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Ponzano July 30, 2010 – The Benetton Group Board of Directors examined and approved the consolidated results for the first half of 2010.
Consolidated income statement
Group net revenues for the first half of 2010, characterised by continuing economic uncertainty in many countries of importance to the Group, reached €891 million (+1% over the comparative half year, corresponding to €9 million). Product mix contributed to this improvement, with a predominance of higher unit value categories; added to this was a positive trend against the euro of some important foreign currencies in the Group’s geographical mix. Again this year, as in 2009, we have reaffirmed the policy of matching deliveries of the Fall/Winter collection with the seasonal requirements of the sales network, continuing an attentive policy of improved service to clients. Consequently, a large part of the deliveries of these collections will be despatched in the third quarter.
Group brands achieved good results in the half year,
with growth of Sisley and the 012 and Sisley Young brands, while
the UCB brand substantially maintained its position.
Geographically, in established markets, the slow-down in
Greece and Spain was offset by a solid performance in Italy.
Regarding emerging markets, whose proportion of total
sales increased to 13%, the strong growth achieved in Mexico (+60%
currency neutral) and in India is of special note.
Gross operating profit of €425 million (47.7% of net revenues) was up (+€24 million) compared with €401 million (45.5%) in the comparative half year, due to the decisive contribution of efficiencies achieved in manufacturing and sourcing.
The contribution margin was €356 million (39.9% of revenues), compared with €336 million (38.2%) in the corresponding period of 2009, up by €20 million.
Due to the cost reduction actions launched during 2009, general expenses for the first six months of 2010 were maintained overall at the same level as in the comparative half year, even though there was an increase in advertising investments. There was, moreover, a further increase in non-recurring charges relating, among others, to the rationalisation program for directly operated stores, in particular in the USA.
As a result, operating profit (EBIT), was €63 million, up compared with €43 million in the corresponding period of 2009, with a percentage to revenues of 7.1%, compared with the previous 4.9%.
Improvements in financial management were associated primarily with the reduction in average indebtedness, containing interest expenses from €12 million in the first half of 2009 to €7 million in 2010, and the usual hedging operations to cover foreign exchange risks.
Net income, finally, was €40 million (4.5% of revenues), compared with €29 million (3.2%) in the corresponding period of 2009. This result was impacted by an increase in the average tax rate.
Consolidated financial situation
Compared with December 31, 2009, there was an increase in fixed
assets (€23 million) as a result of the investment policy,
further detailed below, and a reduction in working capital
(€35 million) due to the improved payables/receivables
position.
Compared with June 30, 2009, there was a significant reduction in
working capital (€39 million), achieved through reduced
inventories (€51 million) and higher trade payables (€21
million), in spite of higher receivables.
Net financial indebtedness at June 30, 2010 was €508 million, down by €48 million compared with December 31, 2009, underlining the strong cash generation in the first half year.
Summary of consolidated cash flows
Cash flow generated by operating activities totalled €150 million, against €145 million in the comparative period.
In the first half of 2010, the Group made net investments of €54 million. To be noted, were €44 million of commercial and real estate investments and €6 million of investment in industrial activities.
Outlook for the year
The cost reduction actions, introduced last year, are having the desired effects and the general level of efficiency in the production area, together with the strength of the brands and the capillary sales network are supporting the strong improvement in results achieved in the first half year.
The 2nd half of 2010 will see, among other things, significant commercial investments, with the relaunch and creation of innovative spaces in the larger Flagship Stores, in cooperation with famous architects and the acquisition of strategic locations in emerging markets.
All company efforts are therefore focussed on creating the right conditions for the resumption of growth, also with the support offered to the Asian markets, accompanied by an unchanged and continuing commitment to greater efficiency.
However, new orders taken for the Fall/Winter collection demonstrate continuing weakness in the economies of markets historically of greater relevance to the Group.
Expected trends in the second part of 2010 confirm estimates for the current full year of a slight reduction in operating margins compared with 2009 levels, in the presence of significant non-recurring costs of an amount similar to the previous year, a greater cost of borrowing due to the loan arranged in June to replace the expired loan and, as already mentioned, a slight increase in the average tax rate.
Consolidated statement of income
| (millions of Euro) | 1st half 2010 |
% |
1st half 2009 |
% |
Change |
% |
Full year 2009 |
% |
|---|---|---|---|---|---|---|---|---|
|
Revenues |
891 |
100.0 |
882 |
100.0 |
9 |
1.0 |
2,049 |
100.0 |
|
Materials and subcontracted work |
400 |
44.9 |
408 |
46.2 |
(8) |
(1.9) |
969 |
47.3 |
|
Payroll and related costs |
41 |
4.6 |
45 |
5.1 |
(4) |
(8.0) |
84 |
4.1 |
|
Industrial depreciation and
amortization |
8 |
0.8 |
8 |
0.9 |
- |
(8.1) |
15 |
0.8 |
|
Other manufacturing costs |
17 |
2.0 |
20 |
2.3 |
(3) |
(14.3) |
38 |
1.8 |
|
Cost of sales |
466 |
52.3 |
481 |
54.5 |
(15) |
(3.1) |
1,106 |
54.0 |
|
Gross operating profit |
425 |
47.7 |
401 |
45.5 |
24 |
6.0 |
943 |
46.0 |
|
Distribution and transport |
33 |
3.7 |
30 |
3.3 |
3 |
11.3 |
63 |
3.1 |
|
Sales commissions |
36 |
4.1 |
35 |
4.0 |
1 |
3.5 |
87 |
4.2 |
|
Contribution margin |
356 |
39.9 |
336 |
38.2 |
20 |
5.8 |
793 |
38.7 |
|
Payroll and related costs |
87 |
9.7 |
87 |
9.9 |
- |
(0.9) |
169 |
8.2 |
|
Advertising and promotion |
30 |
3.3 |
28 |
3.1 |
2 |
7.0 |
53 |
2.6 |
|
Depreciation and amortization |
43 |
4.8 |
43 |
4.9 |
- |
(0.6) |
88 |
4.3 |
|
Other expenses and income - of which non-recurring expenses/(income) |
133 12 |
15.0 1.4 |
135 11 |
15.4 1.2 |
(2) 1 |
(1.0) 16.1 |
277 23 |
13.6 1.1 |
|
General and operating expenses - of which non-recurring expenses/(income) |
293 12 |
32.8 1.4 |
293 11 |
33.3 1.2 |
- 1 |
(0.2) 16.1 |
587 23 |
28.7 1.1 |
|
Operating profit(*) |
63 |
7.1 |
43 |
4.9 |
20 |
46.4 |
206 |
10.0 |
|
Share of income/(losses) of associated
companies |
- |
- |
2 |
0.2 |
(2) |
(92.8) |
2 |
0.1 |
|
Financial (expenses)/income |
(7) |
(0.8) |
(12) |
(1.4) |
5 |
(38.0) |
(20) |
(0.9) |
|
Net foreign currency hedging (losses)/gains and
exchange differences |
9 |
1.0 |
4 |
0.5 |
5 |
n.s. |
(2) |
(0.1) |
|
Income before taxes |
65 |
7.3 |
37 |
4.2 |
28 |
74.0 |
186 |
9.1 |
|
Income taxes |
30 |
3.3 |
11 |
1.2 |
19 |
n.s. |
68 |
3.3 |
|
Net income for the period attributable to: - Shareholders of the Parent Company - Minority interests |
35 40 (5) |
4.0 4.5 (0.5) |
26 29 (3) |
3.0 3.2 (0.2) |
9 11 (2) |
33.7 38.9 99.2 |
118 122 (4) |
5.8 5.9 (0.1) |
(*) Trading profit was 75 million, representing 8.5% of revenues (54 million in first half 2009, representing 6.1% of revenues, and 229 million in 2009 representing 11.1% of revenues).
Balance sheet and financial position highlights
| (millions of Euro) | 06.30.2010 | 12.31.2009 | Change | 06.30.2009 | Change |
|---|---|---|---|---|---|
| Working capital | 623 | 658 | (35) | 662 | (39) |
| - trade receivables | 709 | 791 | (82) | 673 | 36 |
| - inventories | 375 | 301 | 74 | 426 | (51) |
| - trade payables | (455) | (404) | (51) | (434) | (21) |
| - other receivables/(payables) (A) | (6) | (30) | 24 | (3) | (3) |
| Assets held for sale | 10 | 5 | 5 | 6 | 4 |
| Property, plant and equipment and intangible assets (B) | 1,311 | 1,288 | 23 | 1,325 | (14) |
| Non-current financial assets (C) | 25 | 25 | - | 25 | - |
| Other assets/(liabilities) (D) | 20 | 36 | (16) | 18 | 2 |
| Net capital employed | 1,989 | 2,012 | (23) | 2,036 | (47) |
| Net debt (E) | 508 | 556 | (48) | 678 | (170) |
| Total shareholders’ equity | 1,481 | 1,456 | 25 | 1,358 | 123 |
(A) Other receivables/(payables)
include VAT receivables and payables, sundry receivables and
payables, non-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) | 06.30.2010 | 12.31.2009 | Change | 06.30.2009 |
|---|---|---|---|---|
| Cash and banks | 169 | 135 | 34 | 111 |
| A Liquid assets | 169 | 135 | 34 | 111 |
| B Current financial receivables | 50 | 18 | 32 | 20 |
| Financial payables, bank loans and lease financing | (81) | (312) | 231 | (412) |
| C Current financial payables | (81) | (312) | 231 | (412) |
| D = A+B+C Current financial indebtedness | 138 | (159) | 297 | (281) |
| E Non-current financial receivables | 5 | 5 | - | 5 |
| Medium/long-term loans | (650) | (401) | (249) | (402) |
| Lease financing | (1) | (1) | - | - |
| F Non-current financial payables | (651) | (402) | (249) | (402) |
| G = E+F Non-current financial indebtedness | (646) | (397) | (249) | (397) |
| H = D+G Net debt | (508) | (556) | 48 | (678) |
Cash flow statement
| (millions of Euro) | 1st half 2010 | 1st half 2009 |
|---|---|---|
| Cash flow from operating activities before changes in working capital | 130 | 107 |
| Cash flow provided by changes in working capital | 31 | 56 |
| Interest (paid)/received and exchange differences | - | (9) |
| Payment of taxes | (11) | (9) |
| Cash flow provided by operating activities | 150 | 145 |
| Net operating investments/Capex | (47) | (71) |
| Non-current financial assets | (7) | (9) |
| Cash flow used by investing activities | (54) | (80) |
| Free cash flow | 96 | 65 |
| Cash flow used by financing activities of which: | ||
| - payment of dividends | (41) | (50) |
| - purchase of treasury shares | - | (3) |
| - net change in other sources of finance | (24) | (23) |
| Cash flow used by financing activities | (65) | (76) |
| Net increase/(decrease) in cash and cash equivalents | 31 | (11) |
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) |
1st half 2010 | 1st half 2009 | Change | Full year 2009 |
|---|---|---|---|---|
| A Operating profit | 63 | 43 | 20 | 206 |
| B - of which non-recurring expenses/(income) | 12 | 11 | 1 | 23 |
| C Depreciation and amortization | 51 | 51 | - | 103 |
| D Other non-monetary costs (net impairment/(reversals)) |
4 |
2 |
2 |
21 |
| E - of which non-recurring | 4 | 2 | 2 | 21 |
| F = A+C+D EBITDA | 118 | 96 | 22 | 330 |
| G = F+B-E Ordinary EBITDA | 126 | 105 | 21 | 332 |
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 contains forward-looking statements 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, even
significantly, from those announced for a number of
reasons.
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