Reebok 2015 Annual Report Download - page 181

GROUP MANAGEMENT REPORT – FINANCIAL REVIEW
Management Assessment of Performance, Risks and Opportunities, and Outlook
177
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ASSESSMENTOF OVERALL RISKSAND OPPORTUNITIES
The Group’s Risk Management team aggregates all risks and opportunities reported by different business
units and functions through the quarterly risk and opportunity assessment process. In addition, the Group’s
Executive Board discusses and assesses Group risks and opportunities on a regular basis. Taking into
account the potential financial impact as well as the likelihood of materialising of the risks explained
within this report, and considering the strong balance sheet as well as the current business outlook, we
do not foresee any material jeopardy to the viability of the Group as a going concern. This assessment is
also supported by the historical response to our financing demands. The adidas Group therefore has not
sought an official rating by any of the leading rating agencies. We remain confident that the Group’s earnings
strength forms a solid basis for our future business development and provides the resources necessary to
pursue the opportunities available to the Group.
ASSESSMENTOF FINANCIALOUTLOOK
In March 2015, the Group unveiled its 2020 strategic business plan named ‘Creating the New’, which
defined strategies and objectives for the period up to 2020. The strategy aims at further accelerating
growth by significantly increasing brand desirability. This is expected to spur top- and bottom-line growth,
with revenues projected to increase at a high-single-digit rate on average per year on a currency-neutral
basis until 2020 compared to the 2015 results. By outperforming the sporting goods industry, our brands
will increase market share over the period and thus expand the Group’s ability to generate operating
leverage and attractive margin expansion. As a result, the Group’s net income is expected to grow at a
considerably higher rate than the top line and is projected to expand by around 15% on average in each
of the next five years.
In 2016, we will see a specific emphasis on continuing to pursue growth opportunities, while also focusing
on driving improvements in the Group’s earnings. We will continue to over-proportionately invest in brand-
building activities and continue to focus on innovation platforms such as Boost, expanding our digital
activities as well as rolling out our controlled space initiatives globally.
Through our extensive pipeline of highly attractive and innovative products, which have received favourable
reviews from retailers, the positive effects from major sporting events, including the UEFA EURO 2016,
as well as through strict cost management, we project strong top- and bottom-line improvements in the
Group’s financial results in 2016. While less favourable hedging rates and higher input costs are projected
to weigh on the Group’s gross margin development, the Group’s profitability is expected to benefit from
lower other operating expenses as a percentage of sales. We believe that our outlook for 2016 is realistic
within the scope of the current trading and economic environment.
Assuming no significant deterioration in the global economy, we are confident to significantly grow our top
and bottom line in 2016. However, ongoing uncertainties regarding the economic outlook and consumer
sentiment in certain emerging markets as well as persisting high levels of currency volatility, represent
risks to the achievement of our stated financial goals and aspirations. No other material event between
the end of 2015 and the publication of this report has altered our view.
see Risk and Opportunity
Report, p. 156
see Treasury, p. 124
see Group Strategy, p. 54
see Group Strategy, p. 54
see Subsequent Events
and Outlook, p. 148