Stock exchange announcement
IC Companys A/S - Interim Report Q1 2008/09
At its meeting on 18 November 2008 The Board of Directors of IC
Companys A/S considered and adopted the interim financial statements
for the period 1 July - 30 September 2008.
* Revenue in the first quarter came to DKK 1,262 million (DKK 1,190
million) which corresponds to a 6% growth.
* Wholesale revenue rose by 5% to DKK 946 million (DKK 897 million).
In-season sales are achieved at the same
level as last year.
* Retail revenue increased by 5% to DKK 276 million (DKK 262
million). Same-store sales are achieved at the
same level as last year.
* Gross profit in the first quarter came to DKK 754 million (DKK 725
million) which equals a 4% growth.
* Operating costs came in at DKK 524 million (DKK 475 million). The
development is affected by restructuring
costs totalling DKK 23 million concerning previously announced
organisational changes.
* Operating profit in the first quarter is down 8% to DKK 230
million (DKK 249 million) corresponding to an EBIT
margin of 18.3% (21.0%). Adjusted for restructuring costs, the
cost efficiency is marginally improved as
compared to last year.
* Order intake for the 2009 spring collections is completed showing a
1% setback as measured against last year.
The total growth in order intake for 3 of a total of 4 seasons
amounts to 5%.
* The Group has closed down its sourcing office in Copenhagen and has
instead established new sourcing offices in
Hanoi, Vietnam and Delhi, India. In cooperation with the office
in Dhaka, Bangladesh, these offices will handle the
sourcing for South Asia under joint regional management.
Downward adjustment of full year guidance
* The uncertain market situation is expected to continue throughout
the remaining part of 2008/09 and results in an
expectation of slightly lower revenue relative to 2007/08
(previously modest growth). The operating profit for the
full year is now expected to be significantly lower than in
2007/08 (previously slightly below the level for 2007/08).
FURTHER INFORMATION
Niels Mikkelsen
Chris Bigler
Chief Executive Officer Chief
Financial Officer
Tel.: +45 3266 7721 Tel.:
+45 3266 7017
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.
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
In the first quarter of the financial year, the Group achieved a
revenue advance constituting DKK 71 million, which corresponds to a
6% growth and a setback in earnings of DKK 19 million, amounting to
8%. The development is affected by restructuring costs totalling DKK
23 million concerning previously announced organisational changes.
The underlying operation in the entire first quarter is thus
marginally better than in 2007/08.
However, as a consequence of the market development the Group was
compelled to defend the market position of our brands. The trend is
expected to persist for the remaining part of 2008/09. For the
remainder of the financial year, the Group therefore expects to
achieve lower sell through at full price, higher discounts and
increased inventory write downs relative to last year.
Against this background the Executive Board now expects slightly
lower revenue relative to 2007/08 (previously modest growth). The
operating profit for the full year is now expected to be
significantly lower than in 2007/08 (previously slightly below the
level for 2007/08).
Revenue development
Revenue recorded DKK 1,262 million (DKK 1,190 million) which is
equivalent to a 6% growth. Revenue is positively affected by net
store openings and expansions by DKK 12 million and adversely
affected by exchange rate conversions of DKK 7 million.
Sales performance for own brands:
Encouraging double digit growth rates are recorded for Peak
Performance, Matinique, Part Two, By Malene Birger, Saint Tropez,
Soaked in Luxury and Designers Remix. Tiger of Sweden and InWear saw
a setback of 2% and 16%, respectively.
Tiger of Sweden declined by 2%. A decline is expected for the full
year 2008/09. A generational change was made in the management of
Tiger of Sweden. The Brand Director and one executive employee will
leave the brand at the end of the year. The Brand Finance Director
leaves Tiger of Sweden at the end of January 2009. The new Brand
Director appointed has worked with Tiger of Sweden for 6 years, most
recently as Export Manager. Further, two internal candidates are
appointed to other executive posts. Combined, the new management of
Tiger of Sweden represents 39 years of experience in the brand.
Sales performance for own brands market breakdown:
Denmark, Norway, Finland, Germany, Schwitzerland, Poland, Austria,
Russia and France all achieve double digit growth rates. Sweden, UK,
Belgium and Spain decline.
In Spain the Group's operations are primarily agent-based and the
Group has tightened the credit lines and in the same process reviewed
the customer portfolio, which has resulted in a revenue fall of 35%
as compared to last year.
It is satisfactory that the Group's Russian partner after a year of
consolidation records growth again.
Order intake
The order intake for the 2009 spring collections is completed showing
a 1% setback. The combined order intake for three of a total of four
seasons in the financial year 2008/09 is completed by a total growth
of 5% relative to 2007/08:
Double digit growth rates are recorded for Peak Performance, Tiger of
Sweden, Part Two, By Malene Birger, Soaked in Luxury and Designers
Remix Collection. InWear, Jackpot and Cottonfield decline.
distribution channels
Wholesale operation
First quarter wholesale revenue reached DKK 946 million (DKK 897
million) which equals a growth of 5%. The preorder revenue increased
by 6% and the in-season sales achieved were retained at last year's
level. This includes franchise revenue, which is up by 1%.
Profit margin increased by 4% to DKK 264 million (DKK 254 million)
corresponding to a profit margin of 27.9% (28.3%).
Retail operation
In the first quarter, retail revenue came to DKK 276 million (DKK 262
million) which is the equivalent of a 5% growth. Revenue was
positively affected by net store openings and expansions constituting
DKK 12 million. In the first quarter, revenue in same-store sales
(organic revenue development) was achieved at the same level as last
year.
Retail profit in the first quarter was down DKK 20 million to DKK 1
million (DKK 21 million) which is the equivalent of a profit margin
of 0.4% (8.2%). The development is attributable to higher discounts
and increasing inventory write downs.
The Group's retail operations constitute 36,500 square metres
distributed on 238 locations.
Outlet operation
Outlet revenue reached DKK 40 million (DKK 31 million) equivalent of
a 29% growth. Outlet profit for the first quarter reduced DKK 5
million, which corresponds to a profit margin of 11.4% (33.6%).
earnings development
Gross profit
For the first quarter, gross profit came to DKK 754 million (DKK 725
million), which corresponds to a 4% growth.
First quarter gross margin was 59.8% (60.9%). The deterioration of
1.1 percentage points is attributable to higher discounts and
increased inventory write downs relative to last year. Cottonfield
inventory write downs related to Cottonfield Female account for DKK 5
million. The higher discounts and the inventory write downs have more
than cancelled out the affect from lower sourcing currencies that
seen in isolation have improved the gross margin by 2.0 percentage
points. The effect on gross from shifts across channels was neutral
as compared to last year.
The Group has closed down its sourcing office in Copenhagen and has
instead established new sourcing offices in Hanoi, Vietnam and Delhi,
India. In cooperation with the office in Dhaka, Bangladesh, these
offices will handle the sourcing for South Asia under joint regional
management. This initiative is driven by an aspiration to have a
closer liaison and follow-up with the South Asian suppliers, which
form an increasing part of the Group's sourcing. The initiative is
cost-neutral vis-à-vis the current set-up, but it enhances the
Group's opportunities to capitalise on the attractive price/quality
ratio in this particular region. In 2007/08, the Group's sourcing in
South Asia constituted 8% of the total sourcing.
Operating costs
Capacity costs amounted to DKK 524 million (DKK 475 million), and the
cost rate increased by 1.5 percentage points to DKK 41.5%. As
previously announced, this development is affected by the
discontinuation of Cottonfield Female, the integration under joint
management of Cottonfield and Jackpot for one, and InWear and
Matinique for the other, and other restructuring costs constituting
DKK 18 million (see note 6). Adjusted for these affects the cost rate
is retained at the same level as last year.
With a view to ensuring earnings in the currently uncertain market
situation, the Group focuses continually on improvements in cost
efficiency.
Operating profit
Operating profit came to a profit of DKK 230 million (DKK 249
million) which corresponds to a setback of 8%. This development is
affected by restructuring costs amounting to a total of DKK 23
million related to organisational changes previously announced.
Financial items
The financial items are decreased, as the Group last year achieved a
profit from a currency/interest rate swap that aimed at hedging
equity denominated in SEK. The financial costs increased DKK 4
million as a result of averagely higher utilisation of the Group's
credit facilities and a higher interest rate level.
Income tax
Calculated tax costs amounting to DKK 63 million are recognised,
which represents 29% of the pre-tax profit.
Net result
Net result for the first quarter decreased by 13% to DKK 153 million
(DKK 176 million).
Cash flows and balance sheet
Cash flows
Cash flows from operating activities for the first quarter were an
outflow of DKK 236 million (an outflow of DKK 115 million), a
decrease of DKK 121 million as compared to last year. The development
is attributable to decreased earnings and a significant increase in
funds tied up in the Group's working capital as compared to last
year. The Group has recently initiated a project that aims at
reducing funds tied up in working capital. Further, the Group has
tightened the general terms of payment.
First quarter gross investments constituted DKK 33 million, of which
refurbishing stores and showrooms account for DKK 29 million.
The free cash flows from operating and investing activities were in
the first quarter an outflow of DKK 269 million (an outflow of DKK
148 million), which represents a reduction of DKK 121 million
relative to last year.
First quarter cash flows from financing activities were an outflow of
DKK 13 million (an inflow of DKK 11 million). In July, share buyback
constituted DKK 13 million.
The total cash flow for the first quarter was an outflow of DKK 282
million (an outflow of DKK 137 million).
Net interest-bearing debt
Consolidated net interest-bearing debt was DKK 924 million (DKK 694
million) which amounts to an increase of DKK 230 million relative to
30 September 2007. The Group's available committed credit lines
amount to DKK 1,420 million.
Balance
Group assets increased DKK 97 million from DKK 2,274 million as at 30
September 2007 to DKK 2,371 million as at 30 September 2008.
Non-current assets decreased DKK 34 million relative to the same
quarter last year. Consolidated deferred tax assets are reduced DKK
46 million to DKK 92 million as at 30 September 2008. The
development is attributable to the utilisation of deferred assets in
2007/08 (DKK 18 million) and an adjustment of calculated tax of
unrealised profits from forward currency contracts recognised
directly over equity (DKK 28 million).
Current assets increased DKK 131 million to DKK 1,579 million (DKK
1,448 million). Cash funds decreased DKK 78 million to DKK 117
million (DKK 195 million). Inventory rose DKK 92 million to DKK 522
million (DKK 430 million). Trade receivables increased DKK 39 million
to DKK 728 million (DKK 689 million).
Equity
Equity is at 30 September 2008 decreased DKK 43 million to DKK 689
million (DKK 732 million). The movements in equity and treasury
shares are specified on page 13.
At the Annual General Meeting of the Company 22 October 2008, the
proposal to pay dividends amounting to DKK 66 million was passed, and
dividend was subsequently paid.
outlook 2008/09
The uncertain market situation is expected to continue throughout the
remaining part of 2008/09 and results in an expectation of slightly
lower revenue relative to 2007/08 (previously modest growth). The
operating profit for the full year is now expected to be
significantly lower than in 2007/08 (previously slightly below the
level for 2007/08).
IC Companys A/S
Niels Martinsen
Niels Mikkelsen
Chairman of the Board of Directors Chief
Executive Officer
further INFORMATION
Niels Mikkelsen
Chris Bigler
Chief Executive Officer
Chief Financial Officer
Tel.: +45 3266 7721
Tel.: +45 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 2008 - 30
September 2008.
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 polices and additional Danish
interim reporting requirements for listed companies.
We consider the accounting policies applied to the effect that the
interim financial report gives a true and fair view of the Group's
assets, liabilities and financial position as at 31 March 2008, and
of the results of the Group's operations and cash flows in the period
1 July 2008 - 30 September 2008.
We further consider management's review to be a true and fair
presentation of the development in the Group's operations and
financial matters, the profit of the period and of the Group's
financial position as a whole and describes material risks and
elements of uncertainty pertaining to the Group.
Copenhagen, 18 November 2008
Executive Board:
NIELS MIKKELSEN CHRIS BIGLER
ANDERS CLEEMANN
Chief Executive Officer Chief Financial Officer
Executive Brand Officer
Board of Directors:
NIELS ERIK MARTINSEN HENRIK HEIDEBY OLE
WENGEL
Chairman Deputy
Chairman Deputy Chairman
PER BANK ANDERS COLDING FRIIS
income statement
balance sheet - assets
balance sheet - equity and liabilities
Movements in equity
Group cash flow statement
NOTes
1. Accountig 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.
The accounting policies applied in the interim financial report are
unchanged with respect to the Company's Annual Report for 2007/08.
For more information on the accounting policies, we refer to our
Annual Report for 2007/08. A few reclassifications are 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.
2. seasonability
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. 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 remuneration
Stock option grants in 2008/09
The Executive stock option programme comprised 130,000 stock options
as at 30 June 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.
By the use of the Black & Scholes model and under the assumption of
an exercise price of DKK 163 plus 5% per annum, a volatility of 25
per cent annually, an expected yield percentage of 2.8% and a
risk-free rate of return of 4.40 per cent annually, the market value
of the stock options can be assessed to DKK 0.3 million.
The Board of Directors has also granted Peter Fabrin 30,000 stock
options. 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 11 - against payment in cash - to buy
10,000 shares annually.
By the use of the Black & Scholes model, and under the assumption of
an exercise price of DKK 113 plus 5% per annum, a volatility of 35
per cent annually, an expected yield percentage of 4.1% and a
risk-free rate of return of 4.0 per cent annually, the market value
of the stock options can be assessed to DKK 0.3 million.
4. Inventory
5. trade receivables
Movements in allowance for bad debt:
6. restructuring costs
First quarter profit is affected by non-recurring costs in connection
with the integration under joint management of, for one, Cottonfield
and Jackpot, and for the other, InWear and Matinique and the
discontinuation of Cottonfield Female.
