Accounts Report 1 September 2000 - 31 August 2001

ACCOUNTS REPORT 2000/2001 1 September 2000 - 31 August 2001 Operating profit for the fourth quarter, ecxlusive exceptional items, on a par with the previous year * Operating profit for the fourth quarter amounted to SEK 30M (73) and is charged with structural costs of SEK 22M (0). The previous year's accounts included a refund from Alecta (formerly SPP) of SEK 20.5M. Operating profit excluding structural costs and items affecting comparability was, therefore, on a par with the previous year. * Operating profit for the financial year fell to SEK 86M (287) and profit after financial income amounted to SEK 100M (313). Operating profit is charged with structural costs of SEK 39M (0). The previous year's accounts included a refund from Alecta (formerly SPP) of SEK 20.5M. * In the 2000/2001 financial year, Lindex's sales rose by 14.4 per cent to SEK 4,707M (4,114). Same-stores sales increased by 6.7 per cent (5.1). New stores contributed with a sales increase of 7.7 per cent (8.7). * In total, Lindex opened 19 (34) new stores during the financial year of which 6 (16) are in Germany. * The action programme which was initiated during the first quarter had a positive impact on the cash flow and the results in the fourth quarter. At the end of the fourth quarter, inventory levels were on a par with the corresponding period in the previous year. * Jörgen Johansson took over as President and CEO on 1 August 2001. * The Board of Directors proposes that the Annual General Meeting sets a dividend of SEK 3,00 per share for the 2000/2001 financial year. Lindex is a retail chain with 351 stores of which 317 are in the Nordic market and 34 stores in Germany. The Group's product areas are ladies' wear, lingerie1 and children's clothing. For further information, please contact: Jörgen Johansson, President and CEO Phone: +46 (0)70- 594 21 22 Åsa Lindell Byström, Director of Group Phone: +46 (0)70- 633 59 79 Communications & Investor Relations Peter Andersson, Chief Financial Officer Phone: +46 (0)70- 584 44 37 1 Lindex Cosmetics (formerly Lindex Care) now forms part of business area Lingerie. Market and demand The mild autumn and the downturn in the economy typified the demand situation during the financial year. The general downturn in the economy also affected consumers' willingness to buy. Measured as SCB's Consumer Confidence Indicator1, willingness to buy dropped from index 27 to index 0 during the first half of the year and then stabilised at this low level. Retail clothing in Sweden, which previously reported significant growth figures, grew by only 0.2 per cent in the past year. The sector shows a similar trend in Lindex's other markets. In Germany, retail clothing fell by 2 per cent during the financial year. Sales increased by 14 per cent In the fourth quarter of the financial year, sales rose by 14.4 per cent to SEK 1,204M (1,053). Same-stores sales increased by 8.0 per cent compared with the previous year. During the 2000/2001 financial year, Lindex's sales increased by 14.4 per cent (13.8) to SEK 4,707M (4,114). Lindex's same-stores sales rose by 6.7 per cent (5.1). New stores generated an increase of SEK 7.7 per cent (8.7). The same-stores sales increase exceeded growth in the respective markets throughout the financial year. Lindex continues to win market share and is the market leader in ladies' wear, lingerie and children's clothing in Sweden and lingerie in Norway. With the aim of balancing the inventories, marketing activities were higher than normal throughout the financial year. The unusually large price reductions had a positive effect on the sales trend whereas the gross profit margin fell. Operating profit for the fourth quarter, ecxlusive exceptional items, on a par with the previous year Operating profit for the fourth quarter amounted to SEK 30M (73) and was charged with structural costs of SEK 22M (0). The previous year's profit included a refund from Alecta (formerly SPP) of SEK 20.5M. The profit development, excluding structural costs and items affecting comparability, thus confirms the impact of the action programme and is on a par with the previous year. Operating profit during the financial year amounted to SEK 86M (287). Profit after financial items fell to SEK 100M (313). During the fourth quarter, the gross profit margin amounted to 48.1 per cent (49.0). The gross profit margin amounted to 49.7 per cent (52.5). It was affected by unusually large price reductions as a result of the fall in growth in demand. Profit after financial items for the 2000/2001 financial year in the Nordic countries fell to SEK 270M (402). 1 The share of the households which believe that the Swedish economy and their finances will improve over the next 12 months compared with the same period in the previous year. As a significant proportion of the Group's purchases are made in USD or USD-linked currencies, Lindex is exposed to fluctuations in the USD rate. The high USD rates during the year have affected the gross profit margin. Lindex's hedging policy with contracts for a period of six to eight months from date of order reduces the currency risk in the short term and thus cushions the impact. Financial income and expenses amounted to SEK 14M (26). During the financial year, interest-bearing liabilities averaged SEK 581M (385) and interest expenses amounted to SEK 36M (17). Financial income and expenses were positively affected by increased interest income from the Lindex Card, now called Lindex Club. Profit per share after full tax was SEK 4.40 (16.00). Action programme makes an impact The action programme, which was initiated in the first quarter, is aimed at adapting the product supply, costs and investments to the fall in the growth in demand. The measures implemented for adapting product supply meant that the surplus inventories of autumn and winter clothing were phased out during the second quarter. In the third quarter, the adaptation of the purchasing volumes made some impact and, at the end of the fourth quarter, inventory levels were on a par with the corresponding period in the previous year. Cost adaptations were initiated during the first quarter and enabled Lindex to break the cost trend during the second quarter. Measures of a more structural nature, in the form of a reduction in the number of jobs and closure of a number of stores, started during the third quarter. In total, nine stores will be closed and the structural costs for this is charged to the financial year 2000/2001. The structural costs of all the measures total SEK 39M of which SEK 17M is charged to the third quarter and SEK 22M to the fourth quarter. The initiated cost savings are expected to generate an annual profit contribution of SEK 100M and will be implemented in full before the end of the first six months of the 2001/2002 financial year. All investment plans have been examined as a phase of the action programme. This has led to a lower expansion rate for the financial year. In total, 19 new stores were opened (34). Investment in existing stores, in the form of setting up cosmetics departments and upgradings, was implemented at a lower rate. Developments in Germany During Lindex's initial years, the establishment of stores was concentrated on Nordrhein-Westfalen in Western Germany. In the first quarter of the 2000/2001 financial year, the operations were expanded when a new large store was opened in Berlin. Sales in the retail clothing sector in Germany were substantially lower than in the previous year due to reduced willingness to buy. The sector reported a fall of a 2 per cent during the year. Lindex's same-stores sales trend in 2000/2001 amounted to -1.2 per cent. The corresponding figure in 1999/2000 was 18.2 per cent. The very weak sales trend, therefore, generated substantial surplus inventories in the German operations. These surplus inventories were reduced during the year through significantly increased price reductions which affected profit. In addition, profit and same-store sales are charged with the high expansion rate in the previous financial year when 16 new stores were opened. This generated a total charge for the year of SEK 170M (110). However, the same-stores deficits were less than in the previous year. A number of measures are being implemented to secure increased sales and improved profitability in the German operations. These measures comprise adaptations of product ranges, stores and market communications. These are tested in a number of stores before successful solutions are gradually implemented in the other parts of the store network. A significant proportion of the measures are aimed at increasing the number of customers. Taxes Paid and deferred taxes amounted to SEK 39M (92) in the financial year. The tax rate in Sweden, Norway and Finland is 28 per cent and in Hong Kong 16 per cent. The tax rate in Germany was 44 per cent during December and was reduced to 38 per cent from January 2001. Deferred income taxes recoverable on accumulated losses carried forward in the German company are reported at SEK 91M, which reduced "Tax on the period's profit" by SEK 42M (27). 19 new stores opened during the financial year During the financial year, Lindex opened a total of 19 (34) new stores. Two stores were closed. The store network comprised 346 stores on 31 August 2001. Of the new stores, several are so-called large stores with an area of approximately 1,000 square metres. These stores report a higher sales and profitability trend per square metre. A decision has been made to close an additional seven stores within the framework of the action programme. Most of these stores will be closed during the 2001/2002 financial year. Lindex expects to establish 10-15 new stores during the 2001/2001 financial year. Several of these stores will be of the new, larger format. Inventories Inventories on 31 August 2001 amounted to SEK 954M compared with SEK 945M on 31 August 2000. New stores and new cosmetics departments accounted for SEK 93M (117). Same-stores inventories fell by SEK -84M (44). Excluding currency effects, the same-stores decrease was SEK -127M (51). The turnover rate amounted to 2.2 (2.6) per annum. Global purchasing network Lindex's purchasing network consists of purchasing offices in Hong Kong, Shanghai, New Delhi, Dhaka, Istanbul and Bucharest. The latest office was established in Shanghai in January 2001. The purchasing office in Seoul was closed in August 2001. The closure was a result of increased competition from suppliers in northern China and Bangladesh. At the same time, a decision was made to strengthen the office in Shanghai and transfer some functions from the office in Hong Kong. The background for this is the strong development of the textile sector in northern China. During the year, Lindex further developed its concept for the acquisition of textiles. This means that Lindex selects the textiles which are then purchased by the manufacturer or by Lindex. This 'integration backwards' currently takes place in most markets and provides for lower purchase prices, improved quality control, and an opportunity to shorten the lead times. Investments The Group's net investment in fixed assets amounted to SEK 261M (236) in the financial year. Most of this related to investment in new stores and refurbishment of stores. The strategy to expand the size of the stores had an effect on the investment amount per store. The launch of the cosmetics concept in Norway increased investment as did IT investment and an expansion of the head office property. Action program makes an impact on the cash flow in the fourth quarter The reduced expansion rate combined with more balanced inventories generated a significant increase in the cash flow during the fourth quarter. The action programme, therefore, has also started to make an impact on the cash flow. Cash flow after investment for the financial year amounted to SEK -143M (-67) in the financial year. Cash flow from current operations was affected by the negative profit trend compared with the previous year. The cash flow was also affected by increased trade debtors by SEK 106M (-68), compared with 31 August 2000. Of total trade debtors of SEK 308M, trade debtors for the Lindex Club (former Lindex Card) amounted to SEK 300M. Financing and liquidity On 31 August 2001, liquid funds amounted to SEK 186M compared with SEK 104M on 31 August 2000. On 31 August 2001, net borrowing was SEK 551M compared with SEK 321M on 31 August 2000, an increase of SEK 230M. During the financial year, the net debt/equity ratio increased from 33.6 per cent to 56.7 per cent and the equity ratio amounted to 40.1 (44.2) per cent. Personnel The number of full-time employees during the financial year amounted to 2,950 compared with 2,678 during the 1999/2000 financial year. The increase is mainly the result of recruitment by the newly-opened stores. Incentive scheme The synthetic option scheme, which was launched for senior executives within the Lindex Group in 1995, was completed in accordance with the option terms in August 2000. The Annual General Meeting on 18 January 2001 resolved to implement a new incentive scheme for senior executives. The scheme is based on issuing warrants for Lindex shares and relates to the period 1 September 2000 - 31 August 2001. Parent company Sales increased by SEK 142M, equivalent to 5.6 per cent, to SEK 2,682M (2,539). Profit after financial items fell to SEK 208M (311). Net investments in fixed assets were made of SEK 327M (208). Dividend The Board of Directors has decided to recommend that the Annual General Meeting sets a dividend of SEK 3.00 per share for the 2000/2001 financial year, equivalent to a total of SEK 41M (69). Annual General Meeting The Annual General Meeting will be held in Alströmergymnasiets aula, Teatergatan, Alingsås, on Thursday 17 January 2002 at 4 pm. Future information dates The complete Annual Report will be available from 10 December 2001 on Lindex's premises at Kristineholmsvägen 14 - 16 in Alingsås. It will simultaneously be distributed to the shareholders. Interim Report for the first quarter of the 2001/2002 financial year will be published on 17 January 2002. Alingsås, 11 October 2001 AB Lindex (publ) Board of Directors ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/11/20011011BIT00790/bit0001.doc Full Year End Report http://www.waymaker.net/bitonline/2001/10/11/20011011BIT00790/bit0002.pdf Full Year End Report