stock exchange announcement
IC Companys A/S - Interim Report Q1 2007/08
Revenue increased by 9% in the first quarter of the financial year.
Operating profit achieved a 14% progress. The order intake for the
first three of the four collections in 2007/08 is completed showing a
combined growth of 13%. The revenue and operating profit guidance is
retained.
At its meeting on 13 November 2007, the Board of Directors of IC
Companys A/S considered and adopted the interim financial report for
the period 1 July - 30 September 2007.
As expected, revenue was DKK 1,190 million (DKK 1,096 million)
representing a 9% growth.
Gross profit came to DKK 725 million (DKK 639 million) corresponding
to a 13% growth. Gross margin saw a 2.6 percentage point improvement
to 60.9%. Of this improvement 2.3 percentage point is attributable to
lower sourcing currencies.
Operating profit increased by 14% to DKK 249 million DKK (DKK 219
million) equivalent to a 21.0% EBIT margin (20.0%).
The order intake for the 2008 spring collection is completed by a 13%
growth. The combined growth in order intake for three of the four
2007/08 collections reaches 13%.
All distribution channels have achieved improved results. Same-store
sales achieved a satisfactory 15% increase, and franchise revenue
increased by 22%.
Full year guidance is retained
The previously guided revenue growth of 12% -15% to DKK 3,750 - 3,850
million and a 30% - 40% growth in operating profit reaching DKK 440 -
480 million (EBIT margin 11.5% - 12.5%) is retained.
Direct sales promoting investments in the form of showrooms,
refurbishments and opening new stores will be carried through as
announced in the region of DKK 130 - 140 million. In addition,
previously planned investments in the IT platform and warehouse
facilities in the region of DKK 20 - 30 million will also be carried
out in the financial year 2007/08.
The previously announced share buyback programme of DKK 200 million
is retained. The first programme is expected to be initiated at the
beginning of January 2008.
IC Companys A/S - Raffinaderivej 10 - DK 2300 Copenhagen S - tel +45
3266 7788 - fax +45 3266 7703
CVR no. 62 81 64 14 - ho@iccompanys.com - www.iccompanys.com
Financial Highlights and key ratios
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
Revenue development
Revenue was DKK 1,190 million (DKK 1,096 million) representing a 9%
growth. The growth rate is satisfactory seen in the light of a time
lag relative to last year in the first winter deliveries.
Consequently, growth is projected to increase considerably in the
second quarter of 2007/08. Time lags affect revenues primarily in
InWear, Jackpot and Peak Performance and the Group's distributor in
Russia and is combined in the region of DKK 45 million.
Revenue is further affected positively by scheduled net store
openings and expansions amounting to DKK 19 million and adversely
affected by exchange rate conversions of DKK 2 million.
Sales performance for own brands:
The double-digit growth rates in Peak Performance, Tiger of Sweden,
Matinique, By Malene Birger and Designers Remix Collection are
satisfactory.
InWear realized a decline of 4%. The decline is collection specific,
as the summer 2007 collection in particular did not meet the target,
which had repercussions in both own retail and in-season sales. The
autumn collection 2007 is progressing as planned.
The setback in Jackpot is caused solely by the brand's wholesale
activity, where the distribution platform is adjusted to the
positioning of the brand. However, it is satisfactory that the brand
has achieved growth in eight consecutive months in own stores from
March through October. Same-store sales for the first quarter
exclusively showed a total growth of 37%.
Sales performance for own brands market breakdown:
Denmark, Norway, Belgium, Germany, Switzerland, Canada and Poland all
achieve
double-digit growth rates.
The development in Holland does not meet the expectations. The Group
has employed a new country manager, who is expected to join the Group
1 December 2007.
In Spain the group's operations are primarily agent-based and the
Group has tightened credit lines and in the same process reviewed the
customer portfolio, which has resulted in revenue fall. The setback
in Spain is expected to continue throughout the full year 2007/08.
After several years of substantial growth, the Group's Russian
partner is consolidating. Also, as projected first quarter revenue in
Russia is affected by a delivery lag equivalent to revenue of DKK 10
million expected in the second quarter. For the full year 2007/08
zero growth is expected for Russia.
After several years of decline, Poland performs satisfactorily, which
is substantiated by 26% growth. In Poland half of the revenue is
attributable to Jackpot that seen in isolation progresses by 34%.
Order intake
The order intake for the 2008 spring collections is completed by a
combined 13% growth. The aggregate order intake for three of the
four collections in the financial year 2007/08 is likewise completed
by a combined 13% growth relative to 2006/07:
Peak Performance, Tiger of Sweden, Matinique, By Malene Birger,
Soaked in Luxury and Designers Remix Collection all advance by
double-digit growth rates.
The uncompleted order intake of the 2008 summer collections
progresses as planned and completion is expected by a growth of 10% -
12%.
distribution channels
* Unallocated corporate costs comprise IT, finance, HR and general
management.
The financial overview of the distribution channels is adjusted in
line with the Group's updated strategy according to which retail is
no longer exclusively defined as wholesale support, but as a business
area in its own right. In the future, the retail channel carries its
proportional share of product and brand building costs that
historically have been recognised in full in the wholesale
operations. An overview of the consequences of this adjustment to the
first quarter 2007/08 is included in note 6 to this interim report
including revised comparative figures for 2006/07. The adjustment
does not affect the outlet channel.
Wholesale operation
Wholesale revenue was DKK 894 million (DKK 854 million) representing
a 5% growth. Preorder revenue increased by 5%, in-season sales rose
by 5% and franchise revenue increased by 22%. Growth in preorder
revenue is lower than growth in the order intake for autumn 2007,
which reached 13%. This is, as forecast, a result of the lag of the
first winter deliveries relative to last year, which entails a
revenue postponement to second quarter 2007/08.
Wholesale profit increased by 8% to DKK 253 million (DKK 235 million)
which corresponds to a wholesale profit margin of 28.4% (27.6%). The
improved relative earnings are contributable to a higher wholesale
channel gross margin derived from lower sourcing currencies and
streamlined operation.
Retail operation
Retail revenue reached DKK 265 million (DKK 211 million) which
represents a 26% growth. Revenue is affected positively by scheduled
net store openings and expansions amounting to DKK 19 million. First
quarter development in same-store sales (organic revenue development)
achieved 15% growth.
First quarter retail profit improved significantly by 144% or DKK 13
million to DKK 22 million (DKK 9 million) equivalent to a profit
margin of 8.3% (4.1%). Half of the 4.2 percentage point improvement
is driven by a higher gross margin, whilst the remaining half is due
to better operations. Retail earnings level has improved in 13
consecutive quarters.
The Group's retail operations constitute 36,000 square metres
distributed between 213 locations.
Outlet operation
Outlet revenue was DKK 31 million (DKK 31 million) maintaining last
year's level. First quarter outlet profit increased DKK 1 million
representing a profit margin of 33.6% (28.7%).
earnings development
Gross profit
Gross profit was DKK 725 million (DKK 639 million) which corresponds
to a 13% growth.
Gross margin reached 60.9% (58.3%). The increase of 2.6 percentage
point is primarily contributable to lower sourcing currencies that
seen in isolation have improved gross margin by 2.3 percentage point.
Shifts across channels and the underlying operational improvement
have increased gross margin by 0.3 percentage point.
The second quarter 2007/08 is likewise expected to see a material
gross margin improvement as a result of lower sourcing currencies,
whereas the improvement will be less pronounced in the second half
year of 2007/08. As previously announced, the effect of sourcing
currencies is projected to improve gross margin by combined 1.5 - 1.8
percentage point for the full year 2007/08 measured against 2006/07.
Operating costs
Operating costs were DKK 475 million (DKK 423 million), and the cost
rate increased by 1.3 percentage point to 39.9%. The increase is
caused by the projected lag in the first winter deliveries which seen
isolated has affected the cost rate negatively by 1.5 percentage
point.
Operating profit
Operating profit generated a net profit of DKK 249 million (DKK 219
million) constituting a progress of 14%.
Financial items
Financial income is increased as a result of a gain on interest rate
swaps used to set off equity denominated in SEK. The financial
expenses increased by DKK 5 million as a result of increased use of
credit facilities and a higher interest level.
Income tax
Tax costs amounting to DKK 68 million are recognised, which
represents 28% of the pre-tax profit.
Net result
The quarterly net result increased by 15% to DKK 176 million (DKK 154
million).
Balance sheet and liquidity
Cash flows
Cash flows from operating activities were an outflow of DKK 115
million (DKK -148 million) which represents a year-on-year
improvement of DKK 33 million. This is attributable to profit and a
time lag in the realisation of working capital measured against last
year.
Gross investments came to DKK 34 million, of which refurbishing
stores and showrooms account for DKK 26 million.
The free cash flow from operating and investing activities was
consequently an outflow of DKK 148 million (DKK -222 million),
equivalent to an improvement of DKK 74 million relative to last year.
First quarter cash flows from financing activities were an inflow of
DKK 11 million (DKK 32 million). Proceeds from exercise of
share-based payment plans amount to DKK 26 million. Repurchased
treasury shares account for DKK 15 million.
The total cash flow for the quarter was an outflow of DKK 137 million
(DKK -190 million).
Net interest-bearing debt
Consolidated net interest-bearing debt was DKK 694 million (DKK 642
million) which amounts to an increase of DKK 52 million relative to
30 September 2006.
Balance
Group assets increased by DKK 127 million from DKK 2,147 million as
at 30 September 2006 to DKK 2,274 million DKK as at 30 September
2007.
Non-current assets are reduced by DKK 6 million measured against
first quarter last year. Consolidated deferred net tax assets are
reduced by DKK 56 million to DKK 108 million as at 30 September 2007
(DKK 164 million). This is mainly attributable to a DKK 16 million
adjustment of tax rates and the utilisation of deferred assets in
2006/07 of DKK 33 million.
Current assets increased by DKK 133 million or 10% to DKK 1,448
million (DKK 1,315 million). Cash and cash equivalents increased by
DKK 67 million or 52% to DKK 195 million (DKK 128 million). This is
caused by the time lag in payments outlined in the annual report for
2006/07. Inventory rose by DKK 55 million or 14% to DKK 430 million
(DKK 375 million) which is a result of increased activities,
averagely lower inventory writedowns and the aforementioned planned
lag of the first winter deliveries. Trade receivables increased by
DKK 37 million or 6% to DKK 689 million (DKK 652 million).
Equity
Equity is at 30 September 2007 reduced by DKK 4 million to DKK 732
million DKK (DKK 736 million).
At the Company's Annual General Meeting on 24 October 2007 the
proposal to pay dividend of DKK 70 million was adopted and the
dividend was subsequently paid.
Movements in equity and treasury shares are specified on page 13.
outlook 2007/08
The previously guided revenue growth of 12% - 15% to DKK 3.750 -
3.850 million and a 30% - 40% growth in operating profit reaching DKK
440 - 480 million (EBIT margin 11.5% - 12.5%) is retained.
Direct sales promoting investments in the form of showrooms,
refurbishments and opening new stores will be carried through
unchanged in the region of DKK 130 - 140 million. In addition,
investments in the IT platform and warehouse facilities in the region
of DKK 20 - 30 million will also be carried out in the financial year
2007/08.
The previously announced share buyback programme of DKK 200 million
is retained. Initiation of the first programme is scheduled at the
beginning of January 2008.
IC Companys A/S
Niels
Martinsen
Henrik Theilbjørn
Chairman of the Board of Directors
President & CEO
contacts:
Henrik Theilbjørn, President & CEO
Tel.: 3266 7646
Chris Bigler, Chief Financial Officer
Tel.: 3266 7017
statement by the management
The Board of Directors and the Executive Board have considered and
approved the interim financial report for the period 1 July 2007 - 30
September 2007.
The interim financial report is unaudited and has been prepared in
accordance with IAS 34 "Interim Financial Reporting" as adopted by
the EU, cf. section on accounting policies and additional Danish
interim reporting requirements for listed companies.
We consider the accounting policies applied to be appropriate to the
effect that the interim financial report gives a true and fair view
of the Group's assets, liabilities and financial position at 30
September 2007, and of the results of the Group's operations and cash
flows in the period 1 July 2007 - 30 September 2007.
Copenhagen, 13 November 2007
executive board:
HENRIK THEILBJØRN
MIKKEL V. OLESEN
President &
CEO Chief
Operating Officer
board of directors:
NIELS ERIK MARTINSEN HENRIK HEIDEBY OLE
WENGEL
Chairman Deputy
Chairman Deputy Chairman
ANDERS COLDING FRIIS NIELS HERMANSEN
Income statement
balance sheet - assets
Balance sheet - equity and liabilities
movements in Equity - group
group cash flow statement
NOTEs
1. Accounting policies
The interim financial report is prepared in accordance with IAS 34"Interim Financial Reporting" and additional Danish disclosure
requirements to the interim financial reports for listed companies.
It is the first time that the Group presents an interim financial
report in accordance with IAS 34, which compared to previous interim
reports has entailed a more detailed presentation of statement of
movements in equity and more detailed notes for specific areas.
Comparative figures in the interim financial report are adjusted to
reflect the changed presentation.
The accounting policies applied in the interim financial report are
unchanged with respect to the Company's Annual Report for 2006/07.
For more information on the accounting policies, we refer to our
Annual Report for 2006/07.
2. seasonality
The Group's business area is influenced by seasonal fluctuations.
These fluctuations are attributable to seasonality in deliveries to
wholesale customers and a sales season of the Group's products that
varies over the year in retail and outlet operations. The Group's
wholesale peak quarters are historically first and third quarter,
respectively. By association, revenue and operating profit vary in
the various reporting periods, and interim financial reports are not
necessarily indicative of future trends. Results of the individual
quarters are therefore not reliable sources in terms of projecting
the Group's development.
3. sharebased Compensation
Stock option grants 2007/08
As reported in detail in the Annual Report for 2006/07, 66 executives
and key employees have been granted stock options. The grant is
performance-based and calculated on a proportion from 10% - 30% of
the wage of the individual employee, which via a Black & Scholes
calculation granted a specific number of options to the employee in
question. The calculation is based on a future volatility of 23% per
annum, an expected yield percentage of 1.3% and a risk-free interest
rate of 4.1%. The total grant constituted 237,769 stock options, that
each entitles the holder to acquire one existing share of DKK 329.39
per share and 5% per annum is added to the exercise price. The
exercise price was calculated as the average share price the last
five trading days prior to the grant. The options cannot be
exercised until after the publication of the Annual Report for
2009/10 and no later than after the publication of the Annual Report
for 2012/13. The aggregate market value of the plan is DKK 10 million
which will be amortized over the term.
Exercise of stock options in 2007/08
The executive stock option plan (2 persons) comprised at 30 June 2007
160,000 unexercised stock options. On 12 September 2007, the
Executive Board exercised 40,000 stock options, after which
unexercised executive stock options constitute 120,000.
Warrants exercised in 2007/08
On 26 September 2007 executive employees in IC Companys exercised
112,059 warrants at 10 DKK nominal value granted in previous
financial years. The share capital is increased by DKK 1,120,590
nominal value. The subscription price per share was DKK 173.50
without pre-emptive rights for other shareholders or others. The
company proceeds of the subscription amounted to 19,442,237 DKK.
4. Inventories
5. Trade receivables
Movements in allowance for bad debt:
6. change in the overview of distribution channels
The financial overview of the distribution channels is adjusted in
line with the Group's updated strategy according to which retail is
no longer exclusively defined as wholesale support, but a business
area in its own right. In the future, the retail channel defrays its
proportional share of product and brand building marketing costs that
historically have been recognised in full in the wholesale
operations.
The figures below illustrate the consequences of this change in the
first quarter, in which costs of DKK 17 million and DKK 12 million
are transferred from wholesale to retail in 2007/08 and 2006/07,
respectively.
New method:
Old method:
Adjusted comparative figures for the remaining quarters in 2006/07:
