Annual report 2006/07

Sep 12, 2007, 8:02

Profit announcement for 2006/07 The Group’s continuing brands achieved a revenue growth of 14%. Operating profit (EBIT) achieved an improvement of 12% to DKK 340 million. In 2007/08 revenue growth of 12% – 15% is forecast and operating profit is expected to show a growth of 30% – 40%.

The Board of Directors of IC Companys A/S has approved the audited Annual Report for the period 1 July 2006 – 30 June 2007.

Continuing brands accomplished a revenue growth of 14%. The total revenue was DKK 3,354 million.

Operating profit before special items increased by DKK 37 million or 12% to DKK 340 million. The Group has launched several growth initiatives that have added 0.5 percentage points to the share of costs. Parallel to these initiatives, the cost efficiency increased by 0.8 percentage points in the second half year.

All distribution channels achieved progress. The most significant was recorded in the Group’s own retail stores with a 33% growth in earnings and a 15% growth in revenue, of which 9% is attributed to same store growth.

The net profit of the year was DKK 241 million (DKK 224 million).

After several years of decline, Jackpot shows signs of stabilisation. Between March and August 2007, Jackpot achieved growth in own stores.

Order intake for the first two of the four collections in the financial year 2007/08 has been completed with a combined growth of 13%. Seven out of ten brands advance by double digit growth rates. Order intake for the spring collection 2008 progresses as planned and a growth of 11 – 13% is expected.

For 2007/08 a revenue growth of 12% – 15% is expected, representing DKK 3,750-3,850 million. Further, a growth in operating profit of 30-40%, the equivalent of DKK 440-480 million (an EBIT margin 11.5% – 12.5%) is forecast.

The Board of Directors recommends a dividend of DKK 70 million, equivalent to DKK 4.0 per share eligible for dividend and a share buy back for a total of DKK 200 million is expected for the 2007/08 financial year. Combined this corresponds to a payout yield of 4.6% (4.5%) of the market value.

New financial target – 15/15

No later than over a period of three to five years, the target of IC Companys is to create a group that annually achieves a minimum of 15% organic growth and an EBIT margin of a minimum of 15%.

Within the strategy horizon, the Group’s generation of free cashflow is forecast to be above 70% of the net result. All free cashflow is expected to be distributed as dividend and under share buyback programmes.

IC Companys A/S will host an information meeting Wednesday 12 September at Raffinaderivej 10, 2300 Copenhagen S. The information meeting will be held in English and webcast live.


Henrik Theilbjørn
President & CEO
Tel +45 3266 7646

Chris Bigler
Chief Financial Officer
Tel +45 3266 7017

Group Financial highlights and key ratios

This announcement contains future-orientated statements regarding the Company’s future development and results and other statements that are not historic facts. Such statements are based on the currently well-founded prerequisites and expectations of the management that may prove erroneous. The actual results may deviate considerably from what has been outlined as planned, assumed, assessed or forecast in this announcement.

As in 2005/06, the Annual Report for the 2006/07 financial year in the form of this announcement replaces in its entirety the print version of the financial statements. The Annual Report can also be downloaded at summary

The 2006/07 financial year became the year, in which double digit growth was achieved for the first time since the 2001 merger of InWear and Carli Gry. Also, for the first time the revenue exceeded the pre-merger level. The Group has achieved its so far best financial performance and after a successful turnaround, focus is now on growth stimulation.

We are satisfied with our financial performance in the financial year 2006/07, regardless that earnings have not met the expectations held at the beginning of the year. An unseasonably warm winter and a slightly less positive progress for Jackpot at the beginning of the year resulted in a downwards adjustment in the half year interim report. However, the end of the year was satisfactory. The development in the fourth quarter of the year has been particularly positive showing a revenue growth of 21%, a 1.5 percentage points increase in gross margin and an improvement of cost efficiency by 6.6 percentage points relative to last year.

For the financial year 2006/07, the operating profit was DKK 340 million, which constitutes an increase of 12% as measured against the previous financial year. This progress was achieved whilst the foundation of the Group’s future growth was built and several growth initiatives were launched.

Cottonfield launched Cottonfield Female and introduced the men’s line in China. We regionalised the sales structure for the Group’s largest brand, Peak Performance, acquired the brand’s Norwegian distributor and established a separate organisation for the brand’s golf collection. We launched a customer loyalty program to increase customer loyalty to our brands and stores. Another important event was the start up of the Group Retail Academy, which aims to train and educate the Group’s more than 900 retail staff members. To be added is the general organisational development, which relative to last year has resulted in a net influx of 132 employees directly related to sales (including retail staff). Overall in 2006/07, the foundation of the Group’s future growth was a focal point.

It is satisfactory that we achieve progress in many of the Group’s key performance indicators. The same store sales increased by 9%, in-season sales increased by 22%, and earnings from the operation of own stores and outlets in total rose by 31% as measured against last year. Cost efficiency for the Group is not quite satisfactory, but seen in isolation, cost efficiency increased 0.8 percentage points during the second half year. Consequently, 2007/08 will be a year characterised by increased growth and earnings on the existing platform.

After several years of decline Jackpot has shown signs of stabilization. Between March and August 2007 the brand has achieved growth in the brand’s own stores..

At the close of 2006/07 we have completed the second year of the three-year financial target of IC Companys to generate revenues of DKK 3,800 million and an EBIT margin of 13 – 15% in the 2007/08 financial year. The order intake for the first two of the four collections in 2007/08 has been completed showing a 13% growth. The order intake for the spring collections is not completed yet, but is forecast to achieve a growth of 11% – 13%.

Time has come to look beyond 2007/08. The Group ambition level will be raised, as it is IC Company’s target in no later than three to five years to create a group that annually achieves a minimum of 15% organic growth and an EBIT margin of a minimum of 15%.

Key events 2006/07

Revenue growth in 2006/07 was a solid and healthy 14% in continuing brands notwithstanding that Jackpot and Saint Tropez that combined represented a fifth of the group revenue in 2005/06, have had a setback. Discontinued and sold off brands have constituted a DKK 65 million decrease in revenue against last year. The acquisition of the Norwegian distributor of Peak Performance has resulted in a positive revenue effect of DKK 45 million.

Revenue growth was, however, less than forecast at the beginning of the year. An unseasonably warm winter and a slightly less positive progress for Jackpot at the beginning of the year resulted in a lower growth than planned, which led to a downwards adjustment in the half year interim report.

The third quarter interim report was characterized by revenue lags and delays in delivery, which resulted in delayed invoicing and thus relatively larger receivables from trade and inventories and a decreased operational cash flow by the end of the quarter. These lags and delays were recovered in the fourth quarter and the delivery situation for the autumn collection 2007 complies with the historically high standard of the Group.

The Group’s growth initiatives affected the cost efficiency negatively, and the share of costs relative to revenue increased by 0.5 percentage points to 49%. However, this development was uneven throughout the year. Cost efficiency decreased by 1.5 percentage points in the first half of the year, but improved by 0.8 percentage points in the second half of the year. The growth initiatives are recognised primarily in the Group’s wholesale channel, which affects the earnings margin negatively by 0.4 percentage points to 14.1%.

Solid momentum in the order intake for 2007/08
The order intake for the autumn and wither collections 2007/08 closed with a DKK 139 million growth, corresponding to a comparable organic growth of 13%:

Saint Tropez is not a preorder-based company and is as such not included in the overview.

Peak Performance, Tiger of Sweden, Matinique, Part Two, By Malene Birger, Soaked in Luxury and Designers Remix Collection all advance by double digit growth rates. It is satisfactory that Peak Performance achieved a growth of 14% in spite of an unseasonably warm winter, which made the season difficult for the brand’s retailers.

The moderate growth in InWear is primarily the result of an unsatisfactory development in Holland, where order intake declined 33%. Adjusted for Holland, the growth of order intake is 10%.

The significant progress in Tiger of Sweden derives from a widely founded growth in both Tiger Men and Women. The brand has achieved the highest growth rate in Germany, doubling last year’s order intake. In addition, the brand has opened seven new franchise stores and taken over the shoe sales from a former licensee.

Jackpot saw a 19% decline in the order intake for the autumn collection and a setback of 15% for the winter collection corresponding to a combined decline of 18% in order intake for the first half year 2007/08. From March to August 2007, the brand delivered growth in own stores.

The Group’s combined order intake for the spring collections 2008 proceeds as planned and is expected to be completed by a growth of 11% – 13%

Group growth initiatives
In the course of the financial year 2006/07 several growth initiatives were launched. We regionalised the sales structure for the Group’s largest brand, Peak Performance and acquired the brand’s Norwegian distributor. The regionalisation of the sales structure proceeds as planned, and experienced sales managers for Scandinavia, the Alps and Benelux have been employed. This initiative is expected to increase the execution power and response time and thus support the continued internationalisation of the brand considerably. Furthermore, a separate organization for the brand’s golf collection has been set up.

Cottonfield launched Cottonfield Female and introduced the men’s line in China.

We also launched a customer loyalty program with the target of increasing sales per customer. The loyalty programme enhances in our customers the brand loyalty and increases the efficiency of electronic marketing. The programme is tested for six brands on the Danish market, and roll out is planned in several markets once the concept has been adapted.

The Companys store concept that includes the entire or parts of the brand portfolio in a shop-in-shop store environment was also updated in the course of the financial year and the organisation strengthened.

The professionalisation of the HR effort has also been implemented and among other things, the Group has carried out an extensive People Review that has provided a platform for employee development, internal recruitment and succession planning. Furthermore, in the spring the Group Retail Academy was set up. This measure has been taken to train and educate the Group’s more than 900 retail staff members. After the introductory training of the Group’s country managers and store managers, the actual training of the Group’s retail staff commenced in August 2007. A revenue effect is expected as soon as the end of 2007/08. In the autumn of 2007, start-up of the Group Leadership Academy is scheduled. This initiative is to be applied as a lever for the basic leadership competences, team development and not least the execution skills of the Group’s approximately 200 managers.

To be added is the general organisational development, which relative to last year has resulted in a net influx of 132 employees directly related to sales (including retail staff). Overall in 2006/07, the foundation of the Group’s future growth was built.

Corporate Social Responsibility
IC Companys considers corporate social responsibility (CSR) to be a natural part of an international fashion company. In August 2007, the Group adopted the United Nations Global Compact, the world’s largest voluntary corporate responsibility initiative. In addition to this, in July 2007 IC Companys assented to the Business Social Compliance Initiative (BSCI), a joint European forum directed at retail chains, industries and importers who wish to improve social compliance in all supplier countries. Follow-up on these initiatives is performed by independent auditors approved by the BSCI by means of supplier audits.
IC Companys alone cannot change all conditions in the Group’s sourcing markets, but via the BSCI and Global Compact memberships IC Companys wishes to work pro-actively with our suppliers to promote compliance in the countries where we operate.

The full wording of the IC Companys’ Code of Conduct is available for download from our corporate website at

Outlook 2007/08

For 2007/08, expectations are revenue growth of 12% – 15% to DKK 3,750 – 3,850 million and a growth in operating profit of 30% – 40% reaching DKK 440 – 480 million (EBIT margin of 11.5% – 12.5%).

While the expectations to revenue remain unchanged, the expectations to operating profit do not quite correspond to the previous financial target of an EBIT margin of 13% – 15%. The all-important cause is that costs and investments have increased more than was initially assumed, which, among other things, is a result of the growth initiatives launched to support the Group’s new financial targets. It should also be taken into account that anchoring the brand-driven organisation comprised shifts in fields of responsibility and more requirements to independence in the brands, which combined proved more time-consuming than initially estimated.

Direct sales investments such as showrooms and store renovation and store openings are planned in the magnitude of DKK 130 – 140 million. Further, in the financial year 2007/08 investments in the IT platform and inventory facilities in the order of DKK 20 – 30 million are planned.

A dividend of DKK 70 million is expected after the general annual meeting 24 October 2007 and a share buy back for a total of DKK 200 million is expected. Combined this corresponds to a payout yield of 4.6% (4.5%) of the market value as at 30 June 2007.

A new financial and strategic target

In the past year, IC Companys has worked intensively on improving the strategic planning and anchoring in the Group’s brands and shared services. Part of the strategy process was to determine a new mission and vision for IC Companys. The elements constitute the foundation for the strategy process, as they address not only the mission, but also act as the guiding star of the organisation. Point of departure is the mission:

We build successful international fashion brands

The mission emphasises our core competence which is the ability to develop and build international brands. Our vision is:

We want to be the best owner and business support for international fashion brands

The vision epitomises that IC Companys as a group strives to be a competent and development-oriented support and, not least, a quality-assuring and cost-saving platform to our brands. Both the mission and vision reflect a continuation of the multi brand strategy supported by the shared business platform.

The mission and vision support the Group’s new financial target to achieve a minimum of 15% organic growth and an EBIT margin of a minimum of 15% no later than over a period of three to five years. The target is ambitious and requires increased growth with particular emphasis on the ear-nings capacity. Overall, this target will be met by enhanced professionalisation of all aspects of Group sales, enhanced efficiency of the Group shared services and a better anchoring of the brand-driven organisation.

The professionalisation of the Group sales is driven by a host of specific efforts in both wholesale, retail and the outlet operation, where the code word is efficiency enhancement. The efficiency enhancement will be implemented by means of increased sales per sales representative, per customer, per market and per square metre in the Group’s own stores. Efficiency enhancement of the Group’s shared services will be driven partly by increased efficiency enhancement in lockstep with the Group growth, and partly by an array of efforts aiming at improving operations. It is thus expected that the shared services can handle the main part of growth in the next coming strategy period without a proportional cost base increase. The solid anchoring of the brand-driven organisation is expected to be generated by virtue of increased continuity and also by the effect of the enhancement already implemented in several brand managements.

The Group action plans for brands and other business units are in summary:

  • Accelerate growth in Peak Performance, InWear, Tiger of Sweden and By Malene Birger retaining the relative cost consumption.
  • Create a pronounced operational leverage in Cottonfield, Matinique, Part Two, Soaked in Luxury and Designers Remix Collection by sustaining growth without the implication of more overhead costs.
  • Carry through the turnaround of Jackpot and recreate growth in Saint Tropez
  • Strengthen and enhance the efficiency of the shared business platform
  • Complete the leadership change and create a team based performance culture The financial target

No later than over a period of three to five years, the target of IC Companys is to create a group that annually achieves a minimum of 15% organic growth and an EBIT margin of a minimum of 15%.


The attractive mid-price segment
The Group has a history of operating in the mid-price segment. An attractive segment that to an increasing extent wins back the attention from the consumer by means of increased affluence, more quality consciousness and a pronounced tendency to “mix and match” from different price segments. Therefore, the mid-price segment receives more attention from several international competitors. Luxury brands have introduced product lines at lower prices, and low price brands have moved up in the market. The mid-price segment constitutes by far the largest part of the combined fashion market, and the growth in the segment is estimated at 3-4% per year. The Group has always maintained a strong foothold in this market. In the next few years, we expect to gain even more foothold in lockstep with the Group professionalisation.

Substantial potential in existing markets
IC Companys’ brands hold a substantial growth potential in all existing markets. Even in the main markets in Scandinavia, where all Group brands are introduced, growth potential exists. Only in the Group’s eight most important markets have all brands been introduced. In conclusion, several opportunities are present in order to introduce the Group’s other brands in markets where the Group has already gained market share, market experience and competence.

As point of departure, no new subsidiary markets are included in the strategic horizon, however, as stated above, a host of brands are set to extend distribution on the Group’s current markets. The growth potential of the existing brands on existing markets is also assessed to be substantial, also beyond the new strategy horizon – particularly via franchise and retail distribution.

Distribution Strategy
Expected growth in the Group’s distribution channels in breakdown:

Wholesale to external third party retailers remains the most important part of the Group revenue. Overall growth in the wholesale operation is driven by continued customer entries and add on sales to existing customers. The average order per customer is estimated to hold considerable growth potential. The improvement will be derived from enhanced professionalisation of the sales planning and execution and the implementation of selected retail principles (sales of shop-in-shop product mix, structured repeat orders and sales of prepacked selections).

The main part of the wholesale revenue is made up by preorders placed by customers 5 – 7 months prior to delivery. By virtue of enhanced focus on in-season sales (OTB) and franchise, this part of the wholesale revenue is forecast to be reduced gradually in the course of the strategy period. The order intake of the autumn and winter collections to delivery in the first half year 2007/08 was completed delivering a 13% growth.

In-season sales (OTB) is ordered within a delivery time as short as 48 hours. OTB is expected to increase as part of the wholesale revenue by means of enhanced focus via sales training and better IT tools, improved inventory management and increased repeat order possibilities for the Group third party retailers.

Franchise, under which an external partner runs the Group concept stores, currently represents a modest 4% of the Group revenue. As the Group brands are increasingly strengthened and competences in supporting a profitable retail operation are enhanced, the possibilities in terms of establishing cooperation with attractive franchise partners are also improved. In 2007/08, 20 – 30 franchise stores are expected to open, primarily in Peak Performance, InWear and Tiger of Sweden. The number of store openings is at group level planned to increase over the next years, as the retail operation and the brand strength of the other brands reach the same level.

The Group’s multi brand strategy comprises a unique possibility of offering the entire or parts of the brand port folio as a combined shop-in-shop store concept under the Companys designation. This store concept paves the way in export markets. Expansion of the Companys store concept via franchise and third party retailers will remain a growth driver in new markets such as Russia, the remaining Eastern Europe and the Middle East. Over the next three to five years, 30 – 50 new Companys franchise stores are planned to open in the export markets. As at 30 June 2007, the Group had 3 own stores and 43 franchise Companys stores.

Retail operation
Successful retail and franchise concepts are decisive factors in building internationally attractive brands. Therefore, the retail distribution becomes increasingly important to growth and increased earnings. As a first step, focus will be on opening new retail stores in Peak Performance and InWear and for the majority in markets, where the Group already has set up retail operation. Within the strategy horizon more brands are expected to attain the same high level, after which point more store openings will follow.

Even though the past three years have delivered significant retail earnings improvement, the existing store portfolio holds a very important untapped revenue and earnings potential. Over the next three to five years, the existing stores are averagely targeted at increasing revenues per square metre by DKK 5 – 10,000. In 2006/07 the Group’s average revenue per square metre was DKK 29,100. All things equal, a DKK 1,000 revenue increase per square metre results in Group retail earnings of DKK 20 million.

To reach this target, a professionalisation of the retail operation is required. Several effort areas are defined. The supply and the merchandising flow will be developed with a view to supporting wholly the retail operation and thus to a higher extent adapted to consumer buying patterns. Concurrently, retail logistics will be extended to match supply and demand in the individual stores. Additionally, increased use of automatic repeat orders and training of the retail staff via the Retail Academy will also serve as drivers in achieving higher revenue per square metre in the Group stores.

Improvement of purchasing procedures is an on-going process equal to”mystery shoppers” that are used to identify specific areas of improvement in each store. The Group is also testing a loyalty programme on selected brands in Denmark. Roll out is planned in more brands, in franchise and in more markets once the concept is estimated to be ready.

For 2007/08 a same store (organic) growth of 6 – 8% (DKK 30 – 40 million) and a positive full year effect of 3% – 4% (DKK 40 – 50 million) from store openings in 2006/07 is forecast. The store openings consisted to a certain extent in wholesale distribution points that were converted into retail concessions (shop-in-shops) and which were profitable from the onset.

As a result of the unexploited potential in the existing stores, only 5 – 10 stand alone retail stores are scheduled to open in 2007/08 representing a revenue growth of 2 – 3% (DKK 20 – 30 million), primarily in Peak Performance and InWear. New stand alone retail stores are expected to be profitable from the second operating year.

Investments in the distribution of InWear and Cottonfield in China continue, and in 2007/08 30 – 40 retail or franchise concessions are planned in China, constituting a revenue growth of DKK 10 – 20 million. In a three to five years perspective the number of stores is expected to heavily increase, and the Chinese market is overall forecast to be profitable in 2009.

Outlet operation Outlet continues to be used primarily to sell surplus products from the main sales channels. Outlet revenue is not anticipated to increase proportionally to Group revenue. Improved purchasing management and increased inventory control are expected to reduce the relative part of surplus products. On that basis a modest growth of 5 – 10% is expected over the next few years.


Gross margin
It is estimated that the Group gross margin holds unexploited improvement potential. Cardinal areas are improved purchase management and by association lower inventory writedowns, improved full price sell-through in own retail, increased sourcing in Asia, continued efficiency enhancement of the outlet operation concurrently with increasing order volumes concentrated on smaller collections. These improvements are over the next three to five years anticipated to accommodate the upwards price pressure specific to China.

The Group gross margins are heavily influenced by temporary currency fluctuations, as close to 70% of the Group purchases are denominated in USD related currencies, whereas only an insignificant part of the revenue is denominated in this currency. The Group hedges the currency risk on a rolling 6 months basis. All things equal, a downfall (increase) in USD of 5% will result in an increase (a decrease) in the Group gross margin of 1 percentage point.

Group gross margin is in 2007/08 forecast to increase by 1.5 – 1.8 percentage points. A very large proportion thereof can be attributed to better sourcing currencies in the first half year. The currency flow expected is hedged for the full financial year of 2007/08.

Operating Costs As part of the Group’s new financial target cost efficiency is to be enhanced by a minimum of three percentage points. This enhancement will partly derive from improved cost efficiency in the revenue growth created by the Group over the next strategy period. It is, however, estimated that structural changes are required in order to achieve the objective. A project has therefore been initiated with a view to identifying structural efficiency improvements that can reduce the company’s complexity and also increase the sales pressure.

The most substantial improvement potential is to be found in the Group’s shared sales logistics. Sales effectiveness as measured by key performance indicators such as sales per sales representative and sales per customer is to be increased significantly. This is emphasised by the fact that no new subsidiary markets are expected in the strategy period. The remaining part of the shared platform is also expected to be used successfully as a lever. The shared functions are expected to handle the main part of growth in the next strategy period without proportional cost base increase. Over the next year, new initiatives launched will, however, increase the cost level by DKK 25-30 million:

  • A distribution centre will be added in Copenhagen
  • The wage costs for the distribution centres are increasing in lockstep with the volume, as the prerequisite for material efficiency improvement is not present in the existing facilities
  • IT investments and staffing are increased
  • Complete roll out of Retail and Leadership Academy expected in 2007/08

For the Group in its entirety costs are expected to be reduced by 0.5 – 1.0 percentage points in 2007/08. Costs in 2007/08 are affected over the full year by both store openings and other growth initiatives launched in 2006/07. The organic cost development in wages, agent commissions and leases will also affect costs. The full year affects of the growth initiatives in 2006/07 constitute a cost increase in the region of DKK 60 – 65 million DKK and is ascribable to the following:

  • Strengthening the organisations in Peak Performance, InWear, Tiger of Sweden and By Malene Birger
  • Increased sales force in Peak Performance, including a separate sales force to the golf collection
  • Cottonfield Female
  • Companys concept group
  • China expansion of InWear and Cottonfield
  • Customer loyalty programme

Apart from the above, no other large isolated growth initiatives are planned for 2007/08. As mentioned above, new retail stores will be opened in 2007/08, which in the short term dilutes the margin and affects cost efficiency negatively.

Cottonfield, Matinique, Part Two, Soaked in Luxury and Designers Remix Collection are expected to improve cost efficiency in 2007/08 as a result of improved exploitation of sales and management resources. This progress is to a considerable extent drawn down by Jackpot, which also in the first half year of 2007/08 is expected to decline.


A part of achieving the financial goal is the continued investments in the market development, including to a substantial degree retail and franchise stores. Maintenance investments in the Group inventory facilities are also anticipated. The total investments are thus expected to exceed the actual yearly depreciations. The combined investment volume in the existing business is expected to be up to 4% of revenue.

Within the strategy period, two likely and significant investments not encompassed in the strategy above will be evaluated and prioritised based on contribution to the Group’s value generation.

The planned growth will result in a volume increase of the Group inventories. This volume will be handled via the Group’s existing inventory facilities and purchase/lease af additional inventory facilities. However, this solution entails a proportional cost increase as the volume increases. Therefore, alternative and more cost-efficient solutions are considered. Solutions that also can increase the service level to the Group’s customers. It is expected that the Group has implemented a long-term solution in two to three years.

The Group’s current IT platform is based on a major number of systems from many suppliers and different technologies. The platform is reliable and supports the basic business, however, development of new functionalities is highly cost-consuming for reasons related to integration and competence. A decision to upgrade the finance system to SAP has therefore been made with a view to a possible, future replacement of the ERP system. A decision to initiate such a project is expected at the earliest in the calendar year of 2009.


With the purpose of building congruent interests between shareholders, members of the Executive Board and other executives and contribute to a joint focus on meeting the Group targets, IC Companys has implemented bonus and share-based incentive compensation plans.

The incentive-based compensation plans for members of the Executive Board and other executives includes bonus and share-based incentive plans. In accordance with the IC Companys corporate governance guidelines, members of the Board of Directors are not included in the incentive plans.

The members of the Executive Board and a number of other executives are included in a bonus plan where payments are based on the financial results achieved in the employee’s own area of responsibility. The bonus potential is in the range of 20-30% of annual salary. The bonus plan is based on results achieved in the individual financial year, which helps ensure that the Group’s growth targets are met, as the full bonus is only paid if the Group targets are met.

Previously, the Group has granted warrants to a number of executives and key employees. Details of the plans are given in note 5 to the financial statements. The main part of these warrant programmes expire in 2008. It was therefore decided to grant stock options to 66 executives and key employees on September 12 2007. The grant is performance based and calculated on a proportion from 10% – 30% of the wage of the individual employee which by means of the Black & Scholes formula will grant a specific number of stock options to the employee in question. The calculation is based on a future volatility of 23% per annum, an expected yield percentage of 1.3% and a risk-free interest of 4.1%. The total grant constitutes 237,769 stock options that each entitles the holder the right to acquire one existing share at DKK 329.39 per stock plus 5% per annum. The share price is calculated as the average share price the last 5 trading days prior to the grant. The stock options cannot be exercised earlier than after the release of the Annual Report 2009/10 and no later than after the release of the Annual Report 2012/13. The aggregate market value of the programme is DKK 10 million which will be amortized over the term.

The Executive Board is not included in the new stock option programme. In April 2005, the Executive Board was granted an option programme that has a 5 years term. Details of the stock option programme of the Executive Board are also given in note 5 to the financial statements.

Group capital structure and dividend policy

The Group’s new financial target does not assume acquisitions or extraordinarily extensive investment programmes. The Group’s cash generation is forecast to exceed the cash needed for operating activities. IC Companys retains the financial objective of distributing dividends of 30% of the net profit each year, and any cash in excess of this will be used for share buyback programmes. The extent of a share buyback programme will be announced for a year at a time. The total payout as part of the free liquidity is expected to be 100%. The Group’s cash conversion rate is expected in average in the financial strategy horizon to be above 70%.

This is mainly due to the following factors:

  • The average investment level in concept stores, showrooms, IT etc. is expected to amount to up to 4% of revenue.
  • The working capital is expected to represent 11% – 12% of revenue
  • Consolidated tax costs are expected to account for 25 – 27% of the pre-tax profit, of which 50 – 75% will be payable; the remaining part will be offset against already recognised tax assets.
  • Short-term net bank debt is to be in the region of DKK 300-400 million
  • Long-term debt will be used solely to finance the corporate head office at Raffinaderivej

In the financial year 2006/07 IC Companys has carried out a share buyback programme totalling DKK 225 million and has bought back a total of 659,725 shares, equivalent to 3.6% of the equity. Moreover, DKK 70 million of the profit for the year is expected to be paid out in dividend.

In the financial year 2007/08 a share buyback programme totalling DKK 200 million is expected to be carried out. Furthermore, 83,000 shares will be acquired to cover this stock option programme.

The multi brand strategy

IC Companys’ multi brand strategy is retained. IC Companys wishes to create a portfolio of strong and independent brands with a high degree of distinctiveness, a portfolio which draws on the competencies and resources of joint functions, and an organisation that combines the commercial focus of each brand with the great cost and quality benefits that having a number of joint functions brings.

Via the multibrand strategy, value is created through a systematic utilisation of our industry competencies that cut across brands and by utilising our economies of scale.

Each brand has a market-oriented management that handles market positioning, product development, sales and marketing, i.e. the activities that are vital to the development of each brand’s identity and are the decisive factor in a consumer’s decision to buy. Moreover, each brand is supported by a shared platform which handles activities of no significance to the brand identity and gives each brand substantial advantages in terms of cost savings and quality.

The synergies in the brand portfolio of the company are primarily achieved through the shared platform, which consists of a number of corporate functions such as sourcing, distribution, sales logistics, HR, IT, marketing, finance and administration. The Group’s corporate brand – IC Companys – acts as a guarantee of continuity, ability to deliver and creditworthiness.

A natural risk diversification in several dimensions is an inherent element of the Group’s brand portfolio. The overall business risk has been reduced through each brand pursuing an individually adapted positioning and market strategy. In addition, the portfolio approach reduces the creative risk by reducing the overall collection and fashion risk. Furthermore, this risk reduction ensures that each brand can afford to have a more characteristic design expression and thus a stronger brand identification.

BRAND portfolio

All the Group brands are active in a world of fashion clothing and are distributed via wholesale, franchise, retail and outlet sales, and as such they have a uniform business risk and operate under uniform long-term profitability requirements.

By means of our brand portfolio, IC Companys meets demands from international consumers through a broad positioning spectrum, different dress elements and a broad price structure. Below is a presentation of the brand portfolio:

The shared PLATFORM – quality and synergy

Another important element of the group strategy is the shared platform, which encompasses a number of corporate functions. The platform includes sourcing, distribution, sales logistics, HR, IT, marketing, finance and administration. These joint functions make it possible to utilise the synergies across the Group’s brands regardless of size.

The costs of operating the Group’s joint functions excluding sales logistics amount to 9.7% of revenue. The joint functions employ about 27% of all company employees.

It is a central element of IC Companys’ strategy to continue to develop the Group’s joint functions as:

  • The shared platform makes it possible to achieve considerable competence and cost benefits for each brand, irrespective of size.
  • The shared platform makes it possible to ensure a high product quality and reliability of delivery to retailers and own stores.

The combination of a multibrand strategy with a shared platform is a strength for IC Companys. Our objective with the shared platform is thus to further develop a structure that in the long run can handle efficient management of the existing brands alongside with the integration of additional acquired brands.


IC Companys has more than 30 years of experience in sourcing internationally and outsources all end production to subsuppliers. The sourcing for all brands is handled via joint sourcing offices in Hong Kong, Shanghai, Bucharest, Istanbul and Dhaka and through limited use of agents in Europe and India. A geographic breakdown of sourcing by value is as follows: 60% China, Rumania 13%, Turkey 10%, India 5% and other countries 12%.

Synergies are achieved through substantial cost benefits for each brand, irrespective of size, due to lower prices from production suppliers and more cost-effective quality control of suppliers. The shared sourcing offices also make it possible for all brands to handle geographic sourcing changes quickly and securely. This enables brands to take advantage of new sourcing opportunities and also reduces IC Companys’ operational risk.

The objective of the shared platform is to further increase the cost efficiency. Current projects include increased automisation, merger of the sourcing offices in Bucarest and Istanbul, evaluation of a new office in India, implementation of webrooms and corporate messenger in order to reduce the distance between brands, sourcing and suppliers in China.


The Group’s shared sales logistics function includes sales subsidiaries in 18 countries: Denmark, Sweden, Norway, Finland, the UK, Ireland, Germany, the Netherlands, Belgium, Austria, Switzerland, France, Spain, Poland, the Czech Republic, Hungary, Canada and China. In addition to its own sales subsidiaries, IC Companys has an export organisation which primarily works with external agents and distributors.

The Group’ goal in the future strategy horizon is a substantial enhancement of the sales efficiency and consequently improved cost efficiency in the sales logistics. Further, the complexity in the organization is to be reduced resulting in an increased and more effective sales pressure.


The Group’s platform also comprises a support function for the Group’s brands within all aspects of marketing, assisting the brand managements in everything from the creative process of generating ideas to actual production or sourcing of marketing materials. The function also includes departments for PR, Interior Design and Visual Merchandising.


As a crucial measure to support the financial target the Group has made an investment that will strengthen the ability of IC Companys to attract, develop and retain the best employees and thus enhance the competitive force considerably. In the spring of 2006 a new HR strategy was approved and the professionalisation of the HR effort was initiated.

In the financial year 2006/07 an experienced HR team was built. Staff administration and the recruitment process were professionalised, which has resulted in a more efficient administration and enhanced quality in the decision support in connection with recruitments and promotions. Quality insurance and a systemised recruitment process that combined reduce the number of unsuccessful recruitments.

The Group also carried out an extensive People Review that has provided a platform for employee development, internal recruitment and succession planning. From a business perspective this enables the Group to retain talented employees and develop the weakest by focusing on development and bringing to the forefront internal career opportunities. All competent employees will be addressed by means of specific and goal-oriented efforts. The goal of the People Review is to increase the share of internal recruitments resulting in a considerable cost reduction in external recruitment. Furthermore, a top management evaluation has been carried out throughout the organisation with a view to identifying strengths and development areas. In the autumn of 2007, the Group Leadership Academy will be ready for launching. This initiative is to be applied as a lever for the basic leadership competences, team development and execution skills of the Group’s approximately 200 managers.


Strong IT support in all aspects of sourcing, distribution, logistics, administration and sales also help the individual brands focus on creative and commercial development activities. Shared operation of the IT platform ensures cost benefits for the individual brands.

Financial planning, follow-up, reporting and administration are organised in a shared service centre which handles financial and administrative tasks in the Group’s sales companies. In addition to significant cost benefits, this means that the Group can integrate new units or implement organisational changes relatively easily and quickly.

The Group has set out the goal to further enhance efficiency. In addition, in the future strategy period the focal point will be on improving decision support and enhancing the support of the Group’s business development.


Revenue was DKK 3,354 million, which was DKK 332 million, or 11%, higher than in 2005/06. The Group’s most recently released forecast revenue was DKK 3,400 million. Net store openings added DKK 64 million to the revenue. Revenue was not affected by exchange rate fluctuations in 2006/07.

Sales performance for continuing brands:

The combined growth rate seen for continuing brands was 14%. 7 out of 11 brands accomplished growth rates of more than 15%, and 9 out of 11 brands achieved double digit growth rates. The strongest growth was recorded for Peak Performance, Matinique, By Malene Birger, Soaked in Luxury and Designers Remix Collection, which all achieved growth rates of more than 20%.

Jackpot saw a decline of 11%. Jackpot has been repositioned, and the brand has regained its contemporary image. Also, the repositioning encompassed an adjustment of the distribution platform and in this process, the brand has lost third party retailers and end consumers to an extent that exceeds the number added. The past months Jackpot showed signs of stabilisation. Within the six months from March to August 2007, the brand has achieved growth in the brand’s own stores. Historically, own retail is the first to benefit from the effect of a repositioning process, as the brand concept is shown full-scale and the exposure to the customers is direct.

Sales performance for continuing brands by market:

Of the total revenue 81% was generated outside Denmark. Sales is carried out through own sales companies in 18 countries plus export to 25 other countries.

Revenue for continuing brands rose in all the Group’s markets in 2006/07 apart from the UK. In Sweden, Denmark, Norway, Belgium, Switzerland, Russia and France double-digit growth rates were achieved.

It is very positive that both the Dutch and the Polish market are accomplishing growth again after several years of decline.

The acquisition of the Norwegian distributor of Peak Performance has resulted in a positive revenue surge of DKK 45 million. Adjusted accordingly, the underlying growth in Norway was 11%.

As an implication of the continued decline in the UK and Ireland, a new country manager has been employed. Under the new country manager, the sales structure will become more brand focused in order to increase the brand dedication of the sales representatives and organise them under one sales manager per brand on both markets.

Gross profit
Gross profit rose by DKK 215 million, or 12%, to DKK 1,983 million (DKK 1,768 million). This represents an improvement in the consolidated gross margin of 0.6 percentage points to 59.1% (58.5%).

The operational improvement in gross margin was a significant 1.8 percentage points when adjusted for a negative exchange rate effect of 1.2. percentage points, a result of higher sourcing currencies. The operational improvement was largest in retail delivering a combined improvement including exchange rate effects of 1.1 percentage points and a combined improvement including exchange rate effects of 0.5 percentage points in wholesale. The Group outlets have achieved a lower gross margin than last year as a consequence of inventory composition.

Capacity costs
Capacity costs rose by DKK 178 million, or 12%, to reach DKK 1,643 million compared to DKK 1,465 million in 2005/06. The cost rate was increased by 0.5 percentage points to 49% in 2006/07 against 48.5% in 2005/06. This development was uneven throughout the year. Cost efficiency decreased by 1.5 percentage points in the first half of the year, but improved by 0.8 percentage points in the second half of the year.

Staff costs grew by DKK 96 million, representing 14%. The development is caused primarily by an 11% increase in the average number of employees. As at 30 June 2006, the Group has had a net employee influx of 220, of whom 157 are sales or brand related positions, and 33 are pertinent to the Group’s supply chain.

Depreciation and amortisation increased by DKK 15 million, or 19%, to reach DKK 96 million (DKK 81 million), which was attributable to the refurbishment of stores and showrooms, the renovation of the Group head office and write-down of goodwill on the Company’s Turkish sourcing company.

Other operating expenses grew by DKK 72 million, or 11%, to DKK 756 million (DKK 684 million). Marketing costs have increased by 10% and constituted 6% of revenue in the financial year 2006/07. This level is expected to be maintained in 2007/08.

The Group’s other operating income amounted to DKK 16 million against DKK 11 million in 2005/06. Of the achieved income DKK 7 million is attributed to the realisation of the Group’s office in the UK. Additionally, DKK 9 million (DKK 11 million) was attributable to the realisation of leasehold rights in connection with the closure of stores.

Operating profit
In the financial year 2006/07, IC Companys performance generated an increase in operating profit before special items of DKK 37 million or 12% reaching DKK 340 million (DKK 303 million) representing an EBIT margin before special items of 10.1% (10.0%). The most recently published Group forecast was an operating profit in the region of DKK 330 – 350 million.

Last year’s operating profit was affected by a non-recurring gain of DKK 20 million from the Danstruplund property sale.

Net financial items
Net financials amounted to an expense of DKK 20 million against DKK 20 million in 2005/06, primarily as a result of a DKK 9 million gain from currency swaps that hedged the currency risk of equity denominated in SEK. In 2005/06, a loss of DKK 6 million was realized from currency swaps with the same purpose. The increase in net interest costs seen in isolation is DKK 15 milllon, of which DKK 7 million was attributable to the acquisition of the head office at Raffinaderivej, Copenhagen, Denmark, and the remaining increase results from a higher withdrawal and increased interest rates on the other credit facilities of the Group.

Income tax
Tax on the profit for the year was an expense of DKK 80 million, representing a tax rate of 25%. Taxes were DKK 79 million in 2005/06, corresponding to a tax rate of 26%.

Tax payable is calculated to be DKK 31 million and consists of tax payments in countries where the Group either has no tax assets or cannot offset such assets in full against the profit for the year. In addition, DKK 33 million of the tax assets recognised in prior years was used. Adjustments concerning tax rate changes constitute DKK 16 million.

Profit for the year and profit allocation
The net profit for the year was DKK 241 million (DKK 224 million), representing a year-on-year improvement of DKK 17 million, or 8%.

Earnings per share increased by 9% and amounts to DKK 13.0 relative to DKK 11.9 per share in 2005/06. Earnings per share were adjusted for treasury shares and the diluting effect of outstanding share incentive programmes.

The Board of Directors recommends a dividend of DKK 70 million, equivalent to DKK 4.0 (3.75) per share eligible for dividend. The remaining part of the net profit will be taken to retained earnings.

Distribution channels

Wholesale operation
Wholesale revenue grew by DKK 210 million, or 10%, to DKK 2,308 million (DKK 2,098 million). Wholesale revenue as a percentage of revenue was reduced marginally by 0.6 percentage points to 68.8%. The total number of third party retailers at 30 June 2007 is 11,500 against 10,275 in 2005/06.

For the Group’s continuing brands the preorder revenue achieved an increase of 12% and accounts for approximately 81% of the wholesale revenue. OTB revenue increased by 24% in 2006/07 and represents 13% of the wholesale revenue. Franchise revenue increased by 8% and accounts for 6% of the wholesale revenue. Discontinued and sold off brands have constituted losses of DKK 54 million, DKK 4 million and DKK 2 million in preorder, OTB and franchise, respectively.

The distribution channel profit of the wholesale operation was DKK 325 million against DKK 305 million last year. Distribution channel profit margin was reduced from 14.5% in 2005/06 to 14.1% in 2006/07. The changes in relative earnings of 0.4 percentage points result from costs incurred via the Group’s growth initiatives is primarily recognised in the wholesale channel.

Retail operation
Retail revenue rose by 15% to DKK 915 million against DKK 798 million last year. Same store sales achieved a 9% growth.

The earnings level for the Group’s own retail operation was again this year remarkably high. The earnings level for own retail operation was historically high with a profit margin of 14.9% representing a year-on-year improvement of 2.2 percentage points. This is an outcome of better products, improved purchase and inventory management and increased professionalisation of the product flow.

In 2006/07, 69 new stores opened, of which 29 are concessions. 20 stores were closed in 2006/07. The Group has renovated 17 stores during the financial year. The Group’s own retail operation extends to 15 countries, of which the concentration is highest in Denmark, Belgium, Holland, Sweden and Poland. The Group’s own retail operations account for 36,000 square metres relative to 30,000 square meters in 2005/06.

Average sales per square metre was increased in 2006/07 by 13% to DKK 29,100. The level continues to be quite low, even though there are significant differences in terms of brands, markets and locations. Average sales per square metre is expected to increase considerably over the next years as the Group’s retail operation becomes more professionalised.

Outlet operation
Revenue from the outlet operation was DKK 131 million against DKK 126 million the previous year, amounting to a 4% increase. The distribution channel profit was DKK 23 million equivalent to an distribution channel profit margin of 17.5% compared to DKK 19 million and 15.0% the previous year.

Increase of full price sale in the primary distribution channels and thus a reduction of the inflow of new surplus products remains a focus area. This area is consequently not forecast to show any growth. The earnings level in the outlet operation is considered to be satisfactory.

The Group operates 21 outlet stores covering 6,000 square metres in nine countries. The average sales per square metre in the Group outlets is DKK 20,000. The operation of outlets forms an integral part of the Group’s business model for the profitable sale of residual post-season products. The earnings capacity depends on the composition of the surplus stocks and will therefore show fluctuations over time.

BALANCE sheet and LIquidity

Non-current assets The carrying amount of intangible assets was DKK 246 million at 30 June 2007 against DKK 222 million at 30 June 2006. The Group’s intangible assets increased primarily as a result of an addition of goodwill amounting to DKK 27 million attributable to the acquisition of the Norwegian distributor of Peak Performance.

The carrying amount of property, plant and equipment was DKK 409 million at 30 June 2007 DKK relative to DKK 362 million at 30 June 2006. The increase was primarily attributable to the refurbishment of stores, showrooms with DKK 87 million and the recently completed renovation of the corporate head office at Raffinaderivej with DKK 22 million.

Consolidated gross tax assets amounted to DKK 236 million at 30 June 2007 relative to DKK 296 million at 30 June 2006. Recognised net assets were decreased by DKK 55 million to DKK 108 million at 30 June 2007. This development was caused by an adjustment of DKK 16 million pertinent to reduced tax rates and utilization of deferrable assets in 2006/07 amounting to DKK 33 million.

Taxable income estimates for the individual companies are based on the applicable local tax rules, the budget approved by the Board of Directors for 2007/08 and the Group’s financial targets.

Inventories grew by DKK 75 million, equivalent to 19%, to DKK 466 million at 30 June 2007 (DKK 391 million). The increase was partly due to the higher level of activity, and partly driven by an increase of DKK 36 million in new products. The latter is a time lag which was offset after balance sheet day. The level of surplus products and inventory writedowns remains unchanged as measured against last year.

Trade receivables
Trade receivables rose by DKK 59 million to reach DKK 267 million at 30 June 2007, equivalent to a 28% growth. The increase is driven primarily by a DKK 54 million increase in the wholesale revenue in the fourth quarter 2006/07 as compared to last year. Furthermore, the growing share of concessions in the Group retail distribution increases the average credit time. Notwithstanding this increase, the absolute debtor risk is less than last year as a result of a better age distribution of the Group accounts receivable.

Equity Group assets excluding cash and cash equivalents increased by DKK 139 million to DKK 1,704 million (DKK 1.565 million), whilst equity was reduced by DKK 13 million to DKK 567 million.

Equity was positively affected by the net profit for the year of DKK 241 million. Equity was reduced by DKK 225 million through the Group’s share buyback programme and paid dividends of DKK 68 million.

Cash flow and capital investments
Consolidated cash flows from operating activities decreased by DKK 35 million to DKK 291 million relative to DKK 326 million in 2005/06. This is primarily attributable to funds tied up in the group working capital, as inventory and outstanding trade receivables increased DKK 75 million and 59 million DKK, respectively, whereas debts to suppliers of goods and services have increased only DKK 9 million.

The cash flow from investing activities amounts to DKK 186 million DKK relative to DKK 142 million in 2005/06. As at 1 July 2006 the Group acquired the Norwegian distributor of Peak Performance which resulted in an investment flow of DKK 37 million. Other operating investments made during the year totalled DKK 127 million, of which DKK 87 million was spent on new concept stores, as well as refurbishing existing stores.

The free cash flow from operating and investing activities was DKK 105 million relative to DKK 185 million last year. Excluding acquistion of the Norwegian distributor, the free cash flow constituted DKK 142 million.The most recently released Group forecast was in the region of DKK 170-200 million. The deviation is caused primarily by more new products in the Group inventory than estimated combined with a significant wholesale growth in the fourth quarter.

The cash flow from financing activities was an outflow of DKK 262 million. This was primarily attributable to a share buyback programme amounting to DKK 225 million in the financial year 2006/07 and dividends from 2005/06.

Interest-bearing debt
Consolidated net debt to financial institutions increased by DKK 156 million during the financial year to reach DKK 558 million DKK at 30 June 2007 (DKK 402 million). The increase in debt was due to the financing of the Group head office at Raffinaderivej and increased withdrawal of the Group’s credit facilities.

The Group’s available committed credit lines amounted to DKK 1.209 million at 30 June 2007 (DKK 1.185 million). Out of this amount, a total of DKK 703 million had been drawn at 30 June 2007, and DKK 206 million had been used for trade finance facilities and guarantees. Thus, the Group’s available unused credits totalled DKK 300 million at 30 June 2007 (DKK 550 million).


Apart from events described in this Annual Report, the management is not aware of any events subsequent to 30 June 2007 which are expected to have a material impact on the Group’s financial position or outlook.

RISK Management
The Group is exposed to risks of a commercial as well as a financial nature that are common for the fashion industry. Below is a description of the most important risk factors and the steps the Group has taken to reduce them.


Fashion risk The Group’s brands all have a high fashion content. As collections change at a minimum of four times a year and have a long lead time, there is a risk that the products will not match consumer tastes.

Each brand works with commercial and facts-based development of its collections with a view to reducing this risk. At Group level, there is an inherent high level of diversification as a result of the number of independent brands.

The Group’s products are solely produced by third parties, which ensures a high level of flexibility. In 2006/07, 69% of production took place in Asia and 31% in Europe. The Group has 566 suppliers, of which the largest 10 suppliers account for 27% of the total production value. The largest single supplier accounts for 4% of the total production value.

The Group has six independent sourcing offices in China, Romania, Turkey, Bangladesh, Hong Kong and Denmark which compete for production orders from the brands. This means that sourcing can be moved to wherever the combination of price, quality and supply stability is best.

Inventory risk
Sales through own stores and the need to carry stock service products and supplementary products for retailers involves a risk that products which, during the year, have been allocated for sale remain unsold at the end of the year. The Group has a network of outlets for the ongoing sale of such stocks. Capacity in these outlets is increased or reduced as required. Any products that cannot be sold through the Group’s own outlets are sold to brokers for resale outside the Group’s established markets. The inventory risk of the Group is reduced by the fact that a considerable part of the total order intake is preordered by the Group’s retailers.

Debtor risk (third party retailer risk)
The Group brands are sold by a total of 11,500 selling points. A considerable number of third party retailers are customers to more than one brand, and the number of customers is consequently lower. No customer accounts for more than 5% of the Group wholesale revenue. The Group’s distributor in Russia is the single largest customer.

Before a customer relationship commences, the Group’s customers are credit rated according to the Group debtor policy and subsequently on a regular basis. Nevertheless, losses do occur. Credit insurance is typically only used in countries in which the credit risk is unusually high and where this is feasible. This primarily applies to export markets in which IC Companys is not represented through an independent sales company.

The credit terms vary in line with individual market customs. Loss on bad debts have been less than 1% of wholesale revenue in recent years.

Dependence on IT systems
The Group is dependent on reliable IT systems for day-to-day operations, as well as to ensure control of product sourcing and to increase efficiency in the Group’s supply chain. The Group is continuously working to hedge these risks through firewalls, access control, contingency plans, etc.


A large part of the Group’s purchases are made in markets which from time to time see political turmoil. The most significant dependence concerns reliable supplies from Hong Kong and China, where approximately 60% of the Group’s supplies is purchased. The current quota system imposed on clothing and textiles manufactured in China is price-increasing, but works seamlessly after a slightly chaotic introduction in the summer of 2005. According to the information available, the EU does not plan to extend the quota system, and by the end of 2007 it will be transferred to supervision.


The Group monitors and manages all its financial risks through the Parent Company’s Treasury Department. The Group’s financial risks consist of exchange rate risks, interest rate risks and liquidity risks, including counterparty risks. The use of financial instruments and the related risk limits are managed through the Group treasury policy approved by the Board.

The Group uses financial instruments solely to hedge risks. All financial transactions are based on commercial activities, and IC Companys does not enter into speculative transactions.

Foreign exchange risks
The Group’s commercial transactions expose the Group to significant foreign exchange rate risks, which arise through purchases and sales of products in foreign currencies. The main part of Group purchases are made in the Far East and are denominated in USD or USD related currencies, whereas most revenues and capacity costs are denominated in EUR, DKK and other European currencies. Thus, there is only a limited natural currency match in the Group’s transactions.

The Group basically hedges all material transaction risks. As a result, the cash flow in foreign currency is normally hedged 12 months into the future, except for positions in EUR, which are not hedged.

The Group primarily uses forward currency contracts to hedge the exchange rate exposure.

Net assets (equity investments) denominated in foreign currencies are hedged if material fluctuations may occur in the relevant currencies.

Interest rate risks
The Group’s interest rate risks are related to the Group’s interest-bearing assets and liabilities and off-balance-sheet items.

The Group’s interest-rate risks are managed by obtaining floating-rate and fixed-rate loans and/or by financial instruments matching the interest rate risk on the underlying investment.

Liquidity risks The Group’s cash resources and capital structure are planned so as to always ensure and support Group operations as well as planned investments.

See note 33 to the financial statements for additional information on the Group’s financial risks as at 30 June 2007. CORPORATE GOVERNANCE The Board of Directors of IC Companys is committed to promoting the long-term interests of the Company, and thus of all shareholders. This work is handled at nine planned Board meetings per year and through continuing contact between the chairmanship and the Executive Board.

In the past financial year, the Board of Directors revised the guidelines for the Group’s management. In this connection the Board also considered the Group’s relationship with its stakeholders and the community, and the Board of Directors’ and the Executive Board’s work and further their relationship with each other. The revised guidelines can be downloaded from under the section Investor Relations.

These guidelines are intended as the working base for IC Companys’ management when defining procedures and principles with respect to among other things:

  • The Group’s relationship with its stakeholders, including the public and the press
  • The Group’s external communication, including its Investor Relations policy;
  • The Board of Directors’ work, including rules of procedure for the Board of Directors;
  • The Executive Board’s work, including rules of procedure for the Executive Board;
  • The relationship between the Board of Directors and the Executive Board; and
  • The remuneration and incentive plans for the Company’s management and employees.

These guidelines are intended to ensure the efficient, appropriate, adequate and viable management of IC Companys. The guidelines have been prepared within the framework defined by the IC Companys’ articles of association, mission, corporate vision and corporate values, as well as applicable legislation and rules for Danish listed companies.

The revised guidelines are – with two exceptions explained in the following below – in accordance with the Corporate Governance Recommendations by OMX Copenhagen Stock Exchange

During the spring of 2007, the Board of Directors carried out a self-evaluation procedure with a view to offering the Board the opportunity to systematically and based on unequivocal criteria evaluate the performance and achievements of the Board, the Chairman and the individual members. The evaluation was performed under the Chairman of the Board of Directors in cooperation with an internationally renowned consulting firm. The findings were discussed with the entire Board of Directors.

OMX Copenhagen Stock Exchange recommends that the self-evaluation procedure is carried out once a year. However, the Board of Directors finds a regular interval sufficient.

The present Annual Report includes the scope of the total and itemised remuneration and other material benefits of the Board of Directors and the Executive Board. All material factors concerning share-based incentive programmes are disclosed including information about all incentive paid employees and the aggregated incentive pay of the Executive Board. The aggregated, individualised remuneration of the Executive Board and the Board of Directors are not disclosed as recommended by OMX The Copenhagen Stock Exchange, as the Board of Directors after careful consideration has concluded that individualised remuneration disclosure would not be purposeful.

In compliance with the recommendations of the OMX Copenhagen Stock Exchange, the Board of Directors has assessed the need for committees, including audit committees. The Board of Directors finds that the current meeting structure without committees is sufficient. However, the Board will continuously assess the expediency gained by setting up special ad hoc committees.


The Board of Directors and the Executive Board have today presented the Annual Report of IC Companys A/S for the financial year ended 30 June 2007.

The Annual Report has been prepared in accordance with the International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for the annual reports of listed companies. We consider the accounting policies to be appropriate to the effect that the Annual Report gives a true and fair view of the Group’s and the Parent Company’s assets and liabilities, financial position, results of operations and cash flows.

We recommend that the Annual Report be adopted by the shareholders at the annual general meeting.

Copenhagen, 11 September 2007

Executive Board:

President & CEO Chief

Operating Officer

Board of Directors:


Deputy Chairman

Deputy Chairman


The Independent auditors’ report
To the shareholders of IC Companys A/S We have audited the annual report of IC Companys A/S for the financial year 1 July 2006 to 30 June 2007, which comprises the statement by Management on the annual report, Management’s review, income statement, balance sheet, statement of changes in equity, cash flow statement and notes, including the accounting policies, for the Group as well as the Parent. The annual report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed companies.

Management’s responsibility for the annual report
Management is responsible for the preparation and fair presentation of an annual report in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed companies. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of an annual report that is free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility and basis of opinion
Our responsibility is to express an opinion on this annual report based on our audit. We conducted our audit in accordance with Danish and International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the annual report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of an annual report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the annual report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Our audit has not resulted in any qualification.

In our opinion, the annual report gives a true and fair view of the Group’s and the Parent’s financial position at 30 June 2007, and of their financial performance and their cash flows for the financial year 1 July 2006 to 30 June 2007 in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed companies.

Copenhagen, 11 September 2007

Deloitte Statsautoriseret Revisionsaktieselskab

Kirsten Aaskov Mikkelsen
State Authorised Public Accountant

Jesper Jørgensen
State Authorised Public Accountant