Interim Financial Report for the Period 1 January 30 September 2013

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1 Interim Financial Report for the Period 1 January 30 September 2013 Brødrene A & O Johansen A/S Rørvang 3 * DK-2620 Albertslund * Denmark Tel: * Fax: * CVR (Central Business Register) No.: Company Announcement No. 10/2013 1/14

2 Contents Company Announcement No. 10/2013, summary... page 3 Financial highlights for the AO Group... page 4 Management s review... page 5-7 Management s statement... page 8 Income statement and statement of comprehensive income... page 9 Balance sheet as at 30 September... page Statement of changes in equity... page 12 Consolidated cash flow statement... page 13 Notes... page 14 Company Announcement No. 10/2013 2/14

3 Company Announcement No. 10/2013 Brødrene A & O Johansen A/S The Board of Directors has today approved the Group s interim financial report for the period 1 January 30 September Summary Pre-tax profit for the first three quarters of 2013 was DKK 90.5 million, which is DKK 0.9 million more than last year. Pre-tax profit for the third quarter of 2013 was DKK 35.4 million, which is DKK 0.2 million more than last year. The results are in line with expectations. Consolidated revenue for the first nine months of the year was DKK 1,701.7 million against DKK 1,639.2 million for the same period of, equalling an increase of DKK 62.5 million or 3.8%. In the third quarter of 2013, consolidated revenue was DKK million against DKK million last year, equalling an increase of DKK 31.8 million or 5.7%. Gross profit for the first three quarters of 2013 was DKK million, an increase of DKK 13.7 million compared to last year. In the first three quarters of 2013, the gross profit margin decreased from 30.3% to 30.0% due to hard competition in the market. Gross profit for the third quarter increased by DKK 7.7 million, whereas the margin was slightly below last year s level. Operating profit (EBIT) for the period was DKK 91.8 million, equalling a profit margin of 5.4%, compared to DKK 93.4 million and 5.7% last year. EBIT for the third quarter of 2013 was DKK 35.9 million against DKK 36.4 million in the same period of. In the third quarter of 2013, the profit margin was 6.1% which is 0.5 percentage point less than in the third quarter of. As at 30 September 2013, the Group s total assets amounted to DKK 1,401.7 million, which is DKK million more than last year. The increase is attributable to investment in new stores and increased current assets caused by, among other things, the opening of a branch in Stockholm. Cash flow from operating activities for the first three quarters was DKK million after payment of DKK 29.1 million in corporation taxes. Cash flow from operating activities is DKK million less than in the same period of due to slightly increasing inventories and timing differences in relation to the recording of trade receivables and trade payables. Important events An upgrade of AO s ERP-system in Denmark and Sweden was carried out in September. Stores in Stockholm, Nykøbing Falster, Hillerød, Helsingør and Esbjerg opened in A new store will open in Viby, Århus. It has also been agreed to relocate the stores in Vejle, Hørsholm, Nørrebro and Slagelse. Investment in connection with these projects is estimated at approximately DKK 45 million. It has been decided to invest in a new pallet high-bay warehouse and a renovation of the central warehouse in Albertslund. Total investment in connection with this project to be completed in 2015 is estimated at approximately DKK 175 million, and a positive effect on operations is expected as of Expectations for the year As previously announced, profit before tax for 2013 is expected to be approximately DKK 125 million. Albertslund, 22 November 2013 Niels A. Johansen Henrik T. Krabbe CEO COO & CFO Company Announcement No. 10/2013 3/14

4 Financial highlights for the AO Group (DKKm) Key figures 2013 Q Q3 Full Year Consolidated revenue 1, , ,272.7 Gross margin Operating profit or loss (EBIT) Financial income and expenses, net (1.3) (3.9) (0.5) (1.3) (5.4) Profit or loss before tax (EBT) Tax on profit or loss for the period (18.3) (21.9) (8.6) (8.7) (30.8) Net profit or loss for the period Non-current assets Current assets Total assets 1, , , , ,286.4 Share capital Equity Non-current liabilities Current liabilities Average number of employees Cash flow from operating activities (12.9) (88.6) Cash flow from investing activities (79.4) (14.1) (44.6) (8.0) (42.9) Of which investments in property, plant and equipment (64.7) (11.2) (40.4) (6.8) (38.1) Cash flow from financing activities 82.1 (190.2) 82.3 (90.5) (207.7) Cash flow for the period (10.2) (3.9) (50.9) (2.4) 15.9 Financial ratios Gross profit margin 30.0% 30.3% 30.1% 30.4% 29.7% Profit margin 5.4% 5.7% 6.1% 6.6% 5.6% Return on capital employed 6.8% 7.3% 2.7% 2.9% 9.9% Return on equity 9.0% 9.6% 3.3% 3.7% 12.7% Solvency ratio 59.8% 58.4% 59.8% 58.4% 59.6% Book value 1,470 1,305 1,470 1,305 1,344 Share price at the end of the period 1, , ,050 Earnings per share (EPS Basic), DKK Diluted earnings per share (EPS-D), DKK Basic EPS and diluted EPS have been calculated in accordance with IAS. Other financial ratios have been calculated in accordance with the Danish Society of Financial Analysts Recommendations and Financial Ratios The financial ratios have been calculated on the basis of the respective periods. Figures given in brackets are negative results or deductible items. Company Announcement No. 10/2013 4/14

5 Management s review Brødrene A & O Johansen A/S The consolidated financial statements include the financial statements of Brødrene A & O Johansen A/S and the wholly owned subsidiaries AO Invest A/S, AO Sverige AB in Sweden and Vaga Tehnika Eesti OÜ in Estonia. Activities of the period Consolidated revenue for the first three quarters of 2013 was DKK 1,701.7 million against DKK 1,639.2 million for the same period of, equalling an increase of DKK 62.5 million or 3.8%. Revenue for the third quarter was DKK million against DKK million for the same quarter of, equalling an increase of DKK 31.8 million or 5.7%. In Sweden, revenue for the quarter increased by 7.7%, i.a., as a result of the opening of the Stockholm branch. Gross profit for the first nine months of 2013 was DKK million, compared to DKK million in. The increase is attributable to higher revenue countered by a gross profit margin decline of 0.3 percentage point to 30.0%. The decline in the gross profit margin is attributable to increased competition in the market. A gross profit of DKK million was realised in the third quarter of 2013, compared to DKK million in. The improvement of DKK 7.7 million is attributable to increased revenue countered by a minor decline in the gross profit margin. Total operating expenses for the three quarters of 2013 were DKK million, which is DKK 15.3 million or 3.8% more than reported for the same period last year. The increase in expenses is mainly attributable to the fact that External expenses went up by DKK 14.7 million due to the opening of the Stockholm branch, the opening of new stores in Denmark, increased freight charges and ordinary price adjustments. Third-quarter operating expenses were DKK million which is DKK 8.2 million or 6.2% more than in the third quarter of. In this case, the difference is also attributable to the above-mentioned factors. The item of Other operating expenses includes losses on receivables of DKK 4.2 million, which is nearly half the amount of the same period last year. Operating profit (EBIT) for the first nine months of the year was DKK 91.8 million, equalling a profit margin of 5.4%. Compared to the same period last year, EBIT is DKK 1.6 million lower, and the profit margin is down by 0.3 percentage point. Operating profit (EBIT) for the third quarter of 2013 was DKK 35.9 million, which is DKK 0.5 million less than in the third quarter of. The profit margin of 6.1% is down by 0.5 percentage point compared to the third quarter of. Financial income and expenses, net, for the first three quarters of the year were negative at DKK 1.3 million, compared to a negative DKK 3.8 million in. The improvement is attributable to a reduced draw on the Group s credit facilities. A pre-tax profit of DKK 90.5 million was recorded for the period, compared to DKK 89.6 million for the first three quarters of. Profit before tax for the third quarter of 2013 amounted to DKK 35.4 million, which is DKK 0.2 million more than last year. Tax is in accordance with applicable tax rates in the areas where the Group is operating. Deferred tax in Denmark is calculated on the basis of a tax rate of 22% in consequence of a resolution made by the Danish Parliament to reduce the corporation tax to 22% in In that connection, deferred tax of DKK 3.5 million has been reversed, and as a result the average tax rate for the Group ended up at approximately 20%. Net profit for the period was DKK 72.2 million, compared to DKK 67.6 million in. As at 30 September 2013 the Group s total assets amounted to DKK 1,401.7 million, which is DKK million more than last year at the same time. The increase is attributable to investment in new stores, Company Announcement No. 10/2013 5/14

6 investment in a high-bay warehouse and an upgrade of the ERP system which caused non-current assets to rise by DKK 71.6 million. Currents assets increased by DKK 56.4 million. The increase in current assets is attributable to the fact that inventories increased by DKK 28.8 million due the opening of the Stockholm branch and an enlargement of the product range. Trade receivables are DKK million higher than last year due to increased sales. In addition, the Company s corporation tax receivable is DKK 7.3 million. On the equity and liabilities side, trade payables declined by DKK 11.6 million to DKK million as a result of timing differences, and payables to credit institutions increased by DKK 64.5 million to DKK million. Equity of DKK million, equalling a solvency ratio of 59.8%, is DKK 94.2 million higher than last year. The Group s cash flow from operating activities for the first three quarters of 2013 was negative at DKK 12.9 million after payment of DKK 29.1 million in corporation taxes. The negative cash flow in relation to net income is primarily attributable to timing differences in connection with the Group s recording of trade receivables and trade payables that are much affected depending on whether the last day of the month falls on a weekday or in the weekend. Net investments for the period totalled DKK 79.4 million against DKK 14.2 million for the same period last year. The major part of the investments is attributable to acquisition and improvement of the five new stores and the current investment in a new pallet high-bay warehouse. In addition, investments have been made in upgrades and development of ERP and procurement systems. Total cash flow from operating and investing activities for the first three quarters of 2013 was negative at DKK 92.3 million. It has been financed by a reduction in the Group s cash and cash equivalents of DKK 10.5 million and through an additional draw of DKK 82.1 million on the Group s credit facilities. At 30 September 2013, total payables to credit institutions constituted DKK million, and cash and cash equivalents constituted DKK 8.7 million. Significant risks As mentioned in the annual report for, under the paragraph Internal controls and risk management, the Company assesses on an ongoing basis the most significant risks in connection with the Company s activities. In addition to the risks mentioned in the annual report, the Group is sensitive to the overall development in Danish and Swedish economy as well as business trends in the building industries of these countries. Incentive programme The present incentive programme is in accordance with the general guidelines for incentive pay approved by the annual general meeting on 22 March. The guidelines are available in full on the Company s website A total of 18,887 share options have been granted in connection with the existing incentive programme. Of the above-mentioned number of share options, 8,664 matured on 30 September On 30 September 2013, the Company holds a total of 23,270 treasury shares. Outlook For the remaining part of 2013, the Group expects a level of activity in the market comparable to that of. It is to be noted, though, that the market shows downward trends which will result in severe competition. As previously announced, profit before tax is expected to be approximately DKK 125 million. Events after the end of the interim period No significant events have occurred after the end of the reporting period. Company Announcement No. 10/2013 6/14

7 Financial calendar for 2013 The financial calendar for 2014 will be released in December of Company announcements in 2013 Announcement no. 1 Insiders tradings 5 February 2013 Announcement no. 2 Annual report for 19 February 2013 Announcement no. 3 Notice convening the annual general meeting 19 February 2013 Announcement no. 4 Insiders tradings 22 February 2013 Announcement no. 5 Results of annual general meeting 15 March 2013 Announcement no. 6 Interim financial report for the first quarter of May 2013 Announcement no. 7 Financial calendar for the remainder of May 2013 Announcement no. 8 Interim financial report for the first half of August 2013 Announcement no. 9 Insiders tradings 4 September 2013 Additional information This interim financial report is available in Danish and English. In case of doubt, the Danish version shall apply. Company Announcement No. 10/2013 7/14

8 Management s statement Today the Board of Directors and the Executive Board have discussed and approved the interim financial report of Brødrene A & O Johansen A/S for the period 1 January - 30 September The interim financial report, which has not been audited or reviewed by the Company s auditor, has been prepared in accordance with IAS 34 Presentation of Interim Financial Statements as adopted by the EU and Danish disclosure requirements for listed companies. In our opinion the interim financial statements give a true and fair view of the Group s assets, liabilities and financial position at 30 September 2013 and of the results of the Group s operations and cash flows for the period 1 January 30 September Further, in our opinion the Management s review includes a fair review of the development in the Group s operations and financial matters, the net profit or loss for the period and of the Group s financial position as a whole as well as a description of the most significant risks and elements of uncertainty facing the Group. Albertslund, 22 November 2013 Executive Board Niels A. Johansen CEO Henrik T. Krabbe COO & CFO Board of Directors Henning Dyremose Chairman of the Board Michael Kjær Deputy Chairman René Alberg Erik Holm Michael Delcke Jensen Carsten Jensen Niels A. Johansen Preben Damgaard Nielsen Contacts: Niels A. Johansen/Henrik T. Krabbe Telephone: Company Announcement No. 10/2013 8/14

9 Income statement and statement of comprehensive income (All amounts are in DKK thousands) Note: 2013 Q Q3 Full Year Revenue 1,701,669 1,639, , ,597 2,272,740 Cost of sales (1,191,652) (1.142,813) (409,443) (385,313) (1,597,166) Gross profit 510, , , , ,574 Other operating income Gross margin 510, , , , ,756 External expenses (156,139) (141,428) (51,332) (46,938) (191,071) Staff costs (231,557) (226,430) (77,788) (74,004) (309,381) Depreciation, amortisation and impairment of property, plant and equipment as well as intangible assets (26,523) (27,726) (9,552) (9,085) (37,385) Other operating expenses (4,216) (7,498) (1,461) (1,863) (10,573) Total operating expenses (418,435) (403,081) (140,133) (131,890) (548,410) Operating profit or loss (EBIT) 91,769 93,449 35,866 36, ,346 Financial income 2,485 2, ,971 Financial expenses (3,736) (6,241) (1,236) (1,881) (8,400) Profit or loss before tax (EBT) 90,518 89,564 35,360 35, ,918 Tax on profit or loss for the period (18,271) (21,923) (8,606) (8,693) (30,814) Net profit or loss for the period 72,248 67,641 26,754 26,488 91,104 Other comprehensive income Items reclassified to the income statement Foreign currency translation adjustment relating to foreign entities (437) 4, ,275 1,847 Tax on other comprehensive income Other comprehensive income after tax (437) 4, ,275 1,847 Total comprehensive income 71,811 72,170 27,345 29,763 92,951 Earnings per share Earnings per share (EPS) Diluted earnings per share (EPS-D) Company Announcement No. 10/2013 9/14

10 Balance sheet as at 30 September (All amounts are in DKK thousands) ASSETS Note: 2013 Full Year Non-current assets Intangible assets Goodwill 4 102, , ,446 Software 54,759 53,838 52,644 Property, plant and equipment 5 157, , ,090 Land and buildings 426, , ,290 Leasehold improvements 7,749 1,983 3,475 Fixtures and operating equipment 95,313 67,623 65, , , ,585 Total non-current assets 686, , ,675 Current assets Inventories 6 320, , ,154 Trade receivables 7 348, , ,713 Corporation tax receivable 7, Other receivables 20,461 26,084 26,901 Prepayments 9,425 7,666 6,122 Cash at bank and in hand 8,691 1,656 19,202 Total current assets 715, , ,676 Total assets 1,401,739 1,273,677 1,286,351 Company Announcement No. 10/ /14

11 Balance sheet as at 30 September (All amounts are in DKK thousands) EQUITY AND LIABILITIES Note: 2013 Full Year Equity Share capital 57,000 57,000 57,000 Other reserves 200, , ,000 Reserve for foreign currency translation adjustments 5,210 8,329 5,647 Retained earnings 575, , ,609 Proposed dividend Total equity 838, , ,256 Non-current liabilities Deferred tax 8 28,231 31,754 32,391 Credit institutions 169, , ,060 Total non-current liabilities 197, , ,451 Current liabilities Credit institutions 86,328 19,896 2,792 Trade payables 224, , ,905 Corporation tax 0 20,894 0 Other payables 52,131 46,650 52,262 Deferred income 2,509 2,684 2,684 Total current liabilities 365, , ,644 Total liabilities 563, , ,095 Total equity and liabilities 1,401,739 1,273,677 1,286,351 Company Announcement No. 10/ /14

12 Statement of changes in equity (All amounts are in DKK thousands) Foreign currency Share Other translation Retained Total (All amounts are in DKK thousands) capital reserves adjustment earnings Equity Equity at 1 January , ,000 5, , ,256 Comprehensive income for the period 0 0 (437) 72,248 71,811 Share-based payment Acquisition/sale of treasury shares Dividends paid Changes in equity 0 0 (437) 72,248 71,811 Equity at 30 September , ,000 5, , ,067 Equity at 1 January 57, ,000 3, , ,287 Comprehensive income for the period 0 0 4,529 67,641 72,170 Share-based payment Acquisition/sale of treasury shares Dividends paid Changes in equity 0 0 4,529 68,077 72,606 Equity at 30 September 57, ,000 8, , ,893 Equity at 1 January 57, ,000 3, , ,287 Comprehensive income for the year 0 0 1,847 91,104 92,951 Share-based payment ,019 2,019 Acquisition/sale of treasury shares Dividends paid Changes in equity 0 0 1,847 93,123 94,970 Equity at 31 December 57, ,000 5, , ,256 Company Announcement No. 10/ /14

13 Consolidated cash flow statement (All amounts are in DKK thousands) 2013 Full Year Cash flow from operating activities Operating profit or loss 91,769 93, ,346 Financial income and expenses, net (interest paid) (1,251) (3,884) (5,429) Profit or loss before tax 90,518 89, ,918 Adjustment of non-cash operating items ,019 Depreciation and amortisation: Intangible assets 9,896 8,215 11,236 Property, plant and equipment 16,627 26,523 19,510 27,726 26,149 37,385 Change in working capital: Change in trade receivables (51,809) (22,867) 11,787 Change in other receivables 3,136 (5,430) (4,702) Change in inventories (17,774) 17,933 6,857 Change in trade payables (34,074) 96, ,981 Change in other current liabilities (307) (100,828) (561) 85,565 5, ,974 Corporation tax paid (29,122) (2,902) (32,734) Cash flow from operating activities (12,908) 200, ,561 Cash flow from investing activities Goodwill (2,078) 0 0 Software (12,688) (2,818) (4,872) Land and buildings (27,093) (4,971) (28,639) Leasehold improvements (5,411) (1,160) (3,180) Fixtures and operating equipment (38,173) (6,386) (9,241) Disposal of property, plant and equipment 6,003 1,274 3,005 Cash flow from investing activities (79,438) (14,061) (42,928) Cash flow from financing activities Repayment of debt to/raising of loans with credit institutions, net 82,118 (190,183) (207,719) Acquisition/sale of treasury shares Cash flow from financing activities 82,118 (190,183) (207,719) Cash flow for the period (10,228) (3,855) 15,914 Cash and cash equivalents at beginning of period 19,202 2,369 2,369 Foreign currency translation adjustment (283) 3, Cash and cash equivalents at end of period 8,691 1,656 19,202 Company Announcement No. 10/ /14

14 Notes Brødrene A & O Johansen A/S 1 Accounting policies The interim financial report has been prepared in accordance with IAS 34 Preparation of Interim Financial Statements as adopted by the EU and Danish disclosure requirements for listed companies. With effect from 1 January 2013, the Group has implemented Amendments to IAS 1, Amendments IFRS 7, IFRS 13, IAS 19 (amended 2011) and Annual improvements to IFRSs None of the new accounting standards and interpretations have had any effect on recognition and measurement. Apart from the above, the accounting policies are unchanged from the accounting policies applied in the consolidated and company financial statements for to which reference is made. A full description of the accounting policies may be found in the consolidated and company financial statements for. 2 Accounting estimates and judgements Estimation uncertainty The preparation of the interim financial statements requires Management to make accounting estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant estimates made by Management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated and company financial statements for. For a more detailed description of the estimation uncertainty, reference is made to the consolidated and company financial statements for. 3 Segment information Group activities relating to the trade of technical installation materials take place in an integrated manner and are dealt with as one segment. 4 Impairment test The annual impairment test of intangible assets, including goodwill, is performed at 31 December 2013, after the completion of budgets and strategy plans for the coming period. At 30 September 2013, Management is of the opinion that there has been no indication of impairment of the carrying amount of goodwill, and therefore no impairment test of goodwill has been performed at 30 September For a more detailed description of impairment tests, reference is made to the consolidated and company financial statements for. 5 Non-current assets Acquisition and disposal of non-current assets During the reporting period the Group invested DKK 85.4 million (: DKK 15.3 million) in non-current assets. 6 Inventories No unusual inventory write-downs or reversals of inventory write-downs have been recorded in the period. 7 Trade receivables An estimate is used to assess the recoverability of receivables according to the same principles as applied in the financial statements for. 8 Deferred tax At 30 September 2013 net deferred tax liabilities were DKK 28.2 million, compared to DKK 31.8 million at 30 September. Deferred tax for the Danish entities is calculated on the basis of a tax rate of 22%, in consequence of a resolution made by the Danish Parliament to reduce the corporation tax. Company Announcement No. 10/ /14

Interim Financial Report for the Period 1 January 31 March 2014

Interim Financial Report for the Period 1 January 31 March 2014 Rørvang 3 * DK-2620 Albertslund * Denmark Tel: +45 70 28 00 00 * Fax: +45 70 28 01 01 * www.ao.dk CVR (Central Business Register) No.: 58