Highlights from the Group's statements of income for 2009 and 2008 are presented below; they are based on a reclassification according to the function of expenses. The percentage changes are calculated with reference to the absolute amounts.
|
(millions of Euro)
|
2009
|
%
|
2008
|
%
|
Change
|
%
|
|
Revenues
|
2,049
|
100.0
|
2,128
|
100.0
|
(79)
|
(3.7)
|
|
|
|
|
|
|
|
|
|
Materials and subcontracted work
|
969
|
47.3
|
997
|
46.9
|
(28)
|
(2.8)
|
|
Payroll and related costs
|
84
|
4.1
|
88
|
4.2
|
(4)
|
(4.7)
|
|
Industrial depreciation and amortization
|
15
|
0.8
|
16
|
0.8
|
(1)
|
(2.0)
|
|
Other manufacturing costs
|
38
|
1.8
|
45
|
2.0
|
(7)
|
(15.9)
|
|
Cost of sales
|
1,106
|
54.0
|
1,146
|
53.9
|
(40)
|
(3.4)
|
|
|
|
|
|
|
|
|
|
Gross operating profit
|
943
|
46.0
|
982
|
46.1
|
(39)
|
(4.0)
|
|
|
|
|
|
|
|
|
|
Distribution and transport
|
63
|
3.1
|
66
|
3.0
|
(3)
|
(3.8)
|
|
Sales commissions
|
87
|
4.2
|
89
|
4.2
|
(2)
|
(2.4)
|
|
|
|
|
|
|
|
|
|
Contribution margin
|
793
|
38.7
|
827
|
38.9
|
(34)
|
(4.2)
|
|
|
|
|
|
|
|
|
|
Payroll and related costs
|
169
|
8.2
|
168
|
7.9
|
1
|
0.8
|
|
Advertising and promotion (A)
|
53
|
2.6
|
61
|
2.9
|
(8)
|
(13.7)
|
|
Depreciation and amortization
|
88
|
4.3
|
84
|
3.9
|
4
|
5.2
|
|
Other expenses and income
|
277
|
13.6
|
260
|
12.3
|
17
|
6.4
|
|
- of which non-recurring expenses/(income)
|
23
|
1.1
|
(1)
|
n.s.
|
24
|
n.s.
|
|
General and operating expenses
|
587
|
28.7
|
573
|
27.0
|
14
|
2.4
|
|
- of which non-recurring expenses/(income)
|
23
|
1.1
|
(1)
|
n.s.
|
24
|
n.s.
|
|
|
|
|
|
|
|
|
|
Operating profit (*)
|
206
|
10.0
|
254
|
11.9
|
(48)
|
(19.1)
|
|
|
|
|
|
|
|
|
|
Share of income/(losses) of associated companies
|
2
|
0.1
|
-
|
-
|
2
|
n.s.
|
|
Financial (expenses)/income
|
(20)
|
(0.9)
|
(41)
|
(1.9)
|
21
|
(51.9)
|
|
Net foreign currency hedging (losses)/gains and exchange differences
|
(2)
|
(0.1)
|
(1)
|
n.s.
|
(1)
|
n.s.
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
186
|
9.1
|
212
|
10.0
|
(26)
|
(12.6)
|
|
|
|
|
|
|
|
|
|
Income taxes
|
68
|
3.3
|
56
|
2.7
|
12
|
20.5
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
118
|
5.8
|
156
|
7.3
|
(38)
|
(24.5)
|
|
|
|
|
|
|
|
|
|
Net income from discontinued operations
|
-
|
-
|
1
|
0.1
|
(1)
|
n.s.
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
118
|
5.8
|
157
|
7.4
|
(39)
|
(25.0)
|
|
attributable to:
|
|
|
|
|
|
|
|
- shareholders of the Parent Company
|
122
|
5.9
|
155
|
7.3
|
(33)
|
(21.8)
|
|
- minority interests
|
(4)
|
(0.1)
|
2
|
0.1
|
(6)
|
n.s.
|
(A) Of which 11 million invoiced by holding and related companies in 2009 (11 million in 2008).
(*) Trading profit was 229 million, representing 11.1% of revenues (254 million in 2008 representing 11.9% of revenues).
The Group's revenues in 2009 amounted to 2,049 million compared with 2,128 million in the comparative year, reporting a slight reduction of 3.7% partly due to:
-a different contribution from the collection mix, reflecting prudent consumer spending in the market as a whole;
-an unfavorable trend in emerging country currencies against the Euro's exchange rate (15 million), particularly by the Korean won, Turkish lira, Russian rouble and Indian rupee;
-a net positive impact from the opening of directly operated stores.
The apparel segment reported 1,947 million in revenues from third parties, representing a reduction of 87 million on 2008.
The textile segment increased its revenues from third parties by 8 million to 102 million, 8.2% more than in the comparative year, benefiting from the new commercial initiatives already started in 2008 which partially offset lower sales of wool yarn.
2009 revenues from third parties by activity (%)
Cost of sales, which accounted for 54% of revenues against 53.9% in the comparative year, reported the following trends by individual segment:
-apparel: cost of sales amounted to 1,027 million (52.6% of revenues like in the prior year), reflecting savings of 35 million thanks to measures under the reorganization plan involving production sources and supply chain efficiency, and of more than 21 million thanks to other actions already taken to reduce collection complexity, as offset by 11 million in negative exchange rate trends, especially by the US dollar;
-textile: cost of sales amounted to 188 million, representing 90.6% of revenues compared with 91.6% in 2008.
Gross operating profit came to 943 million, reporting a margin of 46% which was largely in line with 2008; adjusting for negative exchange rate trends (26 million), constant currency gross operating profit would have had a margin of 46.9% on revenues.
Trends in the individual segments were as follows:
-apparel: gross operating profit amounted to 923 million, retaining a margin of 47.4% like in 2008 despite the negative impact of exchange rates discussed earlier and the different sales contribution from the collection mix;
-textile: gross operating profit was 19 million, representing 9.4% of revenues against 8.4% in 2008, benefiting from the higher margins earned from the new commercial initiatives developed in the year.
Variable selling costs (distribution, transport and sales commissions) decreased by 5 million to 150 million, mainly thanks to lower fuel costs, the significant reduction in other prices resulting from market trends, and the slight decline in turnover; variable selling costs represented 7.3% of revenues, which was in line with the comparative year.
Contribution margin came to 793 million, representing 38.7% of revenues, against 38.9% in 2008, with the individual segments reporting the following trends:
-apparel: contribution margin came to 780 million, representing 40% of revenues, in line with the prior year;
-textile: contribution margin was 12 million, representing 5.9% of revenues against 4.7% in the comparative year.
General and operating expenses amounted to 587 million, compared with 573 million in 2008, and accounted for 28.7% of revenues against 27% in the comparative year. The individual segments reported the following trends in general and operating expenses:
-apparel: these expenses were 7 million higher than in the comparative year at 572 million, accounting for 29.3% of revenues compared with 27.7% the year before; this increase is principally due to the change in non-recurring income and expenses, discussed below, and partly due to the higher incidence of the direct channel;
-textile: these expenses amounted to 15 million compared with 8 million in 2008 and accounted for 7.5% of revenues against 3.4% in the comparative year, which included some 2 million in capital gains on the disposal of the factory in Cassano Magnago, while 2009 was affected by a reduction of 2 million in other operating income and the presence of 3 million in non-recurring expenses relating to the strategic reorganization being carried out in this segment.
The targeted actions, initiated at the start of 2009, to reduce general and administrative expenses generated 23 million in savings in the year, particularly in the areas of general expenses, outside services and consulting, and advertising due to lower rates. These actions made up for the anticipated increase in rental costs associated with the opening of directly operated stores, and in depreciation and amortization for investments completed in prior periods, including the enlargement of the logistics hub in Castrette.
General and operating expenses are discussed in more detail below:
-Non-industrial payroll and related costs increased by 1 million to 169 million, accounting for 8.2% of revenues (7.9% in 2008), and reflecting the higher average headcount in 2009.
-Advertising and promotion costs amounted to 53 million against 61 million in the comparative year, while decreasing from 2.9% to 2.6% of revenues after benefiting from the Group's policy of making advertising campaigns more focused while retaining high brand visibility.
-Non-industrial depreciation and amortization increased by 4 million on the comparative year to 88 million mainly because of the impact of investments made in the prior year that entered service in the period; these charges accounted for 4.3% of revenues, compared with 3.9% in 2008.
-Other expenses and income were 17 million higher at 277 million, corresponding to 13.6% of revenues against 12.3% in 2008. This line item includes non-industrial general costs, additions to provisions, net other operating expenses and other expenses and income, details of which are as follows:
-non-industrial general costs of 109 million, representing 5.3% of revenues, were around 17 million lower than in the comparative year after benefiting from the Group's multiple initiatives to reduce fixed costs;
-additions to provisions increased from 24 million in 2008 to 29 million in 2009, of which 19 million for doubtful accounts (16 million in 2008);
-net operating and other expenses came to 140 million (111 million in 2008), representing 6.8% of revenues against 5.2% in the comparative year. The increase of around 29 million since the prior year primarily reflects:
-an increase of 7 million in rental expense (net of rental income), mainly attributable to the apparel segment as a result of new openings.
-24 million for the change in non-recurring income and expenses as follows:
-in 2009 net non-recurring expenses of 23 million represented the sum of:
-16 million in expenses for the strategic reorganization plan, involving actions to support the commercial structure, to achieve greater excellence in sourcing and the supply chain and to optimize costs;
-around 16 million in impairment recognized to adjust the value of certain commercial assets to recoverable amount;
-over 6 million in net capital gains realized on the sale of four commercial properties in
Italy
;
-3 million in compensation received for a legal dispute relating to costs incurred in 2008 for the early termination of a property lease in
Great Britain
,
-in 2008 net non-recurring income of 1 million represented the sum of:
-10 million for reinstating the value of Villa Loredan and recognizing the capital gain on its disposal, and 2 million for the capital gain arising on the disposal of the factory in Cassano Magnago;
-6 million in impairment recognized to adjust the value of certain commercial assets to recoverable amount;
-5 million in compensation paid and expected to be paid for the early termination of three leases relating to properties in
Great Britain
.
Operating profit was 206 million compared with 254 million in 2008, with the margin at 10.0% against 11.9% in the prior year. Excluding the extraordinary items that negatively affected 2009, trading profit would have been 229 million (11.1% of revenues).
Operating profit in the individual segments was as follows:
-208 million in the apparel segment against 252 million in the comparative year, with the margin at 10.7% compared with 12.4%;
-3 million in operating loss in the textile segment, with a negative margin of 1.6%, particularly reflecting the change in non-recurring income and expenses discussed above.
The share of income of associated companies includes the positive adjustment to the liabilities recognized for put options on shares held by minority shareholders in some of the Group's consolidated companies.
The positive change of 21 million in net financial expenses was primarily due to the decline in interest rates which partially made up for the growth in average debt over the period.
Net foreign currency hedging losses and exchange differences reflect the negative contribution of hedges taken out against purchases in US dollars.
Income taxes amounted to 68 million, representing a tax rate of 36.5%, up from 26.5% in 2008, mainly reflecting increased operating losses by certain foreign subsidiaries and higher impairment of property, plant and equipment and intangible assets recognized in 2009.
Net income for the year attributable to the Group was 122 million, representing 5.9% of revenues.
The average number of employees in each segment during the year was as follows:
-apparel: 8,051 (of whom 4,134 in the retail channel), compared with 7,917 (of whom 3,970 in the retail channel) in 2008, with the increase due to the growth in the directly operated commercial network;
-textile: 1,588 compared with 1,414 in 2008, with the increase mainly due to development of the textile production center in
Tunisia
.