Three months ended 30 September 2007
* Local currency sales increased by 24% and Euro sales increased by
22% to €229.6m (€188.8m).
* Average sales force increased by 24% to 2,151,000 consultants and
productivity was constant in local currency. Closing sales force
was up by 17%.
* EBITDA before restructuring increased by 44% to €26.1m (€18.1m).
* Operating margin before restructuring costs was 8.6% (7.3%),
resulting in a 42% increase in operating profit to €19.7m
(€13.8m).
* Net profit before restructuring costs increased by 33% to €11.9m
(€9.0m).
* Establishment of new operational platform ahead of plan.
* New long term financial target: Oriflame has raised its target
for annual sales growth from 5-10% to around 10% in local
currency. The operating margin target for 2009 remains at 15%.
The outlook for 2007 remains unchanged.
* Operating cash flow amounted to €-17.5m (€-0.4m) principally due
to €26.3m in higher build-up of inventories compared to last
year.
Nine months ended 30 September 2007
* Local currency sales increased by 23% and Euro sales increased by
20% to €767.8m (€638.4m).
* Net profit before restructuring costs increased by 16% to €72.4m
(€62.4m).
* EPS after dilution and before restructuring increased by 21% to
€1.28 (€1.06).
* Cash flow from operating activities amounted to €40.2m (€56.2m).
FINANCIAL Rolling
SUMMARY 3 months 12
(€ Million) ended 9 months ended months, Year
30 September 30 September Oct 06- End
2007 2006 Change 2007 2006 Change Sep 07 2006
Sales 229.6 188.8 22% 767.8 638.4 20% 1,047.3 917.9
Gross margin, % 70.5 68.9 - 70.2 69.6 - 69.7 69.1
EBITDA 26.1[1] 18.1 44% 117.0[2] 97.0 21% 164.7[2] 144.6
Operating profit 19.7[1] 13.8 42% 98.7[2] 84.1 17% 141.7[2] 127.1
Operating
margin, % 8.6[1] 7.3 - 12.9[2] 13.2 - 13.5[2] 13.8
Profit before
tax 13.4[1] 10.3 31% 82.9[2] 71.4 16% 113.3[2] 101.7
Net profit 11.9[1] 9.0 33% 72.4[2] 62.4 16% 100.5[2] 90.5
EPS, diluted, € 0.21[1] 0.16 34% 1.28[2] 1.06 21% 1.91[2] 1.52
Cash flow from
operating
activities (17.5) (0.4) n.m 40.2 56.2 (28%) 105.6 121.6
Net
interest-bearing
debt 229.3 249.6 (8%) 229.3 249.6 (8%) 229.3 193.5
Sales force,
average, '000 2,151 1,739 24% 2,153 1,769 22% 2,024 1,808
[1] Before restructuring costs of €9.6m. [2] Before
restructuring costs of €11.8m.
SALES AND EARNINGS
Three months ended 30 September 2007
Sales in local currencies increased by 24% and by 22% in Euro to
€229.6m compared to €188.8m in the same period last year. Unit sales
were up by 22%.
Sales growth in local currencies was driven by a 24% increase in the
average size of the sales force and a constant productivity. Closing
sales force increased by 17% or 294,400 to 2,065,800 consultants.
Local currency sales in Asia, CIS & Baltics, Latin America, Central
Europe & Mediterranean and Western Europe & Africa increased by 34%,
29%, 28%, 15% and 6% respectively.
Gross margins improved to 70.5% (68.9%) mainly as a result of lower
provisions for obsolete products and production gains from highervolumes. Negative currency effects in the CIS region was offset by
price increases while Oriflame had positive currency effects in
Central Europe.
The operating profit before restructuring costs increased by 42% to
€19.7m (€13.8m) reflecting higher sales and improved margins.
Operating margins before restructuring costs improved to 8.6% (7.3%)
as a result of higher gross margins, leverage on fixed overhead costs
as well as higher marketing expenses in the third quarter last year.
Margins were however, as a consequence, held back by higher
conference costs compared to last year partly as a result of
Oriflame's 40th anniversary having over 1.0 percentage point negative
impact on margins. Currency movements had a 0.2 percentage point
negative effect on operating margins.
Profit before tax amounted to €3.8m (€10.3m). Results were negatively
affected by €1.7m in foreign exchange losses during the quarter,
while Oriflame saw foreign exchange profits amounting to €0.2m last
year. Restructuring charges, related to the creation of a new
operational platform for the company, affected profit before tax by
€9.6m during the quarter.
Net profit amounted to €2.4m (€9.0m) and fully diluted earnings per
share amounted to €0.04 (€0.16). Diluted EPS excluding restructuring
costs increased by 34% to €0.21 (€0.16).
Nine months ended 30 September 2007
Sales in local currency increased by 23% and by 20% in Euro to
€767.8m (€638.4m). Unit sales were up by 21%.
Sales growth in local currency was driven by a 22% increase in the
average size of the sales force and a 1% productivity improvement.
Gross margins improved to 70.2% (69.6%). Net profit decreased by 3%
to €60.6m (€62.4m). Net profit excluding restructuring costs
increased by 16%.
Cash flow from operating activities decreased to €40.2m (€56.2m)
mainly due to a higher build of inventories compared to the same
period last year.
OPERATIONAL HIGHLIGHTS
Marketing and Sales Support
During the quarter, the toiletries and fragrance categories showed
higher than average sales growth.
Strong growth of toiletries was partly the result of the continued
successful roll out of the oral care products Optifresh Toothpaste
and Toothbrush.
The overall top sellers in the quarter were the fragrances Elvie
Summer Magic and the new design of the fragrance Soul EDT. Oriflame
also launched Ascendant a new fragrance for men.
Within skin care, the focus during the quarter was on the core
product range Time Reversing skin care by adding an eye and lip
contour cream and a restoring hand cream. The formulations of Time
Reversing Restoring Day and Night creams and Time Reversing Instant
Illuminating Serum have been enriched.
Highlights in the colour cosmetics category were the introduction of
two key products building the Oriflame Beauty brand combining the
wisdom of nature with the best of science: Wonderlash - an innovative
mascara with a patented brush developed exclusively for Oriflame, and
Colour Attraction - a lipstick using a breakthrough microsphere
technology. Both product launches were supported by an integrated
communication campaign including print, press, TV and sales support
material.
Recognition of top leaders is an important part of Oriflame's
business. In September, Oriflame held its largest annual Global Gold
Conference ever for top consultants in Spain with over 3,800
participants. This was the first ever global such event with
participants from all regions celebrating Oriflame's 40th
anniversary.
Global Supply
Oriflame has during the third quarter carried out an inventory build
up in anticipation of the fourth quarter, being the most important
selling period of the year.
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 improved
service levels in the company's main markets, with visible effects
beginning to materialise towards the latter part of this year. In
2007 the benefits will come primarily from more effective and
efficient inventory management. Service levels are expected to
improve as the new distribution network is rolled out throughout the
company during 2008 and 2009.
Oriflame is continuing to move inventory closer to its main
markets with Warsaw now continuously serving as the main group
warehouse. This site will be expanded further to serve as a
distribution centre with pick & pack capabilities expected to be
operational during the first quarter 2008. The company will
also intensify the efforts of looking at sourcing opportunities
closer to its main markets. The purpose of these changes is
to increase flexibility and reduce lead-times wherever possible, all
with the aim at improving the service levels in the company's main
markets.
New Operational Platform
The overall project is somewhat ahead of time and the new operational
platform is expected to be fully up and running in the first quarter
2008. The recruitment activities are proceeding according to plan and
the new office in the centre of Stockholm is ready for occupancy.
The restructuring charges are expected to amount to €30 - 35m over
two years as previously communicated with the largest share occurring
in 2007.
REGIONAL HIGHLIGHTS
CIS & Baltics
Local currency sales in the third quarter 2007 increased by 29% as a
result of a 31% increase in the average size of the sales force and a
1% productivity decrease compared to last year. Euro sales increased
by 24% to €119.0m (€95.7m) and closing sales force was up by 20% year
over year. All markets performed well, particularly Kazakhstan,
Mongolia and Lithuania. Sales in Russia increased by 25% in local
currency.
Sales increase was strong due to a higher sales force, the result of
successful recruitment campaigns and catalogue promotions, in
addition to events celebrating Oriflame's 40th anniversary. In the
comparable period in 2006, Oriflame lost sales due to a licence
requirement to import fragrances in Russia.
Operating margins improved to 14.0% (12.9%) resulting in a 35%
increase in operating profit to €16.7m (€12.4). Margins improved as a
result of lower obsolete stock provisions and lower sales and
marketing costs. This was partly offset by higher costs for
conferences and recognitions for the sales force. Negative currency
effects on margins were offset by price increases.
Central Europe & Mediterranean
Local currency sales in the third quarter increased by 15% driven by
a 6% increase in the size of the sales force and a 9% productivity
improvement. Closing sales force was up by 6%.
Euro sales increased by 21% to €55.7m (46.1m) helped by stronger
currencies in many key markets. Sales growth was particularly strong
in Czech Republic and Slovakia due to a good implementation of
marketing activities as well as strong leadership development and
recruitment. Sales growth in Poland continued to be strong due to a
well executed pricing strategy and attractive customer offers.
Operating profit increased by 28% to €10.2m (€8.0m). Operating
margins improved to 18.3% (17.3%) mainly due to stronger local
currencies.
Western Europe & Africa
Sales increased by 6% in local currency and in Euro to €20.8m
(€19.6m) as a result of a 13% increase in the size of the sales force
partly offset by a 6% productivity decrease. Growth was particularly
strong in Spain, Egypt and Morocco while Finland, Holland and Norway
reported lower sales partly due to timing effects in the closing
schedules of the catalogues compared to last year. Closing sales
force was up by 8%.
Operating margins amounted to 8.3% (9.7%) resulting in an operating
profit of €1.7m (€1.9m). Margins were lower mainly due to more
sellout actions.
Latin America
Local currency sales in the third quarter increased by 28% driven by
a 29% increase in the size of the sales force partly offset by a 1%
decrease in productivity. Euro sales increased by 23% to €12.4m
(€10.1m). Sales growth was strong in all markets and particularly in
Colombia and Mexico. Closing sales force was up by 28%.
Operating margins decreased to 10.2% (12.9%) resulting in an
operating profit of €1.3m (€1.3m). Margins were lower mainly due to
negative currency effects.
Asia
Local currency sales in the third quarter increased by 34% driven by
a 44% increase in the size of the sales force partly offset by a 6%
productivity decrease. Euro sales increased by 28% to €15.0m
(€11.7m). Oriflame posted strong growth in all countries and
particularly in India and Sri Lanka. Closing sales force was up by
28%.
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 margins were 6.9% (8.7%) resulting in an operating profit
of €1.0m (€1.0m). Margins were lower mainly due to negative currency
effects.
CASH FLOW & INVESTMENTS
Cash flow from operating activities amounted to €-17.5m (€-0.4m)
during the third quarter and €40.2m (€56.2m) in the nine month
period. A €20.1m increase in EBITDA excluding restructuring costs in
the nine month period was partly offset by €18.8m in higher working
capital requirements compared to the same period last year. The
increase in working capital was principally due to a €31.7m higher
build-up of inventories.
Cash flow from investing activities during the first nine months
amounted to €-22.4m (€-30.5m). Capital expenditure was lower mainly
due to the investments in the CIS Supply Centre in the same period
last year.
FINANCIAL POSITION
Net interest-bearing debt amounted to €229.3m by the end of the
period compared to €249.6m at the end of the third quarter 2006 and
€193.5m at year-end 2006. Interest-bearing debt increased mainly as a
result of €56.2m in dividends paid in the second quarter. The net
debt/EBITDA ratio was 1.39 (1.78) and interest cover amounted to 10.2
(9.0) in the nine month period.
MANAGEMENT AND SHARES
In order to balance their portfolios, members of the Executive
Committee may sell shares during the trading window following the
third quarter 2007 report.
PERSONNEL
The average number of employees during the third quarter 2007 was
6,411 (5,453).
NEW LONG TERM FINANCIAL TARGETS
Oriflame's Board of Directors has adopted a new financial target for
sales growth, following a revision of the strategic scenario and
reflecting the Company's geographical and product mix. Oriflame's
target is to achieve local currency sales growth of around 10% per
annum. The previous growth target was to achieve local currency sales
growth of 5-10% per annum.
Oriflame's margin target remains unchanged: Oriflame has a target 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 of recruitment programmes
* Timing of sales and marketing activities
* Number of effective sales days per quarter
* Currency effect on sales and results
OUTLOOK FOR 2007
The outlook for 2007 is unchanged. Oriflame expects sales growth for
2007 to be well above 15% in local currency. Operating margins,
excluding restructuring costs, is expected to be slightly better than
in 2006 despite the current negative currency effects.
NOMINATING COMMITTEE FOR ORIFLAME'S 2008 AGM
Oriflame and its main shareholders are in the process of forming a
nominating committee for the Company's 2008 AGM. For contact please
send a mail to corporate.governance@oriflame.be.
AUDIT
Report on Review of Interim Financial Information by the Réviseur
d'Entreprises
To the Shareholders,
Oriflame Cosmetics S.A.
20, rue Philippe II
L-2340 Luxembourg
Introduction
We have reviewed the accompanying consolidated condensed balance
sheet of Oriflame Cosmetics S.A. and it's subsidiaries ("the Group")
as at 30 September 2007, and the related consolidated condensed
statements of income, changes in equity, cash flows and related notes
for the nine month period then ended (the "interim financial
information"). Management is responsible for the preparation and
presentation of this consolidated interim financial information in
accordance with IAS 34, 'Interim Financial Reporting'. Our
responsibility is to express a conclusion on this interim financial
information based on our review.
Scope of Review
We conducted our review in accordance with the International Standard
on Review Engagements 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity". A review of
interim financial information consists of making inquiries, primarily
of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance
with International Standards on Auditing and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us
to believe that the accompanying consolidated interim financial
information as at 30 September 2007 is not prepared, in all material
respects, in accordance with IAS 34, 'Interim Financial Reporting'.
Luxembourg, 23 October KPMG Audit S.à r.l.
2007 Réviseurs
d'Entreprises
D.G. Robertson
OTHER
A Swedish translation is available on www.oriflame.com.
The Company will host a conference call at 15.00 CET on Wednesday 24
October. The conference call will be web cast in "listen-only" mode
through Oriflame's website: www.oriflame.com.
To participate in the conference call you are kindly requested to
call +44 (0)20 7162 0125
24 October 2007
Magnus Brännström
Chief Executive Officer
For further information, please contact:
Magnus Brännström Chief Executive Officer Telephone: +32 2 357
5529
Gabriel Bennet Chief Financial Officer Telephone: +32 2 357
5526
Patrik Linzenbold Investor Relations Telephone: +35 2 26
Manager 203 232
Oriflame Cosmetics S.A.
20 rue Philippe II
L-2340
Luxembourg
www.oriflame.com
Company registration no B.8835
Oriflame's year-end report 2007 will be announced on 20 February
2008.
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:
INTERIM REPORT 1 JANUARY - 30 SEPTEMBER 2007
| Source: Oriflame Cosmetics S.A.
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