Profit announcement FOR 2007/08
The Group recorded revenue growth of 11% to DKK 3,737 million.
Operating profit (EBIT) increased by 3% to DKK 349 million. The
result is affected by non-recurring costs amounting to a total of DKK
40 million, of which fourth quarter write downs account for DKK 20
million. For the full year 2008/09 expectations are a modest revenue
growth compared to 2007/08 and an operating profit slightly below the
level in 2007/08.
The Board of Directors of IC Companys A/S has approved the audited
Annual Report for the period 1 July 2007 - 30 June 2008.
The Group reported revenue of DKK 3,737 million, which constitutes an
increase of DKK 383 million or 11% up on 2006/07.
Operating profit increased DKK 9 million or 3% to DKK 349 million.
The result is affected by non-recurring costs amounting to DKK 40
million combined, of which writedowns of inventory and fixed assets
in the fourth quarter account for DKK 20 million.
Wholesale revenue recorded DKK 2,497 million, equivalent to an 8%
growth.
Retail revenue came in at DKK 1,092 million amounting to a 19%
increase. Same-store sales achieved a growth of 11% in 2007/08.
Order intake has been completed for the first two of four collections
in the financial year 2008/09 at a combined growth of 8% (9% in local
currencies).
The Board of Directors recommends a dividend of DKK 66 million,
equivalent to DKK 4.00 per share eligible for dividend.
Niels Mikkelsen, the new Group CEO, was appointed 1 August 2008,
while Chris Bigler and Anders Cleemann joined the Executive Board 1
April and 15 August 2008, respectively.
With a view to ensuring a clear division of work and inherently
strengthen execution skills and ownership, the allocation of
responsibilities has been redefined between the individual brand
managements and the country sales managements of InWear, Jackpot,
Cottonfield, Matinique and Part Two. Sales responsibility is now to a
higher extent locally anchored. Further, the organisation is
simplified by an integration of the brand managements of InWear and
Matinique and Jackpot and Cottonfield, respectively.
2008/09 FULL YEAR GUIDANCE
For the full year 2008/09 expectations are a modest revenue growth
compared to 2007/08 and an operating profit slightly below the level
in 2007/08.
Direct sales promoting investments will be carried through in the
region of DKK 140 million. In addition, investments in the shared
platform including IT and Supply Chain will be carried out in the
region of DKK 20 million.
further INFORMATION
Niels Mikkelsen Chris Bigler
Chief Executive Officer Chief Financial Officer
Tel + 45 3266 7721 Tel + 45 3266 7017
group 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.
As in 2006/07, the Annual Report for the 2007/08 financial year in
the form of this announcement replaces in its entirety the print
version of the financial statements. The Annual Report can also be
downloaded at www.iccompanys.com
This announcement is a translation from the Danish language. In the
event of any discrepancy between the Danish and English versions, the
Danish version shall prevail.
summary
The 2007/08 financial year was challenging. Cost development in
relation to revenue development did not progress as expected. At the
beginning of the 2007/08 financial year, we forecast an improvement
in cost efficiency. However, the end of the financial year saw a
discernible deterioration. This development is affected by a host of
non-recurring costs, but it is a fact that the underlying efficiency
was not improved in the financial year 2007/08.
We are not satisfied with our financial performance in the financial
year 2007/08, as both revenue and earnings in particular are less
than was expected at the beginning of the financial year. The primary
source to this remains insufficient sales efficiency in Group
wholesale operations, but also Group retail operations -
notwithstanding solid improvements in recent years - hold further
efficiency potential.
2007/08 was also characterised by uncertainty in regard to the
macroeconomic situation in Scandinavia and the rest of Europe. The
media, economists and other observers expressed growing concerns,
particularly in the second half year of 2007/08. However, the impact
on IC Companys in 2007/08 was not unequivocal. The organic
development in the Group's own stores was pronounced achieving 11%
full year growth and 9% growth in the last quarter of the year. Even
so, development in the individual months was more volatile than
usual, as March and April in particular stood out showing negative
growth. In wholesale, order intake for the all-important autumn
collection was completed mid-March with 11% growth (in DKK 10%),
whereas the minor winter collection was completed end of May with 2%
growth. Further, the Group saw an increasing share of overdue
wholesale trade receivables and a generally decreasing receivables
turnover ratio. Combined this resulted in allowances for bad debts
amounting to DKK 37 million, which is an increase of DKK 21 million
as compared to last year.
NEW EXECUTIVE BOARD APPOINTED
2007/08 was also the year in which a new, strong Executive Team was
set. Niels Mikkelsen was brought in as new CEO, while Chris Bigler,
CFO, and subsequently Anders Cleemann, Executive Brand Officer, were
appointed members of the Executive Board.
The change in the Executive Board is based on the ambition to further
strengthen the company's growth and earnings capacity. Niels
Mikkelsen joined the company 1 August 2008, while Chris Bigler and
Anders Cleemann were appointed members of the Executive Team 1 April
and 15 August 2008, respectively.
IC Companys still wants to build international fashion brands on a
strong shared platform, but the manner in which the business model is
executed will be subject to changes over the next years.
It remains IC Companys' target to create a group that annually
achieves a minimum of 15% organic growth and an earnings capacity
(EBIT-margin) of a minimum of 15%.
IMPORTANT INITIATIVES 2008/09
The financial year 2008/09 will be defined by actions aimed at
strengthening the execution skills and efficiency of the Group.
THE OPERATIONAL SALES RESPONSBILITY IS PLACED LOCALLY
Development of a portfolio of 11 brands present in a vast number of
markets result in many management cross-sections. In 2008/09, the
Group will focus on balancing the work division between brands and
the Group's shared sales companies in order to ensure a clear
allocation of responsibilities and as much ownership as possible. The
Group has shared sales companies in 12 countries and these sales
companies primarily have the responsibility for the sales of InWear,
Jackpot, Cottonfield, Matinique and Part Two.
The first step of this process has been taken, as accountability for
sales performance as opposed to previously is now anchored locally in
the respective countries. Brand managements remain globally
responsible for sales performance and will focus on brand
positioning, marketing, product development and strategic sales,
whereas the operational sales responsibility is placed with the local
sales companies.
INTEGRATION OF BRAND ORGANISATIONS
In 2008/09 the Group will focus on a simplification of the
organisation in order to strengthen implementation skills and
efficiency. With that view, the managements of InWear and Matinique
for one and Jackpot and Cottonfield for the other, have been
integrated. The brands concerned have a considerable distribution
match on both country and customer level. Additionally, InWear and
Matinique have common conceptual platforms.
These changes are expected to result in increased execution skills
and sales efficiency in the four brands. Furthermore, from 2009/10
the integrations are set to generate annual net cost savings in the
region of DKK 15 - 20 million.
The total cost effect of integrating the brands concerned is expected
to be neutral in 2008/09.
EVALUATION OF THE DISTRIBUTION STRATEGY
In 2008/09 the Group's collected distribution strategy will be
reviewed in order to ensure the best prioritisation of the effort per
brand, store concept and market between own and franchise stores and
also the optimal placement with the Group's wholesale customers.
OPTIMAL UTILIZATION OF GROUP RESOURCES
In 2008/09, a project with the purpose of optimizing the Group's
value chain will be initiated. The aim is to ensure optimal
utilization of resources and coherence between all decisions made in
the individual links of the value chain.
As such, 2008/09 will become a year, in which many organisational
changes and initiatives must be carried through in order to increase
the Group's execution skills and hence the ability to reach the set
targets.
OUTLOOK 2008/09
For the full year 2008/09 expectations are a modest revenue growth
compared to 2007/08 and an operating profit slightly below the level
in 2007/08.
Direct sales promoting investments will be carried through in the
region of DKK 140 million. In addition, investments in the shared
platform including IT and Supply Chain will be carried out in the
region of DKK 20 million.
The Board of Directors recommends a dividend of DKK 66 million,
equivalent to DKK 4.00 per share eligible for dividend after the
Annual General Meeting 22 October 2008.
ASSUMPTIONS
Revenue expectations to 2008/09 are affected by uncertainty
surrounding the macroeconomic development in Europe and the
implementation of organisational changes mentioned.
The earnings expectations to 2008/09 are based on an assumption of an
unchanged gross margin as compared to 2007/08.
The 2008/09 profit expectations are further based on a projected
marginal deterioration in the Group's total cost efficiency. This
development is driven by long reaction time for adjusting cost to the
expected revenue development.
key events 2007/08
PERFORMANCE
Revenue growth in 2007/08 reached 11%, amounting to DKK 3,737
million. An important growth driver is Group retail operations
recording a 19% progress, of which organic growth (same-store growth)
was strong at 11%. Group wholesale activities achieved 8% growth.
Group gross margin came to 60.4% equivalent to an improvement of 1.3
percentage point relative to 2006/07. The gross margin progress is
driven by lower sourcing currencies in the Group's sourcing
countries, which combined has resulted in a gross margin improvement
of 1.7 percentage point. The development in the Group's gross margin
was lagged due to significantly more inventory writedowns in 2007/08
relative to the previous year.
Group operating costs are increased by 16% to DKK 1,910 million,
which corresponds to a cost rate increase of 2.1 percentage point.
The development is unsatisfactory. The cost development is affected
by non-recurring costs, a changed distribution mix owing to increased
retail revenue and by generally increasing allowances for bad debts
amounting to DKK 21 million.
Operating profit grew by 3% to DKK 349 million in 2007/08,
corresponding to a 9.3% EBIT margin.
The earnings development combined is affected by non-recurring costs
amounting to DKK 40 million in 2007/08. As a consequence of
reassessment of the Group's assets in the fourth quarter, inventory
writedowns amounting to DKK 15 million were made for the Group's
sales activities in China and the Group's inventory of supplementary
products. In addition, in the fourth quarter writedowns constituting
DKK 5 million have been made concerning tangible fixed assets in
China. Third quarter of the financial year accounts for the remaining
DKK 20 million. Severance pay to the Group's Chief Executive Officer
accounts for DKK 13 million. Furthermore, the Group had an
extraordinary loss on trade receivables on two export partners
amounting to DKK 7 million.
ORDER INTAKE 2008/09
Order intake for autumn and winter collections in the financial year
2008/09 was completed at a combined growth of 8% (9% in local
currencies).
Order intake for the autumn collections was completed mid-March at a
10% growth (in local currencies 11%), whereas the minor winter
collections were completed end of May with 2% growth (2% in local
currencies).
CHANGES IN THE EXECUTIVE BOARD
As part of IC Companys A/S' continued ambition to further strengthen
the company's growth and earnings capacity the Board of Directors
has, as previously announced, appointed Niels Mikkelsen as new Chief
Executive Officer. Niels Mikkelsen joined the company 1 August 2008.
Niels Mikkelsen, 43, comes from a position at Esprit de Corp. Since
1998, Niels Mikkelsen has been responsible for the Nordic and Baltic
countries, where he has generated significant growth in turnover as
well as in earnings. From 1996 to 1998, Niels Mikkelsen worked for
InWear Group (today IC Companys A/S), most recently as Country
Manager for Denmark.
In this connection Chief Financial Officer Chris Bigler was appointed
member of the Executive Board. Chris Bigler, 38, has been employed
with IC Companys A/S since 2002, from 2004 as Chief Financial
Officer. Since 2004, Chris Bigler has thus been an important
contributor to the positive development of IC Companys A/S. Today,
Chris Bigler has the responsibility for Finance, Administration, Risk
Management, Treasury, Shared Service, Investor Relations as well as
IT.
As previously announced, Chief Operating Officer, Mikkel Vendelin
Olesen, has accepted an offer to become Chief Executive Officer
outside the group. Therefore he resigned from his position in IC
Companys A/S 15 August 2008.
On 6 August, the Board of Directors appointed Anders Cleemann, 41,
Executive Brand Officer and member of the Executive Board.
Anders Cleemann has been Brand Director of Part Two in IC Companys
A/S since 2005 and was further International Marketing Director in
InWear Group A/S from 1997 to 1999. He has previously worked in sales
and marketing in Reebok A/S and Carlsberg A/S. Furthermore, Anders
Cleemann worked as a consultant for six years, 2 of which as CEO of
Valtech A/S.
Anders Cleemann will be in charge of InWear, Jackpot, Matinique,
Cottonfield, Part Two, Saint Tropez and Soaked in Luxury. Anders
Cleemann took up the new position as Executive Brand Officer 15
August 2008 and he continues in the position as Brand Director of
Part Two until a replacement has been found.
Hereafter, the Executive Board of IC Companys A/S consists of:
§ Niels Mikkelsen, Chief Executive Officer (CEO)
§ Chris Bigler, Chief Financial Officer (CFO)
§ Anders Cleemann, Executive Brand Officer
INVESTMENT IN EASTERN EUROPE
The Group has launched a 3-year investment programme for Jackpot and
Cottonfield in Eastern Europe (Poland, the Czech Republic and
Hungary). Jackpot and Cottonfield, which in these countries are
exclusively distributed via own retail, have seen a very encouraging
development during the past years. Retail revenue in Eastern Europe
for these brands is expected to double over the 3-year period from
the current level of DKK 150 million. In 2008/09, 15 - 20 store
openings are planned in Eastern Europe.
THE CHINA SALES ORGANISATION
The Group has adjusted the sales organisation in China. Revenue
growth in China did not match investments in distribution and
organisation, which resulted in an organisational adjustment. The
Group operates a total of 31 concessions in China. In 2007/08, the
Group had a considerable operating loss for the sales operation in
China and made further writedowns of inventories and tangible fixed
assets in the fourth quarter.
RETAIL AND LEADERSHIP ACADEMY
The Group's Academy was launched in the spring of 2007. This
initiative aims at training and educating the Group's more than 900
store employees. In 2008/09, Retail Academy will be followed up by
semi-annual training days for the Group's retail managers and store
managers. Further in 2008/09, a number of the Group's franchise
stores in Denmark and Holland will be trained.
2007/08 was also the year, when the Group's Leadership Academy was
initiated. This initiative aims at strengthening the Group managers'
competences, team building and execution skills. A total of 100
middle managers were trained in 2007/08.
DECENTRALISATION OF INTERNAL MARKETING AGENCY
The Group has decentralised an internal marketing agency, which until
now carried out tasks for primarily InWear, Jackpot, Matinique,
Cottonfield and Part Two. Consequently, a number of employees have
been transferred to the relevant brand organisations. The initiative
results in a simpler group organisation, strengthens the brand
organisation and anchors the identity building activities in the
brand organisation. Subsequently, the Group has also begun divesting
an internal PR department in an external company, of which the
management hitherto will take over ownership. Cost-savings from these
initiatives are expected to total DKK 10 million in 2008/09.
NEW MEMBER OF THE BOARD OF DIRECTORS
At the Group's Extraordinary General Meeting held 30 January 2008,
Per Bank was elected new member of the Board of Directors of IC
Companys A/S in accordance with the agenda for the meeting.
Per Bank is Managing Director of Coop Danmark A/S, Chairman of the
Board of Directors of Irma A/S, Fakta A/S, Coop Trading A/S, Coop
Nonfood A/S and Intercoop Ltd. as well as member of the board of OK
A.m.b.a.
IMPLEMENTATION OF SAP FINANCIAL SYSTEM
During 2007/08, the Group replaced the financial system to SAP. The
project was initiated in August 2007, and in the period until 30 June
2008, 38 companies were migrated to SAP. The replacement was seamless
and progressed according to plan. The replacement was made with a
view to a possible subsequent replacement of the ERP system. A
decision on the possible commencement of such a project is
anticipated not sooner than at the beginning of the calendar year
2009.
CORPORATE GOVERNANCE
The Board of Directors of IC Companys is committed to promoting the
long-term interests of the Company - and thus of all shareholders.
This work is handled at nine planned Board meetings per year and
through continuing contact between the chairmanship and the Executive
Board.
The Board of Directors has in the Group's guidelines for Corporate
Governance considered the Group's relationship with its stakeholders
and the community, and the Board of Directors' and the Executive
Board's work and further their relationship with each other. The
guidelines can be downloaded from www.iccompanys.com under the
section Investor Relations.
These guidelines are intended as the working base for IC Companys'
management when defining procedures and principles with respect to
among other things:
* The Group's relationship with its stakeholders, including
the public and the press
* The Group's external communication, including its Investor
Relations policy;
* The Board of Directors' composition and work including
rules of procedure for the Board of Directors;
* The Executive Board's work, including rules of procedure
for the Executive Board;
* The relationship between the Board of Directors and the
Executive Board; and
* The remuneration and incentive plans for the Company's
management and employees.
These guidelines are intended to ensure the efficient, appropriate,
adequate and viable management of IC Companys. The guidelines have
been prepared within the framework defined by the IC Companys'
articles of association, mission, corporate vision and corporate
values, as well as applicable legislation and rules for Danish listed
companies.
The revised guidelines are - with two exceptions explained in the
following below - in accordance with the Corporate Governance
Recommendations by OMX Nordic Exchange Copenhagen
During the autumn of 2006, the Board of Directors carried out a
self-evaluation procedure with a view to offering the Board the
opportunity to systematically and based on unequivocal criteria
evaluate the performance and achievements of the Board, the Chairman
and the individual members. The evaluation was performed under the
Chairman of the Board of Directors in cooperation with an
internationally renowned consulting firm. The findings were discussed
with the entire Board of Directors.
OMX Nordic Exchange Copenhagen recommends that the self-evaluation
procedure is carried out once a year. However, the Board of Directors
finds a regular interval sufficient. The Board of Directors expects
to carry out a self-evaluation procedure during 2008/09.
The present Annual Report includes the scope of the total and
itemised remuneration and other material benefits of the Board of
Directors and the Executive Board. All material factors concerning
share-based incentive programmes are disclosed including information
about all incentive paid employees and the aggregated incentive pay
of the Executive Board. The aggregated, individualised remuneration
of the Executive Board and the Board of Directors are not disclosed
as recommended by OMX Nordic Exchange Copenhagen, as the Board of
Directors after careful consideration has concluded that
individualised remuneration disclosure would not be purposeful.
The principles of and the magnitude of the remuneration of the Board
of Directors and the Executive Board appears from the section
regarding incentive remuneration and note 5 to the financial
statements.
In compliance with the recommendations of the OMX Nordic Exchange
Copenhagen, the Board of Directors has assessed the need for
committees, including audit committees. The Board of Directors finds
that the current meeting structure without committees is sufficient.
However, the Board will continuously assess the expediency gained by
setting up special ad hoc committees.
INCentive-based compensation
With the purpose of building congruent interests between
shareholders, members of the Executive Board and other executives and
contribute to a joint focus on meeting the Group targets, IC Companys
has implemented bonus and share-based incentive compensation plans.
The incentive-based compensation plans for members of the Executive
Board and other executives includes bonus and share-based incentive
plans. In accordance with the IC Companys corporate governance
guidelines, members of the Board of Directors are not included in the
incentive plans.
The members of the Executive Board and a number of other executives
are included in a bonus plan where payments are based on the
financial results achieved in the employee's own area of
responsibility. The bonus potential is in the range of 20-30% of
annual salary. The bonus plan is based on results achieved in the
individual financial year, which helps ensure that the Group's growth
targets are met, as the full bonus is only paid if the Group targets
are met.
Previously, the Group has granted warrants to a number of executives
and key employees. Details of the plans are given in note 5 to the
financial statements.
As previously announced in stock exchange announcement of 31 March
2008, the Board of Directors granted 100,000 stock options to the
Group's new Chief Executive Officer, Niels Mikkelsen. The stock
options granted give admittance to - in immediate continuation of the
company's release of the annual report for 2008/09, 2009/10, 2010/11,
2011/2012 and 2012/13 - against payment in cash - to buy 20,000
shares annually.
Further, as announced in stock exchange announcement of 31 March
2008, after his appointment to the Executive Team, the Board of
Directors granted Chris Bigler 30,000 stock options. The stock
options granted give admittance to - in immediate continuation of the
company's release of the annual report for 2007/08, 2008/09 and
2009/10 - against payment in cash - to buy 10,000 shares annually.
Equally, as announced in stock exchange announcement of 9 September
2008, the Board of Directors granted Anders Cleemann 30,000 stock
options after his appointment to the Executive Team. The stock
options granted give admittance to - in immediate continuation of the
company's release of the annual report for 2008/09, 2009/10 and
2010/11 - against payment in cash - to buy 10,000 shares annually.
RISk management
The Group is exposed to risks of a commercial as well as a financial
nature that are common for the fashion industry. Below is a
description of the most important risk factors and the steps the
Group has taken to reduce them.
COMMERCIAL RISK FACTORS
Fashion risk
The Group's brands all have a high fashion content. As collections
change at a minimum of four times a year and have a long lead time,
there is a risk that the products will not match consumer tastes.
Each brand works with commercial and facts-based development of its
collections with a view to reducing this risk. At Group level, there
is an inherent high level of diversification as a result of the
number of independent brands.
Suppliers
The Group's products are solely produced by third parties, which
ensures a high level of flexibility. In 2007/08, 72% of production
took place in Asia and 28% in Europe. The Group has 396 suppliers, of
which the largest 10 suppliers account for 30% of the total
production value. The largest single supplier accounts for 5% of the
total production value.
The Group has six independent sourcing offices located in China,
Romania, Turkey, Bangladesh, Hong Kong and Denmark, which compete for
production orders from the brands. This means that sourcing can be
moved to wherever the combination of price, quality and supply
stability is best.
Inventory risk
Sales through own stores and the need to carry inventory service
products and supplementary products for retailers involves a risk
that products which, during the year, have been allocated for sale
remain unsold at the end of the year.
The Group has a network of outlets for the ongoing sale of such
inventories. Capacity in these outlets is increased or reduced as
required. Any products that cannot be sold through the Group's own
outlets are sold to brokers for resale outside the Group's
established markets. The inventory risk of the Group is reduced by
the fact that a considerable part of the total order intake is
preordered by the Group's retailers.
Debtor risk (third party retailer risk)
The Group brands are sold by a total of 12,000 selling points. A
considerable number of third party retailers are customers to more
than one brand, and the number of customers is consequently lower. No
customer accounts for more than 5% of the Group wholesale revenue.
The Group's distributor in Russia is the single largest customer.
Before a customer relationship commences, the Group's wholsale
customers are credit rated according to the Group debtor policy and
subsequently on a regular basis. Nevertheless, losses do occur.
Credit insurance is typically only used in countries in which the
credit risk is unusually high and where this is feasible. This
primarily applies to export markets in which IC Companys is not
represented through an independent sales company.
Credit terms vary in line with individual market customs. In the past
years, the Group had loss on bad debts which was less than 1% of
wholesale revenue. In 2007/08 the losses achieved constitute 0.6% of
the wholesale revenue. In addition, in 2007/08 allowances for bad
debts constitute DKK 37 million.
Dependence on IT systems
The Group is dependent on reliable IT systems for day-to-day
operations, as well as to ensure control of product sourcing and to
increase efficiency in the Group's supply chain. The Group is
continuously working to hedge these risks through firewalls, access
control, contingency plans, etc.
POLITICAL RISK FACTORS
A large part of the Group's purchases are made in markets which from
time to time see political turmoil. The most significant dependence
concerns reliable supplies from Hong Kong and China, where
approximately 63% of the Group's supplies is purchased. The EU did
not extend the quota system for products manufactured in China, which
was introduced in the summer of 2005. The quota system has been
replaced by a continuous supervision in 2008.
FINANCIAL RISKS
The Group monitors and manages all its financial risks through the
Parent Company's Treasury Department. The Group's financial risks
consist of exchange rate risks, interest rate risks and liquidity
risks, including counterparty risks. The use of financial instruments
and the related risk limits are managed through the Group treasury
policy approved by the Board.
The Group uses financial instruments solely to hedge risks. All
financial transactions are based on commercial activities, and IC
Companys does not enter into speculative transactions.
Foreign exchange risks
The Group's commercial transactions expose the Group to significant
foreign exchange rate risks, which arise through purchases and sales
of products in foreign currencies. The main part of Group purchases
are made in the Far East and are denominated in USD or USD related
currencies, whereas most revenues and capacity costs are denominated
in EUR, SEK, DKK and other European currencies. Thus, there is only a
limited natural currency match in the Group's transactions.
The Group basically hedges all material transaction risks 12 months
into the future. The Group primarily uses forward currency contracts
to hedge the company's exchange rate exposure.
Net assets (equity investments) denominated in foreign currencies are
hedged if material fluctuations may occur in the relevant currencies.
Interest rate risks
The Group's interest rate risks are related to the Group's
interest-bearing assets and liabilities and off-balance-sheet items.
The Group's interest-rate risks are managed by obtaining
floating-rate and fixed-rate loans and/or by financial instruments
matching the interest rate risk on the underlying investment
Liquidity risks
The Group's cash resources and capital structure are planned so as to
always ensure and support Group operations as well as planned
investments.
See note 30 to the financial statements for additional information on
the Group's financial risks as at 30 June 2008.
Corporate social responsibility
SOCIAL RESPONSIBILITY
IC Companys considers corporate social responsibility to be an
integrated part of our business. Since August 2007 IC Companys is a
member of UN Global Compact which is the broadest business-driven
platform for the improvement of social compliance.
UN Global Compact is a voluntary and flexible initiative in order to
involve private companies in tackling some of the major social and
environmental challenges. The core is ten principles based on
internationally agreed conventions and treaties on human rights,
labour standards, environmental protection and anti-corruption.
The membership of Global Compacts involves an annual reporting on the
progress made in relation to the ten principles of Global Compact - a
so-called Communication on Progress (COP).
COMMUNICATION ON PROGRESS 2007/08
BSCI
In July 2007, IC Companys assented to the Business Social Compliance
Initiative (BSCI). BSCI is a common and standardized European
approach directed at retail chains, the manufacturing industry and
importers who wish to improve social compliance in all supplier
countries. Follow-up on these initiatives is performed by independent
auditors approved by the BSCI by means of supplier audits.
In the future, BSCI's Code of Conduct will be a permanent part of the
contractual basis with the Group's suppliers. Furthermore, during the
first year of the Group's membership auditing and compliance
processes have been initiated with suppliers, who combined account
for 33% of the purchase volume in countries classified by the UN as
risk countries. In 2007/08, IC Companys sourced 91% of the total
volume from this category of countries. During the first 3 years,
that is before July 2010, we expect that 2/3 of our order mass
purchased in countries under this classification will be audited.
Danish Initiative for Ethical Trade
In February 2008 IC Companys co-founded the organisation the Danish
Initiative for Ethical Trade (DIEH). DIEH is a resource centre and a
member organisation that aims at strengthening the ethical trade and
supplier control of Danish companies. The purpose of DIEH is to
promote international trade that respects human rights and employee
rights and to contribute to a sustainable development of developing
countries and emerging markets.
The purpose of DIEH is to gather experience and knowledge thereby
assisting Danish companies in making sure that the suppliers comply
with international conventions such as ILO employee rights.
FashionAid(TM)
IC Companys is member of and active participant in FashionAid(TM), an
initiative started by Federation of Danish Textile & Clothing for the
member companies. The initiative is a joint partnership with Danish
Red Cross involving collections in Denmark for the subsequent
distribution in relevant priority areas worldwide of the member
companies' donations of for instance defective (but usable) clothing
and textiles and surplus production.
IC Companys expects to donate between 8,000 and 12,000 garments per
year through FashionAid(TM).
Group brands
The Group's brand Jackpot is among the Nordic frontrunners in terms
of sustainable development of the entire value chain in clothing
production. Jackpot joined the Dutch NGO Made-By group in order to
contribute to this development.
10% of all Jackpot products are organic and via a number on the care
label of the garment, the consumer may trace the production journey
of a garment. The brand also supports farmers, who are converting
from conventional to organic production (Cotton in Conversion), among
other things by paying a premium for the cotton in the conversion
period.
In addition to this, Jackpot has a donation policy that aims at
lending a hand to the communities who produce the organic cotton &
sows the clothes. Each year, Jackpot supports a slum school in
Bangladesh, "The Gulshan Literacy Programme", and a farm cooperative
in India, "Chetna". The support is made by fair trade agreements and
the sales of special t-shirts made of organic cotton, of which a part
of the amount is donated to the school.
The Group's other brands have also launched a string of individual
initiatives that appear from their respective websites.
GROUP CAPITAL STRUCTURE AND DIVIDEND POLICY
IC Companys has the financial objective of distributing dividends of
30% of the net profit each year, and any cash in excess will be used
for share buyback programmes.
The Board of Directors recommends a dividend of DKK 66 million,
equivalent to DKK 4.00 per share eligible for dividend.
The short-term net bank debt amounts to DKK 471 million at 30 June
2008. The level thus exceeds the Group's financial objective of DKK
400 million. As a consequence, IC Companys is not expecting to
intitate share buyback programmes in 2008/09, but instead allocate
any cash in excess to reduce the short-term bank debt.
The other prerequisites of the group capital structure are as
follows:
* The average investment level in concept stores, showrooms,
supply chain and IT is expected to amount to up to 4% of revenue.
* The working capital is expected to represent 11% - 12% of
revenue
* Consolidated tax costs are expected to account for 27 -
29% of the pre-tax profit, of which 50 - 75% will be payable; the
remaining part will be offset against already recognised tax
assets.
* Short-term net bank debt is to be in the region of DKK 300
- 400 million.
* Long-term debt will be used solely to finance the
corporate head office at Raffinaderivej.
the multi brand strategy
IC Companys operates a portfolio of strong, very distinctive brands
that draw on the competencies and resources made available by the
Group's joint functions - an organization that combines the
commercial focus of each brand with the great cost and quality
benefits that having a number of joint functions brings.
Via the multibrand strategy, value is created through a systematic
utilisation of our industry competencies that cut across brands and
by utilising our economies of scale for a host of relevant joint
functions.
Each brand has a market-oriented management that handles market
positioning, product development, sales and marketing - the
activities that are vital to the development of each brand's identity
and are the decisive factor in a consumer's decision to buy.
Moreover, each brand is supported by a shared platform which handles
activities of no significance to the brand identity and gives each
brand substantial advantages in terms of cost savings and quality.
The Group's shared platform consists of a number of central functions
such as sales infrastructure, sourcing, logistics, HR, IT, Finance
and Administration. The Group's corporate brand - IC Companys - acts
as a guarantee of continuity, ability to deliver and
creditworthiness.
A natural risk diversification in several dimensions is an inherent
element of the Group's brand portfolio. The overall business risk has
been reduced through each brand pursuing an individually adapted
positioning and market strategy. In addition, the portfolio approach
reduces the creative risk by reducing the overall collection and
fashion risk. Furthermore, this risk reduction ensures that each
brand can afford to have a more characteristic design expression and
thus a stronger brand identification.
The shared PLATFORM - quality and synergy
The Group's shared platform encompasses a number of central,
corporate functions such as sales infrastructure, sourcing,
logistics, HR, IT, finance and administration. These joint functions
make it possible to utilise the synergies across the Group's brands
regardless of size.
The costs of operating the Group's joint functions excluding sales
logistics amount to 10.5% of revenue. The joint functions employ
about 28% of all company employees.
It is a central element of IC Companys' strategy to continue to
develop the Group's joint functions as:
* The shared platform makes it possible to achieve
considerable competence and cost benefits for each brand,
irrespective of size.
* The shared platform makes it possible to ensure a high
product quality and reliability of delivery to retailers and own
stores.
A strength to IC Companys lies in the combination of a multibrand
strategy and a shared platform. The objective of the shared platform
is continued efficiency improvement. The costs of operating the
shared platform are thus not expected to increase by the same rate as
revenue over the next years.
SALES INFRASTRUCTURE
The Group operates sales companies in 12 countries - Denmark, Sweden,
Norway, Finland, England, Ireland, Germany, Holland, Belgium, Poland,
Canada and China. In addition to its own sales companies, IC Companys
operates an export organisation, which operates primarily through
external agents and distributors. The sales companies hold the
executive sales responsibility for InWear, Jackpot, Matinique,
Cottonfield, Part Two and Soaked in Luxury.
Sales of Peak Performance are carried out by an independent and
regionalised sales organisation and to some extent by the Group's
sales companies. Sales of Tiger of Sweden, By Malene Birger, Saint
Tropez and Designers Remix Collection are carried out by the head
offices of the respective brands and through external agents.
SOURCING AND LOGISTICS
IC Companys has more than 30 years of experience in sourcing
internationally and outsources all end production to subsuppliers.
Sourcing for all brands is handled via joint sourcing offices in
Hong Kong, Shanghai, Bucharest, Istanbul and Dhaka and through
limited use of agents in Europe and India.
The joint sourcing offices ensure cost benefits for each brand,
irrespective of size, due to lower prices from production suppliers
and more cost-effective quality control of suppliers.
The shared sourcing offices also make it possible for all brands to
handle geographic sourcing changes quickly and securely. This enables
brands to take advantage of new sourcing opportunities and also
reduces IC Companys' operational risk.
A geographic breakdown of sourcing in 2007/08 by value is as
follows: 63% in China, 11% in Rumania, 9% in Turkey, 5% in India and
12% in other countries.
HUMAN RESOURCES
Since the beginning of 2006, IC Companys has worked on a
professionalisation of the HR effort. The Group has built an
experienced and professional HR team that supports all business and
platform units. In addition, staff administration and the recruitment
process were professionalised, just as the Group performs periodic
People Reviews in order to establish a foundation for employee
development, internal recruitment and succession planning.
Furthermore, the Group has initiated four academies aimed at our
store employees (Retail Academy), wholesale sales representatives
(Wholesale Academy), executives on various levels (Leadership
Academy) and courses of a more general nature for all employees
(Employee Academy).
IT, FINANCE & ADMINISTRATION
Strong IT support in all aspects of sourcing, distribution,
logistics, administration and sales also help the individual brands
focus on creative and commercial development activities. Shared
operation of the IT platform ensures cost benefits for the individual
brands.
Financial planning, follow-up, reporting and administration are
organised in a shared service centre which handles financial and
administrative tasks in the Group's sales companies. In addition to
significant cost benefits, this means that the Group can integrate
new units or implement organisational changes relatively easily and
quickly.
The Group has set out the goal to further enhance efficiency. In
addition, in the future strategy period the focal point will be on
improving decision support and enhancing the support of the Group's
business development.
BRAND PORTFOLIO
All Group brands are active in a world of fashion clothing and are
distributed via wholesale, franchise, retail and outlet sales, and as
such they have a uniform business risk and operate under uniform
long-term profitability requirements.
By means of our brand portfolio, IC Companys meets demands from
international consumers through a broad positioning spectrum,
different dress elements and a broad price structure. A presentation
of the brand portfolio can be found on the following pages:
revenue development
Revenue was DKK 3,737 million, which is DKK 383 million or 11% higher
than in 2006/07. Net store openings added DKK 88 million to the
revenue. Exchange rate fluctuations in 2007/08 had a neutral net
affect on revenue.
Sales performance for own brands:
The combined growth rate seen for own brands was 11% reaching DKK
3,698 million. Peak Performance, Tiger of Sweden, Cottonfield,
Matinique, Part Two, By Malene Birger and Designers Remix Collection
all achieve double digit growth rates, whereas Saint Tropez decline
by 3%.
Peak Performance has accomplished a growth of 11%. The growth is
driven by internationalisation and by the product lines Casual and
Golf. Peak Performance has achieved growth rates exceeding 20% in
Denmark, Norway, Belgium, Germany, Austria and Canada.
InWear has achieved a marginal advance of DKK 2 million to DKK 542
million. The development is not satisfactory.
Tiger of Sweden has achieved a 26% growth. The growth is driven by
increased internationalisation and 10 new franchise stores in
2007/08. Tiger of Sweden has accomplished growth rates in excess of
30% in Finland, Germany, Switzerland and Canada.
It is encouraging that Jackpot regardless of a 15% setback in order
intake for 2007/08 achieves a 2% advance. The increase is driven by
the development in the brand's own retail, which has achieved an
increase of 30% in the same-store sales.
Sales performance for own brands by market:
Of the total revenue 80% was generated outside Denmark and 48%
outside Scandinavia. Sales is carried out through own sales companies
in 31 countries by means of agents and distributors.
In 2007/08, revenue for own brands advanced by double digit growth
rates in Sweden, Denmark, Norway, Belgium, Poland, Canada, Austria
and France.
After several years of decline, Poland records sound progress with a
revenue growth of 34% in 2007/08. The development is driven by
Jackpot's and Cottonfield's retail operations in the country. As
previously mentioned the Group has launched a 3-year investment
programme for Jackpot and Cottonfield and expects to open 15 - 20 new
stores in 2008/09 in Eastern Europe (Poland, the Czech Republic and
Hungary).
After years of significant growth, the Group's Russian partner is
consolidating and has in the financial year 2007/08 achieved a 9%
decline.
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 caused a revenue fall of 17% in
2007/08.
DISTRIBUTION channels
WHOLESALE OPERATION
Wholesale revenue grew by DKK 189 million or 8% to DKK 2,497 million
(DKK 2,308 million). Wholesale revenue as a percentage of revenue was
reduced marginally by 2.0 percentage points to 66.8%. The total
number of third party retailers at 30 June 2008 is 12,000 against
11,500 in 2006/07.
For the Group's own brands the pre-order revenue achieved an increase
of 9% and accounts for approximately 87% of the wholesale revenue.
OTB revenue increased by 2% in 2007/08 and represents 13% of the
wholesale revenue. This includes franchise revenue, which is
increased by 22% and accounts for 11% of the wholesale revenue.
The distribution channel profit of the wholesale operation came to
DKK 419 million against DKK 384 million last year. Distribution
channel profit margin was increased by 0.2 percentage point to 16.8%
(16.6%).
RETAIL OPERATION
Retail revenue came in at DKK 1.092 million against DKK 915 million
last year, leading to a 19% growth. Same-store sales achieved an 11%
growth. Same-store sales increased by 9% in the fourth quarter of
2007/08.
Retail profit came to DKK 78 million against DKK 77 million last
year, which is equivalent to a retail profit margin of 7.2% (8.5%).
The development is to a significant degree affected negatively by the
retail activities for InWear and Cottonfield in China. The Group has
seen a considerable operational loss in the sales activities in China
in 2007/08 and has in the fourth quarter made further writedowns on
inventory and intangible fixed assets.
The Group's retail operations constitute stores in 15 countries
distributed between 243 locations. Store concentration is highest in
Denmark, Belgium, Holland, Sweden and Poland. The Group operates own
retail on combined 37,400 square metres (36,000 square metres in
2006/07)
Average revenue per square metre achieved in 2007/08 was DKK 33,000
(DKK 29,100). The level is still below the potential, even if
material differences occur across brands, markets and locations. The
level is expected to increase over the next years as the Group's
retail operation is optimised.
OUTLET OPERATION
Outlet revenue reached DKK 148 million DKK relative to DKK 131
million last year, which constitutes a 13% growth. Outlet profit came
to DKK 21 million corresponding to a profit margin of 14.1% as
measured against DKK 23 million and 17.6% last year.
Increasing full price sales remains a focus area in the primary
distribution channels and consequently a reduction of the influx of
new surplus products.
The Group operates 24 outlet stores on combined 7,000 square metres
in 9 countries. The average turnover per square metre in the Group's
outlets is DKK 22,000 (20,000 DKK in 2006/07).
Outlet operation forms an integral part of the Group's business model
for the profitable sale of residual post-season products. The
earnings capacity depends on the composition of the surplus stock and
thus fluctuates over time.
earnings development
GROSS PROFIT
Gross profit increased DKK 276 million or 14% to DKK 2,259 million
(DKK 1,983 million). The Group gross profit is consequently improved
by 1.3 percentage point to 60.4% (59.1%).
The Group's sourcing currencies for 2007/08 were hedged at a lower
exchange rate than in the same period in 2006/07. Viewed isolated,
this benefits the Group's gross margin by 1.7 percentage point in
2007/08.
As a result of a significant increase in inventory writedowns in
2007/08 as compared to last year, the Group's gross margin has been
affected. As a consequence of a reassessment of the Group's assets in
the fourth quarter, inventory writedowns amounting to DKK 15 million
were made for the Group's sales activities in China, Cottonfield
Female and the Group's inventory of supplementary products.
Wholesale gross margin improvement was the highest showing a total
improvement including exchange rate effect of 1.9 percentage point
and a total deterioration including exchange rate effect of 0.7
percentage point for retail.
CAPACITY COSTS
Capacity costs rose DKK 267 million or 16% to DKK 1,910 million
compared to DKK 1,643 million last year. The cost rate increased by
2.1 percentage point to 51.1% in 2007/08 against 49.0% in 2006/07.
The development is affected by non-recurring costs in 2007/08
amounting to DKK 25 million. Writedowns of tangible fixed assets in
the sales organisation in China account for DKK 5 million. DKK 13
million account for provisions for severance pay to the Group's Chief
Executive Officer. Furthermore, the Group had an extraordinary loss
on trade receivables in two export partners amounting to DKK 7
million. The negative affect on the cost rate combined comes to 0.7
percentage points.
Retail operation is more cost-intensive than wholesale operation.
Consequently, the cost rate is negatively affected by 0.4 percentage
point as a result of relatively increased retail revenue.
Furthermore, regulations of allowances for bad debts have increased
costs DKK 21 million, corresponding to a negative affect on the cost
rate of 0.6 percentage point.
Staff costs for 2007/08 grew DKK 124 million, representing 15%. The
development is caused primarily by an increase in the number of
employees of 8%. At 30 June 2007, the Group has had a net employee
influx of 189. Moreover, the development is caused by increasing
agent commissions and provisions made for severance pay mentioned
above.
Depreciation and amortisation increased DKK 17 million, or 17%, to
reach DKK 113 million (DKK 96 million), which was attributable to the
refurbishment of stores and showrooms and writedowns of tangible
fixed assets in China.
Other operating expenses grew DKK 116 million, or 15%, to DKK 871
million (DKK 756 million). Leasehold costs increased by 15% to DKK
313 million (DKK 273 million) Marketing costs increased by 7% to DKK
222 million (DKK 208 million)and constituted 6% of revenue in the
financial year 2007/08. Allowances for bad debts increased DKK 21
million to DKK 37 million DKK (DKK 15 million).
The Group's other operating income amounted to DKK 6 million against
an operating revenue of DKK 16 million in 2006/07. Of the achieved
income, DKK 6 million (DKK 9 million) is ascribed to the realisation
of leasehold rights in connection with the closure of stores.
OPERATING PROFIT
In the financial year 2007/08, IC Companys' performance generated an
increase in operating profit of DKK 9 million, or 3%, to DKK 349
million (DKK 340 million), representing an EBIT margin of 9.3%
(10.1%)
NET FINANCIAL ITEMS
Net financials amounted to an expense of DKK 32 million in the
financial year 2007/08 against DKK 20 million in 2006/07. DKK 8
million of the DKK 12 million increase account for a higher
withdrawal on the credit facilities of the Group and DKK 4 million
was attributable to averagely increased interest rates as compared to
2006/07.
INCOME TAX
Tax on the profit for the year was an expense of DKK 93 million,
representing a tax rate of 29%. Taxes were DKK 80 million in 2006/07,
corresponding to a tax rate of 25%.
The increased tax rate is attributable to deferred tax assets in
Spain and China, which are not recognised, and writedowns of deferred
tax assets concerning the Group's share incentive programmes.
Tax payable is calculated to be DKK 44 million and consists of tax
payments in countries where the Group either has no tax assets or
cannot offset such assets in full against the profit for the year. In
addition, DKK 111 million of the tax assets recognised in prior years
was used.
PROFIT FOR THE YEAR AND PROFIT ALLOCATION
The net profit for the year was DKK 224 million (DKK 241 million),
representing a year-on-year decline of DKK 17 million, or 7%.
Earnings per share decreased by 5% and amount to DKK 12.6 relative to
DKK 13.3 per share in 2006/07. Earnings per share were adjusted for
treasury shares and the diluting effect of outstanding share
incentive programmes.
The Board of Directors recommends a dividend of DKK 4.00 per share
eligible for dividend, equivalent to DKK 66 million. The remaining
part of the net profit will be taken to retained earnings.
BALANCE sheet and LIquidity
Non-current assets
The carrying amount of intangible assets was DKK 252 million at 30
June 2008 against DKK 246 million at 30 June 2007. The Group's
intangible assets increased primarily as a result of capitalisation
of development in software and IT systems in connection with
implementation of SAP financial system.
The carrying amount of property, plant and equipment was DKK 424
million at 30 June 2008 DKK relative to DKK 409 million at 30 June
2007. The increase was primarily attributable to the refurbishment of
stores and showrooms.
Consolidated gross tax assets amounted to DKK 189 million at 30 June
2008 relative to DKK 236 million at 30 June 2007. Recognised net
assets decreased DKK 29 million to DKK 79 million at 30 June 2008.
Taxable income estimates for the individual companies are based on
the applicable local tax rules and the budget approved by the Board
of Directors for 2008/09.
Inventories
Inventories grew DKK 66 million, equivalent to 14%, to DKK 532
million at 30 June 2008 against DKK 466 million at 30 June 2007. The
increase was partly due to the higher level of activity, and partly
driven by an increase in surplus products as a consequense of lower
activity in the second half of the financial year than expected.
Trade receivables
Trade receivables rose DKK 30 million to reach DKK 297 million at 30
June 2008, equivalent to an 11% growth. The increase is driven
primarily by an increase in wholesale revenue and a deterioration in
the customers' payment patterns in the form of an increasing share of
overdue trade receivables and a generally decreasing rate of
turnover. The development has entailed further allowances for bad
debts constituting DKK 21 million relative to 2006/07.
Equity
Group assets increased DKK 83 million to DKK 1,932 million as
compared to DKK 1,849 million at 30 June 2007, whilst equity was
reduced DKK 93 million to DKK 474 million.
Equity was positively affected by the net profit for the year of DKK
224 million. Equity was reduced DKK 238 million through the Group's
share buyback programme, of which DKK 50 million has been employed in
connection with stock option programmes granted. Furthermore, paid
dividends for 2006/07 accounts for DKK 74 million.
Cash flow and capital investments
Consolidated cash flows from operating activities decreased DKK 49
million to DKK 340 million relative to DKK 291 million in 2006/07.
This is primarily attributable to an increased operating profit and a
decrease in funds tied up in the group working capital.
Cash flow from investing activities amounts to DKK 138 million
relative to DKK 186 million in 2006/07. Other operating investments
made during the year totalled DKK 141 million, of which DKK 108
million was spent on new concept stores, as well as refurbishing
existing concept stores and showrooms.
Free cash flow from operating and investing activities was DKK 202
million relative to DKK 105 million last year.
Cash flow from financing activities was an outflow of DKK 285
million. This was primarily attributable to a share buyback programme
amounting to DKK 238 million in the financial year 2007/08 and
dividends amounting to DKK 74 million from 2006/07.
Interest-bearing debt
Consolidated net debt to financial institutions increased DKK 81
million during the financial year to reach DKK 639 million DKK at 30
June 2008 (DKK 558 million). The increase in debt is attributable to
an increased withdrawal on the Group's credit facilities.
The Group's available committed credit lines amounted to DKK 1.420
million at 30 June 2008 (DKK 1.209 million). Out of this amount, a
total of DKK 771 million was drawn at 30 June 2008, and DKK 270
million had been used for trade finance facilities and guarantees.
Thus, the Group's available unused credits totalled DKK 379 million
at 30 June 2008 (DKK 300 million).
POST BALANCE SHEET EVENTS
Board member Niels Hermansen resigned 1 August 2008 from the Board of
Directors of IC Companys A/S. The search for a new Board member has
been initiated.
As announced in stock exchange announcement of 9 September 2008, the
Board of Directors granted Anders Cleemann 30,000 stock options after
his appointment to the Executive Team. The stock options granted give
admittance to - in immediate continuation of the company's release of
the annual report for 2008/09, 2009/10 and 2010/11 - against payment
in cash - to buy 10,000 shares annually.
As outlined in the profit announcement for the year 2007/08, the
Group has simplified the organisation by an integration of the brand
managements of InWear and Matinique, and Jackpot and Cottonfield,
respectively. Moreover, sales responsibility between the individual
brand managements and the country management was redefined in order
to increase local anchorage of sales focus.
Apart from this and other factors included in the financial
statements, the Executive Board does not have knowledge of events
occurred after 30 June 2008, which are expected to have a material
affect on the financial position or future prospects of the Group.
STATEMENT BY THE MANAGEMENT
The Board of Directors and the Executive Board have today presented
the Annual Report of IC Companys A/S for the financial year 1 July
2007 - 30 June 2008.
The Annual Report has been prepared in accordance with the
International Financial Reporting Standards as adopted by the EU and
additional Danish disclosure requirements for the annual reports of
listed companies. We consider the accounting policies to be
appropriate to the effect that the Annual Report gives a true and
fair view of the Group's and the Parent Company's assets andliabilities, financial position at 30 June 2008 and of consolidated
operations and cash flows for the financial year 2007/08.
We consider the Annual Report to give a true and fair view of the
development in the Group's and the Parent Company's operations and
financial situation, financial performance of the financial year and
of the Group's financial position in its entirety and a true and fair
view of the material risks and elements of uncertainty faced by the
Group.
We recommend that the Annual Report be adopted by the shareholders at
the annual general meeting.
Copenhagen, 16 September 2008
Executive Board:
NIELS MIKKELSEN CHRIS BIGLER
ANDERS CLEEMANN
President & CEO Chief Financial
Officer Executive Brand Officer
Board of Directors:
NIELS ERIK MARTINSEN HENRIK HEIDEBY OLE
WENGEL
President Deputy
Chairman Deputy Chairman
PER BANK ANDERS COLDING
FRIIS
The Independent auditors' report
To the shareholders of IC Companys A/S
We have audited the annual report of IC Companys A/S for the
financial year 1 July 2007 to 30 June 2008, which comprises the
statement by Management on the annual report, Management's review,
income statement, balance sheet, statement of changes in equity, cash
flow statement and notes, including the accounting policies, for the
Group as well as the Parent. The annual report has been prepared in
accordance with International Financial Reporting Standards as
adopted by the EU and additional Danish disclosure requirements for
listed companies.
Management's responsibility for the annual report
Management is responsible for the preparation and fair presentation
of an annual report in accordance with International Financial
Reporting Standards as adopted by the EU and additional Danish
disclosure requirements for listed companies. This responsibility
includes: designing, implementing and maintaining internal control
relevant to the preparation and fair presentation of an annual report
that is free from material misstatement, whether due to fraud or
error, selecting and applying appropriate accounting policies, and
making accounting estimates that are reasonable in the circumstances.
Auditors' responsibility and basis of opinion
Our responsibility is to express an opinion on this annual report
based on our audit. We conducted our audit in accordance with Danish
and International Standards on Auditing. Those Standards require that
we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance whether the annual report is free from
material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the annual report. The
procedures selected depend on the auditor's judgement, including the
assessment of the risks of material misstatement of the annual
report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity's preparation and fair presentation of an annual report in
order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by Management, as
well as evaluating the overall presentation of the annual report.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Our audit has not resulted in any qualification.
Opinion
In our opinion, the annual report gives a true and fair view of the
Group's and the Parent's financial position at 30 June 2008, and of
their financial performance and their cash flows for the financial
year 1 July 2007 to 30 June 2008 in accordance with International
Financial Reporting Standards as adopted by the EU and additional
Danish disclosure requirements for listed companies.
Copenhagen, 16 September 2008
Deloitte Statsautoriseret Revisionsaktieselskab
Jesper Jørgensen Henrik
Z. Hansen
State Authorised Public Accountant State Authorised
Public Accountant
income statement
BALANCE sheet - assets
BALANCE sheet - equity and liabilities
Movements in equity
Cash flow statement
The cash flow statement cannot be deducted from the released
financial statements.
NOTes to the financial statements
1. Accounting policies
The Annual Report of IC Companys A/S, which comprises the Parent
Company's financial statements and the consolidated financial
statements, has been prepared in accordance with the International
Financial Reporting Standards as adopted by the EU and additional
Danish disclosure requirements for the annual reports of listed
companies, cf. the disclosure requirements imposed by the OMX Nordic
Exchange Copenhagen on annual reports of listed companies and the
executive order on the adoption of IFRS with reference to the Danish
Financial Statements Act.
The financial statements are also presented in accordance with the
IFRS standards issued by the International Accounting Standards Board
(IASB).
The Annual Report is presented in Danish kroner (DKK), which is
considered the primary currency of the Group's activities and the
functional currency of the Parent Company
The accounting policies are used consistently in the financial year
and for the comparative figures. A few reclassifications of the
comparative figures have been made in the notes to the financial
statements, which have had no affect on the income statement, the
balance sheet and the equity in the comparative year.
NEW STANDARDS AND INTERPRETATIONS ADOPTED IN 2007/08
In the financial statements for 2007/08 IC Companys A/S has adopted
all new and changed standards (IFRS/IAS) and new interpretations
(IFRIC), in force as at 1 July 2007 or subsequent. The following
standards and interpretations have been adopted:
* IAS 1, Presentation of Financial Statements (amended in
2005).
* IAS 32, Financial Instruments: Presentation.
* IFRIC 7, Applying the Restatement Approach under IAS 29
Financial Reporting in Hyperinflationatory Economies.
* IFRIC 8, Scope of IFRS 2.
* IFRIC 9, Reassessment of Embedded Derivatives.
* IFRIC 10, Interim Financial Reporting and Impairment.
* IFRIC 11, IFRS 2 - Group and Treasury Share Transactions.
The implementation of these standards and interpretations has not led
to any changes in the Group's nor the Parent Company's accounting
policies in 2007/08 or prior years, but has solely affected the scope
and nature of the notes to the financial statements.
STANDARDS AND INTERPRETATIONS NOT YET IN FORCE
At the time of the publication of the financial statements a number
of new and changed standards and interpretations not yet in force or
are pending EU approval and are therefore not incorporated in the
financial statements.
* IAS 1 (Amended 2007), Presentation of Financial
Statements. The amended standard will have taken effect from
financial years commencing 1 January 2009 or later. The standard is
pending EU approval.
* Amended IFRS 2, Share-based Payment. The amended standard
will have taken effect from financial years commencing 1 January
2009 or later. The standard is pending EU approval.
* Amended IFRS 3, Business Combinations. The Amended
standard will be in force for financial years commencing 1 July
2009 or later. The standard is pending EU approval.
* IFRS 8, Operating Segments. The amended standard will have
taken effect from financial years commencing 1 January 2009 or
later. The standard is pending EU approval.
* Amended IAS 23, Borrowing costs. The amended standard will
have taken effect from financial years commencing 1 January 2009 or
later. The standard is pending EU approval.
* Amended IAS 27, Consolidated and Separate Financial
Statements. The Amended standard will have taken effect from
financial years commencing 1 July 2009 or later. The standard is
pending EU approval.
* Amended IAS 39, Financial instruments: Recognition and
Measurement. The amendments define the risks that may be
recognised. The amended standard will have taken effect from
financial years commencing 1 July 2009 or later. The standard is
pending EU approval.
* IFRIC 12, Service Concession rights. The interpretation
will have taken effect from financial years commencing 1 January
2008 or later. The interpretation is pending EU approval.
* IFRIC 13, Customer Loyalty Programmes. The interpretation
will have taken effect from financial years commencing 1 August or
later. The interpretation is pending EU approval.
* IFRIC 14, The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction. The interpretation will
have taken effect from financial years commencing 1 January 2008 or
later. The interpretation is pending EU approval.
* IFRIC 15, Agreements for the Construction of Real Estate.
The interpretation will have taken effect from financial years
commencing 1 January 2009 or later. The interpretation is pending
EU approval.
* IFRIC 16, Hedges of a Net Investment in a Foreign
Operation. The interpretation will have taken effect from
financial years commencing 1 October 2008 or later. The
interpretation is pending EU approval.
* Amended IAS 32, Financial instruments: Presentation and
Amended IAS 1, Presentation of financial statements. The amendments
concern puttable financial instruments and obligations occurring at
liquidation. The amended standards will have taken effect from
financial years commencing 1 January 2009 or later. The standards
are pending EU approval.
* Amended IAS 27, Consolidated and Separate Financial
Statements and amended IFRS 1, First-Time Adoption of International
Financial Reporting Standards. The amendments concern statement of
costs in relation to investments in subsidiaries, joint venture
companies and associated companies. The amended standards will have
taken effect from financial years commencing 1 January 2009. The
amendments are pending EU approval.
* Improvements to IFRS'. Amendments to 20 standards as part
of annual amendment project 2008. The amendments will have taken
effect from financial years commencing 1 January 2009 or later,
with the exception of IFRS 5 that will be in force for financial
years commencing 1 July 2009 or later. The amendments are pending
EU approval.
The future IFRS amendments are not expected to have material impact
on the financial statements for the future financial years, apart
from the additional disclosure requirements following from
implementation of IFRS 8, Operating Segments.
BASIS OF CONSOLIDATION
The consolidated financial statements consolidate the financial
statements of IC Companys A/S (the "Parent Company") and subsidiaries
in which the Company's voting rights directly or indirectly exceed
50%, or in which the Company has a controlling interest in any other
way.
The consolidated financial statements are prepared on the basis of
the financial statements of the Company and the individual
subsidiaries by combining items of a homogeneous nature. Equity
interests, intercompany transactions, intercompany balances,
unrealised intercompany gains on inventories and dividends are
eliminated.
The items of the financial statements of subsidiaries are fully
consolidated in the consolidated financial statements. The minority
interests' proportionate share of the profit is included in the
consolidated profit for the year.
Business combinations
Newly acquired or newly established companies are recognised in the
consolidated financial statements from the date of acquisition or
establishment. The date of acquisition is the date when control of
the company actually passes to the Group. Companies sold or
discontinued are recognised in the consolidated income statement up
to the date of disposal. The date of disposal is the date when
control of the company actually passes to a third party.
Acquisitions are accounted for using the purchase method, under which
the identifiable assets, liabilities and contingent liabilities of
companies acquired are measured at fair value at the date of
acquisition. Non-current assets held for sale are measured at fair
value less expected costs to sell, however.
Restructuring costs are only recognised in the take-over balance
sheet if they represent a liability to the acquired company. The tax
effect of revaluations is taken into account.
The cost of a company is the fair value of the consideration paid
plus costs directly attributable to the business combination. If the
final determination of the consideration is conditional on one or
more future events, these adjustments are only recognised in cost if
the event in question is likely to occur and its effect on cost can
be reliably measured.
Any excess of the cost of an acquired company over the fair value of
the acquired assets, liabilities and contingent liabilities
(goodwill) is recognised as an asset under intangible assets and
tested annually for impairment. If the carrying amount of an asset
exceeds its recoverable amount, the asset is written down to the
lower recoverable amount.
In case of negative differences (negative goodwill), the calculated
fair values and the calculated cost of the company are reassessed. If
the fair value of the acquired assets, liabilities and contingent
liabilities still exceeds cost following the reassessment, the
difference is recognised as income in the income statement.
FOREIGN CURRENCY TRANSLATION
For each of the reporting entities in the Group, a functional
currency is determined. The functional currency is the currency in
the primary economic environment in which the individual reporting
entity operates. Transactions in currencies other than the functional
currency are transactions denominated in foreign currencies.
On initial recognition, transactions denominated in foreign
currencies are translated into the functional currency at the
exchange rate ruling at the transaction date. Exchange differences
arising between the exchange rates at the transaction date and the
date of payment are recognised in the income statement as financial
income or expenses.
Receivables, payables and other monetary items denominated in foreign
currencies are translated into Danish Kroner at the exchange rates
ruling at the balance sheet date. The difference between the exchange
rate ruling at the balance sheet date and the exchange rate at the
date when the receivable or payable arose or was recorded in the most
recent annual report is recognised in the income statement under
financial income and expenses. Property, plant and equipment and
intangible assets, inventories and other non-monetary assets acquired
in foreign currency and measured based on historical cost are
translated at the exchange rates at the transaction date.
The balance sheets of foreign subsidiaries are translated at the
exchange rate ruling at the balance sheet date, while income
statements are translated at average exchange rates for the year.
Exchange differences arising on the translation of foreign
subsidiaries' opening equity using the exchange rates ruling at the
balance sheet date as well as on the translation of the income
statements using average exchange rates at the balance sheet date are
taken directly to equity. Exchange adjustments of receivables and
subordinated loan capital in foreign subsidiaries that are considered
to be part of the overall investment in the subsidiary are taken
directly to equity.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Derivative financial instruments are measured on initial recognition
in the balance sheet at their fair value. Positive and negative fair
values of derivatives are recognised under other receivables and
other payables, respectively, as unrealised gains on financial
contracts and unrealised losses on financial contracts, respectively.
Changes in the fair value of derivative financial instruments
designated as and qualifying for recognition as a hedge of expected
future transactions are recognised directly in equity. Income and
expenses relating to such hedge transactions are transferred from
equity on realisation of the hedged item and recognised in the same
line item as the hedged item.
For derivative financial instruments not qualifying as hedges,
changes in the fair value are recognised in the income statement
under financial income and expenses.
Changes in the fair value of derivative financial instruments used to
hedge net investments in independent foreign subsidiaries and which
otherwise meet the criteria for hedge accounting are recognised
directly in equity (Net Investment Hedge).
SHARE-BASED INCENTIVE PLANS
Share-based incentive plans in which employees can only opt to buy
shares in the Parent Company (equity schemes) are measured at the
equity instruments' fair value at the grant date and recognised in
the income statement under staff costs over the period during which
the employee's right to buy the shares vests. The balancing item is
recognised directly in equity.
The fair value of equity instruments is determined using the Black &
Scholes model with the parameters stated in note 5 to the financial
statements.
DISCONTINUED OPERATIONS AND NON-CURRENT ASSETS HELD FOR SALE
Discontinued operations are major business areas or geographical
areas which have been sold or which are held for sale according to an
overall plan.
The results of discontinued operations are presented as a separate
item in the income statement, consisting of the activity's operating
profit/loss after tax and any gains or losses on fair value
adjustment or sale of the related assets.
Non-current assets and groups of assets held for sale, including
assets related to discontinued operations, are presented as a
separate item in the balance sheet as current liabilities.
Liabilities directly related to the assets and discontinued
operations in question are presented as current liabilities in the
balance sheet.
Non-current assets held for sale are not depreciated or amortised,
but are written down to fair value less expected costs to sell where
this is lower than the carrying amount.
INCOME STATEMENT
Revenue
Revenue from the sale of goods is recognised in the income statement
when delivery and transfer of risk to the buyer have taken place and
if the income can be reliably measured and is expected to be
received. Revenue is measured excluding VAT, indirect taxes and
discounts related to sales.
Revenue is measured at the fair value of the consideration received
or receivable.
In addition to the sale of goods, revenue comprises licence revenue.
Cost of sales
Cost of sales includes direct costs incurred to obtain the revenue
for the year. The Company recognises cost of sales as revenue is
earned. The change for the year in the inventory of goods for resale
is included in cost of sales.
Staff costs
Staff costs include salaries, remuneration, pensions, share-based
payments and other staff costs to the Company's employees, including
the members of the Executive Board and Board of Directors. Agents'
commissions to external sales agents are also included.
Depreciation, amortisation and writedown of fixed assets
Amortisation, depreciation and impairment comprise amortisation of
intangible assets, depreciation of property, plant and equipment and
impairment losses for the year.
Other operating expenses
Other operating expenses comprise other purchase and selling costs
and administrative expenses of a primary nature relative to the
Company's principal activities.
Leasing expenses relating to operational leasing agreements are
recognised by straight-line method in the income statement under"Other operating expenses".
Other gains and losses
Other gains and losses comprise items of a secondary nature relative
to the principal activities, including gains and losses on the sale
of intangible assets and property, plant and equipment.
Special items
Includes material amounts of a one-off nature that are not directly
attributable to normal activities, including special impairment
charges and provisions and the reversal hereof.
Financial income and expenses
Financial income and expenses include interest, the interest element
of finance lease payments, realised and unrealised exchange
differences, fair value adjustments of derivative financial
instruments which do not qualify for hedge accounting and
supplements, deductions and allowances relating to the payment of
income tax.
Interest income and expense is accrued based on the principal and the
effective rate of interest. The effective rate of interest is the
discount rate to be used in discounting expected future payments in
relation to the financial asset or the financial liability so that
their present value corresponds to the carrying amount of the asset
or liability, respectively.
Income tax
Tax for the year, consisting of the year's current tax and movements
in deferred tax, is recognised in the income statement as regards the
amount that can be attributed to the profit/loss for the year and
posted directly in equity as regards the amount that can be
attributed to movements taken directly to equity. Exchange
adjustments of deferred tax are recognised as part of the adjustment
of deferred tax for the year.
The current tax charge for the year is calculated based on the tax
rates and rules applicable at the balance sheet date.
The Parent Company is taxed jointly with all wholly-owned Danish
subsidiaries. The current income tax liability is allocated among the
companies of the Danish tax pool in proportion to their taxable
income (full absorption with refunds for tax losses). The jointly
taxed companies pay tax under the Danish on-account tax scheme.
Deferred tax is calculated using the current tax rules and tax rates
on temporary differences between carrying amounts and tax bases.
Deferred tax assets, including the tax base of tax losses carried
forward, are recognised at the expected value of their utilisation as
a setoff against future taxable income or as a setoff against
deferred tax liabilities within the same legal entity and
jurisdiction. If deferred tax is an asset, it is included in
non-current assets based on an assessment of the potential for future
realisation.
Deferred tax is calculated based on the planned use of each asset and
settlement of each liability, respectively.
Deferred tax is measured using the tax rates and tax rules that,
based on legislation in force or in reality in force at the balance
sheet date, are expected to apply in the respective countries when
the deferred tax is expected to crystallise as current tax. Changes
in deferred tax as a result of changed tax rates or tax rules are
recognised in the income statement.
Deferred tax is provided on temporary differences arising on
investments in subsidiaries, unless the parent is able to control
when the deferred tax is to be realised and it is likely that the
deferred tax will not crystallise as current tax in the foreseeable
future.
BALANCE SHEET
Intangible assets
Goodwill
On initial recognition, goodwill is recognised in the balance sheet
at cost as described under "Business combinations". Subsequently,
goodwill is measured at cost less accumulated impairment. Goodwill is
not amortised.
The carrying amount of goodwill is allocated to the Group's
cash-generating units at the date of acquisition. The determination
of cash-generating units is based on the management structure and the
internal financial management.
Amortization is not made for goodwill; however, it is tested annually
for impairment as a minimum one time, cf. below.
Other intangible assets
Payments to take over leases ("key money") are classified as
leasehold rights. Leasehold rights are amortised over the shorter of
the lease period and the useful life. The basis of amortisation is
reduced by any impairment write-downs.
Leasehold rights with an indefinable useful life are not amortised,
but tested for impairment annually.
Software and IT development is amortised over the useful life of
three to five years. Amortisation is provided on a straight-line
basis.
Property, plant and equipment
Property, plant and equipment are measured at historical cost less
accumulated depreciation and impairment losses.
Cost comprises the acquisition price and costs directly related to
the acquisition until the time when the asset is ready for use.
The difference between cost and the expected residual value is
depreciated on a straight-line basis over the expected economic lives
of the assets. The depreciation period is determined on the basis of
Management's experience in the Group's business area, and Management
believes this to be the best estimate of the economic lives of the
assets, which are as follows:
Leasehold improvements up to 10 years
Buildings 25-50 years
Equipment and furniture 3-5 years
If the depreciation period or the residual values are changed, the
effect on depreciation going forward is recognised as a change in
accounting estimates.
Gains and losses on disposal of property, plant and equipment are
computed as the difference between the selling price less costs to
sell and the carrying amount at the date of disposal. Gains and
losses are recognised in the income statement under other gains and
losses.
Impairment
The carrying amount of goodwill is tested at least once a year for
impairment together with the other non-current assets of the
cash-generating unit to which the
goodwill has been allocated, and is written down to the recoverable
amount through the income statement if this is lower than the
carrying amount. The recoverable amount is generally calculated as
the present value of the future cash flows expected to be derived
from the business or activity (cash-generating unit) to which the
goodwill relates.
The carrying amount of non-current assets other than goodwill,
intangible assets with indefinable useful lives, deferred tax assets
and financial assets is tested annually for indications of
impairment. If such an indication exists, the recoverable amount of
the asset is calculated. The recoverable amount is the higher of the
fair value of the asset less costs to sell and the value in use.
An impairment loss is recognised when the carrying amount of an asset
or a cash-generating unit exceeds the recoverable amount of the asset
or the cash-generating unit. Impairment losses are recognised in the
income statement under depreciation, amortisation and writedowns.
Impairment write-downs of goodwill are not reversed. Impairment
write-downs of other assets are reversed to the extent changes have
occurred to the assumptions and estimates leading to the write-down.
Write-downs are only reversed to the extent the new carrying amount
of an asset does not exceed the carrying amount the asset would have
had net of depreciation, had the asset not been written down.
Financial Assets
Securities are measured at their fair value on the balance sheet
date.
Other investments are measured at cost or at fair value at the
balance sheet date, if this is lower for reasons that are not
considered to be temporary.
Inventories
Inventories are measured at cost using the FIFO method. Inventories
are written down to the lower of cost and net realisable value.
The cost of raw materials and consumables includes the purchase price
and direct costs to take delivery of the products.
The cost of finished products includes the cost of raw materials,
consumables, external production costs and costs to take delivery of
the products, including transportation costs and quotas. The net
realisable value of finished products is determined as the expected
selling price less costs incurred to execute the sale.
Receivables
Receivables are on initial recognition measured at fair value and
subsequently at amortised cost, which usually corresponds to the
nominal value less provision for bad debts.
Prepayments
Prepayments recognised under assets comprise costs incurred relating
to the following financial year, including collection samples, rent,
insurance, etc.
Dividends
Proposed dividends are recognised as a liability at the time of
adoption by the shareholders at the annual general meeting.
Treasury shares
The acquisition and sale of treasury shares and dividends thereon are
taken directly to equity under the line item "Retained earnings".
Pension obligations
The Group has entered into pension agreements and similar agreements
with most of the Group's employees.
Obligations relating to defined contribution plans are recognised in
the income statement in the period in which they are earned, and
payments due are recognised in the balance sheet under other
payables.
For defined benefit plans, annual actuarial calculations are made of
the net present value of future benefits to be paid under the plan.
The net present value is calculated based on assumptions of the
future developments of salary, interest, inflation and mortality
rates. The net present value is only calculated for those benefits
earned by the employees through their employment with the Group until
the present. The actuarial calculation of the net present value less
the fair value of any assets related to the plan is included in the
balance sheet as pension obligations. See below, however.
Differences between the expected development of pension assets and
liabilities and the realised values are termed actuarial gains or
losses. Subsequently, all actuarial gains or losses will be
recognised in the income statement.
If a pension plan represents a net asset, the asset is recognised
only to the extent that it offsets future repayments from plans, or
it will reduce future payments to the plan.
Provisions
Provisions are recognised when, as a consequence of a past event
during the financial year or previous years, the Group has a legal or
constructive obligation, and it is likely that settlement of the
obligation will require an outflow of the Company's financial
resources.
Provisions are measured as the best estimate of the costs required to
settle the liabilities at the balance sheet date. Provisions with an
expected term of more than a year after the balance sheet date are
measured at present value.
In connection with a planned restructuring of the Group, provision is
made only for liabilities relating to restructurings that have been
set out in a specific plan and where those affected have been
informed of the overall plan.
Other financial liabilities
Other financial liabilities, including bank loans and trade payables,
are on initial recognition measured at fair value. In subsequent
periods, financial liabilities are measured at amortised cost,
applying the effective interest method, to the effect that the
difference between the proceeds and the nominal value is recognised
in the income statement as financial expenses over the term of the
loan.
CASH FLOW STATEMENT
The cash flow statement shows the Group's and the Parent Company's
cash flows for the year, broken down by operating, investing and
financing activities, and the year's changes in cash and cash
equivalents as well as the Group's cash and cash equivalents at the
beginning and end of the year.
The cash flow statement shows cash flows from operating activities
indirectly, based on the operating profit.
The cash flow from operating activities is calculated as the Group's
share of results adjusted for non-cash operating items, the cash
effect of special items, provisions, financial items paid, movements
in working capital and income tax paid.
The working capital comprises current assets, excluding cash items or
items attributable to the investing activity, less current
liabilities excluding bank loans, mortgages and income tax payable.
The cash flow from investing activities includes payments regarding
the purchase and sale of non-current assets and securities, including
investments in companies.
The cash flow from financing activities includes payments to and from
shareholders, mortgage loans raised and instalments thereon and other
non-current liabilities not included in working capital.
Cash and cash equivalents comprise cash and net short-term bank loans
and overdrafts that are an integral part of the Group's cash
management.
SEGMENT INFORMATION
The Group's primary segment is the business segment "fashionwear".
The secondary segment is the Group's geographical markets. Segments
are based on the Group's risks and managerial and internal financial
management.
Segment information for the secondary segment is otherwise disclosed
in accordance with the Group's accounting policies. Segment assets
are those operating assets that are employed by a segment in its
operating activity and that are either directly attributable or can
be allocated to the segment on a reasonable basis.
FINANCIAL HIGHLIGHTS AND KEY RATIOS
The key ratios have been calculated in accordance with"Recommendations and Financial Ratios 2005" issued by the Danish
Association of Financial Analysts. The definitions of the key ratios
used are shown on page 93.
Capital employed, including goodwill, is defined as net working
capital (NWC) plus property, plant and equipment and intangible
assets, including goodwill, and less other provisions and other
long-term operating commitments. Goodwill is recognised at cost less
goodwill impairment.
Net working capital (NWC) is defined as inventories, receivables and
other current operating assets less trade payables and other
liabilities and other current operating liabilities.
Earnings per share and diluted earnings per share are calculated as
specified in note 10.
2. ACCOUNTING ESTIMATES AND JUDGMENTS
The calculation of the future carrying amount of certain assets and
liabilities requires an estimate of how future events will affect the
value of such assets and liabilities at the balance sheet date.
Estimates material to the financial reporting are made in the
calculation of depreciations, amortisations and impairment
writedowns, the measurement of inventories and receivables, tax
assets, pensions and provisions.
The estimates applied are based on assumptions which Management
believes to be reasonable, but which are inherently uncertain and
unpredictable. In the consolidated financial statements, the
measurement of inventories could be materially affected by
significant changes in estimates and assumptions underlying the
calculation of inventory write-downs. Similarly, the measurement of
goodwill could be affected by significant changes in estimates and
assumptions underlying the calculation of values. See note 12 for a
more detailed description of impairment tests for intangible assets.
The measurement of inventories is based on an individual assessment
of season and age and on the realisation risk assessed to exist for
individual items.
Tax assets are written down if:
* Management believes that it is not sufficiently likely
that the operation of an individual tax object (company) or a group
of jointly taxed companies can generate a profit within the
foreseeable future (typically three to five years);
* the expected taxable income is insufficient for the tax
assets to be exploited in full; or
* at the balance sheet date, there is uncertainty with
respect to the value of the tax asset, for instance as a result of
an ongoing tax audit or pending tax litigation.
3. SEGMENT INFORMATION FOR THE GROUP
Business segments
In terms of the primary segment, all the Group's brands operate in
sales of "fashionwear" and, in Management's opinion in all material
respects all brands have similar risk profiles and similar
prerequisites in terms of long-term financial performance.
Furthermore the supply-, the distribution- and the sales processes
are shared for all brands. On this basis, the Group does not disclose
separate segment information for the individual brands, which is
considered to be in compliance with the requirements of IAS 14.
Geographical segments
The Group's activities are primarily based in Scandinavia (Denmark,
Sweden and Norway) and the rest of Europe.
The below table specifies the Group's sale of goods, broken down by
geographic markets, and the allocation of carrying amounts and the
additions for the year of property, plant and equipment and
intangible assets broken down by geographical areas based on physical
location.
4. revenue
5. staff costs
Remuneration of Board of Directors, Executive Board and other
executives:
The members of the Executive Board and a number of other executives
are included in a bonus plan the payments of which are related to the
financial performance of the employee's own area of responsibility.
The bonus potential is in the range of 20-30% of the annual salary.
The bonus plan is based on profits achieved in the individual
financial year, which helps ensure that the Group's growth targets
are met.
Remuneration policy
The Board ensures that the individual remuneration of the members of
the Executive Board reflects their performance and the value added to
the company. The remuneration paid to the members of the Executive
Board consists of a cash salary, a 10% pension, an annual bonus, a
company car, stock option plans, and the usual other benefits. The
overall composition of the Executive Board's remuneration is in
general expected to be unchanged for 2008/09 where the remuneration
policy will be applied as in 2007/08.
If the employment of a member of the Executive Board is terminated by
the Company before reaching retirement age, the Company shall pay his
salary during the period of notice, which is 12 months, as well as
salary for a further 24 months, against which any new salary may be
offset after 3 months.
Stock option programme
In the spring of 2008, the Board of Directors granted stock options
to the Chief Executive Officer and the Chief Financial Officer of the
Company. At 30 June 2008, the stock option plan comprises 130,000
outstanding stock options.
Each stock option entitles the holder to acquire one existing share
of DKK 10 nominal value in the Company. The stock option plan
entitles the holders to buy 0.7% of the share capital if all stock
options are exercised.
The stock options granted give the Group's Chief Executive Officer
admittance to in immediate continuation of the company's release of
the annual report for 2008/09, 2009/10, 2010/11, 2011/2012 and
2012/13 against payment in cash to buy 20,000 shares annually.
The stock options granted give the Group's Chief Financial Officer
admittance to in immediate continuation of the company's release of
the annual report for 2007/08, 2008/09 and 2009/10 against payment in
cash - to buy 10,000 shares annually.
The options were issued at an exercise price corresponding to DKK
180.0 and 5% per annum is added to the exercise price calculated from
31 March 2008. Unexercised options from one year can be transferred
to the two subsequent years. In the event of termination of
employment, all exercised stock options will lapse.
The options may only be settled in shares. A part of the Company's
holding of treasury shares is reserved for settlement of the options
granted.
In September 2007, 66 executives and key employees were 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 total grant
constitutes 237,769 stock options that each entitles the holder the
right to acquire one existing share at DKK 10 nominal value. The
stock option programme entitles the holder to acquire 1.3% of the
share capital in the event that all stock options are exercised.
The options were issued at an exercise price corresponding to DKK
329,39 and 5% per annum is added to the exercise price calculated
from 13 September 2007.
The options may be exercised at the earliest after the publication of
the Company's Annual Report 2009/10 and not later than after the
publication of the Company's Annual Report 2012/13.
The options may only be settled in shares. A part of the Company's
holding of treasury shares is reserved for settlement of the options
granted.
In the spring of 2005, IC Companys granted stock options to the
Executive Board (two persons). At 30 June 2008, the stock option plan
comprised 60,000 outstanding stock options and 40,000 stock options
have been exercised in 2007/08. Each stock option entitles the holder
to acquire one existing share of DKK 10 nominal value in the Company.
In the financial year 2007/08, 60,000 stock options have lapsed as a
consequence of termination of employment. The stock option plan
entitles the holders to buy 0.3% of the share capital if all stock
options are exercised.
The options were issued at an exercise price corresponding to DKK
154.50 and 5% per annum is added to the exercise price calculated
from 15 April 2005. Unexercised options from one year cannot be
transferred to subsequent years.
The options may only be settled in shares. A part of the Company's
holding of treasury shares is reserved for settlement of the options
granted.
Specification of outstanding stock options:
The average market price of options exercised in 2007/08 was DKK
355.5 (2006/07: DKK 344.5).
In 2007/08, the fair value of the stock options recognised in the
consolidated income statement amounted to DKK 2.8 million (2006/07:
DKK 1.2 million). In 2007/08, the fair value of the stock options
recognised in the Parent Company's income statement amounted to DKK
1.5 million (2006/07: DKK 1.2 million).
The exercise period of stock options granted to the Executive Board
in 2007/08 is a period of 30 days from the release of the Company's
Annual Report from the autumn of 2008 to the autumn of 2013. The
overall plan can be exercised by 10,000 stock options in the autumn
of 2008, 30,000 in the autumn of 2009, 30,000 stock options in the
autumn of 2010 and the remaining 60,000 stock options can be
exercised by 1/3 in each of the subsequent years.
The exercise period of stock options granted to executives in 2007/08
is a period of 4 weeks from the release of the Company's Annual
Report.
The exercise period of stock options granted in 2004/05 is a period
of 30 days from the autumn of 2006 to the autumn of 2009 the release
of the Company's Annual Report. The overall plan can be exercised by
40,000 stock options in the autumn of 2008 and 20,000 in the autumn
of 2009.
In none of the stock option plans it has been possible to settle the
options by paying the difference in cash.
Warrant plan
In April 2007, the Company granted warrants to 1 executive employee.
The granted warrants provide access to the subscription for a total
of 10,000 shares with up to 1/3 in the autumn of 2007, 2008 and 2009
after the release of the Annual Report. The subscription price
amounts to 328.3 plus 5% per annum calculated from 11 April 2007.
Furthermore, in November 2006, the company granted warrants to 4
executive employees who had taken a position with the Company since
the latest issue in May 2006. The granted warrants provide access to
the subscription for a total of 30,000 shares with up to 1/3 in the
autumn of 2007, 2008, 2009 after the release of the Annual Report.
The subscription price amounts to 363.0 plus 5% per annum calculated
from 24 November 2006.
I maj 2006 blev der tildelt et warrantprogram til 7 ledere. De
tildelte warrants giver adgang til at tegne i alt 65.000 stk. aktier
med indtil 1/3 i efteråret 2007, 2008 og 2009 efter offentliggørelse
af årsrapporten. Tegningskursen udgør 382,7 og denne tillægges 5%
p.a. regnet fra den 19. maj 2006.
Finally in the spring of 2005, IC Companys also granted warrants to a
number of key employees (45 persons). The warrants granted entitle
the holders to subscribe for 365,000 shares by up to one third in the
autumn of 2006, 2007 and 2008 respectively, after the release of the
Annual Report. The subscription price amounts to 154.50 plus 5% per
annum calculated from 15 April 2005.
For all warrants granted applies that non-exercised warrants in one
year can be transferred to the subsequent year during the term of the
warrant plan. The exercise of warrants is conditional upon the holder
not having terminated his position at the time of exercise. No other
vesting conditions apply.
Specification of outstanding warrants:
The average market price of options exercised in 2007/08 was DKK
355.5 (2006/07: DKK 341.8).
In 2007/08, the fair value of the warrants recognised in the
consolidated income statement amounted to DKK 3.4 million (2006/07:
DKK 4.8 million). In 2007/08, the fair value of the warrants
recognised in the Parent Company's income statement amounted to DKK
2.4 million (2006/07: DKK 2.9 million).
The computation of fair values is based on the Black & Scholes model.
The applied assumptions, which are based on actual market conditions,
are as follows:
In the fair value calculation, the terms used are average expected
terms.
The expected volatility is based on the volatility over the past year
for the IC Companys share, compared with management's expectations.
The risk-free interest rate has been set at the yield of a government
bond with the same term to maturity as the plan.
6. other external costs
Other external costs include the total fees paid for the preceding
financial year to the auditors appointed at the annual general
meeting. The fees break down can be specified as follows:
Two of the Group's minor subsidiaries are not audited by Deloitte,
nor by international business partners of the aforementioned nor by a
recognised international auditing company.
7. Other gains and losses
8. FINAnCIAL INCOME AND EXPENSES
9. income tax
Breakdown of tax on profit:
10. earnings per share
* In the calculation of diluted earnings per share, any adjustment
factor used in share issues completed in prior periods has been taken
into account.
11. dividends
please see note 9 to the consolidated financial statements.
12. THE GROUP'S INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT
*The capitalised value of leased assets is included at an amount of
DKK 1.0 million under development in the balance under intangible
assets.
The public assessment of Danish land and buildings was DKK 116
million at 30 June 2008 (assessment as at 1 October 2006) (30 June
2007: DKK 116 million) and the carrying amount of land and buildings
at 30 June 2007 is DKK 174.6 million.
Goodwill
Goodwill on business combinations is allocated at the takeover date
to the cash-generating units expected to achieve economic benefits
from the takeover. The carrying amount of goodwill is allocated as
follows to the respective cash-generating units.
Goodwill is tested at least once annually for impairment and more
frequently in the event that impairment is indicated.
The recoverable amounts of the individual cash-generating units to
which the goodwill amounts have been allocated, are calculated based
on expected future cash flows, compared with carrying amounts. Future
cash flows are based on the entities' business plans and budgets
during the strategy period for 2007/08-2009/10. The most important
parameters in the calculation of value in use are revenue, EBITDA and
working capital. The business plans are based on management's
specific assessment of the business units' expected performance
during the strategy period. The terminal values for the period after
2009/10 have been calculated by means of a conservative projection of
the business entities. In the calculation of value in use, a WACC of
8.58% before tax has been applied.
Leasehold rights with indefinable useful lives
Of the total carrying amount of "Leasehold rights", DKK 6.2 million
(2006/07: DKK 6.1 million) relates to leasehold rights with
indefinable useful lives, determined on the basis of the contractual
terms of the leases. Therefore, impairment tests were conducted at 30
June 2008, and management assesses that the recoverable amount
exceeds the carrying amount.
13. Financial assets
The Group has in 2006/07 granted a loan of DKK 3 million to a
wholesale partner to be used for financing of operating investments.
This loan has been settled during the financial year 2007/08. In
2007/08, the Group has granted subordinated loan of DKK 1.1 million
to a business partner. The term of the loan is 5 years with a
floating interest rate adjusted according to the at all times
floating rate repo in force with additional 150 basis point. At 30
June 2008, the effective rate of interest amounts to 5.85%. No
security has been received for the loan. The carrying amount of the
loan corresponds to the fair value.
14. deferred tax
Unrecognised tax assets relate to tax losses that are not assessed to
be sufficiently likely to be utilised in the foreseeable future. The
unrecognised tax losses have in all material respects no expiry date.
See also note 26 to the financial statements. Temporary differences
and changes to these during the year are specified as follows:
15. INVENTORIES
Movements in inventory writedowns:
Inventories recognised at net realisable value amount to DKK 113.3
million at 30 June 2008 (2006/07 DKK 96.9 million).
16. TRADE RECEIVABLES
Movements in allowance for bad debt:
Receivables are written down to net realisable value, corresponding
to the sum of expected future net payments received on the
receivables. Allowance is calculated on the basis of individual
assessments of the receivables.
Trade receivables (gross) are specified as follows:
The carrying amounts of the receivables in all material respects
correspond to their fair values.
The receivables do not carry interest until normally between 30 and
60 days after the invoice date. After this date, interest is charged
on the outstanding amount.
17. other receivables
Management assesses that the carrying amount of receivables at 30
June 2008 in all material respects corresponds to the fair value, and
that the receivables are not subject to any particular credit risk.
18. Prepayments
19. Share capital
The share capital consists of 17,919,632 shares of DKK 10 nominal
value each. No shares carry any special rights. The share capital is
fully paid up.
The following capital increases have been made in the past five
years:
Breakdown of treasury shares:
Pursuant to a resolution passed by the shareholders in general
meeting, the Company may acquire treasury shares equivalent to a
maximum of 10% of the share capital.
The treasury shares held as of 1 July 2005 were originally acquired
to cover the Company's liabilities under the stock option plan for
the Executive Board.
In the 2007/08 financial year, the Company has in accordance with
2006/07 completed a share buyback programme in order to reduce the
Companys share capital. Under the programme, the Company in 2007/08
acquired treasury shares with a nominal value of DKK 10,912,000
(2006/07: DKK 6,597,250) at an average price per share of DKK 217.7
(2006/07: 341.4 DKK), equivalent to DKK 237.6 million (2006/0: DKK
225.2 million) excluding brokerage.
As a consequence of the share buyback 585,925 shares have been
cancelled in January 2008.
The value of the Company's treasury shares at the market price on 30
June 2008 was DKK 205.7 million (30 June 2007: DKK 271.5 million).
20. PENSION obligations
The pension obligations of Danish companies are covered by insurance,
which is also the case with the pension obligations of a large number
of the Group's foreign companies. Foreign companies whose pension
obligations are not or only partly covered by insurance (defined
benefit plans) recognise the uncovered pension obligations on an
actuarial basis at the present value at the balance sheet date. The
Group has defined benefit plans in the Netherlands and Norway. These
pension plans are covered in pension funds for the employees. In the
consolidated financial statements an amount of DKK 5.7 million
(2006/07: DKK 5.1 million) has been recognised in liabilities in
relation to the Group's obligations towards current and former
employees after deduction of plan assets. The Parent Company only
operates defined contribution pension plans.
For defined benefit plans, the present value of future benefits,
which the Company is liable to pay under the plan, is computed using
actuarial principles. The computation of the present value is based
on assumptions about discount rates, increases in pay rates and
pensions, investment yield, staff resignation rates and mortality.
Present value is computed exclusively for the benefits to which the
employees have earned entitlement through their employment with the
company up till now.
An amount of DKK 33.3 million (2006/07: DKK 25.7 million) has been
recognised in the consolidated income statement relating to plans
covered by insurance (defined contribution plans). For plans not
covered by insurance (defined benefit plans) a cost of DKK 2.1
million has been recognised (2006/07: an income of DKK 0.9 million).
For defined contribution plans, the employer is obliged to pay a
defined contribution (for example a fixed amount or a fixed
percentage of an employee's salary). For a defined contribution plan,
the Group runs no risk in respect of future developments in interest
rates, inflation, mortality or disability.
The pension obligation is specified as follows:
The average assumptions for the actuarial calculations at the balance
sheet date were:
The plan assets consist of ordinary investment assets, including
shares and bonds. No investments have been made in the Group's own
shares.
The expected return on the plans is based on long term expectations
to the return of the assets in the respective countries. The return
of the plans' assets amounted to DKK -2.5 million in 2007/08 (2006/07
DKK -0.3 million). The Group's expected contribution to the plans in
2008/09 amounts to DKK 1.7 million.
21. NON-CURRENT DEBT TO FINANCIAL INSTITUTIONS
The non-current debt to financial institutions as at 30 June 2008 was
a floating-rate bullet loan denominated in Danish kroner. The average
interest rate in 2007/08 amounted to 5.30% (2006/07 4.33%). The loan
amounted to DKK 168.0 million at 30 June 2007. The nominal value of
the debt corresponds in all material respects to the fair value.
22. SHORT-TERM DEBT TO CREDIT INSTITUTIONS
The Group's total short-term debt to credit institutions comprises
Danish and foreign overdraft facilities carrying interest at an
average rate of 5.40% p.a. (5.23% in 2006/07).
Short-term debt is repayable on demand, and the fair value therefore
corresponds to the carrying amount.
Short-term debt to credit institutions is denominated in the
following currencies:
23. Trade payables
The carrying amount corresponds to the fair value of the liabilities.
24. other debt
DKK 10.2 million in severance pay is due within a year.
The carrying amount of amounts payable under Other debt in all
material respects corresponds to the fair value of the liabilities.
25. OPERATing LEASes
The Group leases properties under operating leases. The lease period
is typically between 3 - 10 years with an option to extend on expiry.
Many of the lease contracts contain rules regarding revenue based
lease.
In addition, the Group leases cars and other operating equipment
under operating leases. The lease period is typically between three
to five years with an option to extend on expiry.
An amount of DKK 246.7 million (2006/07: DKK 233.6 million) relating
to operating leases has been recognised in the consolidated income
statement for 2007/08.
Some of the leased stores are sub-let to franchise stores etc., and
for these the Company has received a rental income on non-terminable
leases of DKK 24.2 million (2006/07: DKK 26.1 million). The expected
future minimum rental income on non-terminable leases is DKK 46.8
million (2006/07: DKK 66.2 million) for the financial years 2007/08 -
2016/17.
26. OTHER LIABILITIES AND CONTINGENT LIABILITIES
The Company is jointly and severally liable with the other jointly
taxed Danish companies for tax on the joint taxable income for the
period 2003/04 - 2004/05.
The Company has entered into binding agreements with suppliers on the
delivery of collections until 31 December 2008, of which the majority
are tied to sales orders entered into with preorder customers.
The Parent Company's shares in the subsidiary Raffinaderivej 10 A/S
(recognised in the consolidated financial statements with an amount
of DKK 1.1 million) have been provided as security for the Group's
long-term debt in relation to the acquisition of the property
Raffinaderivej 10, amounting to DKK 168.0 million at 30 June 2008.
Carrying amount of the property amounts to DKK 163.4 million.
The Group is not currently involved in any pending litigation which
may have a material effect on the Group's financial position.
The Group is subject to the usual return obligations imposed in the
industry. Management expects no major loss on these obligations.
The Group is regularly involved in litigation with Danish and foreign
tax authorities. For an extended period of time, IC Companys has been
subject to a tax audit in one of the Group's German companies, which
has generated a tax loss of DKK 145 million in the tax years
comprised by the audit. Based on their audit, the German tax
authorities have increased the income for the years under review by
DKK 130 million. The argument is that the transfer pricing principles
have not been correctly applied. IC Companys has brought the case
before the Danish tax authorities in order to obtain a corresponding
adjustment and repayment of tax paid. The Danish tax authorities have
rejected this claim. Consequently, IC Companys has decided to bring
the case before an EC Arbitration Commission pursuant to the
applicable rules.
In the financial year 2007/08 IC Companys' other German sales company
has been subject to a tax audit. The audit of the years under review
has generated a tax loss of DKK 55 million. Based on their audit, the
German tax authorities have increased the income for the years under
review by DKK 65 million. As in the case above, the argument is that
the transfer pricing principles have not been correctly applied.
Equal to the other case, the Danish authorities have rejected to
perform corresponding adjustment. As in the case mentioned above, the
case will be brought before an EC Arbitration Commission and
preliminary proceedings are ongoing.
Historically, such cases are lengthy, and a resolution is not
expected for at least one year for the first case and three years for
the latter. The tax base of these tax losses and the possible refund
of Danish taxes are not recognised in the balance sheet.
27. CASH FLOW FROM INVESTMENT AND FINANCING ACTIVITIES
28. CHANGES IN WORKING CAPITAL
29. cash at year end
The Group's total credit commitments amounted to DKK 1,420 million at
30 June 2008 (30 June 2007: DKK 1,209 million). Of this amount, DKK
771 million has been utilised in the form of short-term and long-term
debt to credit institutions and DKK 270 million has been utilised in
the form of trade finance facilities and guarantees. Accordingly,
unutilised credit facilities amount to DKK 379 million. All credit
facilities are standby credits which can be utilised with a day's
notice.
30. RISKS AND DERIVATIVE FINANCIAL INSTRUMENTS
Foreign exchange risk
The Group's foreign exchange risk (transaction risk) is handled
centrally by the Group's Treasury Department. DKK is the Group's
functional currency, and foreign exchange positions are generally
hedged vis-à-vis DKK. The Group's primary transaction risk relates to
the buying and selling of goods in foreign currency. The accounting
and anticipated risks are hedged by means of forward transactions
and/or options. Hedging is made on a 12 month horizon. The currencies
HKD and USD are at 30 June 2008 hedged for an 18 month period.
Forward currency contracts relate exclusively to hedges of goods sold
and bought. See the Group's policy in this respect. The risk coverage
of the Group's transaction exposure is made from an estimate of the
cash flow demand for the future 12 months and for USD and HKD for the
future 18 months. As a general rule cash flows in all currencies are
hedged except from EUR.
The Group's foreign exchange exposure is hedged centrally, although a
few subsidiaries have unhedged foreign exchange exposures if they
have signed leases in a currency other than the local currency.
Net outstanding forward currency contracts at 30 June 2008 for the
Group and the Parent Company designated as and qualifying as a hedge
of future transactions:
* Positive principal amounts on forward currency contracts indicate a
purchase of the currency in question. Negative principal amounts
indicate a sale.
Open currency hedge contracts for the Group and the Parent Company
qualifying as hedges of recognised assets and liabilities:
The exchange rate loss as at 30 June 2008 is recognised in the income
statement under cost of sales.
The calculated fair values are made on the basis of actual interest
rate curves and exchange rates as at 30 June 2008.
In 2007/08 DKK 1.5 million (2006/07: DKK -1.1 million) regarding
ineffective cash flow hedging transactions have been recognised in
the income statement.
Neither the Group nor the Parent Company have any open currency hedge
contracts that do not qualify for hedge accounting at 30 June 2008 or
at 30 June 2007.
The recognised positive/negative market values in equity have been
treated in accordance with the rules for hedging of future cash flows
and are closed/adjusted during the year after the "hedge accounting
principles".
The net position of the Group calculated after the value at risk
method will maximally result in a loss of DKK 2.0 million. The
calculation is made by using a 95% confidence interval with a term of
6 months. Value at risk states the amount that maximally can be lost
on a position calculated by using volatilities on the different
currencies as well as correlations between the currencies. The
calculation is made by using historical data.
Apart from derivative financial instruments entered into to hedge
foreign exchange risks in the balance sheet, no changes to the fair
value of unlisted financial assets and liabilities have been
re-cognised in the income statement.
The calculation of fair values regarding financial instruments is
made on the basis of official market rates on an active market and
exchange rates at 30 June 2008.
The existing categories of financial assets and liabilities are shown
below:
Translation risk
In accordance with the Group's financial guidelines the translation
risk (investment in or loans to foreign subsidiaries) is normally not
hedged. The only exception is the Parent Company's investment in the
Swedish subsidiaries which in 2005/06 was hedged with
currency/interest rate swaps at a nominal amount of SEK 1,660
million.
At 1 July 2007 the translation was reduced to a nominal value SEK 900
million. In the financial year 2007/08, these currency/interest swaps
have been settled.
The fair value adjustment in comparison with last year amounts to DKK
4.9 million.
DKK 3.7 million hereof is recognised in the income statement under
financial items as an income relating to the ineffective part and DKK
1.2 million is recognised in equity relating to the effective part.
Liquidity risk
IC Companys secures a sufficient liquidity reserve by a combination
of liquidity control and non-guaranteed credit facilities see note
29.
Interest rate risk
The Group's interest rate risk is monitored by the Treasury
Department on an ongoing basis in accordance with Group policies. The
Group employs matching of the maturities of each individual
asset/liability. The typical neutral maturity for the Group is two
months. FRA's and/or interest rate swaps are used to hedge potential
interest rate risks.
The company's interest rate risk relates to the interest rate bearing
debt. The company's loan portfolio consists of current bank debt and
a non-current loan financing the properties which the company owns.
The sensitivity of an interest rate change of +/- 1% amounts to
approximately DKK +/- 0.6 million calculated by using the BVP method.
The following maturity/reassessment profiles apply to the Group's
financial assets and liabilities:
Credit risk
The Group solely uses internationally recognised banks with a high
credit rating. The credit risk on forward contracts and bank deposits
is consequently deemed to be low.
In respect of trade receivables, the Group typically uses credit
insurance in countries in which the credit risk is deemed to be high
and where credit insurance is feasible. This primarily applies to
export markets in which IC Companys is not represented through an
independent sales company.
Beyond this the credit risk regarding trade receivables and other
receivables is limited as the Group has no material concentration of
credit risk as the exposure is spread on a large amount of
counterparties and customers in many different markets.
31. Related party transactions
IC Companys A/S' related parties include subsidiaries as set out at
the back of the Annual Report, their Board of Directors, Executive
Board and other executives as well as their related family members.
Related parties also comprise companies in which the individuals
mentioned above have material interests. IC Companys A/S has no
related parties with controlling influence on the Company.
IC Companys A/S conducts substantial trading with all its
subsidiaries. Trading is conducted on an arm's length basis.
Information on trading with subsidiaries is provided below:
Transactions with subsidiaries have been eliminated in the
consolidated financial statements in accordance with the accounting
policies.
The remuneration paid to the members of the Board of Directors,
Executive Board and other executives as well as share-based
compensation plans are disclosed in note 5 to the financial
statements. Other executive positions of the Executive Board and the
Board of Directors appear from page 91.
Interest on accounts with related parties is stated in note 7 to the
Parent Company financial statements.
The Parent Company's accounts with the subsidiaries comprise ordinary
trade balances concluded on trading terms equivalent to those applied
for the Group's and the Parent Company's other customers and
suppliers. Moreover, the Parent Company has granted loans to
subsidiaries with a total balance as at 30 June 2008 of DKK 862.3
million (30 June 2007: DKK 878.8 million). The loans carry interest
on normal market terms. DKK 831.9 million becomes due for payment in
2008 and the remaining DKK 30.4 million is a bullet loan for which no
due date has been set. The Parent Company's net receivables from
subsidiaries include a provision of DKK 80.0 million (30 June 2007:
DKK 66 million) to meet likely future losses in subsidiaries with
negative equity values.
The Parent Company has issued letters of comfort for certain
subsidiaries.
The Parent Company has received dividends of DKK 50.3 million
(2006/07: DKK 353.0 million) from subsidiaries.
The Group has a property lease with I/S Hakkesstraat 35-37, Venlo,
the Netherlands. This partnership is owned 95% by the Chairman of the
Board of Directors: Niels Martinsen (who owns 39.0% of IC Companys
A/S via Friheden Invest A/S). The property functions as a
distribution centre. The lease has been entered into on arm's length
terms based on an impartial assessment of the rent by a licensed
estate agent in the Netherlands. The lease cannot be terminated by
any of the parties until 1 November 2008. The rent paid by the Group
in respect of the lease was DKK 2.4 million in 2007/08 (2006/07: DKK
2.4 million).
The Company has had other transactions during the year with Niels
Martinsen and companies controlled by Niels Martinsen. The
transactions were all made on arm's length terms and did not exceed
DKK 1 million for the financial year.
With the exception of intra-group transactions, which have been
eliminated in the consolidated financial statements, and usual
management remuneration, the Group has not made transactions in this
or any previous years with the Board of Directors, Executive Board,
executives, major shareholders or other related parties.
parent company financial statements
Table of contents
PROFIT
..................................................................................................
72
BALANCE SHEET -
ASSETS......................................................................
73
BALANCE SHEET - EQUITY AND
LIABILITIES.............................................. 74
MOVEMENTS IN EQUITY, PARENT
COMPANY............................................. 75
PARENT COMPANY CASH FLOW
STATEMENT............................................. 76
NOTES TO THE FINANCIAL
STATEMENTS.................................................. 77
Profit
Balance sheet - Assets
balance sheet - equity and liabilities
Movements in equity, parent company
parent company cash flow statement
Notes to the financial statements
1. ACCOUNTING POLICIES
The annual report of the Parent Company forms an integral part of the"Annual Report 2007/08" of IC Companys A/S. The Parent Company's
financial statements for the year ended 30 June 2007 are presented in
accordance with IFRS. The accounting policies for the Parent Company
remain unchanged compared to last year.
The accounting policies for the Parent Company are the same as for
the Group with the exception of the items below see note 1 to the
consolidated financial statements.
Other operating income
Other operating income comprises management fees from subsidiaries to
the Parent Company for their share of the Group's overheads.
Dividend on investments in subsidiary undertakings in the Parent
Company annual report
Dividend on investments in subsidiary undertakings is recognised in
the Parent Company's income statement in the financial year in which
the dividend is declared. However, to the extent that the dividend
distributed exceeds accumulated earnings after the acquisition date
dividend is recognised as a reduction of the cost of the investment
rather than being recognised in the income statement.
Investments in subsidiary undertakings in the Parent Company annual
report
Investments in subsidiary undertakings are measured at cost. Where
the recoverable amount is lower than cost, the investments are
written down to such lower value.
Cost is reduced to the extent that distributed dividend exceeds the
accumulated earnings after the acquisition date.
Receivables from subsidiary undertakings in the Parent Company annual
report
Receivables from subsidiary undertakings in the Parent Company annual
report are, on initial recognition, measured at fair value and
subsequently at amortised cost, which usually corresponds to the
nominal value less provision for bad debts.
2. ACCOUNTING ESTIMATES AND JUDGMENTS
See note 2 to the consolidated financial statements.
3. revenue
4. staff costs
Remuneration of the Board of Directors, Executive Board and stock
option plans for the management and employees are disclosed in note 5
to the consolidated financial statements.
5. other operating income
6. other external costs
Other external costs include the total fees paid for the preceding
financial year to the auditors appointed at the annual general
meeting. The fees break down as follows:
7. FINANCIAL INCOME AND EXPENSES
8. income tax
Breakdown of income tax:
9. dividends
In the financial year 2007/08, the distribution of dividends of IC
Companys A/S amounted to DKK 74 million to the shareholders (2006/07:
DKK 68 million).
For the financial year 2007/08, the Board of Directors recommends a
dividend of DKK 66 million, equivalent to DKK 4.00 per share eligible
for dividend including treasury shares (2006/07: DKK 4.00 DKK per
share), which will be paid to the shareholders after the Annual
General Meeting to be held 22 October 2008 provided that the Annual
General Meeting approves the proposal of the Board of Directors. As
the dividend will depend on the approval of the Annual General
Meeting, it is not recognised as a liability at 30 June 2008 in the
balance sheet. Dividends will be paid to the shareholders who are
registered in the Company's register of shareholders at 22 October
2008.
10. INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT
* Under assets under construction, DKK 1.0 million is classified IT
systems under development in the balance sheet under intangible
assets.
11. equity interests in subsidiaries
An overview of the Group structure may be found at the back of the
financial statements.
Revenue from equity interests in subsidiaries amount to gross DKK
22.1 million (DKK 205.6 million DKK in 2006/07) and comprises the
share of profit from subsidiaries that are not in excess of the
combined earnings in the subsidiary since the acquisition deducted
the amortization of the equity interests and receivables
A loss of DKK -14.0 million (2006/07: DKK -3.4 million) related to
short-term receivables of subsidiaries is recognised in the income
statement.
12. other non-current assets
The Group has in 2006/07 granted a loan of DKK 3 million to a
wholesale partner to be used for financing of operating investments.
This loan has been settled during the financial year 2007/08. In
2007/08, the Group has granted a subordinated loan of DKK 1.1 million
to a business partner. The term of the loan is 5 years with a
floating interest rate adjusted according to the at all times
floating rate repo in force with additional 150 basis point. At 30
June 2008, the effective rate of interest amounts to 5.85%. No
security has been received for the loan.
The carrying amount of the loan corresponds to the fair value.
The carrying amount on the deposit corresponds to the fair value.
13. DEFERRED TAX
Unrecognised tax assets relate to tax losses that are not assessed to
be sufficiently likely to be utilised in the foreseeable future. The
unrecognised tax losses have no expiry date.
Changes to temporary differences during the year are as follows:
14. inventories
Movements in inventory writedowns:
At 30 June 2008, inventories made up at net realizable value
constitute DKK 68.5 million (2006/07: DKK 32.8 million).
15. TRADE RECEIVABLES
Movements in allowance for bad debt:
Breakdown of trade receivables (gross)
Please see note 16 to the consolidated financial statements.
16. other receivables
Management assesses that the carrying amount of receivables at 30
June 2008 in all material respects corresponds to the fair value, and
that the receivables are not subject to any particular credit risk.
17. Prepayments
18. Share CAPITAL
Information on the share capital distribution on number of shares
etc. appears from note 19 to the consolidated financial statements.
19. SHORT-TERM DEBT TO CREDIT INSTITUTIONS
The Group's total short-term debt to credit institutions comprises
Danish and foreign overdraft facilities carrying interest at an
average rate of 5.34% p.a. (5.31% p.a.).
Short-term debt is repayable on demand, and the fair value therefore
corresponds to the carrying amount. Short-term debt to credit
institutions is denominated in the following currencies:
20. trade payables
The carrying amount corresponds to the fair value of the liabilities.
21. other debt
DKK 6.5 million in severance pay is due within a year.
The carrying amount of amounts payable under Other debt in all
material respects corresponds to the fair value of the liabilities.
22. OPERATIONAL LEASING
The Parent company leases properties under operating leases. The
lease period is typically between 3 - 10 years with an option to
extend on expiry.
In addition, the Parent Company leases cars and other operating
equipment under operating leases. The lease period is typically
between three to five years with an option to extend on expiry.
An amount of DKK 24.7 million (2006/07: DKK 20.6 million) relating to
operating leases has been recognised in the income statement for
2007/08.
23. OTHER LIABILITIES AND CONTINGENT LIABILITIES
The Parent Company has issued letters of comfort for certain
subsidiaries. The Parent Company's shares in the subsidiary
Raffinaderivej 10 A/S (recognised in the financial statements of the
Parent Company DKK 0.5 million) has been provided as security for the
Group's long-term debt of DKK 168.0 million concerning the
acquirement of the property Raffinaderivej 10. Recognised value of
the property amounts to DKK 163.4. Please see note 26 to the
consolidated financial statements.
24. CASH FLOW FROM INVESTMENT
25. CHANGES IN WORKING CAPITAL
26. cash at year end
27. RISKS AND DERIVATIVE FINANCIAL INSTRUMENTS
Please see note 30 to the consolidated financial statements.
28. Related party transactions
Please see note 31 to the consolidated financial statements.
SHAREHOLDER INFORMATION
The long-term financial objective of IC Companys is to achieve a
competitive return to Company shareholders. The return is generated
by share price increases, distribution of dividends and share
buybacks.
THE FINANCIAL YEAR 2007/08
IC Companys' shares are listed on OMX Nordic Exchange Copenhagen. As
measured on daily average prices the share price decreased by 51%
from DKK 316.7 per share on July 1 2007 to DKK 155.1 on June 30 2008.
At the end of the financial year the market capitalisation of IC
Companys was DKK 2.8 billion. The highest price of IC Companys shares
was reached November 1 2007, when the average share price was DKK
361.1. The lowest price of the year of IC Companys shares was on June
25 2008, at which point the average share price was DKK 155.1.
The share buy back programme for IC Companys during the financial
year amounted to DKK 238 million (1,091,200 shares). Of these shares,
193,000 are employed to hedge stock option programmes. In the
financial year 2007/08, dividends of DKK 4.00 per have been
distributed, corresponding to DKK 70 million.
The trading volume of IC Companys shares on OMX Nordic Exchange
Copenhagen in the financial year 2007/08 amounted to DKK 2.1 billion
(DKK 4.3 billion) and the transaction volume totaled DKK 7.7 million
(DKK 12.2 million).
SHARE CAPITAL
In the 2007/08 financial year the share capital rose by a total of
112.059 shares. The increase of DKK 1.120.590 nominal value can be
contributed to the exercise of warrants granted in previous financial
years. The subscription price per share was DKK 173.50 and the
company proceeds of the subscription amounted to DKK 19.4 million.
At IC Company's Annual general meeting 24 October 2007 a resolution
was passed to the effect that the share capital be reduced by DKK
nominal value 5,859,250 equivalent to the number of shares
repurchased under the share buyback programmes carried out in the
period 24 November 2006 to 29 June 2007.
At 30 June 2008 the share capital constituted DKK 179,196,320 (DKK
183,934,980). The share capital consists of 17,919,632 shares nominal
value DKK 10.
TREASURY SHARES
At the Group's Annual general meeting a proposal will be made to
reduce the share capital by nominal value DKK 9,768,250 equivalent to
the 976,825 shares repurchased under the buyback programmes carried
out in the period 3 January 2008 to 29 July 2008.
OWNERSHIP STRUCTURE
At 30 June 2008, IC Companys had 8,994 registered shareholders, who
aggregated hold 96.9% of the share capital. A breakdown of the
shareholders is shown below.
INVESTOR RELATIONS
The Group has set out the objective to maintain a high and uniform
information flow and to further the open and active dialogue with
investors, analysts and other stakeholders. Visit www.iccompanys.com
for investor policy, financial statements, presentations, the group's
announcements to the OMX Nordic Exchange Copenhagen and other
relevant investor information.
During the financial year the group has hosted 4 webcasts at the
release of the quarterly reports. Furthermore, the Company
participates continually in road shows, investor seminars and sets up
meetings with individual investors and financial analysts. IC
Companys A/S does not hold investor meetings in a period of 4 weeks
up to the release of financial statements or other material
announcements.
FINANCIAL CALENDER 2008/09
Inquiries from shareholders, analysts and other stakeholders may be
directed at:
Chief Financial Officer Investor
Relations Manager
Chris Bigler Henrik
Steensgaard
IC Companys A/S IC Companys A/S
Raffinaderivej 10 Raffinaderivej
10
2300 København S 2300 København S
Tel: +45 3266 7017 Tel.: +45 3266 7409
Fax: +45 3266 7040 Fax: +45 3266 7040
E-mail: Investorrelations@iccompanys.com
ANALYSTS
ANNUAL GENERAL MEETING 2007/08
The Annual General Meeting will be held Wednesday 22 October 2008 at
15:00 hours at "The Black Diamond", Søren Kierkegaards Plads 1,
DK-1221 Copenhagen K.
The agenda is as follows:
1. Report by the Board of Directors on the activities of the
Company.
2. Presentation of the annual report for the period 1 July 2007
- 30 June 2008 endorsed by the auditors and approval of the annual
report.
3. Resolution as to the appropriation of the profits, including
the declaration of dividends, or provision for losses in accordance
with the adopted annual report.
The Board of Directors proposes to distribute a dividend of DKK 4.00
per share ranking for dividend.
4. Election of members to the Board of Directors. Niels
Hermansen has resigned from the Board of Directors as at 1 August
2008. The Board of Directors proposes re-election of the remaining
Board.
5. Appointment of auditor. The Board of Directors proposes that
Deloitte Statsautoriseret Revisionsaktieselskab be reappointed.
6. Authority to the Board of Directors to acquire for the
Company up to 10% of the Company's shares during the period until the
next Annual General Meeting at market price +/- 10%.
7. Capital reduction - Amendment of article 4 of the Articles of
Association. The Board of Directors proposes that the share capital
be reduced by DKK 9,768,250 nominal value equivalent to the number of
shares repurchased under the share buyback programmes carried out.
8. Members of the Executive Board - Amendment of article 24 of
the Articles of Association. The Board of Directors proposes that
article 24 of the Articles of Association be amended to the effect
that the Board of Directors may engage an Executive Board consisting
of one to four Executive Officers to handle the daily management of
the company.
9. Any other business.
ANNOUNCEMENTS TO THE STOCK EXCHANGE 2007/08
Board of Directors, Executive Team and executives
DEFINITION of key ratios
gROUP STRUCTURE AT 30 JUNE 2008
