Lavoro) 31/12/2013 - - 2,000 (68)

Poltrona Frau S.p.A. Interest Rate Swap (Banca Nazionale del Lavoro) 30/06/2016 4,152 (117) 4,675 (209)

Poltrona Frau S.p.A. Interest Rate Swap (Banca Popolare) 30/06/2016 3,559 (99) 4,007 (175)

Poltrona Frau S.p.A. Interest Rate Swap (Unicredit) 30/06/2016 2,966 (83) 3,339 (146)

Cassina S.p.A. Interest Rate Swap (Banca Nazionale del Lavoro) 31/12/2013 - - 2,000 (68)

Cassina S.p.A. Interest Rate Swap (Banca Nazionale del Lavoro) 30/06/2016 7,415 (209) 8,348 (371)

Cassina S.p.A. Interest Rate Swap (Unicredit) 30/06/2016 6,525 (182) 7,346 (323)

24,617 (690) 31,715 (1,360)

These contracts, which were already outstanding at 31 December 2012, represent arrangements entered to

hedge the interest rate risk arising on medium term loans and mainly regard interest rate swaps which envisage

receipt at a floating rate (3M and 6M EURIBOR) and payment at a fixed rate.


instruments are recognised directly through profit or loss.

Reference should also be made to note 13 “Derivative instruments” in this respect.



140

26. OTHER CURRENT LIABILITIES



2013

31 December

2012 change

Advances from customers 6,101 7,172 (1,071)

Commissions and royalties 3,709 3,583 126

Amounts due to employees 8,246 3,681 4,565

Due to social security organisations 2,203 2,336 (133)

Other payables 5,438 3,850 1,588

Total Other current liabilities 25,697 20,622 5,075

Advances from customers consist of the advances received from customers for the provision of goods and

services and relate mainly to Luxury Interiors segment contracts.

The increase in item "Other payables", totalling Euro 1,588 thousand, is mainly due to the recognition of the

fixed portion of the remuneration agreed between the parties and amounting to Euro 2.1 million, as set forth in

the sale and purchase agreement of the Business Unit, signed between Estel Group S.r.l. and Cassina S.p.A. in

2013.

27. LIABILITIES HELD FOR SALE

Further details may be found in note 15 “Assets held for sale”.



141

COMMENTS ON ITEMS IN THE CONSOLIDATED INCOME STATEMENT

Comments relating to the Group‟s performance during the year may be found in the respective section of the

Directors‟ Report.

The values as at 31 December 2012 were restated to ensure their alignment and comparability with those of

the current year. This adjustment was necessary by reason of the classification of actuarial profit/loss resulting

from the calculation of Employee benefits. These actuarial profits/losses are now recognised under "Other items

of the Statement of Comprehensive Income", as set forth by new IAS 19.

28. REVENUES

Revenues by type of activity for the year ended 31 December 2013 compared to those for the previous year may

be analysed as follows:


2013

31 December

2012 change

Sales revenue 265,359 238,497 26,862

Other revenues and income 7,485 8,491 (1,006)

Total Revenues 272,844 246,988 25,856

Details of revenues by segment and geographical area may be found above in the note “Segment reporting”.

Other revenues and income are of a residual nature and the more significant amounts involved relate to

revenues for assistance, consultancy, the recovery of transport costs and the recovery of advertising

contributions.

29. COSTS FOR RAW MATERIALS AND CONSUMABLES

This item consists of production costs for raw materials, ancillary materials, consumables and goods for resale

and changes in inventories.

Costs for raw materials and consumables increased from Euro 96,340 thousand for the year ended 31 December

2012 to Euro 113,845 million for the year ended 31 December 2013, marking a 2.7% increase as a percentage

of sales revenues compared to the previous year.

Reference should be made to the comments on changes in income provided in the Directors‟ Report for an

analysis of operating profitability.

30. COSTS FOR SERVICES

Costs for services may be analysed as follows for the year ended 31 December 2013, compared to the previous

year:



142


31 December

2013

31 December

2012 change

External processing 25,162 23,700 1,462


Consulting 6,761 7,994 (1,233)

Communication and marketing 6,036 4,551 1,485

Transport and logistics 9,897 9,460 437

Maintenance 1,874 2,203 (329)

Utility costs 2,487 2,505 (18)

Rental and lease payments 9,800 9,740 60

Other costs for services 13,076 9,651 3,425

Total Costs for services 83,810 78,270 5,540

“Costs for services”, net of non-recurring costs related to the CEO's remuneration, reported 1.7% increase,

mainly due to higher costs incurred for external processing and connected with higher sales volume and

investments recognised under item communication and marketing expenses to support sales. Besides the above

effects, a strong effort in reducing costs is to be noted.

“Other costs for services” mainly relate to travel and entertainment expense incurred, remuneration for

directors and statutory auditors, research and development costs and other minor expenses. This item also

includes the non-recurring cost related to the variable remuneration of the Chief Executive Officer, recognised

in compliance with the IFRS 2 international accounting standard and amounting to around Euro 4.2 million. For

further details reference should be made to the paragraph below "Significant, non-recurring, abnormal and/or

unusual transactions".

31. PERSONNEL COSTS

This item may be analysed as follows for the years ended 31 December 2013 and 31 December 2012:


2013

31 December

2012 change

Wages and salaries 33,169 33,278 (109)

Social security and pensions 9,409 8,821 588

TFR charge 1,692 1,692 0

Other personnel costs 1,969 1,712 257

Total Personnel costs 46,239 45,503 736

If compared to the figure as at 31 December 2012, Personnel costs increased by around Euro 0.7 million. The

deconsolidation of the joint venture Zhejiang Casanova Furniture Ltd. should be taken into account which

involved a change in the average number of employees of around 60 units.

Compared to similar areas, a unit increase in labour costs of around 2.9% is reported.

The following table sets out the average number of employees in Group companies at 31 December 2013 and

31 December 2012, broken down into the main categories:

31 December

2013

31 December

2012

Executives 29 32

Middle-management and white-collar workers 394 386

Blue-collar workers 471 539

Total 894 957



143

32. OTHER OPERATING COSTS

Other operating costs for the years ended 31 December 2013 and 2012 may be analysed as follows:


2013

31 December

2012 change

Miscellaneous operating costs 1,391 1,338 53

Bad and doubtful debts 375 396 (21)

Increase of fixed assets for internal work (1,547) (1,603) 56

Taxes and duties 885 712 173

Total Other operating costs 1,104 843 261

33. RESTRUCTURING COSTS

The item as at 31 December 2012 included costs related to the restructuring process started up by the Group

and mainly involving the Parent Poltrona Frau S.p.A. and the subsidiary Cassina S.p.A.. For further details

reference should be made to the Annual Financial Report as at 31 December 2012.

34. AMORTISATION, DEPRECIATION AND WRITE-DOWNS

Amortisation and depreciation for the years ended 31 December 2013 and 2012 may be analysed as follows:


2013

31 December

2012 change

Amortisation and write-downs of intangible fixed assets 2,366 1,949 417

Depreciation and write-downs of tangible fixed assets 5,221 4,619 602

Total Amortisation, depreciation and write-downs 7,587 6,568 1,019

The increase reported in item "Amortisation, depreciation and write-downs" is related to investments made in

2013. This item as at 31 December 2013 also includes a write-down of Euro 0.2 million related to the closure of

the Poltrona Frau store in Naples.

35. ADJUSTMENT OF ASSET VALUE AND OTHER PROVISIONS

The balance of item "Adjustment of asset value and other provisions" as at 31 December 2013 totals Euro 25

thousand and relates to residual values.

36. INTEREST IN PROFIT (LOSS) OF ASSOCIATES ACCOUNTED FOR BY USING THE EQUITY METHOD

This item consists of the effect of accounting for investments in associates and joint ventures using the equity

method, as discussed in note 5 “Investments in associates and joint ventures” and in note 6 "Other

investments".



144

37. FINANCIAL CHARGES AND INCOME

Financial charges and income for the periods ended 31 December 2013 and 2012 may be analysed as follows:


2013

31 December

2012 change

Charges on derivative instruments 811 882 (71)

Exchange losses 1,123 1,273 (150)

Interest expense, commissions and other financial charges 4,440 5,148 (708)

Total Financial charges 6,374 7,303 (929)

Income from derivative instruments 722 254 468

Exchange gains 427 1,049 (622)

Interest income and other financial income 326 184 142

Total Financial income 1,475 1,487 (12)

Total Financial (Charges) and Income, Net (4,899) (5,816) 917

The financial management, improved if compared to 2012, is primarily attributable to the decrease reported in

item "Interest expense, commissions and other financial charges", connected with the improvement of the

consolidated Net Financial Position as well as higher income resulting from changes in fair value of hedging

contracts.

38. INCOME TAXES

Income tax for the years ended 31 December 2013 and 2012 may be analysed as follows:


2013

31 December

2012 change

Current taxes 6,747 4,012 2,735

Deferred taxes 452 48 404

Total Income taxes 7,199 4,060 3,139

In addition to the amounts stated in the annual financial statements of the Parent Poltrona Frau S.p.A. and the

other companies included in the consolidation scope, the deferred tax balance also includes the deferred tax

arising from consolidation entries, where applicable, including adjustments made to the amounts stated in the

various annual financial statements (prepared in accordance with the accounting principles of the country in

which the subsidiary is located) in order to align these with the IFRS adopted by the European Union.

A reconciliation between the tax charge in the consolidated financial statements and the theoretical tax charge

calculated on the basis of the IRES (Italian corporate income tax) rate applicable to the Parent for the years

ended 31 December 2013 and 31 December 2012 is as follows:



145


2013

31 December

2012

Income before taxes 11,732 8,859

IRES (corporate income tax) rate applicable to the year 27.5% 27.5%

Theoretical tax charge 3,226 2,436

Non-recoverable losses for the year of subsidiaries 802 715

Differences arising from the use of different rates – IRAP and others 1,997 568

Other non-deductible costs 1,174 341

Total differences 3,973 1,624

Total Income tax charge 7,199 4,060

Effective tax rate 61.4% 45.8%

The total tax charge is significant mainly due to the inclusion of IRAP regional production tax - a tax calculated

on value added and especially penalising for groups with a high cost of labour and financial debt - as well as

costs which are not deductible for IRES (corporate income tax) purposes.

39. PROFIT / (LOSS) FROM ASSETS HELD FOR SALE

The item "Profit / (Loss) from assets held for sale" as at 31 December 2012, included the breakdown of income

statement items related to the contribution of Artelux S.A. and the "Nemo" BU in the scope of consolidation, in

compliance with provisions set forth by the IFRS 5 accounting standard.

40. EARNINGS PER SHARE

Basic earnings per share has been calculated by dividing the profit for the period attributable to the ordinary

shareholders of the Parent by the weighted average number of ordinary shares outstanding during the period.

There are no differences between diluted earnings per share and basic earnings per share as the dilutive effect

of the potential ordinary shares connected with the stock option plan is not significant.

The information used to calculate earnings per share is as follows:

31 December

2013

31 December

2012

Profit/(loss) attributable to shareholders (Euro/000) (A) 4,582 1,250

Number of ordinary shares at the beginning of the year

140,275,159 140,275,159

Number of ordinary shares at the end of the year

140,275,159 140,275,159

Weighted average number of ordinary shares used for the calculation of basic

earnings per share (B) 140,275,159 140,275,159

Basic earnings (loss) per share (Euro) (C)=(A)/(B) 0.03 0.01

Weighted average number of ordinary shares used for the calculation of diluted

earnings per share

140,275,159 140,275,159

Diluted earnings (loss) per share (Euro)

0.03 0.01



146

41. NET FINANCIAL POSITION

In accordance with the requirements of Consob Note no. DEM/6264293 of 28 July 2006 and in compliance with

the CESR Recommendation of 10 February 2005 “Recommendations for the consistent implementation of the

European Commission‟s Regulation on Prospectuses”, it is hereby stated that the Group‟s Net Financial Position

at 31 December 2013 was the following:


2013

31 December

2012 change

A. Cash 214 80 134

B. Cash equivalents 20,424 8,988 11,436

C. Securities held for trading - - -

D. Liquidity (A) + (B) + (C) 20,638 9,068 11,570

E. Current financial receivables 1,326 5,319 (3,993)

F. Current bank borrowings (34,794) (32,755) (2,039)

G. Current portion of non-current debt (16,686) (13,082) (3,604)

H. Other current financial payables (690) (1,360) 670

I. Current financial debt (F)+(G)+(H) (52,170) (47,197) (4,973)

J. Current financial debt, net (I) – (E) – (D) (30,206) (32,810) 2,604

K. Non-current bank borrowings (31,666) (36,265) 4,599

L. Bonds issued - - -

M. Other non-current receivables (payables) (11,482) (12,164) 682

N. Non-current financial debt (K) + (L) + (M) (43,148) (48,429) 5,281

O. Net financial position (J) + (N) (73,354) (81,239) 7,885

Of which:

- due to related parties 938 4,942 (4,004)

- due to third parties (74,292) (86,181) 11,889

The net financial position stated in the above table reconciles with total net consolidated financial debt

presented in the Management Report as follows:

O. Net financial position (J) + (N) (73,354) (81,239) 7,885

Other non-current financial receivables 4,014 2,166 1,848

Total Net financial position (69,340) (79,073) 9,733

The net financial debt recorded improvement of around Euro 9.7 million compared to 31 December 2012 as a

result of contrasting elements, which may be summarised as follows:


potential cash flow (EBITDA) for the year, equal to Euro 32 million;

the Euro 2.4 million benefit from application of the equity method for consolidation following

the disposal of 51% of the Chinese subsidiary Zhejiang Casanova Furniture Ltd.;

the reduction of around Euro 4 million in the net working capital (amount less the non-

recurring component equal to Euro 4.2 million);

other changes amounting to Euro 0.3 million.


the payment of compensation to Group employees who left following the launch of the

restructuring plan, agency indemnities and other payments totalling Euro 2.0 million;

net investments in fixed assets for the year, equal to Euro 12.5 million;



147

net financial charges and tax charges in the income statement for a total of Euro 12.1 million;

investments in shareholdings totalling Euro 0.9 million, related to share capital increases,

purchase of treasury shares during the year for Euro 1.5 million.



148

42. RELATED PARTY TRANSACTIONS

Transactions with subsidiaries

The transactions executed form part of normal business operations in relation to the activities typical of each

entity involved, and are agreed and settled at arm‟s length.

The following table shows changes in financial receivables due from subsidiaries at 31 December 2013

compared to the previous year:


2012 increases decreases

exchange

effect

Change in the

scope of

consolidation

31 December

2013

Poltrona Frau (UK) Ltd. 1,050 272 - (22) - 1,300

Zhejiang Casanova Furniture Co. Ltd. 2,090 - - - (2,090) -

Cassina France S.A. 6,000 - - - - 6,000

Total 9,140 272 - (22) (2,090) 7,300

Transactions with associates and joint ventures

Transactions with associates and joint ventures may be summarised as follows:


2013

31 December

2012

GROUP SALES TO:

Associates

Alias S.p.A. - 3

Nemo S.r.l. 143 -

KBR Sarl - -

Spazio Washington LLC - 216

Joint ventures

PF Emirates Interiors LLC 2,851 2,076

Casa Décor Private Ltd. 791 747

Zheijang Casanova Furniture Co Ltd. 209 -


Cassina IXC Ltd 7,076 7,325

11,070 10,367

OTHER GROUP REVENUES FROM:

Associates

Alias S.p.A. 94 -

Nemo S.r.l. 13 126


Joint ventures

PF Emirates Interiors LLC 38 75



Cassina IXC Ltd 509 -

666 225



149


2013

31 December

2012

GROUP COSTS INCURRED WITH:

Associates

Alias S.p.A. 526 481

Nemo S.r.l. 179 -

Joint ventures

PF Emirates Interiors LLC - 1




Cassina IXC Ltd 2 6

1,689 495


2013

31 December

2012

TRADE RECEIVABLES OF THE GROUP DUE FROM:

Associates

Alias S.p.A. - 37

KBR Sarl 75 82

Nemo S.r.l. 5 -


Joint ventures

PF Emirates Interiors LLC 1,587 665




Cassina IXC Ltd 1,033 1,639

3,063 2,963

OTHER RECEIVABLES OF THE GROUP DUE FROM:

Associates

Alias S.p.A. 19 -

Nemo S.r.l. 700 -

Joint ventures

PF Emirates Interiors LLC 938 4,942

Zheijang Casanova Furniture Co Ltd. 2,090 -


Cassina IXC Ltd - -

3,747 4,942

TRADE PAYABLES OF THE GROUP DUE TO:

Associates

Alias S.p.A. 166 203

K.B.R. S.a.r.l. - 2

Nemo S.r.l. 94 -

Joint ventures

PF Emirates Interiors LLC - 104



499 316

OTHER PAYABLES OF THE GROUP DUE TO:

Associates

Alias S.p.A. 95 96

Joint ventures


648 96



150

Transactions with other related parties

Details of transactions with other related parties at 31 December 2013 compared to the previous year are as

follows.

a) Gebrüder Thonet Vienna GmbH

The transactions in question refer to royalties paid to the company for the marketing of Thonet brand products

by the Parent. Revenues in the previous year related to the sale of the Thonet brand from subsidiary Meno

Warenhandels GmbH to Gebrüder Thonet Vienna GmbH, an Austrian company attributable to the Chairman of

the Poltrona Frau Board of Directors, Franco Moschini.

The following table provides details of the relations as at 31 December 2012.

(in thousands of Euro) 31 December 2012

Other revenues -

Services 10

31 December 2012

Trade receivables -

Trade payables 10

Records indicated that there are no further transactions with this related party as at 31 December 2013.

b) PF Real Estate S.r.l.

PF Real Estate S.r.l. was formed on 23 December 2005 and is held as to 60% by Charme Investments S.C.A.,

38% by Moschini S.p.A. and the remaining 2% by Mosconi & Associati S.r.l. In December 2005 PF Real Estate

S.r.l. played an active role in the operation the aim of which was to rationalise the real estate assets held by

Cassina S.p.A. This operation to rationalise real estate forms part of the Group‟s policy which is not to maintain

ownership of the real estate assets of Group companies, having amongst other things the objective of

facilitating future investment initiatives.

The subsidiary Cassina S.p.A. has entered an agreement with PF Real Estate S.r.l. to lease the Meda real estate

complex for a monthly instalment today equal to Euro 117 thousand. Cassina S.p.A. paid a guarantee deposit of

Euro 3,600 thousand in respect of this agreement in January 2006 and at 31 December 2013 recognised lease

payments of Euro 1,363 thousand for the period under review (Euro 1,146 thousand at 31 December 2012).

c) Ferrari S.p.A.

Poltrona Frau has long-standing business relations with Ferrari S.p.A., whose Chairman of the Board of

Directors is the Director Luca Cordero di Montezemolo. These relations are carried out under market conditions

and relate to the supply of interiors well as the preparation of customised upholstery. The following table

provides details of transactions and balances with Ferrari S.p.A. for the period under review and the

corresponding period of the previous year:



151


2013 31 December 2012

Sales 20,793 21,988

Other revenues 544 1,144

Purchases 155 305

Costs for services 191 -

31 December

2013 31 December 2012

Trade receivables 830 1,750

Trade payables 128 206

d) Other minor transactions

Shown below are the balances as at 31 December 2013 compared with the previous period relating to minor

transactions which mainly concern the purchase/sale of products and services with members of the Board of

Directors or companies they own.


2013

31 December

2012

Sales 91 23

Other revenues 63 96

Costs 78 143

31 December

2013

31 December

2012

Trade receivables 75 53

Trade payables 9 64



152

For summary purposes the following table provides details of related party transactions and balances as a

percentage of the total item in the financial statements to which they relate:


2013

31 December

2012

Sales revenue from related parties 31,954 32,378

Sales revenue - Consolidated total 265,359 238,497

As a % of the item in the financial statements 12% 14%

Other revenues and income from related parties 1,273 1,465

Other revenues and income - Consolidated total 7,485 8,491


Costs for raw materials and consumables incurred with related parties 683 789

Costs for raw materials and consumables - Total consolidated 113,845 96,340


Costs for services incurred with related parties 6,964 1,503

Costs for services - Consolidated total 83,810 78,270



31 December

2013

31 December

2012

Trade receivables from related parties 3,948 4,766

Trade receivables - Consolidated total 54,628 52,110


Other non-current assets with related parties 6,390 3,600

Other non-current assets - Consolidated total 9,055 7,443


Other current assets with related parties 977 4,942

Other current assets - Consolidated total 7,743 14,264


Trade payables due to related parties 1,481 973

Trade payables – Consolidated total 70,857 59,197


Other current liabilities due to related parties 4,828 132

Other current liabilities - Consolidated total 25,697 20,622


As regards executives with strategic responsibility, reference is made to the special section of the Annual

Financial Report "Compensation for executives with strategic responsibility".



153

43. IVESTMENTS IN JOINT VENTURES

The Parent has a 49% investment in PF Emirates LLC, a jointly controlled entity. The portion of the assets which

Poltrona Frau S.p.A. jointly controls and the portion of the liabilities for which it is jointly responsible, together

with the portion of revenues and costs of the jointly controlled entity, are as follows:


2013

31 December

2012

Non-current assets 849 1,170

Current assets 6,798 8,665

TOTAL ASSETS 7,647 9,835

Shareholders' equity 4,525 5,890

Non-current liabilities 90 103

Current liabilities 3,032 3,842

TOTAL LIABILITIES AND SHAREHOLDERS‟ EQUITY 7,647 9,835

REVENUES 5,569 5,295

OPERATING COSTS (6,381) (5,600)

FINANCIAL CHARGES AND INCOME (53) (53)

INCOME BEFORE TAXES (865) (358)

INCOME TAXES - -

PROFIT (LOSS) FOR THE YEAR (865) (358)

The Parent owns 50% investment in Casa Décor Private Limited, a jointly controlled entity. The portion of the

assets which Poltrona Frau S.p.A. jointly controls and the portion of the liabilities for which it is jointly

responsible, together with the portion of revenues and costs of the jointly controlled entity, are as follows:


2013

31 December

2012

Non-current assets 40 54

Current assets 1,113 2,778


Shareholders' equity (771) 450

Non-current liabilities 49 61

Current liabilities 1,875 2,321


REVENUES 983 2,755

OPERATING COSTS (2,349) (3,097)


INCOME BEFORE TAXES (1,517) (418)

INCOME TAXES - -

PROFIT (LOSS) FOR THE YEAR (1,517) (418)

Lastly, it is noted that since February 2013 the Parent owns a 49% investment in Zheijang Casanova Furniture

Ltd., joint venture, following the transfer of 51% of the company to the Chinese company Wenzhou Opal

Furniture Co. Ltd. The portion of the assets which Poltrona Frau S.p.A. jointly controls and the portion of the

liabilities for which it is jointly responsible, together with the portion of revenues and costs of the jointly

controlled entity, are as follows:



154


2013

31 December

2012

Non-current assets 1,200 1,292

Current assets 682 403


Shareholders' equity 412 361

Non-current liabilities 1,049 1,032

Current liabilities 421 302


REVENUES 415 285

OPERATING COSTS (732) (464)


INCOME BEFORE TAXES (359) (219)

INCOME TAXES - -

PROFIT (LOSS) FOR THE YEAR (359) (219)



155

COMMITMENTS AND CONTINGENT LIABILITIES

As at 31 December 2013, outstanding sureties totalled Euro 13,837 thousand (Euro 11,208 thousand as at 31

December 2012), mainly pledged in favour of contract segment customers. Moreover, a financial commitment

with respect to the Parent is outstanding for the amount of Euro 1 million, disbursed in favour of Intesa

Shanghai for a credit facility granted to the joint venture Zheijang Casanova Furniture Ltd. At the end of

February the financial liabilities of Zheijang Casanova Furniture Ltd company in favour of Intesa Shanghai was

refunded and the financial commitment expired.

SIGNIFICANT, NON-RECURRING ABNORMAL AND/OR UNUSUAL TRANSACTIONS

Pursuant to Consob Resolution no. 15519 of 27 July 2006 concerning the format of financial statements, in

relation to the effects resulting from events or transactions which are non-recurring, or from transactions, or

facts, which do not occur frequently as part of normal operations, the variable remuneration to the Chief

Executive Officer, amounting to around Euro 4.2 million, is recorded and highlighted pursuant to the IFRS 2

international accounting standard.

The agreement sets out a variable remuneration proportioned to the price of the Company's shares in case of

sale of the same. Upon occurrence of this condition, following the disposal agreed upon on 5 February 2014,

the fair value was measured at closure date by recognising the value in the income statement as defined by

qualifying the instrument as "Share Based Payments Cash Settled".

As regards the non-recurring post recognised as at 31 December 2012, reference is made to Note 33 thereof.

TRANSLATION OF THE FINANCIAL STATEMENTS OF FOREIGN OPERATIONS

The exchange rates used to translate the financial statements of foreign companies into Euro were as follows:

As at 31 December

2013 Average 2013

As at 31 December

2012 Average 2012

US Dollar (USD) 1.379 1.328 1.319 1.285

Pound (GBP) 0.834 0.849 0.816 0.811

Renminbi (CNY) 8.349 8.165 8.221 8.105

Japanese Yen (JPY) 144.720 129.663 113.610 102.492

Dirham (AED) 5.065 4.878 4.846 4.719

Tunisian Dinar (TND) 2.267 2.160 2.046 2.006

Qatari Rial (QAR) 5.022 4.836 4.804 4.678

Indian Rupee (INR) 85.366 77.930 72.560 68.597

Hong-Kong Dollar (HKD) 10.693 10.302 10.226 9.969



156

Other information

INVESTMENTS IN ASSOCIATES AS AT 31 DECEMBER 2013 (PURSUANT TO ART. 38.2 OF THE LEGISLATIVE

DECREE 127/91)

List of investments in subsidiaries accounted for using the line-by-line method:

Company name Registered office Direct Parent % held % held

by Group

Cap Design S.p.A. Meda, Milan – I Poltrona Frau S.p.A. 100% 100%

Cassina S.p.A. Meda, Milan – I Poltrona Frau S.p.A. 100% 100%

Cassina France S.A. Paris – F Cassina S.p.A. 100% 100%

Cassina Pacific Ltd. Hong Kong – People‟s


Cassina Shanghai Trading Co. Ltd Shanghai - People's


DieciDieci S.r.l. Bologna – I Poltrona Frau S.p.A. 100% 100%

Frau U.S.A. Corporation New York – USA Poltrona Frau S.p.A. 83% 83%

Frau France S.a.r.l. Paris – F Poltrona Frau S.p.A. 100% 100%

Meno Warenhandels GmbH (*) Vienna – A Poltrona Frau S.p.A. 60% 60%

Poltrona Frau UK Ltd. London – UK Poltrona Frau S.p.A. 100% 100%

Poltrona Frau PTE Ltd. Singapore – S Poltrona Frau S.p.A. 100% 100%

Poltrona Frau Group North America Inc. New York – USA Cassina S.p.A. 100% 100%

Poltrona Frau Deutschland GmbH Munich – G Poltrona Frau S.p.A. 100% 100%

Spazio Washington LLC Washington - USA Poltrona Frau Group

North America Inc. 100% 100%

(*) Company placed under liquidation in the second half of 2012

List of investments accounted for using the equity method:


Share capital

(in currency

units)


% held

by

Group

INVESTMENTS IN ASSOCIATES

K.B.R. S.a.r.l. Tunis – Tunisia TND 18,000 Poltrona Frau S.p.A. 20% 20%

Alias S.p.A. Grumello del Monte – I Euro 510,308 Cassina S.p.A. 49% 49%

Nemo S.r.l. Milan – I Euro 100,000 Cassina S.p.A. 49% 49%

INVESTMENTS IN JOINT VENTURES

PF Emirates Interiors LLC Abu Dhabi - UAE AED 10,000,000 Poltrona Frau S.p.A. 49% 49%

Casa Décor Private Ltd. Mumbai – India INR 273,377,660 Poltrona Frau S.p.A. 50% 50%

Zhejiang Casanova Furniture Co. Ltd. (*) Zhejiang People's Rep. of

China RMB 41,295,502 Poltrona Frau S.p.A. 49% 49%

(*) Company accounted for using the equity method from 2013



157

List of investments in other companies:


Share capital

(in currency

units)


% held

by

Group

INVESTMENTS IN OTHER COMPANIES MEASURED AT COST (CELI AND FONDAZIONE) AND AT FAIR VALUE (CASSINA IXC)

Celi S.p.A. Stroncone – I Euro 2,363,837 Poltrona Frau S.p.A. 5% 5%

Cassina IXC Ltd. Tokyo – J Yen 400,294 Cassina S.p.A. 12% 12%

Fondazione Studio - Museo Vico Magistretti Milan – Italy Euro 248,500 Cassina S.p.A. 0.4% 0.4%



158

SUBSEQUENT EVENTS

With reference to events after the end of 2013, see the explanation in the Management Report.



159

ATTESTATION ON THE CONSOLIDATED FINANCIAL STATEMENTS PURSUANT TO ARTICLE 81-TER OF CONSOB

REGULATION NO. 11971 OF 14 MAY 1999, AS AMENDED AND SUPPLEMENTED

1. The undersigned, Dario Rinero, Chief Executive Officer, and Cesare Parachini, officer responsible for the

preparation of the corporate accounting documents of Poltrona Frau S.p.A., hereby attest, also taking into

account the requirements of article 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of 24

February 1998:

the adequacy with respect to the characteristics of the Group and

the actual application of the administrative and accounting procedures required for the preparation

of the consolidated financial statements during 2013.

2. In this respect the administrative and accounting procedures required for the preparation of the

consolidated financial statements for the year ended 31 December 2013 and the assessment of their

adequacy were carried out on the basis of a process established by Poltrona Frau S.p.A. that is consistent

with the document “Internal Control - Integrated Framework” and also takes into account the document

“Internal Control over Financial Reporting - Management Tools”, both drawn up by the Committee of

Sponsoring Organisations of the Treadway Commission (CoSO), an internationally generally accepted

reference framework.

3. The undersigned moreover attest that:

3.1 The consolidated financial statements for the year ended 31 December 2013:

a) have been prepared in accordance with the applicable international accounting standards recognised

by the European Union pursuant to Regulation (EC) no. 1606/2002 of the European Parliament and of

the Council of 19 July 2002;

b) correspond to the amounts stated in the accounting books and records;

c) are suitable for providing a true and fair view of the financial position, results of operations and cash

flows of the issuer and the set of companies included in the consolidation.

3.2 The report on operations includes a reliable analysis of the performance and results of operations, as

well as of the situation of the issuer and the set of companies included in the consolidation, together with

a description of the main risks and uncertainties to which they are exposed.

Milan, 13 March 2014

Officer responsible for the

preparation of the corporate

Chief Executive Officer accounting documents

Dario Rinero Cesare Parachini



160

INDEPEN

DE

NT

AUDITORS'

REPORT



161



162

Poltrona Frau Materials



163


FINANCIAL STATEMENTS AS AT 31 DECEMBER 2013



164



165

Statement of Financial Position (in Euro)

Note 31 december 2013 31 december 2012

(*)

NON-CURRENT ASSETS

Goodwill 1 499,162 499,162

Intanbile assets 2 5,610,954 5,588,724

Tangible fixed assets 3 25,558,139 25,676,107

Investments in subsidiaries, associates and joint venture companies 4 58,314,634 59,330,176

Other investments 5 - 133,337

Other non-current assets 6 3,981,130 3,816,616

of which from related parties 35 3,389,791 3,139,327

Deferred tax assets 7 1,525,914 1,644,452

TOTAL NON-CURRENT ASSETS 95,489,933 96,688,574

CURRENT ASSETS

Inventory 8 37,539,779 24,500,708

Trade receivables 9 37,008,111 31,322,090


Other current assets 10 10,372,298 9,872,384


Derivative financial instruments 11 25,311 15,371

Cash and cash equivalents 12 13,291,663 3,291,141

TOTAL CURRENT ASSETS 98,237,162 69,001,694

TOTAL ASSETS 193,727,095 165,690,268

SHAREHOLDERS' EQUITY

Share capital

34,604,232 34,809,622

Share premium reserve

1,237,854 2,529,888

Other reserves

4,960,999 5,088,875

Profits (losses) of previous year

(2,834,364) (835,047)

Profit/(loss) for the year 190,286 (1,999,317)

TOTAL SHAREHOLDERS' EQUITY 13 38,159,007 39,594,021

NON-CURRENT LIABILITIES

Medium-long term borrowings 14 24,793,765 24,898,999

Employee benefits 15 3,050,007 2,823,602

Provisions for risks and charges 16 2,141,349 2,304,684

Deferred tax liabilities 17 1,963,871 2,103,507

Other non-current liabilities 18 464,336 509,272

TOTAL NON-CURRENT LIABILITIES 32,413,328 32,640,064

CURRENT LIABILITIES

Trade payables 19 41,555,699 35,002,061

of which from related parties 35 940,616 3,262,875

Due to banks and other loans 20 22,919,914 22,686,827

Tax payables 21 4,304,874 1,079,385

Derivative financial instruments 22 298,694 598,080

Other current liabilities 23 54,075,579 34,089,830


TOTAL CURRENT LIABILITIES 123,154,760 93,456,183

TOTAL LIABILITIES 155,568,088 126,096,247

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 193,727,095 165,690,268


with those of the current year following the application of the new IAS 19 on the part of the Parent.



166

Income Statement (in Euro)

Note 31 december 2013 31 december 2012 (*)

Revenues fron sales 135,024,818 106,201,765

of which from related parties 36,203,666 33,202,103

Other revenues and income 9,659,712 11,477,521

of which from related parties 5,343,281 7,080,134

REVENUES 24 144,684,530 117,679,286

Costs of raw material and consumables 25 (69,406,132) (51,831,679)

of which from related parties 35 (1,098,606) (1,122,064)

Costs for services 26 (39,586,799) (32,479,268)

of which from related parties 35 (2,121,253) (2,014,796)

of which non-recurring from related parties (4,171,429) -

Personnel costs 27 (23,211,080) (22,379,060)

Other operating costs 28 (455,306) (366,640)

Restructuring costs 29 - (1,923,896)

of which non-recurring - (1,923,896)

Amortization or depreciation 30 (4,240,284) (3,820,822)

TOTAL OPERATING COSTS (136,899,601) (112,801,365)

OPERATING INCOME 7,784,929 4,877,921

Income (loss) from investments 31 (3,242,289) (2,738,899)

Financial charges 32 (4,018,911) (3,888,678)

Financial income 32 2,627,349 755,399

INCOME BEFORE TAXES 3,151,078 (994,257)

Income taxes 33 (2,960,792) (1,005,060)

PROFIT / (LOSS) FOR THE YEAR 190,286 (1,999,317)





167

Statement of Comprehensive Income (in Euro)

31 december

2013

31 december

2012 (*)

PROFIT FOR THE YEAR 190,286 (1,999,317)

Items that may be reclassified subsequently to profit and loss, net of taxes

Total items that may be reclassified subsequently to profit and loss, net of taxes - -

Items that will not be reclassified subsequently to profit and loss, net of taxes

Remeasurements of post-employment benefit obligations

(214,297) (160,470)

Total items that will not be reclassified subsequently to profit and loss, net of taxes (214,297) (160,470)

TOTAL ITEMS OF COMPREHENSIVE INCOME, NET OF TAXES (214,297) (160,470)

TOTAL COMPREHENSIVE INCOME (24,011) (2,159,787)





168

Cash Flow Statement (thousands of Euro)

Note

31

december

2013

31

december

2012 (*)

NET CASH FLOW FROM OPERATING ACTIVITIES

Profit / (loss) for the year

191 (2,000)

Adjustments to reconcile profit (loss) for the year with the cash flow generated (used in ) by operationg

activities:

Amortization or depreciation 30 3,992 3,821

Provisions and write-downs

3,884 1,436

Change in fair value of financial instruments 11/22 (309) 84

Allocations to provisions for personnel 15 98 178

Payments relating to employee severance indemnity 15 (156) (197)

Payments relating to other provisions and incentives 16 (518) (78)

Capital loss (gains) on sale of non-current assets

(7) (92)

Change in deferred tax assets and liabilities 7/17 60 (428)

Taxes paid in the year

(640) (1,175)

Change in operative assets and liabilities

Change in trade receivables 9 (5,686) 6,594

Change in inventory 8 (13,039) (208)

Change in trade payables 19 6,555 2,746

Other - net

4,605 (1,916)

NET CASH FLOW GENERATED (USE IN) BY OPERATING ACTIVITIES (A) (970) 8,765

CASH FLOW FROM INVESTMENT ACTIVITIES

Sale of tangible and intangible fixed assets

33 143

Purchase of tangible fixed assets 3 (2,816) (3,356)

Purchase of intangible assets 2 (1,378) (1,660)

Investments acquisition/capital increase 4 (1,275) (1,133)

Net change in other non current assets/liabilities 3,136 (669)

NET CASH FLOW GENERATED (USED IN) BY INVESTMENT ACTIVITIES (2,300) (6,675)

CASH FLOW FROM FINANCING ACTIVITIES

Medium-long-term borrowings 14 7,300 3,000

Repayment of medium-long-term borrowings 14 (5,605) (5,428)

Interest paid in the year 32 (2,170) (2,069)

Interest earned in the year 32 4 32

Net change in other short/medium-term financial liabilities

15,240 744


Purchase of treasury shares 13 (2,344) (1,026)

NET CASH FLOW GENERATED (USED IN) BY FINANCING ATIVITIES (C) 13,271 (3,790)

TOTAL CASH FLOWS (D=A+B+C) 10,001 (1,700)

NET CASH AND CASH EQUIVALENTS AT THE BEGINNIG OF YEAR (G) 3,291 4,991

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR (F=D+E) 13,292 3,291





169

Statement of Changes in Equity (thousand of Euro)

Share

capital

Share premium

reserve

Other

reserve (*)

Net merger

surplus

(deficit)

Retained

earning (*)

Total

Sharesholders'

Equity

Balance at 31 December 2011 34,816 2,593 7,777 (2,667) (836) 41,683




Recognition of stock option plan costs 140 140

Purchase of treasury shares (273) (753) (1,026)


Other changes (1) 1

Total comprehensive income (160) (2,000) (2,160)

Balance at 31 December 2012 34,810 2,530 7,756 (2,667) (2,835) 39,594




Purchase of treasury shares

86

86

Sale of treasury shares (447) (1,897)

(2,344)

Recognition of stock option plan costs 241 605

846

Other changes


(214)

191 (23)

Balance at 31 December 2013 34,604 1,238 7,628 (2,667) (2,644) 38,159





170

Notes to the Financial Statements

FORMAT AND CONTENT

Poltrona Frau S.p.A., founded in 1912, is a company registered under Italian law having its registered office at

Vincenzo Vela 42, Turin. Poltrona Frau S.p.A., a company listed on the STAR segment of the Milan Stock

Exchange, is the Parent of one of the main Italian groups and is an international leader in the design and top

range furnishing sectors, and has created around its historical furnishing brand a genuine “Design hub”, having

the aim of combining the autonomy and specificity of each of the brands and respective business histories

which make up the Group with a unitary vision of growth and penetration abroad, promotion and commercial

strategies.

The separate financial statements of Poltrona Frau S.p.A. for the year ended 31 December 2013 have been

prepared in accordance with the International Financial Reporting Standards (hereafter also “IFRS”) issued by

the International Accounting Standards Board (“IASB”) and adopted by the European Union in accordance with

the procedure stated in article 6 of Regulation (EC) no. 1606/2002 of the European Parliament and of the

Council of 19 July 2002 and the provisions issued to implement article 9 of Legislative Decree no. 38/2005.

The accounting principles used to prepare the financial statements for the year ended 31 December 2013 are

consistent with those used for the year ended 31 December 2012 except for the classification of actuarial

profits/losses deriving from the calculation of Employee benefits. These actuarial profits/losses are now booked

under “Other items of the Statement of Comprehensive Income”, in accordance with the provisions of the new

IAS 19. For more details, refer to that specified in the subsequent paragraph “Changes in accounting principles

and disclosures”. No derogation to the application of the IFRS was applied when drafting the financial

statements of the year.

A summary statement of the changes applied to the data relative to 31 December 2012, and linked to the entry

into force of IAS 19, are summarized below:

Statement of financial position 31.12.2012

(restated) 31.12.2012 Change

Share capital 34,810 34,810 -

Share premium reserve 2,530 2,530 -


Profit / (loss) of previous years (835) (779) (56)

Profit / (loss) of the year (2,000) (2,160) 160

TOTAL SHAREHOLDERS‟ EQUITY 39,594 39,594 -

Income statement 31.12.2012

(restated) 31.12.2012 Change

Financial charges (3,889) (4,110) 221

Result before taxes (995) (1,216) 221

Income taxes (1,005) (944) (61)

Profit (or loss) of the year (2,000) (2,160) 160

The separate financial statements consist of the Statement of Financial Position, the Income Statement, the

Statement of Comprehensive Income, the Statement of changes in equity and the Cash flow statement,

prepared in accordance with IAS 1, and the notes to the financial statements prepared in accordance with IFRS.

The Income Statement is presented using a classification based on the nature of expenses and, as of 31

December 2012, additionally includes the item “restructuring costs”, in which costs of a non-recurring nature

connected with the project for reorganising the Company are classified in order to achieve a better



171

understanding and measurability of the actual performance of ordinary operations. The Statement of Financial

Position is presented in current/non-current assets and liabilities, while the Cash flow statement is presenting

using the indirect method.

The statutory financial statements have been prepared on a cost basis, with the exception of derivatives which

are measured at fair value. The financial statements are presented in Euro, whilst all other amounts are rounded

to thousands of Euro unless otherwise stated.

Lastly, with reference to Consob Regulation no. 15519 of 27 July 2006 concerning the format of financial

statements the following sub-items have been presented if material: in the statement of financial position, the

income statement and the cash flow statement the amounts of any balances or transactions with related

parties; in the income statement any income or expense (positive and/or negative) deriving from events or

transactions which are non-recurring or from transactions or facts which do not occur frequently in the course

of normal operations. These latter items are presented under the income or expense items to which they refer.

ACCOUNTING PRINCIPLES AND POLICIES

Intangible fixed assets

Separately acquired intangible assets are recognised as such at cost if it is probable that the use of the assets

will generate future economic benefits and if the cost of the asset can be measured reliably. Intangible assets

acquired in business combinations are recognised at their fair value at the acquisition date if this can be

measured reliably.

Internally generated intangible assets, excluding development costs, are not capitalised and are recognised as

an expense in the period they are incurred.

Intangible assets may have finite useful lives or indefinite useful lives. In particular, there are the following

classes of intangible assets whose useful lives are determined as follows:

- brands with indefinite useful life

- development costs with finite useful life

- industrial patents and intellectual property rights with finite useful life

- concessions, licences and similar rights with finite useful life

After initial recognition, intangible assets with finite useful lives are recognised at cost less accumulated

amortisation and impairment losses. The amortisation period and method used are reviewed at the end of each

financial year or more frequently if necessary.

The amortisation periods used for intangible assets with finite useful lives are as follows:

- development costs 5 years

- industrial patents and intellectual property rights 10 years

- concessions, licences and similar rights 3 years

Expenditure on research is recognised directly as an expense in the period it is incurred.

Development costs incurred in connection with a specific project are only capitalised if the company can

demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or

sale, its intention to complete the intangible asset and use or sell it to third parties, how it will generate



172

probable future economic benefits, the availability of technical, financial or other resources to complete the

development, its ability to measure reliably the expenditure attributable to the intangible asset during its

development and the existence of a market for the goods and services deriving as an output from the intangible

asset or if it is to be used internally the usefulness of the intangible asset. The development costs capitalised

comprise only the expenditure that is directly attributable to the development process.

After initial recognition capitalised development expenditure is recognised at cost less accumulated

amortisation and any impairment losses determined by the means described for intangible assets with finite

useful lives.

In addition to undergoing this process of amortisation over their useful lives, intangible assets with finite useful

lives are also subject to impairment testing if there are indications that they may be impaired.

After initial recognition, intangible assets with indefinite useful lives are not amortised and are recognised at

cost less any accumulated impairment losses. Intangible assets with indefinite useful lives undergo impairment

testing once a year and more frequently at an individual level or at cash-generating unit level if any events or

changes occur which could lead to impairment losses arising.

Tangible fixed assets

Tangible fixed assets are stated at acquisition cost less accumulated depreciation and any accumulated

impairment losses. Depreciation is charged on a straight line basis over the estimated useful life of an asset.

Depreciation of an asset begins when it is available for use, namely when it enters the production cycle, and is

charged on a straight line basis over the estimated useful life of the asset, taking account of its residual value.

The depreciation periods used, which reflect the useful lives generally attributable to the various classes of

assets and which are unchanged compared to the previous year, are as follows:

- buildings from 10 to 33 years

- plant and machinery from 8 to 11 years

- industrial and commercial equipment 4 years

- other from 4 to 8 years

Land is not depreciated as it has an unlimited useful life.

The carrying amount of tangible fixed assets is subject to impairment testing if events or changes indicate that

the carrying amount may not be recoverable according to the established depreciation plan. If indications of

this nature exist and if the carrying amount exceeds estimated realisable value, the assets or the cash-

generating units to which the assets have been allocated are written down to reflect their realisable value.

The residual value of an asset, its useful life and the methods used are reviewed on an annual basis and

adjusted if necessary at the end of each year.

Assets acquired under finance and operating leases

Finance leases, which transfer substantially all the risks and rewards incidental to ownership of the leased asset

to the Parent, are capitalised as part of tangible fixed assets, starting from the initial date of the lease, and

recognised at the fair value of the leased asset or, if lower, the present value of the lease payments. A liability



173

of the same amount is also recognised, which is gradually reduced on the basis of the repayment plan by the

capital portion included in the contractual instalments.

Lease instalments are divided between a capital portion and an interest portion in order to obtain a constant

interest rate on the balance of the residual liability (the capital portion). Financial charges are recognised in the

income statement. Assets are depreciated using the criteria and useful lives described in the previous paragraph

“Tangible fixed assets”.

Leases where the lessor keeps substantially all the typical risks and rewards of ownership are accounted for as

operating leases. Operating lease payments are recognised as an expense over the lease term.

Any sale and leaseback transactions where the “repurchase” of the originally owned asset - by means of a lease

arrangement - is carried out under a finance lease are recognised for accounting purposes as a financing

transaction. The assets involved in this transaction remain in the balance sheet with continuity of accounting

treatment and a liability is recognised as a counter-entry to the cash flows arising from the sale. Any gain

arising on sale is recognised in profit or loss on an accrual basis. This leads to the recognition of deferred

income and the gradual release of the balance to income over the lease term.

Impairment

At each reporting date the Group reviews the book value of its tangible and intangible assets with a finite

useful life to determine whether there are any impairment indicators. If there are any such indicators,

impairment testing is performed on the total recoverable amount of the assets concerned is estimated the

extent of impairment. Where the recoverable value of an asset cannot be estimated individually, the Group

estimates the recoverable value of the cash generating unit in which the asset is included.

The total recoverable amount equals the higher between the fair value less costs to sell and the value in use. In

the absence of a binding agreement to sell, the fair value is estimated on the basis of the values quoted on an

active market, recent transactions or the best information available to reflect the amount that the company

could receive from sale of the asset.

In the assessment of value in use, the estimated future cash flows are discounted at the current value using a

rate net of taxes that reflects the current market assessment of the value of money and the asset-specific risks.

If the recoverable amount of an asset (or cash generating unit) is estimated as lower than the book value, the

book value of the asset is reduced to the lower recoverable value. The impairment amount is recognised to the

income statement.

If there is no longer any reason for the write-down to be continued, the book value of the asset (or cash

generating unit) is increased to the new book value deriving from an estimation of its recoverable value, but

not beyond the net carrying amount that would have applied to the asset had no impairment been recognised.

The restored value is recognised to the income statement.

Goodwill and infinite-life intangible assets are impairment tested each year, or more frequently if there should

be any indication that the asset is impaired.

Investments

Investments in subsidiaries and associates are measured at cost adjusted for any impairment losses calculated

on the basis of appropriate impairment testing.



174

Other non-current assets

Loans and receivables classifies as non-current assets are measured at amortised cost. Receivables due after

more than one year, non-interest bearing receivables and receivables bearing interest below market rates are

discounted using market rates.

Inventories

Inventories are measured at the lower of purchase or production cost and net realisable value, which is the

amount that the Group expects to obtain from a sale in the ordinary course of business. The weighted average

cost formula is used. The weighted average cost includes the attributable accessory costs for purchases of the

period. The measurement of inventories includes the direct cost of materials and labour and production

overheads. Provisions are recognised for materials, finished goods, spare parts and other items considered

obsolete or slow-moving, taking account of their expected future use and realisable value.

Contract work is measured on the basis of the percentage of completion, which is determined as the ratio

between the costs for the contract incurred at the balance sheet date and total estimated costs, and is stated

net of any obsolescence provisions. Losses on such contracts are fully recognised as an expense as soon as they

become known.

Trade receivables

Trade receivables are measured at fair value identified as nominal value less any impairment losses, accounted

for by providing an allowance for doubtful accounts. Trade receivables due beyond normal commercial terms

and which do not bear interest are discounted.

Cash and cash equivalents

Cash and cash equivalents are measured at nominal value or amortised cost depending on their nature.

Long-term borrowings

Long-term borrowings are initially recognised at fair value plus transaction costs; they are subsequently

measured at amortised cost, being their initial amount less any repayments of principal, adjusted (up or down)

on the basis of the amortisation (using the effective interest method) of any differences between their initial

amount and their value at due date.

Personnel provisions

Benefits ensured to employees which are paid on or after the completion of employment by means of defined

benefit plans (the employees‟ leaving entitlement - trattamento fine rapporto - for Italian employees) are

recognised in the rights vesting period.

Liabilities arising from defined benefit plans, net of any plan assets, are calculated on the basis of actuarial

assumptions and are recognised on an accrual basis consistent with the service which needs to be provided to

obtain the benefits; the valuation of liabilities is performed by independent actuaries.

As previously reported, actuarial gains/losses as of 1 January 2013 are booked under “Other items of the

Statement of Comprehensive Income”, in accordance with the provisions of the new IAS 19.



175

Other employee benefits

As required by IFRS 2 (Share-based Payment) stock options granted to employees are measured at their fair

value at the grant date using models which take into account factors and elements (the exercise price of the

option, the life of the option, the current price of the underlying shares, the risk-free interest rate for an

investment for the life of the option) in force at the grant date.

If the right becomes exercisable after a certain period and/or on the occurrence of certain performance

conditions (the vesting period) then the total value of the options is allocated on a temporal basis over this

period and recognised in a specific item of equity with counter-entry “Personnel costs” in the income statement

(being a payment in kind to the employee having the aim of creating loyalty and encouraging business

performance).

At the end of each year the previously calculated fair value of each option is not revised or updated but

remains acquired in equity on a definitive basis; an updating is however made at that date of the estimate of

the number of options which will vest until expiry (and hence the number of employees who will be entitled to

exercise those options). The changes in estimates are recognised as increases or decreases of shareholders‟

equity item with a counter-entry being made to “Personnel costs” in the income statement.

On the expiry of an option the amount stated in the equity account is reclassified in the following way: the

portion of the equity account relating to exercised options is reclassified to the “Share premium reserve” while

the portion relating to unexercised options is reclassified to the account “Retained profit (loss)”.

Cash-settled share-based payment plans for employees are initially recognised at fair value at the grant date

using an actuarial calculation and taking account of the formula for determining the resale price to the

company and the terms and conditions which govern the granting of the instrument. This fair value is expensed

over the vesting period with the recognition of a corresponding liability.

The liability is remeasured at each reporting date until and including the date of settlement, with any changes

in fair value recognised in profit or loss.

Trade payables and other current liabilities other than financial instruments

Trade payables whose due date is within normal commercial terms are initially recognised at cost (identified as

their nominal value) and are not discounted.

Provisions for risks and charges

Provisions for risks and charges regard costs and charges of a determinate nature whose existence is certain or

probable but whose amount or date of occurrence is uncertain at the balance sheet date. Provisions are

recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable

that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the

amount of the obligation.

Provisions are measured as the best estimate of the expenditure that the Group would have to pay to settle the

obligation or transfer it to third parties at the balance sheet date. Where the time value of money is material,

the amount of a provision is the present value of the expected future cash flows discounted using a pre-tax

rate that reflects current market assessments of the time value of money. When a present value calculation is

performed, the increase in the provision arising from the passage of time is recognised as a financial charge.

Derivative financial instruments

The Company uses derivative financial instruments such as interest rate swaps and forward currency contracts

to hedge the risks resulting mainly from fluctuations in interest rates and foreign exchange rates. These

derivative financial instruments are initially recognised at fair value at the date on which the contract is



176

entered; the fair value is then subsequently periodically remeasured. Instruments are classified as assets when

fair value is positive and as liabilities when it is negative.

Any gains or losses arising from changes in the fair value of derivatives which do not qualify for hedge

accounting are recognised directly in profit or loss for the period.

The fair value of forward currency contracts is calculated by referring to current forward foreign exchange rates

included in contracts having a similar maturity profile. The fair value of interest rate swap contracts is

calculated by referring to the market value of similar instruments.

Revenue recognition

Revenues are recognised to the extent that it is probable that economic benefits will flow to the Company and

the amount of revenue can be measured reliably. The following specific policies must be satisfied before

revenue may be recognised in the income statement:

Sale of goods

Revenues from the sale of goods are recognised at fair value when the risks and rewards of ownership of the assets have transferred to the buyer; this generally occurs on despatch of the goods. Revenues are stated net of discounts and allowances.

Provision of services

Revenues from the rendering of services are recognised as the services are provided.

Dividends

Dividends are recognised when the shareholders‟ right to receive payment has vested.

Financial charges and income

Financial income and charges are recognised on an accrual basis and are calculated on the net amount of the

respective assets and liabilities using the effective interest method.

Income taxes

Current taxes

Current tax assets and liabilities for the current year or for previous years represent the amount that the Group

expects to recover from or pay to the tax authorities. The rates and tax laws used for calculating these amounts

are those enacted at the balance sheet date.

Deferred taxes

Deferred tax assets and liabilities are calculated using the liability method on the temporary differences

between the carrying amount of an asset or liability in the balance sheet and its tax base. Deferred tax assets

are also recognised for unused tax losses.

Deferred tax liabilities are recognised for all taxable temporary differences except in the following cases:



177

– when deferred tax liabilities arise from the initial recognition of goodwill or an asset or liability in a

transaction which is not a business combination and which, at the time of the transaction, affects neither

accounting profit nor taxable profit or loss;

– for taxable temporary differences associated with investments in subsidiaries, associates or joint ventures,

where the reversal of the temporary differences can be controlled and it is probable that the temporary

difference will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences and for the carryforward of unused

tax losses to the extent that it is probable that future taxable profit will be available against which the

deductible temporary difference and unused tax losses can be utilised except in the following cases:

– when deferred tax assets connected with deductible temporary difference arise from the initial recognition

of an asset or liability in a transaction which is not a business combination and which, at the time of the

transaction, affects neither accounting profit nor taxable profit or loss;

– for deductible temporary differences associated with investments in subsidiaries, associates or joint

ventures, deferred tax assets are recognised to the extent that it is probable that the deductible temporary

differences will reverse in the foreseeable future and taxable profit will be available against which the

temporary differences can be utilised.

Deferred tax assets are recognised when their recovery is considered probable on the basis of the expected

future availability of taxable profit sufficient to realise the deferred tax assets. The recoverability of deferred

tax assets is reviewed at each reporting date.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when

the asset is realised or the liability is settled, based on current tax rates and those that have been enacted or

substantively enacted by the balance sheet date.

Income taxes relating to items that are recognised directly in equity are themselves recognised directly in

equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset if there is a legally enforceable right to offset current

tax assets against current tax liabilities and if the deferred tax assets and deferred tax liabilities relate to

income taxes levied by the same tax authority on the same taxable entity.

Translation of items in foreign currency

The Company has adopted the Euro as its functional and presentation currency. Transactions in foreign currency

are initially recognised at the exchange rate at the date of the transaction.

Monetary assets and liabilities denominated in foreign currency are translated to the functional currency at the

exchange rate at the balance sheet date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the

exchange rate at the date of the initial recognition of the transaction. Non-monetary items that are measured

at fair value are translated using the exchange rate at the date when the fair value was determined.

Treasury shares

Treasury shares are stated as a deduction from equity. More specifically, the nominal value of treasury shares is

accounted for as a deduction from issued share capital while any excess of the purchase amount over the

nominal value is accounted for as a deduction from “Other reserves”.



178

Derecognition of financial instruments

Financial instruments are derecognised when the Company no longer holds the contractual rights to the

instruments. This usually occurs when the instrument is sold or when the cash flows generated by the

instrument pass through an independent third party.

Use of estimates

The preparation of financial statements and related notes in accordance with IFRS requires the Company to

make estimates and assumptions that affect the amounts of assets and liabilities in the financial statements

and the disclosure of contingent assets and liabilities at the date of those statements. Actual results could

differ from those estimates. Estimates are used to calculate the allowance for doubtful accounts receivable,

inventory obsolescence, depreciation, amortisation, impairment losses, employee benefits, taxation and

provisions for risks and charges. Estimates and assumptions are reviewed periodically and the effects of any

changes are recognised immediately in profit or loss.

The principle measurement process in which the Company used estimates was that regarding impairment

testing.

Changes in accounting principles and disclosures

The accounting principles used in the preparation of the separate financial statements for the year ended 31

December 2013 are consistent with those used in the previous year.

New accounting principles, amendments and interpretations effective as of 1 January 2013 and adopted by the

Parent.

Amendments to IAS 1 - Presentation of Financial Statements. On 16 June 2011, the IASB published this

amendment which requires the grouping of all items presented within the statement of comprehensive

income depending on whether they can be subsequently booked within the income statement. This

amendment was also incorporated by FASB in order to obtain comparability between international

accounting principles (IFRS) and US accounting principles (US GAAP). The adoption of this amendment

had limited effects on information relative to Other overall profits/(losses) reported in these financial

statements;

IAS 12 - Deferred Tax - Recovery of Underlying Assets. This amendment clarifies the calculation of

deferred taxes on real estate assets measured at fair value. The amendment introduces the rebuttable

assumption that the book value of a real estate investment - measured at fair value according to IAS

40 - will be recovered through a sale and, as a result, the relative deferred taxation should be valuated

on a sale basis. This assumption refuted if the real estate investment can be depreciated and held with

the objective of substantially utilizing over time all the benefits which are derived from the real estate

investment itself rather than realizing these benefits through a sale. The amendment had no effect on

the financial position or on the results or financial reporting of the Parent;

Amendments to IAS 19 - Employee Benefits. On 16 June 2011, the IASB published the amended version

of IAS 19. The most important changes concerned the elimination of the option known as the “corridor

method” for the recording of actuarial profits and losses (not utilized by the Poltrona Frau Group), the

presentation of changes in assets and liabilities deriving from defined-benefit plans - including their

re-determination within the statement of comprehensive income – and a greater request for

information relative to the characteristics and risks of defined benefit plans for companies. The

amendments aim to supply the reader of financial statements with a clearer picture of the company‟s



179

obligations in relation to defined benefit plans and how the latter can influence future economic

performance, cash flows and the net financial position of the Parent. In accordance with the transition

rules pursuant to IAS 19 under paragraph 173, the Parent has applied this amendment to IAS 19 in a

retrospective manner as of 1 January 2013 by adjusting the opening values of the statement of

financial position of 1 January 2012 and 31 December 2012 as well as the economic values of 2012, as

if the amendment had always been applicable;

IFRS 13 – Fair value measurement. On 12 May 2011, IASB issued, in accordance with FASB, a guide for

fair value measurements. It was concluded that the adoption of this new principle does not involve

significant effects on the financial statements;

IFRS 7 – Financial Instruments - Disclosures. On 16 December 2011, IASB and FASB issued joint

provisions on disclosures that must be provided in the case of compensation of financial assets with

financial liabilities. The requested information must be supplied retroactively. It was concluded that the

adoption of this new principle does not involve significant effects on the financial statements.

On 17 May 2012 the IASB issued a series of amendment to the IFRS (“Annual Improvements to IFRSs -

2009-2011 Cycle”); those which are applicable to the Parent are cited below while also not considering

those which only resulted in terminological changes and with minimum effects on accounting:

IAS 1 – Presentation of Financial Statements: this amendment clarifies the modalities of presentation

of comparative information in the case that a company modifies its accounting principles and

implements a retrospective restatement of items or a re-classification, as well as in cases where the

company supplies additional reports on financial situations compared to that required by the principle.

This amendment was applied at the time of the retrospective restatement of financial data in reference

to the application of the amendment to IAS 19;

IAS 16 – Property, Plant and Equipment: the amendment clarifies that spare parts and substitute

equipment must only be capitalized if they comply with the definition of "Property, plant and

equipment”, otherwise they must be classified as Inventories;

IAS 32 – Financial Instruments: Presentation: this amendment eliminates the inconsistency between

IAS 12 – Income Taxes and IAS 32 in relation to the booking of taxes derived from distributions to

shareholders by stating that the latter must be booked within the income statement to the extent that

the distribution refers to proceeds generated from operations that were originally booked within the

income statement.

IFRS and IFRIC accounting principles, amendments and interpretations that have been ratified by the EU but

which are not yet applicable except through early adoption

On 12 May 2011, the IASB issued IFRS 10 - Consolidated Financial Statements, which replaces SIC 12 -

Consolidation: Special Purpose Entities and parts of IAS 27 - Consolidated and Separate Financial

Statements, which will be renamed “Separate Financial Statements” and will govern the accounting of

investments in the separate financial statements. The competent bodies of the European Union have

completed the process of ratification of this principle, postponing the date of its application to 1

January 2014, but allowing, in any case, and early adoption as of 1 January 2013. The Parent is

evaluating the effects of adopting this new principle;

On 12 May 2011 the IASB issued IFRS 11 - Joint Arrangements, which replaces IAS 31 - Interests in

Joint Ventures and SIC 13 - Jointly-controlled Entities: Non-monetary Contributions by Venturers. The

new standard – without prejudice to the criteria for identifying the presence of joint control – supplies

criteria for the accounting of joint venture agreements that are based on the rights and obligations

deriving from these agreements rather than on their legal form, and also establishes the equity method

as the only method for booking investments in joint ventures within the consolidated financial



180

statements. The competent bodies of the European Union have completed the process of ratification of

this principle, postponing the date of its application to 1 January 2014, but allowing, in any case, an

early adoption as of 1 January 2013. The Parent is evaluating the effects of adopting this new principle,

and which are not expected to be significant;

On 12 May 2011 the IASB issued IFRS 12 - Disclosure of Interests in Other Entities, a new and

complete standard on the additional information to be provided for each type of investment, including

in subsidiaries, joint ventures, associates, special purpose entities and other companies not

consolidated. The competent bodies of the European Union have completed the process of ratification

of this principle, postponing the date of its application to 1 January 2014;

On 16 December 2011 the IASB issued a number of amendments to IAS 32 - Financial Instruments:

Presentation, to clarify the application of certain criteria for the offsetting of financial assets and

liabilities included in IAS 32. The amendments must be applied from financial years beginning on or

after 1 January 2014, with effects backdated.

As of the date of these financial statements, the competent bodies of the European Union had not yet

completed the ratification process which is necessary for the adoption of the following accounting principles

and amendments:

On 12 November 2009, the IASB published IFRS 9 – Financial instruments; the same principle was

subsequently amended. This principle – which must be applied as of 1 January 2015 in a retrospective

manner – represents the first part of a process in phases whose purpose is to entirely replace IAS 39

and introduce new criteria for the classification and valuation of financial assets and liabilities. In

particular, and with regard to financial assets, the new principle utilizes a single approach that is based

on the modalities for managing financial instruments as well as on the characteristics of the

contractual cash flows of the financial assets themselves in order to determine their valuation

criterion, thereby replacing the different rules pursuant to IAS 39. With regard to financial liabilities,

on the other hand, the primary modification which occurred concerned the accounting treatment of

changes in fair value of a financial liability which was designed as valuated at fair value through the

income statement, and in the case that these changes were due to a change in the credit rating of the

liability itself. According to the new principle, these changes must be booked under Other

comprehensive income / (losses) and will no longer be applied within the income statement;

On 20 May 2013, the IASB issued IFRIC 21 – Levies, an interpretation of IAS 37 - Provisions,

Contingent Liabilities and Contingent Assets. IFRIC 21 clarifies when an entity should book a liability

for the payment of taxes imposed by the government, with the exception of those already regulated by

other principles (e.g. IAS 12 – Income Taxes). IAS 37 establishes the criteria for recognition of a

liability, one of which is the existence of a current obligation for the company as the result of a past

event (known as the binding event). The interpretation clarifies that the binding event, which results in

a liability for the payment of a tax, is described in the regulations of reference from which the payment

is derived. IFRIC 21 is effective for years starting on 1 January 2014;

On 29 May 2013, IASB issued an amendment to IAS 36 - Recoverable Amount Disclosures for Non-

Financial Assets, which regulates disclosures on the recoverable amounts of assets which were subject

to impairment if this amount is based on the fair value net of sales costs. The amendments must be

applied retroactively as of the years starting on 1 January 2014. Early adoption is allowed for periods in

which the entity has already applied IFRS 13;

On 27 June 2013, IASB issued certain minor amendments relative to IAS 39 – Financial Instruments:

Recognition and Measurement, titled “Novation of Derivatives and Continuation of Hedge Accounting”.

These amendments allow for the continuation of hedge accounting in the case that a derivative

financial instrument, designated as a hedging instrument, is novated following the application of the

law or regulations in order to replace the original counterparty and guarantee the fulfilment of the

assumed obligation if certain conditions are met. The same amendment will also be included in IFRS 9



181

- Financial instruments. The amendments must be applied retroactively as of the years starting on 1

January 2014;

IAS 28 (2011) Investments in Associates and Joint Ventures. Following the new IFRS 11 Joint

arrangements and IFRS 12 - Disclosure of Interests in Other Entities, IAS 28 was renamed Investments

in associates and joint ventures; it describes the application of the equity method for investments in

joint ventures and associates. The amendments are effective for the years starting on 1 January 2014

or later.



182

COMMENTS ON ITEMS IN THE STATEMENT OF FINANCIAL POSITION





1. GOODWILL

The balance of this item at 31 December 2013 totalled Euro 500 thousand and refers to goodwill from the

merger of Casanova S.r.l. in 2012.

2. Intangible fixed assets

These may be analysed as follows at 31 December 2013 and 31 December 2012:


2013

31 December

2012 change

Development costs 1,335 1,083 252

Industrial patents and intellectual property rights 679 971 (292)

Concessions, licences and similar rights 3,597 3,535 62

Total Other intangible fixed assets 5,611 5,589 22

Changes during the year were as follows:


Capitalised

development

costs

Industrial

patents

Concessions,

licences and

similar rights

Total

Net book value at 31 December 2012 1,083 971 3,535 5,589

Purchases 765 551 62 1,378

Disposals - - - -

Reclassifications - 17 - 17

Amortisation or depreciation (513) (860) - (1,373)

Net book value at 31 December 2013 1,335 679 3,597 5,611

Development costs, equal to Euro 1,335 thousand as at 31 December 2013, increased thanks to the creation of

prototypes of new products, mainly related to the residential business (Euro 559 thousand), the Luxury in

Motion business (Euro 123 thousand) and the Luxury Interiors business (Euro 83 thousand).

Industrial patents, amounting to Euro 679 thousand at 31 December 2013, relate to expenditure incurred to

protect and register patents on ornamental models and to the costs connected with the purchase and

implementation of management software. The increase over the year mainly regards the purchase and

development of new software.

Concessions, licences and similar rights consist principally of the “Frau” brand which is owned by the Company

and carried at an amount of Euro 3,316 thousand. This intangible asset is considered to have an indefinite

useful life and is accordingly impairment tested to identify any loss in value. This testing, carried out as at 31

December 2013, did not involve any adjustment to the carrying amount.



183

3. TANGIBLE FIXED ASSETS

Tangible fixed assets may be analysed as follows at 31 December 2013 and 31 December 2012:


2013

31 December

2012 change

Land and buildings 16,164 16,641 (477)

Plant and machinery 6,778 7,203 (425)

Industrial and commercial equipment 1,137 330 807

Other assets 1,390 1,395 (5)

Assets under construction and advances 89 107 (18)

Total Tangible fixed assets 25,558 25,676 (118)

The following table provides details of the cost and accumulated depreciation of tangible fixed assets at 31

December 2013 and 31 December 2012:


buildings

Plant and

machinery

Industrial

and

commercial

equipment

Other

assets

Assets

under

constr. and

advances

Total

Cost at 31 December 2012 25,255 14,067 4,707 6,051 107 50,187


Net book value at 31 December 2012 16,641 7,203 330 1,395 107 25,676

Cost at 31 December 2013 25,096 14,741 5,789 6,293 89 52,008


Net book value at 31 December 2013 16,164 6,778 1,137 1,390 89 25,558

Changes in tangible fixed assets during the year ended 31 December 2013 were as follows:


buildings

Plant and

machinery

Industrial

and

commercial

equipment

Other

assets

Assets

under

constr. and

advances

Total

Net book value at 31 December 2012 16,641 7,203 330 1,395 107 25,676

Purchases 571 636

902 426 281 2,816

Disposals - - - (26) - (26)

Amortisation or depreciation (819) (1,100) (275) (425) - (2,619)

Write-downs (249) - - - - (249)

Reclassifications 20 39 180 20 (299) (40)

Net book value at 31 December 2013 16,164 6,778 1,137 1,390 89 25,558

Land and buildings, amounting to Euro 16,164 thousand as at 31 December 2013, consist of buildings owned

and those held under finance leases by Poltrona Frau S.p.A. (factories and offices located in Tolentino - MC).

The increases for the year are attributable to the enlargement of the warehouse for the Luxury in Motion

segment as well as to the completion of the Poltrona Frau Museum at the Tolentino (MC) site, inaugurated in

February 2013.

Plant and machinery, including owned property and those held under finance leases, amount to Euro 6,778

thousand as at 31 December 2013. The plants held under finance leases relate mainly to the integrated



184

photovoltaic plant mounted on the roof of the factory at Tolentino (MC) which has a nominal production

capacity of 1.4 Megawatts. Increases over the year are attributable to investments in plant and machinery used

in production.

Industrial and commercial equipment, equal to Euro 1,137 thousand as at 31 December 2013, relates to

investments made for the purchase of moulds and equipment for production purposes, the latter mainly

intended for the new warehouse of the Luxury in Motion segment.

The change in Other assets, which amount to Euro 1,390 thousand, is mostly due to the purchase of furniture,

furnishings and electronic office machines.

4. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

Changes in investments in the year ended 31 December 2013 were as follows:


2012 Increases Decreases Reclassification

31 December

2013

Subsidiaries 57,864 347 (1,469) (737) 56,005

Associates and joint ventures 1,467 928 (822) 737 2,310

Total Investments 59,331 1,275 (2,291) - 58,315

This item represents the Company‟s long-term and strategic investments and is measured on a consistent basis

at the cost of purchase or subscription, including any directly attributable accessory charges.

The Company has no restriction on the availability of any of the investments and are there no option rights or

liens.

As regards subsidiaries, the increases for the year relate to shareholder contributions in favour of Frau U.S.A.

Corporation, amounting to Euro 0.2 million, as well as of Poltrona Frau Singapore LTD., amounting to Euro 0.1

million. As regards associates and joint ventures, the company increased shareholder contributions by Euro 0.4

million in the investee Casa Décor Private Ltd. and by Euro 0.5 million in the company Zheijang Casanova

Furniture Co. Ltd..

In relation to investments owned by Poltrona Frau S.p.A., impairment testing was performed to verify any

impairment of investments in subsidiaries, associates and joint ventures, by comparing their recoverable

amount, net of the financial position at 31 December 2013 (the “economic value”), with related book values as

at 31 December 2013. Based on the outcome of the impairment test, the above-mentioned investments were

written-down for an aggregate value of Euro 2.3 million. This write-down is attributable to the subsidiaries

Frau France S.a.r.l. e Frau U.S.A. Corporation, in the amount of Euro 0.8 million and Euro 0.6 million,

respectively, as well as to the joint venture Casa Décor Private Ltd., in the amount of Euro 0.8 million.

In the reclassified column, the investment in Zhejiang Casanova Furniture Co. Ltd. is divided, net of the

allowance for doubtful accounts, between associates and joint ventures. During 2013, Poltrona Frau S.p.A. sold

51% of the subsidiary Zhejiang to the Chinese company Wenzhou Opal Furniture Co. Ltd.. This company is

therefore no longer controlled by Poltrona Frau S.p.A., but it is considered as a joint venture, pursuant to

contractual agreements.



185

The main assumptions used by the Parent to calculate the recoverable value (value in use) refer to:

a) Estimated future cash flows from operations;

b) The discount rate;

c) The final growth rate.

With regard to point a), the Parent formed an assumption, for impairment testing purposes only, of the likely

business outlook for 2014-2016, presented at the Board of Directors‟ meeting on 13 March 2014.

The discount rates used represent current market assessments of the time value of money and the risks specific

to the business‟s specific activities. In particular, it was considered appropriate to use a rate representative of

the unlevered cost of risk capital of 9.7%.


In addition, also based on indications in the Bank of Italy-Consob-ISVAP joint document no. 4 of 4 March 2010,

the Group arranged the preparation of a sensitivity analysis of the test results against the changes in basic

assumptions affecting the value in use of the cash-generating units, though no impairment indicators emerged

other than those stated above.

The following table provides a summary of the investments held at 31 December 2013, showing the figures for

their equity and profit (loss) recorded as at 31 December 2013 (or those relating to the most recently approved

financial statements), their carrying amount, the carrying amount of any provision for investments recognised

as a reduction in the investment and the carrying amount of any provision for investments recognised as a

liability (amounts are stated in thousands of Euro):

Company name Shareholders‟

equity Profit (loss)

%

holding

Company‟s

share of

equity

Value as at

31 December

2013

Provision for

write-down of

investments

Provision for

investment

risks

Frau France S.a.r.l. 996 (187) 100% 996 5,574 (5,195) -

Poltrona Frau U.K. Ltd. (952) (799) 100% (952) 2,157 (1,935) -

Frau USA Corporation 467 (282) 83% 388 999 (601) -

Diecidieci S.r.l. 1,825 786 100% 1,825 497 - -

Poltrona Frau (Asia Pacific) PTE Ltd. 979 580 100% 979 100 - -

Cap Design S.p.A. 3,438 (796) 100% 3,438 19,834 (15,236) -

Cassina S.p.A. 49,072 6,693 100% 49,072 49,751 - -

PF Deutschland GmbH (658) (559) 100% (658) 259 (259) (956)

Meno Warenhandels GmbH 5 (2) 60% 3 6,234 (6,174) -

Total Subsidiaries 55,172 5,434

55,091 85,405 (29,400) (956)

KBR S.a.r.l. - - 20% - 3 (3) -

Total Associates - -

- 3 (3)

PF Emirates Interiors LLC 9,234 (1,765) 49% 4,525 1,020 - -

Zhejiang Casanova Furniture Co. Ltd. 840 (733) 49% 412 4,771 (3,481) -

Casa Décor Private Ltd. (1,541) (3,034) 50% (771) 2,044 (2,044) -

Total joint ventures 8,533 (5,532)

4,166 7,835 (5,525) -

Total 93,243 (34,928) (956)



186

5. OTHER INVESTMENTS

As at 31 December 2012, this item included investments in the company Celi S.p.A. for a total amount of Euro

133 thousand. During 2013, the company Celi S.p.A. filed in a creditors' arrangement at the Court of Terni and

the investment cost was fully written-down.

6. OTHER NON-CURRENT ASSETS

Details of this item at 31 December 2013 and 31 December 2012 are as follows:

(in thousands of Euro) 31 December 2012 Increases Decreases 31 December 2013

Investments in subsidiaries, associates

and joint ventures 3,140 250 - 3,390

Guarantee deposits 170 6 (2) 174

Other items 507 - (90) 417

Total other non-current assets 3,817 256 (92) 3,981

The increase of Euro 256 thousand is primarily attributable to the increased funding to the subsidiary Poltrona

Frau UK Ltd.. The decreases relate to the partial repayment of a loan to the company IL America Ltd. and the

reclassification of the short-term portion of said loan to the item “Other current assets”.

7. DEFERRED TAX ASSETS

The following table provides the composition of deferred tax assets at 31 December 2013 and 31 December

2012 by the nature of the underlying temporary differences:


2013

31 December

2012 change

Taxed provisions 1,290 1,402 (112)

Temporary differences on fixed assets 146 160 (14)

Other temporary differences 90 82 8

Total Deferred tax assets 1,526 1,644 (118)

Taxed provisions relate to allowances adjusting asset balances (the allowance for doubtful accounts and the

inventory provision) and provisions for risks and charges which are not deductible for fiscal purposes.

Temporary differences on fixed assets relate to the reversal of the gain realised in 2007 on the sale of a piece of

land intended to be used for the extension of the factory in Tolentino, the subject of a leaseback agreement.

Other temporary differences include deferred tax assets arising from the differences in the measurement of

items in foreign currency, the portion of entertainment expenses deductible in the years following the year in

which they are incurred, compensation due to directors which were not paid during the year and expenses that

are tax deductible using the cash criterion.



187

8. INVENTORIES

Inventories may be analysed as follows for 2013 and 2012:


2013

31 December

2012 change

Raw materials 25,448 15,034 10,414

Semi-finished goods 1,968 1,451 517

Finished goods 7,374 6,437 937

Contract work in progress 2,723 1,455 1,268

Advances 27 124 (97)


Set out below is the balance of inventories together with the amount of the provision for obsolescence

allocated in the financial statements at 31 December 2013, in order to adjust the value of inventories to

presumed recoverable value:


2013

31 December

2012 change

Inventory, gross 39,625 26,210 13,415

Provision for obsolescence (2,085) (1,709) (376)


The change in item “Provision for obsolescence” is due to the increase in the provision for write-downs in raw

materials, equal to Euro 276 thousand, and the provision for write-down in finished goods, equal to Euro 100

thousand. The amount of the provision is calculated on the basis of the turnover of raw materials.

9. TRADE RECEIVABLES

Trade receivables may be analysed as follows at 31 December 2013 and 31 December 2012:


2013

31 December

2012 change

Due from third party customers 27,650 22,537 5,113

Due from subsidiaries 7,683 7,766 (83)

Due from associates and JV 1,675 1,019 656


The increase in trade receivables is almost exclusively related to item “Due from third party customers”, while

the increase in trade receivables from associates and JVs primarily relates to the company PF Emirates Interiors

LLC..

The Company performed non-recourse factoring of receivables totalling Euro 17.9 million at 31 December 2013

(Euro 14.5 million at 31 December 2012), relating to customers of good standing belonging almost exclusively

to the Luxury Interiors segment.



188

The allowance for doubtful accounts is considered adequate for reducing the nominal value of receivables to

their realisable value. Detailed below are the receivables stated at their gross value and net of the related

allowance for doubtful accounts:


2013

31 December

2012 change


Allowance for doubtful accounts (1,481) (1,289) (192)


Changes in the allowance for doubtful accounts in 2013 are as follows:


Balance at 31 December 2012 1,289

Accrual 362

Utilisation (170)

Balance at 31 December 2013 1,481

The accrual to the allowance is the result of a specific and analytical assessment of the risks of non-collection

of individual receivables. The utilisation for the year is the consequence of the definitive closure of positions for

which an allowance had been recognised in prior years.

There are no receivables whose contractual term exceeds 5 years.

10. OTHER CURRENT ASSETS

Other current assets may be analysed as follows at 31 December 2013 and 2012:


2013

31 December

2012 change

Tax receivables 1,535 3,498 (1,963)

Other receivable due from subsidiaries 2,863 - 2,863

Due from associates and JV 938 4,942 (4,004)

Advances to suppliers for services, commissions and

royalties 314 371 (57)

Prepayments and accrued income and other operating

receivables 862 457 405

Other financial assets from third parties 91 99 (8)

Cash pooling with Group companies 3,769 505 3,264

Total Other current assets 10,372 9,872 500

Tax receivables are composed of VAT receivables and other tax receivables. The latter include the claim for

IRAP reimbursement filed by Poltrona Frau S.p.A. on behalf of Group companies (Euro 1.5 million).

“Other receivables due from subsidiaries” as at 31 December 2013 mainly comprises the amounts due from

Cassina S.p.A. and Diecidieci S.r.l. related to the tax consolidation regime, equal to Euro 2.6 million and Euro 0.3

million, respectively.



189

“Due from associates and JV” comprise a loan granted to the joint venture PF Emirates Interiors LLC, the

decrease is justified by the repaid amounts in 2013.

“Other financial assets from third parties” comprise the short-term portion of the loan granted to Il America

Ltd.

“Cash pooling with Group companies” represent the financial relations governed by the centralized treasury

procedure, for which the economic conditions are in line with the conditions normally applied by banks.







Collar Export (Cassa di Risparmio

Fabriano e Cupramontana) 28/06/2013 - -

38 15

Poltrona Frau S.p.A. Collar Export (Veneto Banca) 28/05/2014 363 25 - -

363 25 38 15

Derivative instruments, amounting to Euro 25 thousand at 31 December 2013, include the fair value of

contracts hedging Euro v. US Dollar exchange rate risk with respect to trade flows deriving from the American

market.


financial instruments are recognised directly in profit or loss.

12. CASH AND CASH EQUIVALENTS

The balance on this item at 31 December 2013 was Euro 13.2 million, compared to Euro 3.3 million at 31

December 2012.


2013

31 December

2012 change

Bank deposits 13,129 3,237 9,892

Cash in hand and valuables 163 54 109


The balance on this item represents cash in hand and cash equivalents at the balance sheet date.

Reference should be made to the cash flow statement for details of the sources and applications which have

given rise to the change in this balance at 31 December 2013 and also to the information on the net financial

position contained in the Management Report on the financial statements.



190

13. SHAREHOLDERS‟ EQUITY



2013

31 December

2012 change

Share capital 34,604 34,810 (206)

Share premium reserve 1,238 2,530 (1,292)

Legal reserve 571 571 -

Extraordinary reserve 4,861 4,861 -


Merger surplus (deficit) (2,667) (2,667) -

Retained profit (loss) (2,835) (835) (2,000)

Profit / (loss) for the year 191 (2,000) 2,191

TOTAL SHAREHOLDERS‟ EQUITY 38,159 39,594 (1,435)

The share capital consists of 140,275,159 ordinary shares with a nominal value of Euro 0.25 each. As resolved

by the Shareholders‟ Meeting of the Parent, held on 22 April 2013, the loss for the year, amounting to Euro

2,159,787, was carried forward.

The decrease in share capital and share premium reserve is the result of the purchase/sale of treasury shares,

including the part to service the exercise of stock option rights, totalling Euro 1.5 million.

Other reserves may be analysed as follows:


2013

31 December

2012 change

Stock option reserve 659 573 86

First-time adoption of IFRS reserve 1,326 1,326 -

Provision for remeasurement of post-employment benefit

obligations (319) (105) (214)

Others 530 530 -


In accordance with IFRS 2, the stock option plan reserve consists of the corresponding entry in equity of the

cost, equal to the fair value of the options at grant date, which is recognised in profit or loss over the period in

which the exercising conditions vest. The increase recorded in the year is due to allocation of the portion

accrued in 2013, amounting to Euro 86 thousand.

The item "Provision for remeasurement of post-employment benefit obligations" include the actuarial gains and

losses resulting from the calculation of post-employment benefits according to provisions set forth by the new

IAS 19.

Item “Others” consist of the reserve for accelerated depreciation accrued in previous years and transferred to

available reserves following changes in Italian legislation.

A classification of equity on the basis of the possible utilisation of the accounts is as follows:



191

(in thousands of Euro) Amount Utilisation

possibilities

Available

portion

Summary of uses during the past

three years

To absorb losses For other

reasons

Share capital 35,069

Nominal value of treasury shares (465)

Total share capital 34,604

Capital reserves

Share premium reserve 3,193 A, B, C 1,238 4,322

Treasury shares exceeding nominal value (1,955)

Total capital reserves 1,238

Revenue reserves

Fair Value adjustment reserve (319)

Legal reserve 571 B 571

Extraordinary reserve 4,861 A, B, C 2,193 949

Merger surplus (deficit) (2,667)

First-time adoption of IFRS reserve 1,326

Stock options reserve 659

Accelerated depreciation reserve 530 A, B, C 530

Retained profit (loss) (2,835) A, B, C

Profit / (loss) for the year 191 191

Total revenue reserves 2,317

Total 38,159 4,723

Non-distributable portion * (7,778)

Available portion remaining -

A = for capital increases B = to absorb losses C = for distribution to

shareholders

* of this Euro 1,335 represents the non-distributable portion covering development costs not yet amortised and Euro 6,443 the portion

of the share premium reserve required to supplement the legal reserve in order to reach one fifth of share capital.

Reference should be made to the Statement of changes in equity for variations in equity accounts during the

years ended 31 December 2013 and 31 December 2012.

The tax effect related to items of the Statement of comprehensive income is analysed hereunder:


(in thousands of Euro) Gross value

Tax

(Charge) /

Benefit

Net value Gross value

Tax

(Charge) /

Benefit

Net value

Remeasurement of post-employment benefit

obligations

(296) 82 (214) (221) 61 (160)

14. MEDIUM/LONG-TERM BORROWINGS

“Medium-long term borrowings”, which amounted to Euro 24.8 million as at 31 December 2013 (Euro 24.9

million as at 31 December 2012), consist of the non-current portion of loans from banks and credit institutions

and amounts due to other lenders recognised as the result of using the financial method to account for lease

arrangements.



192

Medium-long term borrowings may be analysed as follows:


2013

31 December

2012 change

Financing of leased assets 11,482 12,154 (672)

Amounts due to banks and other lenders 13,312 12,745 567

Total medium/long-term borrowings 24,794 24,899 (105)

Financing of leased assets arises from application of the financial method to account for assets acquired under

lease arrangements and mainly represents the remaining liability to leasing companies at the balance sheet

date. The decrease recorded during the period is mainly attributable to the repayment of current amounts.

Details of Amounts due to banks and other lenders may be analysed as follows at 31 December 2013 and 2012:

Ref. (in thousands of Euro)

31 December

2013

31 December

2012

a) Banca delle Marche loan to Poltrona Frau S.p.A. - 393

b) Syndicated loan to Poltrona Frau S.p.A. 11,175 14,380

c) Carilo loan to Poltrona Frau S.p.A. 334 537

d) Banco Popolare loan to Poltrona Frau S.p.A. 1,236 2,250

e) Banca Popolare di Sondrio loan to Poltrona Frau S.p.A. 1,903 -

f) Carilo loan to Poltrona Frau S.p.A. 284 -

g) Unicredit loan to Poltrona Frau S.p.A. 4,963 -

Bank loans 19,895 17,560

Less current portion (6,583) (4,815)

Non-current portion of due to banks and other loans 13,312 12,745

Details of bank loans to Group companies are as follows:

a) a loan made to the Parent by Banca delle Marche expiring on 30 June 2013;

b) with the aim of rescheduling the repayment dates of medium-term debt and consolidating a large part of

short term credit lines, in July 2010 the Group signed two syndicated loan agreements, with the funds

being disbursed to the Parent and the subsidiary Cassina S.p.A., for a total of Euro 59 million, with BNL (as

agent bank), Unicredit, Intesa Sanpaolo, Popolare di Sondrio, UGF and Banca Popolare di Verona. By

entering these agreements the Group was able to make early settlement of the outstanding loans with

these banks;

c) in July 2010, Cassa di Risparmio di Loreto disbursed a loan of Euro 1 million to the Parent which is

repayable in monthly instalments and expires on 27 July 2015;

d) in March 2012, Banco Popolare disbursed a loan to the Parent for Euro 3 million, expiring on 31 March

2015, with a 70% counter-guarantee from Sace since the loan is for the promotion of group brands on the

international market and development of the Middle East market;

e) in March, Banca Popolare di Sondrio disbursed a loan to Poltrona Frau S.p.A. for Euro 2,000 thousand,

expiring on 30 April 2018. This is an unsecured loan and accordingly not supported by any guarantees;

f) in November 2013, Cassa di Risparmio di Loreto disbursed a loan of Euro 300 million to the Parent which is

repayable in monthly instalments and expires on 21 May 2015;

g) in December, Unicredit disbursed a loan to Poltrona Frau S.p.A. for Euro 5,000 thousand, expiring on 31

December 2018. This is an unsecured loan and accordingly not supported by any guarantees.



193

Reference should also be made to note 19 “Due to banks and other lenders”.

15. EMPLOYEE BENEFITS

The following changes took place during the year ended 31 December 2013 in Employee benefits:


Net present value of TFR at 31 December 2012 2,824

Transfer Out (12)

Interest Cost 98

Benefits paid (156)

Actuarial gains (losses) 296

Net present value of TFR at 31 December 2013 3,050

With regard to the TFR (Italian employees‟ leaving entitlement), as a result of legislative changes in previous

years that affected this benefit, the Group continued to record the obligation on amounts accrued as at 31

December 2006 in accordance with the rules for defined benefit plans, whilst the obligation on amounts

accrued from 1 January 2007 and payable to the supplementary benefits plan or to the INPS Treasury Fund

were recorded on the basis of contributions due for the period.

Employees‟ leaving entitlement falls under defined benefit plans. This liability was calculated using the

Projected Unit Cost Method, under which the liability for the acquired benefits reflects the expected date of

leaving employment and is discounted to present value. The economic-financial assumptions on which actuarial

evaluations are based, can be summarised as follows: 2% expected inflation rate, 2.5% discount rate, 3%

future wage increases and 3% resignation/dismissal annual rate. The decrease in provisions for personnel is

mainly due to the benefits paid during the year as a result of normal staff turnover.

Disclosures are provided below as required under the new international accounting standard IAS 19, in

particular the results of the sensitivity analysis performed on each actuarial assumption at year end, with an

indication of the effects that would have resulted from changes in the actuarial assumptions that might

reasonably have been made at that date, in absolute terms.

Sensitivity analysis of the main actuarial benchmarks on

figures at 31 December 2013 (in thousands of Euro)


+1% on the turnover rate 3,047

-1% on the turnover rate 3,053

+1% on the annual inflation rate 3,095

-1% on the annual inflation rate 3,006

+1% on the annual discount rate 2,985

-1% on the annual discount rate 3,118


Service Cost -

Plan duration 9.5

Details on the contribution for the next period are provided hereabove, with an indication on the average

financial duration of the commitment for defined benefit plans.



194

16. PROVISIONS FOR RISKS AND CHARGES

The balance of Euro 2.1 million at 31 December 2013 (Euro 2.3 million as at 31 December 2012) may be

analysed as follows:

(in thousands of Euro) Agents‟ indemnity Restructuring

provision Other provisions Total

Balance at 31 December 2012 1,003 1,148 154 2,305

Accrual 167 - 1,005 1,172

Utilisation (364) (105) (49) (518)

Redemptions - (691) (13) (704)

Reclassifications - (114) - (114)

Balance at 31 December 2013 806 238 1,097 2,141

The provisions for risks and charges as at 31 December 2013 consist mainly of the following allocation types:

The agents‟ indemnity is accrued annually on the basis of the commissions payable to the agents and

calculated in accordance with contractual provisions. The decrease instead relates to uses during the year;

The restructuring provision decreased as a result of implementation of the restructuring plan, as already

thoroughly described in the Annual Financial Report as at 31 December 2012;

Item "Other provisions" increased primarily due to the allocation of Euro 0.9 million for the write-down

attributable to subsidiaries Poltrona Frau Deutschland Gmbh, following the impairment testing performed by

the Parent as at 31 December 2013. The remaining portion, amounting to Euro 0.1 million, is attributable to

potential tax liabilities incurred during the 2013.

17. DEFERRED TAX LIABILITIES

The following table sets out the balances as at 31 December 2013 and 2012 analysed by the nature of the

underlying temporary differences.


2013

31 December

2012 change

Finance leases 736 791 (55)

Reversal of the amortisation of goodwill and

trademarks 1,045 1,045 -

Actuarial valuation of the TFR 66 148 (82)

Others 117 120 (3)

Total Deferred tax liabilities 1,964 2,104 (140)

The balance as at 31 December 2013 consists mainly of the following items:

Finance leases: this item relates to the tax effect arising from accounting for assets acquired in

leasing using the financial method;

Reversal of amortisation: the balance relates to the charge for the amortisation of trademarks, which

is not adopted in the income statement but recognised for fiscal purposes pursuant to article 103,

paragraph 3-bis of Presidential Decree 917/86;



195

Actuarial valuation of the TFR: as discussed earlier, the TFR is measured by calculating the liability to

employees using actuarial assumptions and then discounting that liability. This accounting treatment

gives rise to differences with respect to the amounts recognised for tax purposes, requiring in turn

the recognition of deferred taxation;

Other temporary differences: these arise mainly from the translation of items denominated in foreign

currency and the treatment of the gain realised on the sale of a piece of land intended to be used for

the extension of the factory in Tolentino, the subject of a leaseback agreement, which is recognised

on an instalment basis for fiscal purposes.

18. OTHER NON-CURRENT LIABILITIES

The item “Other non-current liabilities” of Euro 464 thousand as at 31 December 2013 (Euro 509 thousand as

at 31 December 2012) relate to the residual portion of the capital gain (originally of Euro 674 thousand)

realised by the Company on the sale of a piece of land intended to be used for the extension of the factory in

Tolentino, the subject of a leaseback agreement.

19. TRADE PAYABLES

Trade payables of Euro 41.6 million as at 31 December 2013 (Euro 35.0 million as at 31 December 2012) consist

of payables of a commercial nature arising from transactions with third party suppliers and, to a lesser extent,

with intragroup suppliers. These balances are stated net of any trade discounts and billing adjustments (returns

and/or allowances) to the extent these have been defined with the other party.

Trade payables may be analysed as follows as at 31 December 2013:


2013

31 December

2012 change

Due to third parties 40,624 31,939 8,685

Due to subsidiaries 670 3,013 (2,343)

Due to associates and JVs 262 49 213

Total Trade payables 41,556 35,001 6,555

20. DUE TO BANKS AND OTHER LENDERS

“Due to banks and other lenders” consist of bank overdrafts, advances received from banks, short term

financing and the current portion of medium-long term loans.

This item may be analysed as follows as at 31 December 2013 and 2012:


2013

31 December

2012 change

Due to banks 14,570 17,288 (2,718)

Current portion of medium-long term loans 7,249 5,388 1,861

Other short term borrowings 1,101 11 1,090

Total due to banks and other lenders 22,920 22,687 233



196

In terms of the use of short-term credit facilities, the main instruments used by the Company are the

presentation of bills of exchange for collection and “hot money” loans with extremely short due dates, settled

at the market rates quoted when the transaction is initiated.

21. TAX PAYABLES

This item consists mainly of amounts due to the tax authorities for tax withheld on payments to employees or

collaborators and income tax payables relating to the year.

The balance may be analysed as follows as at 31 December 2013 and 2012:


2013

31 December

2012 change

VAT payables 6 - 6

Income tax payables 3,472 40 3,432

Payables for withholding tax on collaborators‟

earnings 70 78 (8)

Payables for IRPEF personal income tax 757 961 (204)

Total Tax payables 4,305 1,079 3,226

"Income tax payables" as at 31 December 2013 relate to IRES payables amounting to Euro 3.2 million and IRAP

payables totalling Euro 0.3 million.

The company has elected to use the national tax consolidation and the consolidation scope in this respect for

the 2013 tax year was unchanged compared to that for the previous year, including Cassina S.p.A., Cap Design

S.p.A. and Diecidieci S.r.l..


Details are shown below of outstanding contracts as at 31 December 2013 and 31 December 2012, (amounts

are stated in thousands of Euro), with the relative fair values:



Poltrona Frau S.p.A. Interest Rate Swap (Banca Nazionale del Lavoro) 31/12/2013 2,000 (68)

Poltrona Frau S.p.A. Interest Rate Swap (Banca Nazionale del Lavoro) 30/06/2016 4,152 (117) 4,675 (209)

Poltrona Frau S.p.A. Interest Rate Swap (Banca Popolare) 30/06/2016 3,559 (99) 4,007 (175)

Poltrona Frau S.p.A. Interest Rate Swap (Unicredit) 30/06/2016 2,966 (83) 3,339 (146)

10,677 (299) 14,021 (598)

These contracts, which were already outstanding as at 31 December 2012, represent arrangements entered to

hedge the interest rate risk arising on medium term loans and mainly regard interest rate swaps which envisage

receipt at a floating rate (3M and 6M EURIBOR) and payment at a fixed rate.


instruments are recognised directly through profit or loss.

Reference should also be made to note 11 “Derivative instruments” in this respect.



197

23. OTHER CURRENT LIABILITIES

This item may be analysed as follows as at 31 December 2013, with comparative figures provided for the

previous year:


2013

31 December

2012 change

Due to subsidiaries 732 2,615 (1,883)

Due to social security organisations 1,253 1,202 51


Due to employees 6,553 2,399 4,154

Other payables 2,746 2,293 453

Cash pooling with Group companies 41,177 23,984 17,193

Total Other current payables 54,075 34,090 19,985

The item "Due to subsidiaries" comprises the amounts due for tax consolidation resulting from the transfer of

tax losses of Cap Design S.p.A., and the amounts due to Group companies for which Poltrona Frau filed in a

claim for IRAP reimbursement. Reference should also be made to note 10 “Other current assets” in this respect.

The item "Due to social security organisations" consists of the social security payables due on the wages and

salaries of personnel and collaborators and represents the liability accrued for the final month of the years

presented.

"Other payables" mainly represent advances from customers amounting to Euro 2 million.

“Cash pooling with Group companies” represent the financial relations governed by the centralized treasury

procedure, for which the economic conditions are in line with the conditions normally applied by banks.



198

COMMENTS ON ITEMS IN THE INCOME STATEMENT

Further comments on economic data may be found in the respective section of the Management Report on the

financial statements.





24. REVENUES

Revenues by type of activity for the years ended 2013 and 2012 may be analysed as follows:


2013

31 December

2012 Change

Sale of products 135,025 106,202 28,823

Other revenues 9,660 11,478 (1,818)

Total Revenues 144,685 117,680 27,005

Details of revenues by geographical area are set out in the following table:

(in thousands of Euro) Italy EMEA Americas Asia and

Oceania Total

Revenues at 31 December 2013 79,635 47,299 7,267

10,484 144,685

Revenues at 31 December 2012 67,949 31,907 7,970 9,854 117,680

Change 11,686 15,392 (703) 630 27,005

Change % 17.2% 48.2% (8.8%) 6.4% 22.9%

25. COSTS FOR RAW MATERIALS AND CONSUMABLES

This item consists of production costs for raw materials, ancillary materials, consumables and goods for resale

and changes in inventories.

Costs for raw materials and consumables increased from Euro 51.8 million for the year ended 31 December

2012 to Euro 69.4 million for the year ended 31 December 2013, marking a 4% increase as a percentage of

sales revenues, up from 44.0% in 2012 to 48.0% in 2013.

This trend is a result of the different breakdown of sales revenues in the two years compared, which saw a more

significant presence of the Luxury in Motion segment, characterised by lower margins than the residential

segment.

26. COSTS FOR SERVICES

Costs for services may be analysed as follows for the year ended 31 December 2013, compared to the previous

year:



199


2013

31 December

2012 Change

External processing 13,261 10,561 2,700


Consulting 1,862 2,129 (267)

Communication and marketing 1,970 1,737 233

Transport and logistics 3,877 3,466 411

Rental and lease payments 1,894 2,166 (272)

Other costs for services 11,503 7,417 4,086

Total Costs for services 39,587 32,479 7,108

The cost of “External processing” decreased as a result of the lower volumes processed during the year.

The decrease in “Commissions and royalties” is attributable to the lower turnover recorded in 2013.

"Other costs for services" equal to Euro 11.5 million are mainly comprised of travel and transfer expenses (Euro

2 million), remunerations granted to Directors and Auditors (Euro 5 million), maintenance costs (Euro 1 million),

utility costs (Euro 1 million) and other sundry expenses (Euro 2.5 million).

Remunerations to Directors and Auditors include the non-recurring cost related to the variable remuneration

of the Chief Executive Officer, recognised in compliance with the IFRS 2 international accounting standard and

amounting to around Euro 4.2 million. For further details reference should be made to the paragraph below

"Significant, non-recurring, abnormal and/or unusual transactions".

27. PERSONNEL COSTS

The item "Personnel costs" consists of costs relating to remuneration, social security charges, allocation to the

Italian employees‟ leaving indemnity (TFR) and other personnel costs.

This item may be analysed as follows for the years ended 31 December 2013 and 31 December 2012:


2013

31 December

2012 Change

Wages and salaries 15,478 15,319 159

Social security and pensions 5,355 4,898 457

Other staff provisions 1,032 1,015 17

Other personnel costs 1,346 1,147 199

Total Personnel costs 23,211 22,379 832

The following table sets out the average number of company employees as at 31 December 2013 and 31

December 2012, analysed by the main categories.

Workforce at year end 31 December

2013

31 December

2012 Change

Executives 19 20 (1)

Middle-management and white-collar workers 167 167 -

Blue-collar workers 263 252 11

Total 449 439 10



200

Average workforce 2013 2012 Change

Executives 20 23 (3)

Middle-management and white-collar workers 165 163 2

Blue-collar workers 258 247 11

Total 443 433 10

28. OTHER OPERATING COSTS

Other operating costs of Euro 455 thousand, as at 31 December 2013 (Euro 367 thousand as at 31 December

2012), mainly relate to the accrual for credit risks, trade association costs and other residual cost items of non-

significant amounts.

29. RESTRUCTURING COSTS

During 2012, the Parent started a restructuring process which involved other Group companies as well.

Specifically, “Restructuring costs” (Euro 1.9 million as at 31 December 2012) include staff leaving incentives

paid during the year and charges expected to be incurred on completion of the restructuring process. For

further details, see the thorough discussion in the Annual Financial Report as at 31 December 2012.

30. AMORTISATION, DEPRECIATION AND WRITE-DOWNS

The amortisation of intangible fixed assets, the depreciation of tangible fixed assets and the write-downs of

these assets may be analysed as follows:


2013

31 December

2012 Change

Amortisation and write-downs of intangible fixed assets 1,373 1,262 111

Depreciation and write-downs of tangible fixed assets 2,868 2,559 309

Total Amortization, depreciation and write-downs 4,241 3,821 420

The increase in amortisation of intangible fixed assets and depreciation of tangible fixed assets is connected

with investments made over the year. As at 31 December 2013, the item also included the write-down,

totalling Euro 0.2 million, related to the closure of the Poltrona Frau store in Naples.

31. PROFIT (LOSS) ON INVESTMENTS

In order to allow a better representation of the contribution of management of investments to the profit (loss)

for the year, provision has been made in the income statement for this section which highlights the

contribution of the individual companies:



201

(in thousands of Euro) Disposals Write-backs Write-downs Provision for

risks Total

Frau France - - (804) - (804)

Frau USA - - (601) - (601)

Poltrona Frau Deutschland - - - (865) (865)

Beijing Casanova - - (17) - (17)

Total Subsidiaries - - (1,422) (865) (2,287)

PF Emirates Interiors LLC - - - - -

Casa Décor Private Ltd. - - (822) - (822)

Total joint ventures - - (822) - (822)

Celi SpA - - (133) - (133)

Total Other companies - - (133) - (133)

Total profit (loss) on investments - - (2,377) (865) (3,242)

See note 4 and 5 of this document for related comments.

32. FINANCIAL CHARGES AND INCOME

Financial charges and income for the years ended 2013 and 2012 may be broken down as follows:


2013

31 December

2012 Change

Interest expense 1,797 2,069 (272)

Fair value of derivative instruments 317 452 (135)

Actuarial losses 107 127 (20)

Loan commissions 270 190 80

Exchange losses 387 252 135

Other financial charges 1,141 799 342

Total Financial charges 4,019 3,889 130

The balance of Financial charges was essentially in line with the figure recorded as at 31 December 2012.

Financial income for the years 2013 and 2012 may be analysed as follows:

(in thousands of Euro) 31 December 2013 31 December 2012 Change

Dividends from subsidiaries 1,900 - 1,900

Interest income 54 32 22

Fair value of derivative instruments 325 122 203

Other financial income 271 274 (3)

Exchange gains 77 327 (250)

Total Financial income 2,627 755 1,872



202

The balance of financial income increased due to the resolution to allocate dividends of the subsidiary Poltrona

Frau PTE Ltd , totalling Euro 1.9 million, and decreased due to the lower exchange gains (mainly connected with

the Euro/USD exchange rate trend).

Reference should also be made to note 11 and note 22 “Derivative instruments” for the Fair value of derivative

instruments.

33. INCOME TAXES

Income taxes for the years 2013 and 2012 may be analysed as follows:


2013

31 December

2012 change

Current taxes 2,876 2,116 760

Deferred taxes 60 (265) 325

Adjustments for prior years 25 (846) 871

Total Income taxes 2,961 1,005 1,956

The following is a reconciliation between the theoretical and actual tax charge:


2013

31 December

2012

Income before taxes 3,152 (995)

IRES (corporate income tax) rate applicable to the year 27.5% 27.5%

Theoretical tax charge 867 (273)

Non-taxable dividends (522) -

IRAP and other taxes relating to the year 1,267 241

Other non-deductible costs 437 341

Write-down of investments 890 753

Other minor differences 22 (57)

Total differences 2,094 1,278

Total Income tax charge 2,961 1,005

Effective tax rate 93.9% n/a

The tax charge as a percentage of the result before tax is not very meaningful since the taxable income is

heavily impacted by the non-deductible write-down of investments of Euro 3.2 million and taxes which have a

different tax base from the result before tax (IRAP and other taxes).



203

34. NET FINANCIAL POSITION

In accordance with the requirements of Consob Communication no. DEM/6264293 of 28 July 2006 and in

compliance with the CESR Recommendation of 10 February 2005 “Recommendations for the consistent

implementation of the European Commission‟s Regulation on Prospectuses”, the Company‟s Net Financial

Position at 31 December 2013 was the following:


2013

31 December

2012 Change

A. Cash 163 54 109

B. Cash equivalents 13,129 3,237 9,892

C. Securities held for trading - - -

D. Liquidity (A) + (B) + (C) 13,292 3,291 10,001

E. Current financial receivables 4,823 5,561 (738)

F. Current bank borrowings (15,671) (17,299) 1,628

G. Current portion of non-current debt (7,249) (5,388) (1,861)

H. Other current financial payables (41,476) (24,582) (16,894)

I. Current financial debt (F)+(G)+(H) (64,396) (47,269) (17,127)

J. Current financial debt, net (I) – (E) – (D) (46,281) (38,417) (7,864)

K. Non-current bank borrowings (13,312) (12,745) (567)

L. Bonds issued - - -

M. Other non-current receivables (payables) (11,482) (12,154) 672

N. Non-current financial debt (K) + (L) + (M) (24,794) (24,899) 105

O. Net financial position (J) + (N) (71,075) (63,316) (7,759)

Of which:

due to related parties (36,470) (18,537) (17,933)

due to third parties (34,605) (44,779) 10,174

The net financial position shown in the table above is consistent with total net consolidated financial debt

presented in the Management Report as follows:

O. Net financial position (J) + (N) (71,075) (63,316) (7,759)

Other non-current receivables and other financial assets 3,807 507 3,300

Total Net financial position - Management Report (67,268) (62,809) (4,459)

The net financial position worsened by around Euro 4.5 million over 31 December 2012 as a result of

contrasting elements, which may be summarised as follows:


potential cash flow (EBITDA) for the period of Euro 16.2 million;

loans granted during 2013 to Group companies, amounting to Euro 3.4 million;

dividends collected by Poltrona PTE Ltd., equal to Euro 1.9 million;


the increase of roughly Euro 11.6 million of the net operating working capital (amount net of

the non-recurring component, equal to Euro 4.2 million);

the payment of compensation to Parent employees who left following the launch of the

restructuring plan, agency indemnities and other payments totalling Euro 0.7 million;



204

net investments in fixed assets for the year, amounting to Euro 4.2 million;

investments of Euro 1.3 million relating to share capital increases;

net financial charges and tax charges in the income statement for a total of Euro 6.3 million;

purchase of treasury shares during the year, for Euro 1.5 million;

other changes for Euro 0.4 million.

35. RELATED PARTY TRANSACTIONS

Transactions with related parties as at 31 December 2013 and 31 December 2012 are as follows:

ASSETS



Other non-

current

assets

Trade

receivables

Other

current

assets

Other non-

current

assets

Trade

receivables

Other

current

assets

Subsidiaries

Cassina S.p.A. - 1,806 2,589 - 2,368 -

Cassina France S.A. - 78 - - - -

Cassina Shanghai Trading Co. Ltd. - - 91 - - -

Cap Design S.p.A. - 180 1,889 - 292 446

Diecidieci S.r.l. - 765 274 - 377 -

Frau France S.a.r.l. - 1,258 290 - 1,720 -

Frau U.S.A. Corporation - 548 - - 233 -

Meno Warenhandels GmbH - 40 - - 40 -

Poltrona Frau Deutschland GmbH - 163 1,499 - 558 58

Poltrona Frau (UK) Ltd 1,300 793 - 1,050 573 -

Poltrona Frau PTE Ltd. - 53 - - 86 -

Poltrona Frau Group North America Inc. - 1,920 - - 1,512 -

Spazio Washington LLC - 79 - - - -

Zhejiang Casanova Furniture Co. Ltd. - - - 2,090 7 -

Associates

KBR S.a.r.l. - 75 - - 75 -

Spazio Washington LLC - - - - 97 -

Nemo S.r.l. - 1 - - - -

Joint ventures

PF Emirates Interiors LLC - 1,298 938 - 587 4,942

Casa Décor Private Ltd. - 297 - - 261 -

Zhejiang Casanova Furniture Co. Ltd. 2,090 4 - - - -


Ferrari S.p.A. - 809 - - 1,723 -

Others - 44 20 - 50 -

Total 3,390 10,211 7,590 3,140 10,559 5,446



205

LIABILITIES



Trade

payables

Other

payables

Trade

payables

Other

payables

Subsidiaries

Cassina S.p.A. 47 38,935 1,137 25,915

Cassina France S.A. 1 - 1 -

Cassina Shanghai Trading Co. Ltd. 187 - - -

Cap Design S.p.A. 31 154 268 86

Diecidieci S.r.l. - 2,820 1 597

Frau France S.a.r.l. 91 - 429 -

Poltrona Frau Deutschland GmbH 28 - 32 -

Poltrona Frau (UK) Ltd 37 - 69 -

Poltrona Frau PTE Ltd. 207 - 972 -

Poltrona Frau Group North America Inc. 41 - 26 -

Zhejiang Casanova Furniture Co. Ltd. - - 80 -

Associates

Alias S.p.A. 21 80 46 80

KBR S.a.r.l. - - - -

Nemo S.r.l. 3 - - -

Spazio Washington LLC - - 7 -

Joint ventures

PF Emirates Interiors LLC - - 3 -

Casa Décor Private Ltd. 26 - 7 -

Zhejiang Casanova Furniture Co. Ltd. 212 553 - -


Ferrari S.p.A. 9 - 66 -

Others - 9 119 -

Total 941 42,551 3,263 26,678



206

REVENUES



Sales and services Other

revenues

Sales and

services

Other

revenues

Subsidiaries

Cassina S.p.A. 2,799 3,985 1,540 4,994

Cassina Shanghai Trading Co. Ltd. 54 29 - -

Cap Design S.p.A. 201 528 112 619

Diecidieci S.r.l. 1,026 22 480 -

Frau France S.a.r.l. 2,253 33 1,255 19

Frau U.S.A. Corporation 703 7 712 3

Frau Arabia FZ–LLC - - 27 -

Poltrona Frau Deutschland GmbH 396 2 223 3

Poltrona Frau (UK) Ltd 381 5 266 1

Poltrona Frau PTE Ltd. - 53 - 108

Poltrona Frau Group North America Inc. 4,404 41 5,028 28

Spazio Washington LLC 44 2

Associates

Spazio Washington LLC - - 216 4

Nemo S.r.l. - 1 - -

Joint ventures

PF Emirates Interiors LLC 2,324 27 778 48

Casa Décor Private Ltd. 607 1 512 12

Zhejiang Casanova Furniture Co. Ltd. 178 - 96 1


Ferrari S.p.A. 20,768 544 21,934 1,144

Other minor 66 63 23 96

Total 36,204 5,343 33,202 7,080



207

COSTS



Costs for raw

materials

and

consumables

Services

Costs for raw

materials

and

consumables

Services

Subsidiaries

Cassina S.p.A. 124 103 157 21

Cassina Shanghai Trading Co. Ltd. - 318 - -

Cap Design S.p.A. 148 1 121 -

Diecidieci S.r.l. - - 1 -

Frau France S.a.r.l. - 367 8 421

Poltrona Frau Deutschland GmbH 21 208 - 192

Poltrona Frau (UK) Ltd - 186 - 181

Poltrona Frau PTE Ltd. - 596 - 853

Frau Arabia FZ–LLC - - - 27

Poltrona Frau Group North America Inc. - 147 31 117

Associates

Alias S.p.A. 27 - 42 -

Nemo S.r.l. 23 - - -

Joint ventures

Casa Décor Private Ltd. - 19 - 7

Zhejiang Casanova Furniture Co. Ltd. 643 - 581 -


Ferrari S.p.A. 113 99 181 -

Others - 77 - 196

Total 1,099 2,121 1,122 2,015

The following are noted among the transactions with related parties carried out during 2013 with companies

not belonging to the Group:

Ferrari S.p.A.

Poltrona Frau has long-standing business relations with Ferrari S.p.A., whose Chairman of the Board of

Directors is the Director Luca Cordero di Montezemolo. These relations are carried out under market conditions

and relate to the supply of interiors well as the preparation of customised upholstery.

Others

Minor transactions were entered into with various related parties, for insignificant unitary amounts.

For summary purposes the following table provides details of related party transactions and balances as a

percentage of the total item in the financial statements to which they relate:



208


Sales revenue from related parties 36,204 33,202

Sales revenue - Total 135,025 106,202


Other revenues from related parties 5,343 7,080

Other revenues - Total 9,660 11,478


Costs for raw materials and consumables incurred with related parties 1,099 1,122

Costs for raw materials and consumables - Total 69,406 51,832


Costs for services incurred with related parties 6,293 2,015

Costs for services - Total 39,587 32,479



Trade receivables from related parties 10,211 10,559

Trade receivables - Total 37,008 31,322


Other non-current assets with related parties 3,390 3,139

Other non-current assets - Total 3,981 3,817


Other current assets with related parties 7,590 5,446

Other current assets - Total 10,372 9,872


Trade payables due to related parties 941 3,263

Trade payables – Total 41,556 35,001


Other current liabilities due to related parties 46,722 26,678

Other current liabilities - Total 54,075 34,090


As regards executives with strategic responsibility, reference is made to the special section of the Annual

Financial Report "Compensation for executives with strategic responsibility".

36. COMMITMENTS AND CONTINGENT LIABILITIES

As at 31 December 2013, there were outstanding sureties granted to third parties amounting to Euro 3.5

million, of which Euro 3.0 million granted to Luxury Interiors segment customers and Euro 0.5 million relating

to rental contracts.

As a result of the centralisation of Group treasury functions in the Company sureties have been pledged for the

credit facilities of subsidiaries in the amount of Euro 2.4 million; subsidiaries had used Euro 0.8 million of these

facilities as at 31 December 2013, of which Euro 0.4 million as endorsement commitments. In addition there

are “umbrella” facilities which may be used by the Italian companies and are hence guaranteed by the

Company, which amount in total to Euro 47 million; subsidiaries had used Euro 9.1 million of these facilities as

at 31 December 2013, of which Euro 2.2 million as endorsement commitments. Moreover, a financial

commitment for the amount of Euro 1 million was disbursed in favour of Intesa Shanghai for a credit facility



209

granted to the joint venture Zheijang Casanova Furniture Ltd.. At the end of February the financial liabilities of

Zheijang Casanova Furniture Ltd company in favour of Intesa Shanghai was refunded and the financial

commitment expired.

37. SIGNIFICANT, NON-RECURRING ABNORMAL AND/OR UNUSUAL TRANSACTIONS

Pursuant to Consob Resolution no. 15519 of 27 July 2006 concerning the format of financial statements, in

relation to the effects resulting from events or transactions which are non-recurring, or from transactions, or

facts, which do not occur frequently as part of normal operations, the variable remuneration to the Chief

Executive Officer, amounting to around Euro 4.2 million, is recorded and highlighted pursuant to the IFRS 2

international accounting standard.

The agreement sets out a variable remuneration proportioned to the price of the Company's shares in case of

sale of the same. Upon occurrence of this condition, following the disposal agreed upon on 4 February 2014,

the fair value was measured at closure date by recognising the value in the income statement as defined by

qualifying the instrument as "Share Based Payments Cash Settled".

As regards the non-recurring post recognised as at 31 December 2012, reference is made to Note 29 thereof.



210

INFORMATION PURSUANT TO ARTICLE 149-DUODECIES OF THE CONSOB ISSUERS‟ REGULATION

The following table, prepared pursuant to article 149-duodecies of the Consob Issuers‟ Regulations, sets out the

fees relating to 2013 for auditing services and services other than auditing provided by the independent

auditors and entities belonging to its network.

Thousands of Euro Firm providing the service Recipient of the service Fees relating to 2013

Audit Reconta Ernst & Young S.p.A. Parent – Poltrona Frau S.p.A. 211

Reconta Ernst & Young S.p.A. Italian subsidiaries 129

Reconta Ernst & Young international

network Foreign subsidiaries 40

Other services Ernst & Young Studio Legale Tributario Parent – Poltrona Frau S.p.A. 11

Total 391



211

SHARE-BASED PAYMENT

Stock option plans

On 22 June 2009 the Parent‟s shareholders approved two stock option plans, one of which is reserved for the

Chief Executive Officer and the other for certain of the Poltrona Frau Group‟s directors, employees and

collaborators.

The features of the stock option plan reserved for the Chief Executive Officer are set out in the following table:

Features of the plan

Granting of option rights, not transferable to third parties, for subscribing to the ordinary shares of

Poltrona Frau S.p.A. to be issued in the future or, at the discretion of the Company, for purchasing

treasury shares.

Conditions for exercising options Continuing to hold office as chief executive officer at the exercise dates.

Unit price for subscription/purchase of shares Each option gives the right to subscribe/purchase one ordinary share of the Company at the price of

Euro 0.74.

Exercise period of the options

Up to 31 March 2014 according to the following schedule: one third from 31 March 2010, one third

from 31 March 2011 and one third from 31 March 2012. The plan does not contain any performance

objectives.

Maximum number of options

The plan does not envisage a maximum number of options which may be granted each year. A total

of 1,200,000 options are granted through the plan, which give the right to subscribe/purchase

1,200,000 of the Company‟s ordinary shares.

The features of the stock option plan reserved for certain Poltrona Frau Group directors, employees and

collaborators are set out in the following table:

Features of the plan

Granting of option rights, not transferable to third parties, for subscribing to the ordinary shares of

Poltrona Frau S.p.A. to be issued in the future or, at the discretion of the Company, for purchasing

treasury shares.

Beneficiaries Employees, directors and consultants of the Company and its subsidiaries who have important

positions or functions in the Company or its subsidiaries.

Conditions for exercising options Continuation of an employment relationship, continuation in office as director or continuation as a

consultant at the exercise dates.

Unit price for subscription/purchase of shares Each option gives the right to subscribe/purchase one ordinary share of the Company at the price of

Euro 0.88.

Exercise period of the options

Up to 31 March 2014 according to the following schedule: one third after 12 months from the grant

date, one third after 24 months from the grant date if the beneficiary has achieved the agreed

performance objectives allocated to him/her and one third after 36 months from the grant date if the

beneficiary has achieved the agreed performance objectives allocated to him/her.

Maximum number of options

The plan does not envisage a maximum number of options which may be granted each year. A

maximum number of 2,800,000 options are granted through the plan, which give the right to

subscribe/purchase 2,800,000 of the Company‟s ordinary shares.

A total of 2,230,000 option rights had been assigned at 31 December 2013 (1,316,669 as at 31 December

2012), none of which allocated to members of the Board of Directors (other than those stated above in relation

to the Chief Executive Officer), 610,000 had been granted to executives pursuant to article 152-sexies,

paragraph 1 c)-c.2 of the Issuers‟ Regulation and 420,000 had been granted to other employees and

collaborators of the Parent and its subsidiaries.



212

Adopting a stock option plan requires the recognition for accounting purposes of a cost equal to the fair value

of the options at the grant date. This cost is recognised over the period during which the conditions vest for the

options to be exercised, with counter-entry to an appropriate equity reserve.

The options have been valued by an independent expert and the main assumptions underlying the calculation

were as follows:

- calculation method: Cox Ross Rubinstein binomial model

- current price of the underlying: Euro 0.831

- option exercise price: Euro 0.88 (Euro 0.74 for the Chief Executive Officer‟s plan)

- expected annual volatility: 30%

- risk-free rate: 3.52%

- payout return: 1.5%

Changes in stock options during 2013 were as follows:

Year ended 31 December 2013 Number of

shares

Average price for

the year Market price

Options outstanding at 1 January 2013 2,516,668 0.88 0.994

Options granted during the period 800,000 1.5 -

(Options exercised during the period) (966,668) 0.88 1.551

(Options expiring during the period) (120,000) - -

Options outstanding at 31 December 2013 2,230,000 1.025 2.35

Compensation for Directors and Statutory Auditors

The following tables provide details of the compensation payable for the year to members of the management

and control bodies and to general managers, as required by Annex 3C, table 1 of the Issuers‟ Regulations.

Board of Directors (thousands of Euro)

First and last name Office held

Period

office

held

Term

expiry

date

Cost of office

held in the

company

preparing the

fin. stats.

Non-

monetary

benefits

Bonuses

and other

incentives

Other

compensation

Franco Moschini Chairman 2013 (1) 29 - - -

Matteo Cordero di Montezemolo Deputy Chairman 2013 (1) - 4 - -

Dario Rinero Chief Executive

Officer 2013 (1) 656 - 4,172 -

Luca Cordero di Montezemolo Director 2013 (1) - - - -

Tommaso Beolchini Director 2013 (1) 11 - - -

Lorenzo Romani Director 2013 (1) (2) - - - -

Libero Milone Director 2013 (1) 21 - - -

Innocenzo Cipolletta Director 2013 (1) 20 - - 10

Mario Paolo Moiso Director 2013 (1) 10 - - 23

Luigi Sala Director 2013 (1) - - - -

Irene Tinagli Director 2013 (1) 12 - - -

1) Appointed at the Shareholders‟ Meeting of 27 April 2012 until approval of the financial statements as at 31 December 2014.

2) On 4 February 2014, after Mr. Lorenzo Romani resigned, Mr. Matteo Facoetti was co-opted until the next Shareholders' Meeting.



213

Board of Statutory Auditors (thousands of Euro)

First and last name Office held Period office

held

Term

expiry

date

Cost of office

held in the

company

preparing the fin.

stats.

Non-

monetary

benefits

Bonuses

and other

incentives

Other

compensation

Mario Stefano Luigi Ravaccia Chairman 2013 (1) 32 - - -

Alfonso Donadio Standing Auditor 2013 (1) 16 - - -

Barbara Zanardi Standing Auditor 2013 (1) 22 - - -

Nazzareno Minnozzi Alternate Auditor 2013 (1) - - - -

Gianluca Settepani Alternate Auditor 2013 (1) - - - -

(1) appointed at the Shareholders‟ Meeting of 27 April 2012 until approval of the financial statements as at 31 December 2014.

Compensation for executives with strategic responsibility

Executives with strategic responsibility, namely those having the direct and indirect power to plan, manage and

control the Group‟s activities, have been identified as its chief executive officers, general managers and leading

executives. The compensation payable to this group of executives, in relation to the year ended 31 December

2013, amounted to Euro 8,027 thousand (Euro 3,386 thousand as at 31 December 2012), total corporation

costs including the CEO and it relates essentially to short term benefits, as well as amounts recognised

according to the IFRS 2 international accounting standard connected with the disposal of the Group, as widely

discussed in the section "Subsequent events".



214

Cassina‟s Carpentry



215

REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE POLTRONA FRAU S.P.A. SHAREHOLDERS‟ MEETING PURSUANT TO

ART. 153 OF LEGISLATIVE DECREE 58/1998 AND ART. 2429, PARAGRAPH 3 OF THE ITALIAN CIVIL CODE

Shareholders,

During the year ended 31 December 2013, the Board of Statutory Auditors of Poltrona Frau S.p.A. (“Poltrona

Frau” or the “Company”) performed the supervisory tasks envisaged by law, also taking into account the

principles of conduct recommended by the Italian Accounting Profession and the Consob communications on

corporate governance and Board of Statutory Auditors‟ duties.

Over the course of the year, the Board of Statutory Auditors obtained information for the purpose of its duties

from meetings with the corporate departments, participation in meetings of the Board of Directors and in

meetings of the Internal Control and Corporate Governance Committee meetings, which the Board has always

attended.

In compliance with Consob recommendations and guidance in Communication no. 1025564 of 6 April 2001, as

amended and supplemented by DEM/3021582 of 4 April 2003 and DEM/6031329 of 7 April 2006, we wish to

report the following:

1. The Board of Statutory Auditors supervised compliance with the law, with the Articles of Association

and with the principles of sound management.

2. The Board of Statutory Auditors did not find any atypical and/or unusual transactions performed with

third parties or related parties (including Group companies) during 2013 or after year end.

3. The Board considers that the information provided by the Directors in the Notes to the Financial

Statements as regards intragroup and related party transactions is adequate. In particular, these were

business transactions performed at arm‟s length as part of the company‟s normal business activities.

4. On 26 March 2014 the independent auditors Reconta Ernst & Young S.p.A. issued their report pursuant

to art. 14, Legislative Decree 39/2010, which confirms that the separate and consolidated financial

statements as at 31 December 2013 comply with the International Financial Reporting Standards

(IFRS) endorsed by the European Union and with implementing rules pursuant to art. 9, Legislative

Decree 38/2005, that the statements were prepared with clarity and provide a truthful and accurate

view of the equity, financial and income positions at Company level and at consolidated level for the

Group. The independent auditors also consider that the Management Report and the information

presented in the Corporate Governance Report pursuant to paragraph 1 c), d), f), l) and m) and

paragraph 2 b) of art. 123-bis, Legislative Decree 58/1998 are consistent with the Company‟s separate

financial statements and with the Group‟s consolidated financial statements.

5. No complaints pursuant to art. 2408 of the Italian Civil Code were submitted to the Board of Statutory

Auditors in 2013.

6. No other complaints were received.

7. In 2013 the Company did not confer assignments upon Reconta Ernst & Young S.p.A. other than audit

of the separate and consolidate financial statements, limited review of the interim reports and

verification of correct keeping of the accounts and correct entry of operations in the accounting

records.

8. The Company has assigned legal and fiscal consultancy tasks to other entities associated with the

Reconta Ernst & Young S.p.A. partnership network, for a total amount of Euro 11 thousand.

9. In 2013 the Board of Statutory Auditors issued an opinion to the Board of Directors, pursuant to art.

2389, paragraph 3 of the Italian Civil Code, regarding the remuneration allocated to Directors holding

special offices.



216

Note that the remuneration for Executive Directors (art. 2389, paragraph 3, Italian Civil Code) is

established by the Board of Directors after consulting the Board of Statutory Auditors and subject to

preparatory tasks completed by the Compensation Committee, a committee composed of non-

executive directors, most of which are independent. For further details regarding Directors‟

remuneration and the long-term incentive plans, together with the indemnity envisaged for early

termination of office, reference should be made to the remuneration report prepared by the company

pursuant to art. 123-ter, Legislative Decree 58/1998.

10. In 2013 the Company‟s Board of Directors held four meetings, the Internal Control and Corporate

Governance Committee six meetings and the Appointments and Compensation Committee three.

During 2013 the Board of Statutory Auditors held four meetings. In addition, the Board attended: (i)

the General Meeting for approval of the financial statements as at 31 December 2013; (ii) all meetings

of the Board of Directors; (iii) all meetings held in 2013 by the Internal Control and Corporate

Governance Committee; (iv) all meetings held in 2013 by the Appointments and Compensation

Committee.

11. To the extent of its responsibilities, the Board of Statutory Auditors gained insight into and supervised

compliance with the principles of sound management through direct observation, gathering

information from corporate department managers (including the Internal Control Manager), meetings

with the Internal Control and Corporate Governance Committee and managers of the independent

auditors to exchange significant data and information. In particular, with regard to the Board of

Directors‟ decision-making processes, the Board of Statutory Auditors ascertained - also through

attendance at Board of Directors‟ meetings - the compliance with law and the Articles of Association

of the management decisions adopted by the Directors, and verified that the related resolutions were

aided by analyses and opinions produced within the company or, where necessary, by external

professionals - especially with regard to the economic and financial adequacy of the transactions and

that, as a result, these transactions were in the interests of the Company.

12. The Board of Statutory Auditors gained insight into and supervised the adequacy of the Company‟s

organisational structure and related operations, through information gathered from the relevant

departments, meetings with the managers of those departments, meetings with the internal audit and

independent auditors‟ managers, and in this respect has no particular findings to report.

13. The Board of Statutory Auditors assessed and supervised the adequacy of the Company‟s internal

control system, also through: (i) meetings with the Internal Control and Corporate Governance

Committee and (ii) obtaining documents, and found that there were no significant critical points in the

system.

14. The Board assessed and supervised the adequacy of the administrative and accounting system and its

reliability in correctly representing operations, by obtaining information from the managers of the

relevant departments (including the Internal Control Manager), examination of corporate documents

and analysis of the results of tasks performed by the independent auditors Reconta Ernst & Young

S.p.A. The Board also noted the attestations issued by the Chief Executive Officer and the Group‟s

Officer responsible for the preparation of the corporate accounting documents with regard to the

adequacy and effective application in 2013 of the administrative and accounting procedures for

preparation of the separate and consolidated financial statements.

15. The Board of Statutory Auditors supervised the adequacy of instructions issued by the Company to its

subsidiaries, pursuant to art. 114, paragraph 2, Legislative Decree 58/98 and considers them to be

adequate in meeting the disclosure obligations required by law.

16. Through direct verification and information obtained from the independent auditors Reconta Ernst &

Young S.p.A., the Board of Statutory Auditors confirmed compliance with IAS/IFRS and with laws and

regulations governing the presentation and format of the separate financial statements, consolidated

financial statements and the management report.

17. By adopting its own Corporate Governance Code, the Company complies with the principles and

recommendations contained in the Corporate Governance Code prepared by the Committee on

Corporate Governance for Listed Companies of Borsa Italiana. The Company‟s Board of Directors



217

(composed of eleven members) includes eight non-executive directors, three of which have been

classified by the Board of Directors as independent. The Appointments and Compensation Committee

and the Internal Control and Corporate Governance Committee have been set up within the Board of

Directors. Both committees are mainly composed of Independent Directors. Again with regard to

Independent Directors, note that the Company has established the role of Lead Independent Director as

the contact and coordinator for reports and input from the Independent Directors, to guarantee

maximum autonomy in Independent Directors‟ opinions on the tasks performed by management.

Amongst other things, the Lead Independent Director has the power to call special meetings of

Independent Directors only to discuss topics relating to management activities or to operations of the

Board of Directors. For further details on the corporate governance of the Company, reference should

be made to the Report prepared and approved by the Directors.

In this respect, note that the Company has fully adopted the criteria established in the Borsa Italiana

Corporate Governance Code with regard to Directors‟ classification as “independent”. Based on

information available to the Company and provided by the Directors, the Board of Directors assessed

the independence requirements at the Board of Directors‟ meeting of 13 March 2014. These assessment

activities were also followed by the Board of Statutory Auditors, which performed the valuations falling

under its own responsibility, and found that the requirements for membership of the Board of Directors

were satisfied.

The Board of Statutory Auditors also verified its own independence, pursuant to art. 148, paragraph 3,

Legislative Decree 58/1998.

To conclude, the Board of Statutory Auditors expresses a positive opinion on the Company‟s Corporate

Governance system.

18. No significant facts emerged from the supervisory and control activities that would be subject to report

to the Supervisory Authorities or of mention in this Report.

19. Having noted the results of the separate financial statements as at 31 December 2013, the Board of

Statutory Auditors raises no objections to the proposed resolution formulated by the Board of Directors

as regards the profit of the year.

Tolentino, 26 March 2014

The Board of Statutory Auditors

Mario Stefano Luigi Ravaccia (signed)

Alfonso Donadio (signed)

Barbara Zanardi (signed)



218

ATTESTATION ON THE SEPARATE FINANCIAL STATEMENTS PURSUANT TO ARTICLE 81-TER OF CONSOB

REGULATION NO. 11971 OF 14 MAY 1999, AS AMENDED AND SUPPLEMENTED

1. The undersigned, Dario Rinero, Chief Executive Officer, and Cesare Parachini, officer responsible for the

preparation of the corporate accounting documents of Poltrona Frau S.p.A., hereby attest, also taking into

account the requirements of article 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of 24

February 1998:

the adequacy with respect to the characteristics of the Group and

the actual application of the administrative and accounting procedures required for the preparation

of the separate financial statements during 2013.

2. In this respect the administrative and accounting procedures required for the preparation of the financial

statements for the year ended 31 December 2013 and the assessment of their adequacy were carried out

on the basis of a process established by Poltrona Frau S.p.A. that is consistent with the document “Internal

Control - Integrated Framework” and also takes into account the document “Internal Control over Financial

Reporting - Management Tools”, both drawn up by the Committee of Sponsoring Organisations of the

Treadway Commission (CoSO), an internationally-accepted reference framework.

3. The undersigned moreover attest that:

3.1 The separate financial statements for the year ended 31 December 2013:

a) have been prepared in accordance with the applicable international accounting standards recognised

by the European Union pursuant to Regulation (EC) no. 1606/2002 of the European Parliament and of

the Council of 19 July 2002;

b) correspond to the amounts stated in the accounting books and records;

c) are suitable for providing a true and fair view of the financial position, results of operations and cash

flows of the issuer.

3.2 The Management Report includes a reliable analysis of the performance and results of operations, the

position of the issuer and a description of the main risks and uncertainties.


__________________________________ __________________________________

Chief Executive Officer Officer responsible for the

preparation of the corporate

accounting documents

Signed by Dario Rinero Signed by Cesare Parachini



219

INDEPENDENT AUDITORS' REPORT



220



221

FINANCIAL STATEMENTS AS AT 31 DECEMBER 2013 - PROPOSED RESOLUTION

Shareholders,

to conclude our report and trusting in your agreement with the way in which the financial statements for the

year ended 31 December 2013 have been presented and with the principles and policies used we propose that

you adopt the following resolutions:

1. to approve the separate financial statements for the year ended 31 December 2013 and the Management

Report for the year closed at 31 December 2013, as submitted to you;

2. and, as regards profit for the year, amounting to Euro 190,285.40 (one hundred ninety thousand two

hundred eighty-five/40), we propose to allocate 5% to the legal reserve and the remaining amount entirely

to the extraordinary reserve.


On behalf of the Board of Directors

Chief Executive Officer

Dario Rinero



222 POLTRONA FRAU S.P.A.


222

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