Bata India (500043) Q4 04/05 earnings summary

Executive summary

• 2005 marked a return to profitability after three years of losses: consolidated net profit was Rs.97.0 million versus a Rs.629.2 million loss in 2004; EPS was Rs.1.61 versus negative Rs.11.30.

• Turnaround actions included production rationalization, store remodeling and closures, improved footwear designs, tighter costs and credit controls, and a retail merchandising reset.

Financial highlights

• Consolidated turnover was Rs.7,343.2 million and net turnover Rs.7,068.2 million; consolidated PBT was Rs.108.2 million versus a Rs.636.2 million loss in 2004.

• Standalone net profit was Rs.124.9 million versus a Rs.627.5 million loss; turnover rose to Rs.7,342.4 million from Rs.7,245.6 million, while other income increased to Rs.186.4 million from Rs.44.4 million.

• Standalone expenditure fell Rs.501.6 million YoY; raw materials, finished goods and WIP costs declined to Rs.3,520.2 million from Rs.3,913.2 million.

• Consolidated operating cash flow remained negative at Rs.65.9 million; investing cash outflow was Rs.58.9 million and financing cash inflow Rs.182.2 million.

Outlook and guidance

• Targeted 10% ROT in coming years, supported by design and technology improvements, manufacturing optimization, and lower operating and non-operating expenses.

• 2006 retail actions included ~40 new stores, selective remodeling, a Superstore concept, improved ladies’ and children’s ranges, and employee training; capital spending was expected to increase substantially.

• Management expected further performance improvement from 2006 as restructuring continued; another VRS round was planned for 2006.