STOCKHOLM, Sweden, Jan. 17, 2002 (PRIMEZONE) -- Lindex:
-- The implementation of the action programme was successful and had
a positive impact on the cash flow and gross profit margin.
-- Operating profit increased to SEK 97M (11) and profit after
financial items increased to SEK 101M (14). Profit after financial
items in the Nordic countries rose to SEK 138M (51).
-- The gross profit margin increased to 56.4 per cent (50.7).
-- The cash flow after investment improved by SEK 350M (-140) to SEK
130M (-220).
-- In the first three months of the financial year, Lindex's sales
increased by 9.7 per cent to SEK 1,287M (1,173). Same-stores sales
rose by 4.3 per cent (7.1). New stores contributed a sales
increase of 5.4 per cent (8.1).
-- In total, 10 (12) new stores were opened during the first three
months of the financial year.
-- In November, the Board of Directors decided to acquire the Twifit
retail chain. The Competition Authority approved the acquisition
in January 2002.
Lindex is a retail chain with 356 stores of which 321 are in the Nordic market and 35 stores in Germany. The Group's product areas are Ladies' Wear, Lingerie and Children's Clothing.
Market and Demand
As a whole, growth in the retail clothing markets was weak during the period. The generally uncertain economic situation also affected consumers' readiness to buy. Measured as the SCB Consumer Confidence Indicator1, readiness to buy in the Swedish market fell from index 0 to index -5 during the first quarter.
During the period, the retail and outfit market in Sweden grew by only by 0.2 per cent. The sector also shows a similar trend in Lindex's other markets. In Germany, the retail and outfit market developed negatively during the first quarter.
Sales Increased by 10 per cent
During the period September - November 2001, Lindex's sales increased by 9.7 per cent (15.2) to SEK 1,287M (1,173). Lindex's same-stores sales rose by 4.3 per cent (7.1). New stores generated an increase of 5.4 per cent (8.1).
The sales trend for same-stores exceeded, or was on a par with, growth in the respective market during the period. Lindex, therefore, continues to win market share and is the market leader in ladies' wear, lingerie and children's clothing in Sweden and in lingerie in Norway.
Profit Significantly Higher
Operating profit in the first three months of the financial year amounted to SEK 97M (11). Profit after financial items rose to SEK 101M (14). The gross profit margin for the first quarter increased to 56.4 per cent (50.7).
The improvements are a result of the ongoing action programme which focused on cash flow, inventory levels and gross profit during the period. The improved balance between demand and product supply has led to higher gross profit margins on sales of autumn and winter clothing.
During the period, adaptation of costs continued according to plan. Operating profit was charged with costs in connection with the divestment of another store in Germany.
Profit after financial items for the first three months of the financial year in the Nordic countries increased to SEK 138M (51). The net charge (sales minus costs) for the establishment of stores in Germany amounted to SEK 37M (37).
As a significant proportion of the Group's purchases are made in USD or USD-linked currencies, Lindex is exposed to fluctuations in the USD rate. Lindex's hedging policy with contracts for a maximum period of six to eight months from date of order reduces the currency risk and thus cushions the effect on the gross profit.
Financial income and expenses amounted to SEK 4M (3). During the first three months of the financial year, interest-bearing liabilities averaged SEK 587M (550) and interest expenses amounted to SEK 11M (8).
Profit per share after full tax was SEK 4.80 (0.60).
1 The proportion of the households which believe that Sweden's economy and the economy of the households will improve over the next 12 months compared with the corresponding period in the previous year.
Action Programme Makes an Impact
Implementation of the action programme continued successfully during the period. The implemented measures resulted in a significant strengthening of cash flow and the gross profit margin. The measures also meant further reduced inventory levels and thus a better balance between product supply and demand. At the same time, fewer sales stimulating measures were implemented which generated a slightly lower sales growth.
The adaptation of costs continued during the quarter. The results indicate that the negative cost trend has now definitely been broken and that the measures are, therefore, having the desired effect.
The action programme is expected to generate a profit contribution of SEK 100M and the measures will be implemented in full before the end of the first six months of the 2001/2002 financial year.
Developments in Germany
During Lindex's initial years in Germany, the establishment of stores was concentrated on Nordrhein-Westfalen in Western Germany. In the first quarter of the 2000/2001 financial year, the operations were expanded and a new large store was opened in Berlin.
During the period, sales in the retail clothing and outfit sector in Germany were substantially lower than in the previous year and the sector reported a fall of approximately two per cent. Lindex's same- stores sales trend amounted to -1.6 per cent (4). The weak sales trend affected the results in the German company. In Germany, the ongoing action programme includes a number of measures aimed at securing increased sales and improved profitability.
During the period, it was possible to compensate for the weak sales trend with a higher gross profit margin and greater cost effectiveness, with the result that the same-stores deficit continued to fall. An additional two stores also achieved break-even (income exceeds expenditure) with regard to operating profit before depreciation.
As a step in the continuous evaluation of the store network, a decision has been made to close an additional store. The store has been divested and the costs are charged to operating profit for the quarter.
In total, this generated a net charge for the first quarter of the financial year of SEK 37M (37).
10 New Stores Opened
During the first three months of the financial year, Lindex opened a total of 10 (12) stores - 2 each in Sweden, Norway, Germany and 4 in Finland. The store network comprised 356 stores on 30 November 2001.
The expansion during the remainder of the financial year will mainly be concentrated on upgrading existing stores.
Acquisition of Twilfit
In November, the Board of Directors made a decision to acquire the privately-owned Twilfit retail chain. Twilfit has 61 stores located all over Sweden and holds a strong position in product area Lingerie. The concentration is on the Stockholm region and Twilfit's total sales amount to approximately SEK 400M. Through the acquisition Lindex strengthens its position within the Swedish lingerie market and achieves a stronger presence in the important Stockholm market.
Lindex's intention is to operate and develop the operations as an independent store concept under the Twilfit brand name. It is anticipated that a co-ordination of administration and purchasing and logistics flows will have a synergistic impact amounting to SEK 20-25M within two years.
The acquisition is not expected to make any impact on Lindex's profit for the 2001/2002 financial year. A positive effect on profit of SEK 25- 30M is anticipated for the following financial year.
The Competition Authority approved the acquisition in January 2002.
Taxes
Paid and deferred taxes amounted to SEK 35M (6) in the first three months of the financial year. The tax rate in Sweden, Norway and Finland was 28 per cent, in Germany 38 per cent and in Hong Kong 16 per cent.
Deferred taxes recoverable on accumulated losses in the German company are reported at SEK 101M, which reduced 'tax on the period's profit' by SEK 10M (9).
Inventories
Inventories on 30 November 2001 amounted to SEK 854M compared with SEK 1,006M on 30 November 2000 and was thus SEK 152M lower than during the corresponding period in the previous year.
Purchasing Office in Shanghai Strengthened
Lindex's purchasing network consists of purchasing offices in Hong Kong, Shanghai, New Delhi, Dhaka, Istanbul and Bucharest. The latest office was established in Shanghai in January 2001. Against the background of strong development within the textile sector in northern China and the future admission of China into the World Trade Organisation (WTO) the office in Shanghai has been strengthened through the transfer of some functions from the office in Hong Kong.
During the period, Lindex continued to develop its concept for the acquisition of textiles. This means that Lindex selects the textiles which are then purchased by the manufacturer or by Lindex. This 'reverse integration' also provides for lower purchase prices, improved quality control, and an opportunity to expand into more purchasing markets.
Investments
The Group's net investment in fixed assets amounted to SEK 67M (124) in the first three months of the financial year. Most of this related to investment in new stores and refurbishment of stores. The strategy to expand the size of the stores had an effect on the investment amount per store.
Significantly Increased Cash Flow
Cash flow also increased significantly during the first quarter through a combination of significantly improved profit, the lower inventory level, and the lower expansion rate.
The cash flow after investment amounted to SEK 130M (-220) in the first three months of the financial year.
Cash flow from current operations was affected by the positive profit trend compared with the previous year. The cash flow was also affected by the reduction of inventories and by increased trade debtors which amounted to SEK 343M (281) on 30 November.
Of total trade debtors, trade debtors for Lindex Club amounted to SEK 336M (275).
Financing and Liquidity
On 30 November 2001, liquid funds amounted to SEK 73M compared with SEK 186M on 31 August 2001.
On 30 November 2001, net borrowing was SEK 412M compared with SEK 551M on 31 August 2001, a fall of SEK 139M.
During the period, the net debt/equity ratio fell from 56.7 per cent to 39.8 per cent and the equity ratio rose to 46.4 per cent compared with 40.1 per cent on 31 August 2001.
Personnel
The number of full-time employees during the latest 12-month period (December 2000 - November 2001) amounted to 2,921 compared with 2,781 during the 2000/2001 financial year. The increase is mainly the result of recruitment by the newly-opened stores.
Incentive Scheme
The Annual General Meeting on 18 January 2001 resolved to implement a new incentive scheme for senior executives. The scheme is based on issuing warrants for Lindex shares. A proposal has been made that the Annual General Meeting on 17 January 2002 will pass a resolution to continue this scheme, relating to the period 1 September 2001 - 31 August 2002.
The full proposal is available at Lindex's head office in Alingsas, Sweden.
Parent Company
Sales increased by SEK 5M, equivalent to 0.6 per cent, to SEK 710M (705). Profit after financial items rose to SEK 95M (64). Net investment in fixed assets was made of SEK 24M (33). Profit after tax increased to SEK 60M (46). Net borrowing by the parent company amounted to SEK 335M (506) on 30 November 2001.
Christmas Trading
Sales during December 2001 developed positively and were on a par with the previous year's sales from a volume viewpoint. At the same time, the margins continued to improve compared to last year. The trend was especially positive within product area Lingerie.
Future Information Dates
-- Interim Report for the first six months of the 2001/2002 financial
year will be published on 19 March 2002.
-- Interim Report for the first nine months of the 2001/2002
financial year will be published on 26 June 2002.
-- Year-end Report 2001/2002 will be published on 17 October 2002.
Accounting Principles
This Interim Report has been prepared in accordance with the Swedish Financial Accounting Standards Council's recommendation RR 20 interim reporting. The same accounting principles and calculation methods have been applied in this Interim Report as in the latest Annual Report.
Detailed Audit Report for AB Lindex relating to Interim Report 1 September 2001 - 30 November 2001
In our capacity as Auditors of AB Lindex, we have carried out a review of this Interim Report and in so doing followed the recommendations issued by the Swedish Institute of Authorised Public Accountants, FAR.
A review is considerably restricted compared to an audit.
Nothing has emerged which indicates that the Interim Report does not comply with the requirements stipulated in the Stock Market and Annual Accounts Acts.
Ohrlings PricewaterhouseCoopers AB
Robert Barnden Hasse LundinAuthorised Public Accountant Authorised Public Accountant
This information was brought to you by Waymaker http://www.waymaker.net
The following files are available for download: http:// www.waymaker.net/bitonline/2002/01/17/20020117BIT00350/bit0001.doc The full report http:// www.waymaker.net/bitonline/2002/01/17/20020117BIT00350/bit0001.pdf The full report