Bulgari Group: 2009 results still influenced by the downturn
Turnover: 926.6 million Euro (-13.8 % at current exchange rates)
Gross margin: 565.7 million Euro (-16.9% at current exchange rates and equal to 61.1%)
Ebitda before costs related to the restructuring: 82.4 million Euro (-50% at current exchange rates)
Extraordinary costs related to the restructuring: 37 million Euro
Net profit/loss: -47.1 million Euro
Net financial indebtedness: 216.8 million Euro (-29%)
Dividend proposal of 0.05 Euro per share
Rome, 15 March 2010 – The Board of Directors of Bulgari S.p.A. approved today the draft financial statements for the Company and the draft consolidated financial statements for the Group for the full year 2009.
All the variations reported below and related to the revenues are expressed at comparable exchange rates unless noted otherwise.
The consolidated turnover for 2009 amounted to 926.6 million Euro compared to 1,075.4 million Euro in 2008 (-13.8% at current exchange rates and -18.1% at comparable exchange rates). On this point, it is important to note that sales improved as the year progressed (from -30.6% in the first quarter to -2.7% in the fourth quarter of 2009), and also point out that sales in the directly owned stores were much better (+3.3% at current exchange rates in 2009) than the wholesale channel, where all product categories were subject to widespread de-stocking.
As a whole, over the year, all product categories recorded a drop in sales: jewellery fell by 14.4%, watches by 24.5%, perfumes by 14.9% and accessories by 27.2%. However, we should note the excellent performance of watches (+20.2%) in directly owned stores in the fourth quarter.
As regards the geographical areas, Europe was down by 16.7% and America by 31.6%, while Asia fell by 18.8%: apart from the 33.9% drop in Japan, the rest of Asia was basically stable (-0.1%). The Middle East/Other was up by 12.2% at current exchange rates. Finally, as regards directly owned stores, the highly positive performance in certain strategic markets such as China (+27.7%), South Korea (+32.2%) and Australia (+66.9%) is noteworthy.
Profit & Loss Highlights
The gross margin – which went from 681.1 million Euro in 2008 to 565.7 million Euro in 2009 (-16.9% at current exchange rates) – came down by about two points in terms of percentage ratio on turnover (61.1% compared to 63.3% in 2008). In order to provide a better description, we reclassified certain charges related to product previously recorded under advertising and promotion costs to the cost of goods sold. The previous year was also reclassified for ease of comparison. These charges had approximately a 1% impact on the turnover, without substantial differences in the two years compared.
Various factors contributed to the reduction of the margin: exchange rate trends; the increase in gold prices in 2009, only partially offset by hedging made by the Group, and without significant increases in sales prices; clearance of the Roth and Genta product inventories (following integration of the two brands) through special sales with lower profit margins.
Total operating costs (before costs related to the restructuring), not including advertising and promotion costs were down by 5.0% at comparable exchange rates, and fell from 459.1 million Euro in 2008 to 452.9 million Euro in 2009. We should note that this reduction in costs from the previous year was achieved despite certain unavoidable short-term expenses such as “rents” (+10.8%) and “amortisation and depreciation” (+20.6%).
This reduction in costs was even more pronounced if these items are taken out of consideration, amounting to 11.4% at comparable exchange rates. This was achieved through the strict cost control policies adopted starting from 2008, with the effects becoming increasingly manifest in 2009.
Total operating costs (before costs related to the restructuring) in the fourth quarter, excluding advertising and promotion costs, fell from 128,3 million Euro in 2008 to 119.9 million Euro in 2009 (-5.1% at comparable exchange rates) with an even more pronounced reduction than in the third quarter. This reduction in costs, in fact, amounts to 12% at comparable exchange rates, if “rents” and “amortisation/depreciation” are not taken into consideration.
Advertising and promotional costs stood at 95.6 million Euro in 2009 compared to 110.9 million Euro in 2008 (-16.9% and in line with turnover trends) with a 10.3% incidence on turnover which is in line with 2008 (10.3%).
Ebitda, before costs related to the restructuring, amounted to 82.4 million Euro against 164.9 million Euro in 2008 (-50%).
Operating income, before costs related to the restructuring, amounted to 17.1 million Euro against 111.0 million Euro in 2008 (-84.6%).
Extraordinary, non-recurring costs related to the restructuring amounted to 37.0 million Euro in 2009, of which 9 million Euro due to various compensation payments and the remaining 28 million Euro due to accounting write-downs. It must be underlined that two thirds of these non-recurring costs are related to the integration of the Roth and Genta brands.
Finally, the net loss amounted to 47.1 million Euro compared to a profit of 82.9 million Euro in 2008.
As planned, the Company made an investment plan entailing a total payment of 72.3 million Euro (-12.1% compared to 2008) in 2009.
As of 31 December 2009 the number of the Bulgari stores in the world was 273 of which 166 as directly owned (+2 compared to the previous year).
Balance Sheet Highlights
The Group’s net financial indebtedness as at 31 December 2009 amounted to 216.8 million Euro compared to 303.6 million Euro as at 31 December 2008, falling a significant 29%. This is 100% covered by long-term loans and committed credit lines with average expiry dates greater than 36 months and without covenants. To reinforce the debt structure in July 2009 the issue of a convertible bond for 150 million Euro was completed. It was fully placed with institutional investors and listed on the Luxembourg stock exchange. This loan is included in the 216.8 million Euro of total indebtedness.
The reduction of the indebtedness is also due to the reduction in investments, and the strong contraction of stock (from 728 million Euro at the end of 2008 to 615 million Euro at the end of 2009), with a drop of about 15%.
The gearing ratio between net debt and net equity has been therefore subject to a considerable reduction, falling from 37% in 2008 to 28% in 2009.
The Board of Directors also approved the draft financial statements of the parent company Bulgari S.p.A. which showed a net profit of 17.7 million Euro (-69.4% compared to the profit of 57.8 million Euro in 2008). Total net revenue of the parent company stood at 64.9 million Euro (85.9 million Euro in 2008).
The Board approved the proposal to pay a dividend of Euro 0.05 compared to Euro 0.10 of last year, distributing part of the net profit of the year 2009. The Board proposed that the dividend will be paid on May 27, 2010 to all outstanding shares on the register at the ex-dividend date of May 24, 2010.
The board of directors also examined and approved the Report on Corporate Governance and shareholding structure, providing information about the adoption of the corporate governance code endorsed by the Italian Stock Exchange authority (Borsa Italiana SpA) and the other information requested; this report will be sent to Borsa Italiana SpA and will be available on Bulgari’s website, “Corporate Governance” section.
The Board of directors approved to submit to the shareholders’ approval a new authorisation to purchase and sell the Company’s own shares up to a maximum number of . 30.000.000 shares for the following purposes: (i) to stabilize and foster their liquidity on the stock market, (ii) to establish a portfolio shares which may be utilized: to serve the conversion of bonds or warrants issued or to be issued, to be used as consideration in extraordinary transactions, to meet obligations arising from programs for the distribution of share options or shares, for free or at a price, to directors and employees of the company and the group, for delivery on a gratuitous basis to the shareholders (iii) to enable a share capital reduction, (iv) to make an investment of a medium or long term.
The authorisation is required for a period of 18 months from the shareholders meeting approving the proposal at a price per share of a minimum of 2,5 Euro and a maximum of 11 Euro. As of today the Company does not have in portfolio any of its own shares.
The Board of Directors has given power to its President, Mr. Paolo Bulgari, and to its Chief Executive Officer, Mr. Francesco Trapani, severally, to convene the Ordinary and Extraordinary Shareholders Meeting of the Company on April 22nd, 2010 at 11 a.m., on first call, and on April 23rd, 2010 same time, on second call, at hotel Visconti in Rome, Via Federico Cesi n.37, with the following Agenda:
Ordinary Seat
Group consolidated financial statement at December 31, 2009 and Bulgari S.p.A financial statement at December 31st, 2009; report of the Board of Directors on performance at December 31st, 2009, allocation of net income; consequent and related resolutions;
appointment of the members of the board for the year 201o, 2011 and 2012 and approval of their remuneration; consequent and related resolutions;
Authorisation to the Company to purchase and sale its own shares, also by means of the use of put and call options; consequent and related resolutions;
Extraordinary Seat
Proposal to amend art. 11 of the current bylaws with regards to quorum needed to attend and vote at shareholder meetings;
proposal to amend articles 9, 10, 11, 12 and 17 of the current bylaws to reflects new rules set forth by legislative decree n. 27 of January 27, 2010.
Francesco Trapani, Chief Executive Officer of the Bulgari Group, thus commented:
“The 2009 financial results were heavily influenced by the global crisis in financial markets and its effects on the demand for goods and services: in this highly negative macro-economic context, having started the year with two extremely difficult quarters, Bulgari began to show progressive improvement from the third quarter, continuing to year-end. In a 2009 characterised by sales in directly owned stores much more buoyant than in the wholesale channel, the Group continued to be extremely focused on reducing costs, investments, debt and stock, providing results that exceeded expectations to the benefit of the financial position. As regards 2010, the first two months showed a high single digit increase in turnover with all channels and product categories performing well. The European market remains weak and the Japanese market substantially stable, but the American, South Korean and Chinese (mainland China, Taiwan, Hong Kong and Macau) markets all showed very positive results. In light of these initial market indicators, and of the highly innovative projects in terms of brand image and product launches already in place and set to continue for the rest of the year, I believe we can reasonably expect a mid single digit increase in turnover in 2010 at comparable exchange rates, and a contribution margin increasing to about 63% on sales. In addition, the Group will dutifully go on with its commitment to increase efficiency, but will continue investing in order to exploit growth opportunities offered by the market”.
Source: Bulgari S.p.A. – Not audited preliminary results.