Interim report for the period 1 July 2018 to 31 December 2018

Feb 06, 2019, 8:02

 

Revenue of the Group’s continuing operations for Q2 2018/19 (excl. Saint Tropez) amounted to DKK 271 million (DKK 268 million) corresponding to a growth rate of 1.1% (3.0% measured in local currency). Growth was driven by Tiger of Sweden’s wholesale channel which, as expected, reflected the positive effect from the brand’s execution of its present strategic business plan. Total earnings growth from the Group’s core business was driven by Tiger of Sweden which generated an operating profit for Q2 2018/19 of DKK 4 million (loss of DKK 3 million) corresponding to an EBIT margin of 2.0% (negative EBIT margin of 1.6%). In total, Tiger of Sweden generated an EBIT margin of 7.6% (9.7%) for H1 2018/19. The consolidated operating profit (excl. Saint Tropez) for Q2 2018/19 amounted to DKK 2 million (DKK 7 million) before non-recurring costs in respect of the transformation of IC Group corresponding to an EBIT margin of 0.7% (2.6%).

As communicated in Company Announcement no. 1/2019, Saint Tropez has been sold to DK Company A/S as at 31 January 2019.

The expectations for the financial year 2018/19 for the Group’s continuing operations, as announced on 28 January 2019, are unchanged. The Group thus expects a minor revenue reduction measured in local currency while the EBIT margin is expected to be realized at a level of 1-2% prior to non-recurring costs in respect of the transformation of the Group.

Financial performance of continuing operations for Q2 (excluding Saint Tropez)

  • Consolidated revenue increased by 1.1% (3.0% measured in local currency) to DKK 271 million (DKK 268 million). Growth was driven by the wholesale channels in both Tiger of Sweden and By Malene Birger. However, revenue from the retail channel decreased primarily driven by the physical stores. The same-store revenue declined by 12.9%. During Q2 2018/19. No changes have been made to the total number of stores.


  • The gross profit amounted to DKK 145 million (DKK 171 million), and the gross margin declined by 10.3 percentage points to 53.5%. 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 profit would have amounted to DKK 158 million and the gross margin to 58.3%. The remaining gross margin decline is primarily attributable to higher discounts compared to Q2 2017/18.


  • Capacity costs declined by DKK 8 million to DKK 155 million compared to Q2 2017/18. After having adjusted for non-recurring costs of DKK 12 million in respect of the transformation of IC Group, the costs declined by DKK 20 million. This decline is partly attributable to the fact that approx. DKK 9 million in fee income in respect of logistics services to Peak Performance during Q2 2018/19 has been included under ‘Other operating income’ while this fee income was included under the gross profit last financial year and partly the lower distribution costs in brands as well as a lower cost base in the corporate functions. The cost ratio (excluding non-recurring costs) amounted to 52.8% which is 8.1 percentage points lower compared to last financial year.


  • The operating profit before non-recurring costs amounted to DKK 2 million (DKK 7 million) corresponding to an EBIT margin of 0.7% (2.6%). The Group’s continuing operations (excl. Saint Tropez) generated an operating loss of DKK 10 million corresponding to a negative EBIT margin of 3.7%.


Financial performance of continuing operations for H1 (excluding Saint Tropez)

  • Revenue from the Group decreased by 8.3% (5.7% measured in local currency) to DKK 578 million (DKK 630 million). This reduction was in particular driven by the retail channel, but also revenue from the wholesale channel declined. The same-store revenue declined by 15.8% especially driven by the physical stores. During H1 2018/19, no changes have been made to the total number of stores.


  • The gross profit amounted to DKK 314 million for H1 2018/19 (DKK 400 million) corresponding to a gross margin of 54.3% (63.5%). As was the case for Q2 2018/19, 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 profit would have amounted to DKK 345 million and the gross margin to 59.7%. The remaining gross margin decline is attributable to higher discounts and negative channel mix effects compared to H1 2017/18.


  • Capacity costs declined by DKK 18 million to DKK 310 million compared to H1 2017/18. After having adjusted for the previously mentioned non-recurring costs in respect of the transformation of IC Group of DKK 18 million, the costs declined by DKK 36 million. Approx. half of this amount is attributable to lower distribution costs in Group brands while approx. DKK 19 million is attributable to the fact that the fee income in respect of logistics services to Peak Performance during H1 2018/19 has been included under ‘Other operating income’ while this fee income was included under the gross profit last financial year. The cost ratio (excluding non-recurring costs) amounted to 50.5% which is 1.5 percentage points lower compared to last financial year.


  • The operating profit before non-recurring costs for H1 2018/19 amounted to DKK 22 million (DKK 74 million) corresponding to an EBIT margin of 3.8% (11.7%). The reported operating profit amounted to DKK 4 million corresponding to an EBIT margin of 0.7%.

 

 

Financial performance and divestment of Saint Tropez

  • As communicated in Company Announcement no. 1/2019, IC Group has divested Saint Tropez to DK Company A/S as at 31 January 2019. The Group expects a positive, minor million amount impact on cashflow from the sale while the accounting effect is expected to amount to a loss of DKK 70 million subject to the final adjustment of transaction costs, working capital as well as certain debt items. Out of this amount, DKK 55 million (impairment on non-current assets) has been recognized in H1 2018/19 while DKK 15 million is expected to be recognized in Q3 2018/19 (we refer to note 1 – Significant accounting estimates and assumptions on page 14). As of the interim report for Q3 2018/19, Saint Tropez will be classified and presented as discontinued operations.


  • Revenue from Saint Tropez in Q2 2018/19 declined by 29.6% (28.8% measured in local currency) to DKK 50 million (DKK 71 million). This development was equally driven by both the wholesale channel which reported a revenue decline of 27.0% as well as the retail channel which reported a revenue decline of 32.4%. Revenue in H1 2018/19 declined by 31.3% (30.3% measured in local currency) to DKK 101 million (DKK 147 million) driven by revenue reductions reported in both the wholesale channel as well as the retail channel.


  • The operating loss for Q2 2018/19 amounted to DKK 62 million (loss of DKK 6 million) resulting in a negative EBIT margin of 124.0% (negative EBIT margin of 8.5%). After having adjusted for impairment on non-current assets of DKK 47 million, the negative EBIT margin amounted to 30.0%. The operating loss for H1 2018/19 amounted to DKK 70 million resulting in a negative EBIT margin of 69.3% (negative EBIT margin of 6.1%). After having adjusted for the mentioned impairment, the negative EBIT margin amounted to 22.8%.


      

Outlook for the Group’s continuing operations for the financial year 2018/19

The expectations for the Group’s continuing operations for the financial year 2018/19, as announced on 28 January 2019 (Company Announcement no. 1/2019), are unchanged and are represented in their full length below.

For the Group’s continuing operations, which comprise Tiger of Sweden, By Malene Birger and the reporting segment “Central functions”, a minor revenue reduction measured in local currency is expected for the financial year 2018/19 compared to the year before. The EBIT margin is expected to be realized at a level of 1-2% prior to non-recurring costs in respect of the transformation of the Group.

In Tiger of Sweden, a minor revenue reduction (measured in local currency) and a moderate decline in nominal earnings are expected. The previous guidance for Tiger of Sweden stated: “revenue is expected to increase while the nominal earnings are expected at the same level as last financial year”. The updated expectations for the brand reflect lower anticipated performance in direct-to-consumer channels for the rest of the financial year – retail in particular.

In By Malene Birger, a moderate revenue reduction (measured in local currency) and a substantial decline in nominal earnings are expected. The previous guidance for By Malene Birger stated: “revenue is expected to increase while the nominal earnings are expected at the same level as last financial year”. Similar to Tiger of Sweden, the updated expectations for the brand reflect lower anticipated performance in direct-to-consumer channels for the rest of the financial year.

The line item “Central functions” will be negative as it will be affected negatively by changed allocation principles in respect of costs in the corporate 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. The expected result of “Central functions” is unchanged compared to previous guidance announced on 5 December 2018 (Company Announcement no. 36/2018).

      

Investments for the continuing operations for the financial year 2018/19 are expected to amount to approx. 3% of annual revenue.


Copenhagen, 6 February 2019

IC Group A/S     




Please direct any questions regarding this announcement to:  

Karin Hjort Jensen

Executive assistant to the CEO

+45 32 66 75 43

  

 

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.