2004 Annual Report - Benetton Group

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Letter to Shareholders from the Chairman and Founder of the Benetton Group, Luciano Benetton Dear Shareholders, 2004 closes with the distribution of dividends totaling 50% of net income [which was higher than forecasted], demonstrating the policy of the Benetton Group to create value for the shareholders and the market. During the year, we confirmed our talent for exporting, making 50% of total sales abroad. Having always adopted the practice of thinking and planning with a long-term entrepreneurial mentality, we intend to stay ahead of the competition, concentrating on emerging markets like China and India, where we are already among the principal western players in the clothing sector. In the Chinese market, we distribute our products; and India, where we produce and distribute, is our bridgehead to entry into other Asian countries. In fact, we are convinced that being entrepreneurs means believing in the future and in our abilities, taking advantage of difficult times in the market to become more competitive. And to invest more in the distribution network as well as in pricing policies that are more attractive to the customer. In 2005, in particular, we intend to increase our commitment, earmarking resources of more than 200 million euro for development: with investments directed at restyling stores and new openings, as well as at the product, in order to achieve an even more excellent quality-price ratio, and at style and service to the network. These are important commitments that we take on with conviction and optimism because we believe in our network distribution model – a widespread presence in the world, in large capitals as well as in smaller towns – in cooperation with partners who, in turn, believe and invest in our common development plan. And these are responsible choices, directed towards future growth, which can be achieved only by those with substantial economic strength and constantly reducing financial position. Luciano Benetton Chairman of the Benetton Group LE T TE R TO S H A R E H O LDERS 7
Financial highlights Key operating data [millions of euro] 2004 % 2003 % 2002 % 2001 % 2000 % Revenues 1,686 100.0 1,859 100.0 1,992 100.0 2,098 100.0 2,018 100.0 Cost of sales 929 55.1 1,049 56.4 1,124 56.4 1,189 56.7 1,138 56.4 Gross operating income 757 44.9 810 43.6 868 43.6 909 43.3 880 43.6 Contribution margin 653 38.7 696 37.4 744 37.3 776 37.0 740 36.7 EBITDA 317 18.8 335 18.0 376 18.8 398 19.0 400 19.8 Income from operations 217 12.9 232 12.5 243 12.2 286 13.6 309 15.3 Net income/[loss] for the year 123 7.3 108 5.8 [10] [0.5] 148 7.1 243 12.1 Key financial data [millions of euro] 2004 2003 2002 2001 2000 Working capital 688 729 798 811 772 Assets due to be sold 8 8 114 - - Net capital employed 1,668 1,655 1,768 1,896 1,723 Net financial position 431 468 613 640 536 Shareholders’ equity 1,230 1,174 1,141 1,241 1,175 Self-financing 312 327 349 374 311 Investments in tangible and intangible fixed assets 152 151 169 311 305 Purchase of equity investments 22 19 1 - 7 Financial ratios [in %] 2004 2003 2002 2001 2000 Return on equity [ROE] 10.0 9.2 [0.9] 11.9 20.7 Return on investments [ROI] 13.0 14.0 13.7 15.1 17.9 EBITDA 18.8 18.0 18.8 19.0 19.8 Return on sales [ROS] 12.9 12.5 12.2 13.6 15.3 Net income [loss]/Revenues 7.3 5.8 [0.5] 7.1 12.1 Share and market data 2004 2003 2002 2001 2000 Earnings/[Loss] per share [euro] [1] 0.68 0.59 [0.05] 0.82 1.35 Shareholders’ equity per share [euro] [1] 6.77 6.47 6.29 6.86 6.50 Dividend per share [euro] [1] 0.34 0.38 0.35 0.41 0.46 Pay out ratio [%] 50 64 n.a. 50 37 Dividend yield 3.9 3.8 4.8 3.6 4.8 Share price: December 31 [euro] 9.74 9.11 8.50 12.72 22.01 Screen-based market: high [euro] 10.18 11.30 15.90 22.44 24.20 Screen-based market: low [euro] 8.33 5.90 8.50 9.75 18.71 Price/earnings ratio [P/E] 14.3 15.4 n.a. 15.5 16.5 Share price/Shareholders’ equity per share 1.4 1.4 1.4 1.9 3.4 Market capitalization [millions of euro] 1,768 1,654 1,543 2,309 3,996 Average no. of shares outstanding [2] 181,558,811 181,558,811 181,341,018 180,720,969 180,505,910 Number of shares outstanding 181,558,811 181,558,811 181,558,811 181,558,811 181,558,811 [1] Restated after a reverse split of the shares approved by Shareholders’ Meeting on May 8, 2001. [2] Net of treasury shares held during the year.
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C O N SO LI DATE D F I NANC IAL STA
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Notes to the consolidated financial
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Accounting principles and valuation
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Reserves for risks and charges. The
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Article 2423, paragraph 4, of the I
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N OTES TO TH E C O N SO LI DATE D F
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Reconciliation of the Shareholders
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[16] Reserve for employee terminati
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[19] Due to other lenders [thousand
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[23] Other payables Other payables
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Comments on principal items in the
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Production costs [29] Raw materials
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[33] Amortization, depreciation and
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[37] Interest and other financial e
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[41] Taxes on income for the year,
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Glossary
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G LOSSA RY 104 Net Financial Positi
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2005 financial calendar Date 2005 S
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2004 Annual Report - Benetton Group

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