Lindex Group Nine-Month Report

LINDEX GROUP NINE-MONTH REPORT 1 September 2001-31 May 2002 Increased sales and significantly strengthened margins in a weak market · In the first nine months of the financial year, Lindex sales increased by 8.3 per cent (14.4) to SEK 3,794M (3,502). · The gross margin was positively affected by a decrease in price reductions and increased to 55.7 per cent (50.2) during the period. · For the third quarter, the gross margin increased to 58.1 per cent (52.0). Historically, this is a high level for the period. · The cash flow from current operations amounted to SEK 539M (-35). · Profit after financial items amounted to SEK 232M (66) and operating profit increased to SEK 206M (56). For the German operation, SEK 33M (40) was charged to profit in the third quarter. · Profit after financial items in the Nordic countries increased to SEK 338M (188). · During the first nine months of the financial year, Lindex opened a total of 11 (19) new stores. Of these, 3 (6) are in Germany. · During the period, Lindex signed an agreement with Ikanobanken in Sweden and IKANO Finans in Norway to transfer the credit card portfolio for the Lindex Club. As a result of the deal, Lindex will receive a capital contribution of approximately SEK 270M. This is expected to make an impact on the cash flow in the first quarter of the 2002/2003 financial year. · Telephone conference on 26 June At 3.15pm CET today, 26 June 2002, a telephone conference will take place in Swedish with the President, Jörgen Johansson, and the Chief Financial Officer, Peter Andersson. Journalists and analysts are invited to take part. You can participate by telephoning +44 20 8401 1043 quoting 'Lindex'. Please telephone at least ten minutes before the start of the telephone conference. The presentation can also be watched on our website: The Lindex Group consists of two retail chains: Lindex with 353 stores of which 318 are in the Nordic market and 35 stores in Germany, and Twilfit with 60 stores in Sweden of which 13 are operated as franchise stores. The Group's product areas are Ladies' Wear, Lingerie and Children's Clothing. For further information, please contact: Jörgen Johansson, President and CEO Tel: +46 322-777 02 Mobile: +46 705-94 21 22 Peter Andersson, Chief Financial Officer Tel: +46 322-778 50 Mobile: +46 705-84 44 37 Market and demand Growth in the retail clothing markets in which Lindex operates continued to weaken in the third quarter. Throughout the period, the same-stores sales trend was on a par with or above the respective market's growth. In Sweden, the market fell by 1.0 per cent whereas Lindex same-stores sales fell by only 0.7 per cent. Lindex thus strengthened its market position and is the market leader for ladies' wear, lingerie and children's clothing in Sweden and for lingerie in Norway. The Norwegian market reported positive growth whereas the negative trend continued in Germany. In total, the retail clothing and outfit sector's sales in Germany fell by 4.3 per cent during the period. Increased sales and significantly strengthened gross margin During the period September 2001-May 2002, Lindex sales increased by 8.3 per cent (14.4) to SEK 3,794M (3,502). Lindex same-stores sales rose by 1.3 per cent (6.3). New stores generated an increase of 7.0 per cent (8.1). Excluding fluctuations in exchange rates, same-stores sales fell by 2.0 per cent (+3.9). Twilfit increased its sales by 2.9 per cent (0.0). The gross margin was significantly strengthened during the nine-month period and increased to 55.7 per cent (50.2) and improved in all four markets and within the three business areas. This was partly due to a significantly better balance between product supply and demand and the successful phasing out of inventories. In addition, the logistics costs were substantially reduced. Profit after financial items rose to SEK 232M Profit after financial items rose to SEK 232M (66). Operating profit for the first nine months of the financial year amounted to SEK 206M (56). The adaptation of costs has been implemented in accordance with the action programme and the effects amount to SEK 70-80M. Development costs for mainly organisational and supply chain projects as well as store concept development were charged to the period as were closing down costs for two stores in Germany and costs for opening eleven new stores. In addition, a number of stores were refurbished which was charged to the profit and loss account as a larger proportion of the investment is written off directly against the profit and loss account. This compared with investment in new stores which, in part, becomes capitalised expenditure. Profit after financial items for the first nine months of the financial year in the Nordic countries increased to SEK 338M (188). This means that the profit margin in the Nordic countries currently amounts to 9.6 per cent. The net charge (sales minus costs) for the establishment of stores in Germany amounted to SEK 106M (122). 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. Lindex hedging policy with contracts for a maximum period of six to eight months from date of order reduces the currency risk and thus cushions the effect on the gross profit. Financial income and expenses amounted to SEK 26M (10). During the period, interest-bearing liabilities averaged SEK 439M (632) and interest expenses amounted to SEK 20M (27). Profit per share after full tax was SEK 10.00 (2.90). Impact of action programme The action programme has made an impact in a number of areas and there is still a potential for further improvements. The implemented measures resulted in considerably reduced inventory levels and a significantly better balance between product supply and demand. This has led to significant improvements in gross margins and cash flow. The adaptation of costs has been implemented according to plan. The results indicate that the negative cost trend has been broken. In total, the value of the cost savings amounts to SEK 70-80M in the first nine months of the financial year. The measures have resulted in significantly reduced logistics and handling costs. In addition, the number of jobs at the head office in Alingsås has been cut and the number of hours worked in the store network reduced. The review of other expenses has also meant cost reductions, especially within administrative functions. The nine stores which are due to be closed within the action programme are expected to be closed before the end of the financial year. The structural costs for the closures were charged to the result of the previous financial year. The action programme is expected to generate a profit contribution of SEK 100M for the 2001/2002 financial year. Developments in Germany During the nine-month period, sales in the retail clothing and outfit sector in Germany were substantially lower than in the previous year with a fall of approximately 4.3 per cent. Lindex same-stores sales fell by 8.2 per cent (1.0) during the period. In the third quarter, Lindex sales were on a par with the market. During the period, Lindex succeeded in limiting the impact on the result of the weak sales trend with a higher gross margin and greater cost effectiveness. The same-stores deficits reduced. In total, four stores achieved break-even with regard to operating profit before depreciation during the period. In total, net charge for the nine-month period amounted to SEK 106M (122). Net charge for the third quarter amounted to SEK 33M (40). During the period, the result of the German operation was charged with costs for the closure of two stores and opening costs for three stores. 11 new Lindex stores and 60 Twilfit stores During the first nine months of the financial year, Lindex opened a total of 11 (19) new Lindex stores - two in Sweden, two in Norway, three in Germany and four in Finland. The acquisition of Twilfit meant an addition of 60 stores, of which 13 are franchise stores. Four Lindex stores and one Twilfit store were closed during the nine-month period. The expansion during the remainder of the financial year will be concentrated on rapidly improving existing stores and the continued integration of Twilfit. Twilfit operated as independent store chain Lindex operates and develops Twilfit as an independent retail chain, but aims to improve the efficiency of and co-ordination of its purchasing and logistics flows as well as the administrative functions to the Lindex Group´s head office in Alingsås. During the period, Twilfit´s central warehouse in Stockholm was closed. As previously stated, synergy benefits are expected to amount to SEK 20-25M within a two-year period. The acquisition is expected to make a negative impact on Lindex profit for the 2001/2002 financial year due to lower sales than anticipated. Taxes Paid and deferred taxes amounted to SEK 95M (26) in the first nine months of the financial year. In Sweden, Norway and Finland the tax rate was 28 per cent, in Germany 38 per cent, and in Hong Kong 16 per cent. Deferred taxes recoverable on accumulated losses in the German company are reported at SEK 101M, which reduced tax on the period's profit by SEK 10M (30). Inventories Inventories on 31 May 2002 amounted to SEK 665M compared with SEK 912M on 31 May 2001. This was SEK 247M lower than during the corresponding period in the previous year, representing a fall of 27 per cent. Shorter lead times and more flexible product supply Lindex has purchasing offices in Hong Kong, Shanghai, New Delhi, Dhaka, Istanbul and Bucharest. Through the purchasing networks, Lindex is getting closer to the purchasing market and suppliers in the respective country. This means significant opportunities to direct the purchases to the markets that have the best quality, price, speed, and export quota regulations. A strong local presence also means shorter lead times and increased flexibility in both the production and purchasing processes. This is a prerequisite for ensuring production at the right time. Products are also purchased as close to the season as possible to optimise the accuracy of both collections and product supply. In addition, Lindex is implementing a new business system which will support the continued improvement programme. The system will largely be implemented during the next financial year. Investments The Group's net investment in fixed assets amounted to SEK 219M (185) in the first nine months of the financial year. Most of this related to the acquisition of Twilfit and investment in new stores and refurbishment of stores. Cash flow from current operations SEK 539M The improved profit, lower inventory level and reduced expansion rate generated a significant strengthening of the cash flow. The cash flow from current operations amounted to SEK 539M (-35) and was influenced by the positive profit trend compared with the previous year and reduced inventory levels. The cash flow was also influenced by increased trade debtors which amounted to SEK 376M (338) on 31 May. Of total trade debtors, the Lindex Club trade debtors amounted to SEK 368M (321). During the period, Lindex signed an agreement with Ikanobanken in Sweden and IKANO Finans in Norway. The agreement means that Lindex will transfer its credit card portfolio for the Lindex Club, which consists of approximately 700,000 credit customers. Through the deal Lindex will receive a capital contribution of approximately SEK 270M which is expected to impact on the cash flow during the first quarter of the 2002/2003 financial year. Lindex will continue to own the card concept and will still use the card as an important marketing channel in the future. The cash flow after investment amounted to SEK 344M (-254) in the first nine months of the financial year. Financing and liquidity On 31 May 2002, liquid funds amounted to SEK 75M compared with SEK 186M on 31 August 2001. On 31 May 2002, net borrowing was SEK 287M compared with SEK 540M on 31 August 2001, a fall of SEK 253M. During the same period, the net debt/equity ratio fell from 56.7 per cent to 27.1 per cent and the equity ratio rose to 48.2 per cent compared with 40.1 per cent on 31 August 2001. Personnel The number of full-time employees during the latest 12-month period (June 2001 - May 2002) amounted to 2,813 compared with 2,781 during the 2000/2001 financial year. The increase is mainly due to the acquisition of Twilfit and recruitment by the newly-opened Lindex stores. Parent company Sales increased by SEK 9M, equivalent to 0.4 per cent, to SEK 2,057M (2,049). Profit after financial items fell to SEK 169M (211). Net investment in fixed assets was made of SEK 145M (66). Profit after tax fell to SEK 81M (150). Net borrowing by the parent company amounted to SEK 178M (523) on 31 May 2002. Future information dates Year-end Report 2001/2002 will be published on 17 October 2002. Accounting principles This Interim Report has been prepared in accordance with the Swedish Financial Accounting Standards Council's recommendation RR 20 Interim Reporting. The same accounting principles and calculation methods have been applied in this Interim Report as in the latest Annual Report Alingsås, 26 June 2002 AB Lindex (publ) Board of Directors Detailed Audit Report for AB Lindex relating to Interim Report 1 September 2001 - 31 May 2002 In our capacity as Auditors of AB Lindex, we have carried out a review of this Interim Report and in so doing followed the recommendations 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 Stock Market and Annual Accounts Acts. 26 June 2002 Öhrlings PricewaterhouseCoopers AB Robert Barnden Hasse Lundin Authorised Public Accountant Authorised Public Accountant ------------------------------------------------------------ This information was brought to you by Waymaker The following files are available for download:

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Lindex is one of Europe's leading fashion brands, with approximately 470 stores in 17 markets and sales online. Lindex offers inspiring and affordable fashion for the fashion interested and conscious woman. The assortment includes several different concepts within women's wear, kids' wear, lingerie and cosmetics. Lindex is growing, both in own channels and together with global fashion platforms. Lindex sustainability promise is to make a difference for future generations by empowering women, respecting the planet and ensuring human rights. Lindex is part of the Finnish-listed Stockmann Group. More information is available at