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Ponzano, November 12, 2009 - The Benetton Group Board of Directors examined and approved the consolidated results for the first nine months of 2009 and reviewed progress made in the achievement of the objectives set out in the reorganization plan.
Consolidated income statement
Group net revenues for the first nine months of
2009 were €1,491 million, marginally down (-2.8%) against the
reference period of 2008 (-2.1 % currency neutral). As already
announced, the rescheduling of deliveries decided at the end of the
first half year in order to match seasonality and provide improved
service to clients, was fully recovered during the third quarter of
the year.
Revenue performance was substantially maintained despite the
deterioration in foreign currencies against the euro as well as
product mix. In the period, on the other hand, the opening of more
directly operated stores had a positive effect.
Textile segment sales increased by €10 million to €78 million, while Apparel sales were €1,413 million, €53 million lower than in the first nine months of 2008. Apparel sales included €324 million (+ €12 million) attributable to direct sales, while €1,089 million were generated in the wholesale channel (-€65 million).
In established markets, satisfactory performance was
achieved by: Italy, the main Group market, France, Greece and
Nordic countries; with a slowdown in the Iberian peninsula and
continental Europe.
In emerging markets, which grew overall by 13%, currency
neutral, particularly positive performance was achieved in India
and China. In India, there was in fact a further acceleration in
growth due to continued improvement in comparable performance and
to growth in department stores in prime locations. In China,
comparable performance was positive in the third quarter and for
the year to date, due to the completion of the initial phase of
refocusing and closure of sales outlets, accompanied by the first
new openings in locations of strategic interest.
In Mexico, market development has been focussed on both the direct
network and department stores, where further acceleration is
planned with the opening of 50 new corners for the winter
season.
In Turkey, the market is contracting due to weakness of consumption
and of the currency. Benetton’s well-established presence
benefits from high brand visibility; the latter was further
increased by the recent opening of an important flagship store in
the centre of Istanbul.
Finally, there was a downturn in volumes in the Russian market due
to the strong impact of the economic crisis; however, the Benetton
Group remains committed to seizing development opportunities in
this important market.
Gross operating profit, amounting to €680
million, reduced in absolute value (-€29 million), due to a
different mix and, to an important extent, to the currency
impact.
It should be mentioned that the margin (45.6% of revenues), net of
the currency impact, increased by over 100 basis points, with a
percentage of sales which rose to 47.3% from 46.2% in the first
nine months of 2008. In fact, in the period, improved efficiencies
of €43 million were achieved in the industrial and sourcing
area, including €24 million resulting from actions identified
in the reorganization plan.
The contribution margin was €571 million (38.3% of revenues), down compared with €597 million in the corresponding period of 2008 (38.9%). Lower distribution costs were important elements in this respect.
The aggressive actions pursued at the beginning of 2009 to reduce general and administrative expenses generated savings in the first nine months of the year of €16 million, in the areas of general expenses, third party and consultancy services, and advertising due to lower rates. These initiatives counterbalanced the expected increase in payroll and rental costs, associated with the opening of directly operated stores, and in depreciation and amortization, as a result of investments completed in previous periods. These included investments relative to expansion of the Castrette logistics centre.
Non-recurring items worsened by a total of €22 million (from an income of around €7 million in 2008 to a cost of €15 million in 2009), mostly linked to reorganization costs.
As a result, operating profit (EBIT), net of non-recurring items and currency impacts, was in line with the number reported for the same period in the previous year (€175 million in the first nine months of 2008, against €170 million in 2009). Reorganization plan actions already taken impacted positively by €40 million on this level of profit. EBIT was €134 million, compared with €182 million in the corresponding period of 2008, due to the negative effect of foreign currency trends for €21 million (with corresponding hedging income to which reference is made in the next paragraph) and increased non-recurring expenses of €22 million.
Financial management highlights were: a significant reversal in the trend of results for foreign currency hedging, which produced €2 million of profit, compared with a loss of over €9 million in the corresponding period of 2008, partially compensating for the negative impact of currencies, mentioned above, on revenues and costs; and also a significant improvement in net financial expenses due to the effect of lower interest rates, in the presence of an increase in average indebtedness in the nine months.
Net income, finally, was €82 million (5.5% of revenues), compared with €109 million (7.1%) in the corresponding period of 2008. The increase in the Group tax rate in the period should be noted.
Consolidated financial situation
Capital employed increased by €146 million, compared with December 31, 2008, in line with the cyclical nature of the business and due to the change in working capital. The latter (€845 million) was lower than at September 30, 2008 (€849 million) due to the reduction in finished product inventories.
Net debt at September 30, 2009 was €819 million, substantially in line with values on the same date in 2008, revealing a large reduction in cash flow absorption since the start of the year, compared with the reference period in the previous year. A further improvement of indebtedness, also compared with the end of 2008, is expected in accordance with the seasonality of the business.
Summary of consolidated cash flows
Cash flow generated by operating activities improved, totalling €31 million overall, as opposed to a negative amount of €36 million in the comparable period; this growth mainly resulted from the reduced absorption of working capital.
In the first nine months of 2009, Group net investments were €107 million compared with €183 million in the corresponding period of 2008. Investments for the commercial network predominated, for an amount of €73 million; actions for the renovation and expansion of stores were given preference. The thrust to develop production investments also continued in the nine months, with expenditure of over €23 million (€37 million in 2008).
Free cash flow improved as a result, from a requirement of €219 million in the first nine months of 2008 to one of €76 million in 2009. Total cash absorption in the nine months of 2009 was €129 million, after payment of the dividend in May, a sharp improvement compared with a total absorption of €346 million in the corresponding period of 2008.
Commenting on the results for the period, Benetton Group CEO Gerolamo Caccia Dominioni, stated: “the nine month results strenghten our confidence in the choices made in the reorganization process under way in the company. Benetton can always count on the force of a high quality product, a strong brand and a constant drive to invest. Additionally, the company has put in place incisive actions, particularly in respect of cost containment and financial management. On the basis of the good results in the first nine months, and in the absence of positive signals on the macroeconomic front, we expect to confirm revenues for the full year substantially in line with the 9 months trend. Due to higher than expected savings, we will ensure satisfactory profitability. Positive cash generation will result, by the end of the year, in lower indebtedness than at December 2008”.
Benetton Group consolidated results
(unaudited)
Consolidated statement of income
| (millions of Euro) | Nine months 2009 |
% |
Nine months 2008 |
% |
Change |
% |
Full year 2008 |
% |
|---|---|---|---|---|---|---|---|---|
|
Revenues |
1,491 |
100.0 |
1,534 |
100.0 |
(43) |
(2.8) |
2,128 |
100.0 |
|
Materials and subcontracted work |
707 |
47.4 |
713 |
46.5 |
(6) |
(0.8) |
997 |
46.9 |
|
Payroll and related costs |
64 |
4.3 |
67 |
4.3 |
(3) |
(4.8) |
88 |
4.2 |
|
Industrial depreciation and
amortization |
12 |
0.8 |
12 |
0.8 |
- |
(2.3) |
16 |
0.8 |
|
Other manufacturing costs |
28 |
1.9 |
33 |
2.2 |
(5) |
(14.6) |
45 |
2.0 |
|
Cost of sales |
811 |
54.4 |
825 |
53.8 |
(14) |
(1.7) |
1,146 |
53.9 |
|
Gross operating profit |
680 |
45.6 |
709 |
46.2 |
(29) |
(4.1) |
982 |
46.1 |
|
Distribution and transport |
46 |
3.1 |
46 |
3.0 |
- |
(0.6) |
66 |
3.0 |
|
Sales commissions |
63 |
4.2 |
66 |
4.3 |
(3) |
(4.2) |
89 |
4.2 |
|
Contribution margin |
571 |
38.3 |
597 |
38.9 |
(26) |
(4.3) |
827 |
38.9 |
|
Payroll and related costs |
127 |
8.5 |
124 |
8.1 |
3 |
1.9 |
168 |
7.9 |
|
Advertising and promotion |
39 |
2.7 |
46 |
3.0 |
(7) |
(14.4) |
61 |
2.9 |
|
Depreciation and amortization |
66 |
4.4 |
61 |
4.0 |
5 |
8.3 |
84 |
3.9 |
|
Other expenses and income - of which non-recurring expenses/(income) |
205 15 |
13.7 1.0 |
184 (7) |
11.9 (0.5) |
21 22 |
11.7 n.s. |
260 (1) |
12.3 n.s. |
|
General and operating expenses - of which non-recurring expenses/(income) |
437 15 |
29.3 1.0 |
415 (7) |
27.0 (0.5) |
22 22 |
5.3 n.s. |
573 (1) |
27.0 n.s. |
|
Operating profit(*) |
134 |
9.0 |
182 |
11.9 |
(48) |
(26.4) |
254 |
11.9 |
|
Share of income/(losses) of associated
companies |
2 |
0.1 |
- |
- |
2 |
n.s. |
- |
- |
|
Financial (expenses)/income |
(17) |
(1.1) |
(28) |
(1.8) |
11 |
(37.7) |
(41) |
(1.9) |
|
Net foreign currency hedging (losses)/gains and
exchange differences |
2 |
0.1 |
(9) |
(0.6) |
11 |
n.s. |
(1) |
n.s. |
|
Income before taxes |
121 |
8.1 |
145 |
9.5 |
(24) |
(16.7) |
212 |
10.0 |
|
Income taxes |
39 |
2.6 |
36 |
2.4 |
3 |
8.8 |
56 |
2.7 |
|
Net income from continuing
operations |
82 |
5.5 |
109 |
7.1 |
(27) |
(25.1) |
156 |
7.3 |
|
Net income from discontinued
operations |
- |
- |
1 |
0.1 |
(1) |
n.s. |
1 |
0.1 |
|
Net income for the period attributable to: - shareholders of the Parent Company - minority interests |
82 82 - |
5.5 5.5 0.0 |
110 109 1 |
7.2 7.1 0.1 |
(28) (27) (1) |
(25.6) (24.9) n.s. |
157 155 2 |
7.4 7.3 0.1 |
(*) Trading profit was 149 million, representing 10.0% of revenues (175 million in first nine months 2008, representing 11.4% of revenues, and 254 million in full year 2008 representing 11.9% of revenues).
| (millions of Euro) | 3rd quarter 2009 |
% |
3rd quarter 2008 |
% |
Change |
% |
|---|---|---|---|---|---|---|
|
Revenues |
609 |
100.0 |
538 |
100.0 |
71 |
13.1 |
|
Materials and subcontracted work |
299 |
49.2 |
254 |
47.2 |
45 |
17.8 |
|
Payroll and related costs |
19 |
3.1 |
22 |
4.0 |
(3) |
(13.0) |
|
Industrial depreciation and
amortization |
4 |
0.6 |
4 |
0.8 |
- |
(7.9) |
|
Other manufacturing costs |
8 |
1.3 |
11 |
2.1 |
(3) |
(30.3) |
|
Cost of sales |
330 |
54.2 |
291 |
54.1 |
39 |
13.3 |
|
Gross operating profit |
279 |
45.8 |
247 |
45.9 |
32 |
12.9 |
|
Distribution and transport |
16 |
2.7 |
16 |
3.0 |
- |
2.5 |
|
Sales commissions |
28 |
4.5 |
24 |
4.3 |
4 |
17.8 |
|
Contribution margin |
235 |
38.6 |
207 |
38.6 |
28 |
13.2 |
|
Payroll and related costs |
39 |
6.4 |
40 |
7.5 |
(1) |
(3.0) |
|
Advertising and promotion |
12 |
2.0 |
13 |
2.5 |
(1) |
(12.9) |
|
Depreciation and amortization |
23 |
3.7 |
21 |
3.9 |
2 |
8.7 |
|
Other expenses and income - of which non-recurring expenses/(income) |
70 5 |
11.5 0.8 |
67 1 |
12.4 0.1 |
3 4 |
5.6 n.s. |
|
General and operating expenses - of which non-recurring expenses/(income) |
144 5 |
23.6 0.8 |
141 1 |
26.3 0.1 |
3 4 |
1.8 n.s |
|
Operating profit(*) |
91 |
15.0 |
66 |
12.3 |
25 |
37.3 |
|
Financial (expenses)/income |
(5) |
(0.8) |
(11) |
(2.1) |
6 |
(53.4) |
|
Net foreign currency hedging (losses)/gains and
exchange differences |
(2) |
(0.4) |
(2) |
(0.3) |
- |
19.4 |
|
Income before taxes |
84 |
13.8 |
53 |
9.9 |
31 |
56.8 |
|
Income taxes |
28 |
4.7 |
15 |
2.6 |
13 |
95.4 |
|
Net income from continuing
operations |
56 |
9.1 |
38 |
7.3 |
18 |
42.5 |
|
Net income from discontinued
operations |
- |
- |
- |
(0.1) |
- |
n.s. |
|
Net income for the period attributable to: - shareholders of the Parent Company - minority interests |
56 54 2 |
9.1 8.8 0.3 |
38 37 1 |
7.2 7.0 0.2 |
18 17 1 |
43.6 42.9 62.1 |
(*) Trading profit was 96 million, representing 15.8% of revenues (67 million in third quarter 2008, representing 12.4% of revenues).
Balance sheet and financial position highlights
Management has decided to present working capital in the strict sense of the term, meaning that direct taxes and receivables and payables not relating to working capital have now been excluded, also in keeping with requests from the financial community. As a result, the following items have been reclassified from "Other receivables/(payables)" to "Other assets/(liabilities)" for the periods before December 31, 2008: deferred tax assets and liabilities, receivables due from the tax authorities for direct taxes, receivables/payables due from/to holding companies in relation to the group tax election and payables representing the valuation of put options held by minority shareholders.
| (millions of Euro) | 09.30.2009 | 12.31.2008 | Change | 09.30.2008 |
|---|---|---|---|---|
| Working capital | 845 | 715 | 130 | 849 |
| - trade receivables | 878 | 787 | 91 | 872 |
| - inventories | 311 | 359 | (48) | 353 |
| - trade payables | (331) | (414) | 83 | (373) |
| - other receivables/(payables) (A) | (13) | (17) | 4 | (3) |
| Assets/(Liabilities) held for sale | 6 | 1 | 5 | 1 |
| Property, plant and equipment and intangible assets (B) | 1,316 | 1,309 | 7 | 1,304 |
| Non-current financial assets (C) | 25 | 32 | (7) | 29 |
| Other assets/(liabilities) (D) | 35 | 24 | 11 | 33 |
| Net capital employed | 2,227 | 2,081 | 146 | 2,216 |
| Net debt (E) | 819 | 689 | 130 | 814 |
| Total shareholders’ equity | 1,408 | 1,392 | 16 | 1,402 |
(A)Other receivables/(payables) include
VAT receivables and payables, sundry receivables and payables,
trade receivables and payables from/to Group companies, accruals
and deferrals, payables to social security institutions and
employees, receivables and payables for fixed asset purchases
etc.
(B) Property, plant and equipment and intangible assets
include all categories of assets net of the related accumulated
depreciation, amortization, and impairment losses.
(C) Non-current financial assets include unconsolidated
investments and guarantee deposits paid and received.
(D) Other assets/(liabilities) include retirement
benefit obligations, provisions for legal and tax risks, the
provision for sales agent indemnities, other provisions, current
tax receivables and liabilities, receivables and payables due
from/to holding companies in relation to the group tax election,
deferred tax assets also in relation to the company reorganization
carried out in 2003, deferred tax liabilities and payables for put
options.
(E) Net debt includes cash and cash equivalents and
all short and medium/long-term financial assets and
liabilities.
Financial position
| (millions of Euro) | 09.30.2009 | 12.31.2008 | Change | 09.30.2008 |
|---|---|---|---|---|
| Cash and banks | 77 | 132 | (55) | 85 |
| A Liquid assets | 77 | 132 | (55) | 85 |
| B Current financial receivables | 18 | 38 | (20) | 26 |
| Current portion of medium/long-term loans | - | - | - | - |
| Financial payables, bank loans and lease financing | (517) | (463) | (54) | (529) |
| C Current financial payables | (517) | (463) | (54) | (529) |
| D = A+B+C Current financial debt | (422) | (293) | (129) | (418) |
| E Non-current financial receivables | 5 | 5 | - | 5 |
| Medium/long-term loans | (402) | (400) | (2) | (400) |
| Lease financing | - | (1) | 1 | (1) |
| F Non-current financial payables | (402) | (401) | (1) | (401) |
| G = E+F Non-current financial debt | (397) | (396) | (1) | (396) |
| H = D+G Net debt | (819) | (689) | (130) | (814) |
Cash flow statement
| (millions of Euro) | Nine months 2009 | Nine months 2008 |
|---|---|---|
| Cash flow from operating activities before changes in working capital | 234 | 254 |
| Cash flow used by changes in working capital | (131) | (220) |
| Interest (paid)/received and exchange differences | (16) | (37) |
| Payment of taxes | (56) | (33) |
| Cash flow provided/(used) by operating activities | 31 | (36) |
| Net operating investments/Capex | (94) | (161) |
| Non-current financial assets | (13) | (22) |
| Cash flow used by investing activities | (107) | (183) |
| Free cash flow | (76) | (219) |
| Cash flow provided/(used) by financing activities of which: | ||
| - payment of dividends | (50) | (75) |
| - purchase of treasury shares | (3) | (52) |
| - net change in other sources of finance | 90 | 293 |
| Cash flow provided by financing activities | 37 | 166 |
| Net decrease in cash and cash equivalents | (39) | (53) |
Alternative performance indicators
In addition to the standard financial indicators
required by IFRS, this press release also contains a number of
alternative performance indicators for the purposes of allowing a
better appreciation of the Group's financial and economic results.
These indicators must not, however, be treated as replacing the
standard ones required by IFRS.
The following table shows how EBITDA and ordinary EBITDA are made
up.
| Key operating data (millions of Euro) |
Nine months 2009 | Nine months 2008 | Change | Full year 2008 |
|---|---|---|---|---|
| A Operating profit | 134 | 182 | (48) | 254 |
| B - of which non-recurring expenses/(income) | 15 | (7) | 22 | (1) |
| C Depreciation and amortization | 78 | 73 | 5 | 100 |
| D Other non-monetary costs (net impairment/(reversals)) |
3 |
(6) |
9 |
- |
| E - of which non-recurring | 3 | (6) | 9 | - |
| F = A+C+D EBITDA | 215 | 249 | (34) | 354 |
| G = F+B-E Ordinary EBITDA | 227 | 248 | (21) | 353 |
Declaration by the manager responsible for
preparing the company's financial reports
The manager responsible for preparing the company's financial
reports, Alberto Nathansohn, declares, pursuant to paragraph 2 of
Article 154-bis of the Consolidated Law on Finance, that the
accounting information contained in this press release corresponds
to the document results, books and accounting records.
Disclaimer
This document includes forward-looking statements, specifically
in the section entitled “Outlook for the year”,
relating to future events and operating, economic and financial
results of the Benetton Group. By their nature, such forecasts
contain an element of risk and uncertainty, because they depend on
the occurrence of future events and developments. The actual
results may differ significantly from those announced for a number
of reasons.
For further information:
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www.benettongroup.com/investors www.benettonir.mobi |
Statement released at 01.48 p.m. CET
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