CSP International Fashion Group SpA · MIL:CSP
CSP International Fashion Group SpA — FY2003 Earnings Presentation
49 slides from CSP International Fashion Group SpA's earnings presentation, Feb 26, 2004
Slide 1: CSP International towards break-even in 2004
CSP International towards break-even in 2004 26 February 2004
Slide 2: Objectives announced with the Quarterly Report as at 30.06.2003
Objectives announced with the Quarterly Report as at 30.06.2003 2003 Loss of Euro 10 million after taxes Break-even before taxes 2004 and extraordinary items 2005 Net profit after taxes 2
Slide 3: Summary of the past three years
Summary of the past three years (first losses in the thirty year history of the company) Euro millions Net sales Pre-tax result Net Result 2001 163.3 2.0 - 0.4 2002 159.5 - 1.3 - 4.2 2003 142.4 - 7.4 (1st half) - 1.0 (2nd half) - 8.4 (full year) - 10 (estimate) 3
Slide 4: The solutions to the problems
The solutions to the problems Problems Solutions 1. Chronic consumer recession in Diversification from stocking/tights the stocking/tights market market - Innovation in stocking/tights market - Rationalisation of capacity 2. Over production capacity of - Reduction in personnel the Group - Stabilisat
Slide 5: Action plan
Action plan 1. Reduction of costs 2. Improvement of margins 3. Stabilisation of sales 5
Slide 6: Reduction of costs: Le Bourget personnel
Reduction of costs 1.1. Personnel of Le Bourget The Social Plan provides for: - the reduction of 63 employees at Le Bourget; - the elimination of 100 of the 200 machines installed at Le Bourget; - the reduction of the production capacity from 1,400,000 to 300,000 dozens annually; - a corresponding e
Slide 7: Reduction of costs: Parent Company personnel
Reduction of costs 1.2. Personnel of the Parent Company Year Units at year-end Annual variation 1998 776 1999 751 - 25 2000 706 - 45 2001 657 - 49 2002 610 - 47 (77 departures) 2003 567 - 43 (74 departures) - 50 at Lepel 2004 527 - 40 2005 497 - 30 2006 467 - 30 Year Net turn-over Lower costs 2004 -
Slide 8: Reduction of costs: Production capacity
Reduction of costs 1.3. Production capacity - Le Bourget: reduction of production capacity by 1 million dozens; - Parent Company reduction of production capacity by 1.5 million dozens; - Total: reduction of production capacity by 2.5 million dozens. Remaining production capacity (8.2 – 2.5) = 5.7 mi
Slide 9: Reduction of costs: Sales to Hyper and Supermarkets
Reduction of costs 1.4. Method of sales to Hyper and Supermarkets Criteria: - reduction of the periphery warehouses for the agents with deposits; - outsourcing externally merchandising activity at the sales point and on the shelves. Savings in the service: Euro 1.5 million in the three years, at hal
Slide 10: Reduction of costs: Logistics
Reduction of costs 1.5. Logistics Unification of the warehouses CSP International and Lepel:, - Wholesale channel: already underway; - Organized Trade channel: by 2004; Saving: at least Euro 100,000 in 2004 10
Slide 11: Reduction of costs: Advertising
Reduction of costs 1.6. Advertising The investment promo-advertising will be contained to 10% of sales (11.6% in 2002 and 11.5% in 2003) with preference in the investments of: - advertising, vital for the growth of the business; - for the sales points, which is the moment of truth and thus the choic
Slide 12: Reduction of costs: Amortisation & Depreciation
Reduction of costs 1.7. Amortisation & Depreciation •Amortisation & depreciation in 2003: Euro 10.9 million, equal to 8% of sales •The amount of the amortisation & depreciation will reduce by over Euro 2 million in the coming three years - 0.2 million in 2004, - 1.3 million in 2005, - 0.7 million in
Slide 13: Reduction of costs: Rationalisation of the debt
Reduction of costs 1.8. Rationalisation of the debt Situation 2002: 77% short-term 23% medium term Situation 2003: 73% short-term 27% medium term Objective: 50% short-term 50% medium term 13
Slide 14: Reduction of costs: Reduction of the Working Capital
Reduction of costs 1.9. Reduction of the Working Capital •Inventory held by Parent Company (San Pellegrino + Oroblù) - end of 2002: 3.5 million of dozens, of which 1.6 finished - end of 2003: 1.9 “ 0.8 “ - objective: 1.5 “ 0.7 “ The reduction in inventory will proportionally reduce working capital •
Slide 15: Action plan
Action plan 1. Reduction of costs 2. Improvement of margins 3. Stabilisation of sales 15
Slide 16: Improvement of margins
Improvement of margins 2. Improvement of margins Achieved from: - the product mix resulting from diversification; - the improvement in margins, resulting from innovative products also in hosiery; - the Pricing differentiation by product category; - the containment of discounts; - the activation of l
Slide 17: Product mix from diversification
Improvement of margins 2.1. Product mix from diversification Objective of diversification of CSP International Year Percentage on sales 1999 0% 2000 16% 2001 23% 2002 29% 2003 34% 2004 40% 2005 45% 2006 50% 17
Slide 18: Innovation in diversification
Improvement of margins 2.2. Innovation in diversification Product Brand Innovation Timing Seamless Sanpellegrino Invisible Collection 1st half 2004 underwear “ Biocomplex Colection 1° half 2004 Oroblù BioCosmetic Action Collection 2° half 2004 Le Bourget Cosmetic treatment 2005 Corsetry Lepel Line e
Slide 19: Sanpellegrino Collection Seamless Invisible
Sanpellegrino Collection Seamless Invisible 19
Slide 20: Oroblù Futurity Brassière, Lepel Revolution Brassière
Oroblù Futurity Brassière Lepel Revolution Brassière 20
Slide 21: Innovation in the stocking/tights market
Improvement of margins 2.3. Innovation in the stocking/tights market Product Brand Innovation Timing Tights Sanpellegrino BioComplex Collection 2nd half 2003 “ Pocket Tights 1st half 2004 “ Line extension BioComplex 1st half 2004 Oroblù BioCosmetic Action 1st half 2004 “ Line extension BioCosmetic A
Slide 22: Sanpellegrino Collection BioComplex
Sanpellegrino Collection BioComplex
Slide 23: New product Refreshing BioComplex
Poi de ig CSP TEER IONAL, ” x x a New product Refreshing anpellegrino RINFRESCANT REFRESH i BioComplex s TRANSVITAL GsP
Slide 24: Sanpellegrino Pocket Tights
Sanpellegrino Pocket Tights
Slide 25: Innovation in the fashion and design products
Improvement of margins 2.4. Innovation in the fashion and design products • We can also add to the innovative component fashion and design innovations: • The fashion articles, today particularly in a positive trend, will be produced more and more internally in the company. 25
Slide 26: Collection Oroblù Lingerie
Collection Oroblù Lingerie 26
Slide 27: Impact of the innovation on margins
Improvement of margins 2.5. Impact of the innovation on margins Advantages: - greater freedom in the pricing; - offers higher margins; - maintains the brand image up-dated. Impact on the margins 5 percentage points higher per year from diversification, with margins greater by 7 percentage points = +
Slide 28: Pricing differentiated
Improvement of margins 2.6. Pricing differentiated PRODUCT FUNCTION CRITERIA - Strategic Maintains distribution channels May even cover only and exploits production capacity variable costs - Classic The main body of the collections Covers variable + fixed costs, with limited margins - Innovative Wit
Slide 29: Containment of discounts
Improvement of margins 2.7. Containment of discounts Actions already taken • Exit of the perverse Italy / Russia discounts system Further objective • Contain the level of discounts on sales, with reduction of one percentage point per year, in the two year period 2004 and 2005. 29
Slide 30: Action plan
Action plan 1. Reduction of costs 2. Improvement of margins 3. Stabilisation of sales 30
Slide 31: Instruments for the stabilisation of sales
Stabilisation of sales 3.1. Instruments for the stabilisation of sales Stabilisation of sales at around Euro 150 million annually, is possible in a market in recession, thanks to the new sources of business: •diversification of the offer; •launch of innovative products, for diversified and hosiery p
Slide 32: Maintaining of the Russian market
Stabilisation of sales 3.2. Maintaining of the Russian market Three principal actions: - resumption of the advertising activity : in autumn/winter 2003/04 there is a campaign in favour of Sanpellegrino BioComplex; - reorganisation of the distribution model, damaged in the past by the perverse Italy
Slide 33: Oroblù brand shops
Stabilisation of sales 3.3. Oroblù brand shops • Current situation Today the Oroblù brand shops are: - 3 in Italy - 3 in Russia - 17 in Poland (There are also 3 Le Bourget outlets in France, 1 CSP International store and 1 Lepel store in Italy). •Development The development is planned with two crite
Slide 34: Results expected from the Three-Year Plan
Results expected from the Three-Year Plan - Results 2003 - Criteria for the Three-Year Plan - Progress made in the plan - Conclusions 34
Slide 35: Effects of the Three-Year Plan 2004-2006
Effects of the Three-Year Plan 2004-2006 (Euro millions) ACTIONS LOWER COSTS GREATER MARGINS TOTAL EFFECT - 0.4 Write-down treasury shares (*) + 0.5 Mix diversification - 1.0 Plan Social Le Bourget (*) + 1.0 Price differentiation - 2.3 Personnel Parent Company + 1.0 Product innovations - 1.2 Personn
Slide 36: 4th quarter 2003: Summary of results
4th quarter 2003: Summary of results 36
Slide 37: Revenues
Revenues In Euro millions GROUP 2003 2002 2003 2002 4Q 4Q FY FY REVENUES 39.38 43.04 142.44 159.52 - 8.5% - 10.7% 37
Slide 38: Consolidated net sales by geographic area
Consolidated net sales by GEOGRAFIC AREA AREA: as % of sales at 31.12.2003 AREA: as % of sales at 31.12.2002 Eastern Europe Eastern Europe 10.7% 13.6% Western Europe 10.3% Italy Western Europe 46.1% Rest of the 10.4% world 1.3% Italy 49.9% Rest of the world 1.6% France 26.1% France 26.2% Poland Pola
Slide 39: Consolidated net sales by brand
Consolidated net sales by BRAND BRAND: as a % of sales 31.12.2003 BRAND: as a % of sales 31.12.2002 Lepel Lepel 15.7% 13.3% Sanpellegrino 33.7% Sanpellegrino Private Private 37.7% labels labels 9.3% 8.7% Le Bourget Le Bourget 21.4% 22.4% Oroblu Other brands 18.3% Other brands Oroblu 0.6% 1.0% 17.9%
Slide 40: Consolidated sales by product
Consolidated sales by PRODUCT PRODUCT: as a % of sales at 31.12.2003 PRODUCT: as a % of sales at 31.12.2002 Corsetry Corsetry 19.5% 16.3% Seamless 12.9% Seamless 14.5% Hosiery 66.0% Hosiery 70.8% 40
Slide 41: Consolidated income statement
Consolidated income statement Euro millions GROUP 2003 2002 FY FY REVENUES 142.44 159.52 EBITDA 6.82 17.08 4.8% 10.7% EBIT (4.07) 4.97 -2.9% 3.1% EBT (*) (8.4) (1.41) -5.9% -0.9% (*) After minority interests 0.2 0.1 41
Slide 42: Consolidated balance sheet
Consolidated balance sheet December September December Dati sintetici in milioni di Euro 31, 2003 30, 2003 31, 2002 Current assets 106.33 109.83 127.78 Current liabilities -36.64 -34.67 -43.39 Net working capital 69.69 75.16 84.39 Equity investments(incl. treasury shares 3.58 3.68 4.13 Intangible an
Slide 43: Financial position
Financial position Dati in milioni di Euro December 31, September December 31, 2003 30, 2003 2002 Bank payables short-term 42.61 45.06 54.74 Short-term portion of medium/long term debt 11.02 10.80 12.81 Cash on hand and at banks -1.04 0.88 -0.78 Net debt short-term 53.32 54.98 66.77 Medium/long term
Slide 44: Comparison of 1st and 2nd half year of 2003
Comparison of 1st and 2nd half year of 2003 In Euro millions GROUP 2003 2003 2003 1H 2H FY REVENUES 65.0 77.4 142.4 EBITDA 1.9 4.9 6.8 2.9% 6.4% 4.8% EBIT (3.7) (0.4) (4.1) -5.7% -0.6% -2.9% EBT (*) (7.4) (1.0) (8.4) -11.4% -1.3% -5.9% (*) After minority interest 0.2 0.2 44
Slide 45: Comparison 2nd half 2003 / 2002
Comparison 2nd half 2003 / 2002 In Euro millions GROUP 2003 2002 2H 2H REVENUES 77.4 84.1 EBITDA 4.9 7.4 6.4% 8.8% EBIT (0.4) 1.4 -0.5% 1.7% EBT (*) (1.0) (2.3) -1.3% -2.8% (*) After min. interest 0.2 0.1 45
Slide 46: Progress made in the plan
Progress made in the plan AREA RESULTS 2003 vs. 2002 Inventory Euro - 10.7 million Working capital Euro - 14.7 million Payables Euro - 14.1 million to Banks Euro - 5.6 million to Suppliers Euro - 19.7 million total Personnel Le Bourget 63 units less Personnel 50 units less (43 Locally and 7 in Lepel
Slide 47: First results of new products
First results of new products Product Best seller: Sanpellegrino Day Retail price: 1.82 € Sanpellegrino BioComplex L’Angelica Collection Retail price: between 4.00 – 4.50 € Sales end 2003/beginning 2004: 1.5 million pairs Oroblù BioAction Transvital Collection Retail price: between 7.00 – 9.50 € Sal
Slide 48: Results expected from the Three-Year Plan
Results expected from the Three-Year Plan - Stabilisation of sales at around Euro 150 million annually. - Break-even before taxes in 2004. - Net profit, after taxes, in 2005. Profitability parameters: - EBITDA above 10% in the three years; - EBIT above 5% from 2006. 48
Slide 49: Thank you for your attention
Thank you for your attention Contacts: Gianfranco Bossi, General Director Arturo Tedoldi, Finance & Administration Director Simone Ruffoni, Head of Investor Relations +39 0376 8101 info.investors@cspinternational.it www.cspinternational.it 49
CSP International Fashion Group — FY2003 Earnings Presentation on 6ix