AB Lindex three-month interim report

THREE-MONTH INTERIM REPORT 1 September - 30 November 1999 Sales increased by 9 per cent * Lindex's sales in the first quarter of the financial year increased by 9 per cent to SEK 1,019M (931) despite a record warm September, when sales of autumn clothing are normally strong. Same-store sales rose by 1.7 per cent (7.7) and new store sales by 7.8 per cent (6.4). * Lindex continues to capture market shares on all geographic markets. * In the same period, operating profit fell to SEK 74M (79), whereas profit after financial items was unchanged SEK 79M (79). The results were affected by a charge to profit (sales - costs) for the establishment in Germany of SEK 22M (14) for the first quarter. * In total, 13 (11) new stores were opened during the first quarter of the financial year, of which 5 (3) in Germany. * Lindex Care - cosmetics and body care products - will be launched in 6-8 stores in Norway during spring 2000. * Strong sales trend during December 1999. Future Information dates Interim Report for the first six months of the 1999/2000 financial year will be published on 30 March 2000. Interim Report for the first nine months of the 1999/2000 financial year will be published on 29 June 2000. Preliminary Accounts Report for the 1999/2000 financial year will be published on 16 October 2000. For further information, please contact: Hans Johansson, President and CEO Telephone: +46 322-777 02 Leif Larsson, Executive Vice President Telephone: +46 322-777 34 Lindex is a retail chain with 296 stores on the Nordic market and 17 stores in Germany. The Group's product segments are ladies' wear, lingerie, children's clothing and Lindex Care - cosmetics and body care products Market The market was weak during September, due to extremely warm weather for that time of the year, when sales of autumn clothing are normally strong. However, during October and November the market developed on a par with the average annual trend. Sales During the period, September - November 1999, Lindex's sales increased by 9.5 per cent (14.1) to SEK 1,019M (931). Lindex's same-store sales rose by 1.7 per cent (7.7). Excluding exchange rate fluctuations, the increase amounted to 3.1 per cent. New stores generated an increase of 7.8 per cent (6.4). The sales increase for same-stores in the Nordic countries exceeded market growth of the respective market during the period. Lindex continues to take market shares on all geographic markets. Sales during December 1999 were strong for Lindex due to, among other things, high sales of festive clothing and gifts ahead of the turn of the Millennium. Results Operating profit amounted to SEK 74M (79) in the first quarter of the financial year. Profit after financial items amounted to SEK 79M (79). The net charge (sales - costs) for the establishment in Germany amounted to SEK 22M (14) in the first quarter. The provision for estimated liability 1)for synthetic options reduced profit after financial items by SEK 8M (11). As in the previous year, the gross profit margin amounted to 54.8 (54.8) per cent. The weak sales during September had the effect that some product lots had to be sold at reduced prices in October - November which affected the gross profit margin during the period. Profit after financial items for the first quarter in the Nordic countries, before the provision for estimated liability for synthetic options, rose by 6 per cent to SEK 109M (104). Financial income and expenses improved to SEK 5M (±0), which is mainly due to increased lending activites on the Lindex Card. In the first quarter of the financial year, interest-bearing liabilities averaged SEK 411M and interest expenses amounted to SEK 5M. Profit per share after full tax was SEK 3.90 (3.60) in the first quarter of the financial year. Taxes Paid and deferred taxes amounted to SEK 25M (30) in the first quarter of the financial year. The tax rate in Sweden, Norway and Finland is 28 per cent, in Germany 44 per cent and in Hong Kong 16.5 per cent. Paid taxes were influenced by an estimated tax expense for synthetic options of 28 per cent on the change in provision for the options. Deferred income taxes recoverable on accumulated loss carried forward in the German company are reported at SEK 31M, which reduced "Tax on the period's profit" by SEK 6M (0). 1) The provision is based on the share price on 30 November 1999 which was SEK 243. New stores - 13 new stores During the first quarter of the financial year, Lindex opened a total of 13 (11) new stores - 5 in Sweden, 2 in Norway, 1 in Finland and 5 in Germany. The store network comprised 311 stores on 30 November 1999. During the 1999/2000 financial year, the expansion rate is expected to amount to approximately 35 stores, 15-20 stores in the Nordic countries and 15-20 stores in Germany. Germany - developed according to plan during the first quarter of the financial year The establishment of stores continues in a homogeneous geographic region in Nordrhein-Westfalen in Western Germany. The concentration of stores makes possible, among other things, cost-efficient logistics and marketing. During the previous financial year, seven stores were opened and on 31 August 1999 Lindex had a total of 11 stores which is equivalent to 7 full-year open stores in the 1998/99 financial year. During the first quarter of the financial year, Lindex opened 5 stores and on 30 November 1999 had a total of 16 stores in Germany. Same-store sales developed as expected during the first quarter of the financial year. The proportion of repeat customers increased signigicantly. In recently carried-out opinion poll, among other the following question was asked: Will you visit Lindex again? 85 per cent of the customers replied "Yes, definitely". The charge to profit for the establishment on the German market amounted to SEK 22M (14) for the first quarter of the 1999/2000 financial year Through the increased expansion rate it has been possible to transform the operations in Germany, which have so far been carried out in project form with input from senior executives in the Group, which has been strengthen with German staff into a permanent country organisation with a high level of expertise. The long-term establishment plans in Germany stand which means that 15-20 are planned to be opened annually from the 1999/2000 financial year. Lindex Care to be launched in Norway At 30 November 1999, there were Lindex Care - cosmetics and body care products - in a total of 64 stores in Sweden, of which 19 were launched during the first quarter of 1999/2000. Lindex Care is gradually being launched in most existing stores and in all new stores in Sweden. During the remainder of the 1999/2000 financial year, the product range will be established in a further approximately 20 stores in Sweden. During spring 2000, Lindex Care will also be launched in 6-8 stores in Norway. Lindex Care reports a high gross profit per square metre of sales area and contributes to increasing the number of customers per store and average sales per customer. The Lindex Card increases rapidly Since its introduction in Sweden in 1995, the Lindex Card has been highly successful and at end-November there are approximately 385,000 cardholders (295,000). The card was launched in Norway in September 1997 and at end- November 1999 there are approximately 125,000 cardholders (80,000). The Lindex Card is a benefit and loyalty card with payment and credit functions. Card customers spend twice as much on average on every purchase occasion compared with customers who pay cash. In addition, the proportion of ladies' wear garments is higher on purchases with the Lindex Card compared with cash purchases. Lindex launched a card in Germany during autumn 1998. At end-November 1999 the number of cardholders amounted to approximately 100,000. The German card is a simpler version of the Lindex Card, without a credit function, but with offers and special events. Inventories Inventories at 30 November amounted to SEK 771M compared with SEK 752M on 31 August 1999. New stores and new Lindex Care departments accounted for SEK 43M of inventory value on 30 November 1999. The value of "Goods in transit", which is included in the inventory value, was approximately SEK 104 M lower on 30 November 1999 than the value on 31 August 1999. Investments The Group's net investments in fixed assets during the first quarter of the financial year amounted to SEK 49M (48). Most of this referred to investments in new stores and refurbishment of existing stores. Financing and liquidity Cash flow after investments amounted to SEK -91M (-85) during the first quarter of the financial year. Working capital increased by SEK 121M, of which trade debtors accounted for an increase of SEK 30M, inventories increased by SEK 19M and current liabilities decreased by SEK 82M. The increase in trade debtors was due to a significant increase in the number of Lindex Cards. Of total trade debtors of SEK 208M (154), trade debtors for the Lindex Card amounted to SEK 200M (146). On 30 November 1999, liquid funds amounted to SEK 109M compared with SEK 147M on 31 August 1999. On 30 November 1999, net borrowing was SEK 280M compared with SEK 198M on 31 August 1999, an increase of SEK 82M. During the period, the net debt/equity ratio increased from 25.0 per cent to 33.1 per cent and the equity ratio rose to 46.7 per cent compared with 44.3 per cent on 31 August 1999. Personnel The number of full-time employees during the latest 12-month period (December 1998 - November 1999) amounted to 2,429 compared with 2,344 during the 1998/99 financial year. The increase was mainly the result of recruitment by the newly-opened stores. From autumn 1998, a profit bonus system is being tested for all staff. Effect of the turn of the Millennium Lindex took a number of measures within the IT area aimed at avoiding problems in connection with the turn of the Millennium. So far in January 2000 no problems attributable to the turn of the Millennium have arisen in the IT area. E-commerce Lindex has started a pre-study relating to e-commerce to prepare for a possible introduction of a supplementary business system for the Group. Parent Company Sales increased by SEK 53M, equivalent to 9.1 per cent, to SEK 637M (584). Profit after financial items rose to SEK 53M (49). Net investments in fixed assets were made at SEK 27M (21). Alingsås, 19 January 2000 AB Lindex (publ) Board of Directors Audit Report for AB Lindex relating to Interim Report 1 September 1999 - 30 November 1999 In our capacity as Auditors of AB Lindex, we have carried out a review of this Interim Report and in so doing followed the recommendation issued by the Swedish Institute of Authorised Public Accountants, FAR. A review is considerably restricted compared to an audit. Nothing has emerged which indicates that the Interim Report does not comply with the requirements stipulated in the Stockmarket and Annual Accounts Acts. 19 January 2000 Öhrlings PricewaterhouseCoopers AB Robert Barnden Hasse Lundin Authorised Public Accountant Authorised Public Accountant ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/01/19/20000119BIT00400/bit0001.doc http://www.bit.se/bitonline/2000/01/19/20000119BIT00400/bit0002.pdf