Stock exchange announcement
29 February 2008
IC Companys A/S - Interim Report H1 2007/08
Revenue increased DKK 212 million or 12% to DKK 2,015 million in the
first half year of the financial year. Operating profit increased DKK
68 million or 29% to DKK 301 million. Full year revenue guidance is
reduced by 1% to DKK 3,750 - 3,800 million (previously DKK 3,750 -
3,850 million), whereas full year operating profit guidance is
reduced by 9% to DKK 400 - 440 million (previously DKK 440 - 480
million).
At its meeting on 28 February 2008 the Board of Directors of IC
Companys A/S considered and adopted the interim financial statements
for the period 1 July - 31 December 2007.
Revenue reached DKK 2,015 million DKK (DKK 1,803 million) equivalent
to a 12% growth. Growth in same-store-sales in the Group's own stores
reached 13% in the first half year of the financial year 2007/08.
Gross profit came to DKK 1,229 million (DKK 1,046 million)
corresponding to a gross margin of 61.0% (58.0%). Lower sourcing
currencies account for 2.1%-points of the aggregate 3.0%-points gross
margin improvement.
Costs came to DKK 928 million DKK (DKK 813 million) corresponding to
a 14% increase.
Operating profit grew by 29% to DKK 301 million DKK (DKK 233 million)
equivalent to an EBIT margin of 14.9% (12.9%).
Earnings per share were DKK 11.6 (DKK 8.7) equivalent to 33% growth.
Growth in the order intake for the summer 2008 collection reached
11%. The order intake for all 4 collections for delivery in 2007/08
is completed by a total growth of 12%. The current order intake for
the autumn collection 2008/09 is expected to close at a growth of 6%
- 8%.
Full year guidance for 2007/08 reduced
Full year revenue guidance is reduced by 1% to DKK 3,750 - 3,800
million (previously DKK 3,750 - 3,850 million) corresponding to a
growth of 12% - 13%, whereas full year operating profit guidance is
reduced by 9% to DKK 400 - 440 million (previously DKK 440 - 480
million) which corresponds to a progress of 18% - 29%.
The guidance revision is primarily caused by an unsatisfactory
development in the Group's cost efficiency related to lower sales
than originally planned. The development has on part of the Executive
Board entailed a number of actions, of which the most significant
will be announced concurrently with implementation.
Direct sales promoting investments in the form of showrooms,
refurbishments and opening new stores will be carried through as
announced in the region of DKK 130 - 140 million. In addition,
previously announced investments in the IT platform and warehouse
facilities in the region of DKK 20 - 30 million will also be carried
out in the financial year 2007/08.
The previously announced share buyback programme of DKK 200 million
is retained. The second programme is expected to be initiated on 29
February 2008.
further INFORMATION
Henrik Theilbjørn
Chris Bigler
President & CEO Chief
Financial Officer
Tel + 45 3266 7646 Tel +
45 3266 7017
Financial highlights and key ratios
Disclaimer
This announcement contains future-orientated statements regarding the
Company's future development and results and other statements that
are not historic facts. Such statements are based on the currently
well-founded prerequisites and expectations of the management that
may prove erroneous. The actual results may deviate considerably from
what has been outlined as planned, assumed, assessed or forecast in
this announcement.
summary
In H1, the Group achieved a revenue increase of DKK 212 million
corresponding to a 12% growth and a profit increase of DKK 68 million
equivalent to 29% as measured against the same period last year.
Progress turned out smaller than planned, just as guidance to the
second interim period is adjusted. On this basis the executive
board has decided to reduce the full year revenue guidance by 1% to
DKK million 3,750 - 3,800 (previously DKK 3,750 - 3,850 million),
whereas full year operating profit guidance is reduced by 9% to DKK
400 - 440 million (previously DKK 440 - 480 million).
The guidance revision is caused primarily by an unsatisfactory
development in the Group's cost efficiency. Notwithstanding a sales
uplift, the cost rate increased by 1%-point to 46.1% in H1 as
compared to last year.
The development has on part of the Executive Board entailed a number
of actions, of which the most significant will be announced
concurrently with implementation. In addition a number of initiatives
will be evaluated, just as resource allocation to the Group's brands
will be significantly differentiated and situation-specific for the
individual brand.
revenue development
Revenue in H1 was DKK 2,015 million (DKK 1,803 million) corresponding
to a 12% growth. Revenue growth was affected positively by net store
openings amounting to DKK 42 million and affected positively by the
exchange rate conversion of DKK 1 million.
Sales performance for own brands:
Growth was generated in the Group's own brands in H1 2007/08 at a
combined rate of 12%. Peak Performance, Tiger of Sweden, Matinique,
Part Two, By Malene Birger and Designers Remix Collection all show
double-digit growth rates.
Revenue growth was highest in the second quarter showing a combined
growth of 16%. This development is, as previously announced,
influenced by delivery lags from the first quarter to the second
quarter. The lagged revenue primarily concerns InWear, Jackpot and
Peak Performance.
It is encouraging that Jackpot for the second quarter isolated
delivers 26% growth. The development is driven by a continuous
positive development in the brand's retail activities, in which a
same-store growth of 37% is achieved for both Q2 and H1 2007/08. The
distribution platform in the wholesale activities is still in an
adjustment phase, and consequently, overall growth in the brand is
not expected before 2008/09.
Sales performance for own brands market breakdown:
Sales performance market breakdown shows that Sweden, Denmark,
Norway, Belgium, Poland and Canada all advance by double-digit growth
rates in H1 2007/08.
As was anticipated, in Q2 the Group's Russian partner recovered a
substantial part of the Q1 revenue lag. After several years of
significant growth, the partner is consolidating. A modest setback
for Russia is therefore forecast for the full year 2007/08.
In Spain the group's operations are primarily agent-based and the
Group has tightened credit lines and in the same process reviewed the
customer portfolio, which has resulted in a revenue fall of 16% in H1
2007/08. The setback in Spain is expected to continue throughout the
full year 2007/08.
After several years of decline, it is encouraging that Poland
delivers a solid progress substantiated by 31% growth. The
development is primarily driven by Jackpot and Cottonfield retail
activities in Poland.
The Group's export activity that previously has handled agent and
partner sales to a number of countries is reorganised and simplified.
Distribution channels
Wholesale operation
In H1, wholesale revenue reached DKK 1,368 million (DKK 1,263
million) representing 8% growth. Preorder revenue grew by 9% and
in-season sales rose by 8%. Franchise revenue is included and
accounts for a 19% increase.
Wholesale profit grew by 28% to DKK 287 million (DKK 224 million)
which corresponds to a wholesale profit margin of 20.9% (17.7%). The
improved relative earnings are contributable primarily to an
increased wholesale gross margin derived from lower sourcing
currencies.
Growth in order intake for the summer 2008 collection was 11%.
Factoring in the reintroduction of a minor preorder collection from
Tiger of Sweden, the summer collection reaches 7% growth. Order
intake for 4 of 4 collections in 2007/08 is completed by a combined
growth of 12%. Adjusted for Tiger of Sweden, growth remains 12%:
Peak Performance, Tiger of Sweden, Matinique, Part Two, By Malene
Birger, Soaked in Luxury and Designers Remix Collection all deliver
double-digit growth rates.
When adjusting the order intake of Tiger of Sweden for the summer
collection, growth in the comparable order mass is 38%.
Order intake for the 2008 autumn collection, which started early
January is expected to close at 6% - 8% growth. Order intake will be
finalised mid-March 2008.
Retail operation
Retail revenue in the first half reached DKK 576 million (DKK 473
million) which equals 22% growth. Revenue is affected positively by
scheduled net store openings and expansions amounting to DKK 42
million. In the first half year of 2007/08, development in same-store
sales (organic revenue development) achieved a 13% growth. Same-store
growth came to 12% in the second quarter.
Retail profit improved significantly by 31% taking the total to DKK
77 million (DKK 59 million) which corresponds to a profit margin of
13.4% (12.5%). The improvement is driven by increased efficiency in
the use of the Group's retail square metres.
The Group's retail operations constitute 36,400 square metres
distributed between 222 locations.
In line with the Group's financial target according to which retail
is no longer exclusively defined as wholesale support, but as a
business area in its own right, the financial overview of
distribution channels is adjusted with effect in 2007/08. Revised
comparative figures for all 2006/07 quarters are included in the Q1
2007/08 interim report.
Outlet operation
Outlet revenue was DKK 71 million (DKK 67 million), equivalent to 7%
growth. Outlet profit for the second quarter is increased by DKK 1
million, which corresponds to a profit margin of 24.3% (24.1%).
Outlet operation forms an integral part of the Group's business model
for the profitable sale of residual post-season products. The Group
operates 24 outlet stores.
earnings development
Increasing gross profit
For the first half, gross profit reached DKK 1,229 million (DKK 1,046
million) which corresponds to a 61.0% (58.0%) gross margin.
The 3.0%-points progress is primarily attributable to lower hedging
of the Group's sourcing currencies in the first half of 2007/08 as
compared to the same period 2006/07. Seen in isolation this benefits
the Group's gross margin by 2.1%-points for the first half of
2007/08. The remaining improvement is attributable to operational
improvements of 0.6%-point and shifts across channels contribute by
0.3%-point.
The gross margin improvement derived from the effect of lower
sourcing currencies is expected to be at a 1.0% - 1.2%-points level
in the second half of 2007/08. As previously announced, the effect of
sourcing currencies is expected to improve the gross margin by a
combined 1.5 - 1.8%-points for the 2007/08 full year as measured
against 2006/07.
Increasing operating costs
Costs were DKK 928 million (DKK 813 million), which constitutes a 14%
increase. The cost rate increased by 1.0%-point to 46.1% as measured
against last year. Retail operation is more cost consuming than
wholesale operation and the cost rate is therefore negatively
affected by 0.5%-point as a result of shifts across channels. Changes
in allowance for bad debts and increased recognised loss on bad debts
as measured against last year have furthermore increased the cost
rate by 0.4%-point. Notwithstanding this, the development in the cost
rate is not satisfactory.
The inadequate development in relation to plan results in the
evaluation of a number of initiatives, just as the future resource
allocation to the Group's brands will be significantly differentiated
vis-à-vis the specific situation of the individual brand.
Earnings development
Operating profit was up 29% to DKK 301 million (DKK 233 million)
which equals an EBIT margin of 14.9% (12.9%).
Financial items
Net financial items increased DKK 5.8 million to DKK 13.3 million
(DKK 7.5 million). The augmentation is caused by rising interest
rates amounting to combined DKK 4.0 million as a result of averagely
higher utilised credit facilities. Averagely higher interest rates
have increased the financial expenses DKK 1.8 million.
Income tax
Tax costs amounting to DKK 81 million are recognised, which
represents 28% of the pre-tax profit.
Net result
Net result for the first half year increased by 29% to DKK 207
million (DKK 160 million).
liquidity and balance sheet
Cash flows
Cash flows from operating activities for the first half year 2007/08
increased DKK 3 million to DKK 170 million (DKK 167 million). The
development is attributable to profit and increased funds tied up in
working capital.
Gross investments came to DKK 75 million in the first half year (DKK
116 million), of which refurbishing stores and showrooms account for
DKK 55 million. The DKK 41 million drop relative to last year is
primarily due to acquisition of the Norwegian distributor of Peak
Performance in 2006/07.
The free cash flow from operating and investing activities was DKK 95
million (DKK 51 million), corresponding to an inflow of DKK 44
million relative to last year.
Second quarter cash flows from financing were an outflow of DKK 76
million (an outflow of DKK 87 million). In the period repurchased
treasury shares constituted DKK 29 million and dividends amounted to
DKK 74 million.
The total cash flow for the first half was DKK 19 million (an outflow
of DKK 36 million).
Net interest-bearing debt
Consolidated net interest-bearing debt was DKK 538 million (DKK 448
million) which amounts to an increase of DKK 90 million relative to
31 December 2006. The increase is primarily caused by increased
current liabilities as a result of increased activity and increased
funds tied up in the working capital.
Balance
Group assets increased DKK 181 million to DKK 2,037 million as at 31
December 2007 (DKK 1,856 million). The increase is exclusively
contributable to growth in current assets.
Current assets grew DKK 199 million. Inventory increased DKK 122
million relative to last year, which corresponds to 32%. This
development results from significantly more goods in transit, as
deliveries from the production companies have been brought forward in
order to avoid delivery delays in the spring collections. The
delivery situation is satisfactory and progresses as planned. Trade
receivables increased by 14 % primarily due to increased activity,
but averagely higher debtor days as compared to the same period last
year was also a contributing factor.
Non-current assets decreased DKK 18 million relative to the same date
last year. Consolidated deferred net tax assets are reduced DKK 53
million to DKK 110 million as at 31 December 2007 (DKK 163 million).
This is mainly attributable to adjustment of tax rates constituting
DKK 16 million and the utilisation of deferred assets in 2006/07 of
DKK 33 million.
Equity movements
Equity is at 31 December 2007 increased DKK 27 million to reach a
total of DKK 681 million. Equity ratio is at 31 December 2007 33.4%
(35.2%).
At the Company's Annual General Meeting on 24 October 2007 the
proposal to pay dividend of DKK 74 million was adopted and the
dividend was subsequently paid.
In the autumn of 2007, the Group's Executive Board, key employees and
other employees exercised stock options under incentive-based
compensation plans, which led to an increase in equity of DKK 25
million.
Movements in equity and treasury shares are specified on page 15.
Reduction of share capital
At IC Companys' general annual meeting on 24 October 2007 it was
decided to reduce the share capital by nominal value DKK 5,859.250
corresponding to the 585,925 shares bought back under the share
buyback programme in the period 24 November 2006 to 29 June 2007.
After the 3 months time limit for publication via the Danish Commerce
and Companies Agency, the share capital reduction is registered on 28
January 2008. As a consequence of the share capital reduction 585,925
shares have been annulled. After completion of the reduction, the
Company's share capital constitutes DKK 179,196,320 nominal value
distributed on 17,919,632 shares nominal value DKK 10.
Share buyback
As previously announced, in the period 3 January 2008 to 30 June 2008
IC Companys A/S expects to carry out a share buyback programme of
approx. DKK 200 million.
The first share buyback programme was completed 28 February 2008 and
constituted DKK 68 million. At its meeting on 28 February 2008, the
Board of Directors of IC Companys A/S decided to initiate the next
programme amounting to DKK 90 million. This programme is initiated 29
February 2008 and will be completed 14 May 2008.
outlook 2007/08
Full year revenue guidance is reduced by 1% to DKK 3,750 - 3,800
million (previously DKK 3,750 - 3,850 million) corresponding to a
growth of 12% - 13%, whereas full year operating profit guidance is
reduced by 9% to DKK 400 - 440 million (previously DKK 440 - 480
million) which corresponds to a progress of 18% - 29%.
The guidance reduction is primarily caused by an inadequate
development in the Group's cost efficiency, which is related to lower
sales than initially planned. The development has on part of the
Executive Board entailed a number of actions, of which the most
significant will be announced concurrently with implementation.
Direct sales promoting investments in the form of showrooms,
refurbishments and opening new stores will be carried through as
announced in the region of DKK 130 - 140 million. In addition,
previously announced investments in the IT platform and warehouse
facilities in the region of DKK 20 - 30 million will also be carried
out in the financial year 2007/08.
The previously announced share buyback programme of DKK 200 million
is retained. The second programme is expected to be initiated on 29
February 2008.
IC Companys A/S
Niels Martinsen Henrik Theilbjørn
Chairman of the Board of Directors President & CEO
Contacts
Henrik Theilbjørn, President & CEO
Tel.: + 45 3266 7646
Chris Bigler, Chief Financial Officer
Tel.: + 45 3266 7017
statement by the management
The Board of Directors and the Executive Board have considered and
approved the interim financial report for the period 1 July 2007 - 31
December 2007.
The interim financial report is unaudited and has been prepared in
accordance with IAS 34 "Interim Financial Reporting" as adopted by
the EU, cf. section on accounting polices and additional Danish
interim reporting requirements for listed companies.
We consider the accounting policies applied to the effect that the
interim financial report gives a true and fair view of the Group's
assets, liabilities and financial position as at 31 December 2007,
and of the results of the Group's operations and cash flows in the
period 1 July 2007 - 31 December 2007.
Copenhagen, 28 February 2008
executive board:
HENRIK THEILBJØRN MIKKEL V.
OLESEN
President & CEO Chief Operating Officer
Board of directors:
NIELS ERIK MARTINSEN HENRIK HEIDEBY OLE WENGEL
Chairman Deputy Chairman Deputy Chairman
PER BANK ANDERS COLDING FRIIS NIELS
HERMANSEN
DISTRIBUTION channels
Income statement
BALANCE sheet - assets
BALANCE sheet - equity and liabilities
Movements in equity
GROUP CASH FLOW STATEMENT
NOTEs
1. ACcounting policies
The interim financial report is prepared in accordance with IAS 34"Interim Financial Reporting" and additional Danish disclosure
requirements to the interim financial reports for listed companies.
The financial year 2007/08 is the first time that the Group presents
interim financial reports in accordance with IAS 34, which compared
to previous interim reports has entailed a more detailed presentation
of statement of movements in equity and more detailed notes for
specific areas. Comparative figures in the interim financial reports
are adjusted to reflect the changed presentation.
The accounting policies applied in the interim financial report are
unchanged with respect to the Company's Annual Report for 2006/07.
For more information on the accounting policies, we refer to our
Annual Report for 2006/07.
2. Seasonality
The Group's business area is influenced by seasonal fluctuations.
These fluctuations are attributable to seasonality in deliveries to
wholesale customers and a sales season of the Group's products that
varies over the year in retail and outlet operations. The Group's
wholesale peak quarters are historically first and third quarter. By
association, revenue and operating profit vary in the various
reporting periods, and interim financial reports are not necessarily
indicative of future trends. Results of the individual quarters are
therefore not reliable sources in terms of projecting the Group's
development.
3. sharebased remuneration
Stock option grants in 2007/08
As outlined in detail in the Annual Report 2006/07, 66 executives and
key employees have been granted stock options. The grant is
performance based and calculated on a proportion from 10% - 30% of
the wage of the individual employee which by means of the Black &
Scholes formula will grant a specific number of stock options to the
employee in question. The calculation is based on a future volatility
of 23% per annum, an expected yield percentage of 1.3% and a
risk-free interest of 4.1%. The total grant constituted 237,769 stock
options that each entitles the holder the right to acquire one
existing share at DKK 329.39 per stock plus 5% per annum. The share
price is calculated as the average share price the last 5 trading
days prior to the grant. The stock options cannot be exercised until
after the publication of the Annual Report 2009/10 and no later than
after the publication of the Annual Report 2012/13. The aggregate
market value of the programme is DKK 10 million, which will be
amortized over the term.
Exercise of stock options in 2007/08
The Executive stock option programme (two persons) comprised 160,000
stock options as at 30 June 2007. On 12 September 2007, the Executive
Board exercised combined 40,000 stock options, after which the number
of Executive stock options constitute 120,000.
Warrants exercised in 2007/08
On 26 September 2007 executive employees in IC Companys exercised a
total of 112,059 warrants at nominal value DKK 10 granted in previous
financial years. The share capital is consequently increased by DKK
1,120,590 nominal value. The subscription price per share was DKK
173.50 without pre-emptive rights for the Company's other
shareholders or others. The company proceeds of the subscription
amounted to DKK 19,442,237.
4. inventories
5. TRADE RECEIVABLES
Movements in allowance for bad debt:
