Growth in De Rigo's operating profitability

On April 14th, the board of directors of De Rigo SpA approved the unaudited consolidated results for full year 2004, which evidenced strong growth in the Group's operating profitability.

Highlights of the Group's unaudited consolidated results for 2004 include:
- Net sales amounted to Eur 514.4 m1, an increase of 1.9% from the Eur 504.8 m posted last year. Excluding Eid's sales from the Group's results for 2003, the year on year increase in consolidated net sales was 6.1%;
- Income from operations before depreciation and amortization3 increased by 7.5% to Eur 55.7 m from the Eur 51.8 m posted in 2003, and represented 10.8% of net sales, as compared with 10.3% last year.
- Income from operations grew by 15.7% to Eur 28.8 m from the Eur 24.9 m recorded in 2003, and represented 5.6% of net sales, as compared with 4.9% last year;
- Net income amounted to Eur 14.5 m, a decrease of 21.6% from the Eur 18.5 m recorded in 2003, when earnings were positively affected by the Group's gain on the disposal of its controlling interest in Eid, which contributed Eur 11.8 m to other income, net (including Eur 3.7 m attributable to other investors, which was deducted from the Group's consolidated results as part of minority interests). Net income represented 2.8% of net sales, as compared with 3.7% last year;
- At 31st December 2004, the net financial position4 of the De Rigo Group was positive and amounted to Eur 6.2 m, as compared with the net debt of Eur 3.6 m recorded at 31st December 2003, primarily as a result of 2004 net earnings and improvements in working capital, that were reflected in an increase in cash and cash equivalents and a decrease in borrowings.

Ennio De Rigo, Chairman of the De Rigo Group, commented on 2004's results: 'The Group's strong commitment to recoup the sales lost as a result of the disposal of Eid was reflected in a slight overall increase in sales, while improvements in our gross margin also contributed to our strong operating results. We are working to capitalize on the opportunities for sales growth afforded by all of the license agreements we have recently entered into, as well as looking to develop additional new business with Ermenegildo Zegna and Jean Paul Gaultier. Looking into the future, we must recognize that general economic conditions are strongly influencing the optical sector in certain markets in which we operate. These challenges will requires us to devote additional effort and to develop new strategies in order to achieve the desired results'.

Sales of the wholesale & manufacturing segment amounted to Eur 134.5 m, a decrease of 1.2% as compared with Eur 136.2 m posted in 2003. Excluding from the 2003 results sales made by the wholesale & manufacturing business segment to Eid prior to its disposal, the segment's sales increased by 0.7%, reflecting strong sales results in certain Far Eastern markets, particularly Japan and Hong Kong, as well as in certain European markets, including Greece and Spain Gross margins at the wholesale & manufacturing segment also increased, reflecting both a reduction in the cost of goods sold resulting from improved efficiencies in the manufacturing process and a more favourable sales mix, as the 2003 results had also included relatively lower margin sales to Eid. The increase in gross margin was reflected in strong growth in both income from operations before depreciation and amortization and income from operations: income from operations before depreciation and amortization increased by 15.8% to Eur 21.3 m from the Eur 18.4 m recorded in 2003 and represented 15.8% of sales, as compared with 13.5% last year; income from operations increased by 19.1% to Eur 16.2 m from the Eur 13.6 m posted in 2003, and represented 12.0% of sales, as compared with 10.0% last year.

Sales of the retail segment increased by 7.8% to Eur 389.8 m, as compared with the Eur 361.5 m posted in 2003. The increase in sales reflected same store sales per working day growth of 6.0% at General Optica ('GO'), the Group's Spanish retail chain, and 6.2% in Pound Sterling terms at Dollond & Aitchison ('D&A'), the Group's British retail chain.
GO grew sales by 7.8% to Eur 140.9 m, while its income from operations before depreciation and amortization increased by 11.4% to Eur 23.5 m from the Eur 21.1 m posted in 2003, representing 16.7% of sales as compared with 16.1% last year. The increase in income from operations before depreciation and amortization reflected both the growth in sales due to increase in same store sales and the opening of 6 owned and 4 franchised shops during 2004, as well as a higher gross margin, notwithstanding an increase in advertising expenses. Income from operations increased by 27.4% to Eur 10.7 m from the Eur 8.4 m posted in 2003, representing 7.6% of sales, as compared with 6.4% last year. Income from operations increased at a higher rate than income before depreciation and amortization, as depreciation and amortization remained substantially stable, amounting to Eur 12.8 m in 2004, as compared to Eur 12.7 m last year.
D&A's sales grew by 7.8% to Eur 248.9 m from the Eur 230.8 m posted in 2003. Sales grew by 5.8% in Pound Sterling terms, reflecting the increase in its value against the Euro, while same store sales per working day in Pound Sterling terms increased by 6.2%. The increase in D&A's sales was primarily attributable to the Company's aggressive marketing campaigns, which drove increased sales of higher quality products. As a result of the increase in sales, income from operations before depreciation and amortization increased by 7.9% to Eur 10.9 m from the Eur 10.1 m posted in 2003, representing 4.4% of sales, the same percentage as last year. Income from operations increased by 58.3% to Eur 1.9 m from the Eur 1.2 m posted in 2003, and represented 0.8% of sales, having represented 0.5% last year. As at GO, income from operations increased at a higher rate than income before depreciation and amortization, as depreciation and amortization remained substantially stable, amounting to Eur 9.0 m in 2004, as compared to Eur 8.9 m last year.

Income from operations before depreciation and amortization for the retail segment as a whole increased by 10.3% to Eur 34.4 m, as compared with the Eur 31.2 m posted in 2003 and represented 8.8% of sales, as compared with 8.6% last year. Income from operations for the segment as a whole increased by 31.3% to 12.6 m from the Eur 9.6 m posted in 2003 and represented 3.2% of sales, as compared with 2.7% last year.