MQ Holding AB Interim report

Transcription

1 MQ Holding AB Interim report Results on a par with last year, excluding non-recurring items MQ Group profits for the third quarter, excluding non-recurring items, are on a par with last year despite a market that remains demanding and campaign-driven. Sales fell during the quarter, but this was compensated for in terms of profit by a higher gross margin and very good cost control. A transition programme was launched during the spring focusing on both income and efficiency so as to further speed up the work towards change. Third quarter (March May 2018) Net sales amounted to SEK 413 million (424), down 2.6 per cent. Like-for-like sales declined 4.3 per cent (according to the Swedish Retail Institute Index, the market s comparable stores declined 1.4 per cent). The gross margin was 62.8 per cent (61.6). Operating profit was SEK 28 million (36), which corresponds to an operating margin of 6.7 per cent (8.4). Operating profit excluding non-recurring items was on a par with the previous year. Profit after tax for the period amounted to SEK 21 million (27), which equates to SEK 0.59 (0.77) per share after dilution. Cash flow from operating activities was SEK 27 million (4). Nine-month period (September May 2018) Net sales amounted to SEK 1,290 million (1,354), down 4.7 per cent. Like-for-like sales declined 6.0 per cent (according to HUI Research like-for-like sales for the market as a whole declined by 2.1 per cent). The gross margin was 58.3 per cent (58.2). Operating profit was SEK 59 million (91), which corresponds to an operating margin of 4.6 per cent (6.7). Profit after tax for the period amounted to SEK 44 million (69), which equates to SEK 1.26 (1.98) per share after dilution. Cash flow from operating activities was SEK 47 million (65). 1

2 Events during the third quarter The MQ store in Gallerian Stinsen, Sollentuna, closed according to plan. The MQ store in Hansagallerian, Malmö, was expanded by 155 square metres. The Joy stores in Nyköping, Farsta and Tornby Linköping were refurbished and the store in Luleå was moved to a new location. MQ s new proprietary brand, Visual Clothing Project, was launched. During the third quarter, the Residus brand was launched on MQ Shop Online. MQ s Purchasing and Range Department was restructured in order to increase flexibility, partly through a higher proportion of purchases during the current season. Events after the end of the reporting period Ingvar Larsson has been appointed the new President and CEO of the MQ Group. He will take up the post on 20 August

3 Comments by the CEO Following a weaker second quarter, during the third quarter the MQ Group has returned to the same level of profit as in the previous year, excluding nonrecurring items. This is despite lower sales during the quarter, where MQ s proprietary brands in the womenswear range are underperforming and account for the entire decline in sales. We have a clear focus on the gross margin and cost control, which compensates for the lower sales during the quarter. The positive development of the gross margin during the third quarter is, therefore, most certainly a sign of strength. A transition programme to further strengthen the high pace of change established in the MQ Group was launched during the spring. In the transition programme we are honing our organisation, processes and roles. Above all we are redirecting our efforts towards more of a fast-moving range. We are enhancing our ability to make changes quickly and buy more from nearby markets, and to make more purchases during the current season. This will make our purchasing more efficient, as well as enable us to adapt to demand more quickly and stay more up to date. We are also increasing our efforts to monitor and review our store network. Adjustments such as moving, store closure or store area reduction/expansion are facilitated with short-term leases. We are terminating existing leases on an ongoing basis so that we can renegotiate and reduce our costs. At the same time we can see interesting business opportunities even in the current market, and our measures give us the power to invest and focus. In MQ we are investing in the stores we can see are best suited to carry our store sales in the future. Digital shopping solutions, for customers to use independently or as a shop online complement in stores, strengthen our customer offering. New Head of Digital Sales and IT Director recruited to speed up the MQ Groups digital development. In Joy we can still see great interest among our target group in shopping in stores and receiving guidance and good service. Once again this quarter footfall has increased in Joy stores compared to last year. This will be my final interim report for the MQ Group. In a well-planned move focusing on stability and continuity, Ingvar Larsson will be taking over as the new President and CEO on 20 August this year. This will ensure that the Group keeps growing and moving forward at the desired pace. After five inspiring years as CEO, the time is now ripe for me to move on to pastures new. I would like to finish off my final CEO comments with a big thank you to the Board and all employees for their commitment and co-operation in helping to develop the MQ Group. Christina Ståhl President and CEO, MQ Holding AB 3

4 Group income and earnings Third quarter, March May 2018 Net sales amounted to SEK 413 million (424) during the quarter, down 2.6 per cent. The Group s like-forlike sales declined 4.3 per cent during the third quarter, compared with a market increase of 1.4 per cent in like-for-like sales. Gross profit was SEK 260 million (261), equivalent to a gross margin of 62.8 per cent (61.6). Other external costs, personnel expenses and other operating expenses for the quarter amounted to SEK 227 million (226). Excluding non-recurring costs of SEK 6 million related to restructuring, the Group has made underlying cost savings in operations. Operating profit during the quarter amounted to SEK 28 million (36), which corresponds to an operating margin of 6.7 per cent (8.4). Depreciation/amortisation according to plan amounted to SEK 7 million (7). Net financial items for the third quarter amounted to an expense of SEK 1 million (expense: 1). Profit after financial items was SEK 26 million (35). Profit for the period was SEK 21 million (27). Nine-month period, September May 2018 Net sales amounted to SEK 1,290 million (1,354) during the nine-month period, down 4.7 per cent. The Group s like-for-like sales for the period fell by 6.0 per cent, compared with the market decline of 2.1 per cent in like-for-like sales. Gross profit was SEK 753 million (788), equivalent to a gross margin of 58.3 per cent (58.2). Other external costs, personnel expenses and other operating expenses for the nine-month period amounted to SEK 680 million (688). Operating profit for the nine-month period was SEK 59 million (91), which corresponds to an operating margin of 4.6 per cent (6.7). Depreciation/amortisation according to plan amounted to SEK 21 million (22). Net financial items for the nine-month period were an expense of SEK 2 million (expense: 2). Profit after financial items was SEK 57 million (89). Profit for the period was SEK 44 million (69). Group key figures SEK m Sep-May Rolling 12 months June 17 May 18 Financial year Sep Aug Net sales ,290 1,354 1,758 1,821 Gross margin, % Operating profit Operating margin, % , Profit after financial items Profit for the period Earnings per share before dilution, SEK Earnings per share after dilution, SEK Number of stores at the end of the period

5 Business segment reporting MQ Holding owns and operates fashion stores and online shopping under two business areas, MQ and Joy. The acquisition of the unlisted company Joy Shop AB was completed on 2 May The acquisition is in line with the MQ Group s long-term strategy to generate growth and advance its position as a player in the fashion industry. Due to the acquisition, the internal follow-up will include separate financial information for each business area. The MQ Holding share has been listed on the NASDAQ OMX in Stockholm since 18 June Founded in 1957, MQ currently operates 121 stores in Sweden, as well as online shopping. MQ is Sweden s largest retailer of fashion brands today. Through a combination of proprietary and external brands, MQ offers high-fashion menswear and womenswear in attractive stores. Joy was founded in 1971 and currently operates 53 stores in Sweden as well as online shopping. Joy targets fashion-conscious women at midlife who desire excellent quality, fit and comfort. Customers are offered a well co-ordinated product range with an inspiring variety of textiles, colours, patterns and prints to create a personal and unique fashion style. Sales and earnings per segment for the third quarter 20 Segment Sales Share, % Operating profit Stores SEK 344 m 83% SEK 26 m 121 SEK 69 m 17% SEK 2 m 53 SEK 413 m SEK 28 m 174 Sales and earnings per segment for the nine-month period 20 Segment Sales Share, % Operating profit Stores SEK 1,092 m 85% SEK 69 m 121 SEK 198 m 15% SEK -10 m 53 SEK 1,290 m SEK 59 m 174 5

6 Net sales and operating profit per segment Sep-May Rolling 12 months June 17 May 18 Financial year Sep Aug Net sales and operating profit per segment (SEK m) Net sales MQ ,092 1,152 1,498 1,557 Joy Total net sales ,290 1,354 1,758 1,821 Operating profit MQ Joy Total operating profit

7 Third quarter, March May 2018 Net sales amounted to SEK 344 million (354) during the quarter, down 2.7 per cent. MQ s like-for-like sales declined 4.8 per cent during the third quarter, compared with a market increase of 1.4 per cent. Gross profit was SEK 213 million (214), equivalent to a gross margin of 62.0 per cent (60.5). Other external costs, personnel expenses and other operating expenses for the quarter amounted to SEK 184 million (181). Excluding non-recurring costs of SEK 6 million related to restructuring, MQ has underlying cost savings in operations. Depreciation/amortisation according to plan amounted to SEK 6 million (6). Operating profit during the quarter amounted to SEK 26 million (34), which corresponds to an operating margin of 7.4 per cent (9.6). Nine-month period, September May 2018 Net sales amounted to SEK 1,092 million (1,152) during the nine-month period, down 5.1 per cent. MQ s like-for-like sales for the period fell by 6.8 per cent, compared with the market decrease of 2.1 per cent in like-for-like sales. Gross profit was SEK 630 million (653), equivalent to a gross margin of 57.6 per cent (56.7). Other external costs, personnel expenses and other operating expenses for the period amounted to SEK 549 million (559). Depreciation/amortisation according to plan amounted to SEK 18 million (19). Operating profit for the ninemonth period was SEK 69 million (89), which corresponds to an operating margin of 6.3 per cent (7.7). 7

8 Third quarter, March May 2018 Net sales amounted to SEK 69 million (70) during the quarter, down 1.5 per cent. Joy s like-for-like sales declined 1.9 per cent during the third quarter, compared with a market increase of 1.4 per cent. Gross profit was SEK 46 million (47), equivalent to a gross margin of 67.0 per cent (66.9). Other external costs and personnel expenses for the quarter amounted to SEK 43 million (45). Depreciation/amortisation according to plan amounted to SEK 1 million (1). Operating profit during the quarter amounted to SEK 2 million (2), which corresponds to an operating margin of 3.0 per cent (2.1). Nine-month period, September May 2018 Net sales amounted to SEK 198 million (202) during the nine-month period, down 2.2 per cent. Joy s likefor-like sales for the period fell by 1.3 per cent, compared with the market decline of 2.1 per cent in like-for-like sales. Gross profit was SEK 123 million (135), equivalent to a gross margin of 62.3 per cent (66.5). Other external costs and personnel expenses for the period amounted to SEK 130 million (130). Depreciation/amortisation according to plan amounted to SEK 4 million (3). Operating loss for the nine-month period was SEK -10 million (+3), which corresponds to an operating margin of -5.1 per cent (+1.3). 8

9 Group cash flow and financial performance Cash flow The Group s cash flow from operating activities during the nine-month period amounted to SEK 47 million (65). The negative effect on cash flow compared with the previous year is primarily the result of the lower profit. Cash flow after investments amounted to SEK 24 million (39). Inventories On 2018, the value of the Group s inventories was SEK 320 million (306). In total, the composition of the inventories is deemed to be at a satisfactory level. Investments Investments totalling SEK 23 million (26) were made in the Group during the nine-month period, pertaining to investments in nine MQ stores and 21 Joy stores. Two new MQ stores and a new MQ outlet have been opened, two MQ stores have relocated to new premises, two stores have been remodelled and two stores have been expanded. Two Joy stores have been relocated and 19 Joy stores have been remodelled to a new store concept. Financing and liquidity On 2018, the Group s interest-bearing net debt totalled SEK 193 million, compared with SEK 194 million on the same date in the preceding year. At the end of the period, cash and cash equivalents totalled SEK 15 million (19). Interestbearing net debt/ebitda was 1.6 (1.3) for the 12- month period of June May Employees The average number of full-time employees in the Group for the 12-month period (June May 2018) was 786, compared with 785 in the yearearlier period. Risks and uncertainties The MQ Group s operations are exposed to a number of risks that are completely or partly beyond the company s control, but which could impact sales and earnings. The risks that the company is exposed to include economic trends, shifts in fashion as well as interest rate and currency risks. The MQ Group is dependent on consumer preferences with respect to trends, design and quality. The MQ Group makes conscious efforts to develop its trend monitoring, information systems, forecasts, supply chain management and to shorten lead times in the development of products to minimise the risks arising from shifts in fashion. The purchasing power of Swedish consumers is a prerequisite for retail growth. This is particularly important for growth in the higher price ranges with a high fashion content sold by specialised retailers and brand specialists. A change in Sweden s economic growth would probably impact the purchasing power of consumers and thus growth in the retail sector. Financial risks relate to fluctuations in the company s earnings and cash flow resulting from movements in exchange rates, interest rates, liquidity and credit risks. The Group s financial risks are managed by the Group s finance department, which is charged with identifying and minimising the risk of negative effects on earnings and improving the predictability of future earnings. For further information about financial instruments and risk management, refer to the Administration Report and Notes 25 and 26 of the Annual Report for the 2016/ financial year. Parent Company The Parent Company s net sales for the ninemonth period amounted to SEK 16 million (10) and its profit after financial items to SEK 59 million (58). 9

10 The Board of Directors and the CEO give their assurance that this interim report provides a fair overview of the Parent Company s and the Group s operations, financial position and performance, and also describes material risks and uncertainties facing the Parent Company and companies included in the Group. Gothenburg, 18 June 2018 Board of Directors MQ Holding AB Claes-Göran Sylvén Chairman of the Board Annika Rost Board Member Bengt Jaller Deputy Chairman Michael Olsson Board Member Arthur Engel Board Member Mernosh Saatchi Board Member Anna Engebretsen Board Member Christina Ståhl President and CEO Teleconference A teleconference will be held at 09:00 CET on 19 June for analysts, investors and the media. The presentation will also be webcast directly on To participate, please call +46 (0) Financial calendar Year-end report, fourth quarter, June 2018 August October 2018 Interim report, first quarter, September 2018 November December 2018 Interim report, second quarter, December 2018 February March 2019 Contact For further information, please contact: Christina Ståhl, President and CEO: +46 (0) Tony Siberg, Deputy CEO and CFO: +46 (0) This information is information that MQ Holding AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, on 19 June 2018 at 07:15 CET. MQ Holding AB St. Eriksgatan 5 Box SE Gothenburg, Sweden Corp. Reg. No This interim report has not been reviewed by the company s auditors. 10

11 Consolidated statement of earnings and other comprehensive income 11

12 Consolidated balance sheet Condensed consolidated balance sheet (SEK m) August ASSETS Non-current assets Intangible assets 1,272 1,274 1,273 Tangible assets Total non-current assets 1,343 1,344 1,341 Current assets Inventories Current receivables Cash and cash equivalents Total current assets TOTAL ASSETS 1,758 1,738 1,777 EQUITY AND LIABILITIES Equity 1,105 1,075 1,089 Interest-bearing long-term liabilities Non-interest-bearing long-term liabilities Interest-bearing current liabilities Non-interest-bearing current liabilities TOTAL EQUITY AND LIABILITIES 1,758 1,738 1,777 Statement of changes in equity Condensed specification of changes in the Group s equity (SEK m) Sep-May Financial year Sep Aug Equity, opening balance 1,089 1,078 1,078 Total comprehensive income Dividend EQUITY, CLOSING BALANCE 1,105 1,075 1,089 12

13 Consolidated cash-flow statement Condensed consolidated cash-flow statement (SEK m) Financial year Sep Aug Cash flow from operating activities before changes in working capital Changes in working capital Cash flow from operating activities Cash flow from investing activities Acquisition of intangible assets Acquisition of property, plant and equipment Investments in subsidiaries Cash flow after investing activities Financing activities Repayments Loans raised Dividend Utilisation of overdraft facility Cash flow from financing activities Cash flow for the period Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period The Group s key figures Sep-May Rolling 12 months June 17 May 18 Financial year Sep Aug Sales growth, % Sales growth, like-for-like, % Gross margin, % Operating profit, SEK m Operating margin, % , Profit after financial items Profit for the period Total depreciation/amortisation, SEK m Earnings per share before dilution, SEK Interest-bearing net debt, SEK m Interest-bearing net debt/ebitda, multiples Equity/assets ratio, % Equity, SEK m 1,105 1,075 1,105 1,075 1,105 1,089 Average number of outstanding shares 35,156,507 35,156,507 35,156,507 35,156,507 35,156,507 35,156,507 13

14 Shareholder structure Largest shareholders as of 2018 Name Number of shares Share capital, % Swedbank Robur Fonder 3,396, Jaller Klädcenter AB 3,062, Öresund, Investment AB 1,850, Engebretsen, Anna 1,843, Qviberg, Eva 1,418, Unionen 1,100, Försäkringsaktiebolaget, Avanza Pension 955, Ohlin, Astrid 771, Dimensional Fund Advisors 687, Qviberg, Jacob 664, Clients Account-Dcs 658, Qviberg, Mats 510, SSB Client Omnibus Ac Om07 (15 Pct) 510, Nilsson, Magnus Halvard Torsten 504, Swedbank Försäkring 353, Total 15 largest 18,287, Others 16,869, Total 35,156,

15 Parent Company income statement Parent Company income statement in summary (SEK m) Rolling 12 months June 17 May 18 Financial year Sep Aug Net sales Other operating income Total operating income Goods for resale Other external costs Personnel expenses Other operating expenses Depreciation/amortisation Operating profit Income from shares Group contributions Financial income Financial expenses Profit after financial items Tax on profit for the period PROFIT FOR THE PERIOD Parent Company balance sheet Parent Company balance sheet in summary (SEK m) August ASSETS Non-current assets Intangible assets Tangible assets Financial assets 1,156 1,156 1,156 Total non-current assets 1,156 1,156 1,156 Current assets Current receivables Cash and cash equivalents Total current assets TOTAL ASSETS 1,157 1,157 1,157 EQUITY AND LIABILITIES Equity Interest-bearing long-term liabilities Interest-bearing current liabilities Non-interest-bearing long-term liabilities Non-interest-bearing liabilities TOTAL EQUITY AND LIABILITIES 1,157 1,157 1,157 15

16 Reconciliation between IFRS and performance measures In this report, MQ presents alternative performance measures, which provide certain information that is not defined in accordance with IFRS. Executive Management believes that this information makes it easier for investors to analyse the Group s earnings trend and financial structure. Investors should consider this information to be a complement rather than a replacement of financial reporting in accordance with IFRS. Sep-May Rolling 12 months June 17 May 18 Financial year Sep Aug Gross margin Operating income Net sales ,290 1,354 1,758 1,821 Operating expenses Goods for resale Gross profit ,005 1,040 Gross margin, % To calculate the gross profit margin, gross profit is first calculated by subtracting the cost of goods for resale from net sales. Gross profit is then divided by net sales to obtain the gross profit margin. Gross profit margin therefore states the percentage of net sales that are converted into profit after cost of goods sold, and is impacted by such factors as pricing, the cost of raw materials and manufacturing, inventory impairment and exchange rate movements. Sep-May Rolling 12 months June 17 May 18 Financial year Sep Aug Operating margin Operating income Net sales ,290 1,354 1,758 1,821 Operating profit Operating profit Operating margin, % , Earnings before interest, taxes, depreciation and amortisation (EBITDA) Sep-May Rolling 12 months June 17 May 18 Financial year Sep Aug Operating profit (EBITA) Depreciation/amortisation Earnings before interest, taxes, depreciation and amortisation (EBITDA)

17 Interest-bearing net debt (SEK m) August Interest-bearing long-term liabilities Overdraft facilities Other interest-bearing current liabilities Interest-bearing liabilities Cash and cash equivalents Interest-bearing assets Net debt Net debt comprises interest-bearing liabilities less cash and cash equivalents and financial leases. EBITDA in the performance measure of Interest-bearing net debt/ebitda pertains to the most recent 12-month period. Equity/assets ratio August Equity 1,105 1,075 1,089 Total assets 1,758 1,738 1,777 Equity/assets ratio, % Equity consists of share capital, other contributed capital, reserves and profit brought forward, including the Group s profit for the year. Equity/assets ratio is calculated by dividing equity by total assets and is thus a measure of the percentage of assets that are financed by equity. Sales growth The Group s total sales for the period compared with the year-earlier period. Like-for-like sales All of the Group s sales via MQ, Joy or online in Sweden, with the exception of sales in new/closed stores. A new store becomes comparable one year after its opening. 17

18 Disclosures in accordance with IAS 34.16A are provided in the financial statements and the related notes, as well as in other parts of the interim report. Note 1 Accounting policies This condensed consolidated interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and applicable regulations of the Swedish Annual Accounts Act. The interim report for the Parent Company has been prepared in accordance with Chapter 9 of the Swedish Annual Accounts Act, Interim Financial Reporting. For the Group and the Parent Company, the same accounting policies and measurement principles have been applied as in the most recent Annual Report. IFRS 15 came into force on 1 January An analysis has been conducted and the effects are limited. IFRS 16 will have an effect on the Group s financial position since all leased assets, including rent for premises, will be recognised as assets and liabilities in the balance sheet. IFRS 16 will be applied for the company from 1 September 2019; an analysis of the effects has begun. Note 2 Fair value for financial instruments Derivative instruments are measured at fair value, which amounted to SEK 20.3 million at The fair value of currency contracts (currency forward contracts) is determined based on valuations made by credit institutions, if such figures are available. If they are not available, fair value is calculated by discounting the difference between the agreed forward rate and the forward rate that can be effected on the balance sheet date for the remaining period of the contract. For other financial instruments, carrying amounts reflect their fair value. According to IFRS 7, financial instruments must be categorised into three levels based on the input data used to measure fair value. The first level relates to financial instruments quoted in an active market. The second level is for financial instruments that are not quoted in an active market but for which the market value can be determined using other market data. The last level relates to valuations where no quoted market value or other market data is available. Techniques for obtaining a valuation for level three mainly involve discounting cash flows. All of MQ s derivatives belong to the second level. Note 3 Pledged assets and contingent liabilities (SEK m) Aug Pledged assets Shares in subsidiaries 1,156 1,156 1,156 Contingent liabilities Guarantees related to subsidiaries completion of leasing contracts Guarantees related to MQ Retail AB Total contingent liabilities Note 4 Events after the end of the reporting period Ingvar Larsson has been appointed the new President and CEO of the MQ Group. He will take up the post on 20 August Note 5 Related-party transactions There were no material related-party transactions during the period. 18

19 MQ Holding AB owns and operates fashion stores under two business areas: MQ is Sweden s largest retailer of fashion brands today. Through a combination of proprietary and external brands, MQ offers high-fashion menswear and womenswear in attractive stores. Joy targets fashion-conscious women at midlife who desire excellent quality, fit and comfort. The two business areas currently comprise a total of 174 stores as well as online shopping. The MQ Holding share has been listed on the NASDAQ OMX in Stockholm since 18 June For more information, see 19