Interim report for Q3; Solid cash flow despite challenging market conditions

May 16, 2012, 7:33

Company Announcement no. 7/2012 – Copenhagen, 16 May

As expected, consolidated revenue for Q3 2011/12 amounted to DKK 1,035 million corresponding to a reduction of 6% compared to last financial year. The structural changes last implemented by the Group started to have an impact and costs were reduced by 5%. The operating profit amounted to DKK 56 million corresponding to a decrease of 45%. Efficient price campaigns and sales promoting activities resulted in the Group being able to retain its market position and generate a solid cash flow but did at the same time exert a continuous pressure on the Group’s gross margin which suffered a decline of 3.1 percentage points.

  • Consolidated revenue for Q3 2011/12 amounted to DKK 1,035 million (DKK 1,100 million) and thus suffered a setback of 6%.
  • Wholesale revenue amounted to DKK 694 million (DKK 748 million) corresponding to a 7% setback.
  • Retail revenue amounted to DKK 341 million (DKK 352 million) corresponding to a 3% setback.
  • Gross profit amounted to DKK 568 million (DKK 638 million). The Group thus generated a gross margin of 54.9% (58.0%) corresponding to a decline of 3.1 percentage points compared to last financial year.
  • Capacity costs amounted to DKK 512 million (DKK 537 million) corresponding to a reduction of 5%. The cost rate for Q3 2011/12 thus amounted to 49.5% (48.8%) which is an increase of 0.7 percentage points compared to last financial year.
  • Operating profit amounted to DKK 56 million (DKK 101 million). The Group thus generated an EBIT margin of 5.4% (9.1%).
  • Total cash flow from operating and investing activities amounted to an outflow of DKK 34 million (outflow of DKK 136 million) corresponding to an improvement of DKK 102 million compared to last financial year.
  • Order intake for the autumn collection 2012 is expected to record a setback of 12% reported in local currencies.

Outlook

  • Management anticipates that the volatile market conditions will continue and that Q4 2011/12 will also be marked by a high level of sales promoting activities and campaigns in the industry.
  • However, the pressure on the Group’s gross margin is expected to be weaker during Q4 2011/12 due to declining raw material prices and reduced inventories within the industry. Finally, the Group’s new sourcing structure and continuous optimisation are expected to have a positive effect on the gross margin.
  • Based on these statements, Management expects the consolidated revenue for the financial year 2011/12 to attain a level of DKK 3,800-3,850 million (previously announced outlook of DKK 3.7-3.8 billion). The consolidated operating profit for 2011/12 is expected to attain a level of DKK 130-150 million (in accordance with the previously announced outlook which stated that the Management expected, with the market conditions at that time, a positive operating profit for H2 2011/12, however, were the market conditions to deteriorate, the Group would possibly suffer a double-digit loss in million DKK for H2 2011/12).
  • Management still expects a cash inflow from operating and investing activities as well as a reduction of the working capital for H2 2011/12.
  • Investments for the financial year 2011/12 are expected to attain a level of DKK 80-100 million (unchanged) primarily for an expansion of the distribution and sales promoting improvements of the IT platform.

Chief Executive Officer of IC Companys A/S Niels Mikkelsen commented;

“As expected, the Group suffered revenue and earnings setbacks for Q3 2011/12 as we have experienced challenging market conditions. However, it has been our top priority to steer the Group safely through the quarter under review by retaining market positions on our core markets and maintaining our financial strength. Therefore, we find it positive that we have succeeded in improving our operational cash flow by more than DKK 100 million for Q3 2011/12”.

IC Companys A/S

Niels Mikkelsen
Chief Executive Officer

Chris Bigler
Chief Financial Officer

Please direct any questions regarding this announcement to:

Thomas Rohold
Head of Investor Relations and Communication
+45 32 66 70 93