TOD'S S.P.A. 
Milan - November 13th, 2006
TOD'S S.p.A.: The Board of Directors approved the Consolidated Report for the first nine months of 2006.
The Group's revenues and profits continued to grow strongly; revenues: +10.7%, EBITDA: +19.2%, EBIT: +22.7%, net income: +20.2%.
The Board of Directors of Tod's S.p.A., the Italian company listed on the Milan Stock Exchange and holding of the luxury goods group of the same name operating in luxury shoes, leather goods and apparel with the Tod's, Hogan and Fay brands, today approved the Group's Report for the first nine months of 2006.
Nine month results are in line with management expectations and confirm the continuous and superior growth of revenues and profitability, consolidating the strong results already posted in the last few years.
The Group's turnover was 438.3 million Euros, posting a 10.7% growth as compared to the first nine months of 2005. This figure includes the positive effect, equal to 1.8 million Euros, of the favourable currency fluctuations (mainly related to the Euro/dollar exchange rate). EBITDA and EBIT were 107.4 million Euros and 89.7 million Euros, increasing respectively by 19.2% and by 22.7% versus the same figures of the first nine months of 2005; finally, net income was 52.6 million Euros (+20.2% versus the first nine months of 2005).
We remind once again that the nature of the industrial activities leads to discrepancies in month-on-month revenue and cost flows. As a result, it would be misleading to annualise quarterly results.
Breakdown of Consolidated Sales by Brand: strong growth for the major brands
million Euros | 9M 2006 | 9M 2005 | % change | FY 2005 |
Tod's | 250.8 | 220.4 | +13.8% | 288.5 |
Hogan | 119.0 | 100.0 | +19.0% | 126.1 |
Fay | 62.1 | 65.4 | -5.0% | 77.1 |
Roger Vivier | 4.8 | 3.1 | +55.2% | 3.8 |
Other | 1.6 | 7.0 | n.m. | 7.5 |
TOTAL | 438.3 | 395.9 | +10.7% | 503.0 |
Tod's revenues, which represent 57.2% of the Group's turnover as of September 30th, 2006, grew by 13.8%
in the first nine months of 2006.
Hogan revenues achieved excellent results, posting a 19% growth in the period and represent 27,2% of consolidated sales as of September 30th, 2006.
Fay revenues performance is entirely due to the different timing of production and deliveries as compared to the previous year; in fact, if we include also the month of October, in 2006 total revenues for the ten-
month period were higher than in the first ten months of 2005. This performance is positive, wheter considering that Fay is almost entirely distributed in the Italian market through the wholesale channel, where the Group does not intend to inflate the distribution. A new growth driver for this brand will be the start of the distribution into the foreign markets, which will give its results in the next few years.
Roger Vivier sales continued to grow strongly, reaching 4.8 million Euros in the first nine months of 2006, increasing by 55.2% as compared to the same period of the previous year.
Breakdown of Consolidated Sales by Product: strong growth of shoes and leather goods
million Euros | 9M 2006 | 9M 2005 | % change | FY 2005 |
Shoes | 276.9 | 250.4 | +10.6% | 314.7 |
Leather goods and accessories | 100.7 | 81.2 | +24.1% | 111.9 |
Apparel | 60.2 | 63.6 | -5.4% | 75.4 |
Other | 0.5 | 0.7 | n.m. | 1.0 |
TOTAL | 438.3 | 395.9 | +10.7% | 503.0 |
Nine-month results confirm the strong growth of revenues from leather goods and accessories, in line with the Group's strategy; the increase was equal to 24.1% in 9M 2006. This product category globally accounts for 23% of consolidated turnover as of September 30th, 2006, much higher than in the same period of the previous year (20.5%).
Shoes remain the major product category of the Group, representing 63.2% of consolidated turnover as of September 30th, 2006. In the first nine months of 2006 revenues from shoes posted a significant 10.6% growth.
Finally, revenues from apparel reflected the performance of the Fay brand.
Breakdown of Consolidated Sales by Region: strong growth in all the markets; Asia: +30%
million Euros | 9M 2006 | 9M 2005 | % change | FY 2005 |
Italy | 212.2 | 193.5 | +9.7% | 241.4 |
Europe (excl. Italy) | 116.7 | 110.7 | +5.4% | 134.3 |
North America | 43.0 | 40.7 | +5.6% | 57.0 |
Asia and rest of world | 66.4 | 51.0 | +30.2% | 70.3 |
TOTAL | 438.3 | 395.9 | +10.7% | 503.0 |
Tod's Group posted important growth rates in all the markets where it operates.
In particular, in the first nine months of 2006, sales grew by 9.7% in Italy, which remains the major market for the Group, representing 48.4% of consolidated turnover as of September 30th, 2006.
In the rest of Europe, sales increased by 5.4% in the period. The increase of the Group's brands in this region climbs to 10.8%, net of revenues generated by the production for third parties, which was deeply
reduced in 2006, due to the full and efficient use of the production capacity for the own brands.
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The growth was positive also on the US market, where revenues posted a 5.6% increase.
Sales continued to grow strongly in the Asian markets, which represented 15.2% of the Group's turnover as of September 30th, 2006 (as compared to 12.9% as of September 30th, 2005); the growth was 30.2% in the first nine months of 2006.
Breakdown of Consolidated Sales by Distribution Channel: sound growth in all the channels
million Euros | 9M 2006 | 9M 2005 | % change | FY 2005 |
DOS | 197.5 | 180.0 | +9.8% | 258.8 |
Franchised stores and independent retailers | 240.8 | 215.9 | +11.5% | 244.2 |
TOTAL | 438.3 | 395.9 | +10.7% | 503.0 |
As already explained, the breakdown of revenues by distribution channel is not meaningful in the third quarter of the year, when turnover is mainly represented by wholesale sales, due to the different timing in the accounting of revenues. In fact, deliveries made to DOS are booked as DOS stock inventory under the consolidation process as of the end of September and are translated into revenues only in the fourth quarter, when the products are sold to the final customers.
Wholesale revenues globally increased by 11.5% in the first nine months of 2006. The main growth driver is represented by the strong development of the franchised stores network (57 stores as of September 30th,
2006 versus 40 stores of twelve months before), which was mainly focused on Asia, in line with the
Group's strategy.
Also sales through DOS achieved outstanding results, increasing by 9.8% in the first nine months of 2006, mainly driven by the organic growth.
The Same Store Sales Growth (SSSG) rate, calculated as the worldwide average of sales growth rates reported by DOS opened as of January 1st, 2005, was 6.9% for the first nine months of the year, broadly in line with the previous months .
The same figure as of the end of October is equal to 6.6%; this trend is due, not only to the weather conditions, which have probably delayed some purchases of winter products by the final clients, but also to the timid acceptance of a new leather goods project, which has been designed to target the fashion segment, more than the luxury one.
As of September 30th, 2006 the Group's distribution network was composed by 108 DOS and 57 franchised stores (compared to 104 DOS and 40 franchised stores as of September 30th, 2005).
During the month of October two additional DOS and two franchised stores were opened.
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Comments to the main Profit & Loss figures
In the first nine months of 2006, the Group's EBITDA was 107.4 million Euros, growing by 19.2% as compared to the same period of 2005. EBITDA margin on sales was 24.5%, almost two percentage points higher than in the first nine months of 2005 (22.7%).
In line with management expectations, the main driver for the growth in profitability is the higher efficiency in production, which has more than offset higher costs for services (which includes also A&P expenses) and higher rents (the incidence on sales was respectively 30.9% and 5.5% in the first nine months of 2006 versus
24.3% and 4.9% in the same period of 2005). Despite the continuous growth of the Group's headcount (2,270 employees as of September 30th, 2006 versus 2,192 as of September 30th, 2005), the incidence on sales of labour costs was broadly stable (13.6% in 9M 2006 versus 13.7% in 9M 2005).
The Group's EBIT was 89.7 million Euros in the first nine months of 2006, increasing by 22.7% as compared to the same period of 2005. The margin on sales was 20.5%, showing a strong improvement as compared to the 9M 05 figure (18.5%). The growth of operating profitability was amplified by a further reduction of the incidence on sales of depreciation and amortisation (4.0% in the first nine months of 2006, versus 4.2% of the same period of 2005).
Profit before taxes was 88.9 million Euros, increasing by 19.9% versus the first nine months of 2005; the margin on sales was 20.3%, in line with the EBIT margin, since the result of financial operations was broadly neutral.
After having deducted 36.5 million Euros as income taxes (with a 41.1% tax rate, slightly better than in the first nine months of 2005), consolidated net income was 52.4 million Euros, increasing by 20.3% versus the same period of 2005.
Net of minorities, the Group's net income was 52.6 million Euros, growing by 20.2% versus the first nine months of 2005 and with a 12% margin on sales (versus 11.1% of 9M 2005).
Comments on the Balance Sheet and Cash Flow key figures
In the first nine months of 2006, the Group invested a total amount of 21.7 million Euros in fixed assets, which compares to 16.1 millions of the first nine months of 2005. The major resources were related to tangible fixed assets, mainly for the refurbishment of the DOS network, the relocation and widening of the
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New York and Hong Kong offices and the investment for the new production plant in Tuscany (for leather goods).
As of September 30th, 2006 the net financial position was positive and equal to 58.2 million Euros, growing by 2.5 million as compared to end of September 2005. The 38.8 million change versus the balance as of December 31st, 2005 is mainly due to the dividend payment (for a total amount of 30.2 million Euros versus
12.7 million Euros in 2005) and to the temporary financing of working capital requirements (mainly related to the increase of trade receivables, which will be cashed in in the following quarter, and the stock of the winter products in the DOS, ready to be sold to the final customers in the fourth quarter).
Consolidated shareholders' equity was 507.7 million Euros, which compares to 468.7 as of September 30th,
2005 and to 478.5 million as of December 31st, 2005.
Diego Della Valle, Chairman and CEO of the Group, commented as follows: "The results released today are in line with our expectations and confirm the continuous and sound growth of our Group. Also the indications from the Spring-Summer 2007 orders' backlog confirm the success of all our products, in all the markets. I'm therefore confident in the Group's ability to achieve its targets for the current year and to continue to post significant growth rates in sales and profits also over the next years".
Should you need explanations, please contact: Investor Relations Office - tel. +39 02 77 22 51 e-mail: c.oglio@todsgroup.com
Corporate website: www.todsgroup.com
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ATTACHMENTS
TOD'S GROUP
Key figures of Profit & Loss (compliant with IAS/IFRS principles)
Figures in million Euros | 9M 2006 | 9M 2005 | FY 2005 |
Revenues | 438.3 | 395.9 | 503.0 |
EBITDA | 107.4 | 90.1 | 112.9 |
EBIT | 89.7 | 73.1 | 90.1 |
Profit before taxes | 88.9 | 74.1 | 91.9 |
Net income | 52.4 | 43.6 | 53.9 |
Of which: Group's net income | 52.6 | 43.8 | 53.4 |
minorities | (0.2) | (0.2) | 0.5 |
Key figures of Balance Sheet (compliant with IAS/IFRS principles)
Figures in million Euros | September 30th, 2006 | September 30th, 2005 | December 31st, 2005 |
Operating net working capital (1) | 192.5 | 156.6 | 114.5 |
Tangible and intangible fixed assets | 281.5 | 280.5 | 279.7 |
Other assets/(liabilities), net | (24.5) | (24.1)) | (12.7) |
Total Invested Capital | 449.5 | 413.0 | 381.5 |
Net financial position (positive) | (58.2) | (55.7) | (97.0) |
Consolidated Shareholders' equity |
(1) Trade receivables + Inventory - Trade payables
Key figures of Cash Flow (compliant with IAS/IFRS principles)
Figures in million Euros | 9 months 2006 | 9 months 2005 |
Operating Cash Flow | 7.5 | 32.0 |
Cash flow generated/(used) by investing activities | (20.1) | (16.1) |
Cash Flow generated/(used) by financing activities | (27.2) | (15.7) |
Free Cash Flow generated/(used) | (39.8) | 0.2 |
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