Stock Exchange Announcement
15 May 2008
IC Companys A/S - Interim Report Q3 2007/08
Revenue increased DKK 138 million or 14% to DKK 1,104 million in
third quarter of the financial year. Operating profit increased by
5 % to DKK 153 million. Order intake for the autumn collection
2008/09 is completed by a 10% growth. 2007/08 full year revenue
guidance is in the region of DKK 3,750 million and an operating
profit in the region of DKK 375 million.
At its meeting on 14 May 2008 the Board of Directors of IC Companys
A/S considered and adopted the interim financial statements for the
period 1 January - 31 March 2008.
Revenue in the third quarter reached DKK 1,104 million (DKK 966
million) equivalent to a 14% growth. Year-to-date revenue was DKK
3,119 million (DKK 2,770 million) corresponding to a 13% growth.
Gross profit in the third quarter came to DKK 664 million (DKK 576
million) equal to a 60.1% gross margin (59.6%). Year-to-date gross
margin is 60.7% (58.6%).
Costs came to DKK 511 million (DKK 431 million) in the third quarter,
equivalent to a 19% rise. The cost development is effected by
non-recurring costs amounting to DKK 20 million.
Operating profit in the third quarter increased by 5% to DKK 153
million (DKK 145 million) which corresponds to an EBIT margin of
13.8% (15.0%). Year-to-date operating profit came to DKK 453 million
(DKK 378 million) equivalent to an EBIT margin of 14.5% (13.7%).
Earnings per share were DKK 5.9 (DKK 5.2) in the third quarter
equivalent to a 13% growth. Year-to-date, growth in earnings per
share is 25% to DKK 17.4.
Order intake for the autumn 2008/09 collection is completed showing a
10% growth. In local currencies, growth in order intake is 11%. As
such, the growth in order intake turned out higher than the previous
guidance of 6% - 8%.
Full year guidance 2007/08
2007/08 full year revenue guidance is in the region of DKK 3,750
million (previously DKK 3,750 - 3,800 million) and an operating
profit in the region of DKK 375 million (previously DKK 400 - 440
million). The result is affected by non-recurring costs amounting to
DKK 20 million and deteriorating retail revenue and in-season sales
in March and April.
Direct sales promoting investments in the form of showrooms,
refurbishments and opening new stores will be carried through in the
region of DKK 110 - 120 million (previously DKK 130 -140 million).
In addition, investments in the IT platform and warehouse facilities
will be carried out in the financial year 2007/08 in the region of
DKK 15 - 25 million (previously DKK 20 - 30 million).
The previously announced share buyback programme of DKK 200 million
is retained. The third and last programme of DKK 47 million will be
initiated 15 May 2008.
Further INFORMATION
Chris
Bigler
Chief Financial
Officer
Tel + 45 3266
7017
Henrik Steensgaard
Investor Relations Manager
Tel + 45 3266 7409
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
Changes to the Executive Board
In line with IC Companys A/S' continued ambition to develop the
company further, the Board of Directors has, as previously announced,
appointed Niels Mikkelsen as new Chief Executive Officer. Niels
Mikkelsen takes up the position 1 August 2008, at which point the
company's CEO, Henrik Theilbjørn, resigns. Henrik Theilbjørn will
carry out his responsibilities until Niels Mikkelsen joins the
company.
Niels Mikkelsen, 43, comes from a position at Esprit de Corp. Since
1998, Niels Mikkelsen has been responsible for the Nordic and Baltic
countries, where he has generated a significant growth in turnover as
well as in earnings. From 1996 to 1998, Niels Mikkelsen worked for
InWear Group (today IC Companys A/S), most recently as Country
Manager for Denmark.
In connection with the above, CFO Chris Bigler, 38, was appointed
member of the Executive Board. Chris Bigler, 38, has been employed
with IC Companys since 2002 and since 2004 as CFO. Chris Bigler has
thus since 2004 had a significant role in the turnaround of the
company. Today Chris Bigler has the responsibility for finance,
administration, Risk Management, Treasury, Shared Service, Investor
Relations as well as the entire IT area.
As previously announced, COO Mikkel Vendelin Olesen has accepted an
offer to become Chief Executive Officer outside the group. Therefore
he resigns from his position in IC Companys A/S as at 31 October
2008. Mikkel Vendelin Olesen will carry out his current
responsibilities in the group until he resigns by the end of October
2008.
In consultation with Niels Mikkelsen and Chris Bigler, the Board of
Directors will assess the short term need of filling the position as
Chief Operating Officer.
The changes to the Executive Board will have no effect on initiatives
already launched.
Initiatives launched
The Group has recently launched a 3-year investment programme for
Jackpot and Cottonfield in Eastern Europe (Poland, the Czech Republic
and Hungary). Jackpot and Cottonfield, which in these countries are
exclusively distributed via own retail, have seen a very encouraging
development during the past years. Retail revenue in Eastern Europe
for these brands is expected to double over the 3-year period from
the current level of DKK 150 million. In 2008/09, 20 - 30 store
openings are planned.
The Group has adjusted the sales organisation in China. Revenue
growth in China has not matched investments in distribution and
organisation, which has resulted in an adjustment of the
organisation. No further store openings are expected in China until
2009. The Group operates a total of 35 concessions and 8 franchise
stores in China.
The Group has decentralised an internal marketing bureau, which until
now carried out tasks for primarily InWear, Jackpot, Matinique,
Cottonfield and Part Two. Consequently, a number of employees have
been transferred to the relevant brand organisations. The initiative
results in a simpler group organisation, strengthens the brand
organisation and anchors the identity building activities in the
brand organisation. Subsequently, the Group has also begun divesting
an internal PR department in an external company, of which the
management hitherto will take over ownership. The cost-savings from
these initiatives is expected to amount to a total of DKK 10 million
in 2008/09.
The resource allocation to the Group brands in the ongoing budget
process for 2008/09 is highly differentiated between the Group
brands. In this process, it is also planned to capitalise on the vast
number of investments made in the Group's shared platform over the
past years. Therefore, zero growth is expected in the costs of the
shared platform.
Revenue development
Revenue in the third quarter rose to DKK 1,104 million (DKK 966
million), which is equivalent to 14% growth. Revenue growth was
affected positively by net store openings amounting to DKK 20 million
and adversely affected by exchange rate conversion of DKK 3 million.
Sales performance own brands:
Growth was generated in the Group brands in the third quarter 2007/08
at a combined rate of 14%. Peak Performance, Tiger of Sweden,
Cottonfield, Matinique, Part Two, By Malene Birger and Designers
Remix Collection advanced by double-digit growth rates, whereas
InWear, Saint Tropez and Soaked in Luxury declined.
Sales performance for own brands market breakdown:
Sweden, Denmark, Norway, Belgium, Finland, Germany, Schwitzerland,
Canada, Poland, Austria and France all achieve double-digit growth
rates in the third quarter 2007/08.
The Group's Russian partner is consolidating after several years of
significant growth. Against this background, a modest setback for
Russia is forecast for the full year 2007/08.
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 caused a revenue fall in the third
quarter. A setback in Spain is expected throughout the full year
2007/08.
Distribution channels
Wholesale operation
In the third quarter, wholesale revenue reached DKK 831 million (DKK
728 million) representing a combined 14% growth. The total preorder
revenue in the third quarter moved up by 15% and in-season sales
increased by 5%. This includes franchise revenue, which rose 41%.
Wholesale profit in the third quarter increased 16% to DKK 204
million (DKK 177 million) which corresponds to a wholesale profit
margin of 24.8% (24.3%).
Growth in order intake for the autumn 2008/09 collection was 10%. In
local currencies the growth in order intake is 11%. As such, the
growth in order intake was higher than the guidance indicating 6% -
8%. This is mainly due to higher growth than was expected in Peak
Performance, By Malene Birger, Part Two, Matinique and Designers
Remix Collection.
Peak Performance, Tiger of Sweden, Matinique, Part Two, By Malene
Birger, Soaked in Luxury and Designers Remix Collection all advanced
by double-digit growth rates, whereas InWear, Jackpot and Cottonfield
declined.
Order intake for the summer 2008/09 collection started in mid-April
and completion is expected by the end of May 2008.
Retail operation
In the third quarter, retail revenue came to DKK 242 million (DKK 211
million) corresponding to a 15% growth. Revenue was positively
affected by scheduled net store openings and expansions amounting to
DKK 20 million.
In the third quarter 2007/08, development in same-store sales
(organic revenue development) achieved a combined 7% growth. Compared
to previous quarters, the growth rate is lower, which is solely
attributable to the development in March, during which the same-store
growth seen isolated was negative by 4%. This development continued
throughout April with a negative growth of 2%, whereas the first 14
days of May saw a positive upturn as compared to last year. The
accumulated growth in same-store sales for the first nine months of
the financial year is 11%.
Retail profit in the third quarter achieved a loss of DKK 3 million
DKK (a loss of DKK 1 million). The negative development is to
significant degree affected by the retail activities for InWear and
Cottonfield in China, where the organisation, as mentioned above, is
now adjusted. Furthermore, more inventory write-downs in the third
quarter resulted in a lower retail gross margin as measured against
last year.
The Group's retail operations constitute 37,000 square metres
distributed between 234 locations.
Outlet operation
Outlet revenue in the third quarter reached DKK 31 million (DKK 27
million), corresponding to a 14% growth. Outlet profit for the third
quarter increased DKK 2 million, equivalent to a profit margin of
12.8% (7.8%).
Outlet operation forms an integral part of the Group's business model
for the profitable sale of residual post-season products. The Group
operates 24 outlet stores.
Earnings development
Increasing gross profit
For the third quarter, gross profit reached DKK 664 million (DKK 576
million) which corresponds to an increase of 15%. The third quarter
achieved a gross margin of 60.1% (59.6%).
The Group's sourcing currencies in the third quarter 2007/08 are
hedged at a lower exchange rate than in the same period in 2006/07.
Seen isolated this benefits the Group's gross margin by 1.2%-points
in the third quarter 2007/08.
As previously announced the gross margin improvement from the
combined effect of the development in sourcing currencies is expected
to be at the level of 1.0% - 1.2%-points in the second half of
2007/08 and combined 1.5 - 1.8%-points for the full year 2007/08
relative to 2006/07.
Increasing operating costs
Costs were DKK 511 million (DKK 431 million) in the third quarter,
which equals a 19% increase. The cost rate increased by 1.7%-points
to 46.3% as measured against the third quarter last year.
The development is affected by non-recurring costs amounting to DKK
20 million. DKK 13 million is related to severance pay to the Group's
CEO. Further, the Group had an extraordinary loss on trade
receivables amounting to a total of DKK 7 million from two export
partners.
Earnings development
In the third quarter 2007/08, operating profit was up 5% to DKK 153
million (DKK 145 million), which equals an EBIT margin of 13.8%
(15.0%).
Financial items
Net financial items were reduced DKK 1.0 million to DKK 6.5 million
(DKK 7.5 million). Interest expenses have increased DKK 0.8 million
as a result of averagely higher utilisation of the Group's credit
facilities, whereas settlement of forward exchange contracts is
positive by DKK 2.8 million (DKK 1.0 million).
Income tax
Tax costs amounting to DKK 41 million are recognised, which
represents 28% of the pre-tax profit.
Net result
Net result for the third quarter increased by 7% to DKK 105 million
(DKK 98 million). Earnings per share were DKK 5.9 (DKK 5.2) in the
third quarter, which equals a 13% growth.
CASH FLOWS and balance sheet
Cash flows
Cash flows from operating activities for the third quarter were an
outflow of DKK 65 million (an outflow of DKK 89 million), which
represents an improvement of DKK 24 million. The development is
attributable to increased earnings and decreased funds tied up in
working capital.
Gross investments came to DKK 31 million in the third quarter 2007/08
(DKK 35 million), of which refurbishing stores and showrooms account
for DKK 25 million.
The free cash flows from operating and investing activities were in
the third quarter 2007/08 an outflow of DKK 97 million (an outflow of
DKK 124 million), which represents an improvement of DKK 27 million
relative to last year.
Third quarter cash flows from financing activities were an outflow of
DKK 95 million (an outflow of DKK 83 million). In the period, share
buyback constituted DKK 95 million.
The total cash flow for the third quarter was an outflow of DKK 192
million (an outflow of DKK 207 million).
Net interest-bearing debt
Consolidated net interest-bearing debt was DKK 736 million (DKK 663
million) which amounts to an increase of DKK 73 million relative to
31 March 2007. The increase is primarily caused by increased current
liabilities as a result of increased activity and the Group's share
buyback programme that combined amounted to DKK 214 million since 31
March 2007.
Balance
Group assets increased DKK 258 million to DKK 2,280 million as at 31
March 2008 (DKK 2,021 million). The increase is exclusively
contributable to growth in current assets amounting to DKK 275
million, of which the increase of cash funds constitutes DKK 82
million.
Inventory increased DKK 89 million relative to last year, which
corresponds to 26%. This development results from increasing activity
and an increased number of retail square metres. Furthermore, there
are significantly more goods in transit as compared to last year, as
the deliveries from the production companies have been brought
forward so as to ensure timely deliveries of the summer collections.
The delivery situation is satisfactory and progresses as planned. The
share of surplus products of the total inventory was reduced compared
to last year.
Trade receivables increased DKK 93 million or 17%, which is primarily
due to increased activity, but also averagely higher debtor days as
compared to the same period last year.
Non-current assets decreased DKK 17 million relative to the same date
last year. Consolidated deferred net tax assets are reduced DKK 54
million to DKK 110 million as at 31 March 2008 (DKK 164 million).
This is mainly attributable to an adjustment of tax rates
constituting DKK 16 million and the utilisation of deferred assets in
2006/07 of DKK 33 million.
Equity movements
Equity is at 31 March 2008 increased DKK 105 million to DKK 672
million as compared to 30 June 2007. Equity ratio is at 31 March 2008
29.5% (34.1%).
In the period, dividend of DKK 74 million was paid and treasury
shares bought back amounted to DKK 124 million.
In the autumn of 2007, the Group's Executive Board, executive
employees and other key employees exercised stock options under
incentive-based compensation plans, which led to an increase in
equity of DKK 25 million.
Movements in equity and treasury shares are specified on page 14.
Share buyback
As previously announced, in the period 3 January 2008 to 30 June 2008
IC Companys A/S expects to carry out a share buyback programme of
approximately DKK 200 million.
The second programme was completed 14 May 2008 and constituted DKK 86
million. At its meeting 14 May 2008 the Board of Directors of IC
Companys A/S decided to initiate the third and last programme
amounting to DKK 47 million. This programme is initiated 15 May 2008
and will be completed 31 July 2008.
In addition, the Group bought back 110,000 treasury shares to cover
stock option programmes to the Group's new Chief Executive Officer
and to the Chief Financial Officer upon his appointment to the
Executive Board. The stock option programme is outlined in detail in
note 3 on page 16 and in stock exchange announcement no. 21 of 31
March 2008.
Movements in treasury shares are specified on page 14.
outlook 2007/08
2007/08 full year revenue guidance is in the region of DKK 3,750
million (previously DKK 3,750 - 3,800 million) and an operating
profit in the region of DKK 375 million (previously DKK 400 - 440
million). The result is affected by non-recurring costs amounting to
DKK 20 million and deteriorating retail revenue and in-season sales
in March and April.
Direct sales promoting investments in the form of showrooms,
refurbishments and opening new stores will be carried through in the
region of DKK 110 - 120 million (previously DKK 130 - 140 million).
In addition, investments in the IT platform and warehouse facilities
will be carried out in the financial year 2007/08 in the region of
DKK 15 - 25 million (previously DKK 20 - 30 million).
The previously announced share buyback programme of DKK 200 million
is retained. The third and last programme of DKK 47 million will be
initiated 15 May 2008.
In the assessment of the outlook it should be noted that the
consolidated revenue and profit are significantly higher in the first
half year than in the second half year and that the fourth quarter
seen in isolation is loss-making.
IC Companys A/S
Niels
Martinsen
Henrik Theilbjørn
Chairman of the Board of
Directors President &
CEO
Contacts
Chris Bigler
Chief Financial Officer
Tel + 45 3266 7017
Henrik Steensgaard
Investor Relations Manager
Tel + 45 3266 7409
Statement by the management
The Board of Directors and the Executive Board have considered and
approved the interim financial report for the period 1 January 2008 -
31 March 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 January 2008 - 31 March 2008.
Copenhagen, 14 May 2008
Executive board:
HENRIK THEILBJØRN MIKKEL V.
OLESEN CHRIS BIGLER
President & CEO Chief Operating Officer
Chief Financial Officer
Board of directors:
NIELS ERIK MARTINSEN HENRIK
HEIDEBY OLE WENGEL
Chairman Deputy
Chairman Deputy Chairman
PER BANK ANDERS COLDING
FRIIS NIELS
HERMANSEN
DISTRIBUTION channels
income statement
balance sheets - assets
BALANCE sheet - equity and liabilities
movements in equity
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.
The financial year 2007/08 is the first time that the Group presents
interim financial reports 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 reports
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. 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 2007/08
As previously announced in stock exchange announcement no. 21 of 31
March 2008, the Board of Directors has made the decision to grant
100,000 stock options to the Group's new CEO, Niels Mikkelsen. The
granted stock options give admittance to, in immediate continuation
of the company's release of the annual report for 2008/09, 2009/10,
2010/11, 2011/2012 and 2012/13, against payment in cash, to buy
20,000 shares annually.
Further, the Board of Directors has also decided to grant 30,000
stock options to Chris Bigler. The granted stock options give
admittance to, in immediate continuation of the company's release of
the annual report for 2007/08, 2008/09 and 2009/10, against payment
in cash, to buy 10,000 shares annually.
For both programmes applies that stock options that have not been
exercised in one year can be exercised the following two years. In
case the employment is terminated, all un-exercised options will
lapse. The exercise price for the stock options has been set as the
highest rate of the closing price for the company's share on OMX on
31 March 2008 and the average of the closing price in the five
previous business days. An interest of 5% per annum will be charged.
By applying the Black & Scholes formula and on assumptions of an
exercise price of DKK 180, a volatility of 25% per annum, an expected
dividend rate at 2.6% and a risk-free interest of 4.15% per annum,
the market value of the stock option programme to Niels Mikkelsen
amounts to DKK 2.5 million and DKK 0.7 million to Chris Bigler.
As outlined in detail in the Annual Report 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 by means of the Black &
Scholes formula will grant a specific number of stock 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 of 4.1%. The total grant constituted 237,769 stock
options that each entitles the holder the right to acquire one
existing share at DKK 329.39 per stock plus 5% per annum. The share
price is calculated as the average share price the last 5 trading
days prior to the grant. The stock options cannot be exercised until
after the publication of the Annual Report 2009/10 and no later than
after the publication of the Annual Report 2012/13. The aggregate
market value of the programme is DKK 10 million, which will be
amortized over the term.
Exercise of stock options in 2007/08
The Executive stock option programme (two persons) comprised 160,000
stock options as at 30 June 2007. On 12 September 2007, the Executive
Board exercised combined 40,000 stock options.
Warrants exercised in 2007/08
On 26 September 2007 executive employees in IC Companys exercised a
total of 112,059 warrants at nominal value DKK 10 granted in previous
financial years. The share capital is consequently increased by DKK
1,120,590 nominal value. The subscription price per share was DKK
173.50 without pre-emptive rights for the Company's other
shareholders or others. The company proceeds of the subscription
amounted to DKK 19,442,237.
4. inventories
5. Trade receivables
Movements in allowance for bad debt:
