Interim Report for the period 1 July 2016 to 31 December 2016

Feb 28, 2017, 17:24


 

Consolidated revenue for H1 2016/17 amounted to DKK 1,517 million (DKK 1,446 million) corresponding to a growth rate of 4.9% or 6.3% measured in local currency. Revenue increased in both the wholesale channel as well as the retail channel – in the latter channel driven by new stores and e-commerce. The gross margin amounted to 56.6%, which is at the same level as the corresponding period last financial year. Costs increased by DKK 42 million of which the main part is attributable to sales-related costs. The consolidated operating profit for H1 2016/17 amounted to DKK 180 million (DKK 182 million) resulting in an EBIT margin of 11.9% compared to 12.6% for H1 2015/16.

For the financial year 2016/17, we expect to realize a revenue growth rate of 5-6% measured in local currency (previously “at least 6%”) whereas the EBIT margin before non-recurring costs attributable to the implementation of the new structure in IC Group is expected at a level of 7-8% (previously “8-9%”). When including these non-recurring costs, the EBIT margin is expected to attain a level of 6-7%. 

 

Segment performance for Q2

 

  • Peak Performance generated revenue for Q2 2016/17 of DKK 267 million (DKK 219 million) corresponding to a growth rate of 21.9% (24.0% measured in local currency) driven by both the wholesale channel as well as the retail channel. Timing effects had a positive impact on revenue by approx. DKK 15 million. The operating profit amounted to DKK 49 million (DKK 21 million) corresponding to an EBIT margin of 18.4% (9.6%). This improvement was driven by both the gross margin as well as the cost ratio. The operating profit for Q2 2015/16 was negatively affected by timing effects of DKK 8 million.

 

  • Tiger of Sweden generated revenue for Q2 2016/17 of DKK 220 million (DKK 218 million) thus corresponding to an increase of 0.9% (3.5% measured in local currency). Revenue from the wholesale channel declined due to closure of franchise stores and lower in-season selling. Consequently, growth was driven by the retail channel where new stores and high e-commerce growth contributed. The operating profit amounted to DKK 6 million (DKK 7 million) corresponding to an EBIT margin of 2.7% (3.2%).

 

  • By Malene Birger generated revenue for Q2 2016/17 of DKK 77 million (DKK 76 million) corresponding to a growth rate of 1.3% (3.6% measured in local currency). This increase was attributable to the wholesale channel as well as high e-commerce growth. The operating profit amounted to DKK nil (DKK nil). The gross margin deteriorated due to higher discounts and a larger amount of returned products whereas the cost ratio improved marginally.

 

  • Revenue from the Group’s Other brands increased by 6.4% (6.5% measured in local currency) to DKK 100 million for Q2 2016/17 (DKK 94 million). Growth was primarily driven by Designers Remix. The operating profit amounted to DKK 4 million (DKK 4 million) resulting in an EBIT margin of 4.0% (4.3%).

 

Group performance for Q2

 

  • Consolidated revenue amounted to DKK 666 million (DKK 603 million) corresponding to a growth rate of 10.4% (12.5% measured in local currency). Growth was generated in both the wholesale channel as well as the retail channel where new stores and high e-commerce growth contributed. The Group opened a net amount of 10 stores in Q2 2016/17.

 

  • The gross profit amounted to DKK 381 million (DKK 341 million), and the gross margin was thus improved to 57.2% (56.6%) driven by better product margins and lower inventory write-downs, which were partly diluted by higher discounts and more clearance sales during the period.

 

  •  Capacity costs increased by DKK 14 million to DKK 336 million compared to Q2 2015/16. After having adjusted for timing effects in Q2 2015/16, costs increased by DKK 22 million of which the main part is attributable to sales-related costs – primarily for new stores opened in both 2015/16 as well as 2016/17.

 

  • The consolidated operating profit for Q2 2016/17 amounted to DKK 45 million (DKK 19 million) corresponding to an EBIT margin of 6.8% compared to 3.2% for Q2 2015/16.

 

  • The working capital amounted to DKK 470 million corresponding to an increase of DKK 134 million compared to last financial year. This increase was primarily driven by higher inventories as well as trade receivables. The working capital constituted 17.2% of the trailing twelve months revenue compared to 12.6% for the same period last year.

 

Segment performance for H1

 

  • Peak Performance generated revenue for H1 2016/17 of DKK 615 million (DKK 562 million) corresponding to a growth rate of 9.4% (10.7% measured in local currency) driven by both the wholesale channel as well as the retail channel, particularly from the retail channel where new stores and strong e-commerce growth contributed. The operating profit amounted to DKK 111 million (DKK 99 million) corresponding to an EBIT margin of 18.0% (17.6%). This improvement was driven by a lower cost ratio.

 

  •  Tiger of Sweden generated revenue of DKK 509 million for H1 2016/17 (DKK 495 million) thus corresponding to an increase of 2.8% (4.6% measured in local currency). Growth was driven by a positive effect of approx. DKK 18 million caused by a shift in deliveries in Q1 as well as new stores opened during 2015/16 and e-commerce. The operating profit amounted to DKK 61 million (DKK 60 million) corresponding to an EBIT margin of 12.0% (12.1%).

 

  • By Malene Birger’s revenue for H1 2016/17 declined by 2.2% to DKK 176 million (DKK 180 million). Measured in local currency, this amounted to a revenue decline of 0.4%. This development was driven by the retail channel where growth from the e-commerce channel was not able to compensate the negative development experienced in the physical stores. The operating profit amounted to DKK 4 million (DKK 13 million). The gross margin deteriorated due to higher discounts and a larger amount of returned products whereas costs were negatively affected by non-recurring costs of DKK 4 million attributable to a comprehensive brand and positioning analysis carried out in Q1 2016/17.

 

  • Revenue from the Group’s Other brands increased by 3.9% (4.0% measured in local currency) to DKK 215 million for H1 2016/17 (DKK 207 million). Growth was primarily driven by Designers Remix. The operating profit amounted to DKK 17 million (DKK 14 million). The EBIT margin was improved by 7.9% (6.8%) due to a higher gross margin as well as a lower cost ratio.

 

Group performance for H1

 

  • Consolidated revenue amounted to DKK 1,517 million (DKK 1,446 million) corresponding to a growth rate of 4.9% (6.3% measured in local currency). Growth was generated in both the wholesale channel as well as the retail channel where new stores and high e-commerce growth contributed. The Group opened a net amount of 8 stores in H1 2016/17.

 

  • The gross profit amounted to DKK 858 million (DKK 818 million), and the gross margin of 56.6% was thus equal to last financial year.

 

  • Capacity costs increased by DKK 42 million to DKK 678 million compared to H1 2015/16. After having adjusted for one-off effects in both H1 2016/17 as well as H1 2015/16, costs still increased by DKK 42 million. This increase was mainly driven by sales-related costs – primarily for new stores.

 

  • The consolidated operating profit for H1 2016/17 amounted to DKK 180 million (DKK 182 million) corresponding to an EBIT margin of 11.9% (12.6%).

  

Updated outlook for the financial year 2016/17


Due to the development in in-season selling to wholesale customers, especially in Tiger of Sweden, the revenue growth rate is now expected to be realized at a level of 5-6% measured in local currency (previously “at least 6%”). Based on the current exchange rates of the Group’s primary sales currencies (primarily SEK, NOK and GBP), this corresponds to a reported revenue growth rate of 4-5% (previously “at least 5%”).

Revenue growth is primarily expected to be driven by the retail channel where in particular new stores will generate growth. At present, we expect to open 15-20 new stores for the financial year 2016/17 (unchanged). The Group opened 13 new stores during H1 2016/17.

The changes initiated in 2016 in Tiger of Sweden have now resulted in a number of non-recurring costs, in particular severance payments as well as costs related to distribution changes in the brand.

As a consequence of the above, the expectations for the EBIT margin have been changed, and the EBIT margin is now expected to attain a level of 7-8% (previously “8-9%”) before non-recurring costs attributable to the implementation of the new structure in IC Group, cf. the company announcement dated 2 February 2017.

The non-recurring costs attributable to the implementation of the new structure are estimated to reach a level of approx. DKK 30 million. However, the exact amount will depend on the implementation of the plan as well as negotiations with the different parties involved.

The EBIT margin is subsequently expected to attain a level of 6-7% for the financial year 2016/17.

With effect from the financial year 2017/18, the planned changes are expected to lead to earnings improvement of approx. DKK 30-40 million.

Investments for the financial year 2016/17 are expected to attain a level of 3-5% of the annual revenue (unchanged). These investments are undertaken to maintain existing assets – including store furniture and equipment – as well as in connection with new store openings (leasehold improvements and if necessary key money).


Copenhagen, 28 February 2017
IC Group A/S

Peter Thorsen                                   
Interim Group CEO   

Alexander Martensen-Larsen
Group CFO

 

Information Meeting

IC Group will host an information meeting for investors, analysts and other stakeholders on Wednesday 1 March 2017 at 10.00 a.m. The information meeting will be held in English via audio cast and telephone, and it will be possible to raise questions online using the relevant chat function or telephone. To participate in the information meeting online, please use the link below which is also available on our corporate website icgroup.net under Investors: http://edge.media-server.com/m/p/tzzvzi3y

To participate in the telephone conference, please dial in using the below-listed telephone numbers:
+45 3271 1660 (Denmark)
+1 646 254 3367 (USA)
+44 (0) 20 3427 1901 (UK)

Please direct any questions regarding this announcement to:  

Jens Bak-Holder
Head of Investor Relations
+45 21 28 58 32

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.