GERRY WEBER International AG Report on the first three months of 2007/2008. Report on the three-month period ended 31 January 2008

Transcription

1 GERRY WEBER International AG Report on the first three months of 2007/2008 Report on the three-month period ended 31 January 2008 WKN: ISIN: DE

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3 The share In the first quarter of 2007/2008 the GERRY WEBER share no longer remained isolated from the subprime-induced turbulence in the international capital markets and was pulled into the general downward trend. The share started the current fiscal year at a price of EUR on 1 November 2007 and closed at EUR on 31 January 2008 (all prices refer to the Xetra closing price). The highest price during the reporting period was recorded on November 2, 2007, when the share peaked at EUR The lowest price was reached on 23 January 2008, when the share traded at EUR Even though overall sentiment in the German stock market clouded over appreciably, the individual indices reflected investors insecurity to varying degrees. While the DAX, the most important German stock market index, lost 13.1 percent during the reporting period, the MDAX was down 16.8 percent. A loss of 18.5 percent means that the GERRY WEBER share clearly underperformed these two indexes, given that small caps were impacted in particular measure by the US subprime crisis and institutional investors resulting withdrawal from the market. The GERRY WEBER share initially followed the trend in the SDAX but eventually outperformed this smallcap index which lost 22.2 percent during the first three months of 2007/2008. The loss in the share price contrasted clearly with the outstanding business performance put in by the GERRY WEBER Group in the first quarter of 2007/2008. In light of the good earnings position the Managing Board will propose to the Annual General Meeting a profit distribution of EUR 11.5 million or EUR 0.50 per share, in order to give the shareholders an appropriate share in the company's excellent results. Figures of the first three months of 2007/2008 (to IFRS; in EUR million, unless stated otherwise) 2007/ /2007 Sales revenues EBITDA EBITDA margin 10.4% 9.0% EBIT EBIT margin 8.1% 7.15% EBT EBT margin 7.2% 6.3% Net profit Gross cash flow DVFA result per share in EUR Headcount on January 31 2,058 1,907 Total assets Fixed asset investments Interim management report for the three-month period ended 31 January 2008 Business performance The year 2007 once again saw healthy growth in the German economy, with real gross domestic product (GDP) expanding by 2.5 percent during the full year as lively capital spending and rising exports outweighed such negatives as the VAT hike, the higher energy costs, the restrictive fiscal policy and the appreciation in the euro. In contrast to 2006, no contribution to growth came from consumer spending which contracted by 0.3 percent due to subdued increases in take-home pay and clearly accelerating food and energy prices. In 2007 the German clothing industry recorded its first slight upward trend in a while. According to preliminary figures, the industry achieved total sales of EUR 12.4 billion, equivalent to a 4.6 percent rise compared to the prior year (source: GermanFashion Modeverband e.v.). Ladieswear revenues increased by 2.5 percent and manufacturers of menswear even reported 3.2 percent growth. As many as 62 percent of companies participating in the representative December 2007 survey described the development of sales as good or satisfactory, with 38 percent referring to their sales trend as average or even very poor. More than half the companies polled, 54 percent, said that their export share had risen compared to the prior year. The GERRY WEBER Group finished the first quarter of 2007/2008 with new record figures in both sales and earnings. Group sales rose by 14.4 percent from EUR million to EUR million. All earnings ratios increased at a disproportionate rate. This means that the company was able sustain the strong growth momentum seen in recent years and is excellently positioned to meet its sales and earnings targets for 2007/2008. During the first three months of the current fiscal year a total of 28 new HOUSES OF GERRY WEBER were opened as part of the GERRY WEBER Group s expansion strategy. While 23 of these new multibrand stores are operated by franchisees, the other five - three in Germany and two in Spain - are managed by the company. Of the 205 HOUSES OF GERRY WEBER operated worldwide on 31 January 2008, 134 were franchised and 71 were company-managed operations. In recent years the company has evolved into a vertically integrated systems supplier; the companymanaged retail activities meanwhile contribute 22.3 percent to Group sales. 3

4 With the HOUSES OF GERRY WEBER serving as powerful beacons for the brand in major cities, more and more retailers are encouraged to make available shop-in-shop space on their premises. This means that the GERRY WEBER Group s strong retail position continues to boost the wholesale business too. Retailers are increasingly looking for strong partners assuming store and inventory management functions. The GERRY WEBER Group will exploit this trend with a view to strengthening its market position vis-à-vis the retail sector. Sales performance In the first quarter of 2007/2008 Group sales improved from EUR million to EUR million, which represents an increase of 14.4 percent. This growth was mainly supported by the very good development of the GERRY WEBER core brand and the clear increase in retail revenues. At EUR 97.7 million, brand sales were up 12.0 percent on the previous year's level (EUR 87.2 million). The GERRY WEBER brand generated revenues of EUR 70.5 million which represents an increase of 15.6 percent on the previous year's EUR 61.0 million. Contributing 72.2 percent to total sales, GERRY WEBER remained the Group s most important brand. The success of the core brand was not least owed to the two sublabels, GERRY WEBER EDITION and G.W. The single item line, GERRY WEBER EDITION, achieved revenues of EUR 21.7 million, exceeding the previous year's figure of EUR 15.5 million by 40.0 percent. Sales of the aggressively priced G.W. label were up 68.2 percent from EUR 2.2 million in the previous year to EUR 3.7 million in the reporting period. The younger TAIFUN-Collection label realised sales of EUR 21.1 million and contributed 21.6 percent to total brand revenues. SAMOON-Collection, the niche brand for plus sizes, booked sales of EUR 6.1 million, accounting for 6.2 percent of total revenues. The strongest sales growth was reported by the Group's retail unit, which aggregates the revenues of the 71 company-managed HOUSES OF GERRY WEBER in Germany and abroad. The Group's own retail activities increased by 21.5 percent against the previous year and generated sales in an amount of EUR 27.1 million (previous year EUR 22.3 million). This growth reflected both the opening of numerous new HOUSES OF GERRY WEBER and clearly higher same-store sales. Orders Incoming orders for the first and second collection of the autumn/winter 2008/2009 season came to EUR million and were up 13.0 percent on the previous year's EUR million (note: A complete season consists of three collections. Ordering for the third autumn/winter 2008/2009 collection will start at the beginning of May 2008.). Earnings position The GERRY WEBER Group s earnings figures for the first quarter of 2007/2008 improved even ahead of sales, which were up 14.4 percent on the previous year. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose from the prior year s EUR 9.6 million to EUR 12.6 million reflecting a 31.3 percent increase. Earnings before interest and tax (EBIT) were up by 30.3 percent from EUR 7.6 million to EUR 9.9 million. Earnings before tax (EBT) came in at EUR 8.8 million, reflecting an increase of 33.3 percent on the previous year's EUR 6.6 million. The respective margins increased accordingly. Net profit for the first quarter improved by 54.1 percent and climbed from EUR 3.7 million to EUR 5.7 million. DVFA earnings per share rose by EUR 0.09 to EUR The significant earnings growth reflects the GERRY WEBER Group's unique position in the market which is underpinned by optimised processes, cost-efficient procurement structures and an innovative distribution system. In addition, the GERRY WEBER Group has benefited from Germany s corporate tax reform which has lowered the overall tax rate from 42 percent to 32 percent. Financial situation On 31 January, the equity ratio of the GERRY WEBER Group stood at 53.7 percent compared to the previous year s 53.3 percent. Accordingly, the debt capital ratio declined from 46.7 percent to 46.3 percent. These figures demonstrate that the GERRY WEBER Group s debt-to-equity ratio remains well balanced. A clear increase in current financial liabilities is noted on the liabilities side of the balance sheet. This 75.0 percent rise was mainly due to seasonal short-term funding of inventories and other assets, which increased by 33.0 percent and percent, respectively. In contrast, trade payables declined by 35.6 percent, while trade receivables were down 20.5 percent. Total assets increased from EUR million to EUR million. 4

5 The company s financial stability is also evident from the clearly increased gross cash flow which rose by 33.7 percent from the prior year s EUR 8.6 million to EUR 11.5 million. Investments Investments in the first three months of 2007/2008 came to EUR 3.2 million. This was a 14.3 percent increase over the previous year s EUR 2.8 million. GERRY WEBER International AG s building and construction measures accounted for EUR 1.7 million or just over 50 percent of the total investments. A sum of EUR 1.2 million was invested in the retail operations of the new HOUSES OF GERRY WEBER and the remaining EUR 0.3 million went towards the expansion of the wholesale business. Investments were fully financed from operating cash flow at all times. Employees On January 31, 2008, the number of employees was up by 151 from 1,907 in the previous year to 2,058. The increase is mainly attributable to the retail segment and, more specifically, to the newly opened HOUSES OF GERRY WEBER under company management. Segment report The segment report of the GERRY WEBER Group breaks down the Group's activities into a Ladieswear Production and Wholesale segment and a Ladieswear Retail segment. In the first quarter of 2007/2008, the sales of the Production and Wholesale segment rose by 15.8 percent from EUR 81.1 million to EUR 93.9 million. This segment accounts for 77.1 percent of total sales, compared to the previous year s 76.2 percent. Results from ordinary activities improved from EUR 6.1 million to EUR 8.0 million. The number of employees increased from 915 to 987. Capital expenditure amounted to EUR 0.2 million, down from the previous year's EUR 0.3 million. The retail segment also expanded strongly as compared to the previous year. The segment, which aggregates the 71 company-managed HOUSES OF GERRY WEBER in Germany and abroad, reported a 21.5 percent increase in revenues from EUR 22.3 million to EUR 27.1 million. This strong increment was attributable both to numerous new store openings and growth in the existing HOUSES OF GERRY WEBER. Retail activities accounted for 22.3 percent (previous year: 21.0 percent) of total Group sales. Reflecting the start-up costs of the five new HOUSES OF GERRY WEBER, the result from ordinary activities remains at the previous year's level of EUR 0.3 million. The number of employees increased from 571 to 674. Investments amounted to EUR 1.2 million which was clearly higher than the previous year s EUR 0.1 million; these funds were absorbed by the new HOUSES OF GERRY WEBER. Risk report The risks to the company's future development have not changed materially since the beginning of the fiscal year. The statements made in the consolidated financial statements for the year 2006/2007 therefore continue to apply. These statements and a description of the risk management system can be found on pages 34 to 38 of the 2006/2007 Annual Report. Special events occurring after the reporting date No events that require reporting have occurred. Opportunity and forecast report The economic upswing appears to have peaked and the expansion in the global economy is likely to continue only on a clearly more moderate level. In the USA, in particular, there is great uncertainty about the potential impact of the turbulence in the capital markets on the real economy. The forecasts for 2008 therefore suffer from a number of imponderables. The overall risks to the global economy have increased against the background of a possible recession in the USA. The high commodities prices and the appreciation in the euro are also likely to weigh more heavily on the economy. Moreover, inflationary fears and news about risks to the economy may combine to weaken consumer confidence. Economic researchers therefore expect growth in the German economy to slow down to below two percent. The result of the December 2007 poll by the GermanFashion association shows that the industry was moving forward into 2008 with confidence, expecting 2008 sales to grow by 5.6 percent or even 5.7 percent in the case of ladieswear manufacturers. The GERRY WEBER Group intends to push ahead its fast pace of growth in the current financial year and envisages renewed double-digit increments in terms of both sales and earnings. The Group targets sales revenues of EUR 575 million and an EBIT margin of 11.0 percent for the financial year 2007/2008. Net profit will increase at a disproportionate rate as a result of the corporate tax reform in Germany. Double-digit sales and earnings growth is also anticipated for the financial year 2008/2009. The GERRY WEBER Group s sales are to rise to the 5

6 EUR 1 billion mark over the coming four years, with the EBIT margin increasing to 15 percent during this period. Sustained sales growth is to be achieved, in particular, by pushing ahead the development of the company s own retail activities. During the current financial year alone, the company plans to open another 90 HOUSES OF GERRY WEBER. Half of the new multibrand stores will be operated by the company and the other half will be franchised. Approximately 30 percent of all franchised HOUSES OF GERRY WEBER are opened abroad. The company plans to open some 70 HOUSES OF GERRY WEBER in each of the following four years. In order to enhance its competitiveness the GERRY WEBER Group intends to further sharpen its profile as a vertically integrated supplier, meaning that the share of retail revenues is to rise ahead of headline sales. The retail activities currently account for 22.3 percent of total sales. The company s medium-term goal is to sell approximately 40 percent of its products through companymanaged and franchised HOUSES OF GERRY WEBER. The company also intends to pursue its expansion strategy for the TAIFUN-Collection, SAMOON-Collection and GERRY WEBER EDITION monobrand stores during the current financial year. In addition, alliances with retailers are to be consolidated through the opening of another 400 shop-in-shop outlets. Roughly one third of the additional retail space will be created in Germany. The GERRY WEBER Group intends to further strengthen its market position vis-à-vis retailers and achieve another appreciable increment in its wholesale revenues. In addition, the company contemplates entering the concession business. A 12-month test phase in four department stores was launched a few months ago; the concessions staffed with GERRY WEBER Group personnel achieved sales growth in the region of 35 percent already during this initial period. In order to further improve its margins, the GERRY WEBER Group will move forward with the optimisation of its procurement and logistics structures. As part of this effort, the company will relocate its eastern European production facilities to more cost-efficient countries such as Ukraine, Belarus and Moldavia. In order to benefit from wage cost differences within China, the GERRY WEBER Group s operations in the south of the country will be shifted to the north and into the Chinese hinterland. Calendar of financial events Analysts conference 20 May 2008 Annual General Meeting of Shareholders 4 June 2008 Report on the first six months 25 June 2008 Report on the first nine months 25 September 2008 End of fiscal year 31 October 2008 Contact Hans-Dieter Kley Tel. +49 (0) Fax +49 (0) b.uhlenbusch@gerryweber.de GERRY WEBER International AG Neulehenstraße Halle/Westphalia Tel (0) Fax + 49 (0)

7 Interim consolidated financial statements Consolidated income statement to IFRS in EUR '000 Q1 Q1 2007/ /2007 Sales 121, ,427 Miscellaneous operating income +3,072 +1,601 Changes in inventories +22, ,655 Cost of materials -87,924-71,410 Personnel expenses -19,190-16,822 Depreciation/Amortisation -2,726-2,031 Miscellaneous operating expenses -27,100-23,812 Other taxes Operating result 9,946 7,581 Financial result Income from long-term loans Interest income Write-downs on financial assets - - Incidental bank charges Interest expenses Result from ordinary activities 8,850 6,631 Taxes on income Taxes of the fiscal year -3,054 +2,801 Deferred taxes ,700 Net profit 5,677 3,732 Earnings per share (basic)

8 Consolidated balance sheet to IFRS in EUR '000 Assets 31 Jan Oct Non-current assets Fixed assets Intangible assets 12,742 13,282 Property, plant and equipment 85,709 85,154 Financial assets 925 1,228 Other non-current assets Trade receivables Other assets 6,961 6,962 Income tax claims 4,208 4,208 Deferred tax assets 1,675 1, , ,951 Current assets Inventories 69,798 52,462 Receivables and other assets Trade receivables 62,559 78,724 Other assets 22,932 9,889 Income tax claims Cash and cash equivalents 14,598 17, , , , ,394 Equity and liabilities 31 Jan Oct Equity Capital stock 22,953 22,953 Capital reserve 28,047 28,047 Retained earnings 53,880 53,880 Accumulated other comprehensive income/loss acc. to IAS 39-1,882-2,787 Exchange differences Accumulated profits 48,147 42, , ,079 Non-current liabilities Provisions for personnel 1,433 1,440 Miscellaneous provisions Financial liabilities 31,964 34,200 Deferred tax liabilities 3,577 3,369 37,430 39,465 Current liabilities Provisions Tax provisions 3,248 3,287 Provisions for personnel 4,837 8,564 Miscellaneous provisions 3,078 3,467 Liabilities Financial liabilities 52,025 29,733 Trade payables 21,722 33,738 Miscellaneous liabilities 8,585 9,004 Income tax liabilities ,552 87, , ,394 8

9 Statement of changes in Group equity (in EUR '000) Capital stock Capital Retained Accumulated Exchange Profit Net profit Equity reserve earnings other differences carried comprehensive forward income/loss KEUR KEUR KEUR KEUR KEUR KEUR KEUR KEUR As of 1 November ,953 28,047 53,880-2, ,506 26, ,079 Reclassification of previous year's net income Purchase of own shares Allocations to retained earnings of the AG Net income excl. exchange differences 5,677 5,677 Adjustment of exchange differences Dividends paid Neutral currency forwards 1,293 1,293 Deferred taxes on neutral currency forwards As of 31 January ,953 28,047 53,880-1, ,506 32, ,849 Statement of changes in Group equity (in EUR '000) Capital stock Capital Retained Accumulated Exchange Profit Net profit Equity reserve earnings other differences carried comprehensive forward income/loss KEUR KEUR KEUR KEUR KEUR KEUR KEUR KEUR As of 1 November ,953 28,047 43, ,624 21, ,058 Reclassification of previous year's net income Purchase of own shares Allocations to retained earnings of the AG Net income excl. exchange differences 3,732 3,732 Adjustment of exchange differences Dividends paid Neutral currency forwards Deferred taxes on neutral currency forwards As of 31 January ,953 28,047 43, ,624 24, ,790 9

10 Segment information by divisions (IFRS) Q1 2007/2008 / 31 January 2008 Ladieswear Ladieswear Consolidation Total Production and Retail entries and Wholesale other segments KEUR KEUR KEUR KEUR Sales by segments 93,917 27, ,753 (81,124) (22,300) (3,003) (106,427) EBT 7, ,850 (6,090) (262) (279) (6,631) Depreciation ,136 2,726 (519) (513) (999) (2,031) Interest income (-) (-) (55) (55) Interest expenses 1, (755) (10) (27) (792) Assets 129,096 42, , ,831 (115,547) (37,956) (93,281) (246,784) Liabilities 108,772 45,048-22, ,982 (102,930) (48,801) (-37,736) (113,995) Investments in non-current assets 246 1,220 1,701 3,167 (303) (100) (2,371) (2,774) Number of employees ,058 (915) (571) (421) (1,907) (Previous year s figures in parentheses.) 10

11 Consolidated cash flow statement to IFRS in EUR 000 Q1 Q1 2007/ /2007 Operating result +9,946 +7,581 Write-ups - - Depreciation/Amortisation +2,726 +2,031 Cash flow +12,672 +9,612 Increase/Decrease in inventories -17,335-11,670 Increase/Decrease in trade receivables +16, ,746 Increase/Decrease in other assets that do not fall under investing or financing activities -11,869-5,626 Increase/Decrease in current provisions -4,124-2,396 Increase/Decrease in trade payables -12,016-15,324 Increase/Decrease in other liabilities that do not fall under investing or financing activities ,570 Income tax payments -3,092-3,606 Cash inflows/outflows from operating activities -19,709-13,694 Interest income Incidental bank charges Interest expenses Cash inflows/outflows from current operating activities -1, Proceeds from the disposal of property, plant and equipment and intangible assets Purchases of investments in property, plant and equipment and intangible assets -3,167-2,774 Proceeds from the disposal of financial assets Cash outflows from investing activities -2,439-2,774 Raising/Repayment of financial liabilities +20, ,707 Cash inflows/outflows from financing activities +20, ,707 Movement in cash and cash equivalents -3, Cash and cash equivalents at the beginning of the fiscal year +17,786 +4,995 Cash and cash equivalents on 31 January +14,598 +4,283 11

12 Explanatory notes GERRY WEBER International AG is a parent company as defined in Section 290 of the German Commercial Code (HGB). Pursuant to Article 4 of Directive No. 1606/2002 issued by the European Parliament and Council dated 19 July 2002, the Company, as an issuer of publicly traded securities, is required to prepare consolidated financial statements in accordance with IFRS accounting rules adopted by the EU. Accordingly, the present consolidated interim financial statements for the period ended 31 January 2008, were produced in conformance with IFRS. All standards effective and mandatory as of 31 January 2008 have been applied. The financial statements for the first three months of fiscal 2007/2008 were prepared in accordance with IAS 34 (Interim Financial Reporting). The interim financial statements were not reviewed by the auditors. The accounting and valuation methods and the consolidation principles are basically the same as those applied to the consolidated financial statements for the year ended 31 October The present consolidated interim financial statements take account of the recommendations of DRS 16 (near final draft) of March Currency translation The functional currency of GERRY WEBER International AG is the euro. The financial statements of the consolidated Group companies prepared in foreign currencies are translated according to the concept of the functional currency in compliance with IAS 21 The Effects of Changes in Foreign Exchange Rates. Given that the consolidated Group companies primarily do business in the economic environment of their respective country, the functional currency is always identical with each company s local currency. Accordingly, assets and liabilities are translated at the closing rate, while income and expenses are translated at the average annual exchange rate. Exchange differences resulting from these different translation rates in the balance sheet and the income statement are treated on a neutral basis. Exchange differences resulting from the translation of equity capital at historical exchange rates are also treated on a neutral basis. Disclaimer This interim report contains forward-looking statements that are based on assumptions and/or estimates by the management of GERRY WEBER International AG. While it is assumed that these forward-looking statements are realistic, no guarantee can be given that these expectations will actually materialise. GERRY WEBER International AG Neulehenstraße 8 D Halle/Westphalia