The Benetton Group Annual Report 1996

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Continuing commitment to cost containment is evidenced by an overall reduction in selling and general expenses, both in absolute and percentage terms. Specifically: – Selling expenses rose by around Lire 7 billion or 0.4% of revenues. Following completion of the commissioning phase, the Robostore 2000 system has proved its worth by optimizing shipment quantities and meeting challenging targets in terms of flexibility and efficiency. Early achievements include the distribution of up to 10 million garments in just one month, thus ensuring timely response to market needs. ? Automation of garment packing and loading has minimized the use of personnel in operations involving the heaviest work and greatest risk of human error, while focusing the attention of staff on administration and control. As a consequence, vehicle waiting times have been cut significantly. ? The reduction in handling associated with the automated sorting of delivery batches has also helped to reduce distribution costs, especially with regard to handling and sorting in the loading bays. The introduction of new automated systems offset the 1996 rises in freight rates. ? Automatic batching has optimized the number of garments per carton and considerably increased throughput capacity. This, in turn, has improved the ability to handle additional products and enhanced the effectiveness of the integrated logistics system. ? Agents' commissions increased by Lire 17 billion, however, reflecting the Company’s use of incentives to promote the expansion of the sales and distribution network. – Advertising and sponsorship expenditure declined to 3.5% of revenues (from 4.1% in 1995), with a reduction in absolute terms of around Lire 18 billion. – General and administrative expenses decreased by Lire 34 billion, thus saving about 1% of revenues. In greater detail, the payroll was Lire 16 billion lower than in 1995, following reorganization measures affecting manufacturing and other companies, combined with the closure of the Cosmetics Group and the divestment of Japanese companies no longer strategic to the sales and distribution network. Reorganization projects in various business sectors, coupled with the reorganization of operations among the Japanese subsidiaries and elsewhere, generated overall savings of around Lire 13 billion in general overhead expenditure. The levels of depreciation and operating expenditure were similar to those in 1995. – Provisions increased by around Lire 24 billion, reflecting a prudent approach to supplementing the allowance for doubtful accounts, the reserve for legal disputes and the agents' leaving indemnity reserve. The ratio of operating income to revenues declined slightly to 14% from 15.1% in 1995, despite the adverse effect deriving from the appreciation of the lira. Attention throughout the year again focused on the optimization of treasury management and on insulating the Group from exchange-rate exposures, in market conditions characterized by falling interest rates and the marked appreciation of the lira. The level of coordination and financial support for subsidiaries was maintained. Relevant developments during the final quarter included the progressive start-up of Benetton Gesfin S.p.A., whose activities include the centralization of treasury management and control of the Group’s financial exposures. Constant attention to operating efficiency, combined with the lower cost of money, resulted in a substantial reduction in financial charges. The equity in foreign subsidiaries was again hedged against exchange risks, to protect the value of the Group’s investments abroad. The net exchange gain of Lire 117 billion (Lire 46 billion in 1995) included in financial income and expense (Note 27) was derived from the translation of receivables and payables denominated in foreign currency using year-end exchange rates, coupled with the overall effect of exchange hedges and differences arising from cash receipts and payments denominated in foreign currencies. The substantial reduction in the Group's average borrowings resulted in a further decline in financial charges, which were at an extremely modest level in both absolute and percentage terms. In particular, net financial charges of Lire 12.6 billion were just 0.4% of revenues. The increase in “other expenses, net” reflected the prudent provisions to reserves discussed in the Notes to the Consolidated Financial Statements. The effective tax rate, based on income before income taxes and minority interests, amounted to 45.2%. Net income improved by 11.5% to 8.6% of revenues from 7.5% in 1995. The Group employed 5,973 people at the end of 1996, compared with 6,018 as of December 31, 1995.
Net capital employed Net working capital (in billions of lire) Net indebtedness (in billions of lire) Stockholders' equity (in billions of lire) Cash flows Net income (in billions of lire) 2000 1000 500 400 300 200 100 -100 -200 0 0 2000 1500 1000 500 800 600 400 200 0 0 868 953 1315 1552 1851 1836 1712 653 655 880 1122 1269 1285 1137 1990 1991 1992 1993 1994 1995 1996 171 325 425 303 140 -133 1991 1992 1993 1994 1995 1996 587 717 923 1063 1504 1657 1821 1990 1991 1992 1993 1994 1995 1996 338 425 458 594 526 614 668 133 165 185 208 210 220 246 1990 1991 1992 1993 1994 1995 1996
Page 1: The Benetton Group Annual Report 19
Page 5: Dear Shareholders, in 1996 the Bene
Page 8 and 9: Manufacturing companies invested su
Page 11: Signori Azionisti, nell’esercizio
Page 14 and 15: Gli investimenti I programmi di inn
Page 17 and 18: Consolidated financial statements a
Page 19: The Benetton Group The Benetton Gro
Page 23: Management’s discussion and analy
Page 28 and 29: Consolidated balance sheet as of De
Page 30 and 31: Consolidated balance sheet as of De
Page 32 and 33: Consolidated statements of income f
Page 34 and 35: Statement of changes in consolidate
Page 36 and 37: Statements of consolidated cash flo
Page 38 and 39: NOTES TO THE CONSOLIDATED FINANCIAL
Page 40 and 41: 4. Accounting policies The accounti
Page 42 and 43: Reserve for employee termination in
Page 44 and 45: OTHER INFORMATION 5. Purchase of su
Page 46 and 47: COMMENTS ON THE PRINCIPAL ASSET CAP
Page 48 and 49: 8. Financial fixed assets Equity in
Page 50 and 51: CURRENT ASSETS 9. Inventories Inven
Page 52 and 53: Differentials on forward transactio
Page 54 and 55: Reconciliation of the stockholders'
Page 56 and 57: 20. RESERVES FOR RISKS AND CHARGES
Page 58 and 59: 22. ACCOUNTS PAYABLE The compositio
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Page 62 and 63: 23. ACCRUED EXPENSES AND DEFERRED I
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Page 68 and 69: Expense This caption includes: 1995
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Page 72 and 73: Generally accepted US accounting pr
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The following tables summarize the
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Differences which do not have an ef
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Companies and Groups included withi
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Consolidated balance sheets as of A
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Consolidated statements of income f
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REPORT OF THE BOARD OF STATUTORY AU
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Information for Stockholders Inform
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The Benetton Group Annual Report 1996

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