2008 Results
- 2008 consolidated revenues 2,128 million euro
- Net income 155 million euro
- Proposed dividend 0.28 euro per share
Actions for 2009
- Boost the commercial network
- Supply chain excellence
- Cost optimization
- Focus on capital employed
CFO
Alberto Nathansohn will take the office of CFO
Ponzano, March 18, 2009 - h. 02:25 p.m. CET. The Benetton Group S.p.A. Board of Directors approved the draft 2008 Group Financial Statements(1).
The 2008 results achieved the Group’s preset objectives, despite the deteriorating international economic situation, which became particularly evident in the fourth quarter of the year. Far-reaching structural actions were carried out with resolve in the period and yielded the expected benefits. Of particular note were the improvement of the supply chain structure with the aim of strengthening service to the network of partners, acceleration of profitable growth in strategic countries, such as the former Soviet Union, India and Turkey, and completion of the new organizational structure based on brand and market Business Units.
2008 Group net revenues showed growth of 3.9% to 2,128 million euro; the increase, after eliminating exchange rate impacts (currency neutral) and on a like-for-like basis, was 5.7%. Apparel segment sales to third parties were 2,034 million euro, with a currency neutral increase of 5.6%. Growth in the financial year was largely determined by the enhancement of the offer with higher value product categories and increased sales volumes, as well as accelerated growth in strategic countries, such as Russia and the former Soviet Union, India, Turkey and Latin America, with the positive trend confirmed by 150 new openings in the year.
EBITDA grew by 4.1% in the year to 354 million euro,
benefiting from the positive impact of the substantial actions
undertaken, in particular the reduction of the complexity of
collections and refinements introduced into the supply chain, with
significant improvement in terms of efficiency and effectiveness,
also in respect of the sales network.
Net income for the year was 155 million euro, compared with
145 million in 2007, and 7.3% of sales (7.1% in 2007).
Compared with December 31, 2007, working capital increased by 91 million euro, due to the combined effect of the increase in net trade receivables, associated mainly with the growth in apparel sales, the increase in inventories due to the greater incidence of the direct channel resulting from the greater number of companies consolidated and the increase in trade payables, which was also influenced by the new collection calendars and related production planning.
Capital employed grew by 192 million euro due to the increase in working capital commented on above and the net increase in tangible and intangible assets, relative in particular to gross operating investments in the year of 228 million euro and depreciation and amortization of 100 million.
Total net investments were 209 million euro (230 million in 2007) due largely to investments for the sales network, aimed in particular at the Italian, French and Spanish markets, as well as those in priority development countries such as India, Russia, the former Soviet Union and Turkey, and production investments, relating especially to the logistics hub in Castrette di Villorba (Italy) and the manufacturing facility in Tunisia.
Net financial indebtedness was 689 million euro, up 214 million euro compared with December 31, 2007.
The Board then approved the draft annual financial statements of the Parent Company(1) and submitted a proposal to the next Shareholders’ Meeting, convened at Ponzano for April 20, 2009, (first call and April 24, second call) for payment of a dividend totalling 48 million euro, equivalent to 0.28 euro per share (0.40 euro per share in 2008). Payment of the dividend is planned as from April 30, 2009, with coupon detachment date of April 27, 2009.
CEO Gerolamo Caccia Dominioni, then presented the management
forecasts for the current year to the Board. In view of measures
already initiated to contain and compensate for the negative impact
of the crisis, the Group has set itself as primary objectives for
2009, on the one hand, strengthening of market share both in
established countries and those identified as strategic for
development, and on the other hand, the maintaining of its own
profitability.
To this end, an extensive reorganisation plan has been initiated
which will enable continued investment, accelerate development,
limit the risks of future inflationary pressures, significantly
renew the organisational structure and generate cash flow.
The structural savings produce by this strategy will be partially
available from the second half of the year, and fully in 2010, for
an annual amount of over 50 million euro, which will be used in
part for development and to balance restructuring costs.
In synthesis, the four areas of intervention are:
Alberto Nathansohn will join the Benetton Group as Chief Financial Officer with effect from May 1st. Nathansohn, 51, has matured extensive experience with Bulgari and Eurofly Service SpA, as well as with the Pirelli Group, where he held positions of responsibility both in Italy and abroad.
The Board approved a report for submission to the
Shareholders’ Meeting relating to authorization for the
purchase and sale of Company shares with the terms and conditions
illustrated below, subject to revocation, for the part not yet
executed, of the authorization by the shareholders' meeting
resolution of 24 April 2008.
Authorization is requested for the purchase of a maximum number of
shares which, together with the shares currently held, does not
exceed the limit of 10% of the share capital and for a period of 18
months. The minimum purchase price is envisaged as not less than
30% under, and the maximum price not more than 20% over, the
reference price recorded by the share in the stock exchange session
preceding each individual transaction; the selling price is
envisaged as not less than 90% of the reference price recorded by
the share in the stock exchange session prior to each individual
transaction.
The authorization is requested to enable the Company to acquire a
portfolio of treasury shares, which may also be used to serve any
share incentive schemes. This authorization would also give the
Company the power to act on its own shares, for the purposes and in
the ways permitted by current legislative provisions, also taking
advantage of any strategic investment opportunities.
The purchases will be made in markets regulated, organized and
managed by Borsa Italiana S.p.A. and in accordance with its
procedures. The Company currently holds 10,345,910 treasury shares,
corresponding to 5.663% of share capital.
Finally the Board approved the Corporate Governance Report relating to the 2008 financial year, prepared in compliance with the Experimental Format proposed by Borsa Italiana.
The manager responsible for the preparation of company accounting documents, Lorenzo Zago, declares, in accordance with paragraph 2 of article 154b of the Tax Consolidation Act that the accounting information included in this press release corresponds with the documentary results, books and accounting records.
(1) The consolidated financial statements and the draft annual financial statements are currently being audited and, as of today’s date, the audit is not yet complete.
The consolidated financial statements and the draft annual financial statements are currently being audited and, as of today’s date, the audit is not yet completed.
On April 1, 2008 the Group sold its residual sports equipment manufacturing business in Hungary to third parties, meaning that the income and expenses of the discontinued operations have been reclassified and reported in a single line in the statement of income "Net income from discontinued operations". The related figures for the corresponding period in 2007 have also been reclassified to make them comparable with 2008.
Consolidated statement of income
As stated previously, after the amounts relating to the discontinued sports equipment operations were reclassified, the figures for 2007 have been restated to make them consistent with those in 2008.
| (millions of Euro) | 2008 | % | 2007 pro-forma |
% | Change | % |
|---|---|---|---|---|---|---|
| Revenues | 2,128 | 100.0 | 2,048 | 100.0 | 80 | 3.9 |
| Materials and subcontracted work | 997 | 46.9 | 1,000 | 48.8 | (3) | (0.3) |
| Payroll and related costs | 88 | 4.2 | 82 | 4.0 | 6 | 8.3 |
| Industrial depreciation and amortization | 16 | 0.8 | 16 | 0.8 | - | (3.2) |
| Other manufacturing costs | 45 | 2.0 | 42 | 2.1 | 3 | 6.8 |
| Cost of sales | 1,146 | 53.9 | 1,140 | 55.7 | 6 | 0.5 |
| Gross operating profit | 982 | 46.1 | 908 | 44.3 | 74 | 8.1 |
| Distribution and transport | 66 | 3.0 | 60 | 2.9 | 6 | 9.4 |
| Sales commissions | 89 | 4.2 | 86 | 4.2 | 3 | 3.0 |
| Contribution margin | 827 | 38.9 | 762 | 37.2 | 65 | 8.5 |
| Payroll and related costs | 168 | 7.9 | 156 | 7.6 | 12 | 7.6 |
| Advertising and promotion (A) | 61 | 2.9 | 61 | 3.0 | - | (0.2) |
| Depreciation and amortization | 84 | 3.9 | 74 | 3.6 | 10 | 13.6 |
| Other expenses and income - of which non-recurring expenses/(income) |
260 (1) |
123 n.s. |
228 3 |
11.1 0.2 |
32 (4) |
13.9 n.s. |
| General and operating expenses - of which non-recurring expenses/(income) |
573 (1) |
27.0 n.s. |
519 3 |
25.3 0.2 |
54 (4) |
10.3 n.s. |
| Operating profit(*) | 254 | 11.9 | 243 | 11.9 | 11 | 4.7 |
| Financial (expenses)/income | (41) | (1.9) | (30) | (1.5) | (11) | 39.4 |
| Net foreign currency hedging (losses)/gains and exchange differences | (1) | n.s. | (10) | (0.5) | 9 | (92.5) |
| Income before taxes | 212 | 10.0 | 203 | 9.9 | 9 | 4.7 |
| Income taxes | 56 | 2.7 | 53 | 2.6 | 3 | 6.9 |
| Net income from continuing operations | 156 | 7.3 | 150 | 7.3 | 6 | 3.9 |
| Net income from discontinued operations | 1 | 0.1 | - | - | 1 | n.s. |
| Net income for the year attributable to: - shareholders of the Parent Company - minority interests |
157 155 2 |
7.4 7.3 0.1 |
150 145 5 |
7.3 7.1 0.2 |
7 10 (3) |
4.5 7.0 (66.3) |
(A) Of which 11 million invoiced by
holding and related companies in 2008 (12 million in 2007).
(*) Operating profit, before non-recurring items,
amounts to 254 million, corresponding to 11.9% of revenues (243
million in 2007 with a margin of 11.9%).
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 all the periods presented: 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) | 12.31.2008 | 12.31.2007 | Change |
|---|---|---|---|
| Working capital | 715 | 624 | 91 |
| - trade receivables | 787 | 686 | 101 |
| - inventories | 359 | 336 | 23 |
| - trade payables | (414) | (385) | (29) |
| - other receivables/(payables) (A) | (17) | (13) | (4) |
| Assets held for sale | 1 | 6 | (5) |
| Property, plant and equipment and intangible assets (B) | 1,309 | 1,171 | 138 |
| Non-current financial assets (C) | 32 | 23 | 9 |
| Other assets/(liabilities) (D) | 24 | 65 | (41) |
| Net capital employed | 2,081 | 1,889 | 192 |
| Net financial indebtedness (E) | 689 | 475 | 214 |
| Total shareholders’ equity | 1,392 | 1,414 | (22) |
(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 financial indebtedness includes cash and cash
equivalents and all short and medium/long-term financial assets and
liabilities.
Financial position
| (millions of Euro) | 12.31.2008 | 12.31.2007 | Change |
|---|---|---|---|
| Cash and banks | 132 | 134 | (2) |
| A Liquid assets | 132 | 134 | (2) |
| B Current financial receivables | 37 | 19 | 18 |
| Financial payables, bank loans and lease financing | (462) | (231) | (231) |
| C Current financial payables | (462) | (231) | (231) |
| D = A+B+C Current financial indebtedness | (293) | (78) | (215) |
| E Non-current financial receivables | 5 | 5 | - |
| Medium/long-term loans | (400) | (400) | - |
| Lease financing | (1) | (2) | 1 |
| F Non-current financial payables | (401) | (402) | 1 |
| G = E+F Non-current net financial indebtedness | (396) | (397) | 1 |
| H = D+G Net financial indebtedness | (689) | (475) | (214) |
Cash flow statement
| (millions of Euro) | 2008 | 2007 |
|---|---|---|
| Cash flow from operating activities before changes in working capital | 366 | 343 |
| Cash flow used by changes in working capital | (115) | (96) |
| Net interest (paid)/received and exchange differences | (39) | (40) |
| Payment of taxes | (52) | (11) |
| Cash flow provided by operating activities | 160 | 196 |
| Net operating investments/Capex | (186) | (225) |
| Non-current financial assets | (23) | (5) |
| Cash flow used by investing activities | (209) | (230) |
| Free cash flow | (49) | (34) |
| Cash flow provided/(used) by financing activities of which: | ||
| - payment of dividends | (75) | (69) |
| - purchase of tresury shares | (69) | - |
| - net change in in other sources of finance | 184 | 54 |
| Cash flow provided/(used) by financing activities | 40 | (15) |
| Net decrease in cash and cash equivalents | (9) | (49) |
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) |
2008 | 2007 pro-forma |
Change |
|---|---|---|---|
| A Operating profit | 254 | 243 | 11 |
| B - of which non-recurring expences/(income) | (1) | 3 | (4) |
| C Depreciation and amortization | 100 | 90 | 10 |
| D Other non-monetary costs (net impairment/(reversals)) |
- |
7 |
(7) |
| E - of which non-recurring | - | 7 | (7) |
| F = A+C+D EBITDA | 354 | 340 | 14 |
| G = F+B-E Ordinary EBITDA | 353 | 336 | 17 |
The consolidated financial statements and the draft annual financial statements are currently being audited and, as of today’s date, the audit is not yet completed.
Income statement
| (millions of Euro) | 2008 | 2007 | Change |
|---|---|---|---|
| Dividends and impairment on investments | 103 | 102 | 1 |
| Net financial expenses and exchange differences | (32) | (15) | (17) |
| Other operating income | 59 | 49 | 10 |
| Payroll and related costs | (21) | (21) | - |
| Depreciation and amortization | (2) | (3) | 1 |
| Other operating expenses | (46) | (38) | (8) |
| Income before taxes | 61 | 74 | (13) |
| Income taxes | 10 | 6 | 4 |
| Net income for the year | 71 | 80 | (9) |
Balance sheet and financial position highlights
| (millions of Euro) | 12.31.2008 | 12.31.2007 | Change |
|---|---|---|---|
| Net property, plant and equipment and intangible assets | 17 | 27 | (10) |
| Non-current financial assets | 1,279 | 1,207 | 72 |
| Trade receivables | 23 | 22 | 1 |
| Trade payables | (10) | (10) | - |
| Other receivables | 1 | 8 | (7) |
| Other payables | (5) | (6) | 1 |
| Provisions for impairment on investments and legal risks | (18) | (3) | (15) |
| Retirement benefit obligations | (6) | (6) | - |
| Income taxes receivables | 34 | 44 | (10) |
| Total capital employed | 1,315 | 1,283 | 32 |
| Net financial indebtedness | 399 | 296 | 103 |
| Shareholders' equity | 916 | 987 | (71) |
Cash flow statement
| (millions of Euro) | 2008 | 2007 |
|---|---|---|
| Cash flow provided by operating activities | 97 | 107 |
| Cash flow used by investing activities | (55) | (35) |
| Free cash flow | 42 | 72 |
| Cash flow provided/(used) by financing activities of which: | ||
| - change in shareholders' equity/purchase of tresury share | (69) | - |
| - payment of dividends | (73) | (68) |
| - net change in sources of finance | 97 | (34) |
| Cash flow used by financing activities | (45) | (102) |
| Net decrease in cash and cash equivalents | (3) | (30) |
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