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OPERATIONAL REVIEW |
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Fashion brands |
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 Fashion brand’s cosmetics, footwear and couture offerings meet
the needs of all fashion conscious South Africans. AVI creates,
manufactures and distributes leading cosmetics and toiletry products
that range from mass market to bridge fragrances, including Yardley
and Lenthéric, with licence agreements to distribute world-renowned
brands from the house of Coty and Puig. Spitz, Nina Roche and
Gant retail an exciting portfolio of owned and licensed international
footwear and apparel brands to discerning consumers.
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“Successful new product
development and launches
underpinned the sustained
growth of all of the major
cosmetics brands – Yardley,
Lenthéric and Coty.” |
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| Fashion brands |
2008
Rm |
2007
Rm |
2006
Rm |
2005
Rm |
Change
08 vs 07
% |
| Revenue |
1 253,3 |
1 058,1 |
868,6 |
459,4 |
18,4 |
| Operating profit |
206,3 |
208,4 |
165,6 |
47,0 |
(1,0) |
| Operating margin (%) |
16,4 |
19,7 |
19,1 |
10,2 |
(16,8) |
| Capital expenditure |
89,3 |
54,9 |
26,4 |
14,8 |
62,4 |
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Revenue growth of 18,4% for the year is
largely the result of higher sales volumes
supported by price increases taken
in the second half of the year (4% in
Indigo and 10% in Spitz). Operating profit
has decreased from R208,4 million to
R206,3 million due to lower footwear and
apparel margins as explained below.
Indigo’s revenue increased by 12,2%
to R623,5 million with good growth in
volumes for the second year in succession.
Indigo made strong gains in body sprays
supported by a robust performance
from the fragrance and make-up product
categories. Successful new product
development and launches underpinned
the sustained growth of the major brands –
Yardley, Lenthéric and Coty. |
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| Personal care |
2008
Rm |
2007
Rm |
2006
Rm |
2005
Rm |
Change
08 vs 07
% |
| Revenue |
623,5 |
555,9 |
476,8 |
459,4 |
12,2 |
| Operating profit |
73,4 |
63,3 |
50,5 |
47,0 |
16,0 |
| Operating margin (%) |
11,8 |
11,4 |
10,6 |
10,2 |
3,5 |
| Capital expenditure |
24,9 |
17,3 |
16,9 |
14,8 |
43,9 |
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Gross margins have come under some
pressure from rising import costs due to
the weaker Rand and higher fuel price,
which have been partially offset by selling
price increases. Operating profit increased
16,0% to R73,4 million and operating
margin improved from 11,4% to 11,8%.
The footwear and apparel category grew
revenue by 25,4% through additional
trading space, like-for-like volume growth
of 4% and price increases in the second
half of the year. |
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| Spitz |
2008 |
2006 |
| Average storage
area (m2) |
13 393 |
9 696 |
| Store area at year
end (m2) |
14 722 |
10 555 |
| Sales density
(R000/(m2) |
44,9 |
51,8 |
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Like-for-like revenue growth has trended
lower through the second half as
consumers’ ability to spend becomes
more constrained, although the reduction
has been cushioned by the exceptionally
strong appeal of our key Carvela, Lacoste
and Kurt Geiger brands. The de-leveraging that was expected to result from the
planned investment in new stores, people
and systems has been amplified by the
slowing revenue growth, resulting in a
decline in the operating profit margin from
28,9% to 21,1%. Operating profit declined
from R145,1 million to R132,9 million.
This business needs a period of
consolidation after a prolonged
period of rapid growth. The
rate of expansion has been
reviewed in light of slowing
sales growth, with five
new doors opened in
the second half of 2008
compared to thirteen
in the first half. In 2009,
growth will be limited to no
more than five or six stores.
The increase in capital
expenditure is attributable to Spitz’s
programme of opening new stores
and refurbishing existing stores. The
level of capital expenditure will reduce
in 2009. |
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| Footwear and apparel |
2008
Rm |
2007
Rm |
2006
Rm |
2005
Rm |
Change
08 vs 07
% |
| Revenue |
629,8 |
502,2 |
391,8 |
— |
25,4 |
| Operating profit |
132,9 |
145,1 |
115,1 |
— |
(8,4) |
| Operating margin (%) |
21,1 |
28,9 |
29,4 |
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(27,0) |
| Capital expenditure |
64,4 |
37,7 |
9,5 |
— |
70,8 |
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“exceptionally strong
appeal of our key
Carvela, Lacoste and
Kurt Geiger brands” |
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