De Rigo Announces an Increase of 44.7% in Net Income For the First
Six Months of 2004 LONGARONE, Italy, September 21
/PRNewswire-FirstCall/ -- On September 20th, the board of directors
of De Rigo S.p.A. approved the unaudited consolidated results for
the first six months of 2004, which evidenced a strong growth in
the Group's profitability, as demonstrated by the net income growth
of 44.7%, as well as the achievement of a positive net financial
position. Highlights of the Group's unaudited consolidated results
for the first six months of 2004 include: - Net sales amounted to
EUR 275.9 m[1], an increase of 0.9% from the EUR 273.4 m posted in
the same period last year. The sales results confirmed the positive
trends in the Group's current businesses, as comparisons with the
prior year were affected by De Rigo's sale during July 2003 of the
controlling interest in Eyewear International Distribution ("EID"),
a joint venture with the Prada Group. Excluding EID's sales from
the Group's results for the first six months of 2003, the period on
period increase in consolidated net sales was 8.8%. - Income from
operations before depreciation and amortization[2] increased by
9.9% to EUR 35.5 m from the EUR 32.3 m posted in the first six
months of 2003, and represented 12.9% of net sales, as compared
with 11.8% in the same period last year. - Income from operations
grew by 18.7% to EUR 22.9 m from the EUR 19.3 m recorded in the
first six months of 2003, and represented 8.3% of net sales, as
compared with 7.1% in the same period last year. - Net income
amounted to EUR 12.3 m, an increase of 44.7% from the EUR 8.5 m
recorded in the first six months of 2003 and represented 4.5% of
net sales, as compared with 3.1% in the same period last year. - At
30th June 2004, the net financial position[3] of the De Rigo Group
was positive and amounted to EUR 16.4 m, as compared with the net
debt of EUR 3.6 m recorded at 31st December 2003. The results
posted by the Group in the first six months of 2004 reflected the
contribution of each of the Company's business segments during the
periods under review. The following table summarizes the principal
unaudited results of each of the Group's business segments for the
periods indicated in millions of EUR: Sales % Income from % Income
% Change operations Change from Change before operations
depreciation Group's and amortization Business Segments 1H 1H 1H 1H
1H 1H 2004 2003 2004 2003 2004 2003 Wholesale & 82.8 79.9 +3.6%
18.3 12.8 +43.0% 16.3 10.7 +52.3% Manufacturing Retail 198.7 182.6
+8.8% 17.2 17.3 -0.6% 6.6 6.9 -4.3% - D&A 127.3 116.5 +9.3% 5.1
5.4 -5.6% 0.8 1.2 -33.3% - GO 71.4 66.1 +8.0% 12.1 11.9 +1.7% 5.8
5.7 +1.8% EID - 19.8 -100.0% - 2.2 -100.0% - 1.7 -100.0%
Intercompany -5.6 -8.9 -37.1% - - - - Elimination Total 275.9 273.4
+0.9% 35.5 32.3 +9.9% 22.9 19.3 +18.7% Wholesale &
Manufacturing Sales of the wholesale & manufacturing segment
amounted to EUR 82.8 m, an increase of 3.6% as compared with EUR
79.9 m posted in the first six months of 2003. The increase in
wholesale & manufacturing sales was primarily due to very
strong sales results in certain Far East markets, particularly
Japan and Hong Kong, as well as in several European markets,
including Germany, Spain and Greece. Gross margins at the wholesale
& manufacturing segment continued to increase, reflecting a
reduction in both the cost of goods sold, as a result of improved
efficiencies in the manufacturing process, and a more favourable
sales mix, as the segment's sales in channels offering higher
margins increased, more than offsetting the fact that the results
for the first half of 2003 had also included relatively lower
margin sales to EID. Primarily as a result of the higher gross
margin, the segment posted strong growth in both income from
operations before depreciation and amortization and income from
operations: income from operations before depreciation and
amortization increased by 43.0% to EUR 18.3 m from the EUR 12.8 m
recorded in the first six months of 2003 and represented 22.1% of
net sales, as compared with 16.0% in the same period last year;
income from operations increased by 52.3% to EUR 16.3 m from EUR
10.7 m in the first six months of 2003, and represented 19.7% of
net sales, as compared with 13.4% in the same period last year.
Retail Sales of the retail segment increased by 8.8% to EUR 198.7
m, as compared with the EUR 182.6 m posted in the first six months
of 2003. The increase in net sales reflected same store sales per
working day growth of 7.8% at General Optica ("GO"), the Group's
Spanish retail chain, and 7.6% at Dollond & Aitchison
("D&A"), the Group's British retail chain, as well as the
impact of GO's continuing expansion of its network of company-owned
and franchised stores. Income from operations before depreciation
and amortization for the retail segment as a whole was essentially
stable at EUR 17.2 m as compared with the EUR 17.3 m posted in the
first six months of 2003 and represented 8.7% of sales, as compared
with 9.5% in the same period last year. Income from operations for
the segment as a whole amounted to EUR 6.6 m, a decrease of 4.3%
from the EUR 6.9 m posted in the first six months of 2003 and
represented 3.3% of sales, as compared with 3.8% in the same period
last year. These results reflect the contribution of the Group's
two retail chains: GO grew sales by 8.0% to EUR 71.4 m, while its
income from operations before depreciation and amortization
increased by 1.7% to EUR 12.1 m from the EUR 11.9 m posted in the
first six months of 2003, representing 16.9% of sales as compared
with 18.0% in the same period last year. The increase in income
from operations before depreciation and amortization was primarily
due to the growth in sales as a result of positive same store sales
and the opening of new owned and franchised stores, while its
decrease as a percentage of sales was primarily a consequence of
higher advertising expenses. Income from operations increased by
1.8% to EUR 5.8 m from the EUR 5.7 m posted in the first six months
of 2003, representing 8.1% of sales, as compared with 8.6% in the
same period last year. Income from operations increased in absolute
terms at a lesser rate than income from operations before
depreciation and amortization, as GO incurred higher depreciation
expenses as a result of its investments in the opening of new
stores and in the refitting of certain existing stores. D&A's
sales grew to EUR 127.3 m, an increase of 9.3% as compared with
sales of EUR 116.5 m posted in the first six months of 2003. Sales
grew by 6.5% in Pound Sterling terms, reflecting the appreciation
of the Pound Sterling against the Euro during the period, while
same store sales per working day increased by 7.6%. The increase in
D&A's sales was primarily attributable to the Company's
aggressive marketing campaigns which successfully increased
D&A's market share but at the same time continued to exert
pressure on its operating margins. As a result, income from
operations before depreciation and amortization amounted to EUR 5.1
m, a decrease of 5.6% as compared with the EUR 5.4 m posted in the
first six months of 2003, and represented 4.0% of sales, having
represented 4.6% in the same period last year, while income from
operations decreased by 33.3% to EUR 0.8 m from EUR 1.2 m, and
represented 0.6% of sales, having represented 1.2% in the same
period last year. Additional information on consolidated results
and personnel changes - Basic earnings per share increased by 47.4%
to EUR 0.28 from the EUR 0.19 posted in the first six months of
2003. Diluted earnings per share increased by 42.1% to EUR 0.27
from the EUR 0.19 posted in the first six months of 2003. - Income
taxes amounted to EUR 10.1 m, as compared with EUR 8.5 m in the
first six months of 2003. The Group's income was taxed at an
effective rate of 44.3%, as compared with an effective tax rate of
48.7% in the same period last year. The decrease in the effective
tax rate was primarily due to a lower tax rate in the Wholesale
& Manufacturing business segment, reflecting the reduction in
the Italian corporate tax rate and the positive performance of
certain subsidiaries that allowed the utilization of losses carried
forward from previous years. - Additions to property, plant and
equipment amounted to EUR 7.4 m in the first six months of 2004, as
compared with EUR 3.3 m in the same period last year. The increase
was primarily attributable to higher investments in the refitting
of existing stores and the opening of new stores at the retail
business segment. - Russell Hardy resigned as CEO of D&A with
effect from September 17th. The board has nominated Andrew Ferguson
as new CEO. Andrew has been Commercial and Operations Director at
D&A since 1997. Ennio De Rigo, Chairman of the De Rigo Group,
commented on the first six months of 2004's results: "Our results
for the first six months continued to show the very positive trend
in our Group's operations, as demonstrated by strong earnings
growth as compared with last year. The wholesale &
manufacturing business sharply improved its profitability and we
are gradually developing commercial and distribution synergies with
the Viva Group while looking forward to expand the scope of this
strategic alliance. General Optica is on track to deliver another
year of growth in line with our expectations. Dollond &
Aitchison grew its sales but its margins are still lower than our
expectations: we are strongly committed to the on-going
restructuring process at D&A and believe we will be able to
extract value from its operations." De Rigo is one of the world's
largest manufacturers and distributors of premium eyewear, the
major optical retailer in Spain through General Optica, one of the
leading retailers in the British optical market through Dollond
& Aitchison and a partner of the LVMH Fashion Group for the
manufacture and distribution of Givenchy, Celine, Fendi and Loewe
eyewear. De Rigo also manufactures and distributes the licensed
brands Escada, Etro, Fila, Furla, La Perla, Mini and Onyx and its
own brands Police, Sting and Lozza. DE RIGO S.p.A. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (In thousands of Euro)
For the six months ended June 30, 2004 2003 NET SALES 275,886
273,366 COST OF SALES 105,176 108,710 GROSS PROFIT 170,710 164,656
COSTS AND EXPENSES Commissions 6,491 8,171 Advertising and
promotion expenses 19,695 18,724 Other selling expenses 103,387
99,770 General and administrative expenses 18,197 18,712 147,770
145,377 INCOME FROM OPERATIONS 22,940 19,279 OTHER (INCOME)
EXPENSES Interest expense 499 1,579 Interest income (280) (222)
Other (income) expenses, net 34 439 253 1,796 INCOME BEFORE INCOME
TAXES 22,687 17,483 INCOME TAXES 10,056 8,516 INCOME BEFORE
MINORITY INTEREST 12,631 8,967 MINORITY INTEREST 308 509 NET INCOME
12,323 8,458 DE RIGO S.p.A. AND SUBSIDIARIES UNAUDITED CONSOLIDATED
BALANCE SHEETS (In thousands of Euro) June 30, December June 30,
31, 2004 2003 2003 ASSETS Current assets: Cash and cash 30,488
19,634 21,990 equivalents Investment in debt - - - securities
Accounts receivable, trade, net of 76,464 61,938 92,441 allowances
for doubtful accounts Inventories 45,540 49,366 55,929 Deferred
income 12,958 13,018 13,854 taxes Prepaid expenses and 12,677
12,393 13,210 other current assets Total current assets 178,127
156,349 197,424 Property, plant and equipment: Land 17,069 16,848
17,576 Buildings 55,485 54,587 54,991 Machinery and 25,974 25,491
25,485 equipment Office furniture and 89,365 82,800 83,136
equipment Construction in - - 274 progress 187,893 179,726 181,462
Less: accumulated (78,261) (70,643) (69,194) depreciation Property,
plant and equipment, net 109,632 109,083 112,268 Goodwill and
intangible assets 101,407 103,891 108,876 Other non current assets
7,149 7,564 8,925 TOTAL ASSETS 396,315 376,887 427,493 DE RIGO
S.p.A. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (In
thousands of Euro) June 30, December June 31, 30, 2004 2003 2003
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank
borrowings 13,508 22,569 65,767 Current portion of 117 166 183
long-term debt Accounts payable, 70,900 66,141 72,170 trade
Commissions 1,079 895 2,014 payable Income taxes 7,839 5,452 6,120
payable Deferred income 1,122 1,392 651 taxes Accrued expenses and
other current 33,666 27,223 34,676 liabilities Total current
liabilities 128,231 123,838 181,581 Termination indemnities and
other employee benefits 9,942 9,755 9,371 Deferred income taxes
8,452 8,670 9,801 Long -term debt, less current portion 464 497 605
Other non current liabilities 8,017 7,243 8,291 Shareholder's
equity: Capital stock 11,626 11,626 11,626 Additional paid-in
54,490 54,490 54,490 capital Retained earnings 173,736 161,413
151,393 Foreign currency (3,680) (5,682) (4,702) translation
adjustments Revaluation 5,037 5,037 5,037 surplus Total
shareholders' equity 241,209 226,884 217,844 TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 396,315 376,887 427,493 Reconciliation of
income from operations before depreciation and amortization with
most directly comparable Italian GAAP measure (In millions of Euro)
De Rigo Group 1H 2004 1H 2003 % Change Income from operations 22.9
19.3 +18.7% Amortization of goodwill 3.1 3.2 -3.1% Amortization of
other intangibles 1.1 1.3 -15.4% Depreciation 8.4 8.5 -1.2% Income
from operations before 35.5 32.3 +9.9% depreciation and
amortization Wholesale & Manufacturing 1H 2004 1H 2003 % Change
Income from operations 16.3 10.7 +52.3% Amortization of goodwill
0.1 0.2 -50.0% Amortization of other intangibles 0.5 0.5 0.0%
Depreciation 1.4 1.4 0.0% Income from operations before 18.3 12.8
+43.0% depreciation and amortization Retail 1H 2004 1H 2003 %
Change Income from operations 6.6 6.9 -4.3% Amortization of
goodwill 3.0 3.0 0.0% Amortization of other intangibles 0.6 0.7
-14.3% Depreciation 7.0 6.7 +4.5% Income from operations before
17.2 17.3 -0.6% depreciation and amortization Dollond &
Aitchison 1H 2004 1H 2003 % Change Income from operations 0.8 1.2
-33.3% Amortization of goodwill 0.8 0.8 0.0% Amortization of other
intangibles 0.2 0.3 -33.3% Depreciation 3.3 3.1 +6.5% Income from
operations before 5.1 5.4 -5.6% depreciation and amortization
General Optica 1H 2004 1H 2003 % Change Income from operations 5.8
5.7 +1.8% Amortization of goodwill 2.2 2.2 0.0% Amortization of
other intangibles 0.4 0.4 0.0% Depreciation 3.7 3.6 +2.8% Income
from operations before 12.1 11.9 +1.7% depreciation and
amortization EID 1H 2004 1H 2003 % Change Income from operations
0.0 1.7 -100.0% Amortization of goodwill 0.0 0.0 0.0% Amortization
of other intangibles 0.0 0.1 -100.0% Depreciation 0.0 0.4 -100.0%
Income from operations before 0.0 2.2 -100.0% depreciation and
amortization Reconciliation of Net Financial Position with most
directly comparable Italian GAAP measure (In millions of Euro) June
30, December 31, 2003 2004 Cash and cash equivalents 30.5 19.6
Investment in debt securities 0.0 0.0 Bank Borrowings -13.5 -22.5
Current portion of long term debt -0.1 -0.2 Long term debt, less
current portion -0.5 -0.5 Net Financial Position 16.4 -3.6 [1] The
Group reports its results in Euro. On September 20th, 2004, the
official Euro/U.S. Dollar exchange rate, as reported by the
European Central Bank, was EUR 1 = USD 1.2132. The financial
results reported in this press release have not been audited by the
Group's independent public accountants and are presented on the
basis of accounting principles generally accepted in Italy
("Italian GAAP"). [2] The Group believes that the income from
operations before depreciation and amortization and the other
non-Italian GAAP data included in this release, when considered in
conjunction with (but not in lieu of) other measures that are
computed in accordance with Italian GAAP, enhance an understanding
of the Group's results of operations. The Group's management uses
income from operations before depreciation and amortization as one
of the bases on which it analyses the performance of the Group and
its segments, as management generally does not have control over
the amortization periods for goodwill and other intangibles or the
related depreciation amounts. Income from operations before
depreciation and amortization should not, however, be considered in
isolation as a substitute for net income, operating income, cash
flow provided by operating activities or other income or cash flow
data prepared in accordance with generally accepted accounting
principles or as a measure of a company's profitability or
liquidity. The Group calculates income from operations before
depreciation and amortization as being equal to income from
operations plus depreciation and amortization, as detailed in the
table accompanying this release, which also includes a detailed
reconciliation between income from operations before depreciation
and amortization and the other non-Italian GAAP measures used in
this release and the most directly comparable Italian GAAP
measures. [3] In accordance with Italian practice, management uses
net financial position as the primary measure of the Group's debt
position. A detailed reconciliation between the net financial
position and the most directly comparable Italian GAAP measures is
provided in the accompanying table. DATASOURCE: De Rigo S.p.A.
CONTACT: For further information, please contact: Maurizio
Dessolis, Chief Financial Officer, Tel. +39-0437-7777, Fax
+39-0437-770727, e-mail:
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