INTERIM REPORT FOR THE PERIOD 1 JULY 2018 TO 30 SEPTEMBER 2018

Nov 06, 2018, 8:00

 

Revenue of the Group’s continuing operations for Q1 2018/19 amounted to DKK 379 million (DKK 464 million) corresponding to a reduction of 18.3% (15.8% measured in local currency). The operating profit amounted to DKK 14 million (DKK 69 million) before non-recurring costs in respect of the transformation of IC Group resulting in an EBIT margin of 3.7% compared to 14.9% last financial year. When including the above-mentioned non-recurring costs, the operating profit amounted to DKK 8 million corresponding to an EBIT margin of 2.1%.

Tiger of Sweden is executing in line with its present strategic business plan which is, inter alia, reflected in growth reported for the coming collections as well as a strengthened visual identity towards the consumer. By Malene Birger is working determinedly on bringing the brand in a more international direction while Saint Tropez’ performance in physical retail is challenged by a difficult retail environment, and the brand is thus focusing on consolidating its store portfolio.

The Group’s expectations for the financial year 2018/19 as a whole are unchanged in spite of the weak performance in physical retail reported by all Group brands during Q1 2018/19 where the weather conditions have had a negative impact.


Financial performance of continuing operations for Q1

  • Consolidated revenue amounted to DKK 379 million (DKK 464 million) corresponding to a reduction of 18.3% (15.8% measured in local currency) driven equally by the wholesale channel as well as the retail channel – in particular the physical stores. During Q1 2018/19, no changes have been made to the total number of stores.


  • The gross profit amounted to DKK 205 million (DKK 287 million), and the gross margin declined by 7.8 percentage points to 54.1%. A part of this gross margin decline is attributable to the implemented structural changes as well as the divestment of Peak Performance in 2017/18. After having adjusted for the implemented structural changes as well as the divestment of Peak Performance in 2017/18, the gross margin would have amounted to 59.1%. The remaining gross margin decline is attributable to higher discounts and inventory write-downs compared to Q1 2017/18.


  • Capacity costs declined by DKK 21 million to DKK 197 million compared to Q1 2017/18. This decline is partly attributable to the fact that approx. DKK 10 million in fee income in respect of logistics services to Peak Performance during Q1 2018/19 has been included under ‘Other operating income’ while this fee income was included under the gross profit last financial year. The remaining part of the decline is attributable to lower distribution-related costs as well as cost savings in Saint Tropez. However, as a consequence of the reduced revenue, the cost ratio increased to 52.0% compared to 47.0% last financial year.


  • The operating profit amounted to DKK 14 million (DKK 69 million) before non-recurring costs in respect of the transformation of IC Group resulting in an EBIT margin of 3.7% compared to 14.9% last financial year. When including the above-mentioned non-recurring costs, the operating profit amounted to DKK 8 million corresponding to an EBIT margin of 2.1%.


  • As at 30 September 2018, the working capital amounted to DKK 246 million corresponding to a decline of DKK 319 million compared to last financial year primarily driven by the divestment of Peak Performance. The working capital constituted 17.0% of the trailing twelve months revenue compared to 20.9% for the same period last financial year.


Unchanged outlook for the financial year 2018/19 for the Group as a whole

The Group’s expectations for the financial year 2018/19 as a whole are unchanged in spite of the weak performance in physical retail reported by all Group brands in Q1 2018/19 where the weather conditions have had a negative impact. The outlook has, inter alia, been based on present knowledge gained from pre-order sales in respect of the remainder of the financial year as well as the planned and commenced initiatives in order to improve the revenue development.

For the financial year 2018/19, a flat revenue development for the Group brands in total, measured in local currency, is expected. The EBIT margin is expected to be realized at a level of 0-1% prior to the below-mentioned non-recurring costs.

In Tiger of Sweden, revenue is expected to increase while the nominal earnings are expected at the same level as last financial year. Growth will primarily be driven by international wholesale revenue and e-commerce, while higher costs for staff and marketing will have a negative impact on earnings.

In By Malene Birger, revenue is also expected to increase while the nominal earnings are expected at the same level as last financial year. Growth will primarily be driven by wholesale (previously “pre-order”) and e-commerce, while higher staff costs will have a negative impact on earnings.

In Saint Tropez, revenue is expected to still decline while the nominal earnings are expected to improve compared to last financial year. The lower revenue will be driven by both the wholesale channel as well as the retail channel where a number of stores have been and will be closed. Cost-cutting measures implemented during the financial year 2017/18 will have a positive impact on earnings.

Finally, in Designers Remix, both revenue and nominal earnings are expected to be reduced. The setback will primarily be driven by a lower wholesale revenue.

The line item “Central functions etc.” will be negative as it will be affected negatively by changed allocation principles in respect of costs in the Group’s central functions as well as idle costs in respect of the head office after the divestment of Peak Performance. Combined, these amount to approx. DKK 30 million.

Non-recurring costs in relation to the transformation of the Group structure are still expected to amount to a total of approx. DKK 55 million of which DKK 35 million relates to the financial year 2018/19 and approx. DKK 20 million relates to the financial year 2019/20. As of the financial year 2020/21, the annual savings are expected to be in the region of DKK 25 million. The exact amounts as well as the distribution between the individual financial years will depend on the implementation of the transformation.

Investments for the financial year 2018/19 are expected to amount to approx. 4% of annual revenue primarily driven by Tiger of Sweden.

Copenhagen, 6 November 2018


IC Group A/S

Alexander Martensen-Larsen                                        

CEO

Please direct any questions regarding this announcement to:                                                                               

Jens Bak-Holder

Head of Investor Relations

Phone: +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.