REPORT ON THE FIRST HALF OF 2015

Transcription

1 REPORT ON THE FIRST HALF OF 2015

2 KEY FIGURES Income statement H H Change absolute Change relative Revenue million % EBITDA million % EBITDA margin 1.7% 5.0% -3.3 percentage points EBIT million % EBIT margin -1.3% 2.1% -3.4 percentage points Consolidated net profit/loss million % Per-share figures H H Change absolute Change relative Earnings per share % Financial position H Q Change absolute Change relative Total assets million % Equity million % Equity ratio 38.7% 43.3% -4.6 percentage points Debt/equity ratio Cash flows H H Change absolute Change relative Cash flows from operating activities (net) million % Cash flows from investing activities million % Free cash flow million % Employees H H Change absolute Change relative Employees as at 30 June Number 4,182 4, % Stores H H Change absolute Change relative Number of stores as at 30 June Number % FINANCIAL CALENDAR Entwurf 12 November 2015 Report on the third quarter of August 2015, 4:02 nachm.

3 REPORT ON THE FIRST HALF OF INTERIM GROUP MANAGEMENT REPORT AS AT 30 JUNE 2015 HIGHLIGHTS: H1 revenue up by a further 4.9% following a very positive base from the previous year Significant 7.4% increase in revenue generated in Q Q2 revenues up 2.2% on a like-for-like basis ADLER continues to significantly outpace the industry Ramp-up expenses for acquisition of Kressner and Mömlingen stores weigh down earnings as expected 2015 forecast confirmed ECONOMIC SITUATION & BUSINESS DEVELOPMENT According to the International Monetary Fund (IMF), economic recovery in the eurozone continued apace during the period under review. In particular a generally stronger domestic demand and slight increase in inflation had a positive effect. As a consequence, the IMF revised its growth forecasts for many eurozone countries upwards in its most recent report. For Germany, Adler Modemärkte AG s most important market, growth is forecasted to reach 1.6%. The consumer climate report by the Nuremberg-based market research institution GfK was accordingly positive for Germany: although German consumers economic expectations fell in light of the ongoing Greece crisis, income expectations and propensity to spend remained at a very high level nonetheless. By contrast, in Austria weak domestic economic data caused a more pessimistic sentiment. According to the GfK, economic expectations there fell, as did the propensity to spend. The May 2015 KOF economic barometer, an early indicator for the development of the Swiss economy, gives reason to believe that there is no economic recovery in sight for Switzerland in the near future. THE ENVIRONMENT FOR THE GERMAN TEXTILE RETAIL INDUSTRY In the first half of 2015, revenue in the German textile retail sector fell by 2% year on year according to a survey by TW-Testclub, the German bricks-and-mortar retailers most popular test panel. Following a weak Q1 2015, which closed 5% lower, revenue declined in the months of April and May as well. June was the first month since September 2014 in which the German textile retail sector reported increasing revenue (+3%). According to this survey, the increase in June was also attributable to significant price reductions. Positive influences were that according to TW-Testclub, customer numbers remained stable and that retailers were able to increase the sales value per customer by E13 to nearly E110 on average as compared to June The textile retail sector was therefore only able to profit from the positive consumer sentiment in Germany to a limited degree. Instead of spending their money on fashion, consumers prefer to invest in travel, technology and food and drink.

4 4 REPORT ON THE FIRST HALF OF 2015 DEVELOPMENT & ANALYSIS OF REVENUE In the first half of 2015, as in previous quarters, ADLER deviated significantly from the negative industry trend. While the German textile retail sector recorded a 2% decrease in revenue in the first six months of 2015, ADLER improved its revenue by 4.9%; an even more significant increase (7.4%) in revenue was achieved in the second quarter. This development was particularly encouraging in light of the fact that the first half of 2014 had already been very strong. Adler Modemärkte AG increased its total revenue (IFRSs) by 4.9% from E255.9 million to E268.4 million in the first half of This meant that ADLER was able to continue growing as it had in prior years. On a like-for-like basis, revenue in first half of 2015 was down by approximately 0.7% as compared to the previous year s figure. In the first half of 2015, ADLER integrated a total of ten new stores into its network, all of which are in Germany. Upon transfer in mid-january, eight stores of Bekleidungshaus Kressner GmbH & Co. KG were re-branded and will continue operations under the new ADLER Orange brand. The former Kressner store in Dillenburg was sold to Steilmann-Boecker Fashion Point GmbH & Co. KG. Moreover, one store within the hefa Moden chain in Mömlingen (Miltenberg administrative district) was rebranded as at 31 January 2015, and is continuing operations under the ADLER brand with an encouraging level of response. A hefa Moden store in Lollar was acquired as at 29 June One store in Graz-Gösting, Austria, was closed during the reporting period. In addition, the ongoing programme to modernise older existing ADLER stores continued at full pace. Six stores were extensively renovated under this programme. The total number of stores in operation as at the end of the first half of 2015 is 179. FINANCIAL PERFORMANCE In addition to the lower level of like-for-like revenue compared with the previous year, earnings were weighed down by costs in connection with integrating the newly acquired Bekleidungshaus Kressner GmbH & Co. KG stores and the hefa store in Mömlingen in the first half of the year. The ADLER Group s cost of materials rose from E115.7 million to E125.3 million, reflecting in particular the increased cost of goods sold for the ten newly acquired Kressner and hefa stores. The higher cost of materials is also due to the effect of write-downs on inventory. Gross profit increased from E140.2 million to E143.1 million. The gross profit on goods sold fell from 54.8% to 53.3%. Excluding ADLER Orange, the gross profit on goods sold merely fell from 54.8% to 53.9%. Personnel expenses increased in the first half of 2015 by 9.8% from E48.3 million in the previous year to E53.0 million. While the ADLER stores reported only regular increases in wages, the increase was due primarily to the acquisitions of the Kressner and hefa stores. Restructuring costs in respect of Kressner personnel alone account for E1.1 million in extraordinary expenditure, in the form of severance payments and provisions. Other operating expenses increased from E83.4 million in the previous year to E89.2 million in the reporting period of which E4.1 million was attributable to ADLER Orange. Marketing expenses and rents increased by E3.6 million, of which E0.9 million was attributable to ADLER Orange for marketing activities to increase revenues and customer frequency and E1.2 million, respectively. However, a slight decrease would have been recorded were it not for ADLER Orange. Maintenance and modernisation expenses increased by E1.0 million.

5 REPORT ON THE FIRST HALF OF During the period under review, EBITDA fell from E12.9 million in the previous year to E4.5 million. Depreciation and amortisation in the first six months of 2015 amounted to E8.0 million, just slightly above the prior-year figure of E7.6 million. E0.3 million of that amount was attributable to Kressner. Earnings before interest and taxes (EBIT) decreased from E5.3 million in the previous year to E-3.4 million. Net finance costs amounted to E2.4 million as compared to E2.5 million in the previous year. Earnings before taxes (EBT) fell from E2.9 million in the first half of 2014 to E-5.8 million. ADLER reports a consolidated net loss for the first half of 2015 amounting to E5.3 million as compared to a consolidated net profit of E1.4 million in the same period of the previous year. The adjusted earnings per share amounted to E-0.28 (based on 18,510,000 no-par value shares). Earnings per share totalled E0.08 in the comparable period. QUARTERLY COMPARISON In the second quarter of 2015, ADLER achieved a significant 7.4% increase in revenue to E153.3 million (Q2 2014: E142.7 million). This increase amounted to 2.2% on a like-for-like basis following a very positive base from the second quarter in The ADLER Group s cost of materials increased from E60.8 million to E67.1 million. This reflects in particular the increased cost of goods sold for the in total ten newly acquired Kressner and hefa stores. In addition, the cost of materials was affected by write-downs on inventories which had a slightly less favourable age structure than in the previous year. Gross profit improved from E82.0 million to E86.2 million. The gross profit on goods sold fell from 57.4% to 56.2%. Personnel expenses rose by 6.6% from E24.0 million in the previous year to E25.6 million in the second quarter of Other operating expenses increased during the period under review by 7.4% from E42.0 million in the previous year to E45.1 million. This development was attributable in particular to increased marketing expenses. EBITDA decreased from E18.5 million in the previous year to E17.5 million in the reporting period. Depreciation and amortisation amounted to E4.0 million, just slightly above the prior-year figure of E3.9 million. E0.1 million of that amount was attributable to Kressner. Earnings before interest and taxes (EBIT) decreased from E14.6 million in the previous year to E13.5 million. Net finance costs amounted to E1.2 million as compared to E1.3 million in the previous year. FINANCIAL POSITION & CASH FLOWS The ADLER Group s total assets as at 30 June 2015 amounted to E235.1 million; this represents a E9.2 million decrease as compared to total assets as at 31 December 2014 (E244.3 million). Inventories declined by E0.8 million to E74.8 million despite the acquisition of the new stores (31 December 2014: E75.6 million). Intangible assets increased from E6.8 million (31 December 2014) to E7.1 million (30 June 2015) due to goodwill from the acquisitions. Property, plant and equipment increased by E6.7 million

6 6 REPORT ON THE FIRST HALF OF 2015 compared to the end of 2014 to E79.2 million. Kressner accounts for E2.8 million of this, while the remainder is due to the acquisition of a building in St. Pölten, Austria, the modernisation of existing stores and the acquisition of other office equipment for the stores. Cash and cash equivalents fell from E69.7 million as at 31 December 2014 to E48.6 million due to seasonal factors. This significant reduction is due to the acquisition costs for the new stores, to repaying the credit liabilities of the Kressner companies, to the lower level of revenue, to the higher dividend payment compared to previous year and to the consolidated net loss for the period. On the equity and liabilities side of the statement of financial position, equity fell from E105.6 million as at 31 December 2014 to E91.0 million as at 30 June 2015, mainly due to the dividend payment of E 9.3 Mio. In the previous year, equity had changed only slightly, because the seasonal increase in net accumulated losses had been offset by an increase in capital reserves due to the sale of treasury shares in around the same amount. The equity ratio fell from 43.3% at the end of the 2014 financial year to 38.7% as at 30 June 2015 as a result of the acquisitions. Due to the renewal of two leases and contract modifications, finance lease obligations increased from E54.0 million as at the end of 2014 to E56.1 million as at 30 June Trade payables amounted to E31.7 million; this amount was unchanged as compared to 31 December Due to the expansion, current and non-current other provisions increased overall from E5.6 million to E6.3 million. Financial liabilities increased from E13.4 million to E17.2 million. Income tax liabilities fell by E2.4 million to E0.2 million. The debt/equity ratio increased from 1.31 as at 31 December 2014 to 1.58 as at 30 June ADLER s working capital (inventories plus trade receivables less trade payables) is based on the pure retail business mainly from inventories less accounts payable to suppliers. Despite the expansion, working capital rose from E44.1 million as at 31 December 2014 to E43.6 million as at 30 June CASH FLOW & CASH FLOW MANAGEMENT Net cash flows from operating activities fell by E8.9 million to E4.8 million (H1 2014: E13.7 million) during the period under review as a result of the consolidated net loss. Cash outflows from investing activities amounted to E11.0 million during the period under review (H1 2014: E6.3 million outflow). Of that amount, approximately E4.5 million was attributable to the Kressner acquisition and the purchase of the hefa store in Mömlingen and E1.0 million was attributable to the acquisition of a building in St. Pölten, Austria. In addition, significant costs were incurred in connection with major modernisation measures at existing stores. Free cash flow amounted to E-6.3 million and was thus significantly lower than the previous year s E7.5 million. Net cash flows from financing activities amounted to E-14.8 million in H (H1 2014: E-4.6 million) and include cash outflows in relation to finance leases. The previous year s figure of E-4.6 million included inflows from the sale of treasury shares amounting to E8.9 million. Cash decreased accordingly by a total of E21.0 million in the period under review.

7 REPORT ON THE FIRST HALF OF INVESTMENT The ADLER Group s investments during the first half of 2015 totalled E7.0 million (H1 2014: E6.5 million). Of that amount, E1.0 million was attributable to the acquisition of a building in St. Pölten, E6.3 million (H1 2014: E3.3 million) to property, plant and equipment (operating and office equipment) and E0.8 million (H E0.9 million) to intangible assets. Investments in property, plant and equipment included costs incurred in the course of store modernisations in Alzey, Brandenburg, Holzwickede, Halstenbek, Straubing and Haibach. The Gera store was relocated to new premises during the first quarter. EMPLOYEES As at 30 June 2015, the ADLER Group had a total of 4,182 employees (previous year: 4,129), representing approximately 1.3% more employees than in the same period of the previous year. This increase is exclusively due to the acquisition of Bekleidungshaus Kressner GmbH & Co. KG, from which eight stores are continuing operations under the new ADLER Orange sub-brand as at the end of the quarter, and due to the acquisition of the Mömlingen store. The Kressner acquisition alone added 276 employees to the Group s headcount; as at 30 June it had been just 177. The number of FTEs as at the end of the quarter was exactly 2,795.1 compared with 2,653.6 one year ago. This represents a significant increase of 5.3%. ADLER traditionally takes over social responsibility for young people. As at 30 June 2015, the Company employed a total of exactly 283 trainees and interns (across all apprenticeship years), including 13 at Kressner. In the same period of the previous year, ADLER employed 242 young women and men. This corresponds to a substantial 16.9% increase as compared to the prior-year period. SIGNIFICANT EVENTS DURING THE REPORTING PERIOD Pursuant to a purchase agreement dated 17 December 2014, Adler Modemärkte AG acquired the shares in Bekleidungshaus Kressner GmbH and Bekleidungshaus Kressner GmbH & Co. KG. The shares were transferred on 12 and 14 January 2015, respectively. The companies headquarters were relocated to Haibach and the companies renamed to Adler Orange Verwaltung GmbH and Adler Orange GmbH & Co. KG upon entry in the commercial register of the Local Court (Amtsgericht) of Aschaffenburg on 13 and 17 March 2015, respectively. ADLER sold the Kressner store in Dillenburg (Hesse) to Steilmann-Boecker Fashion Point GmbH & Co. KG on 1 March The remaining eight stores were re-branded and have since been operating under the new ADLER Orange brand concept. In line with Kressner s previous product range, ADLER Orange is positioned as a somewhat higher-end fashion retailer, offering a larger proportion of well-known external brands. In addition, ADLER acquired two stores from hefa-moden Heinrich Faust GmbH & Co. KG in the course of an asset deal: the Mömlingen store as at 31 January 2015 and the Lollar store as at 29 June There were no other significant events during the reporting period.

8 8 REPORT ON THE FIRST HALF OF 2015 RISK REPORT Opportunities and risks may impact business development positively or negatively. ADLER employs a proven risk management and control system to identify in advance and effectively manage the relevant opportunities and risks. ADLER s risk management is an integral part of all of the Group s decisions and business processes and thus supports the long-term protection of our Company s future success. Against this background, the Group risks are finite and manageable. Currently, there are no material risks that jeopardise the Group s long-term financial position, financial performance or cash flows. We have detailed the specific risks and opportunities that could have material long-term effects on our financial position, financial performance or cash flows, as well as the structure of ADLER s risk management system; see pages 51 to 54 of our report on the 2014 financial year. REPORT ON EXPECTED DEVELOPMENTS & OVERALL ASSERTION Based on the development of revenue in the first six months of 2015, the Company continues to consider growth in the medium single-digit percentage range possible for financial year This is also indicated by the fact that overall ADLER s performance slightly outpaced that of its competitors during the reporting period. The Company s comments on earnings before interest, taxes, depreciation and amortisation (EBITDA) remain unchanged from the 2014 Annual Report dated 19 March Due to prepayments and expenses for integrating the Kressner stores acquired, we expect a temporary reduction in EBITDA, or at best stagnation at the high level achieved previously. In the medium term, however, the Executive Board expects the expansion measures currently being undertaken to strengthen the Company and to lead to renewed profitable growth. The forecast is also based on the assumptions that the general economic trend will lie within expectations and that the measures to increase gross profit will continue to make a positive impact during the further course of the year. Furthermore, the Company expects the economic environment in which the Adler stores operate to remain stable and that there will be no declines in demand. EVENTS AFTER THE END OF THE REPORTING PERIOD Between the end of the reporting period and the publication of this interim financial report, there were no material events affecting the ADLER Group.

9 REPORT ON THE FIRST HALF OF ADLER S SHARE PRICE PERFORMANCE ADLER s share price fell 11% in the second quarter of 2015 against the backdrop of a volatile capital market environment and ongoing discussions about future economic development in Europe. At the same time, the share prices of textile retailers are suffering in a difficult industry environment. ADLER s share price trended sideways at the beginning of the second quarter, moving between E12.00 and E The share price fell after publication of the earnings figures on 12 May 2015 for the first quarter, which given the seasonal nature of the industry is typically a weaker-earning quarter for ADLER and was furthermore weighed down by the costs of integrating the recently acquired Kressner and hefa stores. The shares ultimately levelled off at around E In the second half of 2015, ADLER s share price declined by 24%. On 30 June 2015, ADLER shares closed at E10.25, corresponding to a market capitalisation of E189.7 million. All of the management s proposed resolutions were adopted by a wide majority at Adler Modemärkte AG s Annual General Meeting in Aschaffenburg on 13 May The Annual General Meeting agreed with management s proposal and resolved to distribute a dividend of E0.50 per share. This corresponds to an 11% dividend increase as compared to the previous year. During the second quarter, the management also continued its investor relations activities in order to inform investors, financial analysts and business media outlets about the Company s performance. Five research firms are currently monitoring and analysing ADLER shares on a regular basis.

10 10 REPORT ON THE FIRST HALF OF 2015 CONSOLIDATED INCOME STATEMENT CONSOLIDATED INCOME STATEMENT FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2015 k 01/01-30/06/ /01-30/06/2014 Revenue 268, ,887 Other operating income 3,648 4,404 Cost of materials -125, ,700 Personnel expenses -52,987-48,274 Other operating expenses -89,221-83,428 EBITDA 4,525 12,889 Depreciation, amortisation and write-downs -7,968-7,555 EBIT -3,443 5,334 Other interest and similar income Interest and similar expenses -2,415-2,529 Net finance costs -2,392-2,473 Net income from operations -5,835 2,861 Income taxes 576-1,476 Consolidated net profit (+)/loss (-) -5,259 1,385 of which attributable to shareholders of Adler Modemärkte AG -5,259 1,385 Earnings per share* (continuing operations) Basic in E Diluted in E *Earnings per share were calculated on the basis of the weighted average of existing shares in the period from 1 January 2015 to 30 June 2015 in the amount of 18,510,000 shares. 18,446,163 shares were taken into account in the previous year from 1 January 2014 to 30 June 2014.

11 REPORT ON THE FIRST HALF OF CONSOLIDATED INCOME STATEMENT CONSOLIDATED INCOME STATEMENT FOR THE PERIOD FROM 1 APRIL TO 30 JUNE 2015 k 01/04-30/06/ /04-30/06/2014 Revenue 153, ,721 Other operating income 2,073 2,592 Cost of materials -67,118-60,822 Personnel expenses -25,632-24,035 Other operating expenses -45,103-41,992 EBITDA 17,515 18,464 Depreciation, amortisation and write-downs -4,003-3,889 EBIT 13,512 14,575 Other interest and similar income Interest and similar expenses -1,198-1,283 Net finance costs -1,187-1,253 Net income from operations 12,325 13,322 Income taxes -4,065-3,749 Consolidated net profit (+)/loss (-) 8,260 9,573 of which attributable to shareholders of Adler Modemärkte AG 8,260 9,573 Earnings per share* (continuing operations) Basic in E Diluted in E *Earnings per share were calculated on the basis of the weighted average of existing shares in the period from 1 April 2015 to 30 June 2015 in the amount of 18,510,000 shares. 18,510,000 shares were taken into account in the previous year from 1 April 2014 to 30 June 2014.

12 12 REPORT ON THE FIRST HALF OF 2015 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2015 k 01/01-30/06/ /01-30/06/2014 Consolidated net profit (+)/loss (-) -5,259 1,385 Currency translation gains from foreign subsidiaries Remeasurement of defined benefit pension entitlements and similar obligations 0 0 Deferred taxes 0 0 Items that will not be recycled to the income statement going forward Change in fair value of available-for-sale financial instruments Deferred taxes 0 0 Items that may subsequently be recycled to the income statement Other comprehensive income Consolidated total comprehensive income -5,416 1,393

13 REPORT ON THE FIRST HALF OF CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD FROM 1 APRIL TO 30 JUNE 2015 k 01/04-30/06/ /04-30/06/2014 Consolidated net profit (+)/loss (-) 8,260 9,573 Currency translation gains from foreign subsidiaries -6-3 Remeasurement of defined benefit pension entitlements and similar obligations 0 0 Deferred taxes 0 0 Items that will not be recycled to the income statement going forward -6-3 Change in fair value of available-for-sale financial instruments Deferred taxes 0 0 Items that may subsequently be recycled to the income statement Other comprehensive income Consolidated total comprehensive income 8,248 9,581

14 14 REPORT ON THE FIRST HALF OF 2015 CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 k 30/06/ /12/2014 Non-current assets Intangible assets 7,074 6,760 Property, plant and equipment 79,162 72,483 Investment property 1,525 1,525 Other non-current receivables and assets Deferred tax assets 12,784 11,842 Total non-current assets 100,896 93,072 Current assets Inventories 74,785 75,550 Trade receivables Other current receivables and assets 9,979 5,536 Available-for-sale financial assets Cash and cash equivalents 48,631 69,656 Total current assets 134, ,182 Total ASSETS 235, ,254

15 REPORT ON THE FIRST HALF OF k 30/06/ /12/2014 EQUITY Subscribed capital 18,510 18,510 Capital reserves 127, ,408 Accumulated other comprehensive income -2,886-2,279 Net accumulated losses -52,073-37,559 Total equity 90, ,630 LIABILITIES Non-current liabilities Provisions for pensions and similar obligations 6,971 7,147 Other non-current provisions 1,476 1,466 Non-current financial liabilities 3,055 3,217 Non-current finance lease obligations 49,426 47,720 Other non-current liabilities 4,171 3,963 Deferred tax liabilities Total non-current liabilities 65,189 63,533 Current liabilities Other current provisions 4,841 4,153 Current financial liabilities 14,188 10,171 Current finance lease obligations 6,677 6,310 Trade payables 31,691 31,681 Other current liabilities 21,308 20,356 Current income tax liabilities 221 2,420 Total current liabilities 78,926 75,091 Total liabilities 144, ,624 Total EQUITY and LIABILITIES 235, ,254

16 16 REPORT ON THE FIRST HALF OF 2015 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2015 k Subscribed capital Capital reserves Accumulated other comprehensive income Net accumulated losses Total equity Securities Currency translation Other changes* As at 1 Jan , , ,735-37, ,630 Sale of shares Dividend payment ,255-9,255 Total transactions with shareholders ,255-9,255 Consolidated loss for the period ,259-5,259 Other comprehensive income Consolidated total comprehensive income ,259-5,416 As at 30 Jun , , ,735-52,073 90,959 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2014 k Subscribed capital Capital reserves Accumulated other comprehensive income Net accumulated losses Total equity Securities Currency translation Other changes* As at 1 Jan , , ,634-43,376 92,026 Sale of shares 889 7, ,888 Dividend payment ,330-8,330 Total transactions with shareholders 889 7, , Consolidated net profit for the year ,385 1,385 Other comprehensive income Consolidated total comprehensive income ,385 1,393 As at 30 Jun , , ,634-50,321 93,977 *Other changes relate to actuarial gains and losses.

17 REPORT ON THE FIRST HALF OF CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2015 k 01/01-30/06/ /01-30/06/2014 Consolidated net profit (+)/loss (-) before tax -5,835 2,861 (+) Depreciation of property, plant and equipment and amortisation of intangible assets 7,968 7,555 Increase (+)/decrease (-) in pension provisions Gains (-)/losses (+) from the sale of non-current assets Gains (-)/losses (+) from currency translation Other non-cash expenses (+)/income (-) 1,538 7,333 Net interest income 2,392 2,473 Interest income Interest expense Income taxes paid -3,715-3,615 Increase (-)/decrease (+) in inventories 4,181 3,600 Increase (-)/ decrease (+) of trade receivables and other receivables -1, Increase (+)/decrease (-) of trade payables, other liabilities and other provisions -2,125-6,356 Increase (+)/decrease (-) in other items of the statement of financial position 2, Cash from (+)/used (-) in operating activities (net cash flow) 4,764 13,720 Proceeds from disposals of non-current assets Payments for investments in non-current assets -7,276-6,490 Payments for company acquisitions (net less cash received) -3,877 0 Cash from (+)/used (-) in investing activities -11,018-6,265 Free cash flow -6,254 7,455 Payments in connection with the repayment of loan liabilities Proceeds from sale of treasury shares 0 8,888 Dividend distribution -9,255-8,330 Payments in connection with finance lease liabilities -5,364-5,023 Cash from (+)/used (-) in financing activities -14,772-4,614 Net decrease (-)/increase (+) in cash and cash equivalents -21,026 2,841 Cash and cash equivalents at beginning of period 69,656 54,526 Cash and cash equivalents at end of period 48,630 57,367 Net decrease (-)/increase (+) in cash -21,026 2,841

18 18 CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2015 I. PRELIMINARY REMARKS Adler Modemärkte AG is a corporation (Kapitalgesellschaft) in accordance with German law with its registered office at Industriestraße Ost 1-7, Haibach, Federal Republic of Germany. The relevant registration court is located in Aschaffenburg (registered under Number HRB 11581). The ADLER Group (Adler Modemärkte AG and its subsidiaries) is engaged in apparel retailing and operates specialist clothing stores in Germany, Luxembourg, Austria and Switzerland. Under the trade name ADLER, the Group operates specialist clothing stores either on a stand-alone basis or as part of specialist store or shopping centres. It also operates specialist clothing stores together with other retailers at locations operated jointly. The range of goods offered by the ADLER stores includes womenswear, menswear and kidswear. The euro (E) is both the reporting currency and the functional currency of the ADLER Group. Unless stated otherwise, the figures in the notes to the consolidated financial statements are quoted in thousands of euros (E 000). In its role as the ADLER Group s holding company, Adler Modemärkte AG assumes Group-wide responsibilities for all of its subsidiaries. In particular, these include procuring goods, marketing, providing IT infrastructure, financial accounting, audits, controlling and legal. As of 25 April 2013, the ultimate controlling company is Steilmann Holding AG, Bergkamen. It indirectly holds the majority of the shares in the holding company, which it controls together with Excalibur I S.à r.l., Luxembourg, and ADLER s principal shareholder, S&E Kapital GmbH, Bergkamen. II. NOTES ON THE BASES AND METHODS EMPLOYED IN THE CONSOLIDATED FINANCI AL STATEMENTS ACCOUNTING POLICIES The consolidated financial statements of Adler Modemärkte AG were prepared in accordance with the requirements of the International Accounting Standards Board (IASB), London, in conformity with International Financial Reporting Standards (IFRSs), as adopted by the EU. The interpretations issued by the IFRS Interpretations Committee (formerly the International Financial Reporting Interpretations Committee and the Standing Interpretations Committee) were also applied. Accordingly, these consolidated interim financial statements as at 30 June 2015 were prepared in accordance with IAS 34 Interim Financial Reporting. Depreciation and amortisation, additions to provisions for pensions and interest payments are recognised as an expense in the period to which they relate during the year. Income and expenses in connection with taxes on income were determined on the basis of actual tax calculations.

19 CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 19 Those International Financial Reporting Standards (IFRSs) were applied that had become mandatory by the end of the reporting period on 30 June There was no early adoption of standards whose application had not yet become mandatory as at 30 June The notes to the 2014 consolidated financial statements apply accordingly in particular with respect to the significant accounting policies adopted. GROUP OF CONSOLIDATED COMPANIES/SHAREHOLDINGS The consolidated financial statements include Adler Modemärkte AG as well as five German and three foreign subsidiaries. These subsidiaries are listed in the table below. Name, registered office Shareholding in % Currency Subscribed capital / limited partnership capital in local currency in 000 Adler Modemärkte Gesellschaft m.b.h., Ansfelden, Austria 100 E 1,500 ADLER Mode S.A., Foetz, Luxembourg 100 E 31 Advers GmbH, Haibach 100 E 25 Adler Mode GmbH, Haibach 100 E 25 Adler Mode AG Schweiz, Zug, Switzerland 100 CHF 100 Adler Orange GmbH & Co. KG, Haibach 100 E 3,004 Adler Orange Verwaltung GmbH, Haibach 100 E 1,040 A-Team Fashion GmbH, Munich 100 E 25 Due to the fact that the Group holds 100% of shares in the subsidiaries, there are no minority (non-controlling) interests. ALASKA GmbH & Co. KG, Munich, in which the Group holds no interest, has also been included in the consolidated financial statements as a structured entity in accordance with IFRS 10 on the basis of a rental agreement with Adler Modemärkte AG, Haibach (relating to an administration building). There were changes in the group of consolidated companies in the first half of (see III. 4. Company Acquisitions) III. OTHER NOTES 1. SEASONAL EFFECTS The Group s revenue is subject to seasonal fluctuations. For example, revenue and earnings in the second half of the year, particularly in the fourth quarter, are higher than in the other quarters due to the sale of winter merchandise with a higher average selling price for each product. 2. EARNINGS PER SHARE There were 18,510,000 existing shares during the period under review. The weighted average of existing shares amounted to 18,510,000 shares (H1 2014: 18,446,163 shares). Earnings per share amounted to E-0.28 (H1 2014: E0.08). Shares bought back during a period are taken into account on a pro-rated basis for the period in which they are in circulation. There are no dilutive effects at the present time.

20 20 CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. DIVIDEND In May, a dividend payment of E9,255 thousand was made to the shareholders of Adler Modemärkte AG. This corresponds to a dividend of E0.50 per share. 4. COMPANY ACQUISITIONS Pursuant to a purchase agreement dated 17 December 2014, Adler Modemärkte AG, Haibach, acquired the shares in Bekleidungshaus Kressner GmbH, Dillenburg, and the limited partner s interests in Bekleidungshaus Kressner GmbH & Co. KG, Wissen, by way of a share deal. Following the approval of the anti-trust authorities, the shares in Bekleidungshaus Kressner GmbH were transferred on 12 January 2015; the limited partner s interests in Bekleidungshaus Kressner GmbH & Co. KG were transferred on 14 January The lease agreement with one store was terminated as at 31 December Under an asset deal, another store was sold to Steilmann-Boecker Fashion Point GmbH & Co. KG as at 1 March Bekleidungshaus Kressner GmbH is the general partner of Bekleidungshaus Kressner GmbH & Co. KG. The companies headquarters were relocated to Haibach and the companies renamed to Adler Orange Verwaltung GmbH and Adler Orange GmbH & Co. KG upon entry in the commercial register of the Local Court (Amtsgericht) of Aschaffenburg on 13 and 17 March 2015, respectively. The measurement of the transactions is provisional. The fair value of the assets and liabilities acquired has not yet been determined in full. Hence, adjustments to the assets and liabilities recognised in the consolidated financial statements and, consequently, to the calculated goodwill may still be made within the one-year measurement period stipulated in IFRS Given a purchase price of E4,000 thousand, goodwill currently amounts to E417 thousand. The acquired assets include mainly non-current assets of E2.6 million, inventories of E4.7 million and receivables of E2.2 million. Liabilities are at E6.7 thereof E3.1 million liabilities to banks, and E3.6 million provisions as well as trade and other liabilities. In the second quarter of 2015, ADLER Orange achieved sales of E11,9 million. Earning before tax including restructuring cost was at E-3 million. During the financial year, Adler Mode GmbH acquired a fashion retail store in Mömlingen from hefa Moden Heinrich Faust GmbH & Co., Mömlingen, as at 31 January 2015 by way of an asset deal. The purchase price was E455 thousand, with goodwill currently amounting to E329 thousand. During the first half of the financial year, Adler Mode GmbH acquired a fashion retail store in Lollar from hefa Moden Heinrich Faust GmbH & Co., Mömlingen, as at 29 June 2015 by way of an asset deal. The purchase price was E25 thousand, with goodwill currently amounting to E25 thousand. IV. SEGMENT REPORTING Under the provisions of IFRS 8, operating segments are identified on the basis of the internal organisation and reporting structure. An operating segment is defined as a component of an entity which generates revenues and incurs expenses from its business activities, whose operating results are regularly reviewed by the entity s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. The chief operating decision maker is the Executive Board of Adler Modemärkte AG. As in the previous year, there was only one reportable segment in the reporting period: Stores (Modemärkte).

21 CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 21 30/06/2015 in ke Stores segment Reconciliation with IFRS ADLER Group Total revenue (net) 268, ,420 Revenue from trading 132, ,375 Total cost -136, ,498 EBITDA ,368 4,525 30/06/2014 in ke Stores segment Reconciliation with IFRS ADLER Group Total revenue (net) 257,394-1, ,887 Revenue from trading 131, ,375 Total cost -125,114 4, ,889 EBITDA 9,654 3,235 12,889 The reconciliation contains differences from various account allocations for internal control purposes and differences arising between national accounting standards and IFRSs. Where revenue is concerned, these differences relate primarily to customer discounts, while the differences relating to revenue from trading stem from logistics services and differences relating to total costs stem from differences in the accounting treatment for leases and pension provisions under HGB and IFRSs. Non-current assets, defined as intangible assets, property, plant and equipment and investment property, are broken down by region as follows: 30/06/ /12/2014 ke Germany International Group Germany International Group Non-current assets 79,333 8,429 87,761 72,399 8,368 80,767 V. RELATED PARTY DISCLOSURES As at 25 April 2013, Adler Modemärkte AG is an associated company of S&E Kapital GmbH, Bergkamen, and indirectly an associated company of Steilmann Holding AG, Bergkamen. Steilmann Holding AG and its subsidiaries are thus to be considered related parties. Transactions with related parties are contractually agreed and carried out at arm s length prices.

22 22 CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following transactions were entered into with related parties: ke Services purchased from related parties 01/01-30/06/ /01-30/06/2014 Steilmann Group 12,160 6,607 G&C Enterprises 17 0 Sale of goods, services and non-current assets to related parties Steilmann Group The following balances with related parties were outstanding at the end of the reporting periods: ke 30/06/ /12/2014 Trade receivables/services from related parties Steilmann Group G&C Enterprises Trade payables/services to related parties Steilmann Group 1, Family members of individuals in key positions provided services to the ADLER Group in the amount of E6 thousand (H1 2014: E0 thousand). The services were remunerated at arm s length conditions. A member of the Executive Board was billed rent in the amount of E1 thousand per year. Remuneration for members of the Supervisory Board in their function as employees amounted to E144 thousand (H1 2014: E152 thousand) during the reporting period. The number of stock appreciation rights (SARs) issued during the reporting period totalled 50,000 (H1 2014: 375,000). The current income for the period amounts to E38 thousand (H1 2014: current expense E122 thousand). The valuation parameters have not changed. As at the end of 30 June 2015, non-current provisions amounted to E96 thousand (31 December 2014: E134 thousand). For information relating to the remuneration of the Executive Board, please refer to the details given in the consolidated financial statements as at 31 December Haibach, 5 August 2015 Lothar Schäfer Chairman of the Executive Board Karsten Odemann Member of the Executive Board

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24 ADLER MODEMÄRKTE AG INDUSTRIESTRASSE OST 1-7 GERMANY HAIBACH TELEPHONE: +49 (0) ADLER MODEMÄRKTE AG Entwurf 5. August 2015, 4:02 nachm.