Adidas 2005 Annual Report Download - page 82

78 Group Management Report
Group Business
Performance
2005 was another year of outstanding financial perfor-
mance. Currency-neutral sales for the Group’s continuing
operations increased 12%. In euro terms, revenues grew
13% to € 6.636 billion in 2005 from € 5.860 billion in 2004.
The Group’s gross margin grew 0.2 percentage points to
48.2% in 2005 (2004: 48.0%) as a result of increased own-
retail activities at adidas, our improving product mix and
hedging activities that enabled us to capitalize on favorable
currency movements. These developments drove a 21%
increase in the Group’s operating profit from continuing
operations to € 707 million in 2005 versus € 584 million in
2004. The Group’s income before taxes was € 655 million,
up 25% versus € 526 million in 2004, helped also by a
decrease in net financial expenses. The Group’s net income
from continuing operations grew 31% to € 434 million in
2005 from € 333 million in 2004, also helped by a lower
tax rate. On a comparable basis excluding the effects of
IFRS changes, the Group’s operating profit and IBT from
continuing operations would have increased 14% and
17% respectively in 2005. Net income from continuing
operations on a comparable basis increased 18% in 2005.
The income from discontinued operations decreased by
287% to negative € 44 million from negative € 11 million
in the prior year. The Group’s net income attributable to
shareholders from continuing and discontinued operations
increased 22% to € 383 million from € 314 million in 2004,
representing the Group’s highest net income ever. As a
consequence, basic earnings per share were € 8.19 in 2005
versus € 6.88 in the prior year.
Economic and Sector Development
Global Economy Expands
The global economy continued to expand in 2005, although at
a slightly lower level than in 2004. The world’s industrialized
countries developed heterogeneously. The European economy
trended upwards only towards the end of 2005, whereas the
American economy grew solidly throughout the year. The
Asian as well as the Latin American economies also enjoyed
strong growth.
Europe Trending Upwards After Slow Start
The European economy had a sluggish start into 2005. How-
ever, the economy improved in the second half of the year.
Helped by the depreciating euro which fueled exports, a sig-
nificant increase in corporate profits and favorable financ-
ing conditions, investments grew strongly. Germany’s per-
formance gained momentum in the second half of the year,
supported by exports and stronger investment activity. The
region’s emerging markets were the strongest growth driv-
ers. The UK suffered from a lack of domestic demand. The
region as a whole posted GDP growth of approximately 1.5%
in 2005.
North American Economy Benefits From Robust
Private Consumption
In the USA, GDP grew approximately 4% over the year. In the
first half of the year, investment activity and private consump-
tion increased strongly. Hurricane Katrina, high oil prices and
a less optimistic job market outlook depressed consumer
confidence in the third quarter. This effect was partially offset
by continuously buoyant housing prices and significant sales
discounts in the automobile sector which supported consum-
er spending. Nonetheless, domestic demand trended down-
wards towards the end of the year and slowed overall growth.
10
8
6
4
2
0
USA EU Germany Japan Asia China Latin
(excl. America
Japan)
2004
2005
Source: OECD, Allianz, Deutsche Bank
1) Real, percentage change versus prior year; 2005 figures are estimated.
Regional GDP Development1)