* Local currency sales increased by 18% and Euro sales increased by 15% to €268.5m (€234.0m). * Average size of the Sales Force increased by 18% to 2,092,700 Consultants and productivity in local currency was constant. Closing Sales Force was up by 20%. * EBITDA increased by 7% to €46.4m (€43.4m). * Operating margins before restructuring costs was 15.4% (16.7%) resulting in an operating profit of €41.3m (€39.0m). * Net profit before restructuring costs amounted to €31.1m (€31.1m). * EPS after dilution increased to €0.55 (€0.52). * Cash flow from operating activities amounted to €31.3m (€29.4m). * New outlook: Sales growth for 2007 is expected to be well above 10% in local currency and operating margins to be slightly better than in 2006 despite the current negative currency effects. +-------------------------------------------------------------------+ | | | | | | | FINANCIAL | | | Rolling | | | SUMMARY | 3 months ended | | 12 | | | (€ Million) | 31 March | | months, | Year | | |----------------| | April 06- | end | | | 2007 | 2006 | Change | March 07 | 2006 | |---------------------+---------+---------------+-----------+-------| | Sales | 268.5 | 234.0 | 15% | 952.5 | 917.9 | |---------------------+---------+--------+------+-----------+-------| | Gross margin, % | 69.8 | 70.0 | - | 69.1 | 69.1 | |---------------------+---------+--------+------+-----------+-------| | EBITDA | 46.4(1) | 43.4 | 7% | 147.1(1) | 144.6 | |---------------------+---------+--------+------+-----------+-------| | Operating profit | 41.3(1) | 39.0 | 6% | 129.4(1) | 127.1 | |---------------------+---------+--------+------+-----------+-------| | Operating margin, % | 15.4(1) | 16.7 | - | 13.6(1) | 13.8 | |---------------------+---------+--------+------+-----------+-------| | Profit before tax | 35.9(1) | 35.2 | 2% | 102.3(1) | 108.3 | |---------------------+---------+--------+------+-----------+-------| | Net profit | 31.1(1) | 31.1 | - | 90.4(1) | 93.5 | |---------------------+---------+--------+------+-----------+-------| | EPS, diluted € | 0.55(1) | 0.52 | 6% | 1.77(1) | 1.61 | |---------------------+---------+--------+------+-----------+-------| | Cash flow from | | | | | | | operating | 31.3 | 29.4 | 6% | 123.4 | 121.6 | | activities | | | | | | |---------------------+---------+--------+------+-----------+-------| | Net | | | | | | | interest-bearing | 169.7 | 57.6 | 195% | 169.7 | 193.5 | | debt | | | | | ||---------------------+---------+--------+------+-----------+-------| | Sales Force, | 2,093 | 1,775 | 18% | 1,861 | 1,808 | | average, '000 | | | | | | +-------------------------------------------------------------------+ 1) Before restructuring costs of €0.5m. SALES AND EARNINGS Sales in local currencies increased by 18% and by 15% in Euro to €268.5m compared to €234.0m in the same period last year. Unit sales were up by 14% reflecting a change in the product mix and price increases in some major markets. Sales growth in local currencies of 18% was driven by an equivalent increase in the size of the sales force and a constant productivity. The closing Sales Force was up by 20%, or 356,100 to 2,150,600 Consultants. Local currency sales in Asia, Latin America, CIS & Baltics, Western Europe & Africa and Central Europe & Mediterranean increased by 78%, 25%, 20%, 11% and 7% respectively. The sales growth was a result of successful recruitment campaigns, strong product launches and catalogue promotions. Gross margins amounted to 69.8% (70.0%). Currency movements had a 0.7 percentage point negative impact on gross margins. The operating profit before restructuring costs increased by 6% to €41.3m (€39.0m) reflecting increased sales. Operating margins before restructuring costs amounted to 15.4% (16.7%) and were negatively affected by currency movements of 0.8 percentage points. Oriflame also saw higher sales and marketing costs. Profit before tax increased by 1% to €35.4m (€35.2m). Interest and charges were €1.6m higher compared to the same period last year principally reflecting the borrowings following the company's dividend and redemption offer to shareholders. Restructuring charges affected profits by €0.5m during the period. These costs are related to the proposal to create a new operational platform for the company. Net profit decreased to €30.6m (€31.1m) and fully diluted earnings per share amounted to to €0.55 (€0.52). Cash flow from operating activities amounted to €31.3m (€29.4m) during the period. Operating cash flow was higher as a result of higher operating profit and lower inventories. OPERATING HIGHLIGHTS Marketing and Products Oriflame continued to strengthen its skin care category with the successful launch of Ecollagen. The launch was supported by an integrated communication campaign including print, press and sales support material. TV advertising campaigns were run in key markets. Royal Velvet, an anti-ageing skin care was also successfully re-launched during the period. Both products were among the top 10 best sellers during the period. One of the best performing categories during the period was Toiletries. Strong sales were the result of improved formulation, better packaging and in certain markets a price re-positioning. Fragrances also performed very well and were helped by successful launches during the period, particularly the Eau de Toilette for men and women Embrace Him and Embrace Her and Miss O, targeting young girls. Global Supply The Product Fulfilment Project, Oriflame's review of its entire supply chain, is proceeding according to plan. The project is expected to generate long term benefits in the form of improvements of service levels in the company's main markets, with visible effects beginning to materialise towards the latter part of this year. Oriflame has started the implementation of the new group distribution centre structure, building up the Warsaw distribution site to service the company's operations in Northern Europe. New Operational Platform In February, Oriflame presented a proposal to create a new operational platform. Negotiations with the various representative bodies concerning the change are continuing. REGIONAL HIGHLIGHTS CIS & Baltics Local currency sales increased by 20% as a result of a 23% increase in the average size of the Sales Force partly offset by a 3% productivity decrease compared to last year. Euro sales in the first quarter increased by 16% to €152.9m (€132.0m) and closing Sales Force was up 25% year on year. All main markets performed well and particularly Kazakhstan, Belarus and Mongolia. Sales in Russia increased by 12% in local currency. Sales increase was strong due to successful recruitment campaigns and due to sales enhancing actions such as loyalty programmes and events celebrating Oriflame's 40th anniversary in March. However, Oriflame saw lower productivity particularly due to unsatisfactory service levels. Operating margins decreased to 20.5% (21.3%) resulting in an 11% increase in operating profit to €31.3m (€28.1m). The margin decrease was principally due to negative exchange rate movements. Selling costs and sales and marketing costs were higher as a result of a large number of sales enhancing activities during the period partly related to the 40 year anniversary of Oriflame. Central Europe & Mediterranean Local currency sales increased by 7% driven by a 9% productivity improvement partly offset by a 2% decrease in the size of the Sales Force. Closing Sales Force however, was up by 2% year over year. Euro sales increased by 7% to €59.4m (€55.4m). Sales growth was particularly strong in Slovakia, Poland and Czech Republic. This was due to successful implementation of recruitment activities and strong leadership development following a further drive with SARPIO (Sales and Recruitment Processes in Oriflame). Growth was further supported by a re-positioning of toiletries in Poland, increased ad spend in Czech Republic and strong customer offers related to the 40th anniversary in Slovakia. Operating profit amounted to €11.2m (€11.3m). Operating margins decreased to 18.9% (20.4%) due mainly to a negative price mix resulting from stock clearance actions. In addition, marketing costs were higher as a result of timing differences in advertising spending compared to last year. Western Europe & Africa Sales increased by 10% in local currency and by 11% in Euro to €24.2m (€22.0m) as a result of a 16% increase in the size of the Sales Force partly offset by a 4% productivity decrease. Growth was particularly strong in Egypt, Morocco and Spain while Holland and Finland reported lower sales during the period. Closing Sales Force was up by 18%. Operating margins decreased to 9.4% (11.8%) due mainly to increased costs for new sales and recruitment initiatives in Spain and Portugal. The operating profit amounted to €2.3m (€2.6m). Latin America Local currency sales increased by 25% driven by a 17% increase in the size of the Sales Force and a 7% productivity improvement. Euro sales increased by 13% to €10.3m (€9.1m). All countries showed good growth and particularly Mexico. Operating profit amounted to €0.7m (€0.8m). Operating margins were lower at 6.8% (8.8%) mainly due to negative currency effects. The currencies of each of the five markets have depreciated sharply compared to the same period last year. Asia Local currency sales increased by 78% as a result of a 65% increase in the size of the Sales Force and 8% productivity increase. Euro sales increased by 65% to €15.0m (€9.1m). Oriflame posted very strong growth in all countries and particularly in India and Vietnam where sales doubled compared to last year. Sales in China continued in line with the company's plans but have no material impact on the sales of the region. The strong sales trend is to a high degree attributed to Oriflame's focus on sales and recruitment processes which has led to many Leaders in the region taking more responsibility for the training and recruitment of the Sales Force. Operating profit increased to €1.1m (€-0.2m) as a result of positive scale benefits from higher sales. Four out of six countries are now profitable. CASH FLOW & INVESTMENTS Cash flow from operating activities amounted to €31.3m (€29.4m) during the period. Operating cash flow was higher as a result of €3.4m in higher EBITDA. This was partly offset by €1.8m in higher working capital requirements than in the same period last year. Cash flow from investing activities amounted to €-6.6m (€-13.0m). FINANCIAL POSITION The operating cash flow was used to decrease the interest-bearing debt to €169.7m at the end of the quarter compared to €193.5m at year end 2006. Net debt/EBITDA amounted to 1.15 (0.43) and interest cover amounted to 8.4 (12.2). PERSONNEL The average number of employees in the first quarter 2007 was 6,186 (5,393). DIVIDEND Oriflame's Board of Directors has proposed to the AGM a dividend of €1.01 (€0.90) per share. The proposed record date for dividends is 21 May and payment will occur through VPC on 29 May. From January 2007, Oriflame will withhold 15% tax on dividend. Further information is available on www.oriflame.com. NEW OUTLOOK AND LONG TERM FINANCIAL TARGETS The outlook for 2007 has been changed. Oriflame expects sales growth for 2007 to be well above 10% in local currency and operating margins to be slightly better than in 2006 despite the current negative currency effects. Oriflame's previous outlook was that it expected sales to increase by 5-10% in local currency and an operating margin for 2007, excluding the effects of the restructuring, to be in line with 2006. Oriflame's long term financial targets are to achieve locally currency sales growth of 5-10% per annum and to reach an operating margin of 15% in 2009. A number of factors impact sales and margins in-between quarters: * Effectiveness of individual catalogues and product introductions * Effectiveness and timing of recruitment programmes * Timing of sales and marketing activities * The number of effective sales days per quarter * Currency effect on sales and results OTHER This report has not been reviewed by the Company's auditors. A Swedish translation is available on www.oriflame.com. Oriflame will present the results at a meeting on 25 April at Operaterrassen in Stockholm at 8.00 CET. The meeting will be live web cast on www.oriflame.com and www.financialhearings.com. Oriflame's second quarter report 2007 will be announced on August 1. 25 April, 2007 Magnus Brännström Chief Executive Officer For further information, please contact: Magnus Brännström, Chief Executive Telephone: +32 2 357 5529 Officer Kevin Kenny, Chief Financial Officer Telephone: +32 2 357 5544 Patrik Linzenbold, Investor Relations Telephone: +35 2 26 203 232 Oriflame Cosmetics S.A. 20 rue Philippe II L-2340 Luxembourg www.oriflame.com Company registration no B.8835 Oriflame is an international cosmetics company selling direct, with sales in 59 countries. Oriflame offers a complete range of high quality skincare, fragrances, colour cosmetics, toiletries and accessories, marketed through a Sales Force of independent Sales Consultants. Although the company has grown rapidly it has never lost sight of its original business concept - natural Swedish cosmetics, sold from friend to friend. Oriflame is a co-founder of World Childhood Foundation. Oriflame Cosmetics is listed on the Nordic Exchange. The full report including tables can be downloaded from the following link:
Oriflame Cosmetics: INTERIM REPORT 1 JANUARY - 31 MARCH 2007
| Source: Oriflame Cosmetics S.A.
Attachments
