Stockmann Group’s Interim Report 1 January – 30 June 2013
Helsinki, Finland, 2013-08-09 07:00 CEST (GLOBE NEWSWIRE) —
STOCKMANN plc, Interim Report 9.8.2013 at 8.00 EET
Consolidated revenue was EUR 543.6 million (EUR 537.2 million), up 3.0 per cent excluding terminated franchising operations.
Operating profit was up 1.4 per cent to EUR 30.1 million (EUR 29.7 million).
Consolidated revenue was EUR 974.9 million (EUR 987.5 million), up 0.2 per cent excluding terminated franchising operations.
Operating result was EUR -4.6 million (EUR 13.4 million).
Result for the period was EUR -17.1 million (EUR -2.3 million)
Earnings per share came to EUR -0.24 (EUR -0.03).
Full-year outlook unchanged: Stockmann Group’s revenue is expected to increase in 2013, excluding the terminated franchising operations. Operating profit is expected to not exceed the figure for 2012.
Events after the reporting period: AB Lindex is expected to receive a significant tax refund which will improve the Stockmann Group’s profit for 2013.
CEO Hannu Penttilä:
The Stockmann Group’s revenue and operating profit began to rise again in the second quarter of 2013. The retail market was exceptionally weak in Finland, where the Group’s operating profit declined, but in the market areas of Sweden/Norway and Russia operating profit was up. Performance improved in both divisions. The Department Store Division had a good start in the second quarter with the successful Crazy Days campaign. The department stores’ earnings in Russia improved, and the performance in St Petersburg was particularly good. Lindex performed well and its earnings grew in the quarter. Seppälä’s performance was weaker, but initiatives to enable the fashion chain’s turnaround are well under way.
We are aiming to achieve more profitable operations for the entire Stockmann Group. The first effects of the cost savings programme, launched in April, were already visible in the department stores’ earnings in the second quarter. The Group’s full-year operating profit, however, is not expected to exceed the figure for 2012.
Due to the insecure long-term market outlook, the Board of Directors has decided to set new medium-term financial targets for the Stockmann Group. By the end of 2016 Stockmann aims to reach a 10 per cent return on capital employed (ROCE), a 7 per cent operating profit margin, and sales growth above the industry average. There are several areas that we will need to focus on in order to reach the new targets.
Stockmann will retain ownership of the Nevsky Centre shopping centre in St Petersburg for the time being. Key performance indicators for the shopping centre have improved particularly well, which is expected to increase the future value of the property and support Stockmann in achieving its new financial targets.
The Stockmann Group’s long-term financial targets were originally set in 2008 in a different business climate. Due to the insecure long-term market outlook, the Board of Directors has decided to replace the targets with new medium-term financial targets. By the end of 2016 Stockmann aims to reach a 10 per cent return on capital employed (ROCE), a 7 per cent operating profit margin, and sales growth above the industry average. The current 40 per cent equity ratio target, which has already been reached, will continue to be applied.
The Group’s Russian business will play a key role in achieving the financial targets. In particular, the capital expenditure made in the department store business in Russia is expected to generate rapidly increasing earnings. Other initiatives in order to reach the new targets will include structural changes within the Department Store Division to improve its profitability, various measures to achieve Seppälä’s turnaround, and the continuing international expansion of Lindex. Both business divisions have good growth opportunities through their strongly expanding online sales. The more efficient use of capital will continue to be an area of focus across the entire Stockmann Group.
Evaluation of Nevsky Centre
Stockmann announced in October 2012 that it would evaluate the commercial value of its Nevsky Centre shopping centre in St Petersburg. Based on that evaluation and the promising outlook for the shopping centre business, Stockmann will continue under the current operating model for the time being. The number of visitors to the Nevsky Centre, the rental income from existing tenants, and the utilisation rate of parking facilities have grown particularly well during recent months. This, combined with a constantly improving tenant mix, is expected to increase the future value of the property and enable strong operating income, and also support Stockmann in achieving its new financial targets.
Events after the reporting period
The Swedish and German tax authorities have made a resolution to eliminate the Lindex Group’s double taxation in the tax years 1997-2004. The German local tax authorities confirmed the resolution in July 2013. After the resolution is processed by the Swedish tax authorities, AB Lindex is expected to receive a significant tax refund. The refund will be recognized in the income statement, and it will improve the Stockmann Group’s profit for 2013.
The double taxation resulted from the presumptive income tax payable by Lindex GmbH, which meant that a total of EUR 94 million was added to the taxable income of the company. AB Lindex was obliged to pay approximately EUR 26 million in taxes and interest on this income in 2008 to the Swedish tax authorities. The tax authorities are expected to reimburse Lindex a major part of this.
Outlook for 2013
The European economy is expected to perform poorly in 2013, and this will cause uncertainty in retail market performance. Declining purchasing power may further weaken consumer confidence and it seems probable that the market in Finland will experience a long period of low or no growth. The market for affordable fashion performed poorly both in 2011 and 2012, particularly in Sweden. The outlook in Sweden is expected to improve slightly towards the end of 2013.
Although the Russian rouble has weakened and GDP forecasts for the country have been lowered, the Russian market is likely to continue to perform better than the Nordic markets. The stable retail market development in the Baltic countries is expected to continue. However, high uncertainty and low consumer confidence may continue to affect consumers’ willingness to make purchases in all market areas.
Stockmann discontinued the Bestseller franchising in Russia and Zara franchising in Finland, which will slow revenue growth somewhat. In Russia, however, the discontinuation will improve operating profit. Attention will be given to improving cost efficiency particularly in Finland, where a cost savings programme has been initiated. The Group’s capital expenditure is estimated to be lower than depreciation in 2013 and to amount to approximately EUR 60 million for the year.
Stockmann expects the Group’s revenue to increase in 2013, excluding the terminated franchising operations. Operating profit is expected to not exceed the figure for 2012. AB Lindex is expected to receive a significant tax refund which will improve the Stockmann Group’s profit for 2013.
|Revenue, EUR mill.||543.6||537.2||974.9||987.5||2 116.4|
|Revenue growth, %||1.2||5.3||-1.3||7.6||5.5|
|Relative gross margin, %||49.1||49.7||47.7||48.9||49.5|
|Operating profit, EUR mill.||30.1||29.7||-4.6||13.4||87.3|
|Net financial costs, EUR mill.||8.5||7.5||14.5||16.2||32.4|
|Profit before tax, EUR mill.||21.6||22.2||-19.1||-2.8||54.9|
|Profit for the period, EUR mill.||19.5||18.6||-17.1||-2.3||53.6|
|Earnings per share, undiluted, EUR||0.27||0.26||-0.24||-0.03||0.74|
|Equity per share, EUR||11.50||11.60||12.40|
|Cash flow from operating activities, EUR mill.||101.4||88.2||-9.8||14.9||123.7|
|Capital expenditure, EUR mill.||16.9||13.0||28.4||23.3||60.3|
|Net gearing, %||107.0||104.1||90.9|
|Equity ratio, %||40.5||41.0||42.8|
|Number of shares, undiluted, weighted average, 1 000 pc||72 049||71 842||71 945|
Return on capital employed,
rolling 12 months
|Personnel, average||14 977||15 749||14 903||15 403||15 603|
This company announcement is a summary of the Stockmann’s Interim Report for 1 January – 30 June 2013 and includes the most relevant information of the report. The complete report is attached to this release as a pdf file and is also available on the company’s website at www.stockmanngroup.com.
Press and analyst briefing and conference call
A press and analyst briefing in Finnish will be held today, on 9 August 2013 at 9.15 a.m. at the F8 Tema restaurant on the 8th floor of Stockmann’s Helsinki city centre department store, Aleksanterinkatu 52.
A conference call in English will be held today, on 9 August 2013 at 11.15 a.m. EET. To participate the conference call, please dial +358 9 8864 8511 and, when requested, key in the meeting room number *657899* including the asterisks. The presentation material will be available for downloading on the company’s website from 9.15 a.m. EET onwards.
Hannu Penttilä, CEO, tel. +358 9 121 5801
Pekka Vähähyyppä, CFO, tel. +358 9 121 3351