Quarterly Report • Aug 17, 2021
Quarterly Report
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Pandora is a cross-generational brand with unmatched recognition that gives a voice to people's loves. Our jewellery is crafted and hand-finished to the highest ethical and environmental standards at our state-of-the-art crafting facilities in Thailand and made to inspire women to collect, create and combine genuine jewellery at affordable prices.
Pandora's strategy, Phoenix, focuses on delivering sustainable and profitable revenue growth building on the vast untapped opportunities within our existing core business. A
To provide a cleaner view on the performance, Pandora is providing supplementary growth KPI's vs 2019, where there was no COVID-19 impact. Sell-out growth in Q2 2021 was 7% vs. 2019, driven by US. The financial performance in Q2 2021 is one more data point demonstrating that Pandora can drive sustainable and profitable growth.
Based on the strong performance in Q2 and a recently revised forecast for the rest of the year, the financial guidance for 2021 was upgraded on 6 August to "organic growth of 16-18%" (previously "above 12%") and "EBIT margin of 23- 24%" (previously "above 22%"). The guidance remains subject to elevated risks due to the pandemic.
"Our strong momentum continued in the second quarter of 2021, and we are pleased that we delivered solid growth compared to 2019. Performance in the US and online continued to be strong, and in Europe most of our stores have now reopened. Following the launch of Phoenix, our new strategy, we look forward to hosting our Capital Markets Day in September. The Executive Leadership Team will then present how Pandora will drive long-term sustainable and profitable growth, building on the vast untapped opportunities within our existing business."
Q2 2021 Q2 2020 H1 2021 H1 2020 FY 2020 Organic growth, % 84% -38% 42% -26% -11% Sell-out growth incl. temporarily closed stores, % 62% -39% 41% -28% -12% Sell-out growth incl. temporarily closed stores, % vs 2019 7% n/a 2% n/a n/a Revenue, DKK million 5,155 2,876 9,655 7,048 19,009 Gross margin, % 77.1% 74.9% 76.8% 76.4% 76.5% EBIT margin, % 25.2% 1.1% 22.8% 9.5% 20.4%
Financial overview (excl. Programme NOW restructuring costs in 2020)
Financial highlights Business update
Revenue review Profitability Cash Flow &
Balance sheet Financial
guidance Sustainability Other events & Contact
Financial statements Accounting notes
| FINANCIAL HIGHLIGHTS | |
|---|---|
| -- | ---------------------- |
| DKK million | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | FY 2020 | FY 2021 guidance |
|---|---|---|---|---|---|---|
| Key financial highlights | ||||||
| Organic growth, % | 84% | -38% | 42% | -26% | -11% | "16-18%" |
| Organic growth, % vs 20195 | 13% | n/a | 5% | n/a | n/a | |
| Sell-out growth incl. temporarily closed stores, % | 62% | -39% | 41% | -28% | -12% | |
| Sell-out growth incl. temporarily closed stores, %, | ||||||
| vs 20195 | 7% | n/a | 2% | n/a | n/a | |
| Gross margin1 , % |
77.1% | 74.9% | 76.8% | 76.4% | 76.5% | |
| EBIT margin1 , % |
25.2% | 1.1% | 22.8% | 9.5% | 20.4% | "23-24%" |
| Revenue | 5,155 | 2,876 | 9,655 | 7,048 | 19,009 | |
| Earnings before interest, tax, depreciation and | ||||||
| amortisation (EBITDA) | 1,762 | 325 | 3,178 | 1,058 | 4,999 | |
| Operating profit (EBIT) | 1,301 | -198 | 2,204 | 5 | 2,684 | |
| Net financials | -21 | -28 | -113 | -262 | -190 | |
| Net profit for the period | 992 | -175 | 1,621 | -199 | 1,938 | |
| Financial ratios | ||||||
| Revenue growth DKK, % | 79% | -39% | 37% | -26% | -13% | |
| Revenue growth, local currency, % | 85% | -38% | 43% | -26% | -11% | |
| Gross margin (reported), % | 77.1% | 73.0% | 76.8% | 74.4% | 75.6% | |
| EBITDA margin (reported), % | 34.2% | 11.3% | 32.9% | 15.0% | 26.3% | |
| EBIT margin (reported), % | 25.2% | -6.9% | 22.8% | 0.1% | 14.1% | |
| Effective tax rate, % | 22.5% | 22.5% | 22.5% | 22.5% | 22.3% | |
| Equity ratio, % | 44% | 29% | 44% | 29% | 37% | |
| NIBD to EBITDA excl. restructuring costs, x | 0.4 | 1.1 | 0.4 | 1.1 | 0.5 | |
| Return on invested capital (ROIC), % | 44% | 16% | 44% | 16% | 25% | |
| Cash conversion incl. lease payments, % | 98% | n/a | 31% | n/a | 183% | |
| Net working capital, % of last 12 months revenue | -0.3% | -1.5% | -0.3% | -1.5% | -7.6% | |
| Stock ratios | ||||||
| Total pay-out ratio (incl. share buyback) 2 , % Dividend per share, DKK3 |
76% - |
- - |
46% - |
n/a - |
65% - |
|
| Quarterly dividend per share, DKK4 | 5 | - | 5 | - | - | |
| Earnings per share, basic, DKK | ||||||
| Earnings per share, diluted, DKK | 10.0 | -2.1 | 16.3 | -2.1 | 20.0 | |
| 9.9 | -2.1 | 16.2 | -2.1 | 19.9 | ||
| Consolidated balance sheet | ||||||
| Total assets | 18,277 | 18,859 | 18,277 | 18,859 | 19,984 | |
| Invested capital | 11,136 | 12,864 | 11,136 | 12,864 | 10,540 | |
| Net working capital | -57 | -286 | -57 | -286 | -1,447 | |
| Net interest-bearing debt (NIBD) | 3,005 | 7,391 | 3,005 | 7,391 | 3,151 | |
| Equity | 8,130 | 5,473 | 8,130 | 5,473 | 7,389 | |
| Consolidated statement of cash flow | ||||||
| Cash flow from operating activities | 1,586 | 1,082 | 1,270 | 1,137 | 5,975 | |
| Capital expenditure – total | 138 | 121 | 225 | 250 | 491 | |
| Capital expenditure - property, plant and | ||||||
| equipment | 64 | 100 | 98 | 194 | 369 | |
| Free cash flow incl. lease payments | 1,278 | 943 | 693 | 671 | 4,908 | |
12020 numbers are excluding Programme NOW restructuring costs.
2 Excluding sale of Treasury shares amounting to DKK 1.8 billion in Q2 2020.
3 Proposed dividend per share for the year.
4 Paid quarterly dividend per share for the period.
5 Revenue performance compared with 2020 is heavily distorted by COVID-19, as both years are impacted by store closures. Pandora has therefore added two supplementary growth KPI's vs 2019 to provide a cleaner view on the performance: Organic growth vs 2019 and Sell-out growth vs 2019.
Pandora delivered solid revenue performance in Q2 2021, with sell-out growth of 7% vs 2019. This was supported by significant growth in the biggest market, US, representing 34% of revenue in Q2 2021 vs 24% in Q2 2020. Most of Pandora's markets across Europe started to recover from COVID-19 restrictions during Q2 2021, however temporary store closures still affected Q2 2021. Sell-out growth for Moments, our largest product platform, was 4% vs. 2019.
The growth was mainly driven by strong US performance with sell-out growth of 63% vs 2019, fuelled by continued strong performance and accelerated by the stimulus packages. Market data continue to suggest that Pandora US is growing faster than the market. The continued strong performance is encouraging as US is one of Pandora's strategic priorities. We expect growth in the US to slow down in H2 as stimulus packages are phased out.
As COVID-19 restrictions eased in Europe during the second quarter, sell-out growth improved. Overall Q2 performance was, however, still quite impacted by COVID-19.
Performance in China improved sequentially but continues to be unsatisfactory with sell-out decreasing by -13% vs 2019, up from -48% in Q1 2021. Initial media tests and collaboration with influencers supported revenue in Q2 2021. The performance is in line with expectations and China continue to be a top priority. Pandora will elaborate on its objective to set up for growth in China at the Capital Markets Day in September. The first significant steps to reposition the brand in China will be taken during second half of 2021.
Online continued the strong performance in Q2 2021 with organic growth of 132% vs 2019and an online revenue share of 24% in Q2 2021 (12% in Q2 2019). As fewer stores have been temporarily closed due to COVID-19 in Q2 this year and consumers are returning to the physical stores, the online revenue share in Q2 ended below the 52% seen in Q2 2020.
Mother's Day was the key trading event in Q2 2021, and Pandora's performance was strong with revenue up 7% vs 2019. In June, the Moments summer collection, including Blue Ocean, was launched. Blue Ocean has performed well and the Blue Ocean turtle became the second best selling product in the total assortment in June. This is further evidence of Pandora's ability to innovate and commercialize new designs.
As expected and with less inventory to clear, summer sale was substantially smaller than in 2020 and around 60% below 2019. The number of promotional days was furthermore significantly lower in Q2 2021 compared with Q2 2019 across key markets with 50 days in physical stores in Q2 2019 compared with 31 in Q2 2021. For online, promotional days across key markets was 37 days in Q2 2021, down from 47 days in Q2 2019.
Pandora Brilliance is the first collection tested with the aim to become a potential new platform next to Moments by democratising diamonds. The test was launched in the UK in early May. So far, the test launch is progressing well, generating important insights for Pandora that will help sharpen a potential future global launch. A decision on a global launch will be taken late 2021.
In Q4 2021, Pandora ME will be re-launched with the aim to become a potential platform also.
Pandora's strong brand position was maintained and one third of all Google searches for branded jewellery globally in Q2 2021 was for Pandora.
As Pandora enters Q3, the elevated uncertainty around COVID-19 continues. As of today, around 8% of the stores are temporarily closed. Pandora assumes that the number of temporarily closed stores in H2 2021 will be around 5%. Pandora also assumes that there will be no major disruptions in the supply chain, including that production in Thailand and with key suppliers continues. During Q2 2021, Pandora closed down production briefly in connection with a few COVID-19 cases among Thai colleagues. Due to the significant precautionary measures taken by Pandora at the production sites in Thailand, the impact on production in Q2 was immaterial.
The revenue growth development can be illustrated as follows (supplementary comments follows below):
Executive summary Financial highlights Business update Revenue review Profitability Cash Flow & Balance sheet Financial guidance Sustainability Other events & Contact Financial statements Accounting notes
17 AUGUST2021 | INTERIM FINANCIAL REPORT Q22021| COMPANY ANNOUNCEMENT No. 643| page 5 | 32
Q2 2021 was another quarter with performance impacted by temporarily closed stores, especially in the European markets. On average 15% of the stores was temporarily closed in Q2 2021 vs approx. 45% in Q2 2020 and down from an average of 30% in Q1 2021. For this reason, the performance vs 2020 still need to be interpreted with care and development vs 2019 is a better performance measure (although performance vs 2019 is, of course, also impacted by COVID-19).
Organic growth vs 2019 was up 13% in Q2 2021, driven first and foremost by a strong sell-out growth of 7%. In US, Pandora sees strong underlying growth supported by stimulus packages which drove unusual high growth in the market. The organic growth was furthermore positively impacted by relatively higher sell-in compared to Q2 2019. As part of Programme NOW, Pandora initiated a commercial reset in 2019 with the purpose of among others reducing inventory at wholesale partners. Sell-in to partners in Q2 2019 was therefore unusually low. The higher sell-in together with increased online freight income and strong performance in other points of sale, both not included in sell-out growth, drove around 7% of the growth.
The performance was negatively impacted by approximately -2pp from the closure of net 101 concept stores and +600 other points of sale compared with Q2 2019. Finally, the impact of lockdowns and social restrictions in physical stores has skewed the channel mix towards online. This created a positive impact of 1% on reported revenue converting wholesale sell-in to sell-out in the online channel.
Revenue performance compared with 2020 is heavily distorted by COVID-19 impacts, as both years (and especially Q2 2020) are impacted by store closures, making performance difficult to interpret.
This is clearly visible in the growth numbers, as sell-out growth ended at 62% vs Q2 2020 and organic growth at 84%. The difference between sell-out growth and organic growth is driven by a number of different factors.
Both Global Business Units showed good performance in Q2 2021. Moments and Collabs generated 59% sell-out growth vs 2020 while Style and Upstream Innovation generated 68% sell-out growth vs 2020.
Revenue in Pandora owned concept stores was up vs 2020 following the partial reopening of stores, however down vs 2019, as store closures continue to have a negative impact on the channel. This is also visible in the online performance where revenue, as expected, is down vs Q2 2020, as consumers returned to stores. Online performance was on the other hand significantly higher than Q2 2019, ending at 132% organic growth.
Organic growth in Pandoras wholesale business was up +375% vs Q2 2020. The growth level should be seen in the context of a low base in Q2 2020 due to the significant impact from COVID-19. Compared with Q2 2019, organic growth was up +27% following a strong performance in the US particularly. Pandora has maintained its focus to secure a balanced sell-in vs sell-out ratio, and in general the partners have managed well through the pandemic. Other points of sales grew 27% vs 2019 driven by wholesalers in Germany with an online business.
| DKK million | Q2 2021 | Q2 2020 | Sell-out growth vs 2020 |
Sell-out growth vs 2019 |
Organic growth vs 2020 |
Organic growth vs 2019 |
Local currency growth vs 2020 |
Share of Revenue |
|---|---|---|---|---|---|---|---|---|
| Pandora owned1 retail |
3,399 | 2,480 | 31% | 11% | 37% | 9% | 41% | 66% |
| - of which concept stores | 2,027 | 924 | - | - | 115% | -16% | 126% | 39% |
| - of which online stores | 1,222 | 1,487 | - | - | -16% | 132% | -16% | 24% |
| - of which other points of sale | 150 | 68 | - | - | 119% | -17% | 119% | 3% |
| Wholesale | 1,599 | 365 | 188% | 0% | 375% | 27% | 359% | 31% |
| - of which concept stores | 912 | 126 | - | - | 709% | 28% | 663% | 18% |
| - of which other points of sale | 687 | 239 | - | - | 199% | 27% | 199% | 13% |
| Third-party distribution | 157 | 32 | 188% | 0% | 410% | -23% | 410% | 3% |
| Total revenue | 5,155 | 2,876 | 62% | 7% | 84% | 13% | 85% | 100% |
1 Pandora does not own any of the premises (Land and buildings) where stores are operated. Pandora exclusively operates stores from leased premises.
| DKK million | H1 2021 | H1 2020 | Sell-out growth vs 2020 |
Sell-out growth vs 2019 |
Organic growth vs 2020 |
Organic growth vs 2019 |
Local currency growth vs 2020 |
Share of Revenue |
|---|---|---|---|---|---|---|---|---|
| Pandora owned1 retail |
6,355 | 5,102 | 29% | 7% | 26% | 4% | 29% | 66% |
| - of which concept stores | 3,408 | 2,760 | - | - | 24% | -29% | 29% | 35% |
| - of which online stores | 2,639 | 2,109 | - | - | 29% | 166% | 29% | 27% |
| - of which other points of sale | 308 | 234 | - | - | 35% | -16% | 35% | 3% |
| Wholesale | 2,964 | 1,693 | 68% | -7% | 88% | 11% | 84% | 31% |
| - of which concept stores | 1,601 | 891 | - | - | 98% | 7% | 90% | 17% |
| - of which other points of sale | 1,363 | 802 | - | - | 77% | 16% | 77% | 14% |
| Third-party distribution | 336 | 252 | 68% | -7% | 39% | -22% | 39% | 3% |
| Total revenue | 9,655 | 7,048 | 41% | 2% | 42% | 5% | 43% | 100% |
1Pandora does not own any of the premises (Land and buildings) where stores are operated. Pandora exclusively operates stores from leased premises.
Pandora closed net 29 concept stores in Q2 2021 of which 12 was in China, 5 in Spain and rest scattered across other markets. The closures in China are not an effect of the new strategy – Pandora sees ample opportunity for network expansion in China in due course - but merely due to low performing stores as well as some delays in relocating closed stores to new locations.
Other points of sale is down 444 compared with Q2 2020. The closures was mainly driven by US and Spain. In the US, Pandora closed down approx. 230 Jared accounts, while the closures in Spain is part of a general optimisation of the footprint closing smaller multibrand accounts. On a sequential basis vs Q1 2021, Other points of sale increase following a new collaboration with CHRIST in Germany.
| Growth | Growth | ||||
|---|---|---|---|---|---|
| Q2 2021 | Q2 2021 | ||||
| Number of points of sale | Q2 2021 | Q1 2021 | Q2 2020 | /Q1 2021 | /Q2 2020 |
| Concept stores | 2,630 | 2,659 | 2,714 | -29 | -84 |
| - of which Pandora owned1 | 1,379 | 1,394 | 1,373 | -15 | 6 |
| - of which franchise owned | 745 | 755 | 828 | -10 | -83 |
| - of which third-party distribution | 506 | 510 | 513 | -4 | -7 |
| Other points of sale | 4,095 | 4,050 | 4,539 | 45 | -444 |
| Total points of sale | 6,725 | 6,709 | 7,253 | 16 | -528 |
1Pandora does not own any of the premises (Land and buildings) where stores are operated. Pandora exclusively operates stores from leased premises.
The US market, Pandora's largest market generating 34% of total revenue in Q2 2021, delivered a very strong performance in the quarter. Pandora saw an encouraging performance of 63% sell-out growth vs 2019. As mentioned previously, the performance in US is temporarily supported by the stimulus packages. Demand for discretionary goods in the US, also outside the jewellery sector, is seeing unusually high growth, making it difficult to interpret the true underlying performance. According to Bank of Americas global luxury report for Q2, the US market saw growth of +53% vs Q2 2019. Comparing this to Pandoras sell-out growth of +63%, there is indications that Pandora continue to increase market share in the US. The strong performance was driven by a well-executed Mother's Day campaign and a continued utilisation of omni-channel features. Performance in US has been strong since Q3 2020, and growth is expected to ease off in the second half of the year, as stimulus packages are phased out. The strong performance comes on top of a smaller summer sale, as there was substantially less excess inventory to clear. Additionally, Pandora has continued to increase media investments in the quarter, as consumer sentiment towards discretionary goods is strong and the market was almost fully open in the quarter.
Performance in China improved compared to Q1 2021, with sell-out being down -13% vs Q2 2019, which is a significant improvement vs -48% in Q1 2021. During Q2, Pandora conducted a number of initial media tests. Additionally, revenue was supported by successful influencer campaigns and a celebrity collaboration, as well as a successful "618" Tmall promo. As previously communicated, China is one of the larger growth opportunities in the new Phoenix strategy. Pandora will take the first steps in repositioning and strengthening the brand in H2 2021 including to invest significantly in media. China is not expected to return to growth before next year. China accounted for 8% of revenue in Q2 2021.
The UK market ended at positive 1% sell-out growth vs 2019 driven by a very strong online performance. Stores reopened in Q2 2021 with an average of 13% of the network closed in the quarter. With stores reopening, Pandora saw consumers returning to physical stores with encouraging traffic trajectory throughout the quarter. Sell-out growth in the physical stores was still negative vs Q2 2019 with around -22%. As mentioned in the Q1 2021 interim financial report, the UK is the test market for the Pandora Brilliance launch. Pandora Brilliance generated around DKK 18 million of revenue in Q2 2021.
Italy was impacted by closures throughout April and May, with stores being fully open from mid May. Given the impact from the pandemic, the negative sell-out growth vs 2019 of -8% is satisfactory, as Italy is a market where the online business is traditionally limited. Upon the reopening, consumers immediately started to return to stores and in the month of June sell-out growth vs 2019 was positive. Additionally, Italy had 14 less promotional days than Q2 2019.
Australia, France and Germany have all been impacted by closures and social restrictions throughout the quarter. The combined underlying sell-out growth in these markets – adjusted for COVID-19 – is likely to be positive. On top of the negative impact from social restrictions, performance vs 2019 is also, as expected, negatively impacted by a much smaller summer sale. Online performance was strong and all markets saw strong positive online performance vs 2019, particularly France and Germany both seeing triple digit online growth vs 2019.
| DKK million | Q2 2021 | Q2 2020 | Sell-out growth vs 2020 |
Sell-out growth vs 2019 |
Organic growth vs 2020 |
Local currency growth |
Share of revenue |
|---|---|---|---|---|---|---|---|
| US | 1,771 | 687 | 134% | 63% | 179% | 184% | 34% |
| China | 390 | 378 | 7% | -13% | 3% | 3% | 8% |
| UK | 569 | 409 | 25% | 1% | 34% | 35% | 11% |
| Italy | 515 | 261 | 56% | -8% | 98% | 98% | 10% |
| Australia | 226 | 167 | 23% | -9% | 26% | 26% | 4% |
| France | 210 | 197 | 1% | -14% | 7% | 7% | 4% |
| Germany | 241 | 185 | -1% | -8% | 31% | 31% | 5% |
| Total top-7 markets | 3,922 | 2,283 | 59% | 19% | 76% | 78% | 76% |
| Rest of Pandora | 1,233 | 593 | 75% | -22% | 111% | 112% | 24% |
| Total revenue | 5,155 | 2,876 | 62% | 7% | 84% | 85% | 100% |
| Sell-out growth | Sell-out growth | Organic growth | Local currency | Share of | |||
|---|---|---|---|---|---|---|---|
| DKK million | H1 2021 | H1 2020 | vs 2020 | vs 2019 | vs 2020 | growth | revenue |
| US | 3,161 | 1,622 | 107% | 58% | 112% | 114% | 33% |
| China | 671 | 590 | 20% | -32% | 15% | 15% | 7% |
| UK | 1,156 | 999 | 8% | -7% | 15% | 15% | 12% |
| Italy | 955 | 713 | 28% | -9% | 34% | 34% | 10% |
| Australia | 469 | 359 | 26% | -3% | 22% | 22% | 5% |
| France | 403 | 437 | -7% | -18% | -7% | -7% | 4% |
| Germany | 432 | 364 | -8% | -12% | 19% | 19% | 4% |
| Total top-7 markets | 7,248 | 5,084 | 45% | 13% | 47% | 48% | 75% |
| Rest of Pandora | 2,407 | 1,964 | 26% | -24% | 27% | 28% | 25% |
| Total revenue | 9,655 | 7,048 | 41% | 2% | 42% | 43% | 100% |
Executive summary
Financial highlights
Business update
review Profitability Cash Flow &
Balance sheet Financial
guidance Sustainability Other events & Contact
Financial statements Accounting notes
17 AUGUST2021 | INTERIM FINANCIAL REPORT Q22021| COMPANY ANNOUNCEMENT No. 643| page 9 | 32
Revenue
The EBIT margin was 25.2% in Q2 2021, up from 1.1% in Q2 2020 (excluding restructuring costs) with Q2 2020 heavily impacted by the pandemic. The Q2 2021 EBIT margin is up sequentially from 20.1% in Q1 2021 and up from 22.9% in Q2 2019 (excluding restructuring costs), mainly driven by operating leverage.
The strong Q2 EBIT margin is supported by the unusually strong growth seen in US. The US growth is highly margin accretive as limited incremental OPEX has been required. On the other hand, the Q2 2021 EBIT margin is negatively impacted by the continued impact from the pandemic and the 15% of stores temporarily closed during the quarter.
In Q2 2020, the production facilities in Thailand were closed for a couple weeks to manage demand and supply following the COVID-19 outbreak. This negatively impacted gross profit and EBIT by DKK 80m last year and thereby dragged down the gross margin and EBIT margin in Q2 2020 by approx. 2.8pp.
Pandora received DKK 44 million in government support in Q2 2021 (UK, Italy, Spain and Germany), significantly lower than Q2 2020 (DKK 110 million). Furthermore Pandora reached agreements of DKK 26 million in rent concessions with landlords in Q2 2021(DKK 52 million in Q2 2020).
As previously communicated, cost savings generated as part of Programme NOW is expected to have a DKK 350 million incremental impact in 2021 and supported the EBIT margin in Q2 by 2pp. Pandora continues to fully reinvest the cost savings in driving revenue.
The EBIT margin was negatively impacted by rising commodity prices (mainly silver) and led to a headwind of -1.5pp.
In Q22021, the gross margin increased around 2pp to 77.1% compared with 74.9% in Q2 2020 (excluding restructuring cost). The increase was mainly driven by the before mentioned one-off cost of DKK 80m last year, which was a 2.8pp drag on the gross margin. Additionally, the gross margin is positively impacted by lower promotional activity and a reduced mid-season sale (more full-price sell through). This is offset by increasing commodity prices which, net of FX, dragged down the gross margin vs Q2 2020 by approx. 1pp.
| DKK million | Q2 2021 | Q2 2020 | Growth | Share of revenue Q2 2021 |
Share of revenue Q2 2020 |
H1 2021 | H1 2020 | Growth | Share of revenue H1 2021 |
Share of revenue H1 2020 |
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 5,155 | 2,876 | 79% | 100.0% | 100.0% | 9,655 | 7,048 | 37% | 100.0% | 100.0% |
| Cost of sales | -1,180 | -722 | 64% | -22.9% | -25.1% | -2,244 | -1,663 | 35% | -23.2% | -23.6% |
| Gross profit excl. restructuring costs |
3,975 | 2,155 | 84% | 77.1% | 74.9% | 7,410 | 5,385 | 38% | 76.8% | 76.4% |
| Restructuring costs Gross profit |
- | -56 | -100% | - | -1.9% | - | -142 | -100% | - | -2.0% |
| incl. restructuring costs | 3,975 | 2,099 | 89% | 77.1% | 73.0% | 7,410 | 5,242 | 41% | 76.8% | 74.4% |
Total operating expenses was DKK 2,673 million in Q2 2021, up 28% in constant foreign exchange rates compared to an unusual low base in Q2 2020 due to the outbreak of the pandemic. Compared to a cleaner base in Q2 2019, the OPEX ratio declined from 53.2% to 51.9%.
The increase vs Q2 2020 comes from store closures, government support and other extraordinary cost savings activities last year following the outbreak of COVID-19 and the uncertainty it created. Sales and distribution expenses increased 15% in constant foreign exchange rates, following lower government support programmes in Q2 2021 of around DKK 70 million, lower rent concessions of around DKK 25m and less COVID-19 cost savings, as stores are reopening. Marketing expenses increased by 72% in constant foreign exchange rates, reflecting the extraordinary low spend in Q2 2020 as some media spending was paused during lockdowns. Pandora has invested in marketing during Q2 2021 to stay top of mind with consumers. Marketing expenses in Q2 2021 was 15.2% of revenue and in line with Pandora's mid-term expectations. Administrative expenses increased by 19% compared with Q2 2020 in constant foreign exchange rates, mainly due to COVID-19 related savings last year and are in line with the spend in Q1 2021.
OPERATING EXPENSES
Executive summary
Financial highlights Business update
review Profitability Cash Flow &
Balance sheet Financial
guidance Sustainability Other events & Contact
Financial statements Accounting notes
Revenue
Net financial expenses ended slightly below last year, primarily due to gains from commodity overhedging. The effective tax rate was well in line with guidance and in line with last year.
The net working capital continue to be below zero and ended at -0.3% of the last 12 months revenue in Q2 2021 compared with -0.4% in Q1 2021 and -1.5% in Q2 2020. The net working capital continues to be below zero despite further inventory build-up in Q2 2021 of around DKK 0.2 billion on top of DKK 0.4 billion in Q1 2021 in order to decrease the risk of disruptions in the supply chain as well as decrease the risk of stock-outs. Inventories are expected to increase further in Q3 in preparation for the Q4 peak season. Trade receivables are slightly up vs Q1 2021 (DKK 0.1 billion) reflecting the increase in wholesale revenue, and wholesale Days Sales Outstanding (DSO) stayed close to a historical low at 24 days, reflecting the healthy and balanced sell-in to partners. DSO is significantly better than Q2 2020 at 89 days where COVID-19 resulted in temporary cash constraints among our partners. Total DSO, including retail receivables, stayed at 12 days by the end of June.
Free cash flow incl. lease payments ended at DKK 1.3 billion corresponding to a cash conversion of 98% in Q2 2021. Cash conversion for H1 2021 is 31% and reflects the deliberate decision to increase inventories and the payment of the final restructuring costs related to Programme NOW in Q1 2021. CAPEX in the quarter remained low at 3% of revenue partially due to postponement of certain projects due to COVID-19 lockdowns.
The improved underlying performance, combined with the lapse of Programme NOW one-off restructuring costs as well as lower invested capital are positively impacting ROIC. ROIC ended Q2 at 44% - the highest level since Q4 2018.
| Share of preceding 12 months' revenue | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 |
|---|---|---|---|---|---|
| Inventories | 11.8% | 12.3% | 10.3% | 13.7% | 11.6% |
| Trade receivables | 3.2% | 3.1% | 4.6% | 3.2% | 3.1% |
| Trade payables | -10.3% | -11.8% | -16.9% | -12.7% | -11.9% |
| Other net working capital elements | -4.9% | -4.0% | -5.6% | -4.2% | -4.2% |
| Total | -0.3% | -0.4% | -7.6% | 0.0% | -1.5% |
The financial leverage, NIBD to EBITDA excl. restructuring costs, was 0.4x by the end of June. This is just below the capital structure policy range of NIBD to EBITDA between 0.5 and 1.5x. Pandora continue to hold a strong liquidity position and is well positioned for the continued elevated uncertainty related to COVID-19 while at the same time continuing to distribute cash to shareholders. Please see section below.
Based on the strong Q2 2021 results and an updated full-year forecast, the financial guidance for 2021 was upgraded on 6 August to "organic growth of 16-18%" (previously "above 12%") and "EBIT margin of 23-24%" (previously "above 22%").
COVID-19 continues to create an elevated level of uncertainty on the guidance.
The revenue guidance was upgraded on 6 August to "organic growth of 16-18%" (previously "above 12%"). An organic growth of 16-18% vs 2020 correspond to an organic growth expectation of 3-5% vs 2019.
The updated guidance is based on the assumption that approximately 5% of the stores will be temporarily closed or severely impacted due to COVID-19 in the second half compared with 5-10% previously. Today, around 8% of the stores are temporarily closed or severely impacted due to COVID-19. The updated guidance also assumes that COVID-19 will have no major negative impact on production and supply chain.
Full year, a negative impact on organic growth of -6% compared to 2020 is expected. The -6% impact is the net result of revenue lost in the temporarily closed stores and a partial online pickup of the lost revenue. On the other hand, the COVID-19 stimulus packages in US are positively contributing to the growth seen so far in 2021. It is expected that the impact from US stimulus packages will be significantly lower in H2 2021. Looking into 2022, there is obviously high uncertainty on what the net impact of these two COVID-19 related factors are. China is expected to remain a drag on group performance for the rest of the year.
Accounting notes
The EBIT margin guidance was upgraded on 6 August to "23-24%" (previously "above 22%"), driven by operating leverage. A large part of the upgrade comes from the unusually strong US growth, which is highly margin accretive.
In H12021, Pandora delivered an EBIT margin of 22.8%. The EBIT margin was negatively impacted by temporary COVID-19 store closures and restrictions and positively boosted by the strong US growth. The net impact in H1 2021 was slightly positive. The impact of both factors are expected to drop in H2 2021. Combined with the fact that Pandora will take the first significant steps in H2 in China by investing in a repositioning of the brand, this slightly lowers the normal seasonal pick-up in the EBIT margin in H2 vs H1.
Current foreign exchange rates, if unchanged, are estimated to have a favourable impact on the EBIT margin in 2021 of approximately 0.9pp, compared to 2020. This is slightly up from around 0.5 pp in the Q1 2021 Interim Financial Report. The full-year impact from both foreign exchange and commodities at current rates is still expected to be around 1pp negative impact on the EBIT margin in 2021.
CAPEX for 2021 is expected to be around DKK 1 billion (previously DKK 1.0-1.2 billion). The updated guidance for store network development is net 25-50 concept store closures (previously "no major changes to the overall concept store network"). The effective tax rate is expected to be 22-23%, in line with 2020 and unchanged from previous guidance.
At the end of June 2021, Pandora's leverage was only 0.4x NIBD to EBITDA and thereby just below the range in our capital structure policy of 0.5-1.5x. In May 2021, Pandora re-initiated cash distributions with a total of DKK 1 billion which was paid out from May to August (Pandora distributed an extraordinary dividend of DKK 5 per share in May and from May to August, Pandora repurchased DKK 0.5 billion worth of shares). At the same time, Pandora announced the intention to, all else equal, distribute a further DKK 1 billion per quarter in each of Q3 and Q4.
Given the continued strong performance in Q2, the ample liquidity and low leverage, Pandora has decided to continue distributions to its shareholders. During the next three months, up to DKK 1 billion will be distributed through a combination of extraordinary dividend of DKK 5 per share, that will be paid on 31August 2021, and share buyback of up to DKK 0.5 billion.
Assuming no significant worsening of COVID-19, it is Pandora's intention to initiate further cash distribution programmes in Q4 2021.
| Average 2020 | 12 August 2021 | |
|---|---|---|
| 2021 Y-Y Financial | ||
| FX Rates | FX Rates | Impact |
| 6.5422 | 6.3354 | |
| 0.2091 | 0.1919 | |
| 8.3890 | 8.7761 | |
| 0.9476 | 0.9781 | |
| 4.5069 | 4.6590 | |
| ~-100 to -250 |
||
| ~100-200 | ||
| ~0,9% | ||
Pandora's key sustainability targets are listed below. You can read more about our progress against them in our 2020 Sustainability Report.
In Q2, Pandora announced the launch of Pandora Brilliance, its first lab-created diamond collection. Furthermore, Pandora announced that mined diamonds will no longer be used in Pandora's products. The Pandora Brilliance product line has achieved CarbonNeutral® product certification in accordance with The CarbonNeutral Protocol, a leading global framework for carbon neutrality. The certification covers Pandora Brilliance jewellery, its packaging and transportation.
Pandora updated its Responsible Sourcing Policy, which sets out the principles and standards that Pandora applies when selecting and working with its suppliers. Pandora also updated its Supplier Code of Conduct which details the specific expectations to our suppliers. Both can be found under the policies tab in the sustainability section of our website.
Pandora submitted its company and value chain greenhouse gas emission targets to the Science Based Targets initiative (SBTi). Pandora is in the process of finalizing two other key components of our sustainability strategy, Inclusion and Diversity (I&D) and Point of Sales Materials (POSM). We aim to share more about the Science Based Target and our approach to I&D and POSM in fall 2021.
Since 2019, Pandora has been working together with UNICEF to support young voices and improving access to quality learning opportunities. As part of our collaboration, we released a limited-edition blue dreamcatcher charm highlighting the importance of one of UNICEF's programmes in Guatemala. For every Pandora for UNICEF charm sold between 4 March 2021 and 4 June 2021, Pandora donated EUR 15 to UNICEF's work for children and young people, including education, gender equality, rights awareness, personal empowerment and civic engagement programmes.
As announced on 29 June 2021, Luciano Rodembusch joined Pandora on 2 August 2021 as General Manager of the North America cluster, reporting to CCO Martino Pessina. Luciano replaces Sid Keswani who stepped down in April 2021.
The financial calendar lists the expected dates of publication of financial announcements:
| 14 September 2021 | Capital Markets Day (online event) More to come on: https://pandoragroup.com/investor/capital-markets-day-2021 |
|---|---|
| 03 November 2021 | Interim Financial Report for the third quarter/first nine months of 2021 |
Executive summary Financial highlights Business update Revenue review Profitability Cash Flow & Balance sheet Financial guidance Sustainability Other events & Contact Financial statements Accounting notes
Total revenue increased by 43% in local currency to DKK 9,655 million in H1 2021 compared with H1 2020. Organic growth was 42% reflecting good underlying performance but also that H1 2020 was heavily impacted by COVID-19.
Gross profit was DKK 7,410 million in H1 2021 (DKK 5,242 million in H1 2020), resulting in a gross margin of 76.8% in H1 2021 in line with H1 2020 of 76.4% excluding restructuring costs.
Sales and distribution expenses excluding restructuring costs increased to DKK 2,872 million in H1 2021 (DKK 2,834 million in H1 2020), corresponding to 29.8% of revenue in H1 2021 (40.2% in H1 2020). The increase is the result of variable costs related to the higher revenue, cost reductions implemented during the COVID-19 pandemic in H1 2020 and less government support and rent concessions received in Q2 2021. Rent concessions and government support have been recognized in the profit and loss statement under Sales and Distribution expenses.
Marketing expenses excluding restructuring costs increased to DKK 1,362 million in H1 2021 (DKK 1,034 million in H1 2020), resulting in a share of revenue of 14.1% in H1 2021 compared with 14.7% in H1 2020.
Administrative expenses excluding restructuring cost increased to DKK 972 million in H1 2021 compared with DKK 845 million in H1 2020, corresponding to 10.1% of revenue in H1 2021 (12.0% in H1 2020). The increase in absolute terms mainly reflects the COVID-19 savings recognised H1 in 2020.
EBIT for H1 2021 was DKK 2,204 million – a significant increase compared with H1 2020, resulting in an EBIT margin of 22.8% in H1 2021 (9.5% in H1 2020 excluding restructuring costs). The significant improvement in the EBIT margin is mainly a result of strong operating leverage as H1 2020 was very negatively impacted by COVID-19.
Net financials amounted to a cost of DKK 113 million in H1 2021 vs a cost of DKK 262 million in H1 2020.
Income tax expenses were DKK 471 million in H1 2021 compared with a tax income of DKK 58 million in H1 2020, implying an effective tax rate for the Group of 22.5% for H1 2021 (22.5% in H1 2020).
Net profit in H1 2021 was DKK 1,621 million vs a loss of DKK 199 million in H1 2020.
A conference call for investors and financial analysts will be held today at 11.00 CET and can be joined online at www.pandoragroup.com. The presentation for the call will be available on the website before the call.
The following numbers can be used by investors and analysts: DK: +45 35 44 55 77 UK (International): +44 33 33 000 804 US: +1 631 913 1422
Please use PIN: 633 40 815#
Link to webcast: https://streams.eventcdn.net/pandora/q2-2021/
Pandora designs, manufactures and markets hand-finished and contemporary jewellery made from high-quality materials at affordable prices. Pandora jewellery is sold in more than 100 countries on six continents through more than 6,700 points of sale, including more than 2,600 concept stores.
Founded in 1982 and headquartered in Copenhagen, Denmark, Pandora employs around 26,0 0 0 people worldwide of whom more than 11,400 are located in Thailand, where the Company manufactures its jewellery. Pandora is publicly listed on the Nasdaq Copenhagen stock exchange in Denmark. In 2020, Pandora's total revenue was DKK 19.0 billion.
For more information, please contact:
John Bäckman VP, Investor Relations, Tax & Treasury +45 5356 6909 [email protected]
Kristoffer Malmgren Director, Investor Relations +45 3050 1174 [email protected]
Mads Twomey-Madsen VP, Corporate Communications & Sustainability +45 2510 0403 [email protected]
Johan Melchior Director, External Relations +45 4060 1415 [email protected]
| DKK million | Notes | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | FY 2020 |
|---|---|---|---|---|---|---|
| Revenue | 3 | 5,155 | 2,876 | 9,655 | 7,048 | 19,009 |
| Cost of sales | -1,180 | -778 | -2,244 | -1,805 | -4,634 | |
| Gross profit | 3,975 | 2,099 | 7,410 | 5,242 | 14,375 | |
| Sales, distribution and marketing expenses | -2,186 | -1,747 | -4,234 | -4,001 | -9,155 | |
| Administrative expenses | -488 | -550 | -972 | -1,236 | -2,536 | |
| Operating profit | 1,301 | -198 | 2,204 | 5 | 2,684 | |
| Finance income | 65 | 53 | 82 | 71 | 316 | |
| Finance costs | -86 | -81 | -195 | -332 | -507 | |
| Profit before tax | 1,280 | -226 | 2,091 | -256 | 2,494 | |
| Income tax expense | -288 | 51 | -471 | 58 | -556 | |
| Net profit for the period | 992 | -175 | 1,621 | -199 | 1,938 | |
| Earnings per share, basic, DKK | 10.0 | -2.1 | 16.3 | -2.1 | 20.0 | |
| Earnings per share, diluted, DKK | 9.9 | -2.1 | 16.2 | -2.1 | 19.9 | |
| DKK million | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | FY 2020 |
|---|---|---|---|---|---|
| Net profit for the period | 992 | -175 | 1,621 | -199 | 1,938 |
| Other comprehensive income: | |||||
| Items that may be reclassified to profit/loss for the period |
|||||
| Exchange rate adjustments of investments in subsidiaries | -82 | -1 | 96 | -218 | -609 |
| Fair value adjustment of hedging instruments | -39 | 263 | -423 | 84 | 206 |
| Tax on other comprehensive income, hedging instruments, income/expense Items that may be reclassified to profit/loss for the period, net of tax |
11 -110 |
-57 205 |
88 -239 |
-14 -148 |
-13 -416 |
| Items not to be reclassified to profit/loss for the period | |||||
| Actuarial gain/loss on defined benefit plans, net of tax Items not to be reclassified to profit/loss for the period, |
- | - | - | - | 6 |
| net of tax | - | - | - | - | 6 |
| Other comprehensive income, net of tax | -110 | 205 | -239 | -148 | -410 |
| Total comprehensive income for the period | 882 | 30 | 1,382 | -347 | 1,528 |
Financial highlights Business update
Revenue review Profitability Cash Flow &
Balance sheet Financial
guidance Sustainability Other events & Contact
Financial statements
| 2021 | 2020 | 2020 | ||
|---|---|---|---|---|
| DKK million ASSETS |
Notes | 30 June | 30 June | 31 December |
| Goodwill | 9 | 4,326 | 4,343 | 4,247 |
| Brand | 1,057 | 1,057 | 1,057 | |
| Distribution | 1,097 | 1,125 | 1,110 | |
| Other intangible assets | 545 | 737 | 529 | |
| Total intangible assets | 7,025 | 7,263 | 6,943 | |
| Property, plant and equipment | 1,832 | 2,333 | 2,054 | |
| Right-of-use assets | 10 | 2,674 | 3,286 | 3,007 |
| Deferred tax assets | 837 | 914 | 764 | |
| Other financial assets | 232 | 272 | 244 | |
| Total non-current assets | 12,600 | 14,067 | 13,012 | |
| Inventories | 2,557 | 2,250 | 1,949 | |
| Trade receivables | 7 | 691 | 602 | 870 |
| Right-of-return assets | 52 | 60 | 62 | |
| Derivative financial instruments | 5,6 | 71 | 194 | 351 |
| Income tax receivable | 94 | 141 | 83 | |
| Other receivables | 609 | 718 | 745 | |
| Cash | 1,604 | 826 | 2,912 | |
| Total current assets | 5,678 | 4,792 | 6,972 | |
| Total assets | 18,277 | 18,859 | 19,984 | |
| EQUITY AND LIABILITIES | ||||
| Share capital | 100 | 100 | 100 | |
| Treasury shares | -344 | -98 | -93 | |
| Reserves | 520 7,854 |
1,020 | 750 | |
| Retained earnings | 4,452 | 6,632 | ||
| Total equity | 8,130 | 5,473 | 7,389 | |
| Provisions | 421 | 289 | 370 | |
| Loans and borrowings | 10 | 3,682 | 5,475 | 2,066 |
| Deferred tax liabilities | 221 | 383 | 368 | |
| Total non-current liabilities | 4,324 | 6,147 | 2,804 | |
| Provisions | 29 | 38 | 29 | |
| Refund liabilities | 556 | 629 | 654 | |
| Contract liabilities | 107 | 63 | 82 | |
| Loans and borrowings | 10 | 927 | 2,743 | 3,996 |
| Derivative financial instruments | 5,6 | 219 | 82 | 119 |
| Trade payables | 2,236 | 2,316 | 3,211 | |
| Income tax payable | 715 | 444 | 382 | |
| Other payables | 1,035 | 924 | 1,317 | |
| Total current liabilities | 5,823 | 7,239 | 9,790 | |
| Total liabilities | 10,147 | 13,386 | 12,595 | |
| Total equity and liabilities | 18,277 | 18,859 | 19,984 | |
Executive summary
Financial highlights Business
update Revenue
review Profitability Cash Flow & Balance sheet
Financial
guidance Sustainability Other events & Contact
Financial statements Accounting
notes
| DKK million | Share capital |
Treasury shares |
Translation reserve |
Hedging Reserve |
Dividend proposed |
Retained earnings |
Total equity |
|---|---|---|---|---|---|---|---|
| 2021 | |||||||
| Equity at 1 January | 100 | -93 | 535 | 215 | - | 6,632 | 7,389 |
| Net profit for the period | - | - | - | - | - | 1,621 | 1,621 |
| Other comprehensive income, net of tax | - | - | 100 | -330 | - | -9 | -239 |
| Total comprehensive income for the period | - | - | 100 | -330 | - | 1,612 | 1,382 |
| Share-based payments | - | 1 | - | - | - | 109 | 110 |
| Purchase of treasury shares | - | -252 | - | - | - | - | -252 |
| Proposed dividend | - | - | - | - | 498 | -498 | - |
| Dividend paid | - | - | - | - | -498 | - | -498 |
| Equity at 30 June | 100 | -344 | 635 | -115 | - | 7,854 | 8,130 |
| 2020 | |||||||
| Equity at 1 January | 100 | -1,964 | 1,112 | 54 | 836 | 5,110 | 5,249 |
| Net profit for the period | - | - | - | - | - | -199 | -199 |
| Other comprehensive income, net of tax | - | - | -213 | 65 | - | - | -148 |
| Total comprehensive income for the period | - | - | -213 | 65 | - | -199 | -347 |
| Share-based payments | - | 9 | - | - | - | 38 | 47 |
| Purchase of treasury shares | - | -431 | - | - | - | - | -431 |
| Sale of treasury shares | - | 2,288 | - | - | - | -509 | 1,778 |
| Dividend paid | - | - | - | - | -836 | 11 | -825 |
| Equity at 30 June | 100 | -98 | 899 | 120 | - | 4,452 | 5,473 |
Executive summary Financial highlights Business update Revenue review Profitability Cash Flow &
Accounting notes
| DKK million | Notes | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | FY 2020 |
|---|---|---|---|---|---|---|
| Operating profit | 1,301 | -198 | 2,204 | 5 | 2,684 | |
| Depreciation and amortisation | 460 | 523 | 974 | 1,053 | 2,315 | |
| Share-based payments | 39 | 27 | 81 | 45 | 70 | |
| Change in inventories | -183 | -144 | -538 | -282 | -96 | |
| Change in receivables | 122 | 520 | 356 | 1,216 | 869 | |
| Change in payables and other liabilities | 16 | 68 | -1,424 | -812 | 724 | |
| Other non-cash adjustments | -29 | -21 | -26 | -273 | -155 | |
| Interest etc. received | 1 | 1 | 1 | 2 | 3 | |
| Interest etc. paid | -47 | -51 | -108 | -97 | -247 | |
| Income taxes paid | -94 | 356 | -249 | 280 | -192 | |
| Cash flows from operating activities, net | 1,586 | 1,082 | 1,270 | 1,137 | 5,975 | |
| Acquisitions of subsidiaries and activities, net of cash acquired | 8 | - | -1 | -14 | -5 | -12 |
| Purchase of intangible assets | -76 | -28 | -126 | -62 | -130 | |
| Purchase of property, plant and equipment | -39 | -80 | -99 | -163 | -374 | |
| Change in other non-current assets | 1 | 10 | 7 | 9 | 19 | |
| Proceeds from sale of property, plant and equipment | 3 | 1 | 3 | -1 | 13 | |
| Cash flows from investing activities, net | -111 | -98 | -228 | -222 | -484 | |
| Acquisitions of non-controlling interests | - | -42 | - | -42 | -42 | |
| Dividend paid | -498 | - | -498 | -826 | -825 | |
| Purchase of treasury shares | -252 | - | -252 | -431 | -431 | |
| Sale of treasury shares | - | 1,778 | - | 1,778 | 1,778 | |
| Proceeds from loans and borrowings | 1,859 | 2,981 | 1,859 | 5,857 | 5,861 | |
| Repayment of loans and borrowings | -2,975 | -5,315 | -3,004 | -7,100 | -9,073 | |
| Repayment of lease commitments | -243 | -92 | -470 | -345 | -839 | |
| Cash flows from financing activities, net | -2,110 | -689 | -2,366 | -1,108 | -3,571 | |
| Net increase/decrease in cash | -635 | 295 | -1,324 | -193 | 1,920 | |
| Cash at beginning of period1 | 2,239 | 537 | 2,912 | 1,054 | 1,054 | |
| Exchange gains/losses on cash | 0 | -5 | 16 | -34 | -62 | |
| Net increase/decrease in cash | -635 | 295 | -1,324 | -193 | 1,920 | |
| Cash at end of period1 | 1,604 | 826 | 1,604 | 826 | 2,912 | |
| Cash flows from operating activities, net | 1,586 | 1,082 | 1,270 | 1,137 | 5,975 | |
| - Interests etc. received | -1 | -1 | -1 | -2 | -3 | |
| - Interests etc. paid | 47 | 51 | 108 | 97 | 247 | |
| Cash flows from investing activities, net | -111 | -98 | -228 | -222 | -484 | |
| - Acquisition of subsidiaries and activities, net of cash acquired | - | 1 | 14 | 5 | 12 | |
| Free cash flow incl. IFRS 16 (excluding repayment of lease | 1,522 | 1,035 | 1,163 | 1,015 | 5,747 | |
| commitments) | ||||||
| Free cash flow excl. IFRS 16 (including repayment of lease | ||||||
| commitments) | 1,278 | 943 | 693 | 671 | 4,908 | |
| Unutilised committed credit facilities | 5,205 | 7,250 | 5,205 | 7,250 | 6,998 |
1Cash comprises cash at bank and in hand.
The above cannot be derived directly from the income statement and the balance sheet.
The unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board (IASB) and adopted by the European Union and additional Danish disclosure requirements for interim financial reporting of listed companies.
Pandora has adopted all new or amended standards (IFRS) and interpretations (IFRIC) as adopted by the EU and which are effective for the financial year beginning on 1 January 2021. The new or revised Standards and Interpretations did not affect recognition and measurement or result in any material changes to disclosures. The accounting policies applied are consistent with the accounting policies set out in the Annual Report 2020.
Due to rounding, numbers presented throughout this report may not add up precisely to the totals and percentages may not precisely reflect the absolute figures.
Pandora presents financial measures in the interim report that are not defined according to IFRS. Pandora believes that these non-GAAP measures provide valuable information to investors and Pandora's management when evaluating performance. Since other companies might calculate these differently from Pandora, they may not be comparable to the measures used by other companies. These financial measures should therefore not be considered a replacement for measures defined under IFRS. For the definitions of other alternative performance measures used by Pandora which are not defined by IFRS, refer to note 5.6 in the consolidated financial statements in the Annual Report 2020.
In preparing the interim financial report, Management makes various accounting estimates and assumptions, which form the basis of presentation, recognition and measurement of Pandora's assets and liabilities.
All significant accounting estimates and judgements are consistent with the description in the Annual Report 2020 to which we refer.
Due to COVID-19 outbreak and the limited visibility of the impact, Pandora will continue assessing the value of the assets and relevant contracts, especially in case of new material lockdowns.
For information on liquidity risk, please refer to note 5.
Pandora's activities are segmented on the basis of collections and consistent with the management reporting structure.
The operating activities of the Group are divided into two operating segments: Moments and Collabs as well as Style and Upstream Innovation. This structure was implemented as part of Pandora's reorganisation in Q2 2020. The comparative figures for 2020 have been restated to reflect the new segments and disaggregation of revenue by GBU collection structure has replaced revenue by product category in Q2 onwards.
The two operating segments both include all channels relating to the distribution and sale of Pandora products.
The non-unit driven revenue, comprising mainly of franchise fees, is allocated in the different revenue categories proportionately.
| Executive | Financial | Business | Revenue | Profitability | Cash Flow & | Financial | Sustainability | Other events | Financial | Accounting |
|---|---|---|---|---|---|---|---|---|---|---|
| summary | highlights | update | review | Balance sheet | guidance | & Contact | statements | notes |
Management monitors the profitability of the operating segments separately for the purpose of making decisions about resource allocation and performance management. Segment results are measured at gross profit as presented in the table below.
| Moments and | Style and | ||
|---|---|---|---|
| DKK million | Collabs | Upstream Innovation | Group |
| Q2 2021 | |||
| Revenue | 3,722 | 1,433 | 5,155 |
| Cost of sales | -881 | -299 | -1,180 |
| Gross profit | 2,841 | 1,134 | 3,975 |
| Operating expenses | -2,673 | ||
| Consolidated operating profit (EBIT) | 1,301 | ||
| Profit margin (EBIT margin) | 25.2% | ||
| Q2 20201 | |||
| Revenue | 2,139 | 738 | 2,876 |
| Cost of sales | -583 | -195 | -778 |
| Gross profit | 1,556 | 543 | 2,099 |
| Operating expenses | -2,297 | ||
| Consolidated operating profit (EBIT) | -198 | ||
| Profit margin (EBIT margin) | -6.9% | ||
| Restructuring costs | -231 | ||
| Profit margin (EBIT margin) excl. restructuring costs | 1.1% | ||
| H1 2021 Revenue |
6,973 | 2,682 | 9,655 |
| Cost of sales | -1,676 | -568 | -2,244 |
| Gross profit | 5,297 | 2,113 | 7,410 |
| Operating expenses | -5,206 | ||
| Consolidated operating profit (EBIT) | 2,204 | ||
| Profit margin (EBIT margin) | 22.8% | ||
| H1 20201 | |||
| Revenue | 5,112 | 1,936 | 7,048 |
| Cost of sales | -1,318 | -487 | -1,805 |
| Gross profit | 3,794 | 1,449 | 5,242 |
| Operating expenses | -5,237 | ||
| Consolidated operating profit (EBIT) | 5 | ||
| Profit margin (EBIT margin) | 0.1% | ||
| Restructuring costs | -666 | ||
| Profit margin (EBIT margin) excl. restructuring costs | 9.5% | ||
1The 'Garden' collection has been re-allocated from Style and Upstream Innovation to Moments and Collabs in Q2 2021. Comparative figures for 2020 were restated accordingly.
Executive summary Financial highlights Business update Revenue review Profitability Cash Flow & Balance sheet Financial guidance Sustainability Other events & Contact Financial statements Accounting notes
| Sell-out | Sell-out | Sell-out | Sell-out | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| DKK million | Q2 2021 | Q2 20201 | growth vs 2020 |
growth vs 2019 |
Share of Revenue |
H1 2021 | H1 20201 | growth vs 2020 |
growth vs 2019 |
Share of revenue |
| Moments and Collabs | 3,722 | 2,139 | 59% | 7% | 72% | 6,973 | 5,112 | 41% | 4% | 72% |
| hereof Moments | 3,376 | 1,923 | 59% | 4% | 65% | 6,242 | 4,566 | 40% | - | 65% |
| hereof Collabs | 346 | 215 | 55% | 43% | 7% | 732 | 546 | 51% | 50% | 8% |
| Style and Upstream Innovation | 1,433 | 738 | 68% | 2% | 28% | 2,682 | 1,936 | 38% | -7% | 28% |
| hereof Timeless | 886 | 452 | 72% | -12% | 17% | 1,712 | 1,167 | 45% | -18% | 18% |
| hereof Signature | 447 | 215 | 62% | 17% | 9% | 811 | 609 | 28% | 6% | 8% |
| hereof Me | 82 | 71 | 36% | n/a | 2% | 140 | 160 | 10% | n/a | 1% |
| hereof Brilliance | 18 | - | - | n/a | 0% | 18 | - | - | n/a | 0% |
| Total revenue | 5,155 | 2,876 | 62% | 7% | 100% | 9,655 | 7,048 | 40% | 1% | 100% |
1 The 'Garden' collection has been re-allocated from Style and Upstream Innovation to Moments and Collabs in Q2 2021. Comparative figures for 2020 were restated accordingly.
| Goods transferred at a point in time | 5,138 | 2,868 | 9,623 | 7,023 | |
|---|---|---|---|---|---|
| Services transferred over time | 17 | 8 | 32 | 25 | |
| Total revenue | 5,155 | 2,876 | 9,655 | 7,048 |
| Growth in | Growth in | ||||||
|---|---|---|---|---|---|---|---|
| local | local | ||||||
| DKK million | Q2 2021 | Q2 2020 | currency | H1 2021 | H1 2020 | currency | FY 2020 |
| US | 1,771 | 687 | 184% | 3,161 | 1,622 | 114% | 4,505 |
| China | 390 | 378 | 3% | 671 | 590 | 15% | 1,261 |
| UK | 569 | 409 | 35% | 1,156 | 999 | 15% | 2,960 |
| Italy | 515 | 261 | 98% | 955 | 713 | 34% | 2,021 |
| Australia | 226 | 167 | 26% | 469 | 359 | 22% | 1,120 |
| France | 210 | 197 | 7% | 403 | 437 | -7% | 1,154 |
| Germany | 241 | 185 | 31% | 432 | 364 | 19% | 1,014 |
| Total top-7 markets | 3,922 | 2,283 | 78% | 7,248 | 5,084 | 48% | 14,036 |
| Rest of Pandora | 1,233 | 593 | 112% | 2,407 | 1,964 | 28% | 4,973 |
| Total revenue | 5,155 | 2,876 | 85% | 9,655 | 7,048 | 43% | 19,009 |
| Growth in | Growth in | ||||||
|---|---|---|---|---|---|---|---|
| local | local | ||||||
| DKK million | Q2 2021 | Q2 2020 | currency | H1 2021 | H1 2020 | currency | FY 2020 |
| Retail physical stores1 | 2,177 | 992 | 126% | 3,716 | 2,994 | 29% | 7,943 |
| Retail online stores | 1,222 | 1,487 | -16% | 2,639 | 2,109 | 29% | 5,483 |
| Wholesale and third-party distribution | 1,756 | 397 | 363% | 3,300 | 1,946 | 78% | 5,583 |
| Total revenue | 5,155 | 2,876 | 85% | 9,655 | 7,048 | 43% | 19,009 |
1Pandora does not own any of the premises (Land and buildings) where stores are operated. Pandora exclusively operates stores from leased premises.
The use of sales channels for the distribution of Pandora jewellery depends on the underlying market maturity and varies within markets but is consistent when viewed between segments.
Due to the seasonal nature of the jewellery business, higher revenue and profits are historically realised in the second half of the year (the fourth quarter).
| Accounting | Financial | Other events | Sustainability | Financial | Cash Flow & | Profitability | Revenue | Business | Financial | Executive |
|---|---|---|---|---|---|---|---|---|---|---|
| notes | statements | & Contact | guidance | Balance sheet | review | update | highlights | summary |
Pandora's overall risk exposure and financial risks, including risks related to commodity prices, foreign currency, credit, liquidity and interest rates, are described in the disclosures in note 4.4 in the consolidated financial statements in the Annual Report 2020.
| Available facilities | Drawn amount | ||
|---|---|---|---|
| DKK million | Maturity date | DKK million | |
| Revolving Credit Facilities | 7,064 | April 2026 | 1,859 |
| Total | 7,064 | 1,859 |
Revolving Credit Facilities were refinanced in April with a EUR 950 million sustainability-linked facility where the margin on the loan is linked to Pandora's sustainability targets to be carbon neutral and to use recycled metals only by 2025. The facility is part of the company's liquidity reserve and has an initial five-year term, which may be extended by an additional two years subject to approval by the lenders. During Q2 2021, Pandora repaid a DKK 3 billion Club Deal ahead of maturity due to a strong liquidity position. The Club Deal was arranged during the initial COVID-19 outbreak in early 2020 as a precautionary initiative. As of today, available liquidity amounts to approximately DKK 5.2 billion.
Derivative financial instruments are measured at fair value and in accordance with level 2 in the fair value hierarchy (IFRS 13).
See note 4.5 to the consolidated financial statements in the Annual Report 2020.
| 2021 | 2020 | |
|---|---|---|
| DKK million | 30 June | 31 December |
| Receivables related to third-party distribution and wholesale | 467 | 600 |
| Receivables related to retail revenue sales | 225 | 270 |
| Total trade receivables | 691 | 870 |
Pandora took over 22 concept stores in the US in the period 1 January – 30 June 2021. Net assets acquired mainly consists of non-current assets and liabilities relating to the stores. The total purchase price was DKK 14 million and the purchase price allocations have not been finalised at the time of reporting. Outstanding items in these are considered immaterial.
In July 2021, Pandora took over 7 stores in the US. Net assets acquired mainly consists of inventory and non-current assets and liabilities relating to the stores. The total purchase price was DKK 52 million and the purchase price allocations have not been finalised at the time of the reporting.
| 2021 | 2020 | |
|---|---|---|
| DKK million | 30 June | 31 December |
| Cost at 1 January | 4,247 | 4,416 |
| Acquisition of subsidiaries and activities in the period | - | 2 |
| Exchange rate adjustments | 79 | -170 |
| Cost at the end of the period | 4,326 | 4,247 |
No impairment indication was identified based on the information regarding the market and the forecast. The latest impairment test was carried out in 2020 and given the development since then, there continues to be substantial headroom between the carrying amount and the value in use.
Amounts recognised in the balance sheet:
| RIGHT-OF-USE ASSETS | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| DKK million | 30 June | 31 December | ||||
| Property | 2,645 | 2,975 | ||||
| IT | 4 | 5 | ||||
| Cars | 15 | 18 | ||||
| Other | 10 | 10 | ||||
| Total right-of-use assets | 2,674 | 3,007 |
Out of the total decrease of DKK 0.3 billion in right-of-use-assets in the period 1 January – 30 June 2021, DKK 0.5 billion relates to depreciation and currency exchange movement, partially offset by a net increase of DKK 0.2 billion as a result of renewals of lease contracts and new leases. The development in right-of-use-assets is further affected by the timing of renewals of lease contracts and new leases including the negotiation of more favourable leasing terms.
| 2021 | 2020 | |
|---|---|---|
| DKK million | 30 June | 31 December |
| Non-current | 1,823 | 2,066 |
| Current | 927 | 993 |
| Total lease liabilities | 2,750 | 3,059 |
Lease liabilities are recognised in loans and borrowings in the balance sheet.
Amounts recognised in the income statement:
| 1 January – | 1 January – | |
|---|---|---|
| DKK million | 30 June 2021 | 30 June 2020 |
| Property | 533 | 537 |
| IT | 1 | 1 |
| Cars | 5 | 6 |
| Other | 2 | 3 |
| Total depreciation on right-of-use assets for the period | 540 | 546 |
Costs recognised in the period for short term and low value leases were DKK 20 million (2020: DKK 20 million). Expenses are recognised on a straight line basis.
Total cash outflow relating to leases was DKK 642 million in H1 2021 (H1 2020: DKK 484 million) . This comprises of fixed lease payments in scope of IFRS 16 in amount of DKK 470 million (2020: DKK 345 million), variable lease payments in amount of DKK 104 million (2020: DKK 75 million), interest paid of DKK 48 million (2020: DKK 44 million) and short term and low value leases of DKK 20 million (2020: DKK 20 million). Payments related to variable leases and short term and low value leases are not included in the lease liabilities.
Due to COVID-19, repayment of certain fixed leases has been negotiated and a cash settlement has been agreed with landlords and deferred by approximately DKK 35 million (2020: DKK 117 million).
Pandora decided to apply the practical expedient for all contracts with rent concessions occurring as direct consequence of COVID-19 and where it meets all conditions of the practical expedient. The amendments to IFRS 16 are described in the note 1.2 in the Annual Report 2020.
As a result, rent concessions have been recognised in the profit and loss statement in 2021 amounting to DKK 42 million in H1 2021(H1 2020: DKK 52 million) under Sales and Distribution expenses.
Overall financing cash flow is positively impacted by DKK 77 million in H1 2021(H1 2020: DKK 169 million) due to rent relief and rent deferrals.
Reference is made to note 5.1 to the consolidated financial statements in the Annual Report 2020.
Other related parties of Pandora with significant influence include the Board and the Executive Management of this Company and their close family members. Related parties also include companies in which the persons have control or significant interests.
Pandora did not enter into any significant transactions with members of the Board or the Executive Management, except for compensation and benefits received because of their membership of the Board, employment with Pandora or shareholdings in Pandora.
| Q2 2021 | Q1 2021 | Q2 2020 | Growth Q2 2021 / Q1 2021 |
Growth Q2 2021 /Q2 2020 |
|
|---|---|---|---|---|---|
| Other points of sale (retail) | 257 | 253 | 227 | 4 | 30 |
| Other points of sale (wholesale) | 3,274 | 3,243 | 3,706 | 31 | -432 |
| Other points of sale (third-party) | 564 | 554 | 606 | 10 | -42 |
| Other points of sale, total | 4,095 | 4,050 | 4,539 | 45 | -444 |
Executive summary Financial highlights Business update Revenue review Profitability Cash Flow & Balance sheet Financial guidance Sustainability Other events & Contact Financial statements Accounting notes
| Total concept stores | O&O concept stores | |||||||
|---|---|---|---|---|---|---|---|---|
| Number of concept stores Q2 2021 |
Number of concept stores Q1 2021 |
Number of concept stores Q2 2020 |
Growth Q2 2021 / Q1 2021 |
Growth Q2 2021 /Q2 2020 |
Number of concept stores O&O Q2 2021 |
Growth O&O stores Q2 2021 / Q1 2021 |
Growth O&O stores Q2 2021 /Q2 2020 |
|
| US | 389 | 391 | 403 | -2 | -14 | 179 | - | 23 |
| China | 216 | 228 | 236 | -12 | -20 | 202 | -14 | -23 |
| UK | 215 | 216 | 216 | -1 | -1 | 141 | 3 | 14 |
| Italy | 145 | 146 | 146 | -1 | -1 | 106 | -1 | -1 |
| Australia | 122 | 123 | 123 | -1 | -1 | 39 | - | 1 |
| France | 121 | 120 | 121 | 1 | - | 77 | 1 | - |
| Germany | 137 | 137 | 138 | - | -1 | 134 | - | 1 |
| All markets | 2,630 | 2,659 | 2,714 | -29 | -84 | 1,379 | -15 | 6 |
1 Includes 7 key markets measured on revenue for FY 2020. All markets with 10 or more concept stores can be found in the Excel appendix uploaded on www.pandoragroup.com
It is Pandora's policy to hedge at least 70% of the Group's expected gold and silver consumption based on a rolling 12-months production plan. The below table illustrates the timing of the hedges related to the purchase of silver for production, i.e. excluding the time lag effect from inventory to Cost of sales (when the product is sold). The time-lag from use in production to impact on Cost of sales is usually 2-7 months.
| USD / OZ | Realised in Q2 2021 |
Hedged Q3 2021 |
Hedged Q4 2021 |
Hedged Q1 2022 |
Hedged Q2 2022 |
|---|---|---|---|---|---|
| Gold price | 1,835 | 1,835 | 1,812 | 1,812 | 1,794 |
| Silver price | 22.55 | 25.04 | 25.59 | 27.07 | 26.92 |
| Commodity hedge ratio, % | Realised | 70-100% | 70-90% | 50-70% | 30-50% |
Other than as described in "Other events" in the Management review, Pandora is not aware of events after 30 June 2021, which are expected to materially impact the Group's financial position.
| DKK million | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 |
|---|---|---|---|---|---|
| Key financial highlights | |||||
| Organic growth, % | 84% | 13% | 4% | -5% | -38% |
| Organic growth, % vs 2019 | 13% | -3% | n/a | n/a | n/a |
| Sell-out growth incl. temporarily closed stores, % | 62% | 21% | 1% | -2% | -39% |
| Sell-out growth incl. temporarily closed stores, % vs 2019 | 7% | -5% | n/a | n/a | n/a |
| Gross margin, %1 | 77.1% | 76.3% | 75.7% | 78.1% | 74.9% |
| EBIT margin, %1 | 25.2% | 20.1% | 31.8% | 17.2% | 1.1% |
| Consolidated income statement | |||||
| Revenue | 5,155 | 4,500 | 7,891 | 4,070 | 2,876 |
| Earnings before interests, tax, depreciations and | |||||
| amortisations (EBITDA) | 1,762 | 1,416 | 2,896 | 1,045 | 325 |
| Operating profit (EBIT) | 1,301 | 903 | 2,212 | 467 | -198 |
| Net financials | -21 | -92 | 96 | -24 | -28 |
| Net profit for the period | 992 | 628 | 1,794 | 343 | -175 |
| Financial ratios | |||||
| Revenue growth, DKK, % | 79% | 8% | -1% | -8% | -39% |
| Revenue growth, local currency, % | 85% | 13% | 4% | -5% | -38% |
| Gross margin, % | 77.1% | 76.3% | 75.4% | 78.2% | 73.0% |
| EBITDA margin, % | 34.2% | 31.5% | 36.7% | 25.7% | 11.3% |
| EBIT margin, % | 25.2% | 20.1% | 28.0% | 11.5% | -6.9% |
| Effective tax rate, % | 22.5% | 22.5% | 22.3% | 22.5% | 22.5% |
| Equity ratio, % | 44% | 41% | 37% | 30% | 29% |
| NIBD to EBITDA, excl. restructuring costs2 , x |
0.4 | 0.6 | 0.5 | 1.1 | 1.1 |
| Return on invested capital (ROIC) 2 , % |
44% | 29% | 25% | 22% | 16% |
| Cash conversion incl. lease payments (excl. IFRS 16), % | 98% | -65% | 171% | 98% | n/a |
| Net working capital, % of last 12 months revenue | -0.3% | -0.4% | -7.6% | 0.0% | -1.5% |
| Stock ratios | |||||
| Total payout ratio (incl. share buyback) 3 , % |
76% | - | - | - | - |
| Consolidated balance sheet | |||||
| Total assets | 18,277 | 19,211 | 19,984 | 18,932 | 18,859 |
| Invested capital | 11,136 | 11,675 | 10,540 | 12,544 | 12,864 |
| Net working capital | -57 | -76 | -1,447 | 5 | -286 |
| Net interest-bearing debt (NIBD) | 3,005 | 3,735 | 3,151 | 6,862 | 7,391 |
| Equity | 8,130 | 7,940 | 7,389 | 5,682 | 5,473 |
| Consolidated statement of cash flow | |||||
| Cash flow from operating activities | 1,586 | -316 | 4,062 | 776 | 1,082 |
| Capital expenditure (CAPEX), DKK million | 138 | 88 | 124 | 117 | 121 |
| Capital expenditure, property, plant and equipment (CAPEX), DKK | 64 | 35 | 78 | 97 | 100 |
| million Free cash flow incl. lease payments (excl. IFRS 16), DKK |
1,278 | -586 | 3,780 | 457 | 943 |
1 2020 numbers are excluding Programme NOW restructuring costs.
2 Ratios are based on 12 months' rolling EBITDA and EBIT, respectively.
3 Excluding sale of Treasury shares amounting to DKK 1.8 billion in Q2 2020.
The Board of Directors and the Executive Management have reviewed and approved the interim financial report of Pandora A/S for the period 1 January – 30 June 2021. The consolidated interim financial statement, which has not been audited or reviewed by the Company's auditor, has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the EU, and additional requirements in the Danish Financial Statements Act.
It is our opinion that the consolidated interim financial statement gives a true and fair view of the financial position for the Pandora Group at 30 June 2021 and of the results of the Pandora Group's operations and cash flows for the period 1 January – 30 June 2021.
Further, in our opinion, the Management's review gives a fair view of the development in the Group's activities and financial matters, results of operations, cash flows and the financial position as well as a description of material risks and uncertainties that the Group face.
Copenhagen, 17 August 2021
| Alexander Lacik | Anders Boyer |
|---|---|
| Chief Executive Officer | Chief Financial Officer |
| Peter A. Ruzicka Chair |
Christian Frigast Deputy Chair |
|
|---|---|---|
| Heine Dalsgaard | Birgitta Stymne Göransson | Marianne Kirkegaard |
| Isabelle Parize | Catherine Spindler | Jan Zijderveld |
This company announcement contains forward-looking statements, which include estimates of financial performance and targets. These statements are not guarantees of future performance and involve certain risks and uncertainties. Therefore, actual future results and trends may differ materially from what is forecast in this report due to a variety of factors.
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