Ahlers AG

Quarterly Report • Oct 14, 2008

Interim report Q3 2007/08 (December 1, 2007 to August 31, 2008)

BUSINESS performance IN THE FIRST NINE MONTHS OF fiscal 2007/08

1. BUSINESS AND GENERAL CONDITIONS

The European economy started the year 2008 optimistically and with good fundamentals such as rising household incomes, declining unemployment and growing industrial output, on the basis of which private consumption increased moderately. In the course of the first nine months of fiscal 2007/08 (December 2007 to August 2008), the solid growth in the European economy slowed down markedly, though.

Energy price-driven inflation initially put a damper on purchasing power and, more importantly, purchasing propensity, as a result of which retail sales in most Western European markets dropped below the previous year's level. Sales in the German clothing retail sector fell by 5 percent between December 2007 and August 2008. Austria, France and Italy reported similar declines.

In the meantime, the economic slowdown has spread beyond the consumption sector. The crises in the financial and real estate sectors are putting a damper on demand in all sectors, and this will lead to a further slowdown in global economic growth and reduce purchasing power even further. Euro-zone GDP is projected to grow by 1.3 percent and 0.7 percent in 2008 and 2009, respectively (Commerzbank AG forecast September 2008). In 2007, the economy grew by as much as 2.7 percent. The situation in the Western European clothing sector will therefore become more challenging in the near future.

The outlook remains positive for Eastern Europe where the economy is expected to grow strongly at only a slightly slower pace. Following 6.8 percent GDP growth in 2007, growth rates of 6.1 percent and 5.9 percent are projected for 2008 and 2009, respectively (Commerzbank AG forecast).

2. earnings, financial and net worth position

Ahlers reports even faster sales growth for Q3

The sales growth in the first half of 2008 was mainly the result of higher incoming orders in the previous year, due to which Ahlers grew by 6.8 percent in the first six months, while the sector as a whole gained 4 percent. Incoming orders for the autumn/winter season then dropped noticeably in general. It is therefore all the more impressive that the Ahlers Group grew by 7.8 percent in the third quarter, i.e. at a higher rate than in the first half of the year and a much better growth rate than that of the clothing sector as a whole. The menswear manufacturer's total sales for the first nine months of the fiscal year increased by 7.2 percent to EUR 201 million (previous year: EUR 187 million).

Premium segment grows by 17 percent

The Group's sales growth was primarily driven by the premium segment, which reported a 17 percent increase in sales to EUR 95 million. This is equivalent to 47 percent (previous year: 43 percent) of the Group's total sales, which means that Ahlers has made good progress towards its 50 percent target. All three brands of the premium segment ‑ Pierre Cardin, Baldessarini and Otto Kern ‑ reported a double-digit increase in sales.

The jeans & workwear segment also expanded at a good rate of 3 percent. Pionier Workwear reported particularly strong growth thanks to the trend towards standard corporate wear. Sales in the men's & sportswear segment declined by 3 percent, which was primarily attributable to the Jupiter brand.

22 percent growth in Eastern Europe

A geographic breakdown shows 4 percent growth in Germany, 5 percent in Western Europe and 22 percent in Eastern Europe. The fashion company now sells 49 percent of its products outside Germany (previous year: 47 percent).

SALES BY SEGMENTS

in EUR million	Q1 - Q3 2007/08	Q1 - Q3 2006/07	Change
premium brands*	94.7	81.1	16.8%
jeans & workwear	53.2	51.6	3.1%
men's & sportswear	52.6	54.4	-3.3%
Total	200.5	187.1	7.2%

* incl. "Other" EUR 0.2 million (previous year: EUR 0.3 million)

EBIT BEFORE OFF PERIOD EFFECTS

in EUR million	Q1 - Q3 2007/08	Q1 - Q3 2006/07	Change
premium brands	1.7	2.6	-34.6%
jeans & workwear	6.4	6.0	6.7%
men's & sportswear	-1.1	-1.7	35.3%
Total	7.0	6.9	1.4%

Earnings position

Moderate increase in operating result before off period effects

The combination of increased production and declining retail sales has increased the inventories of both manufacturers and retailers. Although Ahlers tried to sell off excess stocks at an early stage, inventories were up by 9 percent on the previous year's level, i.e. slightly above the 7 percent sales growth. Due to partial writedowns on the excess inventories, the gross profit margin declined from 48.4 to 48.0 percent.

Strong pay rises at our Polish production facilities and the appreciation of the zloty led to a sharp rise in personnel expenses. Both affected the premium segment, in particular. Personnel expenses also increased because of the creation of a second upscale Baldessarini line, for which the first orders were – successfully – received for the spring/summer 2009 season. Additional minor expenses resulted from payment defaults by insolvent customers.

Interim report 5

Due to the moderate decline in the gross profit margin and the disproportionate increase in personnel expenses relative to sales, EBIT before off period effects rose only moderately from EUR 6.9 million to EUR 7.0 million (+1.4 percent).

Positive special effects in the prior year period make it difficult to compare the Group results. In the first half of 2006/07, the company released bonus provisions for the Management and the Supervisory Board which had been established following the sale of eterna but were not paid out. This off period income of EUR 1.3 million contrasts with expenses, primarily for restructuring measures, in an amount of EUR 0.5 million in the current year. As a result, EBIT declined from EUR 8.2 million to EUR 6.5 million (-21 percent).

Immediately after the sale of eterna and before the special dividend payout in May 2007, the Group received interest income of EUR 0.3 million, while expenses of EUR 1.3 million had to be paid in the same period of 2008. As a result, Group profit after tax was down 39 percent on the previous year (2007/08: EUR 4.1 million, 2006/07: EUR 6.7 million).

EARNINGS POSITION

in EUR million	Q1 - Q3 2007/08	Q1 - Q3 2006/07	Change
Sales	200.5	187.1	7.2%
Gross profit	96.2	90.5	6.3%
in % of sales	48.0%	48.4%
Personnel expenses	-44.3	-40.5	9.4%
Balance of other expenses/income	-40.9	-39.5	3.5%
Depreciation, amortisation,
and impairment losses	-4.0	-3.6	11.1%
EBIT before off period effects	7.0	6.9	1.4%
Off period effects	-0.5	1.3	–
EBIT	6.5	8.2	-20.7%
Financial result	-1.3	0.3	–
Income taxes	-1.1	-1.8	-38.9%
Net income for the period	4.1	6.7	-38.8%

Financial and net worth position

Solid equity ratio of 50 percent

As of August 31, 2008, the Ahlers Group had a sound equity ratio of 50 percent (previous year: 52 percent). Net liabilities amount to only EUR 5 million, which means that the company is almost debt-free.

The financial situation should improve further in the coming months, as receivables exceeded the previous year's level by EUR 6 million due to increased sales in the past weeks. These should turn into cash soon. Management is also working to further reduce inventories. Following an increase by EUR 11.6 million at the end of the half-year, inventories were up by EUR 5.5 million on the previous year as of the reporting date. The aim is to come even closer to the previous year's level by the end of the year.

At EUR 4.8 million, investments in tangible and intangible fixed assets were slightly higher than in the previous year (EUR 4.3 million) and primarily included investments in shop fittings and showroom space with a view to supporting the sales growth.

in EUR million	Q1 - Q3 2007/08	Q1 - Q3 2006/07	Change
Sales	200.5	187.1	7.2%
Germany	102.6	99.0	3.6%
Western Europe	57.1	54.6	4.6%
Central/ Eastern Europe/ Other	40.8	33.5	21.8%
Gross profit	96.2	90.5	6.3%
as a percentage of sales	48.0%	48.4%
EBITDA	10.5	11.8	-11.0%
EBIT	6.5	8.2	-20.7%
Net income for the period	4.1	6.7	-38.8%
Earnings per share (in EUR)	0.28	0.47
Working Capital	110.1	98.1	12.2%
Equity ratio (in %)	49.6%	51.5%

KEY MANAGEMENT AND FINANCIAL INDICATORS

3. Post balance sheet events

No events of special significance occurred between the end of the third quarter and the preparation of the interim report.

4. Risk report

No changes with respect to risks related to future developments have occurred since the start of the new fiscal year. The statements made in the risk report of the 2006/07 consolidated financial statements remain valid.

5. Employees

On August 31, 2008, the Ahlers Group's headcount comprised 2,877 employees, down by 104 compared to the same point in time one year earlier (-3 percent). 129 jobs were cut in the Polish production facilities and 17 in the Sri Lankan factory, while the number of employees in the retail segment increased by 22, primarily in Germany. The remaining 20 people were hired to fill various functions in Germany, including the sales organisation and the creative team for the Baldessarini premium line.

6. PERFORMANCE of Ahlers shares

On August 29, 2008, Ahlers shares were trading at EUR 8.40 (common share) and EUR 7.30 (preferred share). As a result of the global financial crisis, nearly all shares clearly lost value. Shares from the consumption sector and shares of smaller companies suffered disproportionately high losses.

Compared to the previous year's level of EUR 16.45 (common share) and EUR 16.50 (preferred share), the Ahlers shares lost significantly in value. Factoring in the dividend of EUR 0.65 and EUR 0.70, respectively, the share price declined by 45 percent and 52 percent respectively.

The main shareholder of Ahlers AG began to buy shares in the last quarter and has thus increased its interest in the company moderately. For details, refer to the website of Ahlers AG.

7. outlook

Future economic conditions

The clothing business in Western Europe will become more difficult and change structurally in the near future. This is reflected in market adjustments in the form of bankruptcies and a reduction in the number of stores. Retailers will also modify the structure of their purchasing budgets ‑ and thus change the sector as a whole ‑ but they will do so less visibly. This is a risk and an opportunity at the same time. Ahlers will focus on sharpening the profile of its premium brands. In particular, the company will harmonise the positioning of the Pierre Cardin menswear collection and introduce a upscale premium line for Baldessarini to support its future growth.

Incoming orders rise in H1 2009

These efforts were rewarded with low single-digit growth in incoming orders for the spring/ summer 2009 season, which clearly exceeded the general industry trend.

Restructuring measures initiated

To make the company fit for these challenging times, management has launched several restructuring initiatives. These are currently being implemented and will yield annualised savings in the high single-digit million range from the second half of 2009 at the latest.

Sales and EBIT expected to grow

These initiatives will lead to provisions in a medium single-digit million amount in the financial statements for 2007/08. A small portion of this amount (EUR 0.5 million) has already been booked, while the biggest portion will be accounted for in the 4th quarter of the fiscal year.

Management maintains its operating forecast for the full fiscal year, according to which the company aims to boost its sales by a medium single-digit percentage and increase its EBIT before special effects.

Net profit after restructuring provisions should be clearly positive but below the previous year's level. From today's point of view, the result for fiscal 2008/09 should rise markedly once the restructuring measures have been implemented.

Financial and net worth position remains solid

From today's point of view nothing points to a material change in the Group's sound financial position. The Group should be able to finance its slightly increased investments in fixed assets from its cash flow. Current asset growth should slow down and become further aligned with sales growth.

Interim report 9

Consolidated balance sheet

as of August 31, 2008

A S S E T S in KEUR Aug. 31, 2008 Aug. 31, 2007 Nov. 30, 2007 A. Non-current assets I. Property, plant, and equipment 1. Land, land rights and buildings 21,138 21,747 21,554 2. Technical equipment and machines 2,048 1,685 1,819 3. Other equipment, plant and office equipment 12,094 10,536 11,255 4. Payments on account and plant under construction 226 271 209 35,506 34,239 34,837 II. Intangible assets 1. Industrial property rights and similar rights and assets 11,902 11,636 11,762 2. Payments on account 10 100 10 11,912 11,736 11,772 III. Other non-current assets 1. Other loans 760 1,270 588 2. Other financial assets 117 149 139 3. Other assets 18,163 17,343 17,611 19,040 18,762 18,338 IV. Deferred tax assets 3,016 2,188 2,503 Total non-current assets 69,474 66,925 67,450 B. Current assets I. Inventories 1. Raw materials and consumables 17,277 19,241 22,341 2. Work in progress 460 306 412 3. Finished goods and merchandise 46,297 38,960 37,959 64,034 58,507 60,712 II. Trade receivables 55,891 50,042 44,850 III. Other current assets 1. Other securities 15,820 567 556 2. Receivables from affiliates 24 25 24 3. Current income tax claims 2,852 6,241 6,917 4. Other assets 7,131 6,765 6,896 25,827 13,598 14,393 IV. Cash and cash equivalents 38,923 59,684 60,954 Total current assets 184,675 181,831 180,909

Total assets 254,149 248,756 248,359

E Q U I T Y A N D L I A B I L I T I E S

in KEUR	Aug. 31, 2008	Aug. 31, 2007 N	ov. 30, 2007
A. Equity
I. Subscribed capital	43,200	43,200	43,200
II. Capital reserve	15,024	15,024	15,024
III. Retained earnings	65,588	68,340	71,313
IV. Currency translation adjustments	127	-685	-506
Equity attributable to shareholders of Ahlers AG	123,939	125,879	129,031
V. Minority interests	2,208	2,213	2,192
Total equity	126,147	128,092	131,223
B. Non-current liabilities
I. Pension provisions II. Other provisions	5,730 6,239	6,189 6,223	5,699 5,759
III. Financial liabilities
1. Other financial liabilities	16,699	19,018	17,119
2. Minority interests in partnerships	3,802	3,696	3,711
	20,501	22,714	20,830
IV. Trade payables	1,287	1,158	1,257
V. Other liabilities	50	57	50
VI. Deferred tax liabilities	2,521	2,331	2,136
Total non-current liabilities	36,328	38,672	35,731
C. Current liabilities
I. Current income tax liabilities	901	758	861
II. Other provisions	2,546	2,910	2,347
III. Financial liabilities	59,988	51,025	44,173
IV. Trade payables	9,835	10,472	17,290
V. Other liabilites
1. Liabilities to affiliates	2,460	1,192	3,847
2. Other liabilities	15,944	15,635	12,887
	18,404	16,827	16,734
Total current liabilities	91,674	81,992	81,405
Total liabilities	128,002	120,664	117,136
Total equity and liabilities	254,149	248,756	248,359

Consolidated income statement

for the first three quarters of 2007/08

	Q1 - Q3 2006/07
200,507	187,061
7,518	8,951
1,886	2,851
-111,796	-105,518
-45,169	-40,503
-42,407	-41,044
-3,997	-3,545
1,728	1,672
-3,078	-1,419
5,192	8,506
-1,140	-1,803
4,052	6,703
3,908	6,813
144	-110
0.28	0.47
	Q1 - Q3 2007/08

Consolidated income statement Consolidated income statement

for the third quarter of 2007/08

in KEUR	Q3 2007/08	Q3 2006/07
1. Sales	70,894	65,764
2. Decreases or increases in inventories
of finished goods and work in progress	6,572	10,473
3. Other operating income	505	419
4. Cost of materials	-42,621	-42,429
5. Personnel expenses	-15,803	-14,006
6. Other operating expenses	-14,786	-13,916
7. Depreciation, amortisation, and impairment losses
on property, plant, and equipment, intangible
assets and other non-current assets	-1,369	-1,224
8. Interest and similar income	598	508
9. Interest and similar expenses	-1,093	-705
10. Pre-tax profit	2,897	4,884
11. Income taxes	-555	-1,461
12. Net income for the period	2,342	3,423
13. of which attributable to:
- Shareholders of Ahlers AG	2,301	3,519
- Minority interests	41	-96
Earnings per share (in EUR)	0.16	0.24

Consolidated cash flow statement

for the first three quarters of 2007/08

in KEUR		Q1 - Q3 2007/08		Q1 - Q3 2006/07
Net income for the period		4,052		6,703
Depreciation, amortisation, and impairment losses
of non-current assets	3,997		3,545
Change in deferred taxes	-129		-334
Change in non-current provisions	511		-436
Change in minority interests in partnerships
and other non-current liabilities	121		125
Change in other provisions	199		838
Gains/losses from the disposals of non-current assets (net)	-60		-70
Change in inventories and other
current and non-current liabilities	-11,234		-20,698
Change in other current liabilities	-6,937	-13,532	-6,042	-23,072
Cash flow from operating activities		-9,480		-16,369
Cash receipts from disposals of items of
property, plant, and equipment	732		459
Payments for investment in property, plant, and equipment	-4,580		-4,148
Payments for investment in intangible assets	-204		-177
Cash flow from investing activities		-4,052		-3,866
Dividend payments	-9,680		-42,800
Repayment of non-current financial liabilities	-420		-279
Cash flow from financing activities		-10,100		-43,079
Net change in liquid funds		-23,632		-63,314
Effects of changes in exchange rates		-142		-303
Liquid funds as of December 1		18,942		73,325
Liquid funds as of August 31		-4,832		9,708

Composition of liquid funds

	Balance as of	Balance as of
in KEUR	Aug. 31, 2008 N	ov. 30, 2007	Changes
Cash and cash equivalents	38,923	60,954	-22,031
Other securities	15,820	556	15,264
Current financial liabilities	59,575	42,568	-17,007
	-4,832	18,942	-23,774

Consolidated statement of changes in equity as of August 31, 2008 (previous year as of August 31, 2007)

Equity attributable to shareholders of Ahlers AG

					Adjustment
	Subscribed capital				item for	Total
	Common	Preferred	Capital	Retained	currency	Group	Minority	Total
in KEUR	shares	shares	reserve	earnings	translation	holdings	interests	equity
Balance as of Dec. 1, 2006	24,000	19,200	15,024	104,410	-239	162,395	2,333	164,728
Exchange differences					-446	-446		-446
Net income				6,813		6,813	-110	6,703
Other changes				-83		-83	-10	-93
Total net income
for the period				6,730	-446	6,284	-120	6,164
Dividends paid				-42,800		-42,800		-42,800
Balance as of Aug. 31, 2007	24,000	19,200	15,024	68,340	-685	125,879	2,213	128,092
Balance as of Dec. 1, 2007	24,000	19,200	15,024	71,313	-506	129,031	2,192	131,223
Net result from
cash flow hedges					312	312		312
Exchange differences					321	321		321
Net income				3,908		3,908	144	4,052
Other changes				47		47	-128	-81
Total net income
for the period				3,955	633	4,588	16	4,604
Dividends paid				-9,680		-9,680		-9,680
Balance as of Aug. 31, 2008	24,000	19,200	15,024	65,588	127	123,939	2,208	126,147

Group segment reporting

as of August 31, 2008 (previous year as of August 31, 2007)

by business segment

		premium brands		jeans&workwear men´s&sportswear				Miscellaneous	Total
in KEUR	2007/08	2006/07	2007/08	2006/07	2007/08	2006/07	2007/08	2006/07	2007/08	2006/07
Sales
to third parties	94,524	80,782	53,187	51,593	52,594	54,413	202	273	200,507	187,061
thereof Germany	39,409	35,326	36,648	35,935	26,298	27,409	202	273	102,557	98,943
thereof abroad	55,115	45,456	16,539	15,658	26,296	27,004	-	-	97,950	88,118
Intersegment sales	-	-	-	-	-	-	-	-	-	-
Segment result	1,075	3,109	6,258	6,694	-2,121	-1,258	-20	-39	5,192	8,506
thereof
Depreciation
and amortisation	1,821	1,495	865	999	1,288	1,020	23	31	3,997	3,545
O ther non-cash items	879	479	197	385	256	278	-	-	1,332	1,142
Interest income	825	750	452	448	451	474	-	-	1,728	1,672
Interest expense	1,519	608	536	219	1,023	592	-	-	3,078	1,419
Net assets	129,078	116,400	48,747	52,840	51,503	53,570	18,953	17,517	248,281	240,327
Capital expenditure	2,276	1,714	811	1,160	1,697	1,450	552	1,989	5,336	6,313
Liabilities	60,790	53,096	27,098	30,739	35,674	32,296	679	675	124,241	116,806

by geographic region

		premium brands				jeans&workwear men´s&sportswear		Miscellaneous	Total
in KEUR	2007/08	2006/07	2007/08	2006/07	2007/08	2006/07	2007/08	2006/07	2007/08	2006/07
Germany
S ales	39,409	35,326	36,648	35,935	26,298	27,409	202	273	102,557	98,943
N et assets	88,954	82,805	32,346	36,267	35,697	37,775	18,836	17,396	175,833	174,243
Capital expenditure	1,525	1,050	587	616	1,283	1,189	552	1,989	3,947	4,844
Western Europe
S ales	28,092	24,754	12,092	11,921	16,928	17,887	-	-	57,112	54,562
N et assets	8,439	9,514	9,890	9,889	6,608	5,959	-	-	24,937	25,362
Capital expenditure	129	26	82	132	258	146	-	-	469	304
Central/Eastern Europe/
Other
S ales	27,023	20,702	4,447	3,737	9,368	9,117	-	-	40,838	33,556
N et assets	31,685	24,081	6,511	6,685	9,198	9,835	117	121	47,511	40,722
Capital expenditure	622	638	142	412	156	115	-	-	920	1,165

8. NOTES TO THE FINANCIAL STATEMENTS

Accounting and valuation principles

The interim financial statements for the first nine months of fiscal 2007/08 have been prepared in accordance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretation Committee's interpretations of the IFRS (IFRIC). The interim statements for the first nine months of fiscal 2007/08 comply in particular with the provisions of IAS 34 - Interim Financial Statements.

With regard to the accounting and valuation principles for new hedges, the company now fulfils the requirements for the accounting of hedging relationships pursuant to IAS 39. The other accounting and valuation principles and principles of consolidation are consistent with those applied in the preparation of the consolidated financial statements as of November 30, 2007. A detailed explanation of these principles has been published in the notes to the consolidated financial statements of the 2006/07 Annual Report.

The quarterly report is prepared in euros and all figures are given in thousands of euros (KEUR). Due to the fact that the quarterly report is prepared in EUR thousands, rounding differences can arise, since computations of individual items are based on figures in euros.

Earnings per share

Earnings per share are defined as net income for the period divided by the weighted average number of shares outstanding during the reporting period. No shares existed either as of August 31, 2008, or August 31, 2007, that would have a diluting effect on earnings per share.

Contingent liabilities

Contingent liabilities did not change materially since the last balance sheet date on November 30, 2007.

Forward-looking statements

This report contains forward-looking statements, which are subject to a number of uncertainties that could cause actual results to differ materially from expectations of future developments should one or more of these uncertainties, whether specified or not, materialise or if the assumptions underlying the statements above prove to be incorrect.

Financial calendar

Dates

DVFA analyst meeting in Frankfurt/Main	October 15, 2008
German Equity Forum in Frankfurt/ Main	November 10, 2008
Balance sheet press conference in Düsseldorf	February 26, 2009
Annual Shareholders' Meeting in Düsseldorf	May 6, 2009

Herford, October 2008

The Management Board

If you have any questions regarding this interim report, please contact:

Ahlers AG Investor Relations Elverdisser Str. 313 D-32052 Herford germany

Tel: +49 5221 979-202 fax: +49 5221 7 12 22 investor.relations@ahlers-ag.com WWW.AHLERS-AG.COM

Ahlers AG

• • produces menswear under several brands, tailored to its respective target groups
• • is one of the leading European menswear manufacturers
• • family-run in the third generation by Dr. Stella A. Ahlers
• • was established by Adolf Ahlers in 1919 and listed as a joint stock corporation in 1987
• • employs approximately 2,900 people
• • generates 49 percent of its sales revenues in international markets
• • produces approximately 12 million fashion items per year

The brands