Stockmann Group’s Financial Statements Bulletin 2018
Stockmann Group’s adjusted operating profit for 2018 improved
STOCKMANN plc, Stock Exchange Release 14.2.2019 at 8:00 EET
October-December 2018, continuing operations:
- Consolidated revenue was EUR 304.5 million (315.7), down 1.3% in comparable currency rates.
- Gross margin was 55.6% (56.8).
- Adjusted operating result was EUR 23.5 million (24.2).
- Reported operating result was EUR -2.8 million, including an impairment of EUR 25 million (13.6).
January-December 2018, continuing operations:
- Consolidated revenue was EUR 1 018.8 million (1 055.9), down 1.0% in comparable currency rates.
- Gross margin was 56.9% (55.8).
- Adjusted operating result was EUR 28.4 million (12.3).
- Reported operating result was EUR -5.0 million (-148.4).
- Adjusted earnings per share were EUR -0.22 (-0.59) and reported earnings per share were EUR -0.68 (-2.82).
The Board of Directors will propose that no dividend be paid for the financial year 2018.
Guidance for 2019:
Stockmann expects the Group’s adjusted operating profit, excluding the impact of Nevsky Centre, to improve compared to 2018.
CEO Lauri Veijalainen:
The Stockmann Group’s adjusted operating result improved by EUR 16 million compared to 2017. The improvement was mainly due to Lindex’s successful turnaround. Real Estate continued its steady performance.
Lindex managed to grow its market share in its main markets, and its online sales continued to grow well throughout the year. Lindex’s adjusted operating profit almost doubled, due to growth in sales, a better gross margin and cost savings.
Real Estate proceeded with its planned projects on real estate divestments. In May, Stockmann sold its Book House property in the centre of Helsinki. The strategy of withdrawal from Russia was fulfilled in October, when we signed an agreement for the sale of the Nevsky Centre shopping centre in St Petersburg. The transaction was completed in January 2019. The Group’s net debt decreased by nearly EUR 200 million during the year mainly due to the divestment of the Book House and decrease in working capital. The sales proceeds from Nevsky Centre were also used for repaying a bank loan in January 2019.
Stockmann Retail did not achieve a positive result, despite our efforts. Full-year sales in 2018 fell short of our target, to our true disappointment. The operating result weakened mostly in the last quarter of the year, despite good growth in online sales in the quarter. In early 2019, we launched a project aiming at reducing the Group’s expenses by EUR 20 million by the end of the year. The majority of these measures will affect the Retail division.
In 2019, we will continue the implementation of our strategic projects, seek to secure sales and improve the gross margin. We will also accelerate our renewal measures including our digital journey, the effects of which will become visible for our customers during the year.
KEY FIGURES
| Continuing operations | 10-12/ 2018 |
10-12/ 2017 |
1-12/ 2018 |
1-12/ 2017 |
| Revenue, EUR mill. | 304.5 | 315.7 | 1 018.8 | 1 055.9 |
| Gross margin, % | 55.6 | 56.8 | 56.9 | 55.8 |
| EBITDA, EUR mill. | 36.2 | 34.1 | 76.0 | 67.6 |
| Adjusted EBITDA, EUR mill. | 37.5 | 39.8 | 84.3 | 73.2 |
| Operating result (EBIT), EUR mill. | -2.8 | 13.6 | -5.0 | -148.4 |
| Adjusted operating result (EBIT), EUR mill. | 23.5 | 24.2 | 28.4 | 12.3 |
| Net financial items, EUR mill.* | -9.2 | -10.9 | -34.6 | -31.1 |
| Result before tax, EUR mill. | -12.0 | 2.6 | -39.6 | -179.5 |
| Result for the period, EUR mill. | -7.0 | -12.2 | -43.7 | -198.1 |
| Earnings per share, undiluted and diluted, EUR |
-0.12 | -0.19 | -0.68 | -2.82 |
| Personnel, average | 7 191 | 7 329 | 7 241 | 7 360 |
| Continuing and discontinued operations** | 10-12/ 2018 |
10-12/ 2017 |
1-12/ 2018 |
1-12/ 2017 |
| Net earnings per share, undiluted and diluted, EUR |
-0.14 | -0.20 | -0.70 | -2.98 |
| Cash flow from operating activities, EUR mill. | 82.1 | 82.2 | 82.9 | 18.8 |
| Capital expenditure, EUR mill. | 8.2 | 10.5 | 29.3 | 34.7 |
| Equity per share, EUR | 11.71 | 12.29 | ||
| Net gearing, % | 64.5 | 83.8 | ||
| Equity ratio, % | 46.2 | 43.0 | ||
| Number of shares, undiluted and diluted, weighted average, 1 000 pc | 72 049 | 72 049 | ||
| Return on capital employed, rolling 12 months, % | -0.4 | -9.1 |
* Includes a write-off of EUR 1.7 million related to remaining receivables from Hobby Hall in Q4 2018. In 2017, includes EUR 3.8 million related to Tuko Logistics Cooperative (Q2), EUR 2.0 million related to Seppälä (Q3) and EUR 1.5 million related to Hobby Hall (Q4), and a financial income of EUR 2.1 million related to annulled additional taxes (Q3).
** Discontinued operations include Stockmann Delicatessen food operations in Finland (2017).
Items affecting comparability
| EUR million | 10-12/ 2018 |
10-12/ 2017 |
1-12/ 2018 |
1-12/ 2017 |
| Adjusted EBITDA | 37.5 | 39.8 | 84.3 | 73.2 |
| Adjustments to EBITDA | ||||
| Restructuring arrangements | -0.1 | -9.6 | -3.3 | -9.6 |
| Fair value gains and losses on investment properties |
4.0 | 4.0 | ||
| Gain on sale of properties | -0.1 | 6.8 | ||
| Value adjustment to assets held for sale | -1.1 | -11.9 | ||
| Adjustments total | -1.3 | -5.6 | -8.4 | -5.6 |
| EBITDA | 36.2 | 34.1 | 76.0 | 67.6 |
| EUR million | 10-12/ 2018 |
10-12/ 2017 |
1-12/ 2018 |
1-12/ 2017 |
| Adjusted operating result (EBIT) | 23.5 | 24.2 | 28.4 | 12.3 |
| Adjustments to EBIT | ||||
| Goodwill impairment | -25.0 | -25.0 | -150.0 | |
| Restructuring arrangements | -0.1 | -14.6 | -3.3 | -14.6 |
| Fair value gains and losses on investment properties |
4.0 | 4.0 | ||
| Gain on sale of properties | -0.1 | 6.8 | ||
| Value adjustment to assets held for sale |
-1.1 | -11.9 | ||
| Adjustments total | -26.3 | -10.6 | -33.4 | -160.6 |
| Operating result (EBIT) | -2.8 | 13.6 | -5.0 | -148.4 |
Stockmann uses Alternative Performance Measures according to the guidelines of the European Securities and Market Authority (ESMA) to better reflect the operational business performance and to facilitate comparisons between financial periods. Gross profit is calculated by deducting the costs of goods sold from the revenue, and gross margin is calculated by dividing gross profit by the revenue as a percentage. EBITDA is calculated from the operating result excluding depreciation, amortisation and impairment losses. Adjusted EBITDA and adjusted operating result (EBIT) are measures which exclude non-recurring items and other adjustments affecting comparability from the reported EBITDA and the reported operating result (EBIT).
OUTLOOK FOR 2019
In the Stockmann Group’s largest operating countries, Finland and Sweden, the general economic situations improved and the GDP growth as well as the consumer confidence development continued to be positive in 2018. In 2019, the retail growth is estimated to decline somewhat due to economic slowdown in Finland, but the growth is expected to continue in Sweden (source: Federation of Finnish Commerce, HUI Research).
Purchasing behaviour is changing due to digitalisation and increasing competition. E-commerce is expected to grow steadily, but the development in brick and mortar continues to be challenging. The retail industry is facing major structural challenges through digitalisation and further internationalisation.
In the Baltic countries, the outlook for the retail trade is expected to be better than that for the Stockmann Group’s other main market areas (source: OECD).
Stockmann continues its efforts to improve its performance and in January 2019 launched an initiative aimed at reducing the Group's cost level by EUR 20 million by the end of 2019. In addition, the goal is to improve gross margin and accelerate strategic development projects that will deliver visible results to customers during the year. Of these measures, EUR 15 million will be allocated to Stockmann's operations in Finland and the Baltic countries and EUR 5 million to Lindex, which will continue its profitability improvement programme.
In addition to operational performance improvements, reported EBITDA and the operating profit will improve due to a change in accounting principles when the new IFRS 16 Leases standard is taken into use as of 1 January 2019. The Group will apply the standard using the modified retrospective approach, which means that the comparative figures for 2018 will not be restated.
Capital expenditure for 2019 is estimated to be approximately EUR 35 million, which is less than the estimated depreciation for the year.
GUIDANCE FOR 2019
Stockmann expects the Group’s adjusted operating profit, excluding the impact of Nevsky Centre, to improve compared to 2018.
CORPORATE GOVERNANCE STATEMENT
Stockmann will publish a separate Corporate Governance Statement for 2018 in line with the recommendation by the Finnish Corporate Governance Code. The statement will be published during the week starting on 25 February 2019 (week 9).
Financial Statements Bulletin 2018
This company announcement is a summary of the Stockmann's Financial Statements Bulletin 2018 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 stockmanngroup.com.
Annual General Meeting 2019
The Annual General Meeting of Stockmann plc will be held on Thursday 21 March 2019 at 2 p.m. at Finlandia Hall in Helsinki, Finland (address: Mannerheimintie 13). Notice of the Annual General Meeting which includes proposals to the meeting is published as a separate stock exchange release on 14 February 2019.
Press and analyst briefing and webcast
A press and analyst briefing will be held today, on 14 February 2019 at 10:00 a.m. EET in the Fazer À la Carte restaurant on the 8th floor of Stockmann’s Helsinki city centre department store, Aleksanterinkatu 52 B. The event can be followed as a live webcast by this link or on the address stockmanngroup.com. The recording and presentation material are available on the company's website after the event.
Further information:
Lauri Veijalainen, CEO, tel. +358 9 121 5062
Kai Laitinen, CFO, tel. +358 9 121 5800
STOCKMANN plc
Lauri Veijalainen
CEO
Distribution:
Nasdaq Helsinki
Principal media