185000000 IT Holding Finance SA

increased amounts paid in respect of third-party manufacturing, transportation and administrative services and
agents’ commissions, offset in part by a 20.6% decline in advertising costs related to the disposals of our fragrance
and eyewear businesses. Expressed as a percentage of consolidated net revenues, outside services costs decreased
to 41.9% in 2004 from 43.6% in 2003.
Personnel expenses
Consolidated personnel expenses decreased in absolute terms by €2.7 million, or 3.1%, to €84.1 million in 2004
from €86.8 million in 2003, mainly reflecting the disposals we made during the year. Expressed as a percentage of
consolidated net revenues, personnel expenses declined to 11.8% in 2004 from 13.0% in 2003, as our increased
consolidated net revenues were achieved with substantially the same overall headcount levels.
Other operating expenses
Consolidated other operating expenses increased by €14.5 million, or 40.5%, to €50.3 million for 2004 from €35.8
million in 2003. Expressed as a percentage of consolidated net revenues, other operating expenses increased to
7.1% in 2004 from 5.3% in 2003. This increase was primarily related to non-recurring expenses recorded in 2004
including losses incurred on the disposal of our eyewear business and in connection with our sale of Gigli S.p.A. as
well as certain restructuring and redundancy costs.
EBITDA
Consolidated EBITDA increased by €9.3 million, or 9.6%, to €106.0 million for 2004 from €96.7 million for 2003.
Expressed as a percentage of consolidated net revenues, consolidated EBITDA increased to 14.9% in 2004 from
14.4% in 2003. Had our eyewear business been sold as of January 1, 2004, our consolidated EBITDA margin
would have been 16.1%.
Depreciation and amortization
Consolidated depreciation and amortization decreased by €48.2 million, or 32.9%, to €98.5 million for 2004 from
€146.7 million for 2003. This decrease mainly reflected non-recurring impairment losses of €56.5 million
recognized in 2003 in connection with our Romeo Gigli trademarks and other tangible and intangible assets.
Partially offsetting this factor, amortization charges on investments in collection development increased by €12.7
million during 2004 due to our decision to internalize the production and sale of certain Gianfranco Ferrè products
previously produced under license by third parties as well as costs associated with the launch of our C’N’C’
Costume National lines.
Operating income
For the reasons set forth above, we recorded consolidated operating income of €7.5 million in 2004, compared with
an operating loss of €50.0 million in 2003.
Financial income (charges)
Consolidated financial charges, net of financial income, declined by €5.3 million, or 15.3%, to €29.4 million in
2004 from €34.7 million in 2003. This decline was primarily attributable to a capital gain realized in connection
with our repurchases below par of 2005 Notes as well as the reduction in our net debt achieved during 2004.
Net gain on disposals of discontinued operations
The €24.5 million in net gain on disposals of discontinued operations that we recorded in 2004 (compared to €0 in
the prior year) was an important driver of the improvement in our net income during 2004. See Note 7 to our
Consolidated Financial Statements.
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