Interim report 1 May 2017-31 January 2018 THE URGE TO EXPLORE SPACE
egetæpper a/s Industrivej Nord 25, 7400 Herning Tel. no.: +45 97 11 88 11 Fax no.: +45 97 11 95 80 www.egecarpets.com e-mail: ege@ege.dk Registration No. CVR-no.: 38 45 42 18 Board of Directors Ebbe Malte Iversen, director (chairman) Hans Olesen Damgaard, director (deputy chairman) Kaja Møller, director Anne Mette Zachariassen, self-employed consultant Jørgen Stender Clausen, smith (staff representative) Maja Lorenzen, office clerk (staff representative) Management Svend Aage Færch Nielsen, CEO John Vestergaard, CFO Auditors Ernst & Young Morten Friis, state authorised public accountant Karsten Mehlsen, state authorised public accountant Solicitors DAHL, Herning Bankers Danske Bank Handelsbanken
Contents Financial highlights for the ege Group... 2 Management statement... 4 Management report... 5 Accounting policy... 6 Profit and loss account for the period 1 May 2017 31 January 2018... 8 Consolidated income statement for the period 1 May 2017 31 January 2018... 9 Balance sheet as of 31 January 2018... 10 Cash flow statement for the period 1 May 2017 31 January 2018... 12 Statement of capital and reserves... 15 Notes... 16 Contacts: Mr. Svend Aage Færch Nielsen, CEO Tel: +45 97118811 Mr. John Vestergaard, CFO Tel: +45 97118811 egetæpper a/s Herning, 15 March 2018 1
Financial highlights of the Group DKK million 9 months 9 months Year 2017/18 2016/17 2016/17 Turnover 846 725 1,016 Result before financial entries and taxation (EBIT) 56 55 74 Financial entries (net) -14-8 -11 Result before taxation 42 48 63 Group net result 31 34 43 Total assets at end of period 1,022 974 976 Net working capital 271 246 243 Cash flows from operating activity 29 49 78 Share capital 26 26 26 Equity at end of period excl. of minority holdings 494 474 482 Number of employees 706 684 691 Investments in long-term assets (excl. acquisition of subsidiary) 36 25 31 Investments by acquisition of a subsidiary 0 174 174 Depreciations 33 29 39 Net profit ratio (EBIT-margin) 7 8 7 Return on invested capital after taxation (p.a.) 8 9 9 Equity ratio 48 49 49 Net working capital in percentage of turnover 24 23* 22 Share capital, nominal t.dkk 26,210 26,210 26,210 Number of A-shares 330,340 330,340 330,340 Number of B-shares in circulation 2,290,720 2,290,720 2,290,720 Recommended dividend per share, DKK - - 6.50 Net asset value of share, DKK 188.42 180.93 184.06 Stock exchange price 264.00 241.50 238.50 Stock exchange price/net asset value 1.40 1.33 1.30 The key figures have been calculated according to the Financial Analyst Association s online Recommendations and Key figures. *The calculation is adjusted, taking into account that Carpet Concept which was acquired 1 December 2016 is only included with 2 months of turnover. 2 FINANCIAL HIGHLIGHTS FOR THE GROUP
HIGHLINE 80/20 1400 HOTEL CONTINENTAL NORWAY 3
Management statement The management and the board of directors have today presented and approved the interim report for the period 1 May 2017-31 January 2018. The interim report, which has not been audited or reviewed by the company auditors, has been prepared in accordance with IAS 34 Presentation of interim financial reports as approved by EU as well as additional Danish disclosure requirements for listed companies. In our opinion the interim report gives a true and fair view of the Group s assets, liabilities and financial state as per 31 January 2018 as well as of the result of the Group s activities and cash flows for the period 1 May 2017 31 January 2018. Moreover, we find that the management report gives a true statement of the development of the Group s activities and financial state, of the profit for the period and of the Group s financial state as a whole, as well as a description of the major risks and elements of uncertainties the Group is facing. Herning, 12 December 2017 Management: John Vestergaard CFO Svend Aage Færch Nielsen CEO Board of directors: Ebbe Malte Iversen Hans Olesen Damgaard Kaja Møller Chairman Deputy chairman Anne Mette Zachariassen Jørgen Stender Clausen Maja Lorenzen Staff representative Staff representative 4 MANAGEMENT STATEMENT
Management report Accounting report 3rd quarter (1 November 2017 31 January 2018) 3 months The level of activity during the 3rd quarter did not fully meet our expectations. Turnover of the 3rd quarter amounts to 285 mio. DKK against 269 mio. DKK last year - representing an increase of 6%. Adjusted for the inclusion of last years acquisition of Carpet Concept the organic growth makes up 1%. EBIT of the 3rd quarter makes up 16.8 mio. DKK and has decreased by 0.4 mio. DKK compared to last year, corresponding to 2%. Compared to last year the development in exchange rates affects EBIT negatively with approx. 2.0 mio. DKK. The Group s fixed costs which make up 146.9 mio. DKK (other external costs, personnel costs and depreciations) have increased by 8% compared to last year. The increase makes up approx. 4% when adjusted for Carpet Concept. Profit for the period before taxation amounts to 12.6 mio. DKK against 14.1 mio. DKK last year. As per 31 January 2018 the number of employees amounts to 706 which compared to last year is a reduction of 6 employees. 1st 3rd quarter (1 May 2017 31 January 2018) 9 months The revenue of the first 9 months of the financial year 2017/18 amounts to 846 mio. DKK against 725 mio. DKK last year representing an increase of just under 17%. Adjusted for last year s acquisition of Carpet Concept the organic growth makes up 5%. Overall the level of activity has not quite lived up to our expectations. The export share constitutes 84% against 82% last year. EBIT makes up 55.8 mio. DKK against 55.3 mio. DKK last year for the same period. The development in exchange rates and the influence of this spring s price increase in raw materials affect EBIT of the period negatively with approx. 8.5 mio. DKK against last year. The negative effect of the price increase in raw materials has been on the decline throughout Q3 and is expected normalised in Q4. The Group s fixed costs, which make up 424.7 mio. DKK (other external costs, personnel costs and depreciations), have increased by 15% compared to last year. Adjusted for Carpet Concept the remaining increase in fixed costs amounts to approx. 5%. Investments continue within the focus areas expansion, branding and product development. Focus has to a great extent been on the integration of Carpet Concept in the Group including insourcing of products from external suppliers to realise significant Group synergies. Due to this product and collection development costs among others have increased. The work will continue for the next 6 months. Profit for the period before taxation and minority holdings amounts to 42.0 mio. DKK against 47.7 mio. DKK last year. Profit from hedging currency transactions (GBP) is included last year with an income of 2.1 mio. DKK. Group cash flows from operation activities amount to 29 mio. DKK against 49 mio. DKK last year. The development is mainly attributable to increased binding of liquidity in inventory. Prospects for the financial year 2017/18 Based on the development we have observed during the first 9 months of the financial year, we specify revenue expectations at 1,130-1,170 mio. DKK and EBIT-margin at 6.5-7%. Cash flows from operation activity are adjusted to 55-65 mio. DKK. Expected Specified Realised expectations 9 months 2017/18 2017/18 2017/18 Turnover mio. DKK 1,150-1,225 1,130-1,170 846 EBIT-margin 7-8% 6.5-7% 7% Cash flows from operating activity mio. DKK 65-75 55-65 29 Investments mio. DKK 60-70 60-70 50 *Investments in fixed and intangible assets. Expansion and branding as well as integration of Carpet Concept will be very central areas of action during the financial year 2017/18. The work of expanding the organisation and the positioning in the market will continue with focus on our core markets. MANAGEMENT REPORT 5
Development in turnover Q1-Q3 and prospects for turnover Q4 Realised Q1-Q3 2017/18 Prospects Q4 2017/18 Scandinavia (Denmark, Norway, Sweden) The objective is to maintain our high market share. This is overall fulfilled with growth carried out by Denmark. However, the growth has been at a lower level during Q3. We expect a slightly lower activity during Q4 for which reason the development in Denmark for the year in total will be at level with our objectives. We must realise that the development of Q3 in Norway and Sweden has not quite met our expectations. We do not expect a significant change during Q4 and Norway and Sweden will thus not quite live up to our overall objectives for the financial year 2017/18. Core growth markets DACH (Germany, Austria and Switzerland), England and France We have experienced significant growth and the level of activity is virtually as expected. Our core growth markets have been selected as spearhead for the realisation of our growth objectives. With continued focused effort we also expect that Q4 will live up to our objectives. Other markets Other markets which include Americas and the Far- and Middle East have not all lived up to our objectives. Americas is below the level of last year and below our expectations. The Far East is above the level of last year but below our expectations. The Middle East is on par with our expectations. We expect the same level of activity in Americas and the Far East during Q4. The overall objective of the year is not expected to be fully met. We expect that the Middle East will perform at the same level during Q4 and the overall objectives for the financial year 2017/18 are thus expected to be met. The entire Group We have realised a total growth of 17% of which organic growth constitutes 5% after the correction of factoring in Carpet Concept. The level of activity has not quite lived up to our expectations. Based on the development we have seen during the first 3 quarters of the financial year we specify our expectations to the revenue of the financial year to 1,130-1,170 mio. DKK. Carpet tiles We continue to see a tidy growth 24% during the first 3 quarters of the financial year. Carpet tiles are still gaining market share. We expect growth at the same level during Q4. The development is consistent with our strategic objectives and growth plans. Accounting policies The interim report is presented in accordance with IAS 34 Interim Financial Reporting as approved by the EU and additional Danish disclosure requirements for listed companies. Debt commitment related to the acquisition of minority interests regarding the remaining 49% of Bentzon Carpets ApS and Hammer Tæpper A/S has been reclassified from long-term debt to short-term debt. Comparative figures have also been adjusted. The adjustment has no effect on profit or capital and reserves. Apart from this ratio the used accounting policy is unchanged in relation to the annual financial report 2016/17 to which reference is made. 6 MANAGEMENT REPORT
UNA TEMPO ECOTRUST EDLUND DENMARK 7
Profit and loss account Note t.dkk 9 months 9 months Q3 Q3 2017/18 2016/17 2017/18 2016/17 Turnover 845,914 725,237 284,507 268,674 Change in stock of finished goods, work in progress and commercial goods 31,393 12,180 11,654 702 Costs for raw materials, auxiliaries and commercial goods -399,916-317.310-133,569-116,862 Other external costs -153,497 130,729-53,966-50,951 Gross profit 323,894 289,378 108,626 101,563 Other operating income 3,107 3,423 1,070 1,258 Staff costs -237,814-207,889-81,716-75,011 Depreciations -33,411-29,472-11,211-10,489 Other operating costs -20-171 0-142 Profit before financial entries and taxation 55,756 55,269 16,769 17,179 Result after tax in joint venture 785 250 218-16 Financial income 104 2,439 56 4 1 Financial costs -14,652-10,223-4,472-3,057 Profit before taxation 41,993 47,735 12,571 14,110 Tax on profit for the period -11,252-13,486-3,713-4,011 Profit for the period 30,741 34,249 8,858 10,099 Divided between: Shareholders of egetæpper a/s 29,338 32,851 8,455 9,701 Minority shareholders 1,403 1,398 403 398 30,741 34,249 8,858 10,099 Diluted earnings per share, DKK (EPS-D) 11.19 12.53 2.36 3.70 Earnings per share, DKK (EPS) 11.19 12.53 2.36 3.70 8 PROFIT AND LOSS ACCOUNT
Consolidated income statement t.dkk 9 months 9 months Q3 Q3 2017/18 2016/17 2017/18 2016/17 Financial entries which might be reclassified to the income statement Exchange rate adjustment of foreign subsidiaries -891-1,359 2,024 1,556 Tax on other consolidated income 0 0 0 0 Other consolidated income after tax -891-1,359 2,024 1,556 Profit for the period 30,741 34,249 8,858 10,099 Total recognised consolidated income 29,850 32,890 10,882 11,655 Devided between: Shareholders of egetæpper a/s 28,447 31,492 10,479 11,257 Minority shareholders 1,403 1,398 403 398 29,850 32,890 10,882 11,655 CONSOLIDATED INCOME STATEMENT 9
Balance sheet Note t.dkk 31/1 31/1 30/4 2018 2017 2017 Assets Long-term assets Intangible assets Completed development costs 1,162 1,366 1,063 3 Customer relations 10,402 13,617 12,769 Agency rights 1,610 1,610 1,610 3 Goodwill 148,087 152,551 148,087 Development costs in progress 24,344 6,899 10,237 Total intangible assets 185,605 176,043 173,766 Tangible fixed assets Land and buildings 162,837 160,745 166,168 Plant and machinery 138,471 135,420 145,169 Fixtures and fittings, tools and equipment 24,453 23,817 25,938 Property plant and equipment under construction and prepayments 26,271 30,544 10,022 352,032 350,526 347,297 Other long-term assets Capital investments in joint venture 26,966 26,120 26,181 26,966 26,120 26,181 Total long-term assets 564,603 522,689 547,244 Short-term assets Inventories 274,967 254,834 252,087 Trade receivables 147,612 139,310 143,426 Cash and deposits 34,813 26.953 33,300 Total short-term assets 457,392 421,097 428,813 Total assets 1,021,995 973,786 976,057 10 BALANCE SHEET
Note t.dkk 31/1 31/1 30/4 2018 2017 2017 Equity and liabilities Equity Share capital 26,210 26,210 26,210 Reserve for exchange rate adjustments -1,051 495-160 Retained earnings 468,690 447,518 439,352 Proposed dividends 0 0 17,037 493,849 474,223 482,439 Minority shareholders' part 5,087 5,060 5,349 Total equity 498,936 479,283 487,788 Liabilities Long-term liabilities Deferred tax 30,387 29,252 30,385 Credit institutions 59,964 79,941 74,947 2 Debt obligation regarding acquisition of minority interests 54,837 57,663 53,622 145,188 166,856 158,954 Short-term liabilities Current portion of long-term liabilities falling due within 1 year 20,026 40 20,013 2 Debt obligation regarding acquisition of minority interests 82,997 78,021 80,720 Debt to joint venture 5,055 0 5,082 Trade payables 60,724 57,104 53,299 Bank debt 117,893 94,579 66,239 Corporation tax 5,440 6,985 9,910 Other payables 85,736 90,918 94,052 377,871 327,647 329,315 Total liabilities 523,059 494,503 488,269 Total equity and liabilities 1,021,995 973,786 976,057 BALANCE SHEET 11
Cash flow statement 1 May - 31 October t.dkk 9 months 9 months 2017/18 2016/17 Turnover and other operating income 848,130 726,720 Operating costs -795,141-673,362 Depreciations 33,411 29,472 Change in working capital -28,742-8,476 Cash flow from activity before financial items 57,658 74,354 Interest receipts or similar 889 2,689 Interest payments or similar -13,863-10,396 Cash flow from operation before tax 44,684 66,647 Corporation tax paid -15,720-18,138 Cash flows from operating activitiy 28,964 48,509 Acquisition of tangible assets -35,947-25,419 Sale of tangible assets 2,290 1,274 Acquisition of intangible assets -14,452-4,912 Acquisition of subsidiary 0-118,202 Cash flows to investment activities -48,109-147,259 Borrowing 10,303 108,683 Instalments -21,781-27,435 Change in operating credits 51,627 56,344 Dividend paid -17,037-27,521 Dividend paid to minority shareholders -1,665-1,887 Cash flows from financing activitiy 21,447 108,184 Cash flow of the period 2,302 9,434 Cash and cash equivalents at beginning of period 33,300 17,346 Value adjustment of cash and cash equivalents -789 173 Cash and cash equivalents at end of period 34,813 26,953 12 CASH FLOW STATEMENT
REFORM LEGEND ECOTRUST AUCKLAND AIRPORT, STRATA LOUNGE NEW ZEALAND 13
Statement of capital and reserves t.dkk Share Reserve for Retained Proposed Total Minority Total capital exchange earnings dividend share- equity rate holders adjustment Equity 1 May 2016 26,210 1,854 414,667 27,521 470,252 5,549 475,801 Profit for the period 0 0 32,851 0 32,851 1,398 34,249 Exchange rate adjustment 0-1,359 0 0-1,359 0-1,359 Dividend paid 0 0 0-27,521-27,521-1,887-29,408 Total equity 31 January 2017 26,210 495 447,518 0 474,223 5,060 479,283 Equity 1 February 2017 26,210 495 447,518 0 474,223 5,060 479,283 Profit for the period 0 0-8,166 17,037 8,871 289 9,160 Exchange rate adjustment 0-655 0 0-655 0-655 Total equity 30 April 2017 26,210-160 439,352 17,037 482,439 5,349 487,788 Equity 1 May 2017 26,210-160 439,352 17,037 482,439 5,349 487,788 Profit for the period 0 0 29,338 0 29,338 1,403 30,741 Exchange rate adjustment 0-891 0 0-891 0-891 Dividend paid 0 0 0-17,037-17,037-1,665-18,702 Total equity 31 January 2018 26,210-1,051 468,690 0 493,849 5,087 498,936 14 STATEMENT OF CAPITAL AND RESERVES
Notes Note t.dkk 9 months 9 months Q3 Q3 2017/18 2016/17 2017/18 2016/17 1 Financial costs Other interest expenses 2,331 1,413 802 675 Exchange rate adjustments 2,018 0 1,067 0 Value adjustment on debt commitments on purchase of minority shareholdings 10,303 8,810 2,603 2,382 14,652 10,223 4,472 3,057 31/1 31/1 30/4 2018 2017 2017 2 Debt commitment on acquisition of minority shareholdings Long-term At the beginning of the period 53,622 0 0 Inflow 0 58,018 53,563 Profit of the period 1,215-355 59 54,837 57,663 53,622 Short-term At the beginning of the period 80,720 76,255 76,255 Dividend paid -6,811-7,399-7,399 Profit of the period 9,088 9,165 11,864 82,997 78,021 80,720 Long-term liability incorporate value of put option on purchase of the remaining 25% of Carpet Concept. According to the contract the remaining shares in Carpet Concept will be taken over no later than 1 December 2021. Shares will be taken over at a fixed price of 58.0 mio. DKK (7.8 mio. EUR). The debt is annually increased/reduced by a share of the year result and will be reduced by a share of the dividend distribution. Short-term liability incorporates value of put option on purchase of remaining 49% of Bentzon Carpets ApS and Hammer Tæpper A/S. According to the contracts the remaining shares in Bentzon Carpets will be taken over no later than 1 May 2020 and Hammer Tæpper A/S no later than 1 October 2021. Minorities can according to contract require redemption if requested. For both contracts shares are taken over at equity value. The debt is annually increased/reduced by a share of the year result and will be reduced by a share of the dividend distribution. NOTES 15
Notes without reference The segmentation is prepared on the basis of the Group s internal management reporting and is based on the individual market (operating segment). Consolidation to reportable segments is based on differences in sales channels. The segment Direct sale includes sale achieved by egetæpper s Danish sales organisation as well as foreign subsidiaries and sales offices. The segment Indirect sale is defined as sale via commercial agents or sale to importers/distributors abroad. As segmental result we use the internal phrase market contribution. This is defined as external revenue with deduction of direct wages and material used for production as well as costs, which are directly referable to the individual markets. Segmental information Direct Indirect Total reportable 1 May 2017-31 January 2018 sale sale segments External revenue 751,328 94,586 845,914 Depreciations 8,110 0 8,110 Financial costs 11,454 0 11,454 Profit from sale of assets 1,486 0 1,486 Market contribution 124,770 29,230 154,000 Assets 358,776 13,376 372,152 Direct Indirect Total reportable 1 May 2016-31 January 2017 sale sale segments External revenue 647,949 77,288 725,237 Depreciations 5,257 0 5,257 Financial costs 9,934 0 9,934 Profit from sale of assets 371 0 371 Market contribution 126,027 25,142 151,169 Assets 326,023 15,960 341,983 16 NOTES WITHOUT REFERENCE
Reconciliation of result for the period before tax 2017/18 2016/17 Segmental result for reportable segments 154,000 151,169 Unallocated depreciations -25,301-24,215 Unallocated financial costs -3,094 2,150 Unallocated profit from sale of assets 1,486 371 Unallocated costs -85,098-81,740 Result for the period before taxation, cf. income statement 41,993 47,735 Reconciliation of assets 2017/18 2016/17 Assets for reportable segments 372,152 341,983 Unallocated stock 166,487 144,257 Unallocated cash and cash equivalents 3,720 2,666 Unallocated tangible fixed assets 479,636 484,880 Assets, cf. balance sheet 1,021,995 973,786 NOTES WITHOUT REFERENCE 17
www.egecarpets.com THE URGE TO EXPLORE SPACE