Reebok 2010 Annual Report Download - page 16

12 To Our Shareholders Interview with the CEO
North America and Greater China were key priorities for you in 2010. How did the Group North America and Greater China were key priorities for you in 2010. How did the Group
fare in these and your other geographies last year?fare in these and your other geographies last year?
Looking at your financials, one thing that is striking is the reduction of net debt. How Looking at your financials, one thing that is striking is the reduction of net debt. How
have you managed to achieve this and can you give us an update on your policies towards have you managed to achieve this and can you give us an update on your policies towards
capital management and dividends?capital management and dividends?
I am pleased to report that the growth and successes of 2010 were broad-based and robust
in most of our key markets. For North America, we significantly exceeded our targets with
notable upticks at adidas and Reebok of 14% and 22% currency-neutral, respectively. Key
initiatives such as lightweight and Originals at adidas as well as toning and ZigTech at Reebok
resonated right across the consumer spectrum. In addition, our mission to build a strong
connection to the next generation athlete and to increase our prominence in the important
mall channel is taking shape. In Greater China, although sales declined modestly for the full
year, we returned to growth in the second half, with an increase of 10% for the six-month
period. We dramatically attacked our inventory levels and rationalised our store base in 2010.
And through the improvements we have implemented in our merchandising, product offering
and operational processes, I am confident we are now in a position to sustain this growth
trajectory, at a time when some of our competitors are starting to weaken.
Turning to other markets, in Europe we significantly increased market share in 2010,
supported by a strong performance in the football category and our dominance in the region’s
emerging markets. Revenues in Western Europe increased 7% on a currency-neutral
basis, primarily as a result of double-digit sales growth in the UK, Germany and Spain. In
European Emerging Markets, Group sales increased 16% on a currency-neutral basis. Russia/
CIS in particular was a major standout. In this market, which is predominantly own retail,
comparable store sales increased 25%. And we extended our commanding market share lead
in Russia, with Reebok now the number two sporting goods brand behind adidas. In Other
Asian Markets and Latin America, sales increased 6% and 14% respectively in 2010. Even in
Japan, we grew against a difficult consumer market and, in doing so, extended our market
leadership position, with an impressive 45% currency-neutral increase at Reebok being a
major highlight.
With the difficulties in the financial markets, we set clear targets over the last two years
to significantly reduce our financing obligations. And we have achieved this through our
commitment to increasing operating cash flow, which was an exceptional € 2.8 billion over
the past 24 months. With net debt at year-end standing at € 221 million, the ratio of net
borrowings over EBITDA is now 0.2 times, comfortably within our long-term guideline of below
two times. In terms of capital allocation and capital management, we will continue to maintain
a conservative policy towards debt management, until we have seen a sustainable recovery
in the macro-environment. In the short term, we intend to largely use excess cash to invest
in our Route 2015 growth initiatives, and to further reduce net borrowings. In addition, we are
fully committed to our dividend policy, which was expanded in 2010 to a payout range of 20% to
40% of net income attributable to shareholders. This year, we intend to pay out € 167 million,
up from € 73 million a year ago. This equates
to a dividend per share of € 0.80, which is more
than double the € 0.35 we paid last year. By
striking the balance between investment and
shareholder returns, I am convinced we will
provide significant value for our shareholders
over time.