SOURCE: VALENTINO FASHION GROUP

November 09, 2006 08:26 ET

VALENTINO FASHION GROUP : The Board of Directors approved the Report on 2006 third quarter

Milano -- (MARKET WIRE) -- November 9, 2006 -- CONSOLIDATED SALES: +13.8%

NET INCOME +18.3%

FIRST NINE MONTHS OF 2006:

- Consolidated sales: EUR 1,575.4 million (+13.8% vs 2005 pro-forma EUR 1,384.2 million)

- EBIT: EUR 227.4 million (+17.2% vs 2005 pro-forma EUR 194.0 million)

- Net income: EUR 156.2 million (+18.3% vs 2005 pro-forma EUR 132.0 million)

- Group net income: EUR 91.9 million (+21.1% vs 2005 pro-forma EUR 75.9 million)

- Net financial debt at 30 September 2006: EUR 392.9 million (vs EUR 358.7 million at 30 September 2006)

THIRD QUARTER OF 2006:

- Consolidated sales: EUR 649.6 million (+13.8% vs 2005 EUR 570.8 million)

- EBIT: EUR 133.9 million (+16.1% vs 2005 EUR 115.3 million)

- Net income: EUR 95.5 million (+11.6% vs 2005 EUR 85.6 million)

- Group net income: EUR 57.0 million (+9.6% vs 2005 EUR 52.0 million)

Milan, 9th November 2006 - Today the Board of Directors of Valentino Fashion Group S.p.A. approved The Report on the third quarter and the first nine months of 2006.

FIRST NINE MONTHS OF 2006 [1]

SALES

In the first nine months of the year net consolidated sales Sales amounted to EUR 1,575.4 million, increased by 13.8%.

The increase was the result of a positive trend of all brands, which reported double-digit growth rates.

+-------------------------+--------------------+--------------------+--------+
|(EUR millions)           |January/September   |January/September   |Change %|
|                         |2006                |2006                |        |
+-------------------------+--------------------+--------------------+--------+
|Hugo Boss                |             1,215.6|             1,062.9|    14.4|
+-------------------------+--------------------+--------------------+--------+
|Valentino                |               180.2|               155.7|    15.7|
+-------------------------+--------------------+--------------------+--------+
|Marlboro Classics/other  |               230.4|               208.1|10.7 (*)|
|brands                   |                    |                    |        |
+-------------------------+--------------------+--------------------+--------+
|Other and elisions       |              (50.8)|              (42.5)|    19.5|
+-------------------------+--------------------+--------------------+--------+
|Total                    |             1,575.4|             1,384.2|    13.8|
+-------------------------+--------------------+--------------------+--------+
(*) +13.7% on like-for-like brands marketed

On a geographical basis Group sales showed growth on all markets, particularly in Europe (+13.6%) and in the United States (+18%).

[1] The results of the first nine months of 2006 are compared with the January/June 2005 pro-forma results, as the Group has been operational since 1st July 2005.

+---------------------+--------------------+--------------------+--------+
|   (EUR millions)    |January/September   |January/September   |Change %|
|                     |2006                |2006                |        |
+---------------------+--------------------+--------------------+--------+
|Europe               |             1,111.1|               977.9|    13.6|
+---------------------+--------------------+--------------------+--------+
|Americas             |               255.6|               214.8|    19.0|
+---------------------+--------------------+--------------------+--------+
|Asia                 |               139.5|               126.7|    10.1|
+---------------------+--------------------+--------------------+--------+
|Other countries      |                25.9|                23.8|     8.8|
+---------------------+--------------------+--------------------+--------+
|Products and services|             1,532.1|             1,343.2|    14.1|
+---------------------+--------------------+--------------------+--------+
|Royalties            |                43.3|                41.0|     5.6|
+---------------------+--------------------+--------------------+--------+
|Total                |             1,575.4|             1,384.2|    13.8|
+---------------------+--------------------+--------------------+--------+
The brand extension is continuing successfully, with the womenswear and accessory collections posting growth rates higher than the Group' average (both +34%).

Directly operated shops were 275 at 30 September 2006 against 200 at 30 September 2005. DOS sales, equal to 14% of total sales, rose by 31% (+10% on constant floor space and exchange rates).

EBIT

Group's EBIT increased by 17.2% to EUR 227.4 million (14.4% on sales), thanks to the improvement achieved by all brands.

More in detail:

+-------------------------+--------------------+--------------------+--------+
|(EUR millions)           |January/September   |January/September   |Change %|
|                         |2006                |2005                |        |
+-------------------------+--------------------+--------------------+--------+
|Hugo Boss                |               188.3|               166.1|    13.4|
+-------------------------+--------------------+--------------------+--------+
|Valentino                |                24.6|                18.5|    33.0|
+-------------------------+--------------------+--------------------+--------+
|Marlboro Classics/other  |                19.5|                14.7|    32.7|
|brands                   |                    |                    |        |
+-------------------------+--------------------+--------------------+--------+
|Other and elisions       |               (5.0)|               (5.3)|     5.7|
+-------------------------+--------------------+--------------------+--------+
|Totale                   |               227.4|               194.0|    17.2|
+-------------------------+--------------------+--------------------+--------+
Pre-tax income

Pre-tax income was EUR 218.7 million as at 30 September 2006, a 19% rise on EUR 183.8 million at 30 September 2005.

Net income

Consolidated net income, including income attributable to minority shareholders, amounted to EUR 156.2 million, increased by 18.3% from EUR 132.0 million at 30 September 2005.

Group net income

Net income attributable to the Parent Company's shareholders was EUR 91.9 million, up by 21.1% on EUR 75.9 million in the first nine months of 2005.

Investment

Investment in the period increased sharply to EUR 82.4 million (EUR 62.9 million at 30 September 2005) and was mainly allocated to developing direct retail and implementing the IT platform for the integrated management of the supply chain.

Net financial debt

Group's net financial debt was EUR 392.9 million at 30 September 2006, increased form EUR 358.7 million at 30 September 2005, mainly as result of the rise in net working capital.

The increase on EUR 333.5 million of 31 December 2005 was due to the business seasonality and to the dividend pay-out of the first year half.

FORESEEABLE BUSINESS OPERATIONS PERFORMANCE

Mr Antonio Favrin, Chairman of Valentino Fashion Group S.p.A. commented:

"The good results achieved, lead us to confirm full year's sales growth in line with the first nine months and even higher improvement for both operating and pre-tax income.

The development of our business, particularly of womenswear and accessory collections, both for wholesale and retail, will allow us to reach new positive growth targets in 2007."

*****

This press release is available on the Company's website: www.valentinofashiongroup.com

For further information:

Luca Caserta

Investor Relations Manager

Tel. 02/624911

Cell. 335/7547224

e-mail: luca.caserta@valentino.com

+-------------------------+--------------------+-------+--------------------+
|Income statement         |                    |       |                    |
+-------------------------+--------------------+-------+--------------------+
|                         |January/September   |       |January/September   |
|                         |2006                |       |2005                |
+-------------------------+--------------------+-------+--------------------+
|(millions of euro)       |                    |       |                    |
+-------------------------+--------------------+-------+--------------------+
|Net sales                |             1,575.4| 100.0%|             1,384.2|
+-------------------------+--------------------+-------+--------------------+
|Cost of goods sold       |             (816.1)|(51.8%)|             (733.1)|
+-------------------------+--------------------+-------+--------------------+
|Gross profit             |               759.3|  48.2%|               651.1|
+-------------------------+--------------------+-------+--------------------+
|Product research and     |              (40.4)| (2.6%)|              (34.2)|
|development costs        |                    |       |                    |
+-------------------------+--------------------+-------+--------------------+
|Advertising, marketing   |             (104.9)| (6.7%)|              (95.0)|
|and promotion costs      |                    |       |                    |
+-------------------------+--------------------+-------+--------------------+
|Selling and distribution |             (273.1)|(17.3%)|             (228.0)|
|costs                    |                    |       |                    |
+-------------------------+--------------------+-------+--------------------+
|General and              |             (106.7)| (6.8%)|              (97.4)|
|administrative costs     |                    |       |                    |
+-------------------------+--------------------+-------+--------------------+
|Operating income         |               234.2|  14.8%|               196.5|
+-------------------------+--------------------+-------+--------------------+
|Other non-recurring      |               (6.8)| (0.4%)|               (2.5)|
|(costs)/ revenues        |                    |       |                    |
+-------------------------+--------------------+-------+--------------------+
|EBIT                     |               227.4|  14.4%|               194.0|
+-------------------------+--------------------+-------+--------------------+
|Net financial            |               (8.7)| (0.5%)|              (10.2)|
|income/(charges)         |                    |       |                    |
+-------------------------+--------------------+-------+--------------------+
|Income before taxes      |               218.7|  13.9%|               183.8|
+-------------------------+--------------------+-------+--------------------+
|Taxes                    |              (62.5)| (4.0%)|              (51.8)|
+-------------------------+--------------------+-------+--------------------+
|Net income before        |               156.2|   9.9%|               132.0|
|minorities               |                    |       |                    |
+-------------------------+--------------------+-------+--------------------+
|Minority interest        |              (64.3)| (4.1%)|              (56.1)|
+-------------------------+--------------------+-------+--------------------+
|Group net income         |                91.9|   5.8%|                75.9|
+-------------------------+--------------------+-------+--------------------+

+-------------------------+-------+------+--------+
|Income statement         |       |      |        |
+-------------------------+-------+------+--------+
|                         |       |Change|Ch. in %|
|                         |       |      |        |
+-------------------------+-------+------+--------+
|(millions of euro)       |       |      |        |
+-------------------------+-------+------+--------+
|Net sales                | 100.0%| 191.2|   13.8%|
+-------------------------+-------+------+--------+
|Cost of goods sold       |(53.0%)|(83.0)| (11.3%)|
+-------------------------+-------+------+--------+
|Gross profit             |  47.0%| 108.2|   16.6%|
+-------------------------+-------+------+--------+
|Product research and     | (2.4%)| (6.2)| (18.1%)|
|development costs        |       |      |        |
+-------------------------+-------+------+--------+
|Advertising, marketing   | (6.9%)| (9.9)| (10.4%)|
|and promotion costs      |       |      |        |
+-------------------------+-------+------+--------+
|Selling and distribution |(16.5%)|(45.1)| (19.8%)|
|costs                    |       |      |        |
+-------------------------+-------+------+--------+
|General and              | (7.0%)| (9.3)|  (9.5%)|
|administrative costs     |       |      |        |
+-------------------------+-------+------+--------+
|Operating income         |  14.2%|  37.7|   19.2%|
+-------------------------+-------+------+--------+
|Other non-recurring      | (0.2%)| (4.3)|    n.s.|
|(costs)/ revenues        |       |      |        |
+-------------------------+-------+------+--------+
|EBIT                     |  14.0%|  33.4|   17.2%|
+-------------------------+-------+------+--------+
|Net financial            | (0.7%)|   1.5|   14.7%|
|income/(charges)         |       |      |        |
+-------------------------+-------+------+--------+
|Income before taxes      |  13.3%|  34.9|   19.0%|
+-------------------------+-------+------+--------+
|Taxes                    | (3.8%)|(10.7)| (20.7%)|
+-------------------------+-------+------+--------+
|Net income before        |   9.5%|  24.2|   18.3%|
|minorities               |       |      |        |
+-------------------------+-------+------+--------+
|Minority interest        | (4.0%)| (8.2)| (14.6%)|
+-------------------------+-------+------+--------+
|Group net income         |   5.5%|  16.0|   21.1%|
+-------------------------+-------+------+--------+
Note: Valentino Fashion Group S.p.A. is the beneficiary company of the partial proportional demerger, effective from 1st July 2005, of the apparel business of Marzotto S.p.A. As a consequence, in order to allow a homogenous comparison of the financial and economic results at 30 September 2006 with those of the previous year comparable period, pro-forma accounts for 2005 have also been prepared.
+-------------------------+-------------------+-------+-------------------+
|Income statement         |                   |       |                   |
+-------------------------+-------------------+-------+-------------------+
|                         |July/September 2006|       |July/September 2005|
+-------------------------+-------------------+-------+-------------------+
|(millions of euro)       |                   |       |                   |
+-------------------------+-------------------+-------+-------------------+
|Net sales                |              649.6| 100.0%|              570.8|
+-------------------------+-------------------+-------+-------------------+
|Cost of goods sold       |            (332.9)|(51.2%)|            (294.6)|
+-------------------------+-------------------+-------+-------------------+
|Gross profit             |              316.7|  48.8%|              276.2|
+-------------------------+-------------------+-------+-------------------+
|Product research and     |             (13.1)| (2.0%)|             (11.6)|
|development costs        |                   |       |                   |
+-------------------------+-------------------+-------+-------------------+
|Advertising, marketing   |             (33.5)| (5.2%)|             (36.6)|
|and promotion costs      |                   |       |                   |
+-------------------------+-------------------+-------+-------------------+
|Selling and distribution |             (97.7)|(15.1%)|             (77.5)|
|costs                    |                   |       |                   |
+-------------------------+-------------------+-------+-------------------+
|General and              |             (34.6)| (5.3%)|             (32.5)|
|administrative costs     |                   |       |                   |
+-------------------------+-------------------+-------+-------------------+
|Operating income         |              137.8|  21.2%|              118.0|
+-------------------------+-------------------+-------+-------------------+
|Other non-recurring      |              (3.9)| (0.6%)|              (2.7)|
|(costs)/ revenues        |                   |       |                   |
+-------------------------+-------------------+-------+-------------------+
|EBIT                     |              133.9|  20.6%|              115.3|
+-------------------------+-------------------+-------+-------------------+
|Net financial            |              (4.6)| (0.7%)|              (2.8)|
|income/(charges)         |                   |       |                   |
+-------------------------+-------------------+-------+-------------------+
|Income before taxes      |              129.3|  19.9%|              112.5|
+-------------------------+-------------------+-------+-------------------+
|Taxes                    |             (33.8)| (5.2%)|             (26.9)|
+-------------------------+-------------------+-------+-------------------+
|Net income before        |               95.5|  14.7%|               85.6|
|minorities               |                   |       |                   |
+-------------------------+-------------------+-------+-------------------+
|Minority interest        |             (38.5)| (5.9%)|             (33.6)|
+-------------------------+-------------------+-------+-------------------+
|Group net income         |               57.0|   8.8%|               52.0|
+-------------------------+-------------------+-------+-------------------+

+-------------------------+-------+------+--------+
|Income statement         |       |      |        |
+-------------------------+-------+------+--------+
|                         |       |Change|Ch. in %|
+-------------------------+-------+------+--------+
|(millions of euro)       |       |      |        |
+-------------------------+-------+------+--------+
|Net sales                | 100.0%|  78.8|   13.8%|
+-------------------------+-------+------+--------+
|Cost of goods sold       |(51.6%)|(38.3)| (13.0%)|
+-------------------------+-------+------+--------+
|Gross profit             |  48.4%|  40.5|   14.7%|
+-------------------------+-------+------+--------+
|Product research and     | (2.0%)| (1.5)| (12.9%)|
|development costs        |       |      |        |
+-------------------------+-------+------+--------+
|Advertising, marketing   | (6.4%)|   3.1|    8.5%|
|and promotion costs      |       |      |        |
+-------------------------+-------+------+--------+
|Selling and distribution |(13.6%)|(20.2)| (26.1%)|
|costs                    |       |      |        |
+-------------------------+-------+------+--------+
|General and              | (5.7%)| (2.1)|  (6.5%)|
|administrative costs     |       |      |        |
+-------------------------+-------+------+--------+
|Operating income         |  20.7%|  19.8|   16.8%|
+-------------------------+-------+------+--------+
|Other non-recurring      | (0.5%)| (1.2)| (44.4%)|
|(costs)/ revenues        |       |      |        |
+-------------------------+-------+------+--------+
|EBIT                     |  20.2%|  18.6|   16.1%|
+-------------------------+-------+------+--------+
|Net financial            | (0.5%)| (1.8)| (64.3%)|
|income/(charges)         |       |      |        |
+-------------------------+-------+------+--------+
|Income before taxes      |  19.7%|  16.8|   14.9%|
+-------------------------+-------+------+--------+
|Taxes                    | (4.7%)| (6.9)| (25.7%)|
+-------------------------+-------+------+--------+
|Net income before        |  15.0%|   9.9|   11.6%|
|minorities               |       |      |        |
+-------------------------+-------+------+--------+
|Minority interest        | (5.9%)| (4.9)| (14.6%)|
+-------------------------+-------+------+--------+
|Group net income         |   9.1%|   5.0|    9.6%|
+-------------------------+-------+------+--------+
+-------------------------+-----------+-----------+-------+-----------+
|Balance sheet            | 30.09.2006| 30.09.2005| Change| 31.12.2005|
+-------------------------+-----------+-----------+-------+-----------+
|(millions euro)          |           |           |       |           |
+-------------------------+-----------+-----------+-------+-----------+
|Trade receivables        |      426.0|      359.0|   67.0|      242.9|
+-------------------------+-----------+-----------+-------+-----------+
|Other receivables        |       61.3|       67.5|  (6.2)|       73.0|
+-------------------------+-----------+-----------+-------+-----------+
|Inventories              |      326.3|      292.1|   34.2|      349.1|
+-------------------------+-----------+-----------+-------+-----------+
|Trade payables and other |    (389.9)|    (334.2)| (55.7)|    (337.8)|
|liabilities              |           |           |       |           |
+-------------------------+-----------+-----------+-------+-----------+
|Net working capital      |      423.7|      384.4|   39.3|      327.2|
+-------------------------+-----------+-----------+-------+-----------+
|Other non-recurring      |      112.6|       68.1|   44.5|      109.8|
|assets                   |           |           |       |           |
+-------------------------+-----------+-----------+-------+-----------+
|Investments              |        0.4|        0.4|      -|        0.4|
+-------------------------+-----------+-----------+-------+-----------+
|Net tangible fixed assets|      271.6|      245.2|   26.4|      253.3|
+-------------------------+-----------+-----------+-------+-----------+
|Intangible fixed assets  |       95.0|       80.6|   14.4|       87.0|
+-------------------------+-----------+-----------+-------+-----------+
|Goodwill and trademarks  |      303.7|      303.3|    0.4|      303.7|
+-------------------------+-----------+-----------+-------+-----------+
|Medium/long-term assets  |      783.3|      697.6|   85.7|      754.2|
+-------------------------+-----------+-----------+-------+-----------+
|Non-current liabilities  |     (95.2)|     (79.6)| (15.6)|     (85.3)|
|and provision            |           |           |       |           |
+-------------------------+-----------+-----------+-------+-----------+
|Deferred taxes provision |     (46.8)|     (32.9)| (13.9)|     (47.6)|
+-------------------------+-----------+-----------+-------+-----------+
|Net invested capital     |    1,065.0|      969.5|   95.5|      948.5|
+-------------------------+-----------+-----------+-------+-----------+
|Short-term financial     |      206.0|      158.4|   47.6|      191.1|
|liabilities              |           |           |       |           |
+-------------------------+-----------+-----------+-------+-----------+
|Cash & cash equivalents  |     (71.9)|     (73.4)|    1.5|     (75.6)|
|and short-term financial |           |           |       |           |
|asset                    |           |           |       |           |
+-------------------------+-----------+-----------+-------+-----------+
|Medium/long-term         |      259.3|      274.3| (15.0)|      218.4|
|financial liabilities    |           |           |       |           |
+-------------------------+-----------+-----------+-------+-----------+
|Medium/long-term         |      (0.5)|      (0.6)|    0.1|      (0.4)|
|financial assets         |           |           |       |           |
+-------------------------+-----------+-----------+-------+-----------+
|Net financial debt       |      392.9|      358.7|   34.2|      333.5|
+-------------------------+-----------+-----------+-------+-----------+
|Minority interest        |      251.2|      242.7|    8.5|      234.8|
+-------------------------+-----------+-----------+-------+-----------+
|Group net shareholder's  |      420.9|      368.1|   52.8|      380.2|
|equity                   |           |           |       |           |
+-------------------------+-----------+-----------+-------+-----------+
|Financing of net invested|    1,065.0|      969.5|   95.5|      948.5|
|capital                  |           |           |       |           |
+-------------------------+-----------+-----------+-------+-----------+
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