The Group’s activities are divided into three segments in order to provide the basis for effective management and decision-making, and to supply representative and significant information about company performance to financial investors.
The business segments are as follows:- apparel, represented by casualwear, carrying the United Colors of Benetton, Undercolors and Sisley brands, and sportswear, with the Playlife and Killer Loop brands. The information and results relating to the real estate companies are also included in this segment;
- textile, consisting of production and sales activities of raw materials (fabrics, yarns and labels), semi-finished products and industrial services;
- other and unallocated, includes activities relating to sports equipment produced for
third parties by a Group manufacturing company.
For comparative purposes, segment results for years 2005 and 2004 are shown below.
 |
Download the Segment results for 2005 and 2004 in Excel format |
|
Download the Segment results for 2005 and 2004 (in USD) in Excel format |
Segment results - 2005
| (millions of euro) | Apparel | Textile | Other and unallocated |
Eliminations | Consolidated |
|---|---|---|---|---|---|
| Revenues from third parties | 1,629 | 100 | 36 | - | 1,765 |
| Inter-segment revenues | 2 | 170 | - | (172) | - |
| Total revenues | 1,631 | 270 | 36 | (172) | 1,765 |
| Cost of sales | 887 | 243 | 34 | (169) | 995 |
| Gross operating income | 744 | 27 | 2 | (3) | 770 |
| Selling costs | 119 | 10 | - | (2) | 127 |
| Contribution margin | 625 | 17 | 2 | (1) | 643 |
| General and operating expenses | 421 | 15 | 2 | - | 438 |
| Ordinary operating result | 204 | 2 | - | (1) | 205 |
| Non-recurring expenses/(income) | 44 | 4 | - | - | 48 |
| Operating profit | 160 | (2) | - | (1) | 157 |
| Depreciation and amortization | 66 | 18 | 1 | - | 85 |
| Non-monetary costs (impairment and stock options) | 41 | 2 | - | - | 43 |
| EBITDA | 267 | 18 | 1 | (1) | 285 |
Segment results - 2004
| (millions of euro) | Apparel | Textile | Other and unallocated |
Eliminations | Consolidated |
|---|---|---|---|---|---|
| Revenues from third parties | 1,568 | 106 | 30 | - | 1,704 |
| Inter-segment revenues | - | 194 | - | (194) | - |
| Total revenues | 1,568 | 300 | 30 | (194) | 1,704 |
| Cost of sales | 827 | 264 | 28 | (190) | 929 |
| Gross operating income | 741 | 36 | 2 | (4) | 775 |
| Selling costs | 113 | 10 | - | (2) | 121 |
| Contribution margin | 628 | 26 | 2 | (2) | 654 |
| General and operating expenses | 410 | 17 | 4 | (2) | 429 |
| Ordinary operating result | 218 | 9 | (2) | - | 225 |
| Non-recurring expenses/(income) | 68 | 1 | (2) | - | 67 |
| Operating profit | 150 | 8 | - | - | 158 |
| Depreciation and amortization | 76 | 18 | 1 | - | 95 |
| Non-monetary costs (impairment and stock options) | 59 | - | - | - | 59 |
| EBITDA | 285 | 26 | 1 | - | 312 |
Apparel segment results
|
Download the Apparel segment results in Excel format |
| (millions of euro) | 2005 | % | 2004 | % | Change | % |
|---|---|---|---|---|---|---|
| Revenues from third parties | 1,629 | 1,568 | 61 | 3.9 | ||
| Inter-segment revenues | 2 | - | 2 | n.s. | ||
| Total revenues | 1,631 | 100.0 | 1,568 | 100.0 | 63 | 4.1 |
| Cost of sales | 887 | 54.4 | 827 | 52.8 | 60 | 7.3 |
| Gross operating income | 744 | 45.6 | 741 | 47.2 | 3 | 0.5 |
| Selling costs | 119 | 7.3 | 113 | 7.1 | 6 | 6.1 |
| Contribution margin | 625 | 38.3 | 628 | 40.1 | (3) | (0.6) |
| General and operating expenses | 421 | 25.8 | 410 | 26.3 | 11 | 2.4 |
| Ordinary operating result | 204 | 12.5 | 218 | 13.8 | (14) | (6.2) |
| Non-recurring expenses/(income) | 44 | 2.7 | 68 | 4.3 | (24) | (35.6) |
| Operating profit | 160 | 9.8 | 150 | 9.5 | 10 | 7.2 |
| EBITDA | 267 | 16.4 | 285 | 18.2 | (18) | (6.2) |
Total segment revenues from third parties were 1,629 million euro, an increase of 3.9% on the figure of 1,568 million euro recorded in 2004. Revenue performance was mainly influenced by the policy of developing the commercial network and improvement of product mix, along with initiatives for expanding the network of directly operated stores. As mentioned above, this growth was also the result of the strong performance of reorders for the 2005 Fall/Winter collections, as well as the positive market response to the 2006 Spring/Summer collections and the contribution of countries in the Mediterranean, including Turkey, as well as in eastern Europe and Korea.
Cost of sales increased by 60 million euro to 887 million (up 7.3%), representing 54.4% of revenues, compared with the 52.8% of the previous year. The effect of product enhancements was partially offset by more efficient production. Gross operating income came to 744 million euro, representing 45.6% of revenues, compared with 47.2% in 2004.
Selling costs amounted to 119 million euro, compared with the 113 million euro of the previous year. Sales commissions declined due to the Group’s acquisition of agencies in Italy and Germany, which were previously operated by third parties, while distribution costs increased by 9 million euro due to the growth of sales in Korea. This increase had no significant impact on the contribution margin, which settled at 625 million euro, compared with the 628 million of 2004 and a percentage on sales that went from 40.1% to 38.3%.
General and operating expenses amounted to 421 million euro in 2005, compared with the 410 million euro of the previous year, improving also as a percentage on sales, going from 26.3% to 25.8%. This item includes payroll and related costs, which increased from 118 million to 127 million euro, particularly due to the development of the network of directly operated stores and a higher proportionate cost for staff incentives. Advertising and promotion costs were slightly higher, up from 54 million to 60 million euro, with the percentage on revenues going from 3.4% to 3.7%. This increase is related primarily to services provided to third parties. Depreciation and amortization amounted to 63 million euro, compared with 73 million euro in 2004, representing 3.8% of revenues, down from the 4.6% of the previous year. This decrease is the result of the adjustment in the carrying value of certain assets related to the commercial network and the change in the estimated useful life of the commercial buildings. Overhead costs came to 78 million euro, compared with the 74 million euro of the previous year, representing 4.8% of revenues, compared with 4.7% in 2004. Net operating and other costs went from the 53 million euro of the previous year to 72 million euro, with the percentage on revenues going from 3.4% to 4.4%. Provisions decreased by 18 million euro, primarily in relation to allowances for doubtful accounts.
For more information on the non-recurring charges, see the related comments above regarding the consolidated income statement.
Earnings before interest and taxes (operating profit) amounted to 160 million euro, compared with the 150 million of the previous year, for a margin on revenues of 9.8% (9.5% in 2004).
The average number of employees in the period was 5,856.
Textile segment results
|
Download the Textile segment results in Excel format |
| (millions of euro) | 2005 | % | 2004 | % | Change | % |
|---|---|---|---|---|---|---|
| Revenues from third parties | 100 | 106 | (6) | (6.4) | ||
| Inter-segment revenues | 170 | 194 | (24) | (12.3) | ||
| Total revenues | 270 | 100.0 | 300 | 100.0 | (30) | (10.2) |
| Cost of sales | 243 | 90.0 | 264 | 87.9 | (21) | (8.1) |
| Gross operating income | 27 | 10.0 | 36 | 12.1 | (9) | (25.8) |
| Selling costs | 10 | 3.5 | 10 | 3.5 | - | (12.2) |
| Contribution margin | 17 | 6.5 | 26 | 8.6 | (9) | (31.4) |
| General and operating expenses | 15 | 5.6 | 17 | 5.5 | (2) | (6.0) |
| Ordinary operating result | 2 | 0.9 | 9 | 3.1 | (7) | (75.4) |
| Non-recurring expenses/(income) | 4 | 1.6 | 1 | 0.4 | 3 | n.s. |
| Operating profit | (2) | (0.7) | 8 | 2.7 | (10) | n.s. |
| EBITDA | 18 | 6.6 | 26 | 8.6 | (8) | (31.2) |
Textile segment revenues from third parties were down by 6.4% from 106 million to 100 million euro. This was the result of a general decline in the market for fabrics and yarns.
Cost of sales, although down in absolute terms, rose to 90% of revenues, compared with the 87.9% of 2004. Gross operating income of 27 million euro represented a margin of 10% of total revenues, compared with the 12.1% of 2004, having been influenced by the lower utilization of production capacity.
Selling costs were essentially in line with 2004, representing 3.5% of revenues, while the contribution margin was 17 million euro, going from 8.6% to 6.5% of revenues.
General and operating expenses came to 15 million euro, compared with 17 million euro in 2004, with the percentage on revenues going from 5.5% to 5.6%. This item includes 7 million euro in payroll and related costs, which were essentially in line with 2004, as are advertising and promotion costs in the amount of roughly 0.7 million euro. Depreciation and amortization came to 0.5% of revenues. Other operating costs increased by 1 million euro to 6 million, with the percentage on revenues going from 2.3% to 2.2% in 2005
The operating profit loss of 2 million euro compares with the operating profit gain in 2004 of 8 million euro.
The average number of employees in the period was 1,618.
Other and unallocated segment results
|
Download the Other and unallocated segment results in Excel format |
| (millions of euro) | 2005 | % | 2004 | % | Change | % |
|---|---|---|---|---|---|---|
| Revenues from third parties | 36 | 30 | 6 | 22.0 | ||
| Inter-segment revenues | - | - | - | - | ||
| Total revenues | 36 | 100.0 | 30 | 100.0 | 6 | 22.0 |
| Cost of sales | 34 | 93.8 | 28 | 92.0 | 6 | 24.5 |
| Gross operating income | 2 | 6.2 | 2 | 8.0 | - | - |
| Selling costs | - | 0.7 | - | 1.1 | - | - |
| Contribution margin | 2 | 5.5 | 2 | 6.9 | - | - |
| General and operating expenses | 2 | 4.8 | 4 | 13.1 | (2) | (55.0) |
| Ordinary operating result | - | 0.7 | (2) | (6.2) | 2 | n.s. |
| Non-recurring expenses/(income) | - | - | (2) | (7.3) | 2 | n.s. |
| Operating profit | - | 0.7 | - | 1.1 | - | (21.4) |
| EBITDA | 1 | 3.1 | 1 | 4.2 | - | (8.1) |
The segment includes the sales of sports equipment, particularly as produced for third parties by one of the Group’s manufacturing companies. Revenues increased by 6 million euro, or 22%, year on year. The percentage on revenues of cost of sales went from 92% to 93.8%. General and operating expenses fell by 2 million euro. The operating result at the operating profit level is essentially breaking-even.
The average number of employees in the period was 227.