Earnings
Strong growth in Premium segment continues
Sales revenues of the Premium brands increased by 2.9 percent also in the difficult fiscal year 2012/13. As a result, the Premium segment now accounts for 64 percent (previous year: 60 percent) of total sales revenues. Baldessarini reported double-digit growth, while sales revenues of Pierre Cardin increased by a single digit percentage. Sales of Otto Kern remained stable in the fiscal year.
Having declined in the first half of the year (-8.4 percent), sales revenues in the Jeans & Workwear segment picked up sharply (+6.1 percent) in the second half of the year;
full-year sales were thus almost on a par (-1.4 percent) with the previous year. We expect this segment to post growing sales in 2013/14.
Gin Tonic restructuring sends Group sales revenues falling by 2.6 percent
Sales revenues of Gin Tonic declined by EUR 10 million in the year 2012/13, which had partly been planned. What had been planned was the absence of womenswear sales (EUR -6.0 million), whereas sales of the menswear collection dropped more strongly than expected (EUR -4.0 million). We had originally projected moderately declining sales due to store closures but had expected wholesale revenues to remain stable. As it turned out, Menswear wholesale revenues also declined by 18 percent. Accordingly, total Men’s &
Sportswear sales declined by EUR 10.0 million (-29 percent).
This shows that the drop in Group sales revenues by EUR 6.5 million or 2.6 percent
GROUP MANAGEMENT REPORT
Consistent sales trend within Europe
As outlined in the chapter “Macroeconomic situation”, clothing retail sales declined in most countries, although their economic data differed. This is also reflected in Ahlers’ sales reve-nues, which followed a similar trend in Germany as well as in Western and Eastern Europe.
If the regional trend is adjusted for the impact of the change in Gin Tonic sales, Ahlers’ sales revenues in Germany increased by 2.3 percent, while sales in Western and Eastern Europe rose by 1.0 percent and 1.1 percent, respectively.
Retail sales continue to grow as new Pierre Cardin stores are opened
As part of the restructuring of Gin Tonic nearly all own Gin Tonic stores were transferred to customers or closed. At the same time, five Pierre Cardin stores were opened in Munich, Hamburg, Katowice, Bratislava and Riga in the fiscal year 2012/13. At the bottom line, the impact of the store openings exceeded that of the store closures; accordingly, sales revenues in the company’s own Retail segment increased by 3.6 percent and now represent 10.7 per-cent of total sales revenues (previous year: 10.1 perper-cent).
Strong increase in e-commerce sales
In fiscal 2012/13, we systematically expanded our e-commerce activities. The functions of the existing Otto Kern, Baldessarini and Gin Tonic e-shops were optimised and a Pionier Workwear shop was launched. We also expanded our presence on multi-label platforms.
As a result, sales revenues increased by 130 percent from a low base.
Earnings position
2012/13 2011/12 Change in EUR million in EUR million in %
Sales 246.7 253.2 -2.6
Gross profit 124.3 126.1 -1.4
in % of sales 50.4 49.8
Personnel expenses* -52.7 -52.2 -1.0
Balance of other expenses/income* -58.3 -54.1 -7.8
EBITDA* 13.3 19.8 -32.8
Depreciation and amortisation* -5.3 -5.9 10.2
EBIT* 8.0 13.9 -42.4
Special effects -0.7 -2.8
Net interest expense -0.6 -0.8 25.0
Earnings before taxes 6.7 10.3 -35.0
Income taxes -1.1 -3.0 63.3
Consolidated net income for the year 5.6 7.3 -23.3
* before special effects
GROUP MANAGEMENT REPORT
Sales effects on gross profit and rising costs send earnings falling
As a result of the lower sales revenues, gross profit also declined in the fiscal year 2012/13, namely by EUR 1.8 million to EUR 124.3 million. The gross profit margin increased modera-tely from 49.8 percent to 50.4 percent, as a lower rate of returns led to reduced write-downs in the course of the year.
While the headcount remained stable, personnel expenses increased by EUR 0.5 million or 1.0 percent, primarily due to collective pay rises and a temporary increase in staff numbers at our Polish production plant. Other operating expenses including deprecia-tion/amortisation rose sharply by EUR 3.6 million or 6.0 percent. This was primarily due to expenses for e-commerce, trade fair presentations, showroom and store rents as well as other selling expenses.
Sale of a work of art
A work of art with a carrying amount of EUR 0.2 million was sold at a price of EUR 0.7 million in the fiscal year 2012/13, which means that a net gain of EUR 0.5 million (previ-ous year: net gain of EUR 0.8 million) was realised from the sale. New works of art in about the same amount as the gross sales price were acquired in 2012/13. As a result, the port-folio of works of art increased moderately from EUR 19.2 million on November 30, 2012 to EUR 19.6 million on the balance sheet date.
EBIT before special effects declined by EUR 5.9 million to EUR 8.0 million (previous year:
EUR 13.9 million) due to lower gross profits and increased expenses.
Decline in earnings slowed down by lower special effects in 2012/13
In the previous year, special effects amounted to a high EUR -2.8 million as a result of the expenses incurred for the restructuring of Gin Tonic. In the fiscal year 2012/13, special effects stood at a much lower level, but were still surprisingly high at the end of the year. This was due to the fact that the company was informed of two decisions relating to legal disputes of the past after the reporting date, which led to special expenses of EUR 0.4 million. The latter were partly offset by the release of tax provisions, which reduced the tax ratio from the previous year’s normal level of 29 percent to 16 percent.
Consolidated net income for the fiscal year after taxes amounted to EUR 5.6 million, down EUR 1.7 million or 23 percent on the previous year’s EUR 7.3 million.
GROUP MANAGEMENT REPORT
Balance sheet structure
Nov. 30, 2013 Nov. 30, 2012 Assets in EUR million in % in EUR million in %
Property, plant, and equipment and intangible assets 39.4 21.6 40.6 22.5
Other non-current assets 21.4 11.7 21.0 11.6
Deferred tax assets 1.4 0.8 1.2 0.7
Non-current assets 62.2 34.1 62.8 34.8
Inventories 75.7 41.6 65.9 36.5
Trade receivables 33.9 18.6 32.7 18.1
Other current assets 6.7 3.6 7.5 4.1
Cash and cash equivalents 3.9 2.1 11.8 6.5
Current assets 120.2 65.9 117.9 65.2
Total assets 182.4 100.0 180.7 100.0
Nov. 30, 2013 Nov. 30, 2012 Equity and liabilities in EUR million in % in EUR million in %
Equity 109.3 59.9 112.9 62.5
Pension provisions 4.6 2.5 5.1 2.8
Other non-current liabilities
and provisions 25.8 14.1 23.9 13.2
Deferred tax liabilities 2.5 1.4 2.2 1.1
Non-current liabilities 32.9 18.0 31.2 17.2
Current income tax payables 0.3 0.2 0.7 0.4
Other current liabilities
and provisions 39.9 21.9 35.9 19.9
Current liabilities 40.2 22.1 36.6 20.3
Liabilities 73.1 40.1 67.8 37.5
Total equity and liabilities 182.4 100.0 180.7 100.0 Net worth position
Equity ratio at a solid 60 percent on the reporting date
At first sight, the balance sheet structure had changed only little as of November 30, 2013 compared to the previous year. At EUR 182.4 million, total assets were up by 0.9 percent on the previous year’s EUR 180.7 million. As the dividend paid out in May 2013 exceeded the result for the year 2012/13, equity declined from EUR 112.9 million to EUR 109.3 million and the equity ratio dropped from 62.5 percent to a still very solid 59.9 percent.
GROUP MANAGEMENT REPORT
Upon closer inspection, more changes in the balance sheet can be found. Invento-ries increased at a very high rate of 15 percent or EUR 9.8 million. On the one hand, this was due to the fact that goods for which fixed orders had been received were not called and could therefore not be booked as sales. On the other hand, higher and earlier orders for spring/
summer 2014 sent inventories rising. Stocks of old goods were more or less on a par with the previous year and were therefore not responsible for the rise in inventories.
In the fourth quarter of 2013, sales revenues were up by 4.5 percent or EUR 2.7 million on the previous years quarter. This led to slightly higher receivables in the year-end balance sheet (up EUR 1.2 million or 3.7 percent on the previous year).
Due to increased inventories and receivables and mitigated by higher supplier liabilities, net working capital rose by EUR 7.9 million to EUR 91.7 million. This amount was covered by cash and cash equivalents as well as liabilities to banks.
Low net debt of EUR 27 million
The Ahlers Group had only very little debt capital at the end of the fiscal year. Moreover, the company’s net debt of EUR 27 million was almost entirely comprised by non-current liabilities (EUR 24 million). Non-current liabilities including equity thus cover 78 percent of total assets. As of the reporting date, Ahlers’ unused credit lines exceeded the drawings under those lines. Financing conditions did not change materially in the fiscal year. Off- balance-sheet payment obligations primarily relate to lease agreements for the company’s own retail stores.
Financial figures
2012/13 2011/12
Equity ratio in % 59.9 62.5
Debt ratio* in % 64.6 58.1
Interest coverage ratio** in % 793.0 1.197.0
Return on equity in % 5.1 6.5
Investment in property, plant, and
equipment and intangible assets*** in EUR million 5.3 3.9
Total assets in EUR million 182.4 180.7
* excl. deferred taxes
* * before special effects
* ** excl. additions from changes in the scope of consolidation
Financial position
Free cash flow influenced by increased net working capital
The seasonal EUR 7.9 million increase in net working capital also influenced the free cash flow, which fell short of the zero mark by about the same amount (EUR -9.1 million). There-fore, the aim for the current fiscal year will be to reduce inventories and, hence, the tied-up capital.
Besides the result for the year and the capital tied up in net working capital, cash flow is also influenced by capital expenditures. At EUR 4.3 million, net capital expenditures in the fiscal year were clearly below the prior year level (EUR 6.8 million) and lower than depreciation/amortisation of EUR 5.3 million. Net capital expenditures in the fiscal year comprised gross expenditures in the amount of EUR 5.3 million (previous year: EUR 3.9 million), income from asset disposals of EUR 0.8 million (previous year: EUR 0.4 million) as well as net payments received for works of art of EUR 0.2 million (previous year: EUR 0.0 million). In the previous fiscal year, the company also made financial investments in the amount of EUR 3.3 million. The company primarily invested in store fittings and a leased host computer. Replacement investments, e.g. in machinery, were at a normal level.
GROUP MANAGEMENT REPORT
Free cash flow
in EUR million 2012/13 2011/12 Change in %
Consolidated net income for the period 5.6 7.3 -23.3 Depreciation, amortisation, and impairment losses 5.3 6.2 -14.5
Change in net working capital -7.9 4.2 n.a.
Change in current provisions -0.5 -0.2 <-100
Other changes* -1.0 -5.1 80.4
Cash flow from operating activities 1.5 12.4 -87.9 Net investments (previous year incl. equity investments) -4.3 -6.8 36.8 Effects of changesin the scope of consolidation
and exchange rates -0.2 0.4 n.a.
Free cash flow before financing activity -3.0 6.0 n.a.
Additions to (+), repayment of (-) non-current liabilities 2.5 1.4 78.6
Dividend payments -8.6 -9.2 6.5
Free cash flow -9.1 -1.8 <-100
Liquid funds as of November 30 ** 2.7 11.8 -77.1
* Other non-cash expenses and income EUR -0.3 million (previous year: EUR -4.6 million)
Change in non-current provisions and other liabilities EUR -0.8 million (previous year EUR -0.3 million)
** Cash and cash equivalents less overdrafts
GROUP MANAGEMENT REPORT
General statement by the Management Board on the earnings, financial and net worth position
2012/13 was a difficult year for the Ahlers Group. On the one hand, this was due to the fact that additional expenditures were required for the ongoing development of the Baldessarini business, the own Retail activities, the e-commerce activities and the international sales organisation. On the other hand, business was slow because of economic and climatic prob-lems. As a result, the company failed to reach its sales and earnings targets.
Although the result for 2012/13 was lower than expected, we posted a positive result and our financial situation remained solid.
The Management Board projects growing sales revenues and earnings for 2013/14.
Free cash flow should be positive and the financial position should become stronger.