De Rigo: net income increases in first half

On September 20th, the board of directors of De Rigo SpA 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 m1, 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 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 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.

Income from operations of the wholesale & manufacturing segment 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.

Income from operations of the retail segment 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 General Optica (GO), the Group's Spanish retail chain, and Dollond & Aitchison (D&A).
GO 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. 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.
D&A's 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.

Ennio De Rigo, Chairman of the De Rigo Group, commented: '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'.

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.