Interim Report for New Wave Group AB (publ) JANUARY - SEPTEMBER 2009 The period 1 July - 30 September 2009 - Sales amounted to MSEK 1,002, which was 10 % lower than the previous year (MSEK 1,117). - The result after tax amounted to MSEK 19.3 (74.7). - The result per share amounted to SEK 0.29 (1.19). - The cash flow from operating activities improved by MSEK 246 to MSEK 141 (-105). - The equity ratio amounted to 36.7 (30.5) %. - The net debt to equity ratio amounted to 127.0 (169.4) %. The period 1 January - 30 September 2009 - Sales amounted to MSEK 3,005, which was 11 % lower than the previous year (MSEK 3,378). - The result after tax amounted to MSEK 26.5 (145.5). - The result per share amounted to SEK 0.39 (2.19). - Restructuring costs have affected the result after tax by MSEK 56.4. - The cash flow from operating activities improved by MSEK 698 to MSEK 376 (-322). VIEWS ON 2009 Market development has been weaker than expected, primarily in the Promo sales channel. We expect the sales drop during the fourth quarter to be lower than during previous quarters, but we expect a better quarter result than last year. CEO Comments Our 3rd quarter offered both good and bad. We had a rather pessimistic view of the market - promo in particular - even before the quarter, and unfortunately, we were right. The promo market is very weak, and unfortunately we believe it will remain the same in Q4. To some extent, I am disappointed with the sales figures - we believe we have developed better than our competitors in most areas - but that in itself is no consolation. I am also very disappointed with the result - it is mainly due to lower sales - but also lower gross profit. However, I am incredibly satisfied, pleased and proud of what we have achieved in terms of cash flow, inventory reduction and reduction of our debt - and that is after all what we have focused on and accomplished. Q4 In Q4, we expect a continued weak market, but a lower sales drop than in the previous quarter. However, the quarter result is expected to be better than 2008's. We will continue to focus on cash flow and inventory reduction. 2010 However, it is with pleasure I can say that it can start to be really enjoyable again. We enter 2010 with a stronger balance sheet and we can once again focus on sales - marketing and growth. We are in much better shape than our competitors - thanks to the fact that we took strong action at an early stage. Furthermore, for 2010 we see a considerably more stable market - and in the U.S. we are already seeing a turnaround in orders for Cutter & Buck. Torsten Jansson Comments JULI - SEPTEMBER Sales Sales amounted to MSEK 1,002 (1,117), which was 10 % lower than the previous year. Exchange rates had a positive effect on sales by MSEK 61. Sales decreased by 20 % in the Promo Business Area, while Sports & Leisure and Gifts & Interior show a smaller decrease by 2 and 5 % respectively. Turnover decreased by 8 % in the Nordic countries, mainly in Sweden and Finland. Sales in Europe decreased by about 11 % and in North America by 16 %. Positive currency effect occurred mainly in Euro countries and the U.S. The sales drop is mainly due to the general financial situation. Gross margin The gross margin amounted to 44.6 (50.8) %. The decrease is mainly related to the weak business cycle in the Promo sales channel, in particular on the American market. Other income and other costs Other income decreased by MSEK 21.1 to MSEK 2.1 (23.2). The decrease is attributable to the fact that last year includes capital gain in connection with property sales and an insurance compensation in connection with a fire. Remaining revenues are mainly attributable to the operation's exchange gains and should be set against the result row “Other costs” where primarily the operation's currency exchange losses are reported. Costs and depreciations External costs decreased by MSEK 33.4 and amounted to MSEK -226.5 (-259.9). Costs for personnel amounted to MSEK 166.6, which is on the same level as last year (MSEK 167.5). Both cost elements have been affected positively due to savings, but negatively when recalculating foreign subsidiaries to SEK. Depreciations amounted to MSEK 17.1 (16.5). The operating margin amounted to 3.8 (12.8) %. The decrease is mainly due to weaker sales and gross margin. Finance net and taxes Net financial items amounted to MSEK -11.4 (-39.2). The decrease is due to lowered interest rate levels and lower debt. It is the Group's policy to have a short interest rate guarantee resulting in quick effects on the Group's net interest as the short-term interest changes. Tax expenses in absolute numbers amounted to MSEK 7.0 (28.9), and the tax rate to 26.6 (27.9) %. Result The result after tax decreased by MSEK 55.4 to MSEK 19.3 (74.7) and the result per share amounted to SEK 0.29 (1.19). JANUARY - SEPTEMBER Sales Sales amounted to MSEK 3,005 (3,378) during the period, which was 11 % lower than last year. Exchange rates had a positive effect on sales by MSEK 277. The decrease has affected all business areas, Promo by 16 %, Sports & Leisure by 7 %, and Gifts & Home Interior by 6 %. Turnover decreased by 15 % in the Nordic countries during the period, mainly in Sweden and Finland. Sales in Europe were somewhat better and show a decrease of about 6 %, where mainly Switzerland has a better development and shows growth. Sales in North America decreased by 11 %. Positive currency effect occurred mainly in Euro countries and the U.S. The decrease in sales is due to the general financial situation as well as last year's sales of sports and promo wear for the European football championship. Gross margin The margin amounted to 46.7 (49.4) %. The decrease is related to the weaker business cycle, mainly in the Promo sales channel and in particular on the American market. The gross margin has also been affected by restructuring costs in Orrefors Kosta Boda, which affected the first quarter's earnings by MSEK 25. Other income and other costs Other income increased by MSEK 11.2 to MSEK 47.0 (35.8). The increase is attributable to the sales of Orrefors' art glass collections and properties, which generated a capital gain of MSEK 16.4. Remaining revenues are mainly attributable to the operation's exchange gains and should be set against the result row “Other costs” where primarily the operation's currency exchange losses are reported. Other costs increased by MSEK 14.4 to MSEK -25.2 (-10.8). The result of these two items amounts to a net income of MSEK 5.4. Costs and depreciations External costs decreased by MSEK 93.6 and amounted to MSEK -714.3 (-807.9). Costs have been affected positively due to savings, but negatively when recalculating foreign subsidiaries to SEK. Restructuring costs of MSEK 7.1 have affected external costs in connection with changes in the Cutter & Buck division for direct sales to end customers. Personnel costs have increased by MSEK 47.6 to MSEK -580.6 (-533.0). Costs have been affected positively due to savings, but negatively when recalculating foreign subsidiaries to SEK. The effect of the Orrefors Kosta Boda restructure was reported in the first quarter, which resulted in personnel decrease of 154 people. This meant that the company made an appropriation for restructuring in the form of a one-time cost of MSEK 70.1 total in the financial statement for the first quarter 2009. Of these, MSEK 45.1 is declared as personnel costs and MSEK 25.0 as gross profit as they are attributable to a decreased production result. Depreciations amounted to MSEK 54.6 (45.7). The operating margin amounted to 2.5 (9.1) %. The decrease is due to the restructuring costs and lower volumes. Finance net and taxes Net financial items amounted to MSEK -39.7 (-107.6). The decrease is due to lowered interest rate levels and lower debt. It is the Group's policy to have a short interest rate guarantee resulting in quick effects on the Group's net interest as the short-term interest changes. The tax rate amounted to 26.6 (27.1) %. Result The result after tax decreased by MSEK 119 to MSEK 26.5 (145.5) and the result per share amounted to SEK 0.39 (2.19). During the first quarter the result has been affected by restructuring costs of MSEK 77.2 before tax. With a tax rate of 26.9 % for concerned companies, the net impact of the restructuring costs is MSEK -56.4. REPORTING OF BUSINESS AREAS New Wave Group AB divides its operations into three business areas; Promo, Sports & Leisure, and Gifts & Home Interior. Each brand has been placed into the business area it is considered to belong to (see attachment for breakdown of brands into business areas). The Group observes the areas' and the brands' sales and results (EBITDA). The business segments are based on the Group's operational management. Promo During the period July-September, sales decreased by 20 % to MSEK 403 (503) and the result (EBITDA) decreased by MSEK 63.7 to MSEK 13.5 (77.2). The decrease is attributable to the general financial situation and has affected all markets. During the period January-September, sales decreased by 16 % to MSEK 1,344 (1,603) and the result (EBITDA) decreased by MSEK 125.7 to MSEK 107.6 (233.3). Sales and result were lower in the Nordic countries, mainly in Sweden and Finland. The results for Europe also indicated a decrease, but have been compensated by a positive currency effect. The decrease is due to the general financial situation. Sports & Leisure During the period July-September, sales decreased by 2 % to MSEK 449 (456) and the result (EBITDA) decreased by MSEK 37.3 to MSEK 42.1 (79.4). The weak American market has had a negative effect on Cutter & Buck, but the market seems to have recovered somewhat during this quarter. Craft sales are increasing compared to last year, mainly in the retail sales channel. The decline in earnings is related to lower gross profit margins primarily on the U.S. market. Turnover for the period January-September decreased by 7 % and amounted to MSEK 1,230 (1,319). The result (EBITDA) decreased by MSEK 67.6 to MSEK 90.2 (157.8). Turnover and results for Craft have had a continued positive trend. Cutter & Buck has been negatively affected by the weak U.S. market. Cutter & Buck U.S. has also been affected by restructuring costs of MSEK 7.1 due to changes in the division for direct sales to end customers. The result decrease is mainly related to lower sales this year in comparison to last year's European Football Championship. An agreement with Coop has been reached which means that the current agreement expires at the end of the year. Negotiations for a change in co-operation from the end of the year are nearing finalisation. Gifts & Home Interior During the period July-September, sales decreased by 5 % to MSEK 150 (158) and the result (EBITDA) decreased by MSEK 3.5 to MSEK -0.8 (2.7). The turnover decrease is mainly related to the Orrefors Kosta Boda export market. Sales and results for Sagaform are on the same level as last year. Previous year's result includes a MSEK 5 insurance compensation in connection with a fire. During the period January-September, sales decreased by 6 % to MSEK 431 (456) and the result (EBITDA) decreased by MSEK 29.2 to MSEK -67.4 (-38.2). The lower sales are related to the Swedish Orrefors Kosta Boda retail market and the weaker result to the company's restructuring costs of MSEK 70.1 which were reported during the first quarter. Sales and results for Sagaform are on the same level as last year. Previous year's result includes a MSEK 5 insurance compensation in connection with a fire. GEOGRAPHICAL ALLOCATION A table showing sales in the regions Nordic Countries, Mid Europe, South Europe, North America and Other Regions is displayed on page 15. Sales decreased by 8 % in the Nordic region during the period July-September, which is attributable to all Nordic countries. Europe has been negatively affected on most markets, except Switzerland which had a positive trend. Sales decreased by 16 % in the U.S., the exchange rate development had a positive effect and sales in local currency in the region dropped by 24 %. Sales on all other markets are in line with previous years' numbers. Sales decreased by 15 % in the Nordic region during the period January-September, which mainly is attributable to Sweden and Finland. The currency effect had a positive impact in Europe. Europe has been negatively affected on most markets, although Switzerland shows better development than the other countries. Sales decreased by 11 % in the U.S., the exchange rate development had a positive effect and sales in local currency in the region dropped by 28 %. Sales on all other markets are somewhat lower than last year. CAPITAL TIED UP Capital tied up in stock amounted to MSEK 1,849 (2.225). The weakened Swedish krona affects the declared value when converting to SEK. This has increased the stock by MSEK 31 during the period. Obsolescence reserve as of 30 September, 2009 amounted to MSEK 80 (83), or about 4 % (about 4 %) of the declared stock value. The stock turnover rate for the period January-September amounted to 1.1 (1.1). Accounts receivable decreased by MSEK 110 to MSEK 819 (929). The steps taken to decrease capital tied up have had the desired effect and is expected to continue in the fourth quarter. INVESTMENTS, FINANCING AND LIQUIDITY The Group's cash flow from operations during the period July-September amounted to MSEK 141 (-105) and after investments to MSEK 106 (-127). The Group's cash-effecting net investments amounted to MSEK -35 (-22), where the establishing of Kosta Boda Art Hotel is responsible for the major part of the period's investments. The Group's cash flow from operations during the period January-September amounted to MSEK 376 (-322) and after investments to MSEK 334 (-380). The Group's cash-effecting net investments amounted to MSEK -42 (-59), where the sale of tangible fixed assets included MSEK 19.9. The net debt decreased by MSEK 180 during July-September and amounted to MSEK 2,172. Corresponding period last year showed an increase of MSEK 79 to 2,740. Net debt in relation to equity decreased and amounted to 127.0 (169.4) %. The net debt decreased by MSEK 405 during January-September and amounted to MSEK 2,172. Currency changes have decreased the debt by MSEK 94 since the turn of the year. Corresponding period last year showed an increase by MSEK 383. Net debt relative to equity decreased during the first nine months and amounted to 127.0 % against 140.5 % by 31 December, 2008. The equity ratio improved and amounted to 36.7 (30.5) %. The Group had a credit line of MSEK 2,875 as at 30 September, 2009, and the credit agreement runs up until April 2011. The interest is based on each respective currency's prime interest rate and fixed margin. It is the Group's policy to have a short interest rate guarantee resulting in quick effects on the Group's net interest as the short-term interest changes. New Wave Group's financing agreement includes a commitment (covenant) on the equity ratio and total credit limits of 2,875 as at 30 September to be gradually depreciated down to MSEK 2,475 as at 30 April, 2011. The company's presentation and valuation of intangible assets is made in accordance with previous year at the turn of the year. Impairment tests for intangible assets will be calculated by the expected future cash flows per segment. The deteriorated market conditions and financial situation make it difficult to forecast the coming period. PERSONNEL AND ORGANISATION The number of full time employees as of 30 September, 2009 amounted to 2,241 (2,649) persons, of which 48 % were women and 52 % were men. Out of all the employees, 582 work in production. The production owned by New Wave Group belongs to Orrefors Kosta Boda, Seger, Dahetra, Toppoint and Cutter & Buck (embroidery). SUBSCRIPTION OPTIONS IN NEW WAVE GROUP AB (PUBL.) New Wave Group has four outstanding subscription option programs. A new program for senior executives was introduced during June 2009. The program runs until June 2012 and the exercise price is SEK 26.10. The option subscription premium was SEK 0.21 per option. Two option programs were launched in July 2008, one for senior executives and one for the Board of Directors. The senior executives program consists of 1,800,000 options and expires in June 2011. The exercise price is SEK 64.05. The option subscription premium was SEK 1.11 per option. The Board of Directors program consists of 200,000 options and expires in June 2013. The exercise price is SEK 85.40. The option subscription premium was SEK 0.88 per option. The previous program was launched in July 2007 and consists of 1,653,250 options and expires in June 2010. The exercise price is SEK 102.50. The option subscription premium was SEK 7 per option. 2,000,000 options were originally issued, of which 346,750 have later been cancelled. Acquired premiums for all programs above have been based on market value. RELATED-PARTY TRANSACTION There are lease agreement contracts with associated companies. The parent company has purchased consulting services from a Board Member. The CEO has rented a property for private use. All transactions have occurred in accordance with market conditions. VIEWS ON 2009 Market development has been weaker than expected, primarily in the Promo sales channel. We expect the sales drop during the fourth quarter to be lower than during previous quarters, but we expect a better quarter result than last year. THE PARENT COMPANY Sales amounted to MSEK 128 (111). Profit after financial items amounted to MSEK 37.7 (-38.2). Net borrowing amounted to MSEK 2,063 (1,694), of which MSEK 1,682 (213) refer to financing of subsidiaries. Net investments amounted to MSEK 121 (-58). Total assets amount to MSEK 3,573 (2,982) and equity to MSEK 1,086 (759). RISKS AND RISK CONTROL Having international operations, New Wave Group is continuously exposed to different kinds of financial risks. These risks are currency, borrowings and interest rate risks, as well as liquidity and credit risks. In order to minimize the affect these risks may have on the result, the group has drawn up a financial policy. For a more detailed description of how the Group handles risks, please refer to the Annual Report 2008; www.nwg.se. It is the Group's policy to have a short interest rate guarantee resulting in quick effects on the Group's net interest as the short-term interest changes. The Group's accounted exposures are in all material aspects unchanged. The current market conditions and the financial crisis have however created an uncertainty, which means that the financial risks on the market have increased. ACCOUNTING PRINCIPLES This report has been prepared according to IAS 34 Interim Report and the Annual Report Law. Report regarding Total result has been prepared according to IAS 1 (R) and is applied for the first time 30 September, 2009. The interim report for the parent company has been prepared according to Annual Report Law as well as the Swedish Financial Accounting Standards Council's standards RFR 2:2 - Accounting for legal entity. The comparative year has been recalculated. Applied accounting principles are in accordance with the Annual Report for 2008. CALENDAR • 11 February, 2010 (new date, previously 19 February) Year End Report 2009 • 22 April, 2010 Interim Report for Q1 • 17 May, 2010 Annual Shareholders Meeting 2010 The Board and the CEO assure that the Interim Report gives a true and fair view of the company and the Group's operations, position and result and describes the material risks and uncertainties that the company and the Group face. Gothenburg 12th November, 2009 New Wave Group AB (publ) Anders Dahlvig Chairman of the Board Kinna Bellander Member of the Board Göran Härstedt Member of the Board Helle Kruse Nielson Member of the Board Mats Årjes Member of the Board Torsten Jansson CEO FOR MORE INFORMATION, PLEASE CONTACT CEO Torsten Jansson Phone: 031-712 89 01 E-mail: torsten.jansson@nwg.se CFO Lars Jönsson Phone: 031-712 89 12 E-mail: lars.jonsson@nwg.se The information in this report is that which New Wave Group is required to disclose under the Securities Exchange and Clearing Operations Act and/or the Financial Instruments Trading Act. It was released for publication at 7 am (CET) on 12 November, 2009. New Wave Group AB (publ) (556350 - 0916)
Interim Report for New Wave Group AB (publ) JANUARY - SEPTEMBER 2009
| Source: New Wave Group AB
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