Relazione sull'andamento

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

 

For the month of May, 2004

 

Benetton Group S.p.A.

Via Villa Minelli, 1 - 31050 Ponzano Veneto, Treviso - ITALY

 

(Indicate by check mark whether the Registrant files or will file annual reports under cover of Form 20-F or Form 40-F)

Form 20-F X Form 40-F ______

 

(Indicate by check mark whether the Registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934).

 

Yes ______ No X

TABLE OF CONTENTS

 

Benetton Group SpA's First Quaterly Report 2004

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Benetton Group S.p.A.

By: /s/ Luciano Benetton

______________________

Name: Luciano Benetton

Title: Chairman

May 20, 2004

 

 

 

 

 

 

 

 

 

 

 

Benetton Group

2004 first quarter report

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benetton Group S.p.A.

Villa Minelli

Ponzano Veneto (Treviso) - Italy

Share Capital: Euro 236,026,454.30 fully paid-in

Tax ID/Treviso Company register: 00193320264

 

Index

THE BENETTON GROUP

3

Directors and other officers

4

Financial highlights

5

Directors' report

Results for the first quarter of 2004

Significant events during the quarter

Outlook for the full year

6

Consolidated financial statements and relevant comments

Explanatory notes

7

Group consolidated results

- Consolidated statements of income reclassified to cost of sales

11

- Consolidated balance sheet reclassified according to financial criteria

13

- Financial situation highlights

15

- Summary statement of cash flows

 

Directors and other officers

Board of Directors

Luciano Benetton

Chairman

Carlo Benetton

Deputy Chairman

Silvano Cassano

Managing Director

Giuliana Benetton

Directors

Gilberto Benetton

Alessandro Benetton

Reginald Bartholomew

Luigi Arturo Bianchi

Sergio De Simoi

Gianni Mion

Ulrich Weiss

Pierluigi Bortolussi

Secretary to the Board

Board of Statutory auditors

Angelo Casò

Chairman

Filippo Duodo

Auditors

Dino Sesani

Antonio Cortellazzo

Alternate Auditors

Marco Leotta

Independent auditors

Deloitte & Touche S.p.A.

Financial highlights

1st quarter

1st quarter

Year

Key operating data (millions of euro)

2004

%

2003

%

Change

%

2003

%

Revenues

381

100.0

444

100.0

(63)

(14.1)

1,859

100.0

Cost of sales

210

55.1

252

56.8

42

(16.6)

1,049

56.4

Gross operating income

171

44.9

192

43.2

(21)

(10.9)

810

43.6

Income from operations

45

11.9

54

12.1

(9)

(15.9)

232

12.5

Ordinary income

40

10.4

49

11.1

(9)

(19.8)

210

11.3

Net income

28

7.3

25

5.5

3

12.8

108

5.8

 

Key financial data (millions of euro)

03.31.2004

12.31.2003

03.31.2003

Working capital

820

729

908

Assets due to be sold

8

8

73

Net capital employed

1,707

1,655

1,882

Net financial position

497

468

709

Shareholders' equity

1,204

1,174

1,158

Self-financing

68

327

76

Capital expenditures in tangible

and intangible fixed assets

21

151

66

Purchase of equity investments

15

19

15

 

Share and market data

03.31.2004

12.31.2003

03.31.2003

Shareholders' equity per share (euro)

6.63

6.47

6.4

Period end share price (euro)

8.65

9.11

6.5

Screen-based market: high (euro)

9.37

11.30

9.0

Screen-based market: low (euro)

8.33

5.90

5.9

Market capitalization (thousands of euro)

1,570,484

1,654,001

1,180,132

Average no. of shares outstanding (*)

181,558,811

181,558,811

181,558,811

Number of shares outstanding

181,558,811

181,558,811

181,558,811

(*) Net of treasury shares held during the period.

 

Employees

03.31.2004

12.31.2003

03.31.2003

Total number

6,922

6,949

7,061

Directors' report Results for the first quarter of 2004

 

Significant events during the quarter

On February 17, 2004 Benfin S.p.A. bought the remaining 15% of Olimpias S.p.A. from third parties for 15 million euro, so that it now owns the entire company. Olimpias S.p.A. is the company that produces textiles (fabrics, knitted fabrics, yarn, woven and printed fabrics, as well as acting as a dyehouse and laundry) mainly on behalf of Group companies.

 

Outlook for the full year

Even though consumers are still cautious, not helped by unfavorable weather conditions in certain key Group markets, the results for the quarter are in line with budget. Given this situation and based on the information currently available, the outlook for 2004 is of industrial and operating margins substantially in line with those of 2003, on Group sales that no longer include sports equipment so they should come to around 1,800 million euro; net income should be around 7% of sales. Revenues in the casual clothing segment are expected to see moderate growth, with a target of around 1,580 million euro.

Self-financing by the end of 2004 is expected to be in line with what it was at the end of 2003, and the same for debt, despite having to pay the substitute tax on the corporate reorganization; investments should come in at around 100 million euro, focused mainly on expansion of the sales network.

Consolidated financial statements and relevant comments

Explanatory notes

The quarterly report has been prepared in accordance with art. 82 of the Regulation approved by Consob 11971 of May 14, 1999 in application of Legislative Decree 58 of February 24, 1998 concerning issuers.

The accounting policies and consolidation principles adopted are consistent with those used to prepare the annual consolidated financial statements.

The consolidated statements of income and balance sheet as of March 31, 2004, are shown in the same format as those presented in the 2003 Directors' report.

The scope of consolidation has remained substantially unchanged with respect to December 31, 2003; bear in mind that the Nordica, Prince and Rollerblade businesses were all sold off during the first half of 2003.

Group consolidated results

Consolidated statements of income reclassified to cost of sales adopted for internal reporting purposes

(thousands of euro)

1st quarter

1st quarter

2004

%

2003

%

Change

%

Revenues

381,199

100.0

443,952

100.0

(62,753)

(14.1)

Cost of sales

Material and net change in inventories

91,106

23.9

126,087

28.4

(34,981)

(27.7)

Payroll and related costs

23,966

6.3

24,688

5.6

(722)

(2.9)

Subcontract work

78,859

20.7

83,070

18.7

(4,211)

(5.1)

Industrial depreciation

5,687

1.5

6,822

1.5

(1,135)

(16.6)

Other manufacturing costs

10,567

2.7

11,349

2.6

(782)

(6.9)

210,185

55.1

252,016

56.8

(41,831)

(16.6)

Gross operating income

171,014

44.9

191,936

43.2

(20,922)

(10.9)

Selling, general and administrative expenses

Payroll and related cost

28,700

7.5

32,402

7.3

(3,702)

(11.4)

Distribution and transport

6,725

1.8

7,769

1.8

(1,044)

(13.4)

Sales commissions

18,222

4.8

19,681

4.4

(1,459)

(7.4)

Advertising and promotion

13,842

3.6

24,792

5.6

(10,950)

(44.2)

Depreciation and amortization

18,842

5.0

19,492

4.4

(650)

(3.3)

Other expenses

39,370

10.3

33,907

7.6

5,463

16.1

125,701

33.0

138,043

31.1

(12,342)

(8.9)

Income from operations

45,313

11.9

53,893

12.1

(8,580)

(15.9)

Other income/(expenses)

Foreign currency gain/(loss), net

133

0.0

4,535

1.0

(4,402)

(97.1)

Interest income

5,869

1.5

8,475

1.9

(2,606)

(30.7)

Interest expenses

(11,599)

(3.0)

(17,397)

(3.9)

5,798

(33.3)

Other income /(expenses), net

(753)

(0.2)

(302)

0.0

(451)

149.3

(6,350)

(1.7)

(4,689)

(1.0)

(1,661)

35.4

Income before taxes and minority interests

38,963

10.2

49,204

11.1

(10,241)

(20.8)

Income taxes

11,397

3.0

24,261

5.5

(12,864)

(53.0)

Income before minority interests

27,566

7.2

24,943

5.6

2,623

10.5

Minority interests income/(loss)

198

0.1

(338)

(0.1)

536

(158.6)

Net income

27,764

7.3

24,605

5.5

3,159

12.8

 

Group results for the first quarter of 2004

First quarter net sales amounted to 381 million euro. It is impossible to make a straight comparison with the same period in 2003; for comparison purposes, two key factors have to be borne in mind as together they had a significant influence on the sales trend: the sale of the sports equipment business in the first six months of 2003 and the persistently unfavourable trend in certain currencies during the first quarter of the 2004. The decrease in sales due to the disposal of the business amounts to 60 million euro, while the exchange rate effect on sales for the period comes to more than 8 million euro (2.2%). Without these two factors, Group revenues would have increased by 1.4% on the same period of 2003.

Sales by the casual segment are up slightly on first quarter 2003, with an increase net of the exchange effect of 2.1%; the number of garments sold rose by 4.4%.

In the sports segment, the net decrease amounts to 57 million euro and derives essentially from the impact explained above, as well as the trend in sportswear, which rose by 3 million euro.

Sales in the manufacturing sector fell by 19.1% (5 million euro), reflecting the general state of the market.

Consolidated cost of sales decreased in absolute terms by 42 million euro, above all because of the elimination of the sports equipment costs.

The Group's gross operating income comes to 171 million euro, which is 44.9% of sales, compared with 43.2% in the first quarter of 2003; it shows a decrease of 21 million euro which is attributable almost entirely to the sports equipment business. The casual segment has had a positive impact on this percentage trend, while in absolute terms it is substantially in line with first quarter 2003, despite the exchange effect which penalized it by 5 million euro. The "other segments" have declined both in absolute terms and as a percentage of sales.

Selling and general expenses, at 126 million euro, 33% of sales, are down by 8.9%. Commission expense is down by 1.5 million euro, mainly as a result of selling the sports equipment business. Advertising and sponsorships fell from 5.6% to 3.6% of sales thanks to careful management of these costs and the elimination of certain commitments related to the sports equipment sector.

The ratio of payroll costs to sales went from 7.3% in first quarter 2003 to 7.5%; in absolute terms, the decrease is due to the disposal of the sports equipment business. Depreciation and amortization are substantially in line in absolute terms, though as a percentage of sales they rose from 4.4% to 5%.

Operating costs have gone up, mainly because of the higher rents that the commercial network has to pay.

Income from operations comes to 11.9% of sales compared with 12.1% in first quarter 2003, an absolute change of around 9 million euro, attributable to the casualwear segment for 4 million euro and to the sports segment for 5 million euro; the exchange effect was negative for around 2 million euro.

The net effect of foreign exchange management is more or less neutral because of a slight recovery in exchange rates during the period, while the overall exposure in foreign currency was reduced by the sale of the sports equipment sector.

Net financial charges came down as a percentage of sales, reflecting lower interest rates and a lower level of average net financial position.

Net income comes to 28 million euro (7.3% of sales), compared with 25 million euro (5.5% of sales) in first quarter 2003.

Information by geographic area and business segment

The

Other

1st quarter

1st quarter

Change

(millions of euro)

Europe

%

Americas

%

Asia

%

areas

%

2004

2003

%

Casualwear

278

87.9

21

100.0

39

93.3

1

39.5

339

340

0.3

Sportswear and

equipment

19

5.9

-

-

1

2.3

-

-

20

77

74.0

Manufacturing and others

19

6.2

-

-

2

4.4

1

60.5

22

27

19.1

Total 1st quarter 2004

316

100.0

21

100.0

42

100.0

2

100.0

381

444

14.1

Total 1st quarter 2003

350

39

53

2

444

From this period, the geographical breakdown has been revised, replacing the "Euro area" with "Europe".

The decline in revenues, as commented previously, is principally due to the disposal of the sports equipment sector and the impact of exchange rates on sales in foreign (non-euro) countries.

Performance by activity. The Group's activities are traditionally divided into three segments to provide a basis for effective administration and adequate decision-making by corporate management, and to provide accurate and relevant information about the company performance to financial investors.

These business segments are:

Results of the Casualwear sector

1st quarter

1st quarter

(millions of euro)

2004

%

2003

%

Change

%

Sector total revenues

339

100.0

340

100.0

(1)

(0.3)

Cost of sales

(179)

(52.7)

(181)

(53.1)

2

(1.1)

Gross operating income

160

47.3

159

46.9

1

0.7

Selling, general and

administrative expenses

(117)

(34.6)

(112)

(33.1)

(5)

4.5

Income from operations

43

12.7

47

13.8

(4)

(8.3)

Sales in the casualwear segment were broadly in line with the corresponding period of 2003, with a slight reduction of 0.3%. While sales volumes increased considerably (+4.4%), the trend in the dollar and yen had an adverse effect on the overall figure, penalizing sales by around 8 million euro. Without this, sales would have grown by 2.1%. Cost of sales decreased by 1.1% due to even more effective rationalization of the manufacturing process.

The gross margin has improved to 160 million euro, rising as a percentage of sale from 46.9% to 47.3%, despite the 5 million euro lost due to the exchange effect.

Selling, general and administrative expenses have increased compared with the first quarter of 2003; in particular, there has been an increase in rents and consulting services.

Income from operations fell from 13.8% of sales to 12.7%.

Results of the Sportswear and equipment sector

1st quarter

1st quarter

(millions of euro)

2004

%

2003

%

Change

%

Sector total revenues

20

100.0

77

100.0

(57)

(74.0)

Cost of sales

(13)

(64.9)

(49)

(64.1)

36

(73.7)

Gross operating income

7

35.1

28

35.9

(21)

(74.6)

Selling, general and

administrative expenses

(5)

(23.7)

(21)

(27.0)

16

(77.1)

Income from operations

2

11.4

7

8.9

(5)

(66.6)

The first quarter 2003 figures for the sports segment still include sales of equipment, which explains the decrease of 60 million euro. Sales of sportswear come to 16 million euro, a net increase of 3 million euro.

There has been a slight increase in cost of sales as a percentage of sales. Gross operating income, 7 million euro, has fallen slightly to 35.1% of net revenues, down from 35.9%.

The net margin on sales, in percentage terms, benefited above all from the elimination of the costs involved in the business that was disposed of, coming in at 11.4% compared with 8.9% of sales in first quarter 2003 (especially lower advertising and payroll costs).

Results of the Manufacturing and others sector

1st quarter

1st quarter

(millions of euro)

2004

%

2003

%

Change

%

Sector total revenues

22

100.0

27

100.0

(5)

(19.1)

Cost of sales

(18)

(83.9)

(22)

(81.3)

4

(16.5)

Gross operating income

4

16.1

5

18.7

(1)

(30.5)

Selling, general and

administrative expenses

(4)

(15.9)

(5)

(17.9)

1

(28.5)

Income from operations

0

0.2

0

0.8

0

n.s.

Sales by the manufacturing segment to third parties declined from 27 million to 22 million euro, down by 5 million euro. This trend derived from a contraction in the market for fabrics and yarns. Gross operating income went from 5 million to 4 million euro, though there was also a decrease in selling, general and administrative expenses. Income from operations came in close to breakeven, as in first quarter 2003.

 

Consolidated balance sheet reclassified according to financial criteria

(thousands of euro)

Assets

03.31.2004

12.31.2003

03.31.2003

Current assets

Cash and banks

283,386

324,835

146,287

Marketable securities

27,539

27,289

26,591

Differentials on forward transactions

9,834

10,000

2,132

Financial receivables

16,302

7,298

29,745

337,061

369,422

204,755

Accounts receivable

Trade receivables

859,351

848,508

950,561

Other receivables

276,136

297,220

114,434

less - Allowance for doubtful accounts

(99,412)

(95,870)

(73,565)

1,036,075

1,049,858

991,430

Assets due to be sold

8,356

8,088

72,707

Inventories

263,682

233,736

288,088

Accrued income and prepaid expenses

14,875

15,842

20,678

286,913

257,666

381,473

Total current assets

1,660,049

1,676,946

1,577,658

Investments and other non-current assets

Equity investments

17,880

20,514

17,061

Securities held as fixed assets

9

9

10

Guarantee deposits

16,337

15,832

15,475

Financial receivables

30,292

30,615

36,130

Other non-current receivables

8,069

8,662

9,005

Total investments and other non-current assets

72,587

75,632

77,681

Tangible fixed assets

Real estate

646,310

641,966

642,179

Plant, machinery and equipment

339,964

327,409

352,552

Office furniture, furnishings and electronic equipment

101,300

100,269

103,403

Vehicles and aircraft

22,838

22,817

37,247

Construction in progress and advances for tangible fixed assets

15,772

17,019

15,696

Finance leases

17,627

13,913

15,027

less - Accumulated depreciation

(421,898)

(409,553)

(424,691)

Total tangible fixed assets

721,913

713,840

741,413

Intangible fixed assets

Licenses, trademarks and industrial patents

26,960

28,225

26,781

Deferred charges

192,759

202,800

223,739

Total intangible fixed assets

219,719

231,025

250,520

TOTAL ASSETS

2,674,268

2,697,443

2,647,272

 

(thousands of euro)

Liabilities and Shareholders' equity

03.31.2004

12.31.2003

03.31.2003

Current liabilities

Bank loans

24,429

33,879

63,360

Short-term loans

7,902

1,339

1,414

Current portion of long-term loans

1,320

1,567

52,817

Current portion of lease financing

6,243

4,977

4,656

Accounts payable

291,474

331,563

302,517

Other payables, accrued expenses and deferred income

77,946

91,364

92,901

Reserve for income taxes

130,517

126,514

18,631

Total current liabilities

539,831

591,203

536,296

Long-term liabilities

Bonds

300,000

300,000

300,000

Long-term loans,

net of current portion

501,765

502,269

503,244

Other long-term liabilities

8,135

3,330

5,837

Lease financing

22,753

21,834

24,097

Reserve for employee termination indemnities

49,296

49,774

50,423

Other reserves

42,267

42,373

54,538

Total long-term liabilities

924,216

919,580

938,139

Minority interests in consolidated subsidiaries

5,677

12,799

14,540

Shareholders' equity

Share Capital

236,026

236,026

236,026

Additional paid-in capital

56,574

56,574

56,574

Surplus from monetary revaluation of assets

22,058

22,058

22,058

Other reserves and retained earnings

859,205

762,986

826,533

Translation differences

2,917

(11,657)

(7,499)

Net income for the period

27,764

107,874

24,605

Total Shareholders' equity

1,204,544

1,173,861

1,158,297

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

2,674,268

2,697,443

2,647,272

 

Financial situation - highlights deduced from internal reporting

(millions of euro)

03.31.2004

12.31.2003

Change

03.31.2003

Working capital

820

729

91

908

Assets due to be sold

8

8

-

73

Total capital employed

1,707

1,655

52

1,882

Net financial position

497

468

29

709

Shareholders' equity

1,204

1,174

30

1,158

Minority interests

6

13

(7)

15

As in previous periods, the effect of restructuring the sports sector, namely 8 million euro which is the residual amount of assets still to be sold off at their realizable value, is shown separately from working capital; in particular, the balance at March 31, 2004 represents the amount agreed for the sale of a building owned by a foreign subsidiary. The contract should be finalized in the second quarter of this year.

Working capital is higher than at the end of December 2003 due to the cyclical nature of the various businesses.

The change compared with March 31, 2003 amounts to 88 million euro, reflecting decreases in net trade receivables of 116 million euro, in current payables of 4 million euro and in inventories for 24 million euro; other current receivables and payables have increased by 48 million euro.

Compared with December 31, 2003 total invested capital has gone up by 52 million euro for the following reasons:

 

Changes in the financial position with comparative figures for last year are summarized below:

(millions of euro)

03.31.2004

12.31.2003

03.31.2003

Current financial assets:

- Italian government securities and monetary and bond funds

28

27

27

- bank deposits

181

207

55

- cash and ordinary current accounts

102

118

91

- other short-term financial receivables

26

17

32

Total current financial assets

337

369

205

Medium-term financial receivables

30

31

36

Total financial assets

367

400

241

Current financial liabilities:

- short-term financial payables

(33)

(35)

(64)

- current portion of medium-term debt

(1)

(2)

(53)

- current portion of amounts due to leasing companies

(6)

(5)

(5)

Total current financial liabilities

(40)

(42)

(122)

Medium-term financial payables:

- bond loan

(300)

(300)

(300)

- syndicated loan

(500)

(500)

(500)

- other medium-term loans

(2)

(4)

(4)

- due to leasing companies

(22)

(22)

(24)

Total medium-term financial payables

(824)

(826)

(828)

Total financial liabilities

(864)

(868)

(950)

Net financial position

(497)

(468)

(709)

Net short-term financial position

297

327

83

Net medium-term financial position

(794)

(795)

(792)

Net financial position

(497)

(468)

(709)

Group net financial position at the end of the period amounts to 497 million euro; this figure is usually higher than at the end of the year for cyclical reasons. Compared with first quarter 2003, financial payables show a decrease in short-term loans. The improvements in current financial assets derives from the cash generated by disposal of the sports equipment business and a lower level of capital expenditure.

 

Summary statement of cash flows

1st quarter

1st quarter

Year

(millions of euro)

2004

2003

2003

Self-financing

68

76

327

Change in working capital

(86)

(135)

(4)

Net operating investments

(15)

(60)

(126)

Disposal of the sports equipment sector

27

25

81

Purchase and sale of financial fixed assets, net

(15)

-

(4)

Payment of dividends

-

-

(64)

Payment of taxes

(3)

(5)

(71)

Net financial (requirements)/surplus

(24)

(99)

139

The free cash flow generated by the Group amounted to 68 million euro, compared with 76 million euro in first quarter 2003. Compared with first quarter 2003, there has been a reduction in the financing requirement thanks to lower capital investments during the quarter and to the change in working capital.

Corporate information

Headquarters

Benetton Group S.p.A.

Villa Minelli

31050 Ponzano Veneto (Treviso) - Italy

Tel. +39 0422 519111

Legal data

Share Capital: Euro 236,026,454.30 fully paid-in

R.E.A. (register of commerce) no. 84146

Tax ID/Treviso company register: 00193320264

Media & communication department

E-mail: press@benetton.it

Tel. +39 0422 519036

Fax +39 0422 519930

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Tel. +39 0422 519412

Fax +39 0422 519740

TV Conference +39 0422 510623/24/25

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