Lanvin Group Holdings Ltd. Form 20-F Summary
Business context and reporting period
Annual report for the fiscal year ended December 31, 2022, filed under IFRS as issued by the IASB. The filing presents Lanvin Group Holdings Limited as a Cayman Islands holding company with five principal luxury brands: Lanvin, Wolford, Sergio Rossi, St. John and Caruso. The group operated in more than 80 countries through approximately 1,200 points of sale, including 291 directly operated stores at year-end.
The Business Combination with Primavera Capital Acquisition Corporation closed on December 14, 2022, and Lanvin Group began trading on the NYSE under LANV and LANV-WT. The consolidated financial statements are presented as a continuation of Fosun Fashion Group for accounting purposes.
Financial performance and key metrics
| € millions, except percentages | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | 422.3 | 308.8 | +36.7% |
| Gross profit | 237.9 | 169.9 | +40.0% |
| Gross margin | 56.3% | 55.0% | +130 bps |
| Loss from operations | (225.3) | (62.8) | Higher loss |
| Loss for the year | (239.8) | (76.5) | Higher loss |
| Adjusted EBITDA | (72.0) | (58.9) | Higher loss |
| Adjusted EBITDA margin | (17.0%) | (19.1%) | +210 bps |
| Operating cash flow | (80.9) | (73.1) | Higher use |
| Cash and cash equivalents | 91.9 | 88.7 | +3.6% |
Revenue growth was led by Lanvin, up 64.5% to €119.8 million; Sergio Rossi, up 115.5% to €61.9 million, primarily reflecting a full year of consolidation; St. John, up 17.5% to €85.9 million; Wolford, up 14.8% to €125.5 million; and Caruso, up 24.8% to €30.8 million.
Direct-to-consumer revenue increased 32.5% to €247.5 million, while wholesale revenue increased 41.2% to €164.4 million. Geographically, EMEA revenue rose 38.8% to €205.7 million and North America rose 36.4% to €145.5 million. Greater China increased 15.0% to €48.9 million despite lockdown-related disruption.
At December 31, 2022, inventories were €109.1 million, up from €92.3 million, and trade receivables were €48.9 million, up from €39.8 million. Total assets were €732.2 million and total liabilities were €431.4 million. Borrowings were €33.5 million, comprising €15.4 million current and €18.1 million non-current borrowings. Lease liabilities totaled €140.6 million.
Material changes versus the prior comparable period
- Gross margin improved because of greater scale, improved sell-through and reduced discounting, although inventory impairment increased to €11.4 million from €9.0 million.
- Marketing and selling expenses rose 35.8% to €224.7 million, while general and administrative expenses rose 25.0% to €153.1 million. Both declined as percentages of revenue.
- Adjusted EBITDA remained negative and deteriorated in absolute terms because of higher operating expenses and the full-year impact of Sergio Rossi, despite margin improvement.
- Reported loss was significantly affected by €84.2 million of reverse-recapitalization and listing-related costs, including a €74.5 million IFRS 2 listing expense and €9.7 million of listing expenses recognized in profit or loss.
- Operating cash use increased to €80.9 million, partly because inventories and receivables increased with higher sales volumes. Investing cash use was €21.8 million, including €24.7 million of purchases of long-term assets.
- Financing activities generated €104.9 million, including €183.4 million of reverse-recapitalization proceeds and €24.0 million from a financing fund, partly offset by €225.0 million of borrowings repayments.
Guidance, outlook, commentary and risks
Management expects continued improvement in demand during 2023, with Greater China expected to outpace other regions as post-pandemic recovery progresses. The strategy emphasizes brand repositioning, new product categories, direct-to-consumer and e-commerce expansion, operating efficiencies, strategic partnerships and potential acquisitions. The filing does not provide quantitative revenue or earnings guidance.
Management expects negative operating cash flows over the next few years and states that additional funding may be required. The financial statements were prepared on a going-concern basis assuming Fosun International will continue providing adequate support for at least 12 months from the financial statements’ issuance date.
Material risks include continued losses, negative cash flow, dependence on external funding and Fosun support, inventory and demand forecasting risk, inflation and higher interest costs, foreign-exchange exposure, geopolitical and Ukraine-related disruption, COVID-19 effects, supply-chain interruptions, brand and intellectual-property risks, cybersecurity and privacy risks, and regulatory uncertainty relating to China.
A dispute with minority shareholders of Arpège SAS challenges the group-level use of the Lanvin name. No formal proceedings had been filed as of the report date, but the group may need to change its holding-company name if the matter is not resolved.
Meritz invested $50 million, with $25 million funded in October 2022 and the remaining $25 million funded in April 2023. Meritz is entitled to annual cash dividends of $2.0 million for three years and has put, security and conversion rights that could require substantial cash payments or result in dilution of up to 15 million ordinary or non-voting shares.
All 31,979,969 warrants became exercisable on January 13, 2023 at $11.50 per share and expire in December 2027, subject to their terms. Full cash exercise would generate approximately $367.8 million, but the filing cautions that proceeds depend on the share price and exercise decisions.
The company’s disclosure controls and procedures were considered effective as of December 31, 2022. No management assessment or auditor attestation of internal control over financial reporting was included because the company was within the applicable transition period for newly public companies.
Most important facts for investors to verify
- Whether revenue growth can translate into positive adjusted EBITDA and operating cash flow, given recurring losses and management’s expectation of further negative operating cash flow.
- Cash availability, liquidity by subsidiary and continued support from Fosun International, including restrictions on repatriating cash from certain jurisdictions.
- Inventory quality, aging, impairment exposure and the sustainability of the improved gross margin.
- Terms and potential cash impact of Meritz’s dividend, put, security, indemnity and conversion rights.
- Potential dilution from 31.98 million warrants, the Meritz convertible preference share and outstanding equity incentive awards.
- Resolution and financial or branding consequences of the Arpège minority-shareholder dispute.
- Progress in the Greater China recovery, DTC expansion, e-commerce growth and integration of Sergio Rossi.
- Subsequent events, including the March 2023 ¥3.7 billion Meritz facility used to repurchase Lanvin trademarks from ITOCHU at a fixed 9.10% interest rate.