PERIOD 1 APRIL – 30 JUNE 2015 · Sales amounted to SEK 1,191 million, which was 21% higher than last year (SEK 983 million). · Operating profit amounted to SEK 48.7 (48.0) million. · The periods result amounted to SEK 27.8 (29.4) million. · Earnings per share amounted to SEK 0.41 (0.44). · Cash flow from operating activities amounted to SEK -55.9 (-27.7) million. PERIOD 1 JANUARY – 30 JUNE 2015 · Sales amounted to SEK 1,096 million, which was 21 % higher than last year (SEK 909 million). · Operating profit amounted to SEK 1.8 (-5.9) million. · Result for the period amounted to SEK -10.9 (-11.3) million. · Earnings per share amounted to SEK -0.17 (-0.17). · Cash flow from operating activities amounted to SEK -28.9 (88.8) million. · Equity ratio amounted to 45.8 (51.4) %. · Net debt to equity ratio amounted to 79.1 (56.8) %. CEO COMMENTS APRIL - JUNE I’m quite satisfied with the second-quarter. We are, by and large, following our plan and are at double digit growth even with currency effects excluded. Growth including currency effects at 21% feels strong, not the least because part of what we do requires some time before it gives results. And there is still virtually no sales of Cottover in the figures, as the launch was delayed a month and occurred only at the end of June. Operating profit of SEK 48.7 million is slightly more than last year and acceptable considering all the investments we are making in growth, but I believed in a higher result. The difference being gross profit, which I had hoped for a better outcome. But as I said, I’m quite satisfied with the outcome of the quarter. JANUARY - JUNE I feel confident and secure with our first six months. Even for the half year, we have double digit growth with currency effects excluded and a whole 21% including currency effects. Operating income is just over SEK 8 million better than last year but it is lower than my expectations. A somewhat lower gross profit in the second quarter and just under SEK 10 million in currency losses, mainly in Switzerland, in the first quarter make up the difference and with that knowledge, I think it is fully approved. THE FUTURE As I wrote after the first quarter, I have not looked so bright on the future since 1997. We will continue to grow and the investments we have made will produce results! We should also remember (see prior interim report) that we are in an investment phase and cannot always count on results within a few quarters – it will take a little time. A shining example of this is Cottover which we launched at the end of the second quarter and actually started to sell in June. Cottover is the Group’s most important launch ever and will really leave many competitors far behind us. But if we look critically at the first and second quarters, the result could have been millions better and the balance sheet smaller without the investment, but I am totally convinced that this is the way to go even though in a snapshot, it affects negatively. I look forward to the coming quarters and years with great confidence! TORSTEN JANSSON CEO New Wave Group COMMENTS SUMMARY OF THE QUARTER APRIL-JUNE Our investment in better delivery reliability and new products continues to produce results. The Group increased its sales by 21% (10% excluding currency fluctuations) compared with last year. Out of our operating segments, Sport & Leisure increased the most with 29% of which the USA market accounts for the largest increase. Sales increased in both sales channels. Exchange rates have affected sales positively. The operating segment Corporate Promo increased by 19%, which is related to the regions Sweden, Other Nordic countries and Europe, as well as the promo sales channel. Gifts & Home Furnishings increased its sales by 2%. Product launches as well as the improved supply has mainly taken place in the promo sales channel and it is also here we see the largest increase, namely 24%. The retail sales channel increased by 17%. The gross profit margin was slightly lower than last year and is due to our mix of products, customers and countries. The Group’s costs have increased compared with last year, which is related to the planned investment in sales and marketing as previously announced. Both external costs and personnel costs will increase in the coming quarters as we continue to market our product launches and expand our sales force. Operating profit was slightly higher compared to last year. The improvement is mainly attributable to increased sales but our increased investments in sales and marketing have reduced the effectiveness of sales growth. Higher interest expense due to higher net debt had a negative impact on financial costs and profit after tax was on par with last year. Cash flow from operating activities amounted to SEK -55.9 (-27.7) million, in which the deterioration is related to our purchase of goods and payment of these. Stock increased by SEK 866 million and amounted to SEK 2,486 (1,620) million, of which SEK 143 million is related to changes in exchange rates. Net debt increased by SEK 760 million and amounted to SEK 2,087 (1,327) million, of which SEK 169 million is related to changes in exchange rates. Net debt/equity ratio increased, amounting to 86.5 (62.9)%, which is related to the above mentioned stock building. APRIL – JUNE TURNOVER Turnover amounted to SEK 1,191 million, which was 21% higher than last year (SEK 983 million). Exchange rates affected turnover positively by SEK 109 million (11%). The operating segment Corporate Promo increased by 19%, Sports & Leisure increased by 29% and Gifts & Home Furnishings by 2%. Of the Group’s sales channels, promo increased by 24% while retail sales increased 17%. Turnover in Sweden increased by 7%. USA increased by 36% which is primarily attributable to the positive currency change. Turnover in local currency increased by 8%. Other Nordic countries increased by 18% and all countries in the region are increasing. Sales in Central and Southern Europe have increased by 15% and 34% respectively. The improvement in all regions is mainly due to the promo sales channel. GROSS PROFIT The gross profit amounted to 44.7 (45.9)%. The decrease is due to the mix of products, customers and countries. OTHER OPERATING INCOME AND OTHER OPERATING EXPENSES Other operating income increased by SEK 2.4 million to SEK 7.8 (5.4) million. Other operating income is mainly attributable to operating currency gains but also invoiced expenses and should be compared to the result row “Other operating expenses” where mainly foreign exchange losses are reported. Other operating expenses increased by SEK 4.1 million and amounted to SEK -6.7 (-2.6) million. The net total of the above items amounted to SEK 1.1 (2.8) million. COSTS AND DEPRECIATION External costs increased by SEK 42.0 million and amounted to SEK -258.9 (-216.9) million. The increase is related to increased investment in sales and marketing. Personnel costs amounted to SEK -212.0 million which is SEK 35.3 million higher than last year (SEK -176.7 million). The increase is related to an increased number of employees, mainly within sales and customer service. Currency exchange rates had a negative impact on costs by SEK 42 million. Depreciation increased slightly compared to last year and amounted to SEK -14.3 (-13.2) million. The increase is mainly related to currency movements. OPERATING MARGIN Our increased investments in sales and marketing have given a lower operating margin. The operating margin for the period was 4.1 (4.9)%. NET FINANCIAL ITEMS AND TAXES Net financial items amounted to SEK -13.7 (-9.4) million. This deterioration is related to a worse net interest due to higher net debt. Tax on result for the period amounted to SEK -7.2 (-9.2) million. RESULT FOR THE PERIOD Result for the period amounted to SEK 27.8 (29.4) million and earnings per share amounted to SEK 0.41 (0.44). JANUARY – JUNE TURNOVER Turnover amounted to SEK 2,287 million, which was 21% higher than last year (SEK 1,892 million). Exchange rates affected turnover positively by SEK 216 million (11%). The operating segment Corporate Promo increased by 23%, Sports & Leisure increased by 24% and Gifts & Home Furnishings was on par with last year. Of the Group’s sales channels, promo increased by 27% while retail sales increased 15%. Turnover in Sweden increased by 7% and this is related to the promo sales channel which increased by 11%, while retail was on par with last year. USA increased by 33% which is primarily attributable to the positive currency change. Turnover in local currency increased by 5% and was mainly in the promo sales channel. Other Nordic countries increased by 16%, where the increase was in all countries as well as in both sales channels. Sales in Central and Southern Europe increased by 16% and 35% respectively, which is related to the promo sales channel. GROSS PROFIT The gross profit margin was 45.1 (45.6)%. The lower margin is due to the mix of products, customers and countries. OTHER OPERATING INCOME AND OTHER OPERATING EXPENSES Other operating income increased by SEK 4.6 million to SEK 17.1 (12.5) million. Other operating income is mainly attributable to operating currency gains but also invoiced expenses and should be compared to the result row “Other operating expenses” where mainly foreign exchange losses are reported. Other operating expenses increased by SEK 20.2 million and amounted to SEK -25.2 (-5.0) million. The net total of the above items amounted to SEK -8.1 (7.5) million, where the deteriorated earnings is primarily attributable to the first quarter’s foreign exchange losses associated with the Swiss Franc as it abandoned its EURO cap. Last year also includes a number of allowances and invoiced expenses which have not occurred during the first six months. COSTS AND DEPRECIATION External costs increased by SEK 82.6 million and amounted to SEK -529.0 (-446.4) million. The increase is related to increased investment in sales and marketing. Personnel costs amounted to SEK -417.3 million which is SEK 61.1 million higher than last year (SEK -356.2 million). The increase is related to an increased number of employees, mainly within sales and customer service. Currency exchange rates had a negative impact on costs by SEK 87 million. Depreciation increased slightly compared to last year and amounted to SEK -29.2 (-25.6) million. The increase is mainly related to currency movements. OPERATING MARGIN Sales growth resulted in an improved operating profit, while the operating margin was unchanged compared with last year and amounted to 2.2 (2.2)%. The margin was negatively affected by our investments in sales. NET FINANCIAL ITEMS AND TAXES Net financial items amounted to SEK -28.8 (-17.7) million. This deterioration is related to a worse net interest due to higher net debt. Tax on result for the period amounted to SEK -4.8 (-6.3) million. RESULT FOR THE PERIOD Result for the period amounted to SEK 16.9 (18.1) million and earnings per share amounted to SEK 0.24 (0.27). REPORTING OF OPERATING SEGMENTS New Wave Group AB divides its operations into segments - Corporate Promo, Sports & Leisure, and Gifts & Home Furnishings. The Group monitors the segments’ and brands’ sales and profit (EBITDA). The operating segments are based on the Group’s operational management. CORPORATE PROMO Turnover increased by 19% and amounted to SEK 540 (454) million. The result (EBITDA) amounted to SEK 52.4 (54.7) million. The increased turnover is due to increased sales and marketing activities, as well as an improved inventory structure and level of service. The increase occurred in the promo sales channel and in all regions. The deterioration in earnings is primarily related to increased investments and costs for sales and marketing as well as a slightly lower gross profit margin (mix of products). During the period January-June turnover increased by 23% and amounted to SEK 1,007 (816) million. The result (EBITDA) amounted to SEK 61.5 (56.1) million. Sales growth occurred in all regions and is due to increased sales and marketing activities, as well as an improved inventory structure and level of service. The improved result is related to the increased turnover but has also been negatively affected by increased costs for sales and marketing during the first half of the year. SPORTS & LEISURE Turnover amounted to SEK 522 (404) million, which is 29% higher than last year. The result (EBITDA) amounted to SEK 10.9 (7.9) million. Sales increased mainly in the promo sales channel and in the regions of USA and Europe. The segment has a significant portion of its sales in the American market and the exchange rates have affected turnover positively. The improvement in earnings is attributable to higher turnover but even here the result has been negatively affected by increased sales and marketing costs. During the period January-June turnover increased by SEK 1,046 (842) millions, which is 24% higher than last year. The segment has a significant portion of its sales in the American market and the exchange rates have affected turnover positively. Sales increased mainly in the promo sales channel and in the regions of USA and Europe. The result (EBITDA) amounted to SEK 35.5 (26.8) million. The improved result is related to the increased turnover but has also been negatively affected by increased costs for sales and marketing during the first half of the year GIFTS & HOME FURNISHINGS Turnover increased by 2% and amounted to SEK 129 (126) million. The result (EBITDA) amounted to SEK -0.3 million which is somewhat better than last year (SEK -1.4 million). The increase in turnover is related to the retail sales channel. During the period January-June turnover amounted to SEK 235 (234) million. The result (EBITDA) is somewhat lower than last year and amounted to SEK -17.3 ( -15.2) million. The lower result is related to the planned cost increases in sales and marketing. CAPITAL TIED UP Capital tied up in stock amounted to SEK 2,486 (1,620) million and increased by SEK 866 million compared to the same period last year. Changes in exchange rates for conversion to SEK have affected the stock value by SEK 143 million. The increase is a planned increase and is mainly related to the promo sales channel and its supplemental purchases within its basic range of goods as well as its new base collections. The stock increase raises the level of service and provides supply reliability for our customers. The turnover rate in stock is lower than last year because of our stock build-up and amounted to 1.1 (1.3). The inventory value is expected to be on a higher level than before even in the coming quarters, mainly because of our extended Corporate Promo range as well as new and upcoming base collections. +--------------------+-------+-------+ |SEK million |2015-06|2014-06| +--------------------+-------+-------+ |Raw materials | 23.2| 23.2| +--------------------+-------+-------+ |Work in progress | 2.6| 4.1| +--------------------+-------+-------+ |Goods in transit | 126.8| 155.2| +--------------------+-------+-------+ |Merchandise on stock|2 333.4|1 437.5| +--------------------+-------+-------+ |Total |2 486.0|1 620.0| +--------------------+-------+-------+ Stock was written down by SEK 110 (101) million, of which SEK 11 (13) million pertains to raw materials. Write-down related to merchandise on stock amounted to 4,1 (5,7)%. Accounts receivable amounted to SEK 784 (657) million, where growth is primarily turnover related. However, even currency fluctuations when converted into SEK increased this amount. INVESTMENTS, FINANCING AND LIQUIDITY Consolidated cash flow from operating activities was negative during the quarter and amounted to SEK -55.9 (-27.7) million. The reason for this is that payments of our stock purchases have a different payment period compare to last year. The cash net investments amounted to SEK -39.6 (-17.5) million. The increase is related to tangible assets. Consolidated cash flow from operating activities during the first half year amounted to SEK -84.8 (61.1) million, which relates to increased stock purchases. The cash net investments amounted to SEK -65.9 (-32.5) million. The increase is related to tangible assets. Net debt increased by SEK 760 million to SEK 2,087 (1,327) million, which is primarily related to our planned build-up of stock. Exchange rates have increased the debt by SEK 169 million. The increase in stock means that our net debt in relation to shareholders’ equity and working capital has increased to 86,5 (62,9)% and 75,5 (69,5)% respectively. As a result of our stock build-up, our equity ratio decreased by 5.4 percentage points and amounted to 43.8 (49.2)% as of 30 June. The Group has a funding agreement which extends up to 12 November 2016. Total credit facility at the end of the quarter amounted to SEK 2,625 million, of which the principal agreement amounts to SEK 2,375 million. The credit facility amount is limited to and dependent on the value of some underlying assets. The principal agreement means that financial ratios (covenants) must be fulfilled in order to maintain the agreement. Interest is based on each respective currency’s base rate and fixed margin. Based on the present forecast, management estimates that the Group will be able to meet these covenants. PERSONNEL AND ORGANIZATION The number of annual employees as of 30 June 2015 was 2,308 (2,185) of whom 51% were woman 49% were men. Of the total number of employees 589 (535) work in production. The production contained within New Wave group is attributable to Ahead (embroidery), Cutter & Buck (embroidery), Paris Glove, Orrefors Kosta Boda, Seger, Dahetra and Toppoint. RELATED PARTY TRANSACTIONS There are lease agreements with affiliates. Affiliates of the Managing Director have bought merchandise and recieved compensation for consultancy services rendered. All transactions are on market terms. THE PARENT COMPANY Total income amounted to SEK 67.4 (44.5) million. Profit before appropriations and tax amounted to SEK 69.8 (-10.4) million, which includes dividends paid by subsidiaries of SEK 77.3 million. Net borrowing amounted to SEK 1,963 (1,316) million, of which SEK 1,785 (969) million relates to the financing of subsidiaries. Net investments amounted to SEK -3.8 (-12.0) million. The balance sheet total amounted to SEK 3,664 (2,818) million and shareholders’ equity, including 78% of untaxed reserves, to SEK 1,324 (1,095) million. RISKS AND RISK CONTROL New Wave Group’s international operations mean that it is continuously exposed to various financial risks. The financial risks are currency, borrowings and interest rate risks, as well as liquidity and credit risks. In order to minimize the affect these risks may have on earnings, the Group has established a financial policy. For a more detailed description of the Group’s risk management please refer to the Annual Report 2014; www.nwg.se. The Group’s policy is to have short fixed-interest agreements resulting in quick effects on the Group’s net interest as the short-term interest rate changes. The Group’s reported risks are deemed to be essentially unchanged. ACCOUNTING PRINCIPLES This report is prepared in accordance with IAS 34 Interim Report and the Annual Accounts Act. No new or revised IFRS which came into force 2015 has had any significant impact on the Group. The interim report for the parent company has been prepared according to the Annual Accounts Act as well as the Swedish Financial Accounting Standards Council’s recommendation RFR2 - Accounting for Legal Entities. Applied accounting policies are in accordance with the Annual Report for 2014. CALENDAR · 12 November 2015: Interim report for Q3 · 11 February 2016: Year-end report 2015 · 21 April 2016: Interim report for Q1 The Board and the CEO certify that the financial report gives a true and fair view of the company’s and the Group’s financial position and results and describes the principal risks and uncertainties that the Company and the companies included in the Group face. GOTHENBURG 20 AUGUSTI 2015 NEW WAVE GROUP AB (PUBL) Anders Dahlvig Christina Bellander M Johan Widerberg Chairman of the Board Member of the Board Member of the Board Helle Kruse Nielsen Mats Årjes Torsten Jansson Member of the Board Member of the Board CEO FOR MORE INFORMATION, PLEASE CONTACT: CEO Torsten Jansson Phone: 031–712 89 01 E-mail: torsten.jansson@nwg.se CFO Lars Jönsson Phone: 031–712 89 12 E-mail: lars.jonsson@nwg.se (torsten.jansson@nwg.se) The information in this report is that which New Wave Group is required to disclose under the Securities Market Act and/or the Financial Trading Act. The information was released for publication at 7 am (CET) on 20 August 2015.
Interim Report for New Wave Group AB - JANUARY–JUNE 2015
| Source: New Wave Group AB
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