REVIEW OF THE FIRST SIX MONTHS OF 2013/14

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2 REVIEW OF THE FIRST SIX MONTHS OF 2013/14 Q2 2013/14 Q2 2012/13 H1 2013/14 H1 2012/13 in EUR million Sales Wholesale Retail Earnings key figures EBITDA EBITDA margin 16.9% 13.8% 15.0% 13.2% EBIT EBIT margin 14.2% 11.7% 12.0% 10.7% EBT EBT margin 13.4% Net income of the period Q2 2013/14 GERRY WEBER International AG continued to make headway in the second quarter of the current fiscal year. A 5.2% increase in like-for-like sales means that we again outperformed the German fashion market as a whole in what was a balanced market environment. Total market growth in the first four months of the calendar year was relatively low at only 1-2% year-onyear. While GERRY WEBER International AG s total sales revenues in Q2 2013/14 were up by 1.6% on the prior year quarter, the operating margin improved notably from 11.7% to 14.2%. The operating result amounted to EUR 31.3 million in Q2 2013/14, up 22.3% on the previous year. The shift of the winter sale to the first quarter 2013/14 and the resulting absence of an extended seasonal discounting led to higher profitability in the second quarter than in the same 1

3 period of the previous year. Improved inventory management and the resulting faster inventory turnover also had a positive impact on the company s bottom line. H1 2013/14 Group sales revenues at the six-month stage totalled EUR million, which represents an increase of 2.2% on the first half of the previous year. In this context, it should be noted that the Retail segment posted a 13.3% increase in sales revenues, which offset the -5.6% decline in Wholesale revenues. The margin improvement is primarily attributable to the Retail segment s earnings improvement as well as the increased Retail share in total Group revenues. Taking into account a nearly unchanged financial result compared to the previous quarter and a stable income tax ratio, net income for the period after taxes amounted to EUR 32.7 million (H1 2012/13: EUR 29.3 million), up EUR 3.4 million or 11.5% on the first six months of the previous year. As a result, earnings per share improved from EUR 0.64 to EUR 0.71 in H1 2013/14. Earnings before interest and taxes (EBIT) showed a very positive trend in the first half of 2013/14 and climbed 14.2% to EUR 49.5 million (H1 2012/13: EUR 43.4 million). As a result, the EBIT margin rose from 10.7% to 12.0%. H1 2013/ /13 in EUR million Total assets Equity Debt Capital Equity ratio 67.7% 74.5% Key figures High share price (in Euro) Low share price (in Euro) Earnings per share (in Euro) Investments Number of employees (average) 4,866 4,725 2

4 Die GERRY WEBER AKTIE The GERRY WEBER share clearly picked up in the first half of the fiscal year 2013/14. After a somewhat weaker performance at the end of the past fiscal year, the price of the GERRY WEBER share climbed from EUR on 1 November 2013 to EUR at the end of the first quarter of 2013/14, which represents an increase of 8.2%. This positive trend was even exceeded in the second quarter of 2013/14 (1 February to 30 April 2014), when the share gained another 13.2% to EUR The MDAX, in which the GERRY WEBER share is listed, remained almost constant during the same period. This above-average performance of the GERRY WEBER share, which gained a total of 24.6%, primarily reflects the positive business trend in the first half of the fiscal year 2013/14. The Annual General Meeting held in Halle/Westphalia on 4 June 2014 was attended by some 1,000 shareholders, who represented 72.84% of the company s share capital of EUR 45,905,960. The vast majority of the shareholders who attended the AGM personally or through authorised representatives approved the items on the agenda. Among the most important agenda items was the election of Gerhard Weber to the Supervisory Board of GERRY WEBER International AG with effect from 1 November All voting results and agenda items can be found on our website at under Investors/Annual General Meeting. The dividend payment for the fiscal year 2012/13 to the company s shareholders is also good news, as it remains constant in spite of the fact that earnings figures fell short of the prior year level. According to the resolution passed by the shareholders at the Annual General Meeting on 4 June 2014, the dividend for the fiscal year 2012/13 will amount to a stable EUR Over the past seven years, the dividend increased by a total of 275%. Based on the share price at the end of the fiscal year 2012/13, the dividend yield stood at approx. 2.5%. 3

5 High: 38,98 Low: 28,76 4

6 INTERIM GROUP MANAGEMENT REPORT on the first six months of 2013/14 from 1 November 2013 to 30 April 2014 SALES PERFORMANCE Profitable growth and, hence, improved profit margins are primary objectives pursued by the GERRY WEBER Group. This was achieved impressively in the second quarter of 2013/14, when earnings before interest and taxes (EBIT) increased by 22.3% to EUR 31.3 million. This improved operating result is even more remarkable as Group sales revenues, which had grown by 3% in the first quarter of 2013/14, increased by only 1.6%, i.e. at a lower rate than EBIT. Sales revenues climbed from EUR million in the prior year quarter to EUR million in Q2 2013/14. Group sales revenues for the first six months of the current fiscal year totalled EUR million (H1 2012/13: EUR million). This represents an increase of 2.2%. The Retail segment made an important contribution to the sales growth and accounted for 45.7% of total Group revenues in the first half of 2013/14. This is equivalent to an increase of 4.5 percentage points on the same period of the previous year. Sales split H1 2013/14 by segments Retail 45.7 % (VJ: 41.2%) Wholesale 54.3 % (VJ: 58.8%) 5

7 Performance of the Retail segment Having risen by 14.1% in the first quarter of 2013/14, the Retail segment s sales revenues increased by 12.3% to EUR 90.9 million in the second quarter (Q2 2012/13: EUR 80.9 million). Sales revenues for the first six months of 2013/14 totalled EUR million, up 13.3% on the same period of the previous year. The increase is attributable to both the sales growth generated by the company-managed stores opened in the past two fiscal years and an improvement in like-for-like sales. Like-for-like Retail revenues in the first six months of the current fiscal year were up by 5.2% on the prior year period. According to our definition, like-for-like sales comprise the sales generated by outlets opened more than 24 months ago. A look at only the second quarter shows that like-for-like sales growth was as high as 5.7%. According to an independent panel of Textilwirtschaft magazine, sales revenues in the German fashion market as a whole increased by only 1-2% in the first four months of the calendar year This means that we clearly outperformed the overall market in terms of like-for-like sales growth. Sales split Retail H1 2012/13 Online Shops 5.7% (VJ: 5.4%) HoGWs+Mono 76.6% (VJ:75.2%) Outlets 12.5% (VJ: 14.6%) Concession 5.2% (VJ:4.8%) 6

8 The company-managed Houses of GERRY WEBER and mono-label stores contributed almost 76.6% to total Retail revenues in the first half of 2013/14. Both the e-commerce segment (5.7%) and the concession stores (5.2%) improved their contributions to total Retail revenues. Against the background of the good sales figures in the other Retail distribution channels, the factory outlet stores share in sales revenues dropped sharply from 14.6% to 12.5% in the first half of 2013/14. The factory outlet stores primarily sell merchandise whose seasonal sales phase has already ended. The chart on page 6 shows a detailed breakdown of Retail revenues by distribution channels. Performance of the Wholesale segment Sales revenues in the Wholesale segment amounted to EUR million in the second quarter of 2013/14, down 4.8% on the same period of the previous year. In the first quarter of 2013/14, revenues had declined by as much 6.7%. The Wholesale sales trend in the second quarter confirms our assumption that retailers ordering behaviour will stabilise and recover as the weather and market conditions return to normal. Against the background of the weatherrelated difficult market environment affecting the entire fashion industry in Central Europe in 2013, the inventories of some Wholesale partners were much higher than in the previous years. This led to a decline in pre-order volumes for the spring/summer collection invoiced in the first and second quarter. When analysing the Wholesale revenues, it should also be considered that the 19 Belgian Houses of GERRY WEBER in which majority shareholdings were acquired have been counted towards the Retail segment since August Wholesale revenues for the first six months of 2013/14 totalled EUR million (H1 2012/13: EUR million), which represents a decline by 5.6% compared to the same period of the previous year. As the Retail segment s revenues increased by 13.3%, the Wholesale segment s share in total Group revenues declined to 54.3% (H1 2012/13: 58.8%). This means that we have come a good deal closer to our medium-term aim of achieving a balanced split between Retail and Wholesale revenues. Performance of the distribution channels The ongoing vertical integration of our business model is an important strategic focus of the GERRY WEBER Group. The aim is to assume control over merchandise management in more and more stores and to get the collections to the outlets even more quickly. The vertical integration strategy is being implemented, on the one hand, by aggressively expanding the number of company-managed Retail stores and, on 7

9 the other hand, by continuously implementing the concept of what we call trusted wholesale limit concept. Under this concept, the retailers buying from our Wholesale segment leave the breakdown and the volume of their orders to the experts of the GERRY WEBER Group. Based on the information received from over 6,000 points of sale on a daily basis, we decide what merchandise to supply to each retailer s stores. At the end of the reporting period (30 April 2014), there were 434 companymanaged Houses of GERRY WEBER and 141 mono-label stores in Germany and abroad. The Retail segment additionally comprises 111 concession stores and 25 outlet stores. A total of 711 sales spaces were operated by the company. This means that ten new Houses of GERRY WEBER were opened and three mono-label stores closed in the first six months of the current fiscal year. Due to construction delays, not all stores that were planned to be opened in the first half of the year could be completed. The Wholesale segment comprises among others the franchised Houses of GERRY WEBER as well as the shop-in-shops. 10 (net) new franchised stores were opened in the first half of 2013/14, all of them outside Germany. At 2,828, the number of shop-in-shops remained almost unchanged as of the six-month stage; 531 of these shop-inshops are located outside Germany H1 2013/ / RETAIL Houses of GERRY WEBER Monolabel Stores Concession Flächen Factory Outlets WHOLESALE Houses of GERRY WEBER Shop-in-Shops

10 In the first half of 2013/14, Germany accounted for 60.3% of total Group revenues across all distribution channels (Wholesale and Retail). The European Union (excl. Germany) accounted for 29.1%, while non-eu countries accounted for 10.6%. The relative shares of the brand families on the basis of sales to end consumers and to Wholesale customers amounted in the first half of the current fiscal year:. Sales split H1 2013/14 by brand SAMOON 5.6% GERRY WEBER 76.1% TAIFUN 18.3% 9

11 EARNINGS Q2 2013/14 Q2 2012/13 H1 2013/14 H1 2012/13 in KEUR Sales 222, , , ,884.0 Other operating income 2, , , ,143.6 Changes in inventories -9, , , ,052.9 Cost of materials -88, , , ,472.9 Personnel expenses -36, , , ,268.4 Depreciation/Amortisation -6, , , ,069.8 Other operating expenses -52, , , ,284.5 Other taxes OPERATING RESULT 31, , , ,366.2 Financial result -1, , ,579.8 RESULTS FROM ORDINARY ACTIVITIES 29, , , ,786.4 Taxes on income -8, , , ,463.7 NET INCOME OF THE REPORTING PERIOD 21, , , ,322.7 Q2 2013/14 While earnings in the first quarter of 2013/14 were influenced by the shift of the winter sale to January 2014 (previous year: February 2013), the second quarter saw a clear improvement in profitability. The fact that hardly any merchandise was discounted in the second quarter of the current fiscal year and that the cost structure remained almost unchanged had a positive impact on both the gross margin and the operating margin of the GERRY WEBER Group. Reflecting our production and delivery cycles, inventories declined by EUR 9.2 million in the second quarter of 2013/14. A major part of the spring/summer collections is delivered to our own Retail stores and our Wholesale partners in this quarter. Corresponding to higher revenues than in the prior year quarter, the cost of materials increased slightly by 3.6% in the second quarter of 2013/14 and 10

12 amounted to EUR 88.7 million (Q2 2012/13: EUR 85.7 million). This gives evidence of the good purchasing and production structures of the GERRY WEBER Group. Accordingly, the gross margin rose sharply from 50.7% to 56.0% on a quarterly basis. The improvement clearly reflects the lower discount ratio. More goods were sold at full price. The Retail segment s higher share also had a positive impact on the company s gross margin in the second quarter of 2013/14. Personnel expenses were up by 7.2% on the prior year quarter to EUR 36.9 million. This is primarily attributable to the opening of 80 new own Retail spaces in the last twelve months and the fact that the Belgian payroll is now also included in the consolidated financial statements. A look at personnel expenses in the first quarter shows that they increased only by a moderate 2.2% compared to Q1 2013/14. Due to the increase in the number of company-managed stores compared to the prior year quarter, other operating expenses increased slightly to EUR 52.3 million in the second quarter of 2013/14 (+6.5% on the previous year). This is mainly attributable to the rental expenses for the newly opened stores. Other operating expenses as a percentage of sales increased only moderately to 23.5% (Q2 2012/13: 22.5%). Against the background of the expansion of the Retail segment and the related fixed asset investments, depreciation/ amortisation increased by 32.1% to EUR 6.2 million in the second quarter of 2013/14. Compared to the first three months of the current fiscal year, depreciation/amortisation rose by only 3.0% in the second quarter. Based on the increased profitability in Q2 2013/14, earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by an impressive 23.9% to EUR 37.5 million (Q2 2012/13: EUR 30.3 million). Accordingly, the EBITDA margin climbed from 13.8% to 16.9% on a quarterly basis. The operating result after depreciation/ amortisation (EBIT) amounted to EUR 313 million, up 22.3% on the prior year quarter. The EBIT margin improved notably from 11.7% to 14.2% on a quarterly basis. The financial result deteriorated from EUR 0.8 million to EUR 1.3 million on a quarterly basis. The increase is attributable to the November 2013 issue of a EUR 75 million note loan to finance the new logistic centre. Interest on the note loan has been charged since Q1 2013/14 and led to an increase in the company s interest expenses. Compared to the first quarter of the current fiscal year, the Q2 financial result remained almost unchanged. Net income after taxes amounted to EUR 21.1 million (Q2 previous year: EUR 17.8 million). Accordingly, earnings per share for the second quarter of 2013/14 stood at EUR 0.46 (Q2 2012/13: EUR 0.39). 11

13 H1 2013/14 With sales revenues in the first half of 2013/14 up by 2.2% on the previous year, the GERRY WEBER Group s gross margin improved from 52.3% to 55.0%. This is mainly attributable to the higher share of the Retail segment, which increased by 4.5 percentage points to 45.7%. Moreover, optimised inventory management in the company-managed stores led to better inventory turnover, which also had a positive impact on the company s profitability. Due to the above factors and the Group s flexible procurement policy, the cost of materials advanced slightly by 3.2% to EUR million compared to the first half of the previous year (H1 2012/13: EUR million). Personnel expenses rose to EUR 73.0 million (+5.4%) in the first half of 2013/14, which is attributable to the newly opened company-managed stores and the inclusion of the Belgian Houses of GERRY WEBER in the Retail segment. At 17.7%, personnel expenses as a percentage of sales remained almost constant compared to the first half of the previous year, which reflects strict cost management in all business segments. The headcount increased from 4,725 to 4,866 on a half-year average. At EUR 98.9 million, other operating expenses in the first half of 2013/14 were up by 3.8%. The increase is primarily due to higher rental expenses resulting from the newly opened companymanaged stores and the inclusion of the rent payments for the Belgian Houses of GERRY WEBER. Earnings before interest, taxes, depreciation and amortisation (EBITDA) in the first six months of the current fiscal year amounted to EUR 61.8 million, which represents an impressive 15.6% increase on the first six months of the previous year. After depreciation/amortisation (EUR 12.3 million), the operating result (EBIT) amounted to EUR 49.5 million. This means that the increase in EBIT at 14.2%, was much higher than both the increase in sales revenues (+2.2%) and the gross result (+7.4%). This impressively reflects the company s strict cost management. The EBIT margin stood at 12.0% in the six-month stage 2013/14, compared to 10.7% in the first six months of the previous year. Net income after taxes amounted to EUR 32.7 million at the six-month stage of the current fiscal year (H1 2012/13: EUR 29.3 million). Accordingly, earnings per share climbed from EUR 0.64 to EUR

14 NET WORTH POSITION Primarily due to the issue of a note loan, GERRY WEBER International AG s balance sheet grew by 18.6% to EUR million as of 30 April 2014 compared to the end of the previous fiscal year (31 October 2013: EUR million). The note loan in the amount of EUR 75 million was issued in November It serves to finance the planned logistic centre as well as general corporate purposes. The excellent creditworthiness of the GERRY WEBER Group and its operational strength allowed the company to take advantage of the low interest rates and place the fixed-interest tranches at an average interest rate of 2.3%. Oversubscribed several times, the note loan was issued at 100% of the nominal value and will be repaid at the end of the respective term. Investors could choose between terms of three, five and seven years as well as fixed and variable interest rates. On the assets side of the balance sheet, property, plant and equipment increased by 2.7% compared to the end of the fiscal year 2012/13 and totalled EUR million. This is mainly attributable to the purchase of a piece of land for the new logistic centre in Halle/Künsebeck. As a result, total fixed assets, which comprise intangible assets (EUR 69.2 million), the Hall 30 investment property (EUR 27.0 million), property, plant and equipment (EUR million) and financial assets (EUR 2.4 million), increased by EUR 3.2 million to EUR million. Due to our production and delivery cycles and the expansion of our store network in Germany and abroad, inventories were up by 6.0% to EUR million at the six-month stage of the current fiscal year compared to the end of the previous fiscal year. Current trade receivables rose from EUR 65.8 million on 31 October 2013 to EUR 71.4 million on 30 April Bolstered by the issue of the EUR 75 million note loan and the cash flow from operating activities, the company s liquid funds grew by EUR 76.2 million to EUR million, a sharp increase compared to the end of the fiscal year 2012/13. The equity capital of GERRY WEBER International AG rose from EUR million on 31 October 2013 to EUR million at the six-month stage 2013/14. Against the background of the abovementioned balance sheet growth, the equity ratio declined from 74.4% at the end of the fiscal year 2012/13 to 67.7%. Non-current financial liabilities climbed sharply from EUR 5.7 million to EUR 78.6 million, which is attributable to the issue of the note loan. Other non-current liabilities in the amount of EUR 24.5 million are the result of the majority shareholdings in the Dutch and Belgian Houses of GERRY WEBER and concession stores. The GERRY WEBER 13

15 Group holds 51% in the companies operating these stores. As there is a mutual option right for the acquisition of the remaining 49%, the anticipated purchase price of these shares is recognised under Other non-current liabilities. Current liabilities amounted to EUR 82.6 million as of 30 April 2014 (31 October 2013: EUR 87.4 million). The moderate decline is primarily attributable to a slight reduction in personnel provisions (EUR million). Trade liabilities remained almost unchanged at EUR 29.5 million (31 October 2013: EUR 30.3 million). As liquid funds of EUR million clearly exceed the company s current liabilities of EUR 82.6 million, resulting in a surplus of liquid funds of EUR 59.2 million as of 30 April This and an equity ratio of 67.7% mean that the balance sheet structure of GERRY WEBER International AG continues to be extremely solid. FINANCIAL ASSETS AND INVESTMENTS Due to the increased earnings before interest and taxes in H1 2013/14 cash flow from operating activities also picked up by 22.6% to EUR 20.9 million (30 April 2013: EUR 17.1 million). This clearly reflects the continued operational strength of the GERRY WEBER Group. Against the background of slightly increased interest payments resulting from the issue of the note loan (EUR 1.4 million), cash flow from current operations amounted to EUR 19.0 million. This represents an increase of 20.2% compared to 30 April Cash outflow from investing activities increased by a moderate EUR 1.4 million to EUR 15.6 million, which is primarily attributable to increased investments in property, plant and equipment. Besides the usual expansion investments in new company-managed stores, the piece of land for the construction of the new logistic centre was acquired in the second quarter of 2013/14. Cash flow from financing activities amounted to EUR 72.7 million in the first six months of the fiscal year and primarily comprises the proceeds from the issue of the note loan as well as scheduled repayments of pre-existing non-current financial liabilities. Based on the positive business development and the resulting improved profitability of the GERRY WEBER Group as well as the proceeds from the issue of the note loan, cash and cash equivalents rose sharply by EUR 76.2 million to EUR million. 14

16 SEGMENT REPORT GERRY WEBER International AG distinguishes between two main segments, Production and Wholesale" and Retail", as well as Other segments. The Wholesale segment comprises all distribution structures with external specialist retailers as well as all development and production processes for our merchandise including transport and logistics. The Retail segment is almost exclusively a distribution segment and includes all company-managed Houses of GERRY WEBER, mono-label stores, concession shops, outlet stores as well as the individual national online shops. Other segments mainly comprise the income and expenses as well as the assets and liabilities of the Hall 30 investment property. Income and expenses as well as assets and liabilities of the holding company are allocated proportionately to the Wholesale and Retail segments. As Wholesale sales revenues declined by 5.6% to EUR million in the first half of 2013/14, the Wholesale segment s earnings before taxes (EBT) also dropped by 5.8% to EUR 31.5 million (H1 previous year: EUR 33.4 million). With net 10 franchised Houses of GERRY WEBER opened in the first half of 2013/14, the number of franchised stores outside Germany increased to 281. At 1,245, the Wholesale segment s headcount remained unchanged in spite of the ongoing internationalisation. As of 30 April 2014, the assets attributable to the Wholesale segment were up by 32.8% on the end of the fiscal year 2012/13 to EUR million. Accordingly, the Wholesale segment s liabilities also picked up to EUR 94.1 million (H1 previous year: EUR 46.5 million). In this context, it should be noted that part of the assets and liabilities of the holding segment are assigned to this segment. The figures for the first six months of the previous year include neither the majority takeover of the Belgian operating companies nor the issue of the EUR 75 million note loan. Long-term investments in the Wholesale segment amounted to EUR 6.5 million, which means that investments increased by 38.8% compared to 30 April The expansion of the company-managed Retail stores in the past two fiscal years made an important contribution to the Retail segment s positive sales trend in the first half of 2013/14. Together with the 5.2% increase in like-for-like sales in the first half of the current fiscal year, this sent the Retail segment s sales revenues rising by 13.3% to EUR million (H1 2012/13: EUR million). The first quarter of the current fiscal year was primarily influenced by the shift of the winter sale to January While most of last year s winter discounts 15

17 occurred in February (Q2), the current fiscal year saw most discounts granted already in January (Q1). Thus profitability also increased disproportionately in Q2 2013/14 as Retail revenues were still up by an impressive 12.3% to EUR 90.9 million and. Accordingly, earnings before taxes (EBT) rose from EUR 2.4 million in the second quarter of the previous year to EUR 10.9 million. The Retail segment s EBT for the first six months of 2013/14 totalled EUR 13.9 million, up from EUR 4.5 million in the previous year. In the first six months of the current fiscal year, net ten new Houses of GERRY WEBER/ were opened, while three mono-label stores were closed. As of 30 April 2014, the company operated a total of 434 Houses of GERRY WEBER and 141 mono-label stores. In addition, there are 111 concession stores, 25 outlet stores (+3) as well as five countryspecific online shops. Due to construction delays, not all stores that were planned to be opened in the first half of the year could be completed. The expansion of the Retail operations led not only to an increase in depreciation/amortisation to EUR 7.2 million (+48.3%) but also to a rise in the Retail segment s assets to EUR million (+11.9%). Accordingly, the segment s liabilities climbed to EUR million (30 April 2013: EUR million). OPPORTUNITY AND RISK REPORT Just like any other enterprise, GERRY WEBER International AG is exposed to various opportunities and risks in the context of its business activities. External and internal factors may have a positive or negative impact on the company s sales and earnings. To ensure that opportunities and risks are identified at an early stage, the Managing Board of GERRY WEBER International AG has installed a comprehensive risk management system and additionally initiated strategic measures to minimise new risks and control existing ones. The aim is to identify positive future developments at an early stage and to seize the resulting opportunities in the interest of the company. In the context of our opportunity management approach, we analyse market and competitor data, keep an eye on demographic developments and monitor upcoming fashion trends. Besides various other measures, we attach great importance to evaluating our market prospects in the individual countries in order to respond in a timely manner to changing circumstances. By pushing ahead our regional diversification, we continue to minimise our dependence on economic developments in individual regions. 16

18 As a large global fashion company and in order to remain competitive on an international level, we source our merchandise from many different countries and regions of the world. It is an integral element of GERRY WEBER s corporate strategy to buy only highquality goods produced under socially and environmentally compatible conditions. To identify the black sheeps among the producers, we cooperate with recognised test institutes such as the Business Social Compliance Initiative (BSCI) and have also established our own unit to perform local checks several years ago. Before entrusting a new producer with the manufacture of our products, GERRY WEBER employees perform local checks to ensure that our standards and requirements are met. Only if these checks are passed, will we sign a manufacturing contract with a new supplier. Existing manufacturing partners are reviewed regularly as to whether their production and working conditions have changed. In addition, all suppliers must sign an undertaking to comply with social standards. If they fail to do so or if they breach this agreement, we will no longer work with these manufacturers. We take great care to ensure that our products are produced only by those manufacturers who comply with our requirements regarding working and social conditions as well as our quality standards. For a detailed description of our risk management system, the control systems for the accounting processes and the opportunities and risks in the GERRY WEBER Group, please refer to the risk report in the 2012/13 Annual Report. The statements made in this risk report remain valid. Since the beginning of the fiscal year 2013/14, no material changes have occurred regarding the opportunity risks to our company s future. Based on current knowledge, there are no risks that could jeopardise the continued existence of the GERRY WEBER Group. POST-BALANCE SHEET EVENTS With effect from 1 June 2014, GERRY WEBER International AG acquired eight established Houses of GERRY WEBER and 17 multi-label stores from its franchising partner in Norway. As part of the transaction, GERRY WEBER will acquire a 100% shareholding in the company operating these stores. The purchase price totals approx. NOK million (approx. EUR 14 million). The attainment of certain pre-defined sales and earnings targets in the fiscal year 2018 will trigger an earn-out plan involving special payments of a maximum of NOK 20 million. As of 1 June 2014, the acquired companies will be included in the 17

19 consolidated financial statements of the GERRY WEBER Group and be counted towards the Retail segment. The transaction confirms the GERRY WEBER Group s strategy of expanding its own Retail operations in selected European core markets. FORECAST REPORT Economic situation and industry environment As a fashion and lifestyle company, GERRY WEBER International AG is exposed to the spending mood of end consumers in the individual sales regions. Consumer spending is influenced, on the one hand, by the economic situation and private households' income trend and, on the other hand, by factors such as the weather or special events such as a Soccer World Cup. In spite of the ongoing regional diversification, 5.2% of the company s sales revenues were generated in Germany in the first six months of the fiscal year 2013/14. While global output increased by 3% last year, the Institute for the World Economy expects the upward trend to stabilise and global output to grow by 3.6% this year. However, structural problems in the emerging countries may slow down the recovery of the world economy in the medium term. Also, the recovery remains susceptible to politically induced setbacks, as the risk situation has deteriorated primarily due to Russia s intervention in Ukraine and the resulting confrontation. In the eurozone, the crisis seems to have passed its peak and the first economic upward trends can be identified. In particular, Portugal, Spain and Italy reported the first increase in aggregate economic output in several years. The economy also recovered in Belgium, the Netherlands and Austria. Consumers are hoping that the global economic crisis will end for good this year. This trend is also confirmed by the economic data of the GfK. While the French economy has started to recover at a low level, economic outlooks in the UK and Spain are the best in 16 and 14 years, respectively. People in Poland and the Czech Republic are anticipating growing incomes, and consumer expectations have improved clearly also in the Netherlands and Slovakia. Austria was the only country to report an inconsistent sentiment, as economic expectations declined while income prospects have picked up. The economic situation in Russia remains uncertain, not only because of the political consequences of the Crimea crisis and the weak rouble. The gross domestic product increased by only 1.3% in 2013, which except for 2008, the crisis year was the lowest growth rate since The weak rouble may lead to declining consumer demand in the short to medium term. 18

20 The Institute for the World Economy (ifw) and the OECD are optimistic for Germany s future, as is reflected in projected growth rates of 1.7% and 2.0% for 2014 and 2015, respectively. Based on these very good economic conditions, the GfK results also paint a positive picture for Germany. According to the GfK s May study, consumer confidence, as an overall indicator, stayed at a constantly high level of 8.5 points over the past four months. Income expectations, which are one component of the overall indicator, declined from the previous month s postreunification high to 47.8 points, while buying propensity in Germany decreased moderately from a seven-year high of 55 points in March to 49.5 points in May. But the still high level of buying and consumption propensity has benefited retailers only partially. In the first quarter of 2014, it was primarily the real estate sector and the services sector which seemed to profit from the low interest rates. Industry environment After a mixed year-end, with sales growing by 5% in November and declining by 4% in December, the start to the calendar year 2014 was positive throughout, according to TW-Testclub, a panel of German trade magazine Textilwirtschaft. Sales increases of 2% in January, 5% in February and 8% in March nurtured hopes that April would be equally positive. But the high expectations, which were also attributable to the calendar effect and the fact that this year s Easter fell in April, were not met. The sales growth was based on relatively low sales figures in the previous year. After a 5% decline in April, TW-Testclub reported an accumulated average increase of 1-2% for the calendar year to date. Reporting an increase of 5.2% in like-for-like sales, GERRY WEBER International AG performed better than the market as a whole. The management of GERRY WEBER International AG expects the European economy as a whole to improve slightly in the coming months. Consumer spending in Europe is anticipated to remain constant overall. Provided that the weather is in line with the respective seasons, we anticipate a positive overall environment for our business. für 2014 und 2,0 % für 2015 sehen das Institut für Weltwirtschaft ifw und die OECD für Deutschland optimistisch in die Zukunft. Ausgehend von diesen sehr guten wirtschaftlichen Rahmenbedingungen zeichnen auch die Ergebnisse der GfK für Deutschland ein positives Bild. Laut der Studie der GfK aus dem Monat Mai verharrte das Konsumklima als Gesamtindikator in den vergangenen vier Monaten auf einem konstant hohen Niveau von 8,5 Punkten. 19

21 Business prospects and guidance In the first half of the fiscal year 2013/14, we have shown that we are well on track to reach the targets we have set ourselves for 2013/14. Due to our unique brand positioning, our operational strengths, our customer structure and, most importantly, the international growth opportunities, the GERRY WEBER growth story remains intact. We will therefore stick to our strategies: The strategic positioning of the GERRY WEBER Group is focused, on the one hand, on the further expansion, especially outside Germany, and, on the other hand, on the ongoing vertical integration of the business model. For our strategic positioning and our operations, this will mean the following in the coming months: - Expansion of the Retail operations, especially in European countries outside Germany - Ongoing internationalisation of the distribution structures and, in this context, expansion of the global market presence - Increase the international market penetration of TAIFUN and SAMOON - Ongoing vertical integration through the reinforcement of the Retail segment, the concession store model and the maximum order limit arrangements in the Wholesale segment - Development and expansion of the multi-channel concept through the start-up of the company s own logistic warehouse We will continue to expand the Retail segment by opening company-managed Houses of GERRY WEBER but also other vertical distribution structures such as concession stores. The expansion will remain focused on neighbouring European countries as well as Scandinavia and Eastern Europe. We also intend to grow our Wholesale segment and will open further Houses of GERRY WEBER and shop-in-shops together with franchisees and distribution partners, primarily outside the eurozone. The main target regions are Russia, the Middle East and North America. Besides the ongoing expansion, vertical integration is another key element of our strategic positioning. We aim to exert greater influence on what products our customers specify for their stores and to get our collections to the retail outlets as quickly as possible. We want to provide our Wholesale partners with more support in optimising their space management. We offer our distribution partners to take advantage of our expertise and our knowledge in the form of our maximum order limit arrangements, under which the customer merely specifies an order limit and our 20

22 experts choose the products for the customer s respective store. Over the past years, we have laid the foundation to turn from a mere fashion wholesaler to a vertically integrated fashion and lifestyle corporation. The collections have been streamlined and the collection intervals have been changed to six collections per year. This puts us in a position where we can further accelerate the injection of consecutive new fashion trends into the stores even within a single season while optimising our inventory management at the same time. We implemented our strategies with great determination over the past years and will pursue them aggressively in the months and years ahead in order to allow the GERRY WEBER Group to continue growing. After the first six months of the fiscal year 2013/14, we will - as outlined above - stick to the targets we have set ourselves and continue to project sales revenues of at least EUR 900 million and EBIT of at least EUR 120 million. 21

23 CONSOLIDATED INCOME STATEMENT (IFRS) in EUR'000 for the Second Quarter 2013/14 (1 February April 2014) and the First Half 2013/14 (1 November April 2014) Q2 2013/14 Q2 2012/13 H1 2013/14 H1 2012/13 in KEUR Sales 222, , , ,884.0 Other operating income 2, , , ,143.6 Changes in inventories -9, , , ,052.9 Cost of materials -88, , , ,472.9 Personnel expenses -36, , , ,268.4 Depreciation/Amortisation -6, , , ,069.8 Other operating expenses -52, , , ,284.5 Other taxes OPERATING RESULT 31, , , ,366.2 Financial result Income from long-term loans Interest income Incidential bank charges Interest expenses -1, , , , , ,579.8 RESULTS FROM ORDINARY ACTIVITIES 29, , , ,786.4 Taxes on income Taxes of the reporting period -9, , , ,696.7 Deferred taxes , , , ,463.7 NET INCOME OF THE REPORTING PERIOD 21, , , ,322.7 Earnings per share ( basic)

24 CONSOLIDATED BALANCE SHEET (IFRS) in EUR'000 as of 30 April 2014 ASSETS H1 2013/ /13 in KEUR 30. April Oct NON-CURRENT ASSETS Fixed Assets Intangible assets 69, ,090.2 Property, plant and equipment 170, ,909.9 Investment properties 27, ,251.9 Financial assets 2, ,379.3 Other non-current assets Trade receivables Income tax claims 1, ,666.4 Deferred tax assets 7, , , ,853.6 CURRENT ASSETS Inventories 118, ,467.0 Receivables and other assets Trade receivables 71, ,835.2 Other assets 18, ,968.8 Income tax claims 3, ,913.2 Cash and cash equivalents 141, , , ,776.2 TOTAL ASSETS 630, ,

25 CONSOLIDATED BALANCE SHEET (IFRS) in EUR'000 as of 30 April 2014 EQUITY AND LIABILITIES H1 2013/ /13 in KEUR 30. April Oct EQUITY Share capital 45, ,906.0 Capital reserve 102, ,386.9 Retained earnings 195, ,341.7 Accumulated other comprehensive income/loss acc. to IAS 39-5, ,223.9 Exchange differences Accumulated profits 89, , , ,766.7 NON-CURRENT LIABILITIES Provisions for personnel Other provisions 5, ,479.1 Financial liabilities 78, ,725.0 Other liabilities 24, ,836.7 Deferred tax liabilities 12, , , ,456.0 CURRENT LIABILITIES Provisions Tax liabilities ,920.3 Provisions for personnel 10, ,150.0 Other provisions 8, ,273.4 LIABILITIES Financial liabilities 5, ,008.2 Trade payables 29, ,330.8 Other liabilities 27, , , ,407.1 TOTAL EQUITY AND LIABILITIES 630, ,

26 STATEMENT OF CHANGES IN GROUP EQUITY (IFRS) in EUR'000 for the First Half 2013/14 (1 November April 2014) H1 2013/14 Capital stock Capital Retained Accumulated Exchange Accumulated Equity reserves earnings other comprehensive differences profits in KEUR income/loss As of 1 November , , , , , ,766.7 Allocation of retained earnings of the AG from the net income of the year Adjustments of exchange differences Changes in equity acc. to IAS 39-1, ,072.5 Net income of the reporting period 32, ,708.7 As of 30 April , , , , , ,226.3 H1 2012/13 Capital stock Capital Retained Accumulated Exchange Accumulated Equity reserves earnings other comprehensive differences profits in KEUR income/loss As of 1 November , , , , ,004.7 Allocation of retained earnings of the AG from the net income of the year 0.0 Adjustments of exchange differences Changes in equity acc. to IAS 39 1, ,202.9 Net income of the reporting period 29, ,322.7 As of 30 April , , , , ,

27 CONSOLIDATED CASH FLOW STATEMENT (IFRS) in EUR'000 for the First Half 2013/14 (1 November January 2014) H1 2013/14 H1 2012/13 in KEUR Operating result 49, ,366.2 Depreciation / amortisation 12, ,069.8 Profit / loss from the disposal of fixed assets Increase / decrease in inventories -6, ,509.0 Increase / decrease in trade receivables -5, Increase / decrease in other assets that do not fall under investing or financing activities -6, ,154.8 Increase / decrease in provisions -2, ,316.3 Increase / decrease in trade payables ,995.0 Increase / decrease in other liabilities that do not fall under investing or financing activities -2, ,055.3 Income tax payments -16, ,772.9 Other non-cash effective income/expenses CASH INFLOWS FROM OPERATING ACTIVITIES 20, ,059.2 Income from loans Interest income Incidential bank charges Interest expenses -1, CASH INFLOWS FROM CURRENT OPERATING ACTIVITIES 19, ,834.5 Proceeds from the disposal of properties, plant, equipment and intangible assets Cash outflows for investments in property, plant, equipment and intangible assets , ,240.9 Cash outflows for investments in investment properties Proceeds from the disposal of financial assets Cash outflows for investments in financial assets CASH OUTFLOWS FROM INVESTING ACTIVITIES -15, ,170.1 Proceeds of the sale of own shares Raising / repayment of financial liabilities 72, ,620.6 CASH OUTFLOWS FROM FINANCING ACTIVITIES 72, ,620.6 Changes in cash and cash equivalents 76, Cash and cash equivalents at the beginning of the fiscal year 65, ,159.1 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 141, ,

28 Explanatory notes on the interim consolidated financial statements of GERRY WEBER International AG for the period ended 30 April 2014 (first six months of the fiscal year 2013/14) General information and accounting basis GERRY WEBER International AG is a listed joint stock company headquartered in Neulehenstraße 8, D Halle (Westphalia/Germany). The present abridged consolidated financial statements were prepared pursuant to section 37x para. 3 WpHG in conjunction with 37w para. 2 WpHG as well as in accordance with the International Financial Reporting Standards (IFRS) and the related interpretations by the International Accounting Standards Board (IASB) for interim financial reporting such as they have been adopted by the European Union. Accordingly, these financial statements do not contain all information and notes that are required for year-end consolidated financial statements pursuant to IFRS. The interim consolidated financial statements for the second quarter 2013/14 (1 November April 2014) were prepared in accordance with IAS 34 Interim Financial Reporting and were not reviewed by the auditors. The accounting and valuation methods and the principles of consolidation have basically remained unchanged compared to the latest consolidated financial statements for the year ended 31 October The interim consolidated financial statements for the second quarter and the first half of the fiscal year 2013/14 were prepared in Euros. The Managing Board is of the opinion that the present unaudited interim consolidated financial statements contain all necessary information to give a true and fair view of the business performance and the earnings position in the reporting period. The results achieved in the first six months of the financial year 2013/14 (1 November April 2014) do not necessarily provide an indication as to the future results. Pursuant to IAS 34 Interim Financial Reporting, the Managing Board must make discretionary decisions, estimates and assumptions in the preparation of the interim consolidated financial statements. These may influence the application of accounting standards and the recognition of assets and liabilities as well as income and expenses. The actual results may differ from these estimates in individual cases. The present interim consolidated financial statements comprise the interim financial statements of GERRY WEBER International AG and all its subsidiaries for the period ended 27

29 30 April The subsidiaries are fully consolidated. As of the reporting date, the basis of consolidation comprises 33 subsidiaries. In five of its subsidiaries abroad GERRY WEBER International AG holds 51% interest stake; in the rest the company holds 100%. All subsidiaries have been integrated into the consolidated financial statements in accordance with the rules for full consolidation. Currency translation The functional currency of GERRY WEBER International AG is the euro. Foreign currency transactions in the separate financial statements of GERRY WEBER International AG and its subsidiaries are translated at the exchange rates prevailing at the time of the transaction. As of the balance sheet date, monetary items in foreign currency are shown at the closing rate. Exchange differences are recognised in profit or loss. The interim financial statements of the consolidated Group companies prepared in foreign currencies are translated according to the concept of the functional currency using the modified closing rate procedure. Accordingly, assets and liabilities, with the exception of equity capital, are translated at the closing rate, while income and expenses are translated at the average annual exchange rate. Effects from the currency translation of the equity capital are recognised in equity. Intangible assets Goodwill is recognised in accordance with IFRS 3 and tested for impairment on an annual basis and whenever there are indications of impairment. Purchased intangible assets are recognised at cost, taking ancillary costs and cost reductions into account, and amortised using the straight-line method. Furthermore, the item includes exclusive rights of supply to Houses of GERRY WEBER operated by third parties as well as advantageous lease agreements resulting from acquired stores. The advantageous lease agreements recognised as depreciable intangible assets are written down over the remaining term of the leases using the straight-line method. In addition, customer relationships were identified in the context of the takeover of 51% shares in three Belgian and two Dutch companies, which have been recognized at the present value. Due to the majority takeover in three Belgian companies in August 2013, intangible assets increased from EUR 48.5 million to EUR 70.1 million as of 31 October 2013 in comparison to the previous year. At the end of Q2 2013/14 (30 April 2014) intangible assets decreased to EUR 69.2 million due to straight-line depreciations. 28