ANNUAL REPORT 2012/13

Transcription

1 ANNUAL REPORT 2012/13

2 B IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

3 2 MANAGEMENT LETTER 5 FINANCIAL HIGHLIGHTS AND KEY RATIOS 6 STRATEGY AND CAPITAL STRUCTURE 11 OUTLOOK 12 PERFORMANCE OF BUSINESS SEGMENTS 20 PERFORMANCE OF GROUP 24 RISK MANAGEMENT 28 CORPORATE RESPONSIBILITY 34 CORPORATE GOVERNANCE 38 EXECUTIVE BOARD AND BOARD OF DIRECTORS 40 SHAREHOLDER INFORMATION AND SHARE PERFORMANCE 45 CONSOLIDATED FINANCIAL STATEMENTS 77 PARENT FINANCIAL STATEMENTS 91 DEFINITION OF KEY RATIOS 92 STATEMENTS 94 GROUP STRUCTURE 95 FINANCIAL HIGHLIGHTS AND KEY RATIOS, QUARTERLY FOR 2012/13 (UNAUDITED) MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 1

4 A YEAR MARKED BY ESSENTIAL CHANGES FOR IC COMPANYS Strategy and organisation finalised The financial year 2012/13 was a significant year for IC Companys. Efforts of adjusting the corporate structure and developing a clear portfolio strategy for the Group during the past few years have resulted in IC Companys now having an even more transparent, simple and flexible structure and with a clear plan for the future to generate growth and boost earnings in the Group s Premium brands, and to strengthen the earnings capacity of the Group s Mid Market brands. New segmentation and stronger focus During the financial year under review the main focus area has been to reduce the complexity of the corporate structure and create transparency in all parts of the business. As a consequence of the adopted new portfolio strategy, a new segmentation of the Group s activities and changes to the responsibilities of the Group Management were implemented. This new segmentation of the Group s operations into three core segments and one non-core segment has provided the Group with the opportunity to focus even more on the clearly defined strategic targets. Premium brands deliver satisfactory results The Group therefore finds it very satisfactory that its two Premium segments have generated profits for the financial year 2012/13 in accordance with the defined strategies which confirms the potential of the three Premium brands Peak Performance, Tiger of Sweden and By Malene Birger. Foundation of The Original Group With the segmentation of the Group s operations, a new business unit in the Mid Market Contemporary segment came into existence under the name The Original Group. The foundation of The Original Group, which was announced in Q3 2012/13, is well under way and with the latest restructurings, the first important steps have been taken towards improving this business unit s long-term earnings capacity under a less complex structure. The financial performance of this segment is expected to improve already in 2013/14. 2 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

5 Adjusted capacity The corporate shared service functions have continuously been adjusted during the financial year under review which has resulted in improved profit margins for Group brands. This has also made it possible to better and quicker adjust the capacity of the shared service functions to the future activity level of the Group. Finally, this adjustment has rendered it possible to eliminate the excess capacity arising after the sale of the two Group brands Jackpot and Cottonfield. Important strategic divestment of Jackpot and Cottonfield The sale of Jackpot and Cottonfield to COOP in May 2013 marked an important mile stone in the process of achieving a less complex business model. The two brands in question, which have generated declining revenues and operating losses during a longer period of time, added complexity to the overall Group perspective as their business operations to a large extent were based on retail in Eastern Europe, which is considered far from the Group s core competence. After having concluded this sale, the Group may now focus more on its profit-earning activities. Sale of headquarters The divestment of the two brands, several restructurings as well as the relocation of The Original Group into one of the Group s other leases have in combination heavily reduced the utilisation of the corporate headquarters. The Group therefore decided to sell the property located Raffinaderivej, Denmark. The sales process has been commenced and a clarification of the process is expected by the end of the calendar year As the Group s activities are expected to continue generating positive cash flow from operations, the improved capital structure will thus imply that the Group will distribute any future surplus liquidity to the shareholders through a combination of dividends and share buy-back. New Group CEO Immediately after the end of the financial year 2012/13 Mads Ryder was appointed Group CEO of IC Companys A/S. Mads Ryder joined the Group on 1 August 2013 and now that the Group s strategy and organisation have been finalised, he will be heading the execution plans. The Group reported mixed results, but the total performance was disappointing The Group s important Premium segments realised satisfactory results for the financial year 2012/13 whereas the disappointing performance of the Mid Market Contemporary segment and the discontinued operations had a negative impact on the total Group performance for 2012/13. Revenue of continuing operations for the financial year 2012/13 amounted to DKK 3,314 million and the operating profit for the year after tax merely amounted to DKK 6 million which is unsatisfactory. Profit of continuing operations as expected After having adjusted for total non-recurring costs of DKK 53 million for 2012/13, the operating profit for the year of continuing operations amounted to DKK 210 million (DKK 209 million) which is in line with the Management s expectations. High free cash flow and solid capital structure With the expected sale of the headquarters, another of the Group s important targets will be accomplished which is a total net interest-bearing debt of zero. During the past years the Group has continuously employed its free cash flow to reduce its net interest-bearing debt, and during Q4 2012/13 the shortterm net interest-bearing debt was turned into a net deposit. Consequently, the Group now has a far more solid and flexible capital structure which will support the need for potential investments in the Group s Premium segments. A stronger IC Companys The Management looks back on a year marked by essential changes which all have been implemented to ensure a stronger IC Companys. The strategy is clear. The organisation and capacity have been adjusted. The cost and capital structures have been optimised. The top priority is now to execute in order to generate higher revenues and earnings growth for the Group. MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 3

6 * * EBITDA margin, adjusted for non-recurring items All the above key ratios are based on continuing operations This announcement is a translation from the Danish language. In the event of any discrepancy between the Danish and English versions, the Danish version shall prevail. 4 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

7 FINANCIAL HIGHLIGHTS AND KEY RATIOS DKK million 2012/ /12 1) 2010/11 1) 2009/10 1) 2008/09 1) INCOME STATEMENT Revenue 3, , , , ,966.1 Gross profi t 1, , , , ,738.8 Operating profi t before depreciation and amortisation (EBITDA) Operating profi t before depreciation and amortisation, adjusted for non-recurring costs Operating profi t (EBIT) Net fi nancials (13.1) (0.7) (13.4) (5.2) (10.8) Profi t for the year before tax Profit for the year of continuing operations Profi t/loss for the year of discontinued operations (105.7) (44.7) Profit for the year Comprehensive income (3.8) STATEMENT OF FINANCIAL POSITION Total non-current assets Total current assets 1, , , , Assets classifi ed as held-for-sale Total assets 2, , , , ,784.7 Share capital Total equity Total non-current liabilities Total current liabilities 1, ,052.8 Liabilities concerning assets classifi ed as held-for-sale Total equity and liabilities 2, , , , ,784.7 STATEMENT OF CASH FLOWS Cash fl ow from operating activities Cash fl ow from investing activities (66.3) (108.2) (103.2) (122.5) (135.8) Cash fl ow from investments in property, plant and equipment (58.2) (71.5) (79.3) (92.1) (129.5) Cash fl ow from operating and investing activities of continuing operations Cash fl ow from operating and investing activities of discontinued operations (16.7) Cash fl ow from fi nancing activities (34.8) (86.7) (142.8) (44.3) (83.0) Net cash fl ow for the year (66.3) KEY RATIOS - CONTINUING OPERATIONS Gross margin (%) EBITDA margin (%) EBITDA margin, adjusted for non-recurring items (%) EBIT margin (%) Return on equity (%) Equity ratio (%) Average invested capital including goodwill 1, , , , ,162.1 Return on invested capital (%) Net interest-bearing debt, end of year Financial gearing (%) (2.7) SHARE-BASED RATIOS* Average number of shares excluding treasury shares, diluted (thousands) 16, , , , ,524.4 Share price, end of year, DKK Earnings per share, DKK Diluted earnings per share, DKK Diluted cash fl ow per share, DKK Diluted net asset value per share, DKK Diluted price/ earnings, DKK 2) EMPLOYEES Number of employees, full-time equivalent at end of the year (continuing operations) 1,615 1,720 1,702 1,750 1,761 1) The comparative figures in the income statement have been adjusted in order to reflect that the brands Jackpot and Cottonfield have been separated as discontinued operations. 2) Diluted price/earnings for 2012/13 based on continuing operations amounted to * The effect of IC Companys programmes for share options and warrants has been included in the diluted values. The key ratios and share data have been calculated according to the recommendations in Recommendations and Ratios 2010 issued by the Danish Society of Financial Analysts. Please see definition of key ratios on page 91. MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 5

8 A CLEAR STRATEGY FOR IC COMPANYS IC Companys vision is to be one of the best developers of fashion and sports brands. The Group brands are developed by means of a well-defined business model and an efficient shared service platform which constitute the framework for the Group s mission of building successful brands by uniting business expertise with creativity and innovation. It is IC Companys ambition that an increasing part of the Group s total revenues and earnings derive from brands in the Premium segment. The market of fashion and sportswear IC Companys operates within the market of fashion and sportswear which constitutes one of the world s largest consumer goods markets. Nevertheless, this market is highly fragmented and regionally divided where even the biggest international market players only account for small market shares. The market of fashion and sportswear may roughly be divided into four segments based on factors such as price, brand perception and distribution chain. These four segments are as follows: Luxury segment comprising brands such as Gucci, Louis Vuitton, Prada and Burberry. Premium segment comprising brands such as Peak Performance, Tiger of Sweden, By Malene Birger, Hugo Boss, Filippa K and Acne. Mid Market segment comprising brands such as InWear, Matinique, Part Two, Soaked in Luxury, Esprit, GAP and French Connection. Fast Fashion segment comprising brands such as H&M, ZARA, Topshop and Mango Then there is also a large mass-market for non-branded products as well as private labels. IC Companys core business operates within the Premium and Mid Market segments. IC Companys business segments IC Companys is one of the largest companies within fashion and sportswear in the Nordic region with a core business comprising seven brands within the two market segments Premium (Outdoor and Contemporary) and Mid Market (Contemporary). Five years ago the Premium segment constituted less than 60% of the Group s revenue, however, this segment has generated an average annual growth rate of 5% during the last five years. Today the Premium segment s revenue share accounts for 70%. The Mid Market segment, in contrast, has suffered an average annual setback of 5% during the same period of time. MARKET SEGMENTS Market for fashion and sportswear LUXURY PREMIUM MID MARKET FAST FASHION 6 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

9 The highest earnings level is generated by the Group s Premium segment which has realised an EBIT margin of approx. 8-10% during the past few years whereas the Mid Market segment has been under pressure generating an EBIT margin below 5%. The Group s Mid Market segment will focus on strengthening its position in the Nordic core markets as well as harvesting the synergy potential between the four brands in the segment in order to improve earnings. A focused portfolio strategy providing clear targets IC Companys has set out a clear portfolio strategy comprising a portfolio of brands within the Premium and Mid Market segments as well as a matching set of key competences needed for operating successfully within these two segments. The Group s Premium segment comprising the three brands Tiger of Sweden, By Malene Birger and Peak Performance operates in attractive markets holding significant growth opportunities. The Group s Mid Market brands operate in a market characterised by highly challenging market conditions. While all of the Group s business segments are operated with strong focus on earnings, the Premium segments (Contemporary and Outdoor) are also pursuing revenue growth. Consequently, in the future these segments are thus expected to account for an increasing share of the core business resulting in capital and other resources primarily to be allocated for generating growth in these business segments. The Group will strive at generating organic growth in these segments. In the long-term, growth through acquisitions may also prove to be an option in the Premium segment. Both organic growth and improved earnings in the Premium segments are expected to be realised through higher market shares in existing markets as well as internationalisation in new markets. At present no actual acquisition plans have been formulated. Non-core business The two brands Saint Tropez and Designers Remix are considered non-core business. Saint Tropez is a Fast Fashion brand and is thus operating in a market positioned outside the corporate strategic focus. IC Companys exercises active ownership but the brand is not integrated into the corporate shared service platform. Saint Tropez will continue its operations independently and may in the long-term be divested. Designers Remix is a Premium brand only partly owned by IC Companys which makes it non-core business. The corporate business model The corporate business model seeks to maximise the value of the Group s portfolio of Premium and Mid Market brands while recognising their different potentials. Focus is on boosting performance of the individual brands through a combination of strategic development, business support and shared service functions. With great respect for the individual brands, the fundamental management philosophy for the Group s Premium brands is that each brand should have full ownership of those parts in the value chain being most important for ensuring a strong position in the market. For the Group s Mid Market brands the fundamental management philosophy is rooted in sharing as much as possible in order to optimise the utilisation of the synergy potential. IC COMPANYS BUSINESS UNITS Group brands divided into market segments PREMIUM MID MARKET Outdoor Contemporary Contemporary MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 7

10 Both the Premium and Mid Market brands share best practice in key areas within the value chain as well as the corporate shared service platform. The corporate business model is based on three elements which are as follows: Strategy, business development and support Corporate shared service functions People and culture Strategy, business development and support IC Companys has predefined frames for how to do business. This includes well-defined structures and processes for development, implementation and follow-up on brand strategies for all Group brands. It also includes principles, guidelines and tools on how to practise the key business disciplines such as retail, franchise, e-commerce and wholesale excellence, collection development and sourcing of collections as well as marketing and brandbuilding. These frames have been developed in co-operation between brands and the Executive Board and supported by Corporate Business Development. Corporate shared service functions Corporate shared service functions have been set up in those areas in which significant operational as well as knowledge synergies have been identified. The corporate shared service functions consist of the departments Finance, Global Sourcing, HR, IT, Legal & Real Estate and Logistics. These service functions are shared by all brands to simplify the day-to-day operations and to provide scale advantages in respect of costs/competences or control at Group level. The shared service functions provide the Group brands with a more efficient and service-minded set-up than they could obtain on their own or source outside the Group. Efficient refers to a set-up which is transparent and lean and consequently offers services at competitive prices. In addition to this, it also offers counselling which is competent, relevant and concrete. Serviceminded refers to a pro-active set-up which is customer-focused, business-oriented and reliable. The corporate shared service functions allow the brands to focus on their core business brand building and generating revenue and earnings growth. People and culture In IC Companys people play an important role in the Group s strategy execution. Differences are acknowledged and respected both between people and the different brands and their individual cultures - however, a common set of beliefs throughout the organisation is of vital importance. This common set of beliefs is referred to as Leadership Beliefs and comprises competences and characteristics which are particularly important for retaining a high performance culture throughout the entire organisation and in the way the business is operated. The Group s Leadership Beliefs form the framework as to how people work in IC Companys and how IC Companys attracts, retain and develop excellent employees who contribute in realising the Group s strategic targets. Investments in the Premium segment supported by a strong capital structure Growth strategy and the basis for future investments The expected future revenue development is based on the growth and internationalisation strategy pursued in the Group s Premium segments. Since this strategy is highly driven by distributor or franchise partners, investments in the Group s Premium brands will primarily include selected concept stores or particularly important locations in key markets as well as brand-building initiatives. Investments in the Group s Mid Market segment which is focusing on earnings will almost merely be limited to retaining and adjusting the activities in the core markets. This means that investments will primarily be implemented in the Premium segment. A well-functioning service platform on Group level means that only limited investments are required in order to support a growing business. In the future the Group aims at keeping the annual investments level at roughly the same level as the annual depreciation and amortisation. The Group s future investment level is expected to attain a level of 3% of the annual revenue. The working capital is still expected to constitute approx. 12% of the annual revenue and consequently it will gradually increase in line with the activity level in the long-term. Cash flow and debt level The Group still expects to generate a high level of cash flow from operating activities. During the year under review the accumulated surplus cash has been employed to reduce the Group s net interest-bearing debt. During Q4 2012/13 the short-term net interest-bearing debt was turned into a net deposit, and with the expected sale of the headquarters located Raffinaderivej, Denmark, during 2013 the total net interest-bearing debt will be converted into a net deposit. As the Group s total cash flow development is expected to be positive in the coming years, the Group expects to accumulate considerable surplus cash by 2013/14. To maintain the highest possible flexibility in the future and thereby support the growth strategies pursued in the Premium segments in the best way possible, the Group has decided to 8 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

11 retain the level of net interest-bearing debt to zero. The Group s credit facilities will then primarily be employed to cover for seasonal fluctuations of the cash outflows. As at 30 June 2013 the net interest-bearing debt amounted to DKK 118 million. After having paid ordinary dividends and with respect of the zero net interest-bearing debt level as at 30 June, any additional surplus liquidity will be distributed to the shareholders through share buy-back or extraordinary dividend. The Group has furthermore decided that in the future the net interest-bearing debt, including its lease commitments, may only as a maximum be increased to a level three times higher than EBITDA should such measures be necessary. At present the Group has no plans of employing gearing to the maximum level. Dividend policy As a minimum, 30% of the consolidated profit after tax will be distributed as an ordinary dividend. Based on the profit for the year of continuing operations, Management will propose at the Annual General Meeting 2013 that a resolution recommending DKK 2.00 per ordinary share, corresponding to a total dividend of DKK 33 million, in respect of the financial year 2012/13 to be distributed as dividend to the shareholders. Furthermore, during the financial year 2013/14 Management expects to distribute DKK 100 million through a combination of share buy-back and extraordinary dividend. MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 9

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13 OUTLOOK Outlook for 2012/13 realised Outlook for 2013/14 Consolidated revenue of continuing operations for the financial year 2012/13 amounted to DKK 3,314 million (DKK 3,293 million) corresponding to an increase of 1%. The last reported outlook for continuing operations stated an expected level of DKK 3, million. In the Group s interim report for Q3 2012/13 Management specified the outlook of the operating profit for 2012/13 of continuing operations. The consolidated operating profit for 2012/13 was expected to attain a level of DKK million excluding non-recurring costs for Q4 2012/13. During Q4 the Group recognised non-recurring costs of DKK 38 million. Operating profit for 2012/13 of continuing operations amounted to DKK 157 million. After having adjusted for the non-recurring costs recognised in Q4 2012/13, the operating profit amounted to DKK 195 million and was consequently in line with the last announced outlook for the financial year 2012/13. During the year under review the Group incurred total non-recurring costs of DKK 53 million relating to the continuing operations. After having adjusted for these, the consolidated operating profit for the year of continuing operations amounted to DKK 210 million (DKK 209 million) corresponding to an EBIT margin of 6.3%. The Group s Premium brands are expected to continue the positive development and generate solid growth rates for 2013/14. As a consequence of the challenges in the Group s Mid Market segment, which is expected to suffer a revenue setback, the total consolidated revenue growth for 2013/14 is expected to be modest. However, earnings are expected to be improved in all segments and the total consolidated earnings are consequently expected to increase significantly compared to DKK 157 million realised in 2012/13. Investments for the financial year 2013/14 are expected to attain a level of DKK million primarily for an expansion of the distribution in the two Premium segments. Management will propose at the Annual General Meeting 2013 that a resolution recommending DKK 2.00 per ordinary share, corresponding to a total dividend of DKK 33 million, in respect of the financial year 2012/13 to be distributed as dividend to the shareholders. Furthermore, during the financial year 2013/14 Management expects to distribute DKK 100 million through a combination of share buy-back and extraordinary dividend. Investments of continuing operations for the financial year 2012/13 amounted to DKK 66 million (DKK 108 million) which is lower than expected (the last reported outlook indicated an investment level of the same level as the financial year 2011/12). These investments were primarily attributable to the Group s Premium segments. MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 11

14 PREMIUM OUTDOOR Peak Performance constitutes the Group brand in the Premium Outdoor segment. The target is to improve revenue and earnings supported by the new strategy plan where focus on product development and sale to the end customers are key elements. During the financial year under review the organisation has been strengthened by a new brand CEO. Premium Outdoor The main target of the brand is to generate growth through enhanced market penetration and internationalisation and thereby boost both revenue and earnings. Peak Performance forms the largest brand in Scandinavia regarding tecnical and fashion sportswear. The brand was originally founded within the skiing community in 1986 by passionate skiers. Since then, Peak Performance has been among the world s leading producers when it comes to technical, performance sportswear. The Nordic home markets account for the majority of Peak Perfomance s revenue with Sweden as the largest market. During the financial year 2012/13 the four Nordic countries accounted for 67% of the total revenue. The brand has gained a strong foothold in Europe with the markets in the Alps being particurlarly important. The market segment Rest of Europe thus accounted for 29% of revenue in 2012/13 whereas the market segment Rest of the world accounted for 4% of revenue. The brand s products are sold through 2,065 selling points of which 86 are branded stores divided between 46 franchise stores and 40 own retail stores. The wholesale customers represent 1,979 selling points. Furthermore, Peak Perfomance is sold through own as well as third party e-commerce channels. To read more about Peak Performance please visit their web page at Development in 2012/13 During the financial year under review Peak Performance implemented a new and well-defined strategy. This new strategy plan forms an important foundation for the efforts of capitalising on the brand s large potential. Peak Performance s strategic target is to be the number one brand for skiers and the lifestyle they love to live focusing especially on product development and sale to the end customer. The strong focus on product development, which distinguishes Peak Perfomance positively from other PREMIUM OUTDOOR Financial highlights and key ratios Revenue development DKK million EBIT development and EBIT margin DKK million % / / / / / / Geographic breakdown of revenue Nordic region 67% Rest of Europe 29% EBIT EBIT margin Rest of the world 4% 12 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

15 brands within the same segment, and the increased focus on winning the end customers, where they do their shopping, are both key elements of the strategy plan. Headed by a new brand CEO, efforts have been made during the year to strengthen the organisation by recruiting key employees and managers e.g. within sale, marketing and product development. A strong team is now in place and with a revitalisation of the strong culture, which has always lived in Peak Performance, the organisation has a solid foundation with a clear focus on the brand s targets. The increased focus on product development takes its outset within technical performance sportswear which has always been the brand s core competence with especially outerwear being an important product segment. With development projects such as the highly innovative Project 9 and the re-launch of the R&D concept it is Peak Performance s target to be among the leading producers within this type of clothes as well as to transfer these innovative features to the Casual collection. An optimised Outdoor collection for this segment has been launched and also in this segment the ambition is that Peak Performance must differentiate distinctively from its peers. During 2012/13 Peak Performance has taken decisive steps towards a larger internationalisation. The brand has entered into distributor agreements in Eastern Europe, China and Hong Kong. These agreements are not considered to contribute much to revenues in the short-term, however, these markets are expected to boost the brand s growth significantly in the long-term perspective. Earnings development Peak Performance realised a revenue of DKK 931 million for the financial year 2012/13 (DKK 976 million) corresponding to a setback of 5% which is primarily attributable to the brand s wholesale customers generally being under pressure particularly in the large Swedish home market. Revenue for Q4 2012/13 amounted to DKK 99 million (DKK 80 million) corresponding to a growth rate of 24%. The wholesale customers have been under pressure during the financial year 2012/13 which is reflected in a wholesale revenue setback of 9%. Sales through own sales channels (retail, e-commerce and outlets) increased by 6% compared to 2011/12 which was primarily attributable to high e-commerce sales as well as sales through outlets. However, the brand suffered a minor retail same-store setback of 0.2% which includes a reported decline in sales in physical stores and an increase within e-commerce. The oprating profit increased by 25% to DKK 69 million (DKK 55 million) corresponding to an EBIT margin of 7.4% (5.6%). Even though this marks a significant improvement, Peak Performance s profit margin is still expected to improve. The positive development of the EBIT margin is primarily attributable to a significant improvement of the gross margin as a consequence of improved purchasing and sourcing as well as lower inventory write-downs. Lower capacity costs also contributed to the improved earnings in spite of lower revenues compared to the financial year 2011/12. PREMIUM OUTDOOR Earnings overview Q4 Q4 Year Year DKK million 2012/ / / /12 Revenue Wholesale and franchise Retail, e-commerce and outlet Operating profi t before depreciation, amortisation and net fi nancials (EBITDA) (44.1) (47.1) Depreciation, amortisation and impairment losses (6.4) (9.5) (26.6) (30.6) Operating profit (EBIT) (50.5) (56.6) EBIT margin (%) (51.0) (70.9) MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 13

16 PREMIUM CONTEMPORARY The Premium Contemporary segment comprises the two brands Tiger of Sweden and By Malene Birger which both realised growth and had success with the international expansion during the year under review. Premium Contemporary The Premium Contemporary segment comprises the two brands Tiger of Sweden and By Malene Birger and the main target for these two brands is to generate growth through enhanced market penetration and internationalisation thereby boosting both revenue and earnings. Tiger of Sweden was established in 1903 in Sweden and has its foundation in the strong menswear confection tradition and solid tailoring skills, refined for 110 years. Today, Tiger of Sweden is a modern, unisex brand which distinguishes itself by offering a design characterised by a different cut. By Malene Birger is a high-profile, Danish designer brand for women which offers luxury at affordable prices. Having enjoyed 10 years of success and continuous progress, the brand has achieved great recognition on the international fashion scene. Geographically, the Nordic home markets acount for the majority of the segment s revenue. Consequently, Denmark, Sweden, Norway and Finland accounted for 78% of the segment s revenue in 2012/13. The market segment Rest of Europe accounted for 15% of revenue whereas 7% of the segment s revenue derived from markets positioned outside Europe. In total the segment has 2,032 selling points which are divided between 1,967 wholesale customers, 29 franchise stores, 18 own retail stores and 18 concessions. Furthermore, the segment s products are sold through own as well as third party e-commerce channels. To read more about Tiger of Sweden and By Malene Birger please visit their web pages at: Development in 2012/13 Tiger of Sweden All of Tiger of Sweden s geographical markets and all sales channels reported progress and growth for the financial year 2012/13 which is considered very positive. The brand has experienced a breakthrough in the important strategic markets Great Britain and Germany. Tiger of Sweden ranked among the best-selling menswear brands at the internationally recognised department store Selfridges in London and in August 2013 a new Tiger of Sweden flagship store is scheduled to open at St. James, London a very important event toward supporting the brand s continued expansion in Great Britain as well as PREMIUM CONTEMPORARY Financial highlights and key ratios Revenue development DKK million EBIT development and EBIT margin DKK million % Geographic breakdown of revenue / / / / / /13 Nordic region 78% Rest of Europe 15% EBIT EBIT margin Rest of the world 7% 14 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

17 internationally. The brand has also performed well in Germany with newly opened shop-in-shops in the recognised department stores such as Oberpollinger in Munich and Galleries Lafayette in Berlin. Finally, during the year under review Tiger of Sweden has expanded its position in the Nordic home markets through both store openings and increased sales to wholesale customers. Tiger of Sweden has enjoyed great success with different branding initiatives such as the marketing campaigns Dressing Room Sessions, Working 9 to 5 and the Tiger Jeans campaign Paint it Black which all differentiate the brand significantly from its peers. Consequently, this emphasises Tiger of Sweden s strong brand DNA which is rooted in a different cut. During the financial year under review Tiger of Sweden have completed the insourcing of its accessories collection. The effect of this insourcing is expected to lead to a significant future revenue growth deriving from accesories which previously only constituted revenue from royalties. At the same time the sourcing and capacity costs will increase as Tiger of Sweden will be fully responsible for the entire value chain in the future. By Malene Birger With a new brand CEO in place By Malene Birger experiences strong growth in the Nordic home markets and makes great progress of the internationalisation process which is a key focus area. The brand has worked on opening a new store in the wellknown department store Galleries Lafayette as well as its own retail store in Palais Royal in Paris both with scheduled grand openings in August In addition, agreements have been entered into with selected distributors in Japan and in the Middle East markets which are both characterised by high purchasing power and a high demand for consumer goods and thereby important markets for By Malene Birger. 10-year anniversary show a show which subsequently received good publicity on both the Danish and international fashion scene and a show which particularly emphasised By Malene Birger as a strong international fashion brand. Earnings development The Premium Contemporary segment realised a revenue of DKK 1,064 million, corresponding to an increase of 18% compared to last financial year. Both brands contributed to the positive revenue development, however, Tiger of Sweden accounted for the highest growth rate of the two brands. Revenue for this segment in Q4 2012/13 amounted to DKK 243 milllion corresponding to an impressive growth rate of 33%. The segment reported revenue growth in the wholesale channel as well as higher sales through own stores and e-commerce. In particular, the wholesale channel reported strong progress with a growth rate as high as 19%. Tiger of Sweden contributed most to this positive development. Both brands contributed equally to the growth rate of 14% reported in the retail channel which is attributable to new stores and higher sales through existing stores. The retail operations generated a same-store increase of 13% driven by both own stores as well as e-commerce. The operating profit for this segment amounted to DKK 95 million (DKK 98 million) and thereby realised an EBIT margin of 8.9% compared to an EBIT margin of 10.8% for 2011/12. Investments in future growth and the continued international expansion have affected the operating profit due to higher operating costs as well as increased costs for the mentioned insourcing of Tiger of Sweden s accessories. The gross margin for the Premium Contemporary segment for 2012/13 was at the same level as last financial year. In January 2013 By Malene Birger hosted one of the most spectacular fashion shows in Denmark seen in a long time. The scene of the Royal Danish Theater was used for the brand s Depreciation and amortisation were higher in 2012/13 compared to last financial year. As expected, they reflect the significant investments in growth and expansion implemented in this segment during the past few years. PREMIUM CONTEMPORARY Earnings overview Q4 Q4 Year Year DKK million 2012/ / / /12 Revenue , Wholesale and franchise Retail, e-commerce and outlet Operating profi t before depreciation, amortisation and net fi nancials (EBITDA) Depreciation, amortisation and impairment losses (7.0) (5.3) (25.9) (21.9) Operating profit (EBIT) EBIT margin (%) MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 15

18 MID MARKET CONTEMPORARY The Mid Market Contemporary segment comprises four brands organised under the independent division named The Original Group. Since the division was founded in the spring 2013 it has initiated a number of restructurings which are expected to contribute to an improved earnings capacity. Mid Market Contemporary The Group s Mid Market segment comprises four brands organised under one division named The Original Group. The three brands InWear, Part Two and Soaked in Luxury are women s fashion brands whereas Matinique exclusively produces meanswear. Besides the four brands the division also includes the multi-brand store concept Companys. The main targets for The Original Group are to harvest the synergies between the four brands, to improve the earnings capacity as well as to strengthen the market position in the Nordic core markets. Geographically, the majority of the segment s revenue in 2012/13 is divided between the Nordic home markets Denmark, Sweden, Norway and Finland which accounted for 63% whereas the market segment Rest of Europe accounted for 30% of revenue. In particular, a large part of Matinique s revenue derived from the market segment Rest of Europe. The market segment Rest of the world accounted for the remaining 7% of revenue. The Original Group has 3,879 selling points of which 3,737 are wholesale customers. The segment has 71 franchise stores of which 40 are Companys stores. Finally, products from the four brands are sold through 24 own retail stores, 47 concessions as well as through own third party e-commerce channels. To read more about the four brands of this segment please visit their home pages at: Development in 2012/13 As a consequence of the Group s new segmentation of its brand portfolio, the four Mid Markets brands, together with the Companys concept, were united in February 2013 under one division with a shared management team. This division was named The Original Group. During spring 2013 the division moved into separate headquarters at one of the Group s other leases. During Q3 2012/13 non-recurring costs of DKK 8 million were realised in connection with establishing the division, the initial restructurings and the relocation. The Original Group still faces serious challenges due to its very complex business in particular, the number of distribution channels and geographical markets. Consequently, this business unit is now working on simplifying the complex business by focusing on the Nordic core markets with wholesale customers, concessions, outlets and the Companys store concept as its primary distribution channels. MID MARKET CONTEMPORARY Financial highlights and key ratios Revenue development DKK million EBIT development and EBIT margin DKK million % (20) (40) (8) 2010/ / / / / /13 Nordic region 63% (4) Geographic breakdown of revenue Rest of Europe 30% EBIT EBIT margin Rest of the world 7% 16 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

19 The largest and most profitable distributor agreements in the other geographical markets are retained and the segment s e-commerce solution will be optimised. In the retail channel the focus will be on concessions and the Companys concept stores, and on certain geographical wholesale markets the sales set-up will be changed into a more flexible one. Adjusting the number of geographical markets and distribution channels is expected to lead to a significant reduction in the division s total revenue and cost base in the coming financial year. According to the plan, the business model will be simplified with focus on improving the earnings capacity. A more commercial approach towards collection development with smaller collections and improved price points, realisation of sourcing synergies, less expensive logistic solutions as well as focus on the marketing efforts in the Nordic core markets are some of the initiatives which are expected to contribute to improved earnings in the future. Part of the expected savings arising from the restructurings will be re-invested in the Nordic core business by means of more competitive price points as well as enhanced marketing efforts. Earnings development The segment realised a revenue of DKK 891 million (DKK 995 million) corresponding to a decline of 11% which is equally driven by reported setbacks in retail, wholesale and franchise. The segment s same-store development reflected a decrease of 7% driven by lower sales through own stores. The operating loss for this segment amounted to DKK 37 million (profit of DKK 40 million) corresponding to a negative EBIT margin of 4.2% compared to a positive EBIT margin of 4.0% in 2011/12. However, the financial performance was significantly affected by total non-recurring costs of DKK 46 million for the financial year under review. After having adjusted for nonrecurring costs, the segment realised an operating profit of DKK 9 million. The unsatisfactory results are attributable to a revenue setback which has not been offset sufficiently by adjustments of the capacity costs. Furthermore, a deteriorated gross margin also had a negative impact on earnings. As a consequence of the restructuring plan, The Original Group has implemented structural organisational changes in Q4 2012/13 resulting in staff reductions both in the sales organisation and in the division s headquarters. In total the implemented initiatives in Q4 2012/13 led to non-recurring costs attributable to, e.g., closure of showrooms and retail stores as well as staff reductions. The total non-recurring costs for Q4 2012/13 of DKK 38 million are distributed as follows; During the next two financial years the mentioned initiatives are expected to have a total negative revenue impact of approx. DKK million whereas a positive effect of approx. DKK million is expected on earnings when the initiatives are fully implemented. closure of showrooms and retail stores DKK 19 million; staff reductions DKK 14 million; and other costs in connection with the restructuring plan DKK 5 million. MID MARKET CONTEMPORARY Earnings overview Q4 Q4 Year Year DKK million 2012/ / / /12 Revenue Wholesale and franchise Retail, e-commerce and outlet Operating profi t before depreciation, amortisation and net fi nancials (EBITDA) (51.1) 8.5 (9.1) 71.8 Depreciation, amortisation and impairment losses (7.6) (7.2) (28.0) (31.7) Operating profit (EBIT) (58.7) 1.3 (37.1) 40.1 EBIT margin (%) (32.8) 0.6 (4.2) 4.0 MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 17

20 NON-CORE BUSINESS A part of the Group s brand portfolio is defined as non-core business due to these operations lying either outside the Group s core competences or because they are not wholly owned by IC Companys. Non-core business Earnings development The Group s operations comprise two brands classified as noncore business. These two brands; Saint Tropez and Designers Remix are both profitable. Saint Tropez is a Fast Fashion brand which has not been integrated into IC Companys shared service platform. The brand will continue its operations independently and may in the longterm be divested. Designers Remix is a Premium brand which has developed well during the past few years. IC Companys holds 51% of the brand and the founders Niels and Charlotte Eskildsen hold the remaining 49%. The future ownership of the brand remains to be resolved. The segment reported a revenue of DKK 430 million (DKK 417 million) corresponding to a 3% increase. New stores in the segment s retail channel contributed to the positive development whereas sales to the segment s wholesale and franchise customers have almost been on the same level as last financial year. The segment experienced a minor same-store setback, yet, e-commerce reported growth. During the year 2012/13 Saint Tropez, which accounts for the majority of the segment, increased its focus on improving earnings after the disappointing earnings performance in 2011/12. This higher focus has resulted in significantly improved earnings which contribute substantially to the segment s operating profit of DKK 30 million (DKK 3 million) corresponding to an EBIT margin of 7.0% (0.6%). The satisfactory earnings growth is attributable to an improved gross margin and lower capacity costs. Saint Tropez has consequently regained its strong earnings capacity documented over the past couple of years. NON-CORE BUSINESS Earnings overview Q4 Q4 Year Year DKK million 2012/ / / /12 Revenue Wholesale and franchise Retail, e-commerce and outlet Operating profi t before depreciation, amortisation and net fi nancials (EBITDA) 7.3 (0.9) Depreciation, amortisation and impairment losses (2.8) (2.8) (10.9) (11.0) Operating profit (EBIT) 4.5 (3.7) EBIT margin (%) 4.4 (3.5) IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

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22 RESTRUCTURINGS AFFECT THE TOTAL CONSOLIDATED OPERATING PROFIT Consolidated revenue for 2012/13 of continuing operations amounted to DKK 3,314 million corresponding to a minor increase of 1%. In total, the Group s Premium segments and non-core business contributed to the improved earnings, but the non-recurring costs for restructurings, primarily attributable to the Group s Mid Market Contemporary segment, affected the profit for the year significantly. However, a reduction in the Group s working capital and the total interest-bearing debt ensured that the Group once again reported a significantly improved cash flow. Earnings development Revenue development Consolidated revenue of continuing operations for the financial year 2012/13 amounted to DKK 3,314 million (DKK 3,293 million) corresponding to a setback of 1%. Revenue was positively affected by foreign currency translation of DKK 94 million. Consolidated revenue of continuing operations for Q4 2012/13 amounted to DKK 624 million (DKK 568 million) corresponding to a growth rate of 10%. Revenue was positively affected by foreign currency translation of DKK 6 million. Minor improvement of gross margin Consolidated gross profit for the financial year 2012/13 amounted to DKK 1,869 million (DKK 1,835 million) corresponding to an improvement of 2%. The gross margin for 2012/13 amounted to 56.4% (55.7%) which reflects an improvement of 0.7 percentage points compared to last financial year. The higher gross margin is primarily attributable to an improved inventory situation compared to last financial year. When adjusted for new products, the volume of products was significantly lower at the end of the season resulting in lower inventory write-downs. Furthermore, the Group has experienced an improved control of its sourcing activities. On the other hand the market pressure throughout 2012/13 has been fierce and the expected reduction in customer discounts was not fully feasible. Consolidated gross profit for Q4 2012/13 amounted to DKK 336 million (DKK 327 million) corresponding to an increase of 3%. Non-recurring costs incurred for restructurings implemented in the Mid Market Contemporary segment Consolidated costs including other operating income and costs for 2012/13 amounted to DKK 1,712 million (DKK 1,639 million) corresponding to an increase of 4%. The costs were negatively affected by foreign currency translation of DKK 45 million. The cost rate for the year under review amounted to 51.7% (49.8%) and thus increased by 1.9 percentage points. Consolidated costs for Q4 2012/13 were negatively affected by non-recurring costs of DKK 38 million primarily attributable to provisions for restructurings in the Mid Market Contemporary segment covering closures of showrooms and retail stores, severance payments as well as a number of other implemented measures. Total consolidated non-recurring costs of continuing operations amounted to DKK 53 million compared to DKK 14 million in 2011/12. After having adjusted for non-recurring costs and foreign currency translation in both 2012/13 and 2011/12, consolidated costs were reduced by DKK 11 million compared to last financial year. This cost reduction was achieved in spite of higher costs in the Premium Contemporary segment needed for boosting present and future growth. Consolidated costs for Q4 2012/13 amounted to DKK 435 million (DKK 380 million) which constitutes an increase of 14%. The costs were negatively affected by foreign currency translation of DKK 5 million. The gross margin for Q4 2012/13 amounted to 53.9% (57.6%) corresponding to a setback of 3.7 percentage points compared to Q4 2011/12. The lower gross margin is primarily attributable to the temporary changes between Q3 and Q4 2012/13 where the gross margin was realised by an improvement of 3 percentage points in Q3 2012/13. After having adjusted for non-recurring costs and foreign currency translation in Q4 for both 2012/13 and 2011/12, consolidated costs rose by DKK 12 million driven by higher costs in the Premium Contemporary segment due to the realised growth and investments in future growth. 20 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

23 Operating profit at the same level as last financial year after having adjusted for non-recurring costs Consolidated operating profit of continuing operations for 2012/13 amounted to DKK 157 million (DKK 195 million) corresponding to a setback of 19% and an EBIT margin of 4.7% (5.9%). After having adjusted for non-recurring costs in both 2012/13 and 2011/12, the operating profit of DKK 210 million was realised at the same level as last financial year (DKK 209 million). Consolidated operating loss for Q4 2012/13 amounted to DKK 98 million (loss of DKK 53 million) corresponding to a deterioration of DKK 45 million. Net financials Net financials totalled costs of DKK 13 million which constitutes an increase of DKK 12 million (costs of DKK 1 million). This increase is attributable to realised loss on derivative financial instruments of DKK 4 million (gain of DKK 4 million). Interest on liabilities to credit institutions for 2012/13 was lower compared to 2011/12 due to a lower debt level during the year. Net financials for Q4 2012/13 totalled costs of DKK 4 million (income of DKK 4 million). This decrease is attributable to a positive impact from realised gain on derivative financial instruments in 2011/12. Tax on profit for the year Tax expense for 2012/13 amounted to DKK 8 million (DKK 40 million) which constitutes 56% (31%) on profit before tax. The higher tax rate compared to last financial year is primarily due to the fact that the Group reassessed its tax assets in 2012/13 and the tax carried in the income statement was thus affected negatively by DKK 9 million. Tax payable amounted to DKK 40 million (DKK 39 million) after having utilised losses carried forward from previous years. An amount of DKK 55 million of the tax assets recognised in previous years was utilised corresponding to a tax value of DKK 14 million. Profit for the year of continuing operations Profit for the year of continuing operations declined by 16% to DKK 112 million (DKK 134 million). Loss for the year of discontinued operations Loss for the year of discontinued operations amounted to DKK 106 million (loss of DKK 45 million) corresponding to a setback of 136%. This loss for the year is attributable to the fact that the proceeds received from the sales transaction with COOP do not exceed the provisions and impairment losses recognised for the discontinued operations. Profit for the year Consolidated profit for the year amounted to DKK 6 million (DKK 89 million) corresponding to a decline of 93%. Comprehensive income Comprehensive income for 2012/13 totalled a loss of DKK 4 million (income of DKK 157 million). The comprehensive income was positively affected by adjustments deriving from foreign currency hedging instruments by DKK 1 million (positive adjustment of DKK 85 million) and negatively affected by foreign currency translation adjustments regarding subsidiaries by DKK 10 million (positive adjustment of DKK 11 million). Statement of financial position and cash flows Statement of financial position Consolidated assets rose by DKK 14 million to DKK 2,022 million as at 30 June 2013 (DKK 2,008 million) which is attributable to an increase of the consolidated current assets. Non-current assets were reduced by DKK 203 million relative to last financial year which is primarily attributable to assets classified as held-for-sale of DKK 144 million. Consolidated intangible assets declined by DKK 23 million to DKK 258 million (DKK 281 million) which is attributable to fewer investments as well as amortisation and impairment losses on software and IT systems. Property, plant and equipment decreased by DKK 194 million to DKK 144 million (DKK 338 million) primarily as a consequence of DKK 144 million being classified as assets held-for-sale as well as impairment losses in connection with discontinued operations. In general the Group has invested less than the level of depreciation. Current assets rose by DKK 217 million to DKK 1,502 million (DKK 1,285 million) due to surplus liquidity being invested in securities as well as the reclassification of the Group s headquarters as assets classified as held-for-sale. Inventories amounted to DKK 529 million for 2012/13 (DKK 529 million) which is at the same level as last financial year. During the financial year under review the Group has continued focusing on reducing its inventories and inventory risks by clearing products out-of-season which has improved the age distribution of the Group s inventories compared to 30 June As a consequence of this clearing, inventory write-downs were reduced by DKK 17 million to DKK 90 million (DKK 107 million). The inventory turnover amounted to 3.1 which is the same level as 2011/12. Trade receivables as at 30 June 2013 amounted to DKK 391 million (DKK 392 million) which is at the same level as 2011/12. Gross trade receivables rose by DKK 12 million to MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 21

24 DKK 460 million (DKK 448 million). This development reflects the Group s planned change in delivery flows resulting in collections being delivered earlier to the stores. Furthermore, the age distribution of trade receivables was deteriorated. Nevertheless, the level of days sales outstanding was at the same as last financial year. Write-downs of trade receivables rose by DKK 13 million to DKK 69 million (DKK 56 million) as a consequence of the deteriorated age distribution. Other receivables declined to DKK 72 million (DKK 137 million) which is primarily attributable to the fact that accruals of financial foreign exchange contracts last year included an unrealised gain of DKK 76 million compared to an unrealised gain of DKK 26 million for the year under review. This gain is primarily a result of higher sales currency exchange rates throughout the financial year 2012/13. Prepayments decreased by DKK 14 million which is attributable to a decline in accruals of rent and others. The Group s surplus liquidity has been invested in securities which amounted to DKK 101 million (nil). million in the operating profit. The Group has achieved a reduction of DKK 7 million in the tied-up working capital compared to a reduction of DKK 31 million in the tied-up working capital last financial year. Investments for 2012/13 amounted to DKK 66 million (DKK 108 million) corresponding to a decrease of DKK 42 million. The investments were primarily employed for interior design of new stores and IT. Consolidated cash flow from financing activities for 2012/13 amounted to an outflow of DKK 35 million (outflow of DKK 87 million). Total consolidated cash flow for 2012/13 amounted to an inflow of DKK 131 million (an inflow of DKK 64 million) corresponding to an increase of DKK 67 million. Cash situation As at 30 June 2013 consolidated net interest-bearing debt amounted to DKK 118 million (DKK 248 million) corresponding to a decline of DKK 130 million compared to 30 June Furthermore, cash and cash equivalents increased by DKK 27 million to DKK 110 million (DKK 83 million). After adjusting for non-cash funds, the total working capital amounted to DKK 403 million (DKK 410 million) which is at the same level as last financial year. The working capital constitutes 11% of revenue for the year under review (11%). Long-term liabilities decreased by DKK 164 million to DKK 83 million (DKK 247 million) which is primarily due to DKK 140 million being classified as liabilities concerning assets classified as held-for-sale. As at 30 June 2013 the Group s total credit facilities including banker s credit and guarantees constituted DKK 924 million (DKK 1,097 million) in terms of withdrawal rights of which an amount of DKK 329 million has been drawn in relation to current and non-current liabilities to credit institutions and an amount of DKK 188 million has been drawn for trade finance facilities and guarantees. Undrawn credit facilities thus amounted to DKK 407 million. All credit guarantees, except from the Group s loan in the corporate head office, are standby credits which may be drawn with a day s notice. The withdrawal rights have at no point in time during the financial year 2012/13 exceeded 63%, including provisions for trade finance facilities, bank guarantees, etc. Current liabilities increased by DKK 201 million to DKK 1,131 million (DKK 930 million). An amount of DKK 140 million has been classified as liabilities concerning assets classified as held-for-sale under current liabilities. Furthermore, provisions under current liabilities have been increased by DKK 99 million as a consequence of discontinued operations and the restructurings in the Mid Market Contemporary segment. Liabilities to credit institutions were reduced by DKK 2 million whereas trade payables rose by DKK 23 million. Other liabilities were reduced by DKK 72 million to DKK 252 million (DKK 324 million) which is primarily attributable to a decrease of unrealised loss on financial contracts and other costs payable. Statement of cash flows Consolidated cash flow from operating activities for 2012/13 amounted to an inflow of DKK 232 million (inflow of DKK 258 million) corresponding to a decrease of DKK 26 million compared to 2011/12 which is attributable to a reduction of DKK 104 Equity Equity as at 30 June 2013 decreased by DKK 22 million to DKK 809 million compared to 30 June 2012 (DKK 831 million) which is primarily attributable to negative foreign currency translation adjustments concerning subsidiaries and intercompany loans whereas payment of dividend in respect of the financial year 2011/12 reduced equity by DKK 25 million. Equity ratio as at 30 June 2013 was 40.0% (41.4%). Events after the reporting period Mads Ryder was appointed Group CEO of IC Companys A/S as at 1 August Besides this, no material events have taken place after the reporting period that have not been recognised or included in the Annual Report. 22 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

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26 EFFICIENT RISK MANAGEMENT IN THE FASHION AND SPORTS INDUSTRIES As a market player within the fashion and sports industries the Group is exposed to a number of risks. Through the development of an innovative knowledge centre and more than 30 years of experience, the Group has achieved a unique ability to control the various risks. To the extent that the efficiency, flexibility and service level in respect to brands are not compromised, the risks that fall outside the scope of the Group s key disciplines are outsourced to external partners. Due to the Group s activities, IC Companys is exposed to a number of risks. This entails a variety of risks all inherent in the fashion and sports industries. The Management of IC Companys considers efficient risk management as an integrated part of all Group activities and all risks are therefore assessed thoroughly in order to minimise uncertainty and thus create stakeholder value. Reassessment of the risks will be conducted annually in order to determine whether the risks have changed or the risk control measures are adequate or relevant. when they reach the stores do not appeal to the customers and consequently cannot be sold at the expected volumes and at the expected prices. Each individual brand develops their collections from a commercial and facts-based approach in order to minimise this risk. Furthermore, at Group level, there is an inherent high level of diversification as a result of the number of different and independent brands. In general, IC Companys handles risk management at a strategic level and categorises its risks as either core risks or non-core risks. Both risk categories are managed with the purpose of limiting the volatility in Group cash flows. The first risk category represents areas in which IC Companys hold special competences, whereas the second category represents areas which are either core risks for other companies or risks that fall outside the scope of efficient management. Core risks Brand value risk The Group operates nine strong brands which all hold significant intangible values accumulated over a number of years. Continuous development of the collections results in an all-existing risk of errors which may damage the value of the individual brand. However, a strong control of the fashion risk influencing the Group brands and a selective distribution help reducing this risk. Furthermore, the Group brands continuously work on brand building and marketing in order to retain and build up intangible values. Any business operation involves a variety of risks and the success of the business depends on its ability to control these risks, minimise uncertainty and thus optimise its profit. The Group creates stakeholder value by managing and minimising uncertainty within the core activities in a manner superior to that of its competitors. IC Companys considers fashion, supplier, logistics, inventory, debtor, employee and brand value risks as such risks. The Management believes that these core risks should be accepted as an integrated part of the Group s business. The Group s processes are thus employed in such a manner that risks are controlled efficiently based on the experiences and competences achieved over time in the fashion and sports industries by the Group. Fashion risk All Group brands are heavily influenced by fashion trends. As collections change at a minimum of four times a year and have a long lead time, there is a potential risk that the products Bad publicity in the national and international media or with the brand s core customers may lead to considerable loss of brand value. The Group leads an active policy of corporate responsibility which requires the Group brands to comply with a number of guidelines. Furthermore, the individual brands have their own focus areas within corporate responsibility. The risk of Group brands being involved in questionable issues, which may lead to loss of brand value, is thus limited. Supplier risk The Group s products are solely produced by sub-suppliers which ensures a high level of flexibility. Yet, the co-operation with external suppliers entails a number of risks in regards of correct production of the ordered products. Sourcing for all brands is handled by own shared sourcing offices in China, (including Shanghai and Hong Kong) India and Romania and to a limited extent by the use of agents. 24 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

27 The Group s sourcing strategy, of which the objective is to capitalise on the relevant synergies arising between Group brands by systematising the co-operation between Group brands and selected sourcing partners, ensures that individual brands have their production located in the right countries and co-operate with the best suppliers. The strategy enhances the compliance control of the Group s business and ethical standards through a systematic scoring of all suppliers. In addition to this, the Group is working on increasing the trade with each individual supplier as well as improving the co-operation with its best suppliers. Consequently, this will lead to a reduction in the number of suppliers and thereby a less complex sourcing structure. Furthermore, the sourcing structure makes it possible for all brands to handle geographic sourcing alternatives safely and quickly and thereby move production to wherever the combination of price, quality and supply stability is best. This allows IC Companys to harness new sourcing opportunities more efficiently as well as reduce the operational risk. 2%. The Group has a total of 314 suppliers of which the largest 10 suppliers account for 30% of the total production value. The largest single supplier accounts for 5% of the total production value and the Group is thus not substantially dependent on one single supplier. IC Companys is also working towards increasing the number of suppliers who have completed BSCI training. These efforts are described further in the section Corporate Responsibility on page 28. The number of the Group s suppliers who are actively employing the BSCI processes amounted to 62% in 2012/13. Supplier risk management is based on the Group s international sourcing experience gained over more than 40 years. Inventory risk Sale through own stores and the need to carry inventories and supplementary products for retailers result in a risk that products, which during the year have been allocated for sale, remain unsold at the end of the season just as the Group is often liable for sourcing materials until the products reach the stores which is 6-9 months. In 2012/13 China accounted for 63% of the production whereas rest of Asia accounted for 10%, Europe for 24% and Africa for By focusing on collection development and the purpose of each individual style in the brand s distribution, a significant part of MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 25

28 the inventory risk may be reduced. A substantial amount of the total purchase has been pre-ordered by the Group s wholesale customers which also contributes to a reduction of the inventory risk. The Group also has a network of outlets to where surplus products are channelled and are sold continously during the year. Capacity in this network is increased or reduced as required. Any products that cannot be sold through own outlets are sold to brokers for resale outside the Group s established markets. As a consequence of the divestment of Jackpot and Cottonfield and thereby the closure or sale of these brand stores, the number of own stores will be reduced significantly and the inventory risk will thus be reduced. Logistics risk Collections are products with a limited life-span. If the right products are not available in the stores at the right time, this may result in lost revenues or a potential higher amount of returned and surplus products leading to write-downs. Late, faulty or nondelivery thus poses a risk. In general the Group s products are handled in two ways; the products are either distributed in flat packages or hanging with the flat packages being the primary transport method. The majority of the Group s products sourced in Asia is transported on container liners to Europe, but if deemed necessary air freight is used instead. Measured by total volume, approx. 85% of the products are transported on container liners while approx. 15% is transported by air freight. All the Group s products sourced in Europe are transported by truckage which is a very flexible transport method. Flexible geographical sourcing and the possibility of moving freight from container liners to air planes help reducing the logistics risk optimisation of the corporate logistics function. To ensure timely deliveries to our own and customers stores is a key element of the corporate shared service functions. Debtor risk The risk of late or no payment from the Group s wholesale customers poses a significant risk to the Group. The Group brand products are sold at more than 8,000 selling points. As a considerable number of the Group s wholesale customers are customers of more than one brand, the actual number of wholesale customers is lower. No customer accounts for more than 3% of the Group s wholesale revenue. Prior to entering into business relations with customers, the Group always assesses the customer pursuant to the Group s Debtor Policy and based on their distribution set-up. These assessments are subsequently performed on a regular basis. By ensuring a healthy base of customers, the debtor risk is reduced; however, unanticipated losses may still occur. In addition to this, a new bank integration system is expected to provide a faster and improved overview of the Group s wholesale customers. Credit insurance is typically only taken out in those countries where the credit risk exposure is estimated to be high and where this is feasible. This primarily applies to distant markets in which IC Companys is not represented through an independent sales set-up. Credit terms vary in line with individual market practise. In the past years the Group has recognised loss on trade receivables amounting to less than 1% of the wholesale revenue. The Group has thus recognised loss on trade receivables of 0.6% of the wholesale revenue for the financial year under review. Non-core risks The core of the Group s logistics structure consists of three large warehouses; a modern warehouse in Brøndby, Denmark, which handles the Group s flat packages for the majority of the Group brands, a warehouse at Raffinaderivej, Denmark, which handles the Group s hanging products for the majority of the Group brands and a warehouse in Herning, Denmark, which handles the Group brand Tiger of Sweden s hanging products. Many years of logistics management and distribution experience within the fashion and sports industries has reduced the logistics risk significantly. The corporate shared logistics function is continuously working on optimising and enhancing the planning systems. Investment in a new Warehouse Management System is expected to contribute further to the management and The Group is exposed to a number of other risks. These risks relate to activities in which the Group does not hold special competences in efficient risk management. To the extent that the efficiency, flexibility and service level in respect to brands are not compromised, these risks are outsourced. Such strategic decisions are made at management level. Political risk A substantial part of the Group s sourcing takes place in markets posing significant political risks. The Group s single largest political risk factor concerns reliable supplies from China which accounts for 63% of the Group s sourcing. The sourcing functions are continuously monitoring the conditions at the global sourcing markets and are thereby assisting in providing updated reports 26 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

29 of the situation. As mentioned earlier, geographic relocation of sourcing may take place swiftly if deemed necessary. Financial risks The Group s financial risks may be categorised as follows; foreign currency exposure risk, interest rate risk and liquidity risk, including counter-party risk. The Group monitors and controls all its financial risks through the Parent Company s Treasury Department. The use of financial instruments and the related risk management are controlled and set by the Group s Treasury Policy approved by the Board of Directors. Financial instruments are solely used by the Group to hedge financial risks. All financial instruments are entered into as a means of hedging the underlying commercial activity and thus no speculative contracts are made. Foreign currency exposure risk The Group is exposed to significant foreign currency exposure risks which arise through purchase of supplies and sale of products in foreign currencies. The main part of the Group s purchase of supplies is made in the Far East and denominated in USD and USD-related currencies while the main part of the revenues and capacity costs are denominated in DKK, SEK, EUR and other European currencies. The natural currency hedge in the Group s transactions is thus limited. In general, the Group hedges all material transaction risks on a forward trailing 15 months basis. The Group primarily uses foreign exchange contracts to hedge the Group s foreign currency exposure risks. Interest rate risk The Group s interest rate risks are related to the Group s interest-bearing assets and liabilities. IT risk The Group is dependent on efficient and reliable IT systems for the day-to-day business operations as well as to ensure control of product sourcing and to enhance efficiency throughout the Group s supply chain. The Group is continuously working on minimising the risks relating hereto. This work primarily includes development and new employment of IT systems as well as the day-to-day operation of these systems. Access controls and implemented contingency plans also contribute to an improved security when using the Group s IT systems. Solid IT support in all aspects of sourcing, distribution, logistics, administration and sales renders it possible for the individual brands to focus on the creative and commercial development aspects. The Point of Sale IT System has led to significant improvements of the Group s retail data which permits a more efficient utilisation of the sales area. The new Warehouse Management System is expected to contribute significantly to an improved logistics function and the bank integration system will enhance the control of customer payments. Consequently, in a number of areas the shared operation of the IT platform ensures a significant risk reduction for the individual brands and the Group. Employee risk In order to succeed with the corporate strategy, IC Companys strives at creating a high-performance culture, where passionate, committed employees may provide the all-important competitive edge. To attract, develop and retain high-performance employees thus poses a risk to the Group. IC Companys strives at being an attractive employer offering unique career opportunities, talent development and the opportunity to move between the different Group functions and brands. The Group s interest rate risk is controlled by obtaining loans with a floating or fixed rate and/or financial instruments hedging against the interest rate risk on the underlying investment. Liquidity risk The Group s cash resources and capital structure are allocated and planned in such manner as to always ensure and support the Group s on-going operations as well as planned investment projects. Measures taken to minimise liquidity risks are described further under the section Cash flow and debt level on page 8. The Group has a professional and experienced HR department which supports the development of IC Companys as a knowledge centre. Furthermore, the HR department is responsible for the development and updating of guidelines, tools, processes and training, and conducts employee surveys to ensure that the Group is well on its way to becoming a world class employer. This helps support the development of the Group s performance culture and ensures that all employees have clear goals and can act as accountable, trustworthy ambassadors for our brands and Group. Please see note 31 to the consolidated financial statement for further information on the Group s financial risks at 30 June MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 27

30 CORPORATE RESPONSIBILITY IN IC COMPANYS IC Companys corporate responsibility framework of People, Planet and Profit is based on international principles and the UN Global Compact. Working with these international principles continues to play an important role in guiding IC Companys in making the right decisions while also contributing to the Group s readiness to meet future challenges. As a natural part of aligning the corporate responsibility work with international best practices and to further develop the implementation framework, IC Companys has joined the Sustainable Apparel Coalition. Corporate responsibility policy IC Companys recognises that the Group is part of an industry with many corporate responsibility (CR) challenges both in terms of complex supply chains and resource challenges. These challenges are taken seriously and the Group has adopted an overall approach of making sure that it is not a barrier to sustainable development. However, IC Companys would like to take it one step further and where possible work towards turning these challenges into opportunities. The Group therefore strives at employing its creativity and strong innovation skills to make a difference and contribute to sustainable development. For IC Companys, CR is about not only reassuring that the products comply with the Group s high quality standards and fulfill the customer expectations, but also that they are produced responsibly. IC Companys considers CR to be an integrated part of its business and an essential element in the Company s profitability. Furthermore, working with CR plays an important role in making sure that IC Companys is ready to meet future challenges. IC Companys CR efforts are based on the UN Global Compact s 10 principles which are rooted in internationally adopted declarations and conventions on human rights, labour rights, environmental protection and anti-corruption. These principles and the United Nations Guiding Principles are used as an overall framework to guide CR policies and implementation processes in the Group. enables the Group to prioritise and allocate resources to where the biggest impact can be achieved. Moreover, IC Companys believes that for CR to be sustainable, it has to be integrated in the relevant functions within IC Companys and the Group brands. Consequently, the Group has thus assigned responsibility for the CR issues and CR targets to the relevant functions based on continuously updated assessment. For a complete description of the CR policy, please see the corporate webpage Highlights in 2012/13 Further development of the implementation framework During 2012/13 IC Companys has focused on further developing the processes to guide the implementation of the Group s CR strategy. This includes a very thorough revision and update of IC Companys Restricted Substance List to become even more comprehensive and aligned with the Group s precautionary principle. Furthermore, IC Companys has launched a Chemical Workflow to assist employees in eliminating harmful chemicals in the different stages of a collection development. IC Companys has also introduced a new risk management procedure based on Country Risk Analyses to assess challenges in existing sourcing countries and to assess potential new sourcing countries. IC Companys has pledged to work pro-actively internally as well as externally with its suppliers to promote compliance with these principles. The Group will never be able to guarantee 100% compliance, but it strives at making a positive difference and setting up due diligence processes to avoid non-compliance issues. Furthermore, the Group s Compliance Hotline is used to enable access to remediation in cases of non-compliance. A cornerstone in IC Companys approach is a continuous assessment of the Group s CR risks and opportunities. This is essential for the efforts in securing compliance. Equally importantly, it IC Companys CR implementation framework continues to provide valuable guidance in the Group s everyday CR work where the processes offer hands-on guidance on how to operationalise the CR work. First Danish member of the Sustainable Apparel Coalition During the financial year under review IC Companys has joined the Sustainable Apparel Coalition (SAC), an industry-wide initiative established by a group of sustainability leaders from global apparel and footwear companies. The members recognise that addressing the industry s current CR challenges is both a busi- 28 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

31 ness imperative and an opportunity. The member base consists of more than 90 leading apparel and footwear brands, retailers, suppliers and NGOs working to reduce the environmental and social impacts of apparel and footwear products around the world. IC Companys sees SAC as an opportunity to take it one step further and be a part of defining the rules of the game. IC Companys believes that cooperating to find common solutions is the way forward instead of every member developing their own initiatives which frustrates suppliers and creates confusion amongst consumers. IC Companys believes that through cooperation with other members in SAC and setting a common industry standard, the Group has an opportunity to contribute to a more transparent and sustainable fashion industry. This will benefit consumers, suppliers and brands. Furthermore, a membership of SAC is in line with how IC Companys, through the membership of the Danish Ethical Trading Initiative (DIEH), the Business Social CompIiance Initiative (BSCI) and Kemikaliegruppen, works to find solutions and try to exert leverage beyond what can be achieved alone. Finally, the membership matches the Group s focus on education as one of the main means to being able to identify potential CR challenges and solutions. In SAC IC Companys gains access to a highly qualified network which provides valuable insight in new trends, challenges and opportunities. During 2012/13 IC Companys has used the member-ship of SAC to, among others, participate in developing The Higg Index. The Higg Index is primarily an indicator-based tool for apparel that enables businesses to evaluate material types, products, facilities and processes based on a range of environmental and product design choices. IC Companys has piloted The Higg Index both at a product level among the Group s own brands and on a brand level to assist in setting targets for the Group s CR efforts. The pilot exercise has also shown the educational value of The Higg Index by highlighting the options for improving the sustainability of a product. For further information on SAC and The Higg Index, please visit Working with the suppliers The Group sees its suppliers as critical partners in its CR efforts. Consequently, using a partnership approach to promote responsible supply chain management has continued to be a main focus area during 2012/13. This has included not only assisting the Group s suppliers to find the most responsible solutions but also listening to the suppliers ideas on how to improve the Group s CR performance. An example of this partnership approach is Peak Performance s long-term sourcing strategy which focuses on a closer relationship with the suppliers. The target of Peak Performance is to be the best brand in the world on relationship-based sourcing as opposed to transaction-based sourcing. To achieve this, Peak Performance has worked on being closer to its suppliers and has among others held strategic workshop with the suppliers and set CR requirements for its partner suppliers. During the financial year under review IC Companys has also started to implement the supplier scorecard which in addition to parameters like quality, price and delivery also includes CR parameters. The tool is used to further promote dialogue with the Group s suppliers and to emphasise the focus on CR performance as an important aspect of being an IC Companys supplier. The implementation is still at an initial phase, but the Group has already received very positive feedback from the suppliers who have been involved. An important aspect of working with responsible suppliers is the Group s membership of BSCI. The Group uses the BSCI audit process but puts equal emphasis on BSCI s capacity building work. Consequently, IC Companys has continued during 2012/13 to be an active member of BSCI s Capacity Building Working Group and to continuously promote BSCI training for the Group s suppliers. In other words, auditing is important but can never stand alone. It is through training and partnerships with suppliers that the Group expects to see the biggest improvements. Furthermore, IC Companys has updated the Group s Standard Operating Procedures to be aligned with the CR approach including the focus on the partnership approach and training, etc. Likewise, the Group has developed new procedures for its nominated fabric and trim suppliers. During the financial year 2012/13 the Group has reduced the number of suppliers to 314 from 349. DIEH (Danish Ethical Trading Initiative) As one of the founding members of DIEH, IC Companys continues to play a significant role in the initiative. During 2012/13 IC Companys CR Manager has played the role of vice chairman and also functioning chairman for a period. This period coincided with the partnership agreement on responsible garments and textile production in Bangladesh between the Danish Ministry of Foreign Affairs and the Danish garment and textile industry which was established in the aftermath of the terrible MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 29

32 accident in the garment factory in Savar, Bangladesh. DIEH took lead in not only getting the support of the Danish industry to the partnership, but also in the follow-up work on suggesting concrete actions for implementation and getting the Danish industry to sign the international Accord on Fire and Building Safety in Bangladesh. An agreement which IC Companys has also signed and which put emphasis on ensuring fire and building safety at factories by means of inspections as well as education of factory workers and building inspectors. For IC Companys its engagement in DIEH reflects the Group s belief in working together in a multistakeholder approach to create sustainable solutions to the challenges in the industry. This also reflects the growing awareness in the industry that no single stakeholder can solve the complex challenges alone. On the contrary, there is great potential in working together and in identifying where each stakeholder has the best competences to contribute to sustainable solutions. Implementation of the Compliance Hotline During the financial year under review IC Companys has implemented the Compliance Hotline allowing employees/managers and agents working on the Group s behalf to report suspected misconduct in a secure and confidential way. The Compliance Hotline plays an important role in ensuring that IC Companys complies with all internal policies and regulatory requirements and is an important part of the on-going due diligence work. IC Companys has only received one case during the financial year 2012/13 which was handled by the CR Committee. Targets for 2013/14 In the next financial year IC Companys will continue its strong support of the UN Global Compact Principles and will work hard to have even better systems and processes in place for implementing the CR efforts across the board. Furthermore, the Group s membership of the SAC and the implementation of The Higg Index will be an important driver for the Group s CR work in 2013/14. Moreover, IC Companys will finalise the implementation of the anti-corruption policy which was not fully implemented in 2012/13. In terms of using more quantitative indicators inspired by the Global Reporting Initiative, the Group will assess the new set of guidelines (G4) and then evaluate if inspiration can be drawn from this new set of indicators for future reporting. Furthermore IC Companys will focus on the following; full roll out of Supplier Scorecard tool; continue the work to further increase transparency of supplier CR performance and ranking; continuous training and dialogue with preferred and partner suppliers; active membership of BSCI including participation in working groups; active membership of SAC; active membership of DIEH; continuous updating of the RSL; tools and training on harmful chemicals for brands and production offices; increased training for sourcing and design teams on using The Higg Index; implementation of The Higg Index Facility and Product modules; and continue support to DIEH and the search for multistakeholder solutions. The above sections and the following schedule constitute the Statutory Annual Corporate Responsibility Statement, cf. section 99a of the Danish Financial Statements Act. For more information about the Group s CR activities, please read the separate CR report on the corporate website Through Sustainable Apparel Coalition we can all contribute and work together in setting a common industry standard which we believe is needed. 30 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

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34 CR ACTIVITIES AND RESULTS 2012/13 PRINCIPLES COMMITMENTS SYSTEMS ACTIONS RESULTS PEOPLE SOCIAL RESPONSIBILITY Principle 1: Support and respect the protection of internationally proclaimed human rights Principle 2: Make sure that we are not complicit in human rights abuses Principle 3: Support freedom of association and the right to collective bargaining Principle 4: Support elimination of all forms of forced and compulsory labour Principle 5: Support the effective abolition of child labour Principle 6: Support elimination of discrimination in respect of employment and occupation IC Companys supports and respects the Universal Declaration of Human Rights which is outlined in the UN Global Compact principles 1-6. We do this by continuously identifying and assessing potential adverse human rights impacts both internally in IC Companys as well as in cooperation with our suppliers Furthermore, we use education both externally with our suppliers and internally as a mean to develop the capacity and understanding of the importance and value of working with human rights CR Integration in relevant departments, managed by Corporate CR Manager, who reports directly to our Group CEO Consultation Committee with participation of management and employees representatives CR standards included in Occupational Health and Safety guidelines Annual Employee Surveys Compliance Hotline Business Social Compliance Initiative (BSCI) Code of Conduct (covering principles 3-6) Supplier scorecard incl. CR indicators linked to BSCI process Assessed CR risk and opportunities through Country Risk Analyses Employee survey Input to and membership of BSCI capacity building work group Assessment of suppliers using BSCI process Initiated rating of our suppliers (Supplier Scorecard) according to progression in BSCI process Increased awareness of CR challenges in existing and potential supplier countries Increased dialogue with suppliers on how to avoid identified potential noncompliance issues Employee survey results: Satisfaction & Motivation and Loyalty scores among IC Companys employees are the same as for the 2012 survey In 2012, BSCI trained 12,200 factory and farm staff 62% of the production deriving from countries with a high risk profile was from suppliers who had or were in the process of completing the BSCI auditing process Country Risk Analysis Global Sourcing Project Performed country risk analysis on all existing supplier countries Reduction of suppliers in by 10% to a total of 314 (349) Social and Labour part of The Higg Index Piloted and provided input to the Social and Labour part of the The Higg Index Increased awareness internally and for selected suppliers on the standards for social and labour and how to improve Signed International Accord on Fire and Building Safety in Bangladesh PLANET ENVIRONMENTAL RESPONSIBILITY Principle 7: Support a precautionary approach to environmental challenges IC Companys supports the UN Global Compact s principles for the environment. Practically we do this by continuously assessing our environmental challenges and following the overall principle of taking a precautionary approach to environmental challenges HQ chemicals knowledge center Risk Matrix and supporting guiding documents for avoiding harmful chemicals Continued chemicals training of HQ knowledge center including participation in monthly Swerea meetings Increased competences of own staff and suppliers on how to avoid harmful chemicals in our products 32 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

35 PRINCIPLES COMMITMENTS SYSTEMS ACTIONS RESULTS PLANET ENVIRONMENTAL RESPONSIBILITY Principle 8: Undertake initiatives to promote greater environmental responsibility Principle 9: Encourage the development and diffusion of environmentally friendly technologies Furthermore, we focus on educating our staff to become even better at identifying where in the supply chain we can take action to reduce our impact on the environment and where we can work with our suppliers to facilitate that they, e.g., use environmentally friendly technologies Restricted Substance List (RSL) Database for monitoring test results on harmful chemicals Training of HQ knowledge center on sustainable leather Revised and updated Restricted Substance List One-on-One dialogue with and advice to suppliers on using non-harmful chemicals Increased competences to work with sustainable leather production Improved RSL covering latest REACH (Registration, Evaluation, Authorisation and Restriction of Chemical substances) developments Chemical Workflow Workshop with brands on harmful chemicals and what can be done to eliminate them in the different stages of the collection development Increased competences in brands to eliminate harmful chemicals Internal guidelines on working with chemicals Supplier scorecard incl. CR indicators on harmful chemicals Membership of Swerea The Swedish Chemicals Group - which includes continuous updates on newest research and developments with regards to chemicals in textiles Suppliers rated according to chemical performance Training of Hong Kong and Shanghai offices and suppliers on how to avoid harmful chemicals Increased transparency and awareness for suppliers with regards to compliance with our RSL Increased knowledge of own staff and suppliers on how to avoid harmful chemicals Compliance Hotline Country Risk Analysis Environmental part of The Higg Index Chemical risk matrix Piloted and provided input to the Environmental part of The Higg Index Application of Risk Matrix on all styles to secure the right products are tested for harmful chemicals PROFIT FINANCIAL RESPONSIBILITY Principle 10: Work against corruption in all its forms, including extortion and bribery With regards to anticorruption, we support the 10th principle of the UN Global Compact and apply a zero tolerance approach against corruption in all its forms, including extortion and bribery. To further safeguard our Company against illegal activities and to identify corrupt practices we apply our whistle-blower system which provides a confidential system through which employees can report misconduct Anti-Corruption policy Compliance Hotline Code of Conduct Established Anti-corruption policy Established Compliance Hotline Resolved one issue reported to the Compliance Hotline MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 33

36 IC COMPANYS WORK WITH CORPORATE GOVERNANCE IC Companys considers Corporate Governance as an inherent and decisive factor in realising the corporate strategic targets. Group Management is thus subject to continuous development and monitoring. The objective is to ensure an efficient, suitable, appropriate and sound management of IC Companys which is in accordance with the prevailing recommendations on Corporate Governance. The following sections constitute the Statutory Annual Corporate Governance Statement, cf. section 107b of the Danish Financial Statements Act. The Board of Directors of IC Companys considers its primary task to promote the long-term interests of the Company and thus of all shareholders. This task is handled at six board meetings a year and through an on-going dialogue between the Chairmanship and the Executive Board. As expressed in IC Companys Corporate Governance schedule, the Board of Directors has reviewed the Group s relationship with its stakeholders as well as the tasks of the Board of Directors and the Executive Board and their interaction with each other. The Corporate Governance schedule may be downloaded from the corporate website under About/Corporate Governance. For more information on ownership structure, please see the section on Shareholder information and share performance on page 40. In case of completed acquisition offers, no significant agreements will be affected Articles of Association Amendments to the Articles of Association must be adopted at a general meeting. All resolutions at the general meeting may only be adopted by simple majority unless the Danish Companies Act stipulates specific regulation regarding presentation and majority. In the event of an equality of votes, the resolution in question is decided by drawing of lots. The schedule serves as a framework for IC Companys Management in connection with, e.g., the planning of working procedures and principles of; The article defining majority may only be amended if at least nine-tenths of the total votes at a general meeting vote in favour of such amendment. the Group s relationship with its stakeholders, including the public and the press; the Group s external communication, including its Investor Relations Policy; the tasks and composition of the Board of Directors, including its rules of procedures; the tasks of the Executive Board, including its rules of procedures; the relationship between the Board of Directors and the Executive Board; and the remuneration and incentive programmes for the Company s Management and employees. The voting procedure at the general meeting takes place by show of hands unless the general meeting resolves to take a poll, or the Chairman of the meeting deems a pool desirable. Board of Directors The Company s Board of Directors consists of four to eight members being elected at the annual general meeting for one-year terms. Members may be re-elected, however, when a member reaches the age of 70, the member must resign from the Board at the first coming annual general meeting. This framework is intended to ensure an efficient, suitable, appropriate and sound management of IC Companys. The framework has been prepared within the scope defined by IC Companys Articles of Association, business concept, vision, mission and corporate values as well as the prevailing legislation and rules applicable for Danish listed companies. Prior to the election process of board members at the annual general meeting, all information regarding each candidate s occupations, membership of board committees or other committees in both Danish as well as foreign companies, except from wholly-owned subsidiaries, must be disclosed. 34 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

37 The Board of Directors is composed with emphasis on extensive experience within both the fashion industry and general management. It is furthermore emphasised that the Board of Directors collectively has a professional broad spectrum, extensive experience and documented strategical and managerial competences to the effect that the Board of Directors can perform their tasks in the best possible way. When assessing the nomination of new candidates, the need for integration of new talent and the need for diversity in relation to, e.g., international experience, gender and age are considered. IC Companys has signed Recommendation for more women on supervisory boards and it is the Group s target, over the coming years, to work consistently to recruit more female managers in the Company in general and increase the number of female candidates to the supervisory boards of Danish limited liability companies. The proportionate share of females in IC Companys Board of Directors constitutes 17% at 30 June 2013 and the Group works continuously to recruit and develop new female managers. The Group is subject to compliance with the recommendations of Corporate Governance issued by the Committee of Corporate Governance which are available at In compliance with the recommendations from NASDAQ OMX Copenhagen, the Board of Directors has assessed the need for establishing additional board committees, including an audit committee, a remuneration committee and a nomination committee. As a result of this, the Board of Directors has appointed an Audit Committee and a Remuneration Committee. Furthermore, the Board of Directors will on an on-going basis assess the need for establishing other particular ad hoc committees. The Audit Committee monitors the financial reporting process and estimates whether the Company s internal control and risk management systems operate in an efficient manner. Furthermore, the Audit Committee monitors the statutory auditing of the annual report and makes proposal, for the approval of the entire Board of Directors, on the appointment of auditors. Finally, the Audit Committee monitors and controls the auditor independence, including, in particular, additional services rendered to IC Companys A/S and its subsidiaries. The Audit Committee meets at least three times a year to undertake its assigned tasks. The Remuneration Committee makes proposals, for approval of the Board of Directors, on the Remuneration Policy, including the general guidelines for incentive pay of the Board of Directors and the Executive Board. Furthermore, the Remuneration Committee makes proposals to the Board of Directors on remuneration for members of the Board of Directors and the Executive Board and ensures that the remuneration is consistent with the Remuneration Policy. Finally, the Remuneration Committee oversees that the information in the annual report on the remuneration for members of the Board of Directors and the Executive Board is correct, true and sufficient. The Remuneration Committee meets at least two times a year to undertake its assigned tasks. The Board of Directors conducts an annual self-evaluation in order to, systematically and based on unequivocal criteria, evaluate the performance of the Board of Directors, the Chairman and the individual members. The employees of IC Companys have chosen not to apply the provisions of the Danish Companies Act on employee representation on the Board of Directors. Corporate Governance recommendations IC Companys complies - except from one issue explained in the following sections - with the Recommendations on Corporate Governance of May 2013 by NASDAQ OMX Copenhagen which are based on the Recommendations from the Committee on Corporate Governance. NASDAQ OMX Copenhagen recommends that the supreme governing body establishes a nomination committee. In general, the Chairmanship of the Board of Directors undertakes the preparatory tasks which are recommended to be assigned to a nomination committee. Taking the size and structure of IC Companys into account, it is not deemed expedient to establish such a nomination committee. The principles and the scope of the remuneration to the Board of Directors and the Executive Board are disclosed under the following section Remuneration Policy and under note 4 to the consolidated financial statements. Financial reporting and internal controls The Group s risk management and internal controls in connection with its financial reporting are planned with a view to reduce the risk of material errors and omissions in the financial reporting. MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 35

38 The Board of Directors and the day-to-day management regularly assess material risks and internal controls in connection with the Group s financial reporting process. The complete Remuneration Policy of IC Companys is available on the corporate website With the purpose of promoting common interests between shareholders, the Executive Board and other executives and creating a working environment where focus is on meeting the Group s targets, IC Companys has established bonus and share-based incentive programmes. The incentive pay for the members of the Executive Board and other executives includes bonus and share-based incentive programmes. Pursuant to the IC Companys Corporate Governance guidelines, members of the Board of Directors are not included in the incentive pay programmes. The Board of Directors has appointed an Audit Committee which regularly monitors the financial reporting process and estimates whether the internal control systems operate in an efficient and adequate manner, including new financial reporting standards, significant accounting policies and accounting estimates and assumptions. The Audit Committee reports to the entire Board of Directors. The Board of Directors monitors and reviews the independence of the external auditors and monitors the planning, execution and the opinion of the external auditors. The Board of Directors and the Executive Board define the guidelines for procedures and internal controls to which compliance must be kept. These include; continuous follow-up on achieved targets and results in relation to approved budgets; guidelines for general management; Code of Conduct; Finance Policy; Insurance Policy; Investor Relations Policy; internal rules; Dealing in IC Companys shares and related financial instruments; Remuneration Policy and general guidelines for incentive pay of the Executive Board; and Rules of Authority. The adopted policies, guidelines and procedures are updated and communicated on a regular basis. Any material weaknesses, inadequacies and violation of adopted policies, procedures and internal controls are reported to the Board of Directors and the Audit Committee. Remuneration Policy The members of the Executive Board and a number of other executives are included in a bonus programme where payments are dependent on the financial results achieved within the employee s area of responsibility. The scope of the bonus is potentially between 20% to 50% of the annual salary. The bonus programme is dependent on the results achieved in the individual financial year and helps ensure that the Group s performance targets are met as the full bonus is only paid upon meeting these performance targets. The Group has granted warrants and share options to a number of managers and key employees in earlier years, please find further details on these programmes under note 4 to the consolidated financial statements. Incentive programmes With effect from the financial year 2010/11 the Executive Board has been offered a warrant programme. The Board of Directors resolved under the authorisation granted at the Annual General Meeting 2010 to grant the Executive Board warrants spanning over a three-year programme for 2010/11, 2011/12 and 2012/13. Each of these financial year the individual members of the Executive Board could be granted warrants at a value of up to 100% of their fixed salary. The warrants granted represent the right, against payment in cash, to subscribe for a number of new shares equivalent to the warrants granted. The new shares may be acquired immediately after the Company s announcements of the annual reports after 3, 4 or 5 years, respectively. In case a member of the Executive Board chooses to resign, the warrants granted become void if they are not exercisable at the date of resignation. The warrants have been issued at an exercise price fixed according to the highest share price of either the closing price of the Company s share at NASDAQ OMX Copenhagen on the date of the announcement of the Annual Reports for 2010/11, 2011/12 and 2012/13, respectively, or the average closing price of the five previous trading days. The programme was fully performance dependent. The number of warrants granted each financial year was assessed by the use of the Black & Scholes model as follows: 0% to 50% was granted on a pro rata basis when revenue growth of 5% to 15%, compared to the previous financial year, was achieved 0% to 50% was granted on a pro rata basis when an EBIT margin of 5% to 15% was achieved 36 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

39 The members of the Executive Board were granted warrants for the financial year 2010/11 based on the Group s financial performance, whereas no warrants were granted for the financial year 2011/12. Due to the Group s realised profit for the financial year under review, no warrants have been granted to the Executive Board and other executives for the financial year 2012/13. However, the members of the Executive Board have been awarded cash bonuses for the financial year under review based on the profit of continuing operations. The total remuneration of the Executive Board and other executives is described in note 4 to the consolidated financial statements. Warrant programme for 2013/14 The Board of Directors has decided to offer the Executive Board a warrant programme with effect from the financial year 2013/14 with a similar structure as the recently completed warrant programme and where the individual members of the Executive Board may be granted warrants at a value of up to 100% of their fixed salary. after the Company s announcement of the annual report after 3, 4 or 5 years, respectively. In case a member of the Executive Board chooses to resign, the warrants granted become void if they are not exercisable at the date of resignation. The warrants will be issued at an exercise price fixed according to the highest share price of either the closing price of the Company s share at NASDAQ OMX Copenhagen on the date of the announcement of the Annual Report for 2013/14 or the average closing price of the five previous trading days. The programme will be fully performance dependent. The number of warrants granted each financial year is assessed by the use of the Black & Scholes model as follows: 0% to 50% is granted on a pro rata basis when achieving revenue growth of 3% to 15% compared to the previous financial year 0% to 50% is granted on a pro rata basis when achieving an EBIT margin of 3% to 15% The warrants granted represent the right, against payment in cash, to subscribe for a number of new shares equivalent to the warrants granted. The new shares may be acquired immediately No warrants will be granted when achieving an EBIT margin of 3% or less. MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 37

40 EXECUTIVE BOARD MADS RYDER Group Chief Executive Officer (2013). Born Member of the Board of Directors of Jensen s bøfhus A/S Member of the Board of Directors of MLA- Gruppen A/S Mads Ryder has served as Reserve Offi cer in the Danish Army and hereafter earned a Master of Business Law degree from Aarhus University. He joined the Group from Royal Copenhagen where he was CEO. Prior to this he served as Senior Vice President of Weight- Wathers and CEO of all LEGOLAND parks with residence in various places,e.g. London, Germany, Korea and Japan. He started his career in the LEGO Group where he, among others, worked as Global Head of HR. Member of the Executive Board since 2013 Share holdings: nil Share options: nil CHRIS BIGLER Chief Financial Officer (2004). Born Member of the Board of Directors of BLS Invest Chris Bigler holds a Bachelor in Business Administration and Commercial Law from Aalborg University, a Master in Business Administration and Auditing from Aarhus School of Business and was certifi ed as Chartered Accountant in Previously, Chris Bigler held a position as Group Finance Manager of IC Companys A/S. Prior to this, he worked as a chartered accountant with Arthur Andersen and Deloitte. Member of the Executive Board since 2008 Share holdings: 4,339 Share options: 50,237 Resigns as at 31 August 2013 ANDERS CLEEMANN Executive Vice President (2008). Born Member of the Board of Directors of Muuto A/S Anders Cleemann holds a MSc in Economics and Business Administration from Copenhagen Business School and has previously worked as Brand Director for Part Two in IC Companys A/S and international Marketing Director in InWear Group A/S. Further, he has worked in sales and marketing with Reebok A/S and Carlsberg A/S and has been CEO of Valtech A/S. Member of the Executive Board since 2008 Share holdings: 1,850 Share options: 57,494 PETER FABRIN Executive Vice President (2009). Born Member of the Board of Directors of Ball Group A/S Member of the Board of Directors of Prefa A/S Peter Fabrin holds a business diploma and has further training from, among others, IMD, Lausanne and has been Chief Executive Offi c- er of Diesel Nordic. Furthermore, he has been Executive Sales Offi cer and before that Retail Manager for InWear Group A/S, director with Kilroy Travels Denmark and Country Manager for Norway for Carli Gry International A/S. Member of the Executive Board since 2009 Share holdings: nil Share options: 49, IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

41 BOARD OF DIRECTORS NIELS MARTINSEN Chairman. Born Director of Friheden Invest A/S Chairman of the BoD of A/S Sadolinparken and A/S Rådhusparken. Member of the BoD of Friheden Invest A/S As founder of InWear A/S and long-standing CEO of InWear Group A/S and subsequently IC Companys A/S, Niels Martinsen has extensive national as well as international management experience as well as a solid experience within the international fashion industry. Further, he has experience from board committees of other companies. Member of the Board of Directors (2001), the Audit Committee (2009) and the Remuneration Committe (2011) Considered a dependent Board member Share holdings: 7,191,128 shares held by Friheden Invest A/S controlled by Niels Martinsen HENRIK HEIDEBY Debuty Chairman. Born Group CEO & President of PFA Holding A/S/PFA Pension Chairman of the BoD of FIH Holding A/S, Kirk & Thorsen Invest A/S, PFA Ejendomme A/S, PFA Professional Forening and PFA Invest International A/S and associated businesses. Deputy Chairman of the BoD of FIH Erhvervsbank A/S and Forsikring & Pension. Member of the BoD of C.P. Dyvig & Co. A/S, PFA Kapitalforvaltning, fondsmæglerselskab A/S and PFA Brug Livet Fonden. Henrik Heideby has extensive national and international management experience as Group CEO & President of PFA Pension and previously in Alfred Berg Bank and FIH as well as experience with financing and risk management and from board committees of other companies. Member of the Board of Directors (2005) and Chairman of the Audit Committee (2009) Considered an independent Board member Shareholdings: 12,500 PER BANK Board member. Born CEO of Dansk Supermarked A/S Per Bank has an extensive national and international management experience through, among others, his current position as CEO of Dansk Supermarked A/S and previously as Commercial Director of Clothing, General Merchandising and e-commerce and member of the board of directors of Tesco UK, CEO of Tesco Stores Ltd. Hungary, and as Group CEO of Coop Denmark and Coop Norden A/S. With this background, Per Bank has an extensive knowledge of and experience within European retail. Further, Per Bank also has experience from board committees of other companies. Member of the Board of Directors (2008) Considered an independent Board member Shareholdings: nil OLE WENGEL Deputy Chairman. Born As former Director of Corporate Affairs of InWear Group A/S, Ole Wengel has experience in the management of a major fashion company and the international fashion industry. Through his many years in the Group, he further has an extensive insight into and knowledge of the Company. Member of the Board of Directors (2003), Chairman of the Remuneration Committee (2011) and member of the Audit Committee (2009) Considered an independent Board member Shareholdings: 43,333 ANDERS COLDING FRIIS Board member. Born CEO of Scandinavian Tobacco Group A/S Chairman of the BoD of Dagrofa A/S and Monberg & Thorsen A/S. Deputy Chairman of the BoD of Industriens Arbejdsgivere i København and member of the BoD of Topdanmark A/S and the Executive Committee and Central Board of the Confederation of Danish Industry. Anders Colding Friis has an extensive national and international management experience as CEO of Scandinavian Tobacco Group as well as experience from board committees of other companies. Member of the Board of Directors (2005) and the Remuneration Committee (2011) Considered an independent Board member Shareholdings: 6,925 ANNETTE BRØNDHOLT SØRENSEN Board member. Born Management Consultant of VS Consulting As former Business & Finance Director and board member of By Malene Birger A/S, Annette Brøndholt Sørensen has experience of the international fashion industry as well as board work. Through several executive positions within the SAS Group, Annette Brøndholt Sørensen has furthermore gained extensive experience within management, strategy, management accounting and process optimisation. Member of the Board of Directors (2010) Considered a dependent Board member Shareholdings: 253 MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 39

42 SHAREHOLDER INFORMATION AND SHARE PERFORMANCE A strong free cash flow development and a reduction of the Group s net interest-bearing debt during the financial year under review ensure a sound financial position supporting the corporate strategic targets. In the future the Group will distribute any surplus liquidity to the shareholders through dividends and share buy-back programmes. The financial year 2012/13 has been marked by significant events. The financial performance combined with the large strategic projects announced by the Group during 2012/13 have had significant impact on the share price which, however, did develop significantly positively throughout the year. As in line with the corporate strategy, IC Companys financial targets is to ensure a long-term competitive return on investment to the shareholders of the Company. Share performance 2012/13 The IC Companys share is listed on the NASDAQ OMX Copenhagen. Measured on the daily average closing price, the share increased by 25% from DKK 97.5 per share as at 29 June 2012 to DKK 122 per share as at 28 June At the end of the financial year the market capitalisation of IC Companys amounted to DKK 2.1 billion. The highest closing price of the IC Companys share was registered on 4 April 2013 at DKK 138 per share. The total trading volume of IC Companys shares for the financial year 2012/13 amounted to DKK 334 million (DKK 369 million) and the transaction volume totalled 2.9 million (2.9 million). Treasury shares As at 30 June 2013 IC Companys owned 540,672 shares to be used for outstanding share options. This number of shares corresponds to 3.2% of the total number of issued shares which is at the same level as 30 June SHARE PRICE MOVEMENT (29 June 2012 = index 100) Index Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 IC Companys A/S NASDAQ OMX MidCap NASDAQ OMX C20 40 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

43 Ownership structure Investor relations As at 30 June 2013 IC Companys had 7,534 registered shareholders who aggregated held 96.8% of the total share capital. The share of votes is equivalent to the share capital for the Group s shareholders. A breakdown of the shareholders is as follows: Share Shareholders as at 30 June 2013 Number capital Friheden Invest A/S* (DK) 7,191, % Hs 2.G Aps (DK) 1,793, % Arbejdsmarkedets Tillægspension (DK) 1,792, % Other Danish institutional investors 2,152, % Danish private investors 1,315, % Foreign institutional investors 953, % Foreign private investors 56, % Treasury shares 540, % Non-grouped 1,146, % The Group has set out the objective to maintain a high and uniform information level as well as engaging in an open and active dialogue with investors, analysts and other stakeholders. Our Investor Relations Policy, financial statements, presentations, company announcements and other relevant investor information are available at the corporate website During the financial year the Group hosted four webcasts in connection with the announcements of the interim reports and the annual report. Furthermore, the Company participates regularly in road shows, investor seminars and sets up meetings with individual investors and financial analysts. The four week period leading up to the announcement of financial reports or other significant information is deemed to be a quiet period which means that IC Companys does not hold investor meetings. Total 16,942, % *Friheden Invest A/S is controlled by the Group s Chairman of the Board of Directors. MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 41

44 FINANCIAL CALENDAR 2013/14 Date Event 25 September Annual General Meeting expected to be held 1 October 2013 Expected dividend payment in respect of the financial year 2012/13 13 November 2013 Expected announcement of interim report for Q1 2013/14 4 February 2014 Expected announcement of interim report for H1 2013/14 15 May 2014 Expected announcement of interim report for Q3 2013/14 13 August 2014 Expected deadline for proposed resolutions to be considered at the 2014 Annual General Meeting 21 August 2014 Expected announcement of Annual Report 2013/14 24 September Annual General Meeting expected to be held 29 September 2014 Expected dividend payment in respect of the financial year 2013/14 COMPANY ANNOUNCEMENTS 2012/13 Date Number Subject 24 July (2012) Information meeting 7 August (2012) Annual Report for 2011/12 29 August (2012) Notice of Annual General Meeting September (2012) Minutes of Annual General Meeting October (2012) Articles of Association 24 October (2012) Information meeting 7 November (2012) Interim report for Q1 2012/13 22 January (2013) Information meeting 29 January (2013) Amended financial calendar for 2012/13 5 February (2013) Interim report for H1 2012/13 16 April (2013) Historical comparative figures for new business segments 16 April (2013) CFO Chris Bigler resigns 1 May (2013) Information meeting 15 May (2013) Interim report for Q3 2012/13 15 May (2013) Correction to interim report for Q3 2012/13 17 May (2013) Announcement regarding insider transactions 28 May (2013) Sale of Jackpot and Cottonfield 10 June (2013) Financial calendar for 2013/14 30 July (2013) New Group CEO has been appointed in IC Companys 8 August (2013) Information meeting 21 August (2013) New CFO has been appointed in IC Companys ANALYSTS Securities house Analyst Carnegie Jonas Guldborg jonas.guldborg@carnegie.dk Danske Bank Kristian T. Johansen kjoha@danskebank.dk Handelsbanken Fasial Kalim Ahmad faah01@handelsbanken.dk Nordea Dan Wejse dan.wejse@nordea.com Inquiries from shareholders, financial analysts and other stakeholders may be directed to: Investor Relations Manager Jens Bak-Holder IC Companys A/S, 10 Raffi naderivej 2300 Copenhagen S, Denmark Phone: jeba@iccompanys.com 42 IC COMPANYS ANNUAL REPORT 2012/13 MANAGEMENT COMMENTARY

45 Annual General Meeting 2013 The Annual General Meeting 2013 is scheduled to be held on Wednesday 25 September 2013 at 3 p.m. at the Company s headquarters located at 10 Raffi naderivej, 2300 Copenhagen S, Denmark. The agenda is as follows: 1. Report of the Board of Directors on the Company s activities during the year under review. 2. Presentation of the Annual Report for the period 1 July June 2013 endorsed by the auditors and adoption of the audited Annual Report. 3. Appropriation of the profi ts, including the declaration of dividends, or provision for losses as recorded in the adopted Annual Report. The Board of Directors recommends that a dividend of DKK 32.8 million corresponding to DKK 2.00 per ordinary share eligible for dividend is distributed. 4. Election of members of the Board of Directors. The Board of Directors proposes re-election of the remaining Board. 5. Approval of remuneration of the Board of Directors for the fi nancial year 2013/ Appointment of auditors. 7. Authorisation of the Board of Directors for the period until the next annual general meeting to allow the Company to acquire own shares representing 10% of the share capital and at a price deviating by no more than 10% from the listed price at the time of the acquisition. 8. Any other business. MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 43

46

47 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT PAGE 46 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME PAGE 46 CONSOLIDATED STATEMENT OF FINANCIAL POSITION PAGE 47 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY PAGE 48 CONSOLIDATED STATEMENT OF CASH FLOWS PAGE 49 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS FOR PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS PAGE ACCOUNTING ESTIMATES AND ASSUMPTIONS PAGE SEGMENT INFORMATION PAGE STAFF COSTS PAGE OTHER EXTERNAL COSTS PAGE OTHER OPERATING INCOME AND COSTS PAGE FINANCIAL INCOME AND COSTS PAGE TAX FOR THE YEAR OF CONTINUING OPERATIONS PAGE DISCONTINUED OPERATIONS PAGE EARNINGS PER SHARE PAGE DIVIDENDS PAGE INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT PAGE FINANCIAL ASSETS PAGE DEFERRED TAX PAGE INVENTORIES PAGE TRADE RECEIVABLES PAGE OTHER RECEIVABLES PAGE PREPAYMENTS PAGE SHARE CAPITAL PAGE RETIREMENT BENEFIT OBLIGATIONS PAGE PROVISIONS PAGE NON-CURRENT LIABILITIES TO CREDIT INSTITUTIONS PAGE CURRENT LIABILITIES TO CREDIT INSTITUTIONS PAGE OTHER LIABILITIES PAGE ASSETS AND LIABILITIES CLASSIFIED AS HELD-FOR-SALE PAGE OPERATING LEASES PAGE OTHER LIABILITIES AND CONTINGENT LIABILITIES PAGE CHANGE IN WORKING CAPITAL PAGE SECURITIES PAGE CASH AND CASH EQUIVALENTS PAGE FINANCIAL RISKS AND DERIVATIVE FINANCIAL INSTRUMENTS PAGE RELATED PARTY TRANSACTIONS PAGE EVENTS AFTER THE REPORTING PERIOD PAGE APPROVAL OF THE ANNOUNCEMENT OF THE ANNUAL REPORT PAGE SIGNIFICANT ACCOUNTING POLICIES PAGE 69

48 CONSOLIDATED INCOME STATEMENT Note DKK million 2012/ /12 3 Revenue 3, ,292.5 Cost of sales (1,445.3) (1,457.9) Gross profit 1, , Other external costs (756.6) (727.7) 4 Staff costs (865.9) (827.7) 6 Other operating income and costs Depreciation, amortisation and impairment losses (91.5) (95.2) Operating profit Financial income Financial costs (22.4) (36.4) Profit before tax Tax on profi t for the year of continuing operations (32.4) (60.4) Profit for the year of continuing operations Loss for the year of discontinued operations (105.7) (44.7) Profit for the year Profit allocation: Shareholders of IC Companys A/S Non-controlling interests Profit for the year Earnings per share 10 Earnings per share, DKK Diluted earnings per share, DKK Earnings per share of continuing operations, DKK Diluted earnings per share of continuing operations, DKK CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Note DKK million 2012/ /12 Profit for the year OTHER COMPREHENSIVE INCOME Items which may be reclassifi ed to the income statement: Foreign currency translation adjustments arising in connection with foreign subsidiaries 2.9 (14.7) Foreign currency translation adjustments on intercompany loans (12.7) Fair value adjustments, gains on derivatives held as cash fl ow hedges Fair value adjustments, loss on derivatives held as cash fl ow hedges (6.0) (37.9) 31 Reclassifi cation to profi t or loss, gains on realised cash fl ow hedges (56.4) (2.0) 31 Reclassifi cation to profi t or loss, loss on realised cash fl ow hedges Tax on other comprehensive income (1.0) (27.5) Total other comprehensive income (9.6) 68.0 Total comprehensive income (3.8) Comprehensive income allocation: Shareholders of IC Companys A/S (5.9) Non-controlling interests Total (3.8) IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

49 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS Note DKK million 30 June June 2012 NON-CURRENT ASSETS Goodwill Software and IT systems Leasehold rights IT systems under development Total intangible assets Land and buildings Leasehold improvements Equipment and furniture Property, plant and equipment under construction Total property, plant and equipment Financial assets Deferred tax Total other non-current assets Total non-current assets CURRENT ASSETS 15 Inventories Trade receivables Tax receivable Other receivables Prepayments Securities Cash , , Assets classifi ed as held-for-sale Total current assets 1, ,284.6 TOTAL ASSETS 2, ,007.5 EQUITY AND LIABILITIES Note DKK million 30 June June 2012 EQUITY 19 Share capital Reserve for hedging transactions Translation reserve (46.6) (36.1) Retained earnings Equity attributable to shareholders of the Parent Company Equity attributable to non-controlling interests Total equity LIABILITIES 20 Retirement benefi t obligations Deferred tax Provisions Other liabilities Non-current liabilities to credit institutions Total non-current liabilities , 30 Current liabilities to credit institutions Trade payables Tax payable Other liabilities Provisions Liabilities concerning assets classifi ed as held-for-sale Total current liabilities 1, Total liabilities 1, ,176.9 TOTAL EQUITY AND LIABILITIES 2, ,007.5 CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 47

50 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Total equity owned by Total equity Reserve for Parent owned by Share hedging Translation Retained Company non-contr. Total DKK million capital transactions reserve earnings shareholders interests equity Equity at 1 July (47.7) (40.6) Comprehensive income 2011/12 Profi t for the year Other comprehensive income Foreign currency translation adjustments arising in connection with foreign subsidiaries - - (14.7) - (14.7) - (14.7) Foreign currency translation adjustments on intercompany loans Fair value adjustments, gains on derivatives held as cash fl ow hedges Fair value adjustments, loss on derivatives held as cash fl ow hedges - (37.9) - - (37.9) - (37.9) Reclassifi cation to profi t or loss, gains on realised cash fl ow hedges - (2.0) - - (2.0) - (2.0) Reclassifi cation to profi t or loss, loss on realised cash fl ow hedges Tax on other comprehensive income - (21.1) (6.4) - (27.5) - (27.5) Total other comprehensive income Dividends paid (73.8) (73.8) (3.5) (77.3) Share-based payments Equity at 30 June (36.1) Comprehensive income 2012/13 Profi t for the year Other comprehensive income Foreign currency translation adjustments arising in connection with foreign subsidiaries Foreign currency translation adjustments on intercompany loans - - (12.7) - (12.7) - (12.7) Fair value adjustments, gains on derivatives held as cash fl ow hedges Fair value adjustments, loss on derivatives held as cash fl ow hedges - (6.0) - - (6.0) - (6.0) Reclassifi cation to profi t or loss, gains on realised cash fl ow hedges - (56.4) - - (56.4) - (56.4) Reclassifi cation to profi t or loss, loss on realised cash fl ow hedges Tax on other comprehensive income - (0.3) (0.7) - (1.0) - (1.0) Total other comprehensive income (10.5) - (9.6) - (9.6) Dividends paid (24.6) (24.6) (0.2) (24.8) Share-based payments Equity at 30 June (46.6) IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

51 CONSOLIDATED STATEMENT OF CASH FLOWS Note DKK million 2012/ /12 CASH FLOW FROM OPERATING ACTIVITIES 3 Operating profi t, continuing operations ,9 Operating loss, discontinued operations (130.6) (64.8) Operating profit Reversed depreciation and impairment losses and gain/loss on sale of non-current assets Share-based payments recognised in profi t or loss 6.9 (7.7) Provisions Other adjustments Change in working capital Cash flow from ordinary operating activities Financial income received Financial costs paid (31.8) (19.5) Cash flow from operating activities Tax paid (53.9) (29.5) Total cash flow from operating activities CASH FLOW FROM INVESTING ACTIVITIES 12 Investments in intangible assets (16.1) (34.3) 12 Investments in property, plant and equipment (58.2) (71.5) Change in deposits and other fi nancial assets 6.3 (4.9) Purchase and sale of other non-current assets Total cash flow from investing activities (66.3) (108.2) Total cash flow from operating and investing activities CASH FLOW FROM FINANCING ACTIVITIES Repayment of non-current liabilities (10.0) (9.4) Share buy-back programmes Dividends paid (24.8) (77.3) Total cash flow from financing activities (34.8) (86.7) NET CASH FLOW FOR THE YEAR CASH AND CASH EQUIVALENTS Cash and cash equivalents at 1 July (108.1) (170.9) Foreign currency translation adjustment of cash and cash equivalents at 1 July (1.1) (0.7) Net cash fl ow for the year Cash and cash equivalents at 30 June 21.8 (108.1) The consolidated statement of cash flows may not be concluded based solely on the announced financial statements. CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 49

52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Basis for preparation of consolidated financial statements The consolidated fi nancial statements and the parent fi nancial statements of IC Companys A/S for the fi nancial year 2012/13 have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish disclosure requirements for the annual reports of listed companies (accounting class D), cf. the Statutory Order on the adoption of IFRS under the Danish Financial Statements Act. The consolidated fi nancial statements and the parent fi nancial statements are also prepared in accordance with the IFRS standards as issued by the International Accounting Standards Board (IASB). The consolidated fi nancial statements and the parent fi nancial statements are expressed in Danish Kroner (DKK), which is considered the primary currency of the Group s operations and the functional currency of the Parent Company. The accounting policies are applied consistently throughout the fi nancial year and for the comparative fi gures. Few reclassifi cations and adjustments of the comparative fi gures have been made as a consequence of applying the IFRS concerning discontinued operations as well as the requirement regarding classifi cation of discontinued operations. During the fi nancial year under review the segment reporting has been changed and in the future the Group s segment information will be disclosed under the Group s three core business segments: Premium Outdoor, Premium Contemporary and Mid Market Contemporary. This segmentation refl ects the reporting to the Chief Operating Decision Maker. This new reporting provides an enhanced transparency in respect of the future performance of the individual core segments. Please see note 3 for further information on segment information. New standards in 2012/13 Implementation of new standards and interpretations IC Companys has adopted all new and amended standards and interpretations (IFRIC) as endorsed by the EU and which are effective for the fi nancial year 1 July June Based on thorough analysis, IC Companys has concluded that the standards which are effective for the fi nancial year beginning on 1 July 2012 are either of no relevance to the Group or exert no material impact on the consolidated fi nancial statements. New and amended standards and interpretations not yet effective IASB has issued a number of IFRS standards, amended standards and IFRIC interpretations which are effective for fi nancial years beginning on or after 1 July IC Companys has thoroughly considered the impact of the IFRS standards, amended standards and IFRIC interpretations not yet effective, and it is estimated that these standards and interpretations are deemed to exert no material impact on the consolidated fi nancial statements or the parent fi nancial statements in the coming years. Please see note 35 for further information on signifi cant accounting policies. 2. Accounting estimates and assumptions The calculation of the carrying amount of certain assets and liabilities requires an estimate of how future events will affect the value of such assets and liabilities at the end of the reporting period. Estimates material to the fi nancial reporting are made in connection with, e.g., the calculation of depreciation, amortisation and impairment losses, the valuation of inventories and receivables, tax assets, goodwill, provisions and discontinued operations. The accounting estimates applied in respect of provisions and write-downs of discontinued operations are especially based on Management s best estimates of assumptions and judgments. Due to uncertainty in the closing down process these estimates could be affected signifi cantly by changes in the assumptions and judgments applied. The estimates applied are based on assumptions which Management believes to be reasonable, but which are inherently uncertain and unpredictable. In the consolidated fi nancial statements, the measurement of inventories and receivables could be materially affected by signifi cant changes in estimates and assumptions underlying the calculation of inventory and receivables write-downs. Similarly, the measurement of goodwill could be affected by signifi cant changes in estimates and assumptions underlying the calculation of values. Please see note 12 to the consolidated fi nancial statements for a more detailed description of impairment tests for intangible assets. The measurement of inventories is based on an individual assessment of season and age and on the realisation risk assessed to exist for individual items. Tax assets are written down if Management believes that it is not suffi ciently likely that the operations of an individual tax object (business) or a group of jointly taxed businesses can generate a profi t within the foreseeable future (typically 3-5 years), the expected taxable income is insuffi cient for the tax assets to be exploited in full or there is uncertainty with respect to the value of the tax asset at the end of the reporting period, e.g., as a result of an on-going tax audit or pending tax litigation. 50 IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

53 3. Segment information Business segments Reporting to the Executive Board, which is considered to be the Chief Operating Decision Maker, is based on the Group s three core business segments; Premium Outdoor, Premium Contemporary and Mid Market Contemporary. IC Companys two brands; Saint Tropez and Designers Remix are considered non-core business and are presented under the business segment Non-core business. On 28 May 2013 IC Companys entered into an agreement to sell its two brands Jackpot and Cottonfi eld to COOP (Company Announcement 10/2013) after having had a formal sales process. These two brands have therefore been classifi ed separately as discontinued operations in the income statement. The Executive Board evaluates operating profi ts of business segments separately in order to make decisions in relation to resource allocation and performance measurement. The segment results are evaluated on the basis of operating results, which are calculated by the same methods as in the consolidated fi nancial statements. Financial income, costs and corporate taxes are calculated at Group level and are not allocated to operating segments. No material trade or other transactions take place between the business segments. Revenue from external customers, which is reported to Management, is measured by the same methods as in the income statement. Cost allocation between business segments is made on an individual basis with the addition of some, systematically allocated indirect costs to show the profi tability of the business segments. Assets and liabilities of the individual business segments are not included in the regular reporting to the Management. No individual customer accounts for more than 10% of revenue. Premium Outdoor and Premium Contemporary Premium Outdoor comprises the following brand; Peak Performance as well as any external third party revenue generated in the brand s stores. Premium Contemporary comprises the following two brands; Tiger of Sweden and By Malene Birger as well as any external third party revenue generated in the brands stores. The main target for Premium Outdoor and Premium Contemporary is to generate growth through enhanced market penetration and internationalisation and thereby boost revenues and earnings. Consequently, the prerequisite for future investments is that the business segments must; be among the most successful businesses in their home markets within their segment; be able to document international growth potential; and achieve a high return on invested capital. Mid Market Contemporary Mid Market Contemporary comprises the following brands; InWear, Matinique, Part Two and Soaked in Luxury as well as any external third party revenue generated in the brands stores and the Group s Companys stores. These brands are operated as one business unit with a shared management team. The main targets for brands in Mid Market Contemporary are optimisation and consolidation of their core markets. The requirements for these brands are as follows; to be relevant within their core markets in their segment; to be able to generate satisfactory earnings; and to be able to convert profi t to cash fl ow. Non-core business Non-core business comprises the two brands; Saint Tropez and Designers Remix. Saint Tropez operates independently and has not been integrated into IC Companys shared service platform and may in the long-term be divested. Designers Remix is only partly owned by IC Companys and the future ownership needs to be resolved. The Group sells clothing within a number of brands all characterised as fashion wear. As a result, no Group products or services differentiate by comparison and separate information on products or services are consequently not provided. CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 51

54 Premium Premium Mid Market Non-core Contin. Discontin. Outdoor Contemp. Contemp. business operations operations Group DKK million 2012/ / / / / / /13 Total revenue , , ,783.0 Growth compared to 2011/12 (%) (5) 18 (11) 3 1 (11) (1) Operating profit/loss before depreciation amortisation and net financials (EBITDA) (9.1) (84.6) EBITDA margin (%) (1.0) (18.0) 4.3 Depreciation and amortisation (26.2) (25.9) (27.4) (10.9) (90.5) (17.4) (108.1) Impairment losses (0.4) - (0.6) - (1.0) (28.6) (29.6) Operating profit/loss (EBIT) (37.1) (130.6) 26.4 EBIT margin (%) (4.2) (27.9) 0.7 Reconciliation of segment information of continuing operations Operating profi t (EBIT) Financial income 9.3 Financial costs (22.4) Profit before tax Tax on profi t for the year (32.4) Profit for the year Premium Premium Mid Market Non-core Contin. Discontin. Outdoor Contemp. Contemp. business operations operations Group DKK million 2011/ / / / / / /12 Total revenue , ,819.1 Operating profit/loss before depreciation amortisation and net financials (EBITDA) (31.3) EBITDA margin (%) (5.9) 6.8 Depreciation and amortisation (28.1) (21.9) (27.6) (11.0) (88.6) (21.4) (110.0) Impairment losses (2.5) - (4.1) - (6.6) (12.1) (18.7) Operating profit/loss (EBIT) (64.8) EBIT margin (%) (12.3) 3.4 Reconciliation of segment information of continuing operations Operating profi t (EBIT) Financial income 35.7 Financial costs (36.4) Profit before tax Tax on profi t for the year (60.4) Profit for the year Geographic information Revenue is allocated to the geographic areas based on the customer s geographic location. Allocation of assets is made based on the geographic location of the assets. Assets are measured by the same method as in the statement of fi nancial position. In all material aspects, geographic breakdown of Group revenue and assets are as follows: Revenue Compulsory reporting of assets* share share growth growth share share 30 June 30 June 30 June 30 June DKK million 2012/ / / / / / Nordic region 2, , % 3% 72% 67% % 87% Rest of Europe (17%) (8%) 23% 28% % 12% Rest of the world (1%) 10% 5% 5% % 1% Total 3, , % 0% 100% 100% % 100% *Compulsory reporting of assets consists of non-current assets excluding fi nancial assets and deferred tax. 52 IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

55 4. Staff costs DKK million 2012/ /12 Total salaries, remuneration, etc. can be specified as follows: Remuneration to the Board of Directors Remuneration to the Audit Committee Remuneration to the Remuneration Committee Salaries and remuneration* Defi ned contribution plans, cf. note 20 to the consolidated fi nancial statements Defi ned benefi t plans, cf. note 20 to the consolidated fi nancial statements (2.0) 1.1 Other social security costs Share-based payments Other staff costs Total staff costs Average number of Group employees 1,576 1,807 * Costs re. external agents amounting to DKK 92.3 million (DKK 79.3 million) have been included under salaries and remuneration. Remuneration to the Board of Directors, Executive Board and other executives is as follows: Board of Executive Other Board of Executive Other Directors Board executives* Directors Board executives* DKK million 2012/ / / / / /12 Remuneration to the Board of Directors Remuneration to the Audit Committee Remuneration to the Remuneration Committee Salaries and remuneration Bonus payments Retirement contributions Share-based payments Total * The category other executives comprises Vice Presidents and CEOs. Other executives are together with the Executive Board responsible for planning, executing and supervising the operations of the Group. 15 employees were defi ned as other executives (15 employees) in 2012/13. Vice Presidents appointed as at 1 July 2013 are not included in the fi gures above, but are listed under other executives on page 97. DKK thousands 2012/ /12 Remuneration to the Board of Directors: Niels Martinsen (Chairman) Henrik Heideby (Deputy chairman) Ole Wengel (Deputy chairman) Per Bank Anders Colding Friis Annette Brøndholt Sørensen Total remuneration to the Board of Directors 2, ,885.0 Hereof remuneration to the Audit Committee: Henrik Heideby (Chairman) Niels Martinsen Ole Wengel Total Hereof remuneration to the Remuneration Committee: Ole Wengel (Chairman) Anders Colding Friis Niels Martinsen Total DKK million 2012/ /12 Remuneration to the Executive Board: Niels Mikkelsen (Chief Executive Offi cer) Chris Bigler (Chief Financial Offi cer) Anders Cleemann (Executive Vice President) Peter Fabrin (Executive Vice President) Total remuneration to the Executive Board The members of the Executive Board and other executives are included in a bonus programme, the payments of which are related to the fi nancial performance of the employee s own area of responsibility. The bonus potential is in the range of 20-50% of the annual salary. The bonus programme is based on profi ts achieved in the individual fi nancial year which helps ensure that the Group s growth targets are met. CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 53

56 Remuneration Policy The Board of Directors ensures that the total individual remuneration to the members of the Executive Board refl ects their performance and the value added to the Company. The remuneration paid to the members of the Executive Board consists of a cash salary, an annual bonus, share-based incentive programmes, a company car and the usual other benefi ts. When not taking into account the discontinuation of employment of the former CEO, the overall composition of the Executive Board s remuneration is in general expected to be unchanged for 2013/14 meaning that the Remuneration Policy will be applied as in 2012/13. If the employment of a member of the Executive Board of the Parent Company is terminated by the Company before reaching retirement age, the Company shall pay the executive severance payment during the period of notice, which is months and in certain circumstances up to 24 months. Incentive programmes General information With the purpose of motivating and retaining employees, other executives and members of the Executive Board, IC Companys has established incentive programmes consisting of option and warrant programmes. Furthermore, these programmes are to ensure common interest between the employees and the shareholders. All exercise prices have been fi xed according to the listed share price applicable on the date of the grant. The share options and warrants granted to the employees may only be exercised against payment in cash. The obligation regarding the incentive programmes is partly settled by IC Companys holding of treasury shares. Valuation assumptions The market values of IC Companys share options and warrants have been calculated by using the Black & Scholes model. The expected volatility is based on the volatility over the past years for the IC Companys share compared with Management s expectations at the time when granted. The risk-free interest rate has been set corresponding to the yield of a government bond with similar maturity terms as the programme in question. The applied assumptions are as follows: Stated in % 2012/ /12 Expected volatility Expected dividend rate compared to share price Risk-free interest rate (based on Danish government bonds with similar maturity terms) Outstanding share options are specified as follows: Average exercise Executive Board Other employees Total price per option (no.) (no.) (no.) (DKK) Outstanding share options at 1 July , , , Expired/void (60,000) - (60,000) Void due to discontinuation of employment - (23,167) (23,167) Outstanding share options at 30 June , , , Expired/void (110,000) - (110,000) Void due to discontinuation of employment - (5,404) (5,404) Outstanding share options at 30 June , , , Number of shares options that are exercisable at 30 June , , , Outstanding Exercise price Exercise period 4 weeks after Financial year share options per option (DKK) announcement of annual report Other employees 2007/08 138, % p.a. 2012/13 Executive Board 2007/08 21, % p.a. 2012/13 Executive Board 2007/08 40, % p.a. 2012/13 Executive Board 2008/09 10, % p.a. 2012/13 Executive Board 2008/09 10, % p.a. 2012/13 Other employees 2009/10 144, from 2012/13 to 2013/14 Executive Board 2010/11 60, /13 Total share options 424, No share options have been exercised in 2012/ IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

57 The fair value of the share options recognised in the consolidated income statement amounted to costs of DKK 0.3 million (DKK 1.3 million) for 2012/13. The fair value of the share options recognised in the Parent Company s income statement amounted to costs of DKK 0.4 million (DKK 0.8 million) for 2012/13. Outstanding warrants are specified as follows: Average exercise Executive Board Other employees Total price per warrant (no.) (no.) (no.) (DKK) Outstanding warrants at 1 July ,590 98, ,8 Granted during the fi nancial year 147, , , Void due to discontinuation of employment - (11,097) (11,097) Outstanding warrants at 30 June , , , Void due to discontinuation of employment - (3,250) (3,250) Outstanding warrants at 30 June , , , Number of warrants that are exercisable at 30 June Outstanding Exercise price Exercise period 14 days after Financial year warrants per warrant (DKK) announcement of annual report Other employees 2010/11 88, from 2012/13 to 2014/15 Executive Board 2011/12 147, from 2013/14 to 2015/16 Other employees 2011/12 105, from 2013/14 to 2015/16 Total warrants 342, No warrants have been exercised in 2012/13. The fair value of the warrants recognised in the consolidated income statement amounted to costs of DKK 6.5 million (DKK 6.4 million) for 2012/13. The fair value of the warrants recognised in the Parent Company s income statement amounted to costs of DKK 4.5 million (DKK 3.8 million) for 2012/ Other external costs Other external costs include the total fees paid to the auditors appointed at the annual general meeting for auditing the fi nancial statements for the fi nancial year under review. DKK million 2012/ /12 Statutory audit Other statements and opinions with guarantees Tax consultancy Other services Total other external costs One of the Group s minor subsidiaries is not audited by Deloitte, nor by its international business partners nor by a recognised international auditing company. Costs attributable to this amount to DKK 0.1 million (DKK 0.1 million). 6. Other operating income and costs DKK million 2012/ /12 Loss on sale of intangible assets and property, plant and equipment (0.3) (2.6) Proceeds in connection with handing over store leases Other Total other operating income and costs CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 55

58 7. Financial income and costs DKK million 2012/ /12 Financial income: Interest on bank deposits Interest on receivables Other fi nancial income Interest income from financial assets not measured at fair value Interest income on securities Realised gain on derivative fi nancial instruments Net gain on foreign currency translation Total financial income Financial costs: Interest on liabilities to credit institutions (7.0) (14.4) Interest on mortgage loans (2.7) (4.9) Other interest costs (3.9) (3.1) Interest costs from financial liabilities not measured at fair value (13.6) (22.4) Fair value adjustments on securities (0.4) - Realised loss on derivative fi nancial instruments (6.9) (14.0) Net loss on foreign currency translation (1.5) - Total financial costs (22.4) (36.4) Net financials (13.1) (0.7) 8. Tax for the year of continuing operations DKK million 2012/ /12 Current tax Current tax for the year under review Prior-year adjustments, current tax Foreign non-income dependent taxes Total current tax Deferred tax Change in deferred tax (18.4) 28.7 Prior-year adjustments, deferred tax (7.5) - Adjustment regarding changes in tax rates, deferred tax (5.8) 0.4 Total deferred tax (31.7) 29.1 Tax for the year Recognised as follows: Tax on profi t for the year of continuing operations Tax on loss of discontinued operations (24.9) (20.1) Tax on other comprehensive income Tax for the year Net tax receivable at 1 July Tax payable on profi t for the year (40.2) (39.2) Tax paid during the year Foreign currency translation adjustments, etc Net tax receivable at 30 June Recognised as follows: Tax receivable Tax payable (30.7) (19.0) Net tax receivable at 30 June Breakdown on tax on profi t for the year of continuing operations is as follows: DKK million 2012/ /12 Calculated tax on profi t before tax, 25% Effect of other non-taxable income and other non-deductable costs Effect of adjustment regarding changes in tax rates, deferred tax (5.8) 0.4 Effect of net deviation of tax in foreign subsidiaries relative to 25% (0.2) (1.1) Foreign non-income dependent taxes Prior-years adjustments (2.0) 0.6 Revaluation of tax losses, etc Other adjustments Total tax on profit for the year Effective tax rate for the year (%) Tax on other comprehensive income Foreign currency translation adjustments arising in connection with foreign subsidiaries (0.7) (6.4) Fair value adjustment on derivatives held as cash fl ow hedges (0.3) (21.1) Total tax on other comprehensive income (1.0) (27.5) 56 IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

59 9. Discontinued operations DKK million 2012/ /12 Revenue Costs (570.8) (579.3) Loss before tax for the year (102.0) (52.7) Tax on loss for the year Loss after tax for the year (82.6) (36.4) Write-downs (28.6) (12.1) Tax on write-downs Value adjustment after tax (23.1) (8.3) Loss for the year of discontinued operations (105.7) (44.7) Statement of cash flows: Cash fl ow from operating activities (14.9) 3.2 Cash fl ow from investing activities (1.8) 11.1 Cash fl ow from fi nancing activities - - Total cash flow (16.7) 14.3 EPS - Earnings per share of discontinued operations (6.4) (2.7) EPS - Diluted earnings per share of discontinued operations (6.4) (2.7) A formal sales process for the Group brands Jackpot and Cottonfi eld was initiated in the beginning of the calendar year As a consequence hereof the operations were presented in the interim report for Q3 2012/13 as discontinuing operations, and related assets and liabilities were presented as assets held-for-sale and liabilities concerning assets classifi ed as held-for-sale, respectively. The sales process resulted in an agreement with COOP entered on 28 May 2013 regarding the sale of the trademark rights of Jackpot and Cottonfi eld whereas the remaining assets and liabilities relating to the two brands in question, including existing retail stores, gradually will be sold or closed down during the fi nancial year 2013/14. The profi t/loss from the sales transaction and closing down process is therefore still presented as discontinued operations. The distribution to wholesale customers will continue until 31 December COOP did not want to take over the distribution as Jackpot and Cottonfi eld will be sold through their own distribution chain. The sales proceeds have been recognised as an income under costs. 10. Earnings per share DKK million / 1,000 shares 2012/ /12 Profit for the year Profi t for the year attributable to shareholders of IC Companys The Group IC Companys profi t share of continued operations Average number of shares Number of issued shares 16, ,942.8 Number of treasury shares (540.7) (540.7) Number of outstanding shares 16, ,402.1 Diluted effect of outstanding shares and warrants Number of shares excluding treasury shares, diluted 16, ,406.3 Earnings per share (EPS) Earnings per share, DKK Diluted earnings per share, DKK* Earnings per share of continuing operations, DKK Diluted earnings per share of continuing operations, DKK* *When calculating diluted earnings per share, 424,033 share options (421,637 share options) have not been included as they are characterised as out-of-the-money, but they may, however, dilute earnings per share in the future. 11. Dividends Please see note 9 of the parent fi nancial statements. CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 57

60 12. Intangible assets and property, plant and equipment INTANGIBLE ASSETS Software Trade- Lease- IT systems Total and IT mark hold under de- intangible DKK million Goodwill systems rights rights velopment assets Cost at 1 July Foreign currency translations adjustments Reclassifi cation of assets under construction (6.0) - Addition Disposal - (0.1) - (12.9) - (13.0) Cost at 30 June Foreign currency translations adjustments (0.2) Reclassifi cation of assets under construction (9.5) - Addition Disposal - (1.8) - (2.1) - (3.9) Cost at 30 June Accumulated amortisation and impairment at 1 July (175.8) (8.0) (79.1) - (262.9) Foreign currency translations adjustments - (0.2) (0.1) (0.3) 0.1 (0.5) Amortisation and impairment on disposals Amortisation and impairment for the year - (14.3) - (5.1) - (19.4) Accumulated amortisation and impairment at 30 June (190.1) (8.1) (73.6) 0.1 (271.7) Foreign currency translations adjustments (0.1) 0.2 Amortisation and impairment on disposals Amortisation and impairment for the year - (31.9) - (5.6) - (37.5) Accumulated amortisation and impairment at 30 June (221.1) (8.1) (77.8) - (307.0) Carrying amount at 30 June Carrying amount at 30 June PROPERTY, PLANT AND EQUIPMENT Total Leasehold Equip- Assets- property Land and improve- ment & under con- plant & DKK million buildings ments furniture struction equipment Cost at 1 July ,029.1 Foreign currency translations adjustments Reclassifi cation (0.2) - Addition (3.3) 71.5 Disposal - (74.0) (61.0) - (135.0) Cost at 30 June Foreign currency translations adjustments - (2.5) (1.8) - (4.3) Reclassifi cation 5.3 (5.3) Addition Disposal (0.1) (15.1) (18.6) (0.1) (33.9) Reclassifi cation of assets held-for-sale (184.9) (184.9) Cost at 30 June Accumulated depreciation and impairment at 1 July 2011 (37.3) (288.9) (327.4) - (653.6) Foreign currency translations adjustments (0.2) (1.8) (2.3) - (4.4) Depreciation and impairment on disposals Depreciation and impairment for the year (4.9) (57.7) (46.7) - (109.3) Accumulated depreciation and impairment at 30 June 2012 (42.4) (272.4) (318.0) - (632.8) Foreign currency translations adjustments Depreciation and impairment on disposals Depreciation and impairment for the year (3.2) (50.5) (46.3) - (100.0) Reclassifi cation (3.8) Reclassifi cation of assets held-for-sale Accumulated depreciation and impairment at 30 June 2013 (8.6) (304.7) (349.0) - (662.3) Carrying amount at 30 June Carrying amount at 30 June IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

61 Goodwill Goodwill on business combinations is allocated at the takeover date to the cash-generating units expected to achieve economic benefi ts from the takeover. The carrying amount of goodwill is allocated to the respective cash-generating units as follows: DKK million 30 June June 2012 Tiger of Sweden AB (Premium Contemporary) Peak Performance AB (Premium Outdoor) Saint Tropez A/S (Non-core business) IC Companys Norway AS - the Peak Performance activity of the business (Premium Outdoor) Carrying amount of goodwill Goodwill is tested at least once annually for impairment and more frequently in the event that impairment is indicated. The recoverable amounts of the individual cash-generating units to which the goodwill amounts have been allocated are calculated based on expected discounted future cash fl ows compared with the carrying amounts. Future cash fl ows are based on the entities business plans and budgets during the strategy period for 2013/ /18. The most important parameters in the calculation of the net present value are revenue, EBITDA and working capital. The business plans are based on Management s specifi c assessment of the business units expected performance during the strategy period. When calculating the net present value, a discount rate of 13.78% before tax/10.35% after tax has been applied which is unchanged compared to 2011/12. No write-down of goodwill was recorded during the fi nancial year 2012/13 (no write-downs of goodwill last fi nancial year). Leasehold rights with indeterminable useful lives Of the total carrying amount of leasehold rights DKK 6.2 million (DKK 6.2 million) relates to leasehold rights with indeterminable useful lives which are determined on the basis of the contractual terms of the leases. Therefore, impairment tests were conducted at 30 June 2013, and Management assessed that the recoverable amount exceeded the carrying amount. Non-current assets including leasehold rights with determinable useful lives in Group stores The Group s non-current assets, which are located in Group stores, are tested annually for impairment. The recoverable amounts of the individual stores (cash-generating units) are calculated based on the store s net present value. Future cash fl ows are based on the individual store s budget for a period corresponding to the average expected useful life of the store s assets. When calculating the net present value, a discount rate of 13.78% before tax/10.35% after tax has been applied which is unchanged compared to 2011/12. Write-downs of non-current assets and leasehold rights amounted to DKK 29.6 million (DKK 18.7 million) for 2012/13 which is disclosed in note 3 to the consolidated fi nancial statements. 13. Financial assets Long-term loans Total to business Shares financial DKK million partners and bonds Deposits, etc. assets Carrying amount at 1 July Net additions, disposals and foreign currency translation adjustments for the year (0.2) Carrying amount at 30 June Net additions, disposals and foreign currency translation adjustments for the year (0.2) (1.3) 0.5 (1.0) Carrying amount at 30 June Long-term loans to business partners The Group had granted subordinated loans of DKK 0.4 million to business partners as at 30 June An amount of DKK 0.2 million of the loans was classifi ed as long-term loans to business partners. The Group has received payments of DKK 0.2 million corresponding to the long-term part of the loans for 2012/13. The short-term part of the loans amounting to DKK 0.2 million has been recognised under other receivables. All outstanding amounts are interest-bearing. No security has been received for the loan. The carrying amount of the fi nancial assets corresponds to the fair value. Shares Net additions for the year amounting to DKK 1.3 millon are attributable to shares used for hedging of retirement benefi t obligations in one of the Group businesses. CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 59

62 14. Deferred tax DKK million 30 June June 2012 Deferred tax at 1 July Prior-year adjustments Adjustment regarding changes in tax rates 5.8 (0.4) Foreign currency translation adjustments (0.5) (1.8) Deferred tax on other comprehensive income (1.0) (27.5) Change in deferred tax on profi t/loss for the year 19.4 (1.1) Net deferred tax at 30 June Recognised as follows: Deferred tax assets Deferred tax liabilities (36.6) (52.2) Net deferred tax at 30 June Breakdown of deferred tax at 30 June as follows: Gross deferred tax assets and liabilities Unrecognised tax assets (61.7) (52.6) Net deferred tax at 30 June Unrecognised tax assets relate to tax losses that are assessed not to be suffi ciently likely to be utilised in the foreseeable future. The unrecognised tax losses have in all material respect no expiry date. Temporary differences and changes during the year are specifi ed as follows: Foreign Net deferred currency Recognised Reclassified Recognised Net deferred tax assets at translation in profit as assets in other tax assets at DKK million 1 July 2012 adjustment for the year held-for-sale comp. income 30 June 2013 Intangible assets (0.6) Property, plant and equipment 27.5 (0.2) 0.6 (1.7) Receivables 1.7 (0.1) Inventories (6.2) Provisions Other liabilities (48.8) (0.3) (32.2) Financial instruments (10.5) (1.0) (1.9) Tax losses (10.2) Unrecognised tax assets (52.6) (0.2) (8.9) - - (61.7) Total 11.9 (0.5) 34.4 (1.7) (1.0) 43.1 Foreign Net deferred currency Recognised Recognised Net deferred tax assets at translation in profit in other tax assets at DKK million 1 July 2011 adjustment for the year comp. income 30 June 2012 Intangible assets (1.1) Property, plant and equipment 15.4 (0.1) Receivables Inventories (5.1) Provisions Other liabilities (50.8) (2.1) (48.8) Financial instruments (27.5) (10.5) Tax losses (14.2) Unrecognised tax assets (51.3) (0.2) (1.1) - (52.6) Total 42.7 (1.8) (1.5) (27.5) Inventories DKK million 30 June June 2012 Raw material and consumables Finished goods and goods for resale Goods in transit Total inventories Changes in inventory write-downs are as follows: DKK million 30 June June 2012 Inventory write-downs at 1 July Write-down for the year, addition Write-down for the year, reversal (54.9) (61.1) Total inventory write-downs Inventories recognised at net realisable value amounted to DKK 75.9 million (DKK 87.3 million) at 30 June IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

63 16. Trade receivables Trade receivables (gross) are specifi ed as follows: DKK million 30 June June 2012 Not yet due Due, 1-60 days Due, days Due more than 120 days Total gross trade receivables In general, the receivables do not carry interest until between 30 and 60 days after the invoice date. After this date, interest is charged on the outstanding amount. The Group has recognised DKK 5.0 million (DKK 5.0 million) in connection with interest on overdue trade receivables for 2012/13. Change in write-downs regarding trade receivables is as follows: DKK million 30 June June 2012 Write-downs 1 July Foreign currency translations adjustments Change in write-downs for the year Realised loss for the year (14.3) (14.1) Total write-downs Receivables are written down to net realisable value corresponding to the amount of expected future net payments received on the receivables. Write-downs are calculated on the basis of individual assessments of the receivables. The carrying amounts of the receivables correspond in all material respect to their fair values. 17. Other receivables DKK million 30 June June 2012 VAT Receivables from third party stores Credit card receivables Unrealised gain on fi nancial instruments Sundry receivables Total other receivables All other receivables are due for payment within 1 year. Management assesses that the carrying amount of receivables at 30 June 2013 corresponds in all material respect to the fair value, and that the receivables are not subject to any particular credit risk. 18. Prepayments DKK million 30 June June 2012 Collection samples Advertising Rent, etc Others Total prepayments Share capital The share capital consists of 16,942,807 shares with a nominal value of DKK 10 each. No shares carry any special rights. The share capital is fully paid up. CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 61

64 The below capital adjustments have been made in the past fi ve years as follows: Nominal value Number DKK thousands Share capital at 1 July ,919, ,196 Share capital reduction due to share buy-back programmes (976,825) (9,768) Share capital at 30 June ,942, ,428 Share capital at 30 June ,942, ,428 Share capital at 30 June ,942, ,428 Share capital at 30 June ,942, ,428 Share capital at 30 June ,942, ,428 Treasury shares are as follows: % of share Nominal value capital Number DKK thousands Treasury shares at 1 July ,672 5,407 Treasury shares at 1 July ,672 5,407 Treasury shares at 30 June ,672 5,407 Pursuant to a resolution passed by the shareholders at the Company s general meeting, the Company may acquire treasury shares equivalent to a maximum of 10% of the share capital. The Company has not engaged in any share buy-back for the fi nancial year 2012/13. The value of the Company s treasury shares at market price on 30 June 2013 amounted to DKK 65.9 million (DKK 52.7 million). 20. Retirement benefit obligations The retirement benefi t obligations of Danish companies are covered by insurance which is also the case with the retirement benefi t obligations of a large number of the Group s subsidiaries. Foreign subsidiaries whose retirement benefi t obligations are not or only partly covered by insurance (defi ned benefi t plans) recognise the uncovered retirement benefi t obligations on an actuarial basis at the present value at the end of the reporting period. The Group has defi ned benefi t plans in the Netherlands and Norway. These retirement plans are covered in retirement funds for the employees. In the consolidated fi nancial statements an amount of DKK 2.7 million (DKK 6.3 million) has been recognised under liabilities in relation to the Group s obligations for current and former employees after deduction of assets relating to the plan. The Parent Company only operates defi ned contribution pension plans. Furthermore, an amount of DKK 5.4 million (DKK 6.6 million) attributable to retirement benefi t obligations in one of the Group companies has been included which has been hedged by shares and recognised under fi nancial assets. For defi ned benefi t plans, the present value of future benefi ts, which the Company is liable to pay under the plan, is computed using actuarial principles. The computation of the present value is based on assumptions of computable rate of interest, increases in pay rates and retirement contributions, investment yield, staff resignation rates and mortality rates. Present value is computed exclusively for the benefi ts to which the employees have earned entitlement through their employment with the Company up till now. Costs of DKK 38.2 million (DKK 36.4 million) have been recognised in the consolidated income statement relating to plans covered by insurance (defi ned contribution plans). For plans not covered by insurance (defi ned benefi t plans) income of DKK 2.0 million have been recognised (costs of DKK 1.1 million). For defi ned contribution plans, the employer is obliged to pay a defi ned contribution (for example a fi xed amount or a fi xed percentage of an employee s salary). For defi ned contribution plans, the Group runs no risk in respect of future developments in interest rates, infl ation, mortality or disability. DKK million 30 June June 2012 Recognised in profit or loss: Contributions for defined contributions plans Retirement benefi t obligations for the year Calculated interest on obligations Expected return on the assets of the plan, etc. (1.3) (1.1) Prior-year adjustments (0.1) - Recognised actuarial gain/loss (3.2) (0.4) Total recognised obligations regarding defined benefit plans (2.0) 1.1 Total recognised obligations in profit or loss Change in recognised obligations: Net obligations for defi ned benefi t plans at 1 July Foreign currency translation adjustments of obligations, at the beginning of the year (0.1) 0.1 Recognised in the income statement, net (2.0) 1.1 Group contributions (1.5) (0.7) Total net obligations IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

65 The retirement benefi t obligations are specifi ed as follows: DKK million 30 June June June June June 2009 Present value of defi ned benefi t plans Fair value of the assets of the plan (36.5) (34.0) (30.0) (28.1) (20.4) Total net retirement benefit obligations The average assumptions for the actuarial calculations at the end of the reporting period were as follows: Stated in % Average discounting rate applied Expected return on plan assets Expected future pay increase rate The plan assets consist of ordinary investment assets, including shares and bonds. No investments have been made in treasury shares. The expected return on the plans is based on long-term expectations for the return of the assets in the respective countries. The return on the plans assets amounted to DKK 1.2 million for 2012/13 (gain of DKK 9.5 million). The Group s expected contribution to the plans for 2013/14 amounted to DKK 1.6 million. 21. Provisions Provisions for expected poten- Provisions tial financial for risks of pending loss-making Provisions for Other Total DKK million litigation contracts restructurings provisions provisions Provisions at 1 July Provisions for the year Provisions at 30 June Provisions for the year Provisions at 30 June Specified in the consolidated financial statement of position as follows: Current liabilities Provision at 30 June Non-current liabilities Current liabilities Provision at 30 June From time to time the Group is involved in court litigations of various kinds. Management considers that pending litigation poses no signifi cant fi nancial risks. Provisions for loss-making contracts are primarily attributable to closure of showrooms and termination of retail leases in respect of discontinued operations. Provisions for restructurings are attributable to measures initiated in the Mid Market Contemporary segment. Please see the section on Mid Market Contemporary on page 17 in this Annual Report for further information. Other provisions primarily relate to staff reductions in discontinued operations. 22. Non-current liabilities to credit institutions DKK million 30 June June 2012 Maturity structure of non-current liabilities: After 5 years from the end of the reporting period Total non-current liabilities Nominal value The loan is attributable to the Group s headquarters which have been put up for sale. Consequently, the loan has been reclassifi ed as liabilities concerning assets classifi ed as held-for-sale. Please see note 25 to the consolidated fi nancial statements. CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 63

66 23. Current liabilities to credit institutions The Group s total current liabilities to credit institutions comprise Danish and foreign overdraft facilities carrying variable interest at an average rate of 2.09% p.a. (3.22% p.a.). Current liabilities are repayable on demand, and therefore the carrying amount corresponds to the fair value. Current liabilities to credit institutions are denominated in the currencies as follows: Stated in % 30 June June 2012 DKK 40 4 SEK EUR 7 13 USD - - PLN - 13 CHF - 1 CAD - 4 GBP 4 1 Other currencies 5 3 Total Other liabilities DKK million 30 June June 2012 VAT, customs and tax deducted from income at source Salaries, social security costs and holiday allowance payable Unrealised loss on fi nancial instruments Severance payments Other costs payable Total other liabilities In other costs payable an amount of DKK 25.6 million (DKK 34.6 million) has been recognised which is due after 12 months. The carrying amount of amounts payable under other liabilities corresponds in all material respect to the fair value of the liabilities. 25. Assets and liabilities classified as held-for-sale DKK million 30 June June 2012 Property, plant and equipment Assets classified as held-for-sale Liabilities to credit institutions Liabilities concerning assets classified as held-for-sale The Group s headquarters have been put up for sale and, consequently, the buildings have been classifi ed as assets as held-for-sale. Non-current liabilities to credit institutions as at 30 June 2013 constituted a mortgage loan denominated in DKK and based on a six month CIBOR interest. The loan was taken out on 26 January 2010 with the Group s headquarters located at Raffi naderivej 10 as security for the loan. The average interest rate for 2012/13 amounted to 1.44% p.a. (2.03% p.a.). As of 30 June 2011 the loan was hedged with a 2 year interest rate swap. 6 month CIBOR interest is received and a fi xed interest rate of 1.17% p.a. is paid. 26. Operating leases DKK million 30 June June 2012 Commitments under non-terminable operating leases are: Store leases and other land and buildings 0-1 year years More than 5 years Total Equipment and furniture leases, etc. 0-1 year years More than 5 years - - Total The Group leases properties under operating leases. The lease period is typically between 3-10 years with an option to extend upon expiry. Many of the lease contracts contain rules regarding revenue based lease. 64 IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

67 In addition, the Group leases cars and other operating equipment under operating leases. The lease period is typically between 3-5 years with an option to extend upon expiry. An amount of DKK million (DKK million) relating to operating leases has been recognised in the consolidated income statement for 2012/13. Some of the leased stores are sub-let to franchise stores, etc., and for these, the Group has received a rental income on non-terminable leases of DKK 19.7 million (DKK 16.7 million). The future rental income on non-terminable leases is expected as a minimum to amount to DKK 87.7 million (DKK 90.4 million) for the fi nancial years 2013/ / Other liabilities and contingent liabilities DKK million 30 June June 2012 Guarantees and other collateral security The Company has entered into binding agreements with suppliers on the delivery of collections until 31 December 2013 of which the majority is tied to sales orders entered into with pre-order customers. The Group has furthermore guaranteed punctual and correct payment, secured against the merchandise, on behalf of a business partner in China to the suppliers approved by the Group. As at 30 June 2013 the Group was not involved in any pending litigation which may have a material effect on the Group s fi nancial position. The Group is subject to the usual return obligations imposed on the industry. Management expects no major loss on these obligations. 28. Change in working capital DKK million 30 June June 2012 Change in inventories (1.0) 28.0 Change in receivables excluding derivative fi nancial instruments 31.6 (54.3) Change in current liabilities excluding tax and derivative fi nancial instruments (23.9) 57.5 Total change in working capital Securities DKK million 30 June June 2012 Listed bonds Total securities The Group s securities measured at fair value amounted to a nominal value of DKK 100 million of 0.71% Nykredit 21E Cash and cash equivalents DKK million 30 June June 2012 Cash Credit institutions, current liabilities (188.7) (190.7) (79.1) (108.1) Listed bonds Cash and cash equivalents, cf. the statement of cash flows (21.8) (108.1) As at 30 June 2013 The Group s total credit facilities amounted to DKK 924 million (DKK 1,097 million) in terms of withdrawal rights. Of this amount, DKK 329 million has been drawn in relation to current and non-current liabilities to credit institutions and DKK 188 million has been drawn in relation to trade fi nance facilities and guarantees. Accordingly, undrawn credit facilities thus amount to DKK 407 million. All credit facilities are standby credits which may be drawn with a day s notice. 31. Financial risks and derivative financial instruments Foreign exchange risk The Group s foreign exchange risk (transaction risk) is handled centrally by the Group s Treasury Department. The Parent Company s functional currency is DKK, and foreign exchange positions are generally hedged vis-à-vis DKK. The Group s primary transaction risk relates to the buying and selling of goods in foreign currencies. Hedge accounting as well as hedging of expected risks take place by means of forward contracts and/or options. Hedging is made on a 15-month horizon. The risk coverage of the Group s transaction exposure is made from an estimate of the cash fl ow demand for the future 15 months. As a general rule cash fl ows in all currencies are hedged except from EUR. CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 65

68 Foreign exchange contracts only relate to hedging of selling and buying of goods pursuant to the Group s policy hereto. The risk coverage of the Group s transaction exposure is made from an estimate of the cash fl ow demand for the future 15 months. The Group s foreign exchange exposure is hedged centrally although a few subsidiaries have unhedged foreign exchange exposures if they have signed leases in a currency other than the local currency. As at 30 June 2013 the Group s risks for the coming 0-15 months may be specifi ed as follows: Net posi- At 30 June 2013 Expected Expected Hedges Hedges Hedges Average Net tion DKK Million: inflow outflow 0-6 m m m. rate position million EUR 96.7 (45.7) USD 4.9 (124.8) HKD - (225.0) SEK (20.2) NOK (2.2) GBP 11.5 (0.3) CHF 19.3 (0.5) PLN 16.0 (1.0) CZK HUF CAD Net posi- At 30 June 2012 Expected Expected Hedges Hedges Hedges Average Net tion DKK Million: inflow outflow 0-6 m m m. rate position million EUR 96.5 (38.6) USD 2.4 (149.7) HKD - (297.4) SEK (8.9) (300.0) (280.0) (120.0) NOK (174.5) (147.3) (58.0) GBP (6.0) (6.0) (1.9) CHF (11.4) (5.6) (3.8) PLN (15.0) (11.9) (5.0) CZK (31.0) (23.8) (10.6) HUF (75.0) CAD (7.6) (7.3) (2.5) Net outstanding foreign exchange contracts at 30 June 2013 for the Group and the Parent Company designated and qualifying as hedge accounting of cash fl ow are as follows: fair value fair value adjustments adjustments recognised recognised in statement in statement of other of other Notial compr. Maturity Notial compr. Maturity DKK million principal* income Fair value months principal* income Fair value months USD (4.8) HKD (1.2) SEK (590.4) 3.6 (498.8) 0-15 (700.0) (20.1) (588.5) 0-15 NOK (379.3) 13.4 (355.7) 0-15 (379.8) (9.2) (371.5) 0-15 Other currencies (179.6) (8.6) (206.4) 0-15 Total at 30 June 19.7 (187.0) 18.5 (276.3) * Positive principal amounts on foreign exchange contracts indicate a purchase of the currency in question. Negative principal amounts indicate a sale. Costs of DKK 4.7 million relating to ineffective cash fl ow hedges have been recognised in the income statement for 2012/13 (income of DKK 8.8 million). Ineffective cash fl ow hedges are recognised in the income statement under fi nancial income/costs. Open foreign exchange contracts for the Group and the Parent Company qualifying as hedges of recognised assets and liabilities are as follows: fair value fair value adjustments adjustments recognised recognised Notial in income Maturity Notial in income Maturity DKK million principal* statement Fair value months principal* statement Fair value months HKD 65.0 (2.2) USD 20.9 (4.7) SEK (70.0) (2.0) (59.5) Total at 30 June (8.9) * Positive principal amounts on foreign exchange contracts indicate a purchase of the currency in question. Negative principal amounts indicate a sale. Fair value adjustments as at 30 June 2013 have been recognised in the consolidated income statement under cost of sales. 66 IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

69 The fair values have been calculated based on current interest rate curves and foreign exchange rates as at 30 June Neither the Group nor the Parent Company has any open foreign exchange contracts that do not qualify for hedge accounting at 30 June 2013 or at 30 June The recognised positive/negative market values under equity have been treated in accordance with the rules for hedging of future cash fl ows and are closed/adjusted during the year according to the hedge accounting principles. The net position of the Group calculated according to the value at risk method will as a maximum result in a loss of DKK 1.0 million. The calculation is made by using a 95% confi dence interval with a term of 6 months. Value at risk states the amount that as a maximum may be lost on a position calculated by using historical volatilities on the different currencies as well as correlations between the currencies. Except from derivative fi nancial instruments for hedging of foreign exchange exposure risks in the statement of fi nancial position, no fair value adjustments for unlisted fi nancial assets and liabilities have been recognised in the income statement. The existing categories of fi nancial assets and liabilities are as follows: DKK million 30 June June 2012 Listed securities Unlisted shares and bonds recognised under non-current assets (shares) Financial assets at fair value recognised through the income statement Derivative fi nancial instruments for hedging of recognised assets and liabilities, recognised under current assets (other receivables) Derivative fi nancial instruments for hedging of future cash fl ow, recognised under current assets (other receivables) Financial assets for hedging purposes Deposits (fi nancial assets) Long-term loans (fi nancial assets) Trade receivables Other receivables Cash Loans and receivables Total financial assets Liabilities to credit institutions (non-current liabilities) Liabilities to credit institutions (current liabilities) Trade payables Share of other liabilities recognised at amortised cost (non-current liabilities) Share of other liabilities recognised at amortised cost (current liabilities) Financial liabilities measured at amortised cost ,046.6 Derivative fi nancial instruments for hedging of recognised assets and liabilities, recognised under current liabilities (other liabilities) Derivative fi nancial instruments for hedging of future cash fl ow, recognised under current liabilities (other liabilities) Interest rate swap for hedging interest rate level on the Group s mortgage loan for property at Raffi naderivej Financial liabilities for hedging purposes Total financial liabilities ,085.7 Fair value hierarchy for financial instruments measured at fair value in the statement of financial position The fair value hierarchy is divided into three levels: Listed prices in active markets for identical assets and liabilities (level 1). Listed prices in active markets for identical assets and liabilities or other methods of measurement where all substantial inputs are based on market observables (level 2). Method of measurement where substantial inputs may not be based on market observables (level 3). Calculation of the fair value adjustments of the Group s cash fl ow hedges and interest rate swaps is based on listed prices in active markets for identical assets where all substantial inputs are based on market observables (level 2). Inputs for measurement of the Group s unlisted shares have not been based on market observables (level 3). Liquidity risk IC Companys secures a suffi cient liquidity reserve by a combination of liquidity control and non-guaranteed credit facilities. Please see below for maturity profi les on fi nancial assets and liabilities. Interest rate risk The Group s interest rate risk is continuously monitored by the Treasury Department in accordance with Group policies. The Group employs matching of the maturities of each individual asset/liability. The typical neutral maturity for the Group is 2 months. Potential interest rate risks are hedged by means of FRAs and/or interest rate swaps. CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 67

70 The Company s interest rate risk relates to the interest-bearing debt and the securities with a nominal value of DKK 100 million of 0.71% Nykredit 21E The Company s loan portfolio consists of current bank debt and a long-term loan fi nancing the properties which the Company owns. The sensitivity of an interest rate change of 1%/(1%) amounts to approximately DKK 6.5/(6.5) million calculated by using the BPV method (DKK 3.8/(3.8) million). The below maturity/reassessment profi les applying to the Group s fi nancial assets and liabilities are as follows: Re-assessment-/maturity profile Fixed Effective At 30 June 2013 in DKK million 0-1 year 1-5 years above 5 years interest rate interest rate Short-term loans to business partners No 1.70% Trade receivables No 2-24% Listed securities No 0.71% Trade payables No - Credit institutions, current liabilities No 2.09% Credit institutions, non-current liabilities* No 1.44% Re-assessment-/maturity profile Fixed Effective At 30 June 2012 in DKK million 0-1 year 1-5 years above 5 years interest rate interest rate Long-term loans to business partners No 2.06% Short-term loans to business partners No 2.06% Trade receivables No 2-24% Trade payables No - Credit institutions, current liabilities No 3.22% Credit institutions, non-current liabilities* No 2.03% * The re-assessment profi le is within 1-5 years. The loan is reclassifi ed as liabilities concerning assets classifi ed as held-for-sale. Default on loans The Group has not defaulted any loan during the year under review or last fi nancial year. Credit risk The Group solely uses internationally recognised banks with a high credit rating. The credit risk on forward contracts and bank deposits is consequently deemed to be low. In respect of trade receivables, the Group typically uses credit insurance in countries in which the credit risk is deemed to be high and where credit insurance is feasible. This primarily applies to export markets in which IC Companys is not represented through an independent sales company. Beyond this, the credit risk regarding trade receivables and other receivables is limited as the Group has no material credit risk as the exposure is spread on a large amount of counter-parties and customers in many different markets. Capital structure The Company s Management considers on a regular basis whether the Group s capital structure is in the best interest of the Company and its shareholders. The general target is to ensure a capital structure which supports long-term fi nancial growth and at the same time increases the return on investment for the Group s stakeholders by optimising the ratio between equity and debt. The overall strategy of the Group is unchanged compared to last year. The Group s capital structure consists of debt which includes fi nancial liabilities such as mortgage loan, bank loans and cash and equity which includes share capital, other reserves as well as retained earnings. 32. Related party transactions IC Companys A/S related parties include subsidiaries as set out at the back of this Annual Report, their boards of directors, executive boards and other executives as well as their related family members. Related parties also comprise businesses in which the individuals mentioned above have material interests. IC Companys A/S has no related parties with controlling infl uence on the Company. IC Companys A/S conducts substantial trading with all its subsidiaries. Trading is conducted on an arm s length basis. Information on trading with subsidiaries is as follows: Parent Parent Group Group Company Company DKK million 30 June June June June 2012 Purchase of fi nished goods and consumables from subsidiaries - - 1, ,276.3 Sale of fi nished goods and consumables to subsidiaries - - 1, ,405.2 Sale of services to subsidiaries Transactions with subsidiaries have been eliminated in the consolidated fi nancial statements in accordance with the accounting policies. The remuneration paid to the members of the Executive Board, the Board of Directors, and other executives as well as share-based remuneration programmes and acquisitions are disclosed in note 4 to the consolidated fi nancial statements. Shareholdings of the Executive Board and the Board of Directors are disclosed under Executive Board and Board of Directors in the section IC Companys work with Corporate Governance. 68 IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

71 Interest on accounts with subsidiaries is stated in note 7 to the parent fi nancial statements. The Parent Company s accounts with the subsidiaries comprise ordinary trade balances concluded on trading terms equivalent to those applied for the Group s and the Parent Company s other customers and suppliers. Furthermore, the Parent Company has granted loans to subsidiaries with a total balance as at 30 June 2013 of DKK 33.1 million (DKK million) consisting of two bullet loans for which no due dates have been set. During the fi nancial year 2012/13 loans corresponding to DKK million have been repaid. The Parent Company s net receivables from subsidiaries include a provision of DKK million (DKK million) to meet likely future losses in subsidiaries with negative equity values. The Parent Company has issued letters of comfort for certain subsidiaries. The Parent Company has recognised dividends of DKK 69.6 million (DKK million) from subsidiaries for 2012/13. The Company has had other transactions during the year with the former CEO of the Company as well as the Chairman of the Board of Directors and businesses controlled by the Chairman of the Board of Directors. The transactions were all made on arm s length terms and did not exceed DKK 1 million for the fi nancial year under review. With the exception of intragroup transactions, which have been eliminated in the consolidated fi nancial statements, and usual management remuneration, the Group has not made any other transactions other than mentioned above in this or any previous years with the Board of Directors, Executive Board, other executives, major shareholders or other related parties. 33. Events after the reporting period Mads Ryder was appointed Group CEO of IC Companys A/S as at 1 August Besides from this, no material events have taken place after the reporting period that have not been recognised or included in this Annual Report. 34. Approval of the announcement of the Annual Report The Board of Directors of IC Companys A/S has approved the announcement of this Annual Report at a board meeting held on 22 August This Annual Report will be presented for approval at the Annual General Meeting of IC Companys A/S to be held on 25 September Significant accounting policies Except from the accounting policies described in note 1 and note 2 to the consolidated fi nancial statements, the signifi cant accounting policies applied are as described below. DESCRIPTION OF SIGNIFICANT ACCOUNTING POLICIES Basis of consolidation The consolidated fi nancial statements consist of the fi nancial statements of IC Companys A/S (the Parent Company) and its subsidiaries in which the Company s voting rights directly or indirectly exceed 50%, or in which the Company is able to exercise a controlling interest in any other way. The consolidated fi nancial statements are prepared on the basis of the parent fi nancial statements and the individual subsidiaries by consolidating items of a uniform nature. Equity interests, intercompany transactions, intercompany balances, unrealised intercompany gains on inventories and dividends are eliminated. The items of the fi nancial statements of subsidiaries are fully consolidated in the consolidated fi nancial statements. The proportionate share of the results of non-controlling interests is recognised in the consolidated income statement for the year. Business combinations Newly acquired or newly established businesses are recognised in the consolidated fi nancial statements from the acquisition date or incorporation date. The acquisition date is the date when control of the business actually passes to the Group. Businesses sold or liquidated are recognised up to the date of disposal or liquidation. The date of disposal is the date when control of the business actually passes to a third party. Acquisitions are accounted for using the acquisition method, under which the identifi able assets, liabilities and contingent liabilities of businesses acquired are measured at fair value at the acquisition date. Acquired non-current assets held-for-sale are measured at fair value less expected costs to sell, however. Restructuring costs are only recognised in the acquisition s statement of fi nancial position if they represent a liability to the acquired business. The tax effect of revaluations is taken into account. The cost of a business is the fair value of the consideration paid. If the fi nal determination of the consideration is conditional on one or more future events, these adjustments are recognised at fair value from the acquisition date. CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 69

72 Costs directly attributable to acquisitions are recognised directly in the income statement from the date of payment. Any excess (goodwill) of the cost of an acquired business, the value of the non-controlling interest in the acquired business and the fair value of previously acquired capital interests over the fair value of the acquired assets, liabilities and contingent liabilities is recognised as an asset under intangible assets and tested annually for impairment. If the carrying amount of an asset exceeds its recoverable amount, the asset is written down to the lower recoverable amount. In case of negative differences (negative goodwill), the calculated fair values and the calculated cost of the business, the value of the non-controlling interest in the acquired business and the fair value of previously acquired capital interests are reassessed. If the difference is still negative following the reassessment, the difference is then recognised as income in the income statement. Acquisitions of non-controlling interest in subsidiaries are accounted for as equity transactions in the consolidated fi nancial statements, and the difference between the consideration and the carrying amount is recognised under equity owned by Parent Company. Gains or losses on disposal or liquidation of subsidiaries are stated as the difference between the disposal or liquidation amount and the carrying amount of net assets including goodwill at the date of disposal or liquidation, accumulated foreign exchange adjustments recognised under other comprehensive income and anticipated disposal or liquidation costs. The disposal or liquidation amount is measured as the fair value of the consideration received. Foreign currency translation For each of the reporting entities in the Group, a functional currency is determined. The functional currency is the currency in the primary economic environment in which the individual reporting entity operates. Transactions in currencies other than the functional currency are transactions denominated in foreign currencies. On initial recognition, transactions denominated in foreign currencies are translated into the functional currency at the exchange rate ruling at the transaction date. Foreign exchange differences arising between the exchange rates at the transaction date and the date of payment are recognised in the income statement under revenue, cost of sales or fi nancial income or costs. Receivables, payables and other monetary items denominated in foreign currencies are translated into the functional currency at the exchange rates ruling at the end of the reporting period. The difference between the exchange rate ruling at the end of the reporting period and the exchange rate at the date when the receivable or payable arose or was recorded in the most recent annual report is recognised in the income statement under revenue, sales of costs or fi nancial income or costs. Property, plant and equipment and intangible assets, inventories and other non-monetary assets acquired in foreign currencies and measured based on historical cost are translated at the exchange rates prevailing at the transaction date. The statements of fi nancial position of foreign subsidiaries are translated into DKK at the exchange rate ruling at the end of the reporting period, while income statements are translated into DKK at monthly average exchange rates during the year. Foreign exchange differences arising on the translation of foreign subsidiaries opening equity using the exchange rates ruling at the end of the reporting period as well as on the translation of the income statements using average exchange rates at the end of the reporting period are recognised under other comprehensive income. Foreign exchange adjustments of receivables and subordinated loan capital in foreign subsidiaries that are considered to be part of the overall investment in the subsidiaries are recognised under other comprehensive income in the consolidated fi nancial statements and in the income statement of the parent fi nancial statements. Derivative financial instruments and hedging activities On initial recognition in the statement of fi nancial position, derivative fi nancial instruments are measured at their fair value. Positive and negative fair values of derivative fi nancial instruments are recognised under other receivables and other liabilities, respectively, as unrealised gain on fi nancial instruments and unrealised loss on fi nancial instruments, respectively. Changes in the fair value of derivative fi nancial instruments designated as and qualifying for recognition as cash fl ow hedges are recognised under other comprehensive income. Gains and losses relating to such hedge transactions are reclassifi ed from other comprehensive income on realisation of the hedged item and recognised in the same line item as the hedged item. Changes in the fair value of derivative fi nancial instruments used to hedge net investments in independent foreign subsidiaries and which otherwise meet the criteria for hedge accounting are recognised under other comprehensive income in the consolidated fi nancial statements (net investment hedge). For derivative fi nancial instruments not qualifying as hedges, changes in the fair value are recognised in the income statement under fi nancial income or costs. Discontinued operations and non-current assets held-for-sale Discontinued operations are major business areas or geographical areas which have been sold or which are held-for-sale according to an overall plan. The results of discontinued operations are presented as separate items in the income statement, consisting of the operations operating profi t/loss after tax and any gains or losses on fair value adjustment or sale of the related assets. Cash fl ow from discontinued operations has been included in the consolidated statement of cash fl ows under cash fl ows from operating, investing and fi nancing activities of continuing operations and has been explained in the notes. Non-current assets and groups of assets held-for-sale, including assets related to discontinued operations, are presented as separate items in the statement of fi nancial position under current assets. Liabilities directly related to the assets and discontinued operations in question are presented under current liabilities in the statement of fi nancial position. Assets are classifi ed as held-for-sale when their carrying amounts will be recovered principally through a sale transaction within 12 months according to a formal plan rather than through continuing use. 70 IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

73 Impairment losses arising at the initial classifi cation of held-for-sale as well as any subsequent gains or losses measured at the lower of the carrying amount or the fair value less costs to sell are recognised in the income statement under the items in question. Gains and losses are explained in the notes. Non-current assets held-for-sale are not depreciated or amortised, but are written down to fair value less expected costs to sell where this is lower than the carrying amount. Comparative fi gures in the statement of fi nancial position are not adjusted. INCOME STATEMENT Revenue Revenue from the sale of goods is recognised in the income statement when delivery and transfer of risk to the buyer have taken place and if the income can be reliably measured and is expected to be received. Revenue is measured excluding VAT, indirect taxes and less expected returns and discounts related to sales. Revenue is measured at the fair value of the consideration received or receivable. In addition to the sale of goods, revenue comprises license revenue. Cost of sales Cost of sales includes direct costs incurred in generating the revenue for the year. The Company recognises cost of sales as revenue is earned. Staff costs Staff costs include salaries, remuneration, retirement benefi t schemes, share-based payments and other staff costs to the Group s employees, including the members of the Executive Board and Board of Directors. Agents commissions to external sales agents are also included. Depreciation, amortisation and impairment losses Depreciation, amortisation and impairment losses comprise amortisation of intangible assets, depreciation of property, plant and equipment and impairment losses for the year. Other external costs Other external costs comprise other purchase and selling costs and administrative costs, bad debts, etc. Lease costs relating to operating lease agreements are recognised by using the straight-line method in the income statement under other external costs. Other operating income and costs Other operating income and costs comprise items of a secondary nature relative to the principal activities, including gains and losses on sale of intangible assets and property, plant and equipment. Financial income and costs Financial income and costs include interest, realised and unrealised foreign currency translation adjustments, fair value adjustments of derivative fi nancial instruments which do not qualify for hedge accounting and supplements, deductions and allowances relating to the payment of tax. Interest income and costs are accrued based on the principal and the effective rate of interest. The effective rate of interest is the discount rate to be used in discounting expected future payments in relation to the fi nancial asset or the fi nancial liability so that their present value corresponds to the carrying amount of the asset or liability, respectively. Tax on profit for the year Tax for the year comprises of current tax for the year and adjustments in deferred tax. Tax for the year relating to the profi t/loss for the year is recognised in the income statement and tax for the year relating to items recognised under other comprehensive income or directly in equity is recognised under other comprehensive income or directly in equity, respectively. Foreign currency translation adjustments of deferred tax are recognised as part of the adjustment of deferred tax for the year. The current tax expense for the year is calculated based on the tax rates and rules applicable at the end of the reporting period. The Parent Company is taxed jointly with all consolidated wholly owned Danish subsidiaries. The current tax expense is allocated among the companies of the Danish tax pool in proportion to their taxable income (full absorption with refunds for tax losses). The jointly taxed companies pay tax under the Danish on-account tax scheme. Deferred tax is calculated using the current tax rules and tax rates on temporary differences between carrying amounts and tax bases. Deferred tax assets, including the tax base of deferrable tax losses, are recognised at the expected value of their utilisation as a setoff against future taxable income or as a setoff against deferred tax liabilities within the same legal entity and jurisdiction. If deferred tax is an asset, it is included in non-current assets based on an assessment of the potential for future realisation. Deferred tax is calculated based on the planned use of each asset and settlement of each liability, respectively. Deferred tax is measured using the tax rates and tax rules that, based on legislation in force or in reality in force at the end of the reporting period, are expected to apply in the respective countries when the deferred tax is expected to crystallise as current tax. Changes in deferred tax as a result of changed tax rates or tax rules are recognised in the income statement unless the deferred tax is attributable to transactions which have been recognised previously under other comprehensive income or directly in equity. CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 71

74 Deferred tax is recognised on temporary differences arising on investments in subsidiaries, unless the Parent Company is able to control when the deferred tax is to be realised and it is likely that the deferred tax will not crystallise as current tax in the foreseeable future. STATEMENT OF FINANCIAL POSITION, ASSETS Intangible assets On initial recognition, goodwill is measured and recognised as described under the section Business combinations. Subsequently, goodwill is measured at cost less accumulated impairment losses. Goodwill is not amortised but tested at least once a year for impairment as further described in the below section on Impairment. The carrying amount of goodwill is allocated to the Group s cash-generating units at the date of acquisition. The determination of cashgenerating units is based on the management structure and the internal fi nancial management. Payments to take over leases ( key money ) are classifi ed as leasehold rights. Leasehold rights are amortised over the lease period or the useful life if this is shorter. The basis of amortisation is reduced by any write-downs. Leasehold rights with an indeterminable useful life are not amortised, but tested for impairment annually. Software and IT development are amortised over the useful life of 3-7 years. Cost includes the acquisition price as well as costs arising directly in connection with the acquisition and until the point of time where the asset is ready for use. Amortisation is provided on a straight-line basis over the expected useful life. Property, plant and equipment Property, plant and equipment are measured at historical cost less accumulated depreciation and impairment losses. Cost comprises the acquisition price and costs directly related to the acquisition until the time when the asset is ready for use. The difference between cost and the expected scrap value is depreciated on a straight-line basis over the expected economic lives of the assets. The depreciation period is determined on the basis of Management s experience in the Group s business area, and Management believes the following estimates to be the best estimate of the economic lives of the assets: Leasehold improvements Buildings Equipment and furniture up to 10 years years 3-5 years If the depreciation period or the scrap values are changed, the effect on depreciation going forward is recognised as a change in accounting estimates. Gains and losses on disposal of property, plant and equipment are computed as the difference between the selling price less costs to sell and the carrying amount at the date of disposal. Gains and losses are recognised in the income statement under other operating income or costs. Property, plant and equipment are written down to the recoverable amount if this is lower than the carrying amount as described in the below section on Impairment. Impairment The carrying amount of goodwill is tested at least once a year for impairment together with the other non-current assets of the cashgenerating unit to which the goodwill has been allocated, and is written down to the recoverable amount through the income statement if this is lower than the carrying amount. The recoverable amount is generally calculated as the present value of the future cash fl ows expected to derive from the cash-generating unit to which the goodwill relates. The carrying amount of non-current assets other than goodwill, intangible assets with indeterminable useful lives, deferred tax assets and fi nancial assets is tested annually for indications of impairment. If such an indication exists, the recoverable amount of the asset is calculated. The recoverable amount is the higher of the fair value of the asset less costs to sell and the value in use. An impairment loss is recognised when the carrying amount of an asset or a cash-generating unit exceeds the recoverable amount of the asset or the cash-generating unit. Impairment losses are recognised in the income statement under depreciation, amortisation and impairment losses. Impairment losses on goodwill are not reversed. Write-downs of other assets are reversed to the extent changes have occurred to the assumptions and estimates leading to the write-down. Write-downs are only reversed to the extent the new carrying amount of an asset does not exceed the carrying amount the asset would have had net of depreciation, had the asset not been written down. Financial assets Securities are measured at their fair value at the end of the reporting period. Other fi nancial assets are measured at cost or at fair value at the end of the reporting period if this is lower. Inventories Inventories are measured at cost using the FIFO method. Inventories are written down to the lower of cost and net realisable value. The cost of raw materials and consumables includes the purchase price and direct costs to take delivery of the products. 72 IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

75 The cost of fi nished products includes the cost of raw materials, consumables, external production costs and costs to take delivery of the products. The net realisable value of fi nished products is determined as the expected selling price less costs incurred to execute the sale. Receivables Receivables include trade receivables and other receivables. Receivables are part of the category loans and receivables which are fi nancial assets with fi xed or defi nable payments and which are not listed on an active market nor derivative fi nancial instruments. Receivables are, on initial recognition, measured at fair value and subsequently at amortised cost which usually corresponds to the nominal value less provision for bad debts. Prepayments Prepayments recognised under assets comprise costs incurred relating to the following fi nancial year, including collection samples, rent, insurance, etc. Prepayments are measured at cost. STATEMENT OF FINANCIAL POSITION, EQUITY Dividends Proposed dividends are recognised as a liability at the time of adoption by the shareholders at the annual general meeting. Treasury shares The acquisition and sale of treasury shares and dividends thereon are taken directly to equity under retained earnings. Translation reserve The translation reserve comprises the shareholders of the Parent Company s share of foreign exchange differences arising in connection with the translation of foreign subsidiaries fi nancial statements reported in their functional currency into the Group s reporting currency (DKK). Reserve for hedging transactions Reserve for hedging transactions comprises the accumulated net change of the fair value of hedging transactions which qualify for recognition as cash fl ow hedges, and where the hedged transaction has not yet been realised. Share-based incentive programmes Share-based incentive programmes in which employees can only chose to buy or subscribe for shares in the Parent Company (equity schemes) are measured at the equity instruments fair value at the grant date and recognised in the income statement under staff costs over the period during which the employee s right to buy the shares vests. The balancing item is recognised directly in equity. The fair value of equity instruments is determined by using the Black & Scholes model with the parameters stated in note 4 to the consolidated fi nancial statements. STATEMENT OF FINANCIAL POSITION, LIABILITIES Retirement benefit obligations The Group has entered into retirement benefi t agreements and similar agreements with the majority of the Group s employees. Obligations relating to defi ned contribution plans are recognised in the income statement in the period in which the employees render the related service, and contributions due are recognised in the statement of fi nancial position under other liabilities. For defi ned benefi t plans, an annual actuarial assessment is made of the net present value of future benefi ts to be paid under the plan. The net present value is calculated based on assumptions of the future developments of, e.g., salary, interest, infl ation and mortality rates. The net present value is only calculated for those benefi ts to which the employees have earned the right through their past service for the Group. The actuarial calculation of the net present value less the fair value of any assets related to the plan is included in the statement of fi nancial position as retirement benefi t obligations, however, please see below. Differences between the expected development of assets and liabilities in connection with retirement benefi t schemes and the realised values are termed actuarial gains or losses. Subsequently, all actuarial gains or losses are recognised in the income statement. If a retirement plan represents a net asset, the asset is only recognised to the extent that it offsets future contributions from the plan, or it will reduce future contributions to the plan. Provisions Provisions are recognised when, as a consequence of a past event during the fi nancial year or previous years, the Group has a legal or constructive obligation, and it is likely that settlement of the obligation will require an outfl ow of the Company s fi nancial resources. Provisions are measured as the best estimate of the costs required to settle the liabilities at the end of the reporting period. Provisions with an expected term of more than a year at end of the reporting period are measured at present value. In connection with planned restructurings of the Group, provisions are only made for liabilities relating to the restructurings that have been set out in a specifi c plan at the end of the reporting period and where the parties affected have been informed of the overall plan. CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 73

76 Mortgage loans Mortgage loans are measured at fair value less any transaction costs at the date of raising the loan. Subsequently, mortgage loans are measured at amortised cost. Other financial liabilities Other fi nancial liabilities, including bank loans and trade payables, are on initial recognition measured at fair value. In subsequent periods, fi nancial liabilities are measured at amortised cost, applying the effective interest method, to the effect that the difference between the proceeds and the nominal value is recognised in the income statement as fi nancial costs over the term of the loan. STATEMENT OF CASH FLOWS The statements of cash fl ows of the Group and the Parent Company show the cash fl ows from operating, investing and fi nancing activities for the year, and the net cash fl ows for the year as well as cash and cash equivalents at the beginning and at the end of the fi nancial year. The statement of cash fl ows presents cash fl ow from operating activities indirectly based on the ordinary operating profi t. Cash fl ow from operating activities is calculated as operating profi t adjusted for non-cash operating items, provisions, fi nancials paid, change in working capital and tax. The working capital comprises current assets, excluding cash items or items attributable to the investing activity, less current liabilities excluding bank loans, mortgage loans and tax payable. Cash fl ow from investing activities includes payments regarding acquisition and sale of non-current assets and securities including investments in businesses. Cash fl ow from fi nancing activities includes payments to and from shareholders as well as the raising and repayment of mortgage loans and other non-current liabilities not included in working capital. Cash and cash equivalents comprise cash, listed securities and net short-term bank loans that are an integral part of the Group s cash management. SEGMENT INFORMATION Segment information has been prepared in accordance with the Group s applied accounting policies and is consistent with the Group s internal reporting to the Executive Board. Segment income and costs comprise income and costs that are directly attributable to the individual segment and the items that can be allocated to the individual segment on a reliable basis. The comparative fi gures for the fi nancial year 2011/12 have been adjusted to the new business segments. The adjusted comparative fi gures were announced on 16 April 2013 (Company Announcement no. 4/2013). No information has been provided as to the segments share of items concerning fi nancial position or cash fl ows as the Executive Board does not use this segmentation in the internal reporting of the statement of fi nancial position or the statement of cash fl ows 74 IC COMPANYS ANNUAL REPORT 2012/13 CONSOLIDATED FINANCIAL STATEMENTS

77

78

79 PARENT FINANCIAL STATEMENTS INCOME STATEMENT PAGE 78 STATEMENT OF COMPREHENSIVE INCOME PAGE 78 STATEMENT OF FINANCIAL POSITION PAGE 79 STATEMENT OF CHANGES IN EQUITY PAGE 80 STATEMENT OF CASH FLOWS PAGE 81 NOTES TO THE PARENT FINANCIAL STATEMENTS 1. BASIS FOR PREPARATION OF PARENT FINANCIAL STATEMENTS PAGE ACCOUNTING ESTIMATES AND ASSUMPTIONS PAGE REVENUE PAGE STAFF COSTS PAGE OTHER OPERATING INCOME AND COSTS PAGE OTHER EXTERNAL COSTS PAGE FINANCIAL INCOME AND COSTS PAGE TAX FOR THE YEAR PAGE DIVIDENDS PAGE INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT PAGE INVESTMENTS IN SUBSIDIARIES PAGE FINANCIAL ASSETS PAGE DEFERRED TAX PAGE INVENTORIES PAGE TRADE RECEIVABLES PAGE OTHER RECEIVABLES PAGE PREPAYMENTS PAGE SHARE CAPITAL PAGE CURRENT LIABILITIES TO CREDIT INSTITUTIONS PAGE OTHER LIABILITIES PAGE PROVISIONS PAGE OPERATING LEASES PAGE OTHER LIABILITIES AND CONTINGENT LIABILITIES PAGE CHANGE IN WORKING CAPITAL PAGE SECURITIES PAGE CASH AND CASH EQUIVALENTS PAGE FINANCIAL RISKS AND DERIVATIVE FINANCIAL INSTRUMENTS PAGE RELATED PARTY TRANSACTIONS PAGE EVENTS AFTER THE REPORTING PERIOD PAGE APPROVAL OF THE ANNOUNCEMENT OF THE ANNUAL REPORT PAGE SIGNIFICANT ACCOUNTING POLICIES PAGE 90

80 INCOME STATEMENT Note DKK million 2012/ /12 3 Revenue 1, ,564.3 Cost of sales (1,322.5) (1,360.0) Gross profit Other external costs (178.4) (168.1) 4 Staff costs (265.4) (260.9) 5 Other operating income and costs Depreciation, amortisation and impairment losses (40.8) (20.1) Operating loss (215.2) (108.9) 11 Income from investments in subsidiaries Financial income Financial costs (38.6) (48.2) Loss/profit before tax (56.6) Tax on profi t/loss for the year 42.6 (3.5) Loss/profit for the year (14.0) Profit allocation: 9 Proposed dividend Retained earnings (46.8) Loss/profit for the year (14.0) STATEMENT OF COMPREHENSIVE INCOME Note DKK million 2012/ /12 Loss/profit for the year (14.0) OTHER COMPREHENSIVE INCOME Items which may be reclassifi ed to the income statement: 27 Fair value adjustments, gains on derivatives held as cash fl ow hedges Fair value adjustments, loss on derivatives held as cash fl ow hedges (6.0) (37.9) 27 Reclassifi cation to profi t or loss, gains on realised cash fl ow hedges (56.4) (2.0) 27 Reclassifi cation to profi t or loss, loss on realised cash fl ow hedges Tax on other comprehensive income (1.0) (21.1) Total other comprehensive income Total comprehensive income (13.8) IC COMPANYS ANNUAL REPORT 2012/13 PARENT FINANCIAL STATEMENTS

81 STATEMENT OF FINANCIAL POSITION ASSETS Note DKK million 30 June June 2012 NON-CURRENT ASSETS Software and IT systems IT systems under development Total intangible assets Leasehold improvements Equipment and furniture Property, plant and equipment under construction Total property, plant and equipment Investments in subsidiaries 1, Financial assets Deferred tax Total other non-current assets 1, ,511.8 Total non-current assets 1, ,590.5 CURRENT ASSETS 14 Inventories Trade receivables Receivables from subsidiaries Tax receivable Other receivables Prepayments Securities Cash Total current assets TOTAL ASSETS 2, ,489.4 EQUITY AND LIABILITIES Note DKK million 30 June June 2012 EQUITY 18 Share capital Reserve for hedging transactions Retained earnings 1, ,124.1 Total equity 1, ,309.4 LIABILITIES 20 Other liabilities Total non-current liabilities ,26 Liabilities to credit institutions Trade payables Payables to subsidiaries Other liabilities Provisions Total current liabilities 1, ,145.4 Total liabilities 1, ,180.0 TOTAL EQUITY AND LIABILITIES 2, ,489.4 PARENT FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 79

82 STATEMENT OF CHANGES IN EQUITY Reserve for Share hedging Retained Total DKK million capital transactions earnings equity Equity at 1 July (47.7) ,118.5 Comprehensive income 2011/12 Profi t for the year Other comprehensive income Fair value adjustments, gains on derivatives held as cash fl ow hedges Fair value adjustments, loss on derivatives held as cash fl ow hedges - (37.9) - (37.9) Reclassifi cation to profi t or loss, gains on realised cash fl ow hedges - (2.0) - (2.0) Reclassifi cation to profi t or loss, loss on realised cash fl ow hedges Tax on other comprehensive income - (21.1) - (21.1) Total other comprehensive income Dividends paid - - (73.8) (73.8) Share-based payments Other adjustments Equity at 30 June , ,309.4 Comprehensive income 2012/13 Loss for the year - - (14.0) (14.0) Other comprehensive income Fair value adjustments, gains on derivatives held as cash fl ow hedges Fair value adjustments, loss on derivatives held as cash fl ow hedges - (6.0) - (6.0) Reclassifi cation to profi t or loss, gains on realised cash fl ow hedges - (56.4) - (56.4) Reclassifi cation to profi t or loss, loss on realised cash fl ow hedges Tax on other comprehensive income - (1.0) - (1.0) Total other comprehensive income Dividends paid - - (24.6) (24.6) Share-based payments Equity at 30 June , , IC COMPANYS ANNUAL REPORT 2012/13 PARENT FINANCIAL STATEMENTS

83 STATEMENT OF CASH FLOWS Note DKK million 2012/ /12 CASH FLOW FROM OPERATING ACTIVITIES Operating loss (215.2) (108.9) Reversed depreciation and impairment losses and gain/loss on sale of non-current assets Share-based payments recognised in income statement Other adjustments 30.6 (37.5) 24 Change in working capital (13.1) Cash flow from ordinary operating activities (31.4) (134.5) Financial income received Financial costs paid (13.9) (25.3) Cash flow from operating activities 45.4 (49.7) 8 Tax recovered Total cash flow from operating activities 59.8 (31.7) CASH FLOW FROM INVESTING ACTIVITIES 10 Investments in intangible assets (8.7) (28.5) 10 Investments in property, plant and equipment (7.9) (10.0) Sale of other non-current assets Change in deposits and other fi nancial assets (0.1) (0.1) Dividend received, proceeds in connection with liquidation, etc Total cash flow from investing activities Total cash flow from operating and investing activities CASH FLOW FROM FINANCING ACTIVITIES 9 Dividends paid (24.6) (73.8) Repayment of non-current liabilities (10.0) (9.4) Total cash flow from financing activities (34.6) (83.2) NET CASH FLOW FOR THE YEAR CASH AND CASH EQUIVALENTS Cash and cash equivalents at 1 July (68.1) (137.9) Net cash fl ow for the year Cash and cash equivalents at 30 June 10.0 (68.1) The statement of cash flows may not be concluded based solely on the announced financial statements. PARENT FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 81

84 NOTES TO THE PARENT FINANCIAL STATEMENTS 1. Basis for preparation of the parent financial statements The fi nancial statements of the Parent Company IC Companys A/S for the fi nancial year 2012/13 have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by EU and additional Danish disclosure requirements for the annual reports of listed companies (accounting class D), cf. the Statutory Order on the adoption of IFRS under the Danish Financial Statements Act. The parent fi nancial statements are also prepared in accordance with the IFRS standards as issued by the International Accounting Standards Board (IASB). The parent fi nancial statements are expressed in Danish Kroner (DKK) which is the functional currency of the Parent Company. The accounting policies for the Parent Company are consistent with those used in the previous fi nancial year. Please see note 30 for further information on signifi cant accounting policies. 2. Accounting estimates and assumptions Please see note 2 to the consolidated fi nancial statements. 3. Revenue DKK million 2012/ /12 Sale of goods to subsidiaries 1, ,405.1 Sale of goods to non-group related parties Total revenue 1, , Staff costs DKK million 2012/ /12 Total salaries, remuneration, etc., can be specified as follows: Remuneration to the Board of Directors Remuneration to the Audit Committee Remuneration to the Remuneration Committee Salaries and remuneration Defi ned contribution plans Other social security costs Share-based payments Other staff costs Total staff costs Average number of employees of the Parent Company Remuneration to the Board of Directors, Executive Board and share-based programmes for the Management and employees are disclosed in note 4 to the consolidated fi nancial statements. 5. Other operating income and costs DKK million 2012/ /12 Services provided to subsidiaries Loss on sale of non-current assets (1.1) (0.4) Sales proceeds and other operating income and costs Total other operating income and costs IC COMPANYS ANNUAL REPORT 2012/13 PARENT FINANCIAL STATEMENTS

85 6. Other external costs Other external costs include the total fees paid for the fi nancial year under review to the auditors appointed at the annual general meeting. DKK million 2012/ /12 Statutory audit Other statements and opinions with guarantees Tax consultancy Other services Total other external costs Financial income and costs DKK million 2012/ /12 Financial income: Interest on receivables from subsidiaries Interest on bank deposits Other fi nancial income Interest income from financial assets not measured at fair value Interest income on securities Realised gain on derivative fi nancial instruments Net gain on foreign currency translation Total financial income Financial costs: Interest on liabilities to credit institutions (9.5) (11.2) Interest on payables to subsidiaries (21.3) (23.4) Interest costs from financial liabilities not measured at fair value (30.8) (34.6) Fair value adjustments on securities (0.4) - Realised loss on derivative fi nancial instruments (7.4) (13.6) Total financial costs (38.6) (48.2) Net financials Tax for the year DKK million 2012/ /12 Current tax Current tax for the year under review (11.1) (8.1) Prior-year adjustments, current tax (6.6) - Total current tax (17.7) (8.1) Deferred tax Change in deferred tax (23.0) 27.6 Adjustments regarding changes in tax rates Prior-year adjustments, deferred tax (1.9) 5.1 Total deferred tax (23.9) 32.7 Tax for the year (41.6) 24.6 Recognised as follows: Tax on loss/profi t for the year (42.6) 3.5 Tax on other comprehensive income Tax for the year (41.6) 24.6 Net tax receivable at 1 July Tax payable on profi t for the year Tax paid during the year (14.4) (18.0) Net tax receivable at 30 June Recognised as follows: Tax receivable Net tax receivable at 30 June PARENT FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 83

86 9. Dividends IC Companys A/S distributed to its shareholders DKK 24.6 million in dividends during the fi nancial year 2012/13 (DKK 73.8 million). The Board of Directors has resolved to recommend a dividend of DKK 2.00 per ordinary share corresponding to a total dividend of DKK 32.8 million in respect of the fi nancial year 2012/13 (DKK 1.50 per ordinary share). 10. Intangible assets and property, plant and equipment INTANGIBLE ASSETS Software Trade- IT systems Total and IT mark under intangible DKK million systems rights development assets Cost at 1 July Reclassifi cation (6.1) - Addition Disposal (0.1) - - (0.1) Cost at 30 June Reclassifi cation (9.5) - Addition Disposal (1.6) - - (1.6) Cost at 30 June Accumulated amortisation and impairment at 1 July 2011 (174.2) (8.0) - (182.2) Amortisation and impairment on disposals Amortisation and impairment for the year (13.3) (0.1) - (13.4) Accumulated amortisation and impairment at 30 June 2012 (187.5) (8.1) - (195.6) Amortisation and impairment on disposals Amortisation and impairment for the year (30.0) - - (30.0) Accumulated amortisation and impairment at 30 June 2013 (216.8) (8.1) - (224.8) Carrying amount at 30 June Carrying amount at 30 June PROPERTY, PLANT AND EQUIPMENT Total Leasehold Equip- Assets- property improve- ment & under con- plant & DKK million ments furniture struction equipment Cost at 1 July Reclassifi cation (4.3) - Addition Disposal - (5.9) - (5.9) Cost at 30 June Reclassifi cation Addition Disposal (5.0) (3.1) - (8.1) Cost at 30 June Accumulated depreciation and impairment at 1 July 2011 (6.2) (44.9) - (51.1) Depreciation and impairment on disposals Depreciation and impairment for the year (1.4) (5.3) - (6.7) Accumulated depreciation and impairment at 30 June 2012 (7.6) (46.0) - (53.6) Reclassifi cation Depreciation and impairment on disposals Depreciation and impairment for the year (1.2) (9.6) - (10.8) Accumulated depreciation and impairment at 30 June 2013 (5.0) (54.5) - (59.6) Carrying amount at 30 June Carrying amount at 30 June IC COMPANYS ANNUAL REPORT 2012/13 PARENT FINANCIAL STATEMENTS

87 11. Investments in subsidiaries DKK million 30 June June 2012 Cost at 1 July Addition Cost at 30 June 1, Write-downs at 1 July (359.2) (359.2) Write-downs at 30 June (359.2) (359.2) Total carrying amount 1, An overview of the Group structure may be found at the back of this Annual Report. Income from investments in subsidiaries amounts to net DKK 83.8 million (income of DKK million) and comprises dividends from subsidiaries deducted write-downs of investments and receivables for the year. An amount of DKK 14.2 million for 2012/13 was recognised in the income statement regarding prior-year write-downs of short-term receivables from subsidiaries (write-down of DKK 3.8 million). During the fi nancial year 2012/13 the loan granted to ICe Companys Sweden Holding AB has been repaid and converted into investment in the subsidiary. 12. Financial assets Long-term Long-term receivables loans to Total from business financial DKK million subsidiaries partners Deposits, etc. assets Cost at 1 July Addition Disposal - (0.2) - (0.2) Cost at 30 June Addition Disposal (875.3) (0.2) - (875.5) Cost at 30 June Value adjustments at 1 July Foreign currency translation adjustments for the year, etc Value adjustments at 30 June Foreign currency translation adjustments for the year, etc. (40.3) - - (40.3) Disposal Value adjustments at 30 June Carrying amount at 30 June Carrying amount at 30 June The Parent Company has not granted any loans for 2012/13. During the fi nancial year under review the Parent Company has converted receivables from a subsidiary corresponding to a carrying amount of DKK 916 million into investment in the subsidiary. All loans are interest-bearing. No security has been received for the loans. The carrying amount of the fi nancial assets corresponds to the fair value. PARENT FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 85

88 13. Deferred tax DKK million 30 June June 2012 Deferred tax at 1 July Prior-year adjustments 1.9 (5.2) Adjustments regarding changes in tax rates (1.0) - Deferred tax on other comprehensive income (1.0) (21.1) Change in deferred tax on profi t/loss for the year 24.0 (6.5) Total net deferred tax at 30 June Recognised as follows: Deferred tax Total net deferred tax at 30 June Breakdown of deferred tax at 30 June as follows: Gross deferred tax Unrecognised tax assets (6.0) (6.0) Total net deferred tax at 30 June Unrecognised tax assets relate to tax losses that are assessed not to be suffi ciently likely to be utilised in the foreseeable future. The unrecognised tax losses are not limited in time. Changes to temporary differences during the year are as follows: Net deferred Recognised Recognised Net deferred tax assets at in profit in other tax assets at DKK million 1 July 2012 for the year compr. income 30 June 2013 Intangible assets 6.6 (2.6) Property, plant and equipment 14.1 (2.0) Receivables Provisions Other liabilities Financial instruments (11.9) 9.6 (1.0) (3.3) Tax losses 12.4 (11.7) Unrecognised tax assets (6.0) - - (6.0) Total (1.0) 39.5 Net deferred Recognised Recognised Net deferred tax assets at in profit in other tax assets at DKK million 1 July 2011 for the year compr. income 30 June 2012 Intangible assets Property, plant and equipment Receivables Provisions 0.4 (0.1) Other liabilities (0.2) Financial instruments 16.5 (7.3) (21.1) (11.9) Tax losses 22.5 (10.1) Unrecognised tax assets (6.0) - - (6.0) Total 48.3 (11.7) (21.1) Inventories DKK million 30 June June 2012 Finished goods and goods for resale Goods in transit Total inventories Changes in inventory write-downs are as follows: DKK million 30 June June 2012 Inventory write-downs at 1 July Write-down for the year, addition Write-down for the year, reversal (36.9) (25.4) Total inventory write-downs Inventories recognised at net realisable value amount to DKK 16.7 million at 30 June 2013 (DKK 34.8 million). 86 IC COMPANYS ANNUAL REPORT 2012/13 PARENT FINANCIAL STATEMENTS

89 15. Trade receivables Breakdown of gross trade receivables is as follows: DKK million 30 June June 2012 Not yet due Due, 1-60 days Due, days Due more than 120 days Total gross trade receivables The carrying amounts of trade receivables in all material respect correspond to their fair values. In general, trade receivables do not carry interest until between 30 and 60 days after the invoice date. After this date, interest is charged on the outstanding amount. Change in write-downs regarding trade receivables are as follows: DKK million 30 June June 2012 Write-downs 1 July Foreign currency translation adjustments - - Change in write-downs for the year 3.7 (1.3) Realised loss for the year (0.8) (0.7) Total write-downs Please see note 16 to the consolidated fi nancial statement. 16. Other receivables DKK million 30 June June 2012 VAT Sundry receivables Unrealised gain on fi nancial instruments Total other receivables All other receivables are due for payment within 1 year. Management assesses that the carrying amount of receivables at 30 June 2013 in all material respect corresponds to the fair value, and that the receivables are not subject to any particular credit risk. 17. Prepayments DKK million 30 June June 2012 Collection samples Advertising Others Total prepayments Share capital Information on the share capital distribution on number of shares, etc., is disclosed in note 19 to the consolidated fi nancial statements. PARENT FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 87

90 19. Current liabilities to credit institutions The Parent Company s total current liabilities to credit institutions comprise Danish and foreign overdraft facilities carrying interest at an average fl oating rate of 2.09% p.a. (3.22% p.a.). Current liabilities are repayable on demand, and the fair value therefore corresponds to the carrying amount. Current liabilities to credit institutions are denominated in the below currencies as follows: Stated in % 30 June June 2012 DKK 70 6 SEK 6 45 EUR USD - - PLN 1 19 CHF - 2 CAD - 6 GBP 9 1 Other currencies 4 4 Total Other liabilities DKK million 30 June June 2012 VAT, customs and tax deducted from income at source Salaries, social security costs and holiday allowance payable Unrealised loss on fi nancial instruments Severance payments Other costs payable Total other liabilities In other costs payable an amount of DKK 25.5 million (DKK 34.6 million) has been recognised which is due after 12 months. The carrying amount of amounts payable under other liabilities in all material respect corresponds to the fair value of the liabilities. 21. Provisions Provisions for Other Total DKK million restructurings provisions provisions Provisions at 1 July Provisions at 30 June Provisions for the year Provisions at 30 June Operating leases DKK million 30 June June 2012 Commitments under non-terminable operating leases are: Store leases and other land and buildings 0-1 year years Total Lease of equipment and furniture, etc. 0-1 year years Total IC COMPANYS ANNUAL REPORT 2012/13 PARENT FINANCIAL STATEMENTS

91 The Parent Company leases properties under operating leases. The lease period is typically between 3-10 years with an option to extend upon expiry. In addition, the Parent Company leases cars and other operating equipment under operating leases. The lease period is typically between 3-5 years with an option to extend upon expiry. An amount of DKK 23.1 million (DKK 26.2 million) relating to operating leases has been recognised in the income statement of the Parent Company for 2012/ Other liabilities and contingent liabilities DKK million 30 June June 2012 Guarantees and other collateral security in connection with subsidiaries Other guarantees and collateral security The Parent Company has issued letters of comfort for certain subsidiaries. 24. Change in working capital DKK million 30 June June 2012 Change in inventories Change in receivables 56.1 (45.9) Change in current liabilities excluding tax 22.7 (4.1) Total change in working capital (13.1) 25. Securities DKK million 30 June June 2012 Listed bonds Total securities The Group s securities measured at fair value amounted to a nominal value of DKK 100 million of 0.71% Nykredit 21E Cash and cash equivalents DKK million 30 June June 2012 Cash Credit institutions, current liabilities (91.7) (102.4) (90.9) (68.1) Listed bonds Cash and cash equivalents, cf. the statement of cash flows 10.0 (68.1) 27. Financial risks and derivative financial instruments Please see note 31 to the consolidated fi nancial statements. 28. Related party transactions Please see note 32 to the consolidated fi nancial statements. 29. Events after the reporting period Please see note 33 to the consolidated fi nancial statements. PARENT FINANCIAL STATEMENTS ANNUAL REPORT 2012/13 IC COMPANYS 89

92 30. Approval of the announcement of the Annual Report Please see note 34 to the consolidated fi nancial statements. 31. Significant accounting policies The accounting policies for the Parent Company are the same as for the Group with the exception of the items below, please see note 35 to the consolidated fi nancial statements. Other operating income and costs Other operating income and costs comprise administration fees paid from subsidiaries to the Parent Company for their share of the Group s overheads. Dividends from investments in subsidiaries in the parent financial statements Dividends from investments in subsidiaries are recognised in the income statement for the fi nancial year in which the dividend are declared. Investments in subsidiaries in the parent financial statements Investments in subsidiaries are measured at cost. Where the recoverable amount is lower than cost, the investments are written down to such lower value. Receivables from subsidiaries in the parent financial statements On initial recognition, receivables from subsidiaries in the parent fi nancial statements are measured at fair value and subsequently at amortised cost which usually corresponds to the nominal value less write-downs for bad debts. 90 IC COMPANYS ANNUAL REPORT 2012/13 PARENT FINANCIAL STATEMENTS

93 DEFINITION OF KEY RATIOS Gross profit Gross margin (%) = Revenue Operating profit before depreciation and amortisation EBITDA margin (%) = Revenue Operating profit EBIT margin (%) = Revenue Profit for the year Return on equity (%) = Average equity Equity year-end Equity ratio (%) = Total assets year-end Net average working capital plus intangible assets and property, plant and equipment less provisions. Goodwill included represents Average invested capital = total purchased goodwill after write-down for impairment. Operating profit before goodwill write-down and special items Return on invested capital (%) = Average capital employed including goodwill Short-term and long-term liabilities to credit institutions Net interest-bearing debt = and lease debt less cash and cash equivalents Net interest-bearing debt Financial gearing (%) = Equity at year-end Profit attributable to shareholders of the Parent Company Earnings per share = Average number of shares excluding treasury shares Profit attributable to shareholders of the Parent Company Diluted earnings per share = Average number of shares excluding treasury shares, diluted Cash flow from operating activities Diluted cash flow per share = Average number of shares excluding treasury shares, diluted Equity at year-end excluding non-controlling interests Diluted net asset value per share = Number of shares at year-end excluding treasury shares, diluted Market price per share at year-end Diluted price / earnings = Diluted earnings per share A store measured on same-store data has an unchanged location, sales area and name Same-store definition = on shop for a full financial year of comparable sales data. Cost of sales Inventory turnover = Inventories at year-end Trade receivables at year-end x 182 Days sales outstanding (DSO) = Wholesale revenue for H2 ANNUAL REPORT 2012/13 IC COMPANYS 91

94 STATEMENTS Statement by the Management The Board of Directors and the Executive Board have today considered and approved the Annual Report of IC Companys A/S for the fi nancial year 1 July June The Annual Report is prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies. In our opinion, the consolidated fi nancial statements and the parent fi nancial statements give a true and fair view of the Group s and the Parent Company s fi nancial position at 30 June 2013 and of the results of their operations and cash fl ows for the fi nancial year 1 July June We believe that the management commentary contains a fair review of the development in the Group s and Parent Company s operations and fi nancial affairs, the fi nancial performance for the year as well as the Parent Company s fi nancial position and the fi nancial position as a whole of the entities included in the consolidated fi nancial statements, and describes the signifi cant risks and uncertainty factors that may affect the Group and the Parent Company. We recommend the Annual Report for adoption at the Annual General Meeting. Copenhagen, 22 August 2013 Executive Board: MADS RYDER CHRIS BIGLER ANDERS CLEEMANN PETER FABRIN Group Chief Executive Offi cer Chief Financial Offi cer Executive Vice President Executive Vice President Board of Directors: NIELS ERIK MARTINSEN HENRIK HEIDEBY OLE WENGEL Chairman Deputy Chairman Deputy Chairman ANDERS COLDING FRIIS PER BANK ANNETTE BRØNDHOLT SØRENSEN 92 IC COMPANYS ANNUAL REPORT 2012/13

95 The independent auditor s report TO THE SHAREHOLDERS OF IC COMPANYS A/S Report on the consolidated financial statements and parent financial statements We have audited the consolidated fi nancial statements and parent fi nancial statements of IC Companys A/S for the fi nancial year 1 July June 2013, which comprise the income statement, statement of comprehensive income, statement of fi nancial position, statement of changes in equity, cash fl ow statement and notes, including the accounting policies, for the Group as well as for the Parent Company. The consolidated fi nancial statements and parent fi nancial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies. Management s responsibility for the consolidated financial statements and parent financial statements Management is responsible for the preparation of consolidated fi nancial statements and parent fi nancial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies and for such internal control as Management determines is necessary to enable the preparation and fair presentation of consolidated fi nancial statements and parent fi nancial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on the consolidated fi nancial statements and parent fi nancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated fi nancial statements and parent fi nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements and parent fi nancial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatements of the consolidated fi nancial statements and parent fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of consolidated fi nancial statements and parent fi nancial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as the overall presentation of the consolidated fi nancial statements and parent fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion. Our audit has not resulted in any qualifi cation Opinion In our opinion, the consolidated fi nancial statements and parent fi nancial statements give a true and fair view of the Group s and the Parent s fi nancial position at 30 June 2013, and of the results of their operations and cash fl ows for the fi nancial year 1 July June 2013 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies. Statement on the management commentary Pursuant to the Danish Financial Statements Act, we have read the management commentary. We have not performed any further procedures in addition to the audit of the consolidated fi nancial statements and parent fi nancial statements. On this basis, it is our opinion that the information provided in the management commentary is consistent with the consolidated fi nancial statements and parent fi nancial statements. Copenhagen, 22 August 2013 Deloitte Statsautoriseret Revisionspartnerselskab Kirsten Aaskov Mikkelsen State Authorised Public Accountant Lars Siggaard Hansen State Authorised Public Accountant ANNUAL REPORT 2012/13 IC COMPANYS 93

96 GROUP STRUCTURE AT 30 JUNE 2013 Share capital Company Country Currency 1,000 units Wholly-owned subsidiary IC Companys Danmark A/S Denmark DKK 18,000 IC Companys Danmark Premium Brands A/S Denmark DKK 500 Saint Tropez af 1993 A/S Denmark DKK 500 By Malene Birger A/S Denmark DKK 500 Raffi naderivej 10 A/S Denmark DKK 500 IC Companys Norway AS Norway NOK 9,450 ICe Companys Sweden AB Sweden SEK 10,000 Tiger of Sweden AB Sweden SEK 501 ICe Companys Sweden Holding AB Sweden SEK 50,000 Vingåker Factory Outlet AB Sweden SEK 200 Carli Gry International Sweden AB Sweden SEK 100,000 Peak Performance AB Sweden SEK 2,645 Peak Performance Production AB Sweden SEK 400 S T Sweden AB Sweden SEK 100 By Malene Birger AB Sweden SEK 100 IC Companys Finland Oy Finland EUR 384 IC Companys Holding & Distributie B.V. Netherlands EUR 2,269 IC Companys Nederland B.V. Netherlands EUR 16 IC Companys B.V. Netherlands EUR 23 IC Companys Belgium N.V. Belgium EUR 3,305 IC Companys (UK) Ltd. UK GBP 4,350 IC Companys Germany G.m.b.H. Germany EUR 26 IC Companys Verwaltungs G.m.b.H. Germany EUR 1,432 IC Companys Austria G.m.b.H. Austria EUR 413 IC Companys AG Switzerland CHF 3,101 IC Companys Spain S.A. Spain EUR 1,400 IC Companys France SARL France EUR 457 IC Companys Canada Inc. Canada CAD 2,200 IC Companys Poland Sp. Z o.o. Poland PLN 126 IC Companys Hungary Kft. Hungary HUF 10,546 IC Companys Cz s.r.o. Czech Rep. CZK 2,000 IC Companys Hong Kong Ltd. Hong Kong HKD 10,000 IC Companys (Shanghai) Ltd. China CNY 5,289 IC Companys Romania SRL Romania ROL 1,317 Peak Performance Italy SRL Italy EUR 10 51%-owned subsidiary Designers Remix A/S Denmark DKK IC COMPANYS ANNUAL REPORT 2012/13

97 FINANCIAL HIGHLIGHTS AND KEY RATIOS QUARTERLY FOR 2012/13 (UNAUDITED) DKK million Q1 Q2 Q3 Q4 INCOME STATEMENT 1) Revenue 1, Gross profi t Operating profi t/loss before depreciation and amortisation (EBITDA) (73.8) Operating profi t/loss before depreciation and amortisation, adjusted for non-recurring costs (35.9) Operating profi t/loss (EBIT) (97.7) Net fi nancials (1.8) (5.5) (2.1) (3.7) Profi t/loss before tax (101.4) Profit/loss for the quarter of continuing operations (74.8) Profi t/loss for the quarter of discontinued operations 0.4 (12.1) (16.4) (77.6) Profit/loss for the quarter (8.4) 43.6 (152.4) Comprehensive income 65.4 (7.2) 66.7 (128.7) STATEMENT OF FINANCIAL POSITION Total non-current assets Total current assets 1, , , ,502.0 Assets classifi ed as held-for-sale Total assets 2, , , ,022.3 Share capital Total equity Total non-current liabilities Total current liabilities 1, ,131.0 Liabilities concerning assets classifi ed as held-for-sale Total equity and liabilities 2, , , ,022.3 STATEMENT OF CASH FLOWS Cash fl ow from operating activities (182.1) (77.7) Cash fl ow from investing activities (6.7) (25.9) (10.9) (22.8) Cash fl ow from investments in property, plant and equipment (13.4) (16.7) (7.0) (21.1) Cash fl ows from fi nancing activities (24.6) (9.7) - (0.5) Net cash fl ow for the year (213.4) (88.6) KEY RATIOS - CONTINUING OPERATIONS Gross margin (%) EBITDA margin (%) (11.8) EBITDA margin (%), adjusted for non-recurring costs (5.8) EBIT margin (%) (15.7) Return on equity (%) (9.0) Equity ratio (%) Average invested capital including goodwill 1, , , ,402.1 Return on invested capital (%) (7.0) Net interest-bearing debt, end of quarter Financial gearing (%) SHARED BASED RATIOS* Average number of shares excluding treasury shares, diluted (thousands) 16, , , ,402.1 Share price, end of quarter, DKK Earnings per share, DKK 7.4 (0.5) 2.6 (9.3) Diluted earnings per share, DKK 7.4 (0.5) 1.9 (9.3) Diluted cash fl ow per share, DKK (11.2) 18.8 (4.7) 11.1 Diluted net asset value per share, DKK Diluted price/earnings, DKK 13.9 (268.0) 70.5 (13.1) EMPLOYEES Number of employees, full-time equivalent at the end of the quarter (continuing operations) 1,729 1,712 1,640 1,615 1) The comparative figures in the income statement have been adjusted in order to reflect that the brands Jackpot and Cottonfield have been separated as discontinued operations. * The effect of IC Companys programmes for share options and warrants has been included in the diluted values. The key ratios and share data have been calculated according to the recommendations in Recommendations and Ratios 2010 issued by the Danish Society of Financial Analysts. Please see definition of key ratios on page 91. MANAGEMENT COMMENTARY ANNUAL REPORT 2012/13 IC COMPANYS 95

98