Year End Report for New Wave Group AB (publ)

Q4 January–December 2006

Fine profit growth as well as good cash-flow.

– Sales increased by 15 % to SEK 3 531 (3 059) M.
– Thereof, acquired units contributed by SEK 245 M. This gives an organic growth of 7 %.
– The result after net finance improved by SEK 36.2 M to SEK 290.2 (254.0) M.
– The result after tax improved by SEK 20.4 to SEK 227.1 (206.7) M and profit per share improved to SEK 3.47 (3.22).
– Acquired units burdened the results after net financial items to the second quarter inclusive with SEK 21.3 M. The rest of the year has not been affected by acquired units.
– Cash flow from operation was SEK 281 (-97) M and after investments SEK 232 (-318) M.

– Sales increased by 5 % to SEK 1 079 (1 030) M. Calculated in local currencies the increase was 8 %.
– Profit after net financial items increased by SEK 24.5 M to SEK 156.1 (131.) M.

– The Board proposes to increase the dividend to SEK 1.00 (0.90) per share, which gives a total dividend of SEK 66.3 M.
– For 2007 sales and results are expected to increase for the 17th year in a row.
– Long-term gross profit goal is increased to 50 (40) %.

Sales increased by 15 % to SEK 3 531 (3 059) M during January – December, of which acquired units contributed with SEK 245 M. This gives an organic growth of 7 %. The currency exchange rate has burdened sales by SEK 21 M as the Swedish krona has appreciated in relation to 2005.

Fourth quarter sales increased by 5 % to SEK 1 079 (1 030) M. The mild autumn/winter has had a negative impact on sales of textile both within profile and retail. The currency exchange rate has had a negative effect of SEK 29 M. That gives an organic growth of 8 % in local currencies.

The results after net finance improved by SEK 36.2 M to SEK 290.2 (254.0) M. The results after tax improved by 20.4 to SEK 227.1 (206.7) M and profit per share improved to SEK 3.47 (3.22). Acquired units burdened the results with SEK 21.3 M and the cost for new establishments amounted to SEK 41.0 M. The cost for new establishments also includes the new activities around Orrefors Kosta Boda. The acquired units are the Intraco group that is consolidated from July 2005 and the Orrefors Kosta Boda group that is consolidated from June 2005, meaning that July - December was not effected by acquisitions.

Fourth quarter profit increased before tax by SEK 24.5 M to SEK 156.1 (131.6) M. The cost for establishments amounted to SEK 7.4 M.

The gross margin increased to 47.9 (46.4) % for January – December and to 50.0 (47.5) % for the fourth quarter.

New Wave’s external costs as part of sales increased and amounted to 22.5 (21.4) % of sales. The personnel costs decreased and amounted to 14.8 (15.1) % of sales.

Depreciation increased by SEK 8.6 M to SEK 40.1 (31.5) M.

Net financial items amounted to SEK -54.6 (-41.6) M for the period. The increase is due to increase of net debt and increased interest rates. The Group’s policy is to have a short duration, which has a swift effect on the costs when the interest rate changes.

The tax-rate for New Wave was 21.7 % for the period and 19.1 % for the quarter.

The operating margin was 9.8 (9.7) % and return on capital employed was 12.9 (13.0) %. The acquisition of the Orrefors Kosta Boda group has contributed to higher sales, but will burden the Group’s margin until they reach the same profitability as the rest of the Group. The goal for the Orrefors Kosta Boda group is to reach an operating profit of 10 % in 2010 at the latest.

The Profiling Business Area
The Profiling Business Area’s sales increased by 9 % to SEK 2 146 (1 976) M. Profit on EBITDA-level increased by SEK 40.8 M to SEK 287.9 (247.1) M. Sales in the fourth quarter increased by 3 % to SEK 662 (641) M and the profit by SEK 16.1 M to SEK 115.3 (99.2) M.

The Retailing Business Area
The Retailing Business Area’s sales increased by 28 % to SEK 1 385 (1 083) M. Profit on EBITDA-level increased by SEK 17.0 M to SEK 97.0 (80.0) M. Sales in the fourth quarter increased by 7 % to SEK 417 (389) M and the profit by SEK 13.9 M to SEK 64.4 (50.5) M.

New Wave has purchase offices in Bangladesh, Vietnam and China. A lot of resources are currently spent on strengthening the purchase organization.

See the table below for sales in the different markets. The acquisition of Orrefors Kosta Boda and Intraco has mainly affected the sales in Sweden, the USA, Benelux, England and “other countries”. This means that the increases in the rest of the countries are mainly organic. New Wave is the market leader in the Nordic countries, which means that the future growth will mainly come from the rest of Europe.

New Wave Italy presents continued strong growth as well as profitability, which is proof of the concept’s success all over Europe.

Ever since the establishment in 2004, the Swiss subsidiary has had a continuously high growth-rate. Apart from the profiling area, Craft has been established. This has cost a lot of money, but the high growth-rate is expected to make the results improve during 2007.

New Wave Norway changed its location and computer system during 2005 and has regained its positive trend of a high level of service.

New Wave Denmark continues to grow within the profiling area and Craft. It has also started selling Projob’s work wear and DJ Frantexil’s give-aways. All deliveries are made from Sweden.

Bad service levels during autumn/spring 2005/2006 has lead to the weak increase in Spain. The service level is now corrected and the new management is currently working hard to get the clients’ confidence back.

The new management in New Wave in France is currently focusing on the service level to build up the clients’ confidence.

The profile companies in England/Wales will merge this spring and the stock in London will move to Wales with much lower rent. Despite the move the clients will receive the same service level.

Magnus Vaenerberg, previous Nordic Manager for Villeroy & Boch, was appointed as CEO for Sagaform in the autumn of 2006. When New Wave acquired the Orrefors Kosta Boda group, Magnus Andersson, previous CEO for Sagaform, became CEO for the Orrefors Kosta Boda group. Since then there has only been temporary solutions until Vaenerberg joined the group this autumn. This means that the development in Sagaform has suffered owing to the development of the Orrefors Kosta Boda group. Vaenerberg has already created a team with competence to take Sagaform to the next level and focus is now on marketing and product development. Sagaform sells in several countries in Europe, but mainly in Norway, Germany, Finland, England and Sweden with approximately 60 % of the sales in retail and 40 % in profile.

The acquired units are the Intraco group that is consolidated from July 2005 and the Orrefors Kosta Boda group that is consolidated from June 2005, meaning that January - June was affected by acquisitions. The both units have contributed with SEK 245 M in sales and burdened the results with SEK 21.3 M. The Orrefors Kosta Boda group has developed according to the expectations with cardinally lower external costs, increased sales and a profit for the whole year. The Intraco group has so far not met the expectations, but has contributed with a small profit.

New Wave has launched and started several new establishments and most of these mean adding more of the existing trademarks and product assortments to already existing New Wave companies. It normally takes between 12 – 24 Months before an establishment is profitable, depending on the market and organization.

Several of the Group’s brands within promo wear, work wear and gifts are established in existing New Wave companies in Europe. New Wave has a high rate of establishment with several new start ups during the last years. The goal is to implement most concepts where New Wave is established to achieve wide coverage and big market shares.

Outside Europe, a joint venture in Russia, in which New Wave holds 51 % of the shares and the management holds 49 %, and a wholly-owned company in China have been established. New Wave in Russia is a small establishment in promo wear that is supplied with goods from Sweden. In China, Orrefors Kosta Boda has opened three small flag-ship stores in Shanghai, with a very positive start. Except glass, New Wave sells promo wear in China.

An assortment of textiles is launched under the trademark Kosta Linnewäfveri autumn 2006. An assortment of metal products for kitchen and presents will be launched under the trademark Orrefors Jernverk autumn 2007. Both concepts are under development and the cost for this is taken on a running basis.

One more outlet of approximately 11 000 m2 will be built in Kosta and mainly be let to external companies with attractive brands.

Other establishments around Orrefors Kosta Boda, where New Wave is the only or the major share holder are OKB Restaurang AB, which runs the hotel and restaurant business in Kosta and Orrefors. Several outlets have also been established. A new hotel in Kosta with more than 100 beds is planned for the summer of 2008. The real estate of the hotel will be owned by a company with Lessebo as the majority owner and New Wave as the minority owner. It will contain a crystal bar designed by Kjell Engman. An outdoor stage will be built for audiences and conferences.

All establishments will be profitable on their own and meet New Wave’s profit demands in the long term. Tourists are expected to visit the establishments during summer, while conferences will fill them during winter. Conference packages will be offered to companies via New Wave’s retail network in Sweden and abroad.

The real estates are the largest investments. These will be owned by a company of which New Wave holds 49 % of the shares and the municipality is the majority owner.

During the period, capital tied up in goods has increased by SEK 52 M to SEK 1 519 (1 467) M, of which Orrefors Kosta Boda as a producing company increased by SEK 89 M to be able to raise the service level. Running longer series in production keeps the cost for permutations at a minimum level and increases the profitability, but increases the stock level. The increase in stock is ravishing to Orrefors Kosta Boda’s standard assortment, such as the classic Intermezzo, that has been in the assortment in 25 years. Kosta Linnewäfveri, that was established this autumn, has built up a stock of SEK 25 M. Accounts receivable increased by SEK 25 M to SEK 745 (709) M.

The Group’s cash flow from operation amounted to SEK 281 (-97) M before investments and SEK 232 (-318) M after investments. New Wave’s cash-effecting net investments amounted to SEK -49 (-220) M during January – December. Net debt decreased by SEK 173 M for the period January – December and amounted to SEK 1 316 (1 489) M. New Wave’s credit limits were approximately SEK 2 400 M as of 31 December 2006.

The number of employees as of 31 December 2006 amounted to 2 161 (2 032) persons, of which 40 % were female and 60 % were male. A total of 808 persons were employed within production units. The production owned by New Wave belongs to Orrefors Kosta Boda, Seger, Dahetra and Toppoint.

New Wave has one outstanding programme for subscription options. It expires in June 2008 and consists of 1 500 000 options with an exercise price of SEK 73.10. The options were subscribed in June 2005 with a price of SEK 9.00.

Continued focus on improving the profitability in new establishments, integrate the acquired companies and concentrate the buying. For 2007 the sales and results are expected to increase for the 17th year in a row. The tax rate for 2007 is expected to get back to the same level as previous years.

Sales amounted to SEK 62 (56) M. Profit after financial items amounted to SEK 5.8 (6) M. Net borrowings increased to SEK 903 M, of which SEK 698 M refer to subsidiaries. Net investments amounted to SEK 100 (153) M.

This interim report has been prepared according to IAS 34 interim report and the annual report law as well as according to the Swedish Financial Accounting Standards Council’s standards RR 32 regarding the parent company. Applied accounting principles are in accordance with the annual report for 2005.

The annual general meeting will be held on 11 May 2007 at 1 pm at New Wave Group’s head office in Gothenburg. The Annual Report will be available for shareholders on 27 April at New Wave Group’s head office.

New Wave’s financial goal is to enable the company to continue growing and be prepared to exploit business opportunities. The goal is to pay out 30 % of the Group’s net profit as dividend during a business cycle. The Board of Directors has decided to suggest a dividend of SEK 1.00 (0.90) per share totalling to SEK 66.3 M. The suggestion is an increase of 14 % (calculated on the total amount) from last year and is equivalent to 29 % of the Group’s net profit.

The nomination committee for election of the board to the annual shareholders meeting consists of the following members:
• Håkan Thylén, chairman of the board and convener.
• Torsten Jansson, CEO and the major shareholder.
• Britt Reigo, represents Robur – the second biggest shareholder.

• 23 April 2007
Interim report for Q1
• 11 May 2007
Annual shareholders meeting
• 13 July 2007
Interim report for Q2

Stockholm 16 February 2007
New Wave Group AB (publ)
The Board

CEO Torsten Jansson
Phone: +46 31 712 89 01

dCEO Göran Härstedt
Phone: +46 31 712 89 02

CFO, Krister Magnusson
Phone: +46 31 712 89 21

About Us

New Wave Group is a clothing company concentrating on sportswear and casual clothes.


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