Interim report for the period 1 July 2017 to 31 March 2018

May 03, 2018, 7:59

 

Consolidated revenue for Q1-Q3 2017/18 amounted to DKK 2,170 million (DKK 2,256 million) corresponding to a reduction of 3.8% (2.5% measured in local currency). The consolidated operating profit amounted to DKK 256 million (DKK 228 million) resulting in an EBIT margin of 11.8% compared to 10.1% last financial year.

The Group’s expectations for the financial year 2017/18 are unchanged compared to the revised earnings forecast as communicated to the market on 24 April 2018.

 

Financial performance of continuing operations for Q3

 

Segment performance for Q3

  •  Revenue from Tiger of Sweden for Q3 2017/18 declined by 14.6% (11.9% measured in local currency) to DKK 217 million (DKK 254 million). In particular, the wholesale channel reported revenue declines, but also the retail channel experienced lower revenues. The operating profit amounted to DKK 18 million (DKK 33 million), and the EBIT margin declined to 8.3% (13.0%) as a consequence of a higher cost ratio.
  • By Malene Birger generated revenue for Q3 2017/18 of DKK 84 million (DKK 93 million) corresponding to a reduction of 9.7% (7.8% measured in local currency) driven by the wholesale channel whereas revenue from the retail channel increased driven by e-commerce. The operating profit amounted to DKK 4 million (DKK 6 million), and the EBIT margin amounted to 4.8% (6.5%) due to a lower gross margin and a deteriorated cost ratio.
  • Revenue from the Group’s Other brands decreased by 15.2% (14.6% measured in local currency) to DKK 78 million for Q3 2017/18 (DKK 92 million) driven in particular by Saint Tropez. The operating loss amounted to DKK 9 million (loss of DKK 2 million) resulting in a negative EBIT margin of 11.5% (negative EBIT margin of 2.2%).

Group performance for Q3

  • Consolidated revenue amounted to DKK 379 million (DKK 440 million) corresponding to a reduction of 13.9% (11.9% measured in local currency) driven by the wholesale channel as well as physical stores. During Q3 2017/18, the total number of stores was reduced by three.
  • The gross profit amounted to DKK 228 million (DKK 266 million), and the gross margin declined by 0.3 percentage points to 60.2% which was attributable to lower margins on sold products.
  • Capacity costs declined by DKK 43 million to DKK 209 million compared to Q3 2016/17. This reduction is, inter alia, attributable to the effect of the implemented structural changes during Q3 2016/17. The cost ratio amounted to 55.1% (57.3%). After having adjusted for the non-recurring costs last financial year, the capacity costs declined by DKK 19 million whereas the cost ratio deteriorated by 3.3 percentage points.
  • The consolidated operating profit for Q3 2017/18 amounted to DKK 19 million (DKK 14 million) corresponding to an EBIT margin of 5.0% compared to 3.2% for Q3 2016/17. After having adjusted for the above-mentioned non-recurring costs, the EBIT margin deteriorated by 3.6 percentage points.

 

Financial performance of discontinuing operations for Q3

  •  Peak Performance generated revenue for Q3 2017/18 of DKK 308 million (DKK 299 million) corresponding to a growth rate of 3.0% (6.1% measured in local currency). The revenue development was driven by the retail channel due to strong e-commerce growth. The operating profit amounted to DKK 30 million (DKK 34 million) corresponding to an EBIT margin of 9.7% (11.4%). The lower margin is primarily attributable to a higher cost level.

 

Financial performance of continuing operations for Q1-Q3

 

Segment performance for Q1-Q3

  • Revenue from Tiger of Sweden for Q1-Q3 2017/18 declined by 11.9% (10.6% measured in local currency) to DKK 672 million (DKK 763 million) primarily driven by the wholesale channel. The operating profit amounted to DKK 62 million (DKK 94 million), and the EBIT margin thus declined to 9.2% (12.3%) primarily as a consequence of a higher cost ratio.
  • By Malene Birger generated revenue for Q1-Q3 2017/18 of DKK 258 million (DKK 269 million) corresponding to a reduction of 4.1% (3.0% measured in local currency) driven by the wholesale channel as a consequence of lower order intake as well as in-season selling whereas e-commerce contributed to growth in the retail channel. The operating profit amounted to DKK 17 million (DKK 10 million), and the EBIT margin improved to 6.6% (3.7%) due to a higher gross margin and a lower cost ratio.
  • Revenue from the Group’s Other brands decreased by 11.4% (11.0% measured in local currency) to DKK 272 million for Q1-Q3 2017/18 (DKK 307 million) particularly driven by both the wholesale as well as the retail channel of Saint Tropez. The operating loss amounted to DKK 8 million (operating profit of DKK 15 million) resulting in a negative EBIT margin of 2.9% (positive EBIT margin of 4.9%).

 

Group performance for Q1-Q3

  •  Consolidated revenue amounted to DKK 1,203 million for Q1-Q3 2017/18 (DKK 1,342 million) corresponding to a reduction of 10.4% (reduction of 9.2% measured in local currency). This reduction was primarily driven by the wholesale channel but also the revenue from the retail channel declined due to lower revenue from physical stores. During Q1-Q3 2017/18, the total number of stores was reduced by twelve.
  • The gross profit amounted to DKK 733 million (DKK 806 million) whereas the gross margin increased by 0.8 percentage points to 60.9% which was primarily attributable to improved margins on sold products during H1 2017/18.
  • Capacity costs declined by DKK 82 million to DKK 640 million compared to last financial year. This reduction is primarily attributable to the effect of the implemented structural changes during Q3 2016/17. The cost ratio declined to 53.2% (53.8%). After having adjusted for the non-recurring costs in respect of the structural changes of the Group’s central functions as well as changes to the management team of Tiger of Sweden last year, the capacity costs declined by DKK 58 million whereas the cost ratio deteriorated by 1.2 percentage points.
  • The consolidated operating profit for Q1-Q3 2017/18 amounted to DKK 93 million (DKK 84 million) corresponding to an EBIT margin of 7.7% compared to 6.3% for Q1-Q3 2016/17.

 

Financial performance of discontinuing operations for Q1-Q3

  •  Peak Performance generated revenue for Q1-Q3 2017/18 of DKK 967 million (DKK 914 million) corresponding to a growth rate of 5.8% (7.4% measured in local currency). The revenue development was driven by both the wholesale channel as well as the retail channel. The operating profit amounted to DKK 163 million (DKK 144 million) corresponding to an EBIT margin of 16.9% (15.8%). The improved margin is attributable to a higher gross margin whereas the cost ratio increased.

 

Unchanged outlook for the financial year 2017/18 for the Group as a whole

The expectations for the financial year 2017/18 for the Group as a whole remain unchanged compared to the Company Announcement no. 5/2018 as communicated to the market on 24 April 2018.

Consequently, the Group still expects to realize a minor revenue reduction compared to the financial year 2016/17 measured in local currency while the EBIT margin is expected to amount to approximately 6%.

The expectations for the Group’s business units are unchanged. For Peak Performance we still expect a moderate revenue growth but significantly higher earnings compared to 2016/17. For Tiger of Sweden, we expect revenue to decline and earnings to be significantly reduced compared to last financial year. For By Malene Birger, we expect a moderate revenue decline but significant earnings improvement. For Other brands, we expect that the performance in physical retail in Saint Tropez will lead to a significant revenue and earnings decline leading to an earnings deficit for 2017/18.

Investments for the financial year 2017/18 are expected to be in the region of 2-3% of annual revenue.

 

Divestment of Peak Performance

As communicated in Company Announcement no. 6/2018 dated 30 April 2018, IC Group A/S has entered into an agreement to sell Peak Performance to Amer Sports Corporation. Final closing of the transaction is expected to take place on 30 June 2018 and is subject to customary closing conditions, including approval from the relevant authorities. The selling price amounts to an enterprise value of DKK 1.9 billion.

The net cash proceeds from the divestment are expected to amount to DKK 1.7-1.8 billion (corresponding to DKK 100-105 per share) subject to final adjustment of, i.e., transaction costs, net working capital and certain net debt items. The net proceeds are expected to be distributed to the shareholders as an extraordinary dividend upon final closing of the agreement.

During a transition period of six to twelve months following the completion of the sale, IC Group will continue to provide support and services to Peak Performance on a cost-covered basis.

 

The impact of the divestment on the future Group strategy

IC Group will continue to operate and invest in the Group’s other brands in order to maximize their future values.

IC Group will on a continuous basis consider when it is in the best interest of the shareholders to divest these brands, and IC Group will act accordingly when the time and conditions are favourable for both the shareholders of IC Group and the brands.

 

 

Copenhagen, 3 May 2018

IC Group A/S

 

Alexander Martensen-Larsen                                        

CEO                                                   

 

Information meeting

IC Group will host an information meeting for investors, analysts and other stakeholders on Thursday 3 May 2018 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 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/financials/reports/: https://edge.media-server.com/m6/p/hf7897j6

 

To participate in the telephone conference, please dial in using the below-listed telephone numbers:

+45 3515 8121 (Denmark)

+1 646 828 8156 (USA)

+44 (0) 330 336 9411 (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.