Adidas 1996 Annual Report Download - page 30

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30
MANAGEMENT DISCUSSION AND ANALYSIS
OVERVIEW
Improvement of operational and financial performance
continued in 1996:
vNet sales increased by 35% to DM 4.7 billion primarily driven by organic
growth in Europe and North America and, to a lesser extent, by the con-
solidation of new subsidiaries
v
Gross profit grew by 35% to DM 1.9 billion based on strong volume growth
vIncome before taxes rose from DM 296 million in 1995 to DM 444 million
in 1996, representing growth of 50% and improving the ratio to net sales
by 90 basis points to 9.4%
vEarnings per ordinary share (EPS) reached DM 6.93 in 1996, achieving
growth of 28% for the total fiscal year
vProfitability as measured by return on capital employed was raised from
34.1% in 1995 to 35.4%. A significant increase in operating income more
than compensated for the rise in capital employed due to expanded
business volume
vFinancial leverage decreased as working capital requirements from
increased business volume and the purchase of shareholdings in new
subsidiaries were more than offset by an enlarged equity base and inter-
nally generated cash
Net Sales and Gross Margin
2,544
3,196 3,500
1995
4,709
39.8
199619941993
32.5
35.7
39.7
mNet Sales
(DM million)
m Gross Margin
(%)
Profitability
58
187
343
1995
457
35.4
199619941993
8.5
25.2
34.1
mOperating
Income2)
(DM million)
1) Defined as Operating Income
divided by (Shareholders’
Equity plus Minority Interests
plus Net Borrowings)
2) Defined as Income from
Operations plus Royalty and
Commission Income
m Return on
Capital
Employed1)
(%)
Financial Leverage
349
300
407
1995
340
199619941993
107.7 70.9 70.6
mNet Borrowings
(DM million)
1) Defined as Net Borrowings
divided by
Shareholders’ Equity
m Financial
Leverage1)
(%) 37.6