Quarterly Report • May 11, 2017
Quarterly Report
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"Our biggest victory during the quarter was how we activated our brand in the 'Dear Rival' campaign. We reached over 3.5 million consumers in Sweden and the Netherlands and raised their awareness of Björn Borg as a sports fashion brand by over 100 percent. Also, I am proud to have received an award during the quarter as the year's most health-conscious manager, which of course was a team effort. I have seen how individuals can make a difference, and that healthy individuals make an even bigger difference," said CEO Henrik Bunge.
| SEK million | January- March 2017 |
January- March 2016 |
April 2016- March 2017 |
Full-year 2016 |
|---|---|---|---|---|
| Net sales | 185.7 | 158.1 | 659.2 | 631.6 |
| Gross profit margin, % | 48.9 | 50.0 | 49.9 | 50.3 |
| Operating profit | 6.7 | 13.9 | 57.0 | 64.2 |
| Operating margin, % | 3.6 | 8.8 | 8.7 | 10.2 |
| Profit after tax | 5.0 | 6.5 | 45.4 | 46.9 |
| Earnings per share before dilution, SEK | 0.18 | 0.28 | 1.78 | 1.88 |
| Earnings per share after dilution, SEK | 0.18 | 0.28 | 1.78 | 1.88 |
| Brand sales* | 437 | 419 | 1.569 | 1.551 |
* Estimated total sales of Björn Borg products at the consumer level, excluding VAT, based on reported sales at the wholesale level.
The spring collection has been well received by consumers. Especially the Björn Tee, a functional training T-shirt for men, which in our stores in every country has become the best-selling product from our sports apparel collection.
In total, Björn Borg's sales rose in the first quarter of 2017 by 17.5 percent compared with the same quarter in 2016. This is largely due to the acquisition of our former distributor in Benelux. Finland and our footwear distribution drove organic growth in the quarter, in total 5 percent. Sales were down in the Netherlands year-on-year, mainly because of large purchases and sales in the first quarter of 2016 with higher discounting.
The gross profit margin for the first quarter decreased to 48.9 percent, compared with 50.0 percent in the first quarter of 2016. Adjusted for currency effects, earn-out payments and the acquisition of our former distributor, the gross profit margin was 52.4 percent, an increase from the first quarter of 2016.
Our operating expenses rose by SEK 19 million, but the increase is due to the acquisition of the former distributor. Overall we have kept costs under control. Together, the higher revenue, lower gross profit margin and increased operating expenses reduced operating profit to SEK 6.7 million, compared with SEK 13.9 million for the first quarter of 2016. The previously announced timing effect on
operating profit due to the Benelux acquisition will mainly impact earnings in the first half of 2017. For the first quarter it affected operating profit by about SEK 10 million.
My personal focus during the quarter was on integrating our new companies in the Netherlands and Belgium in an effective way and ensuring that we remain true to, and implement, the plan we have laid down. Under the theme "Executional Excellence," we are focused on accomplishing what we set out to and challenging ourselves to do it better, rather than adding new initiatives. I feel we are making progress in accordance with the process we previously identified in the Northern Star business plan.
Our biggest victory during the quarter was how we activated our brand in the 'Dear Rival' campaign. We reached over 3.5 million consumers in Sweden and the Netherlands and raised their awareness of Björn Borg as a sports fashion brand by over 100 percent. Lastly, I am proud to have received an award during the quarter as the year's most health-conscious manager, which of course was a team effort. I have seen how individuals can make a difference, and that healthy individuals make an even bigger difference.
Head coach Henrik Bunge
Brand sales improved in the first quarter, primarily in footwear, but underwear also grew somewhat. In total, brand sales rose by 4 percent to SEK 437 million (419). Adjusted for currency effects, brand sales increased by 3 percent in the quarter.
Brand sales in the underwear product area improved by 1 percent in the first quarter. Underwear accounted for 54 percent (56) of brand sales.
Brand sales of sports apparel were unchanged compared with the first quarter of 2016. Brand sales of footwear grew by 19 percent, while bags and eyewear decreased by 6 and 88 percent, respectively, in the quarter. In total, sales of licensed products increased by 12 percent in the first quarter.
Among large markets, Finland and Norway reported growth, with Finland seeing a very positive trend. Sweden, the Netherlands and Denmark declined year-on-year. England and Germany are two smaller markets that are performing well. In total, brand sales nearly doubled from the previous year in smaller markets.
A Björn Borg store was closed in Norway in the first quarter and none were opened. As of March 31, 2017 there were a total of 39 (40) Björn Borg stores, of which 33 (18) are Group-owned. The increase in Group-owned stores is due to the Benelux acquisition, after which 13 stores are classified as Group-owned as of 2017.
Sales grew in the first quarter, largely due to the Benelux acquisition, while operating profit decreased year-on-year.
The Group's net sales amounted to SEK 185.7 million (158.1) in the first quarter, an increase of 17.5 percent. Exchange rates positively affected sales in the quarter. Adjusted for currency effects, sales rose by 16.5 percent.
The positive sales trend year-on-year is largely a result of the acquisition of the former distributor in Benelux, which is consolidated in the Group as of January 2, 2017. Adjusted for the acquisition, underlying net sales grew by 5 percent from the previous year. Growth is mainly coming from the Finnish wholesale business and the Group's own footwear distribution in the Nordic markets. Growth in Finland is driven by broader distribution of underwear and sports apparel. In footwear distribution, growth is largely driven by new customers in Finland and Denmark, but also in the Swedish market from existing customers. The Swedish wholesale and retail operations had a tough quarter and declined compared with the previous year. The decrease for the wholesale company was driven by slower sell-through by customers, because of which orders for the spring and summer 2017 collection have decreased year-on-year. For the retail company in Sweden, the main reason for the sales decline was store traffic. For comparable stores, sales
decreased by 16 percent in the quarter and by 23 percent in total. E-commerce also experienced a weak quarter, and here as well traffic to the website was the reason why. It was primarily paid traffic that declined, which is part of a conscious strategy to increase profitability in e-commerce. The Benelux company had a weak quarter and saw external sales decrease compared with the first quarter of 2016. The product company's external sales were down year-on-year, driven by poorer performance in the Danish market and smaller external markets. External revenues decreased since Benelux is now included in the Group and because Denmark, smaller markets and certain licensees saw brand sales decline in the quarter.
The gross profit margin for the first quarter decreased to 48.9 percent (50.0). A stronger dollar negatively affected margins. Adjusted for currency effects, the gross profit margin would have been 50.1 percent. Aside from the dollar, the margin was positively affected by about SEK 6 million because earn-out payments are no longer being paid. At the same time the gross profit margin was negatively affected by the timing effect arising due to the Benelux acquisition. The gross profit margin in the product development segment that was supposed to be realized in the first quarter is now tied up in inventory and negatively affected the margin by about SEK 10 million compared with the first quarter of 2016. Adjusted for currency effects, the effects of earn-out payments and the above-mentioned timing effect, the gross profit margin was 52.4 percent.
Operating expenses increased by SEK 19 million compared with the previous year, largely due to the Benelux acquisition. Excluding Benelux, operating expenses increased by SEK 0.6 million or 0.9 percent.
The higher revenue, lower gross profit margin and increased operating expenses led to a decrease in operating profit to SEK 6.7 million (13.9). Adjusted for currency effects, earn-out payments and the timing effect of the acquisition, operating profit fell by SEK 1.6 million from the first quarter of 2016. The operating margin was 3.6 percent (8.8).
Net financial items amounted to SEK 0.0 million (-4.3). The realized and unrealized return on investments less interest on the bond loan positively affected the Group's financial net by SEK 1.0 million (-1.6). The remaining year-on-year change in net financial items was mainly attributable to the revaluation of financial assets and liabilities in foreign currency. Profit before tax decreased to SEK 6.8 million (9.6).
| Operating revenue, SEK thousands January-March |
Operating profit, SEK thousands January-March |
Operating margin, % | January-March | ||||
|---|---|---|---|---|---|---|---|
| Business segment | Revenue source | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 |
| Brand | Royalties | 15,465 | 22.629 | 9,725 | 5,845 | 63 | 26 |
| Product development | Products | 91.074 | 88,877 | 999 | 6 1 2 4 | ||
| Wholesale | Wholesale revenue | 159.285 | 86.210 | 2.676 | 5.523 | $\overline{2}$ | 6 |
| Retail | Retailers | 46.030 | 32.361 | $-6.659$ | $-3.600$ | $-14$ | $-11$ |
| Less internal sales | $-127.184$ | $-73.166$ | |||||
| Total | 184,670 | 156,911 | 6,741 | 13,892 | 4 | 9 |
The Group operates through thirteen companies under the Björn Borg brand on every level from product development to wholesaling and consumer sales in its own Björn Borg stores.
The Brand segment primarily consists of royalty revenue and expenses associated with the brand.
The business segment's operating revenue amounted to SEK 15.5 million (22.6) in the first quarter. External operating revenue decreased to SEK 5.3 million (9.3), largely because Benelux is not reported as internal brand sales. Excluding Benelux, external brand sales declined by about SEK 0.8 million. The decrease is a result of lower brand sales of clothing and underwear in Denmark as well as lower brand sales of bags and eyewear. Royalty percentages vary by product category, due to which there is not always a precise correlation between royalties and brand sales.
Operating profit increased to SEK 9.7 million (5.8) for the quarter. The improvement was due to the fact that earn-out payments are no longer being paid.
The Björn Borg Group has global responsibility for development, design and production of underwear, sports apparel and adjacent products.
The segment's operating revenue amounted to SEK 91.1 million (88.9) in the first quarter, an increase of 2 percent. External revenue decreased to SEK 10.1 million (42.6) as Benelux is now consolidated in the Group and classified as internal. Excluding Benelux, external revenue was down about SEK 3 million, mainly due to lower sales to Denmark and smaller distributors.
Operating profit decreased to SEK 1.0 million (6.1) due to lower margins and higher operating expenses in the segment.
The Björn Borg Group is the exclusive wholesaler of underwear, sports apparel and adjacent products in Sweden, Finland, the Netherlands, Belgium and England as well as footwear in Sweden, Finland, Denmark and the Baltic countries.
The segment's operating revenue rose in the first quarter of 2017 to SEK 159.3 million (86.2). External operating revenue amounted to SEK 132.8 million (77.0). Of the increase of SEK 56 million, Benelux accounted for SEK 47 million. Other growth came from the Finnish underwear and sports apparel business as well as the footwear wholesale company. The increase was mainly due to broader underwear distribution in Finland as well as good growth among new and existing footwear customers in Sweden, Denmark and Finland. The Swedish wholesale business for underwear and sports apparel decreased year-on-year, while the British business is growing.
Operating profit amounted to SEK 2.7 million (5.5). The decrease was mainly due to a lower gross profit margin and higher operating expenses.
The Björn Borg Group owns and operates a total of 39 stores and factory outlets in Sweden, Finland, the Netherlands, Belgium and England that sell underwear, sports apparel, adjacent products and other licensed products. Björn Borg also sells online through www.bjornborg.com.
Operating revenue in the Retail segment increased in the first quarter to SEK 46.0 million (32.4). External net sales rose to SEK 36.5 million (27.9). The increase was because Benelux is now included in the segment and accounted for SEK 14.5 million of external sales. Excluding Benelux, the
segment's sales decreased by SEK 6 million. The year-onyear trend was weakest in e-commerce and the Swedish retail business. E-commerce sales dropped by 35 percent to SEK 8.1 million (12.4). This was mainly due to lower traffic, the result of an initiative to reduce costs for paid traffic. The Group-owned stores in Sweden had a tough quarter with sales down 16 percent for comparable stores. The Finnish stores lost 2 percent, while the store in England grew year-on-year.
The operating loss for the first quarter was SEK-6.7 million, against a year-earlier loss of SEK-3.6 million. The larger loss was a result of lower gross profit margins and higher expenses compared with the first quarter of 2016.
Intra-Group sales for the first quarter of 2017 amounted to SEK 127.2 million (73.2).
The Björn Borg Group is active in an industry with seasonal variations. Sales and earnings vary by quarter. See the figure on quarterly net sales and operating profit on page 4.
The Group's cash flow from operating activities amounted to SEK 8.2 million (1.5) in the first quarter. The year-on-year improvement, adjusted for acquisition effects, mainly came from better inventory levels than the first quarter of 2016.
Investing activities had relatively small flows in the quarter and were negative at SEK-0.6 million (4.9). Total investments in tangible and intangible non-current assets amounted to SEK 1.0 million (0.7) for the period.
Financing activities had a negative flow of SEK-3.3 million (-8.0). The negative flow was from repurchases of the bond loan and the first amortization of the previous shareholder loan, which funded the acquisition of the former Benelux distributor.
The Björn Borg Group's cash & cash equivalents and investments amounted to SEK 79.4 million (123.3) at the end of the period, with interest-bearing liabilities (bond loan) of SEK 135.5 million (146.7).
In April 2012 the company issued a bond loan that is listed on Nasdaq Stockholm and carries an annual coupon rate corresponding to the 3-month STIBOR rate plus 3.25 percentage points, maturing in April 2017. The bond loan was repaid in April; see also "Events after the balance sheet date."
The surplus liquidity from the issuance of the bond loan and the convertible plan is placed in interest-bearing financial instruments, highly liquid corporate bonds, within the framework of the financial policy laid down by the Board of Directors. As of March 31 investments had been made in bonds with a book value of SEK 27.2 million (73.8), which represents the fair value on the same date. During the period bonds were repurchased for SEK 1.5 million.
In addition to the bond loan, Björn Borg has an overdraft facility of SEK 90 million from Danske Bank as well as a three-year revolving credit of SEK 150 million. The credits had not been utilized as of March 31, 2017.
As a commitment for the above-mentioned bond loan, the company has pledged to ensure that the ratio between the Group's net debt and operating profit before depreciation and amortization does not exceed 3.00 on the last day of each quarter and that the Group maintains an equity/assets ratio of at least 30 percent at any given time.
As of March 31, 2017 the ratio was 1.14 (0.62) and the equity/assets ratio was 53.1 percent (53.6). A complete
description of commitments and conditions of the bond loan is provided in the prospectus, which is available on the company's website and from the Swedish Financial Supervisory Authority.
As a commitment for the overdraft facility and the threeyear revolving credit, the company has pledged to ensure that the ratio between the Group's net debt and rolling 12-month operating profit before depreciation and amortization does not exceed 3.00 on the last day of each quarter, with the exception of the first three quarters of 2017. In the first and second quarters of 2017 the ratio may not exceed 4.00 and in the third quarter it may not exceed 3.50. Moreover, the Group will maintain an equity/assets ratio of at least 35 percent.
No other changes were otherwise made with regard to pledged assets and contingent liabilities compared with December 31, 2016.
The average number of employees in the Group was 199 (132) for the twelve-month period ending March 31, 2017, of whom 69 percent (69) are women. The increase was due to the Benelux acquisition.
There were no transactions with related parties during the period.
In its operations the Björn Borg Group is exposed to risks and uncertainties. Information on the Group's risks and uncertainties can be found on pages 58-59 and in note 3 in the annual report 2016.
Björn Borg AB (publ) is primarily engaged in intra-Group activities. As of March 31, 2017 the company also owns 100 percent of the shares in Björn Borg Brands AB, Björn Borg Footwear AB, Björn Borg Sport BV, Björn Borg Inc., Björn Borg Services AB, Björn Borg UK and Baseline BV. In addition, the company owns 75 percent of the shares in Bjorn Borg (China) Ltd and 75 percent of the shares in Bjorn Borg Finland Oy.
The Parent Company's net sales amounted to SEK 23.9 million (16.3) for the first quarter.
Profit before tax amounted to SEK 0.4 million (-7.2) in the first quarter. Cash & cash equivalents and investments amounted to SEK15.6 million (76.6) as of March 31, 2017.
In April Björn Borg AB repaid the outstanding bond loan of SEK 135.5 million as of March 31, 2017. The repayment was primarily financed with the revolving credit that the company previously obtained from Danske Bank.
Björn Borg currently has 25,148,384 shares outstanding.
The Board of Directors of Björn Borg has established a business plan for the period 2015-2019 with the following long-term financial objectives:
The sales target for 2019 corresponds to average annual organic growth of 16 percent. The sales increase, along with the increase in the operating margin, is expected to come from new product groups in sports fashion as well as expanded geographical distribution within all the product groups.
The Annual General Meeting for the financial year 2016 will be held in Stockholm at 5:30 pm (CET) on May 11, 2017. The Board of Directors has decided to recommend to the AGM a distribution of SEK 2.00 (2.00) per share for the financial year 2016, corresponding to 106 percent of net profit. As proposed, the distribution would be paid through an automatic redemption, where every share is divided into one common share and one redemption share. The redemption shares will then automatically be redeemed for SEK 2.00 per share. Payment for the redemption shares, contingent on the approval of the AGM, is expected to be made around June 15, 2017.
The Board of Directors' proposal corresponds to a transfer to shareholders of SEK 50.3 million (50.3).
This condensed interim report for the Group has been prepared in accordance with IAS 34 Interim Financial Reporting and applicable provisions of the Annual Accounts Act. The interim report for the Parent Company has been prepared in accordance with chapter 9 of the Annual Accounts Act on interim reporting and RFR 2 Accounting in Legal Entities. The accounting principles applied in the interim report conform to the accounting principles applied in the preparation of the consolidated accounts and annual report for 2016, as described on page 54 in the annual report 2016.
New or amended IFRS and IFRIC interpretations effective as of January 1, 2016 have not had a material effect or impact on the interim report or the consolidated financial statements.
This interim report has not been reviewed by the company's auditors.
As a policy, the company does not issue earnings forecasts.
| SEK thousands Note |
January- March 2017 |
January- March 2016 |
April 2016- March 2017 |
Full-year 2016 |
|---|---|---|---|---|
| Net sales | 185,657 | 158.065 | 659,209 | 631,616 |
| Other operating revenue | $-987$ | $-1,154$ | 7,121 | 6,954 |
| Operating revenue | 184,670 | 156,911 | 666,330 | 638,570 |
| Goods for resale | $-94,838$ | $-78.972$ | $-330,004$ | $-314,137$ |
| Other external expenses 1 |
$-45,948$ | $-35,388$ | $-158,746$ | $-148,187$ |
| Staff costs | $-33,380$ | $-25,618$ | $-112,952$ | $-105,191$ |
| Depreciation/amortization of tangible/intangible non-current | ||||
| assets | $-2,264$ | $-1.625$ | $-7.436$ | $-6,797$ |
| Other operating expenses | $-1.499$ | $-1,416$ | $-145$ | $-62$ |
| Operating profit | 6,741 | 13,892 | 57,047 | 64,196 |
| Net financial items | 24 | $-4,312$ | 3,609 | $-727$ |
| Profit before tax | 6.765 | 9.579 | 60.655 | 63,469 |
| Tax | $-1,745$ | $-3,044$ | $-15.273$ | $-16,572$ |
| Profit for the period | 5,020 | 6,535 | 45,382 | 46,897 |
| Profit for the period attributable to | ||||
| Parent Company's shareholders | 4,507 | 7.113 | 44.755 | 47,361 |
| Non-controlling interests | 514 | $-578$ | 628 | $-464$ |
| Earnings per share before dilution, SEK | 0.18 | 0.28 | 1.78 | 1.88 |
| Earnings per share after dilution, SEK | 0.18 | 0.28 | 1.78 | 1.88 |
| Number of shares | 25,148,384 | 25,148,384 | 25,148,384 | 25,148,384 |
| SEK thousands | Note | January- March 2017 |
January- March 2016 |
April 2016- March 2017 |
Full-year 2016 |
|---|---|---|---|---|---|
| Net profit for the period | 5,020 | 6,535 | 45.382 | 46,897 | |
| OTHER COMPREHENSIVE INCOME Components that may be reclassified to profit or loss |
|||||
| Translation difference for the period | 966 | 2.831 | $-1.008$ | 1.704 | |
| Total other comprehensive income for the period | 966 | 2.831 | $-1.008$ | 1.704 | |
| Total comprehensive income for the period | 5,986 | 9,366 | 44,374 | 48.601 | |
| Total comprehensive income attributable to | |||||
| Parent Company's shareholders | 5,006 | 9,421 | 44,270 | 49,065 | |
| Non-controlling interests | 980 | $-55$ | 105 | -464 |
| SEK thousands Note |
March 31 2017 |
March 31 2016 |
Dec 31 2016 |
|---|---|---|---|
| Non-current assets | |||
| Goodwill | 35,926 | 19,116 | 19,292 |
| Trademarks | 187,532 | 187,532 | 187,532 |
| Other intangible assets | 2,933 | 2,483 | 1,668 |
| Tangible non-current assets | 12,318 | 9,022 | 9,277 |
| $\overline{2}$ Long-term receivables |
8,900 | 10,700 | |
| Deferred tax assets | 26,045 | 32,301 | 13,452 |
| Total non-current assets | 264,754 | 259,354 | 241,921 |
| Current assets | |||
| Inventory | 113,335 | 72,501 | 67,477 |
| Accounts receivable | 75,020 | 82,154 | 137,769 |
| Other current receivables | 23,265 | 22,854 | 16,144 |
| $\overline{2}$ Investments |
27,162 | 73,760 | 26,167 |
| Cash & cash equivalents | 52,216 | 49,517 | 48,948 |
| Total current assets | 290,998 | 300,786 | 296,505 |
| Total assets | 555,752 | 560,140 | 538,426 |
| Equity and liabilities | |||
| Equity | 295,089 | 300,042 | 289,103 |
| Deferred tax liabilities | 42,720 | 41.993 | 35,418 |
| Other non-current liabilities | 17,273 | 20,376 | 17,273 |
| $\overline{c}$ Bond loan |
135,470 | 146,654 | 137,092 |
| Accounts payable | 13,976 | 8,008 | 13,797 |
| Other current liabilities | 51,224 | 43,067 | 45,743 |
| Total equity and liabilities | 555,752 | 560,140 | 538,426 |
| SEK thousands | Note | Equity attributable to Parent Company's shareholders |
Non-controlling interests |
Total equity |
|---|---|---|---|---|
| Opening balance, January 1, 2016 | 297,408 | $-6,733$ | 290,675 | |
| Total comprehensive income for the period | 9,421 | $-55$ | 9,366 | |
| Closing balance, March 31, 2016 | 306,829 | $-6,788$ | 300,042 | |
| Opening balance, January 1, 2016 | 297,408 | $-6,733$ | 290,675 | |
| Total comprehensive income for the period | 49,065 | $-464$ | 48,601 | |
| Distribution for 2015 | $-50,297$ | $-50,297$ | ||
| Acquisition of non-controlling interest | $-6,925$ | 6,925 | $\Omega$ | |
| Issuance of warrants | 3 | 68 | 68 | |
| Warrant premium convertible | 3 | 55 | 55 | |
| Closing balance, December 31, 2016 | 289,375 | $-272$ | 289,103 | |
| Opening balance, January 1, 2017 | 289,375 | $-272$ | 289,103 | |
| Total comprehensive income for the period | 5,006 | 980 | 5,986 | |
| Closing balance, December 31, 2017 | 294,381 | 708 | 295,089 |
CONDENSED
| SEK thousands | January- March 2017 |
January- March 2016 |
Full-year 2016 |
|---|---|---|---|
| Cash flow from operating activities | |||
| Before changes in working capital | 5,320 | 11.168 | 69,378 |
| Changes in working capital | 2.884 | $-9.711$ | $-54,066$ |
| Cash flow from operating activities | 8,204 | 1,457 | 15,312 |
| Investments in intangible non-current assets | $-368$ | $-61$ | |
| Investments in tangible non-current assets | $-625$ | $-590$ | $-5,231$ |
| Sale of non-current assets | |||
| Investments/sale of investments | 419 | 5,528 | 54,962 |
| Cash flow from investing activities | $-574$ | 4.877 | 49,731 |
| Distribution | $-50,297$ | ||
| Acquisition of minority shares | $-842$ | ||
| Amortization of loans | $-1,764$ | 1,034 | |
| Issuance of warrants/convertibles | 125 | ||
| Bond loan repurchases | $-1,502$ | $-8,045$ | $-18,480$ |
| Cash flow from financing activities | $-3.266$ | $-8.045$ | $-68,460$ |
| Cash flow for the period | 4.364 | $-1,710$ | $-3,417$ |
| Cash & cash equivalents at beginning of year | 48,948 | 50,643 | 50,643 |
| Translation difference in cash & cash equivalents | $-1,096$ | 585 | 1,722 |
| Cash & cash equivalents at end of the period | 52,216 | 49,517 | 48,948 |
GROUP
| SEK thousands | January- March 2017 |
January- March 2016 |
April 2016- March 2017 |
Full-year 2016 |
|---|---|---|---|---|
| Gross profit margin, % | 48.9 | 50.0 | 49.9 | 50.3 |
| Operating margin, % | 3.6 | 8.8 | 8.7 | 10.2 |
| Profit margin, % | 3.6 | 6.1 | 9.2 | 10.0 |
| Return on capital employed, % | 16.0 | 12.0 | 16.0 | 16.3 |
| Return on average equity, % | 15.0 | 12.3 | 15.0 | 16.3 |
| Profit attributable to Parent Company's shareholders | 4,507 | 7,113 | 44.755 | 47,361 |
| Equity/assets ratio, % | 53.1 | 53.6 | 53.1 | 53.7 |
| Equity per share, SEK | 11.73 | 11.93 | 11.73 | 11.50 |
| Investments in intangible non-current assets | 368 | 61 | 307 | |
| Investments in tangible non-current assets | 625 | 590 | 5.266 | 5.231 |
| Business combinations | 842 | 842 | ||
| Depreciation, amortization and impairment losses for the period | $-2,264$ | $-1,625$ | $-7,436$ | $-6,797$ |
| Average number of employees | 199 | 133 |
GROUP
| January- | January- | April 2016- | Full-year | |
|---|---|---|---|---|
| SEK thousands | March 2017 | March 2016 | March 2017 | 2016 |
| Operating revenue | ||||
| Brand | ||||
| External revenue | 5,287 | 9.339 | 29,573 | 33,626 |
| Internal revenue | 10,178 | 13,290 | 46,711 | 49,822 |
| 15,465 | 22,629 | 76,284 | 83,448 | |
| Product development | ||||
| External revenue | 10,093 | 42,648 | 155,193 | 187,747 |
| Internal revenue | 80,981 | 46,229 | 210,908 | 176,156 |
| 91,074 | 88,877 | 366,101 | 363,903 | |
| Wholesale | ||||
| External revenue | 132,822 | 76,977 | 345,477 | 289,633 |
| Internal revenue | 26,465 | 9,233 | 48,429 | 31,199 |
| 159,285 | 86,210 | 393,906 | 320,832 | |
| Retail | ||||
| External revenue | 36,468 | 27,947 | 136,087 | 127,565 |
| Internal revenue | 9,562 | 4,414 | 22,559 | 17,412 |
| 46,030 | 32,361 | 158,646 | 144,977 | |
| Less internal sales | $-127,184$ | $-73,166$ | $-328,607$ | $-274,589$ |
| Operating revenue | 184,670 | 156,911 | 666,330 | 638,571 |
| Operating profit | ||||
| Brand | 9,724 | 5.844 | 23,382 | 19,500 |
| Product development | 1,000 | 6,124 | 28,290 | 33,415 |
| Wholesale | 2,676 | 5,523 | 14,748 | 17,595 |
| Retail | $-6,659$ | $-3,600$ | $-9,373$ | $-6,314$ |
| Operating profit | 6,741 | 13,891 | 57,047 | 64,196 |
The difference between operating profit for segments for which information must be disclosed, SEK 6,741 thousand (13,891), and profit before tax, SEK 6,765 thousand (9,579), is net financial items, SEK 24 thousand (-4,312).
| SEK thousands | 01 2017 | 04 2016 | 03 2016 | 02 2016 | 01 2016 | 04 2015 | 03 2015 | Q2 2015 |
|---|---|---|---|---|---|---|---|---|
| Net sales | 185,657 | 171,410 | 179,977 | 122,165 | 158,065 | 152,618 | 191,430 | 99,199 |
| Gross profit margin, % | 48.9 | 48.0 | 50.4 | 53.5 | 50.0 | 51.8 | 51.9 | 53.0 |
| Operating profit/loss | 6,741 | 21.365 | 28,636 | 305 | 13 8 91 | 14,554 | 32.872 | $-1,662$ |
| Operating margin, % | 3.6 | 12.5 | 15.9 | 0.2 | 8.8 | 9.5 | 17.2 | neg |
| Profit/loss after financial items | 6,765 | 25,413 | 28,493 | $-16$ | 9,579 | 11,855 | 29,510 | $-1,585$ |
| Profit margin, % | 3.6 | 14.8 | 15.8 | 0.0 | 6.1 | 7.8 | 15.4 | neg |
| Earnings per share before dilution, SEK | 0.18 | 0.74 | 0.95 | $-0.09$ | 0.28 | 0.34 | 0.88 | $-0.04$ |
| Earnings per share after dilution, SEK | 0.18 | 0.74 | 0.95 | $-0.09$ | 0.28 | 0.29 | 0.84 | $-0.04$ |
| Number of Björn Borg stores | ||||||||
| at end of period | 39 | 40 | 39 | 40 | 40 | 41 | 38 | 38 |
| of which Group-owned | ||||||||
| Björn Borg stores | 33 | 20 | 20 | 21 | 21 | 21 | 18 | 17 |
| Brand sales | 436,957 | 371,960 | 479,109 | 280,888 | 424,685 | 330,214 | 472,865 | 249,063 |
| SEK thousands | Note | January- March 2017 |
January- March 2016 |
April 2016- March 2017 |
Full-year 2016 |
|---|---|---|---|---|---|
| Net sales | 23.934 | 16,280 | 72.559 | 64,905 | |
| Other operating revenue | 227 | 2,161 | 2.030 | 3,964 | |
| Operating revenue | 24,161 | 18,441 | 74.589 | 68,869 | |
| Goods for resale | $-2$ | $-72$ | $-74$ | ||
| Other external expenses | $\mathbf{1}$ | $-11,122$ | $-11,534$ | $-55.356$ | $-55,768$ |
| Staff costs | $-8,824$ | $-8.036$ | $-35,403$ | $-34,615$ | |
| Depreciation/amortization of tangible/intangible non-current assets | $-317$ | $-527$ | $-2,024$ | $-2,234$ | |
| Other operating expenses | $-185$ | $-373$ | $-255$ | $-443$ | |
| Operating profit/loss | 3,713 | $-2,031$ | $-18,521$ | $-24,265$ | |
| Result from shares in subsidiaries | 54,270 | ||||
| Net financial items | $-3,272$ | $-5,211$ | $-14,260$ | $-16,199$ | |
| Profit/loss after financial items | 441 | $-7,242$ | $-21,489$ | 13,806 | |
| Group contributions received | 39.047 | 39,047 | |||
| Appropriations | 1,014 | 1,014 | |||
| Profit before tax | 441 | $-7,242$ | 61,550 | 53,867 | |
| Tax | $-877$ | $-877$ | |||
| Profit for the period | 441 | $-7,242$ | 60,673 | 52,990 | |
| Other comprehensive income | |||||
| Total comprehensive income for the period | 441 | $-7,242$ | 60,673 | 52,990 |
CONDENSED
| SEK thousands Note |
March 31 2017 |
March 31 2016 |
Dec 31 2016 |
|---|---|---|---|
| Non-current assets | |||
| Intangible assets | 170 | 261 | 193 |
| Tangible non-current assets | 2,112 | 2,748 | 2,306 |
| $\overline{2}$ Long-term receivables |
10,700 | 8,900 | 10,700 |
| Deferred tax | 131 | 1,008 | 131 |
| Shares in Group companies | 353,181 | 353,882 | 353,181 |
| Total non-current assets | 366,294 | 366,799 | 366,511 |
| Current assets | |||
| Receivables from Group companies | 466,077 | 329,808 | 428,241 |
| Current receivables | 6,101 | 13,561 | 4,632 |
| $\overline{2}$ Investments |
27,162 | 73,760 | 26,167 |
| Cash & cash equivalents | $-11,602$ | 2,880 | 13,330 |
| Total current assets | 487,738 | 420,010 | 472,370 |
| Total assets | 854,032 | 786,809 | 838,881 |
| Equity and liabilities | |||
| Equity | 151,128 | 140,630 | 150,687 |
| Untaxed reserves | 1,014 | ||
| $\overline{c}$ Other non-current liabilities |
135,470 | 146,654 | 137,092 |
| $\overline{2}$ Bond loan |
17,273 | 20,376 | 17,273 |
| Due to Group companies | 528,408 | 464,127 | 516,066 |
| Accounts payable | 1,405 | 4,412 | 2,777 |
| Other current liabilities | 20,348 | 9.596 | 14,986 |
| Total equity and liabilities | 854,032 | 786,809 | 838,881 |
| SEK thousands | January- March 2017 |
January- March 2016 |
Full-year 2016 |
|---|---|---|---|
| Opening balance | 150,687 | 147.872 | 147,872 |
| Distribution | $-50,297$ | ||
| Issuance of warrants | - | 68 | |
| Warrant premium convertible | 55 | ||
| Total comprehensive income for the period | 441 | $-7.242$ | 52.990 |
| Closing balance | 151,128 | 140,630 | 150,687 |
NOTE 1 OTHER EXTERNAL EXPENSES
| Group | Parent Company | |||
|---|---|---|---|---|
| Jan-Mar | Jan-Mar | Jan-Mar | Jan-Mar | |
| SEK thousands | 2017 | 2016 | 2017 | 2016 |
| Cost of premises | 11.546 | 7.819 | 2.556 | 2,801 |
| Selling expenses | 10,419 | 11,178 | 391 | 482 |
| Marketing expenses | 11.163 | 6.886 | 5.273 | 3.143 |
| Administrative | ||||
| expenses | 8.734 | 6,106 | 2.457 | 3.253 |
| Other | 4,087 | 3,399 | 445 | 1,855 |
| Total | 45,948 | 35,388 | 11,122 | 11.534 |
Securities held for trading relate to investments in corporate bonds quoted on Nasdaq Stockholm and have been measured at their quoted prices. Forward exchange contracts are measured according to level 2 based on observable information as of the closing date with respect to exchange rates and market interest rates for the remaining maturities.
Net divestments in the company's portfolio of corporate bonds amounted to SEK 419 thousand during the quarter.
| SEK thousands | Level 1 | Level 2 | Level 3 |
|---|---|---|---|
| Securities held for trading | 26.936 | ||
| Derivatives held for trading | 226 | ||
| Net | 26,936 | 226 |
The carrying amount of financial instruments recognized at amortized cost corresponds to fair value as of March 31, 2017.
On December 8 Björn Borg signed an agreement to acquire all the shares in Baseline BV, the parent company of the distributor of underwear and sportswear in the Netherlands and Belgium. The Baseline Group consists of six legal entities with wholesale operations as well as retail operations through twelve Björn Borg concept and outlet stores.
The acquisition closed on January 2, 2017. Björn Borg is paying about SEK 7.2 million for all shares and shareholders' loans after disposing of net assets to the former owners relating to brands other than Björn Borg. The difference between the actual and preliminary acquisition price previously announced as approximately SEK 12 million (EUR 1.25 million) is the value of assets (primarily inventory and accounts receivables) unrelated to the Björn Borg brand, which on December 31, 2016 was higher than preliminarily estimated and was therefore deducted from the acquisition price. A portion of the acquisition price was paid on the closing day and the remainder falls due in the three subsequent financial years. The acquisition is financed with own funds. There are no earn-out payments.
Direct acquisition expenses amounted to about SEK 1.7 million and were charged to other external expenses in the fourth quarter.
The acquisition of the Benelux operations is an important step in accelerating the vertical integration of the Björn Borg operations and in line with the strategy to get closer to consumers and retailers. Proximity to consumers and retailers is expected to create more opportunities to generate growth for Björn Borg in Benelux in the long term. With respect to efficiencies, there are synergies mainly in procurement that are expected in the future.
Consolidating Baseline in the Björn Borg Group is estimated to increase annual net sales by SEK 100 million with marginal impact on EBIT, excluding short-term negative effects for 2017. In 2017 the Björn Borg Group's EBIT is expected to decline due to timing effects for revenues from the Benelux market as a consequence of accounting effects as wholesale and consumer sales are managed within the Björn Borg Group instead of by an external distributor. At the same time, from 2017 the earn-out payments to the former owner of the Björn Borg brand will discontinue, which is estimated to positively impact EBIT by SEK 21 million, largely compensating for the negative short-term effect from the acquisition of Baseline Group.
Net assets largely consist of inventory, receivables and tangible non-current assets comprising retail and office furniture and fixtures. The financial non-current assets largely consist of tax loss carry forwards. Acquired surplus values are attributable in their entirety to goodwill. Acquired goodwill is not tax deductible.
The table shows a preliminary acquisition analysis. This table has changed since the year-end report for 2016, as financial non-current assets have increased in Benelux by SEK 0.7 million. As a result, goodwill has declined by a corresponding amount, SEK 0.7 million.
| SEK thousands | Fair value |
|---|---|
| Preliminary acquisition price | 11,980 |
| Adjustment net assets | $-4,829$ |
| Acquisition price | 7,151 |
| Acquired net assets | |
| Intangible and tangible assets | 6,731 |
| Financial non-current assets | 12,630 |
| Inventory | 60.932 |
| Other short-term receivables | 8,701 |
| Long-term interest-bearing liabilities | $-20,547$ |
| Short-term non-interest-bearing liabilities | $-76,775$ |
| Total acquired assets and liabilities | $-8,329$ |
| Goodwill | 15,480 |
| Total net assets | 7,151 |
| Acquisition payments fall due as follows: | |
| 2017 | 1.764 |
| 2018 | 109 |
| 2019 | 1,688 |
| 2020 | 3,590 |
The company presents certain financial measures in this interim report that are not defined according to IFRS. The company considers these measures to be valuable complementary information for investors and the company's management. Since not all companies calculate financial measures in the same way, they are not always comparable with measures used by other companies. Consequently, these measures should not be seen as a substitute for measures defined according to IFRS. For more on the calculation of these key financial ratios, see https://corporate.bjornborg.com/en/section/investors/ interim-reports/
Estimated total sales of Björn Borg products at the consumer level, excluding VAT, based on reported wholesale sales. Purpose: Shows the sales trend measured as retail value excluding VAT.
Total assets less non-interest-bearing liabilities and provisions.
Purpose: Capital employed measures capital use and efficiency.
Profit after tax in relation to the weighted average number of shares during the period.
Purpose: This indicator is used to assess an investment from an owner's perspective.
Earnings per share adjusted for any dilution effect. Purpose: Nettoskuld visar bolaget totala skuldsituation.
Equity as a percentage of total assets. Purpose: This indicator shows financial risk, expressed as a share of total restricted equity financed by the owners.
Net sales less cost of goods sold divided by net sales. Purpose: Gross margin is used to measure operating profitability.
Net sales less cost of goods sold divided by net sales. Purpose: Gross profit margin before acquisitions is used to measure operating profitability adjusted for acquisition effects.
Liabilities less investments and cash & cash equivalents. Purpose: Net debt reflects the company's total debt situation.
Liabilities less investments and cash & cash equivalents divided by operating profit before depreciation/amortization. Purpose: This indicator shows the company's ability to pay debts.
Financial income less financial expenses. Purpose: Describes the company's financial activities.
Operating profit as a percentage of net sales. Purpose: The operating margin is used to measure operating profitability.
Profit before tax plus net financial items. Purpose: This indicator facilitates profitability comparisons regardless of the company's tax rate and independent of its financing structure.
Profit before tax as a percentage of net sales. Purpose: Profit margin shows the company's profit in relation to its sales.
Profit before tax (per rolling 12-month period) plus financial expenses as a percentage of average capital employed. Purpose: This indicator is the key measure to quantify the return on the capital used in operations.
Profit for the period/year attributable to the Parent Company's shareholders (for rolling 12 months) according to the income statement as a percentage of average equity. Average equity is calculated by adding equity at January 1 to equity at December 31 and dividing by two.
Purpose: This indicator is used to show, from an ownership perspective, the return generated on the owners' invested capital.
The Board of Directors and the CEO certify that the interim report provides a true and fair overview of the operations, financial position and results of the Parent Company and the Group and describes the material risks and uncertainties faced by the Parent Company and the companies in the Group.
Stockholm, May 11, 2017
Fredrik Lövstedt Chairman
Martin Bjäringer Board member
Lotta de Champs Board member
Petra Stenqvist Board member Mats H Nilsson Board member
Heiner Olbrich Board member Christel Kinning Board member
Henrik Bunge CEO
The interim report for January-June 2017 on August 18, 2017. The interim report for January-September 2017 on November 16, 2017.
The interim report for 2017 on February 23, 2018.
Financial reports can be downloaded from the company's website, www.bjornborg.com or ordered by telephone +46 8 506 33 700 or by e-mail [email protected].
Henrik Bunge, CEO E-mail: [email protected] Tel: +46 8 506 33 700
Daniel Grohman, CFO E-mail: [email protected] Tel: +46 8 506 33 700
The Group owns the Björn Borg trademark and its core business is sports apparel and underwear. It also offers footwear, bags and eyewear through licensees. Björn Borg products are sold in around thirty markets, of which Sweden and the Netherlands are the largest. The Björn Borg Group has operations at every level from branding to consumer sales in its own Björn Borg stores. Total sales of Björn Borg products in 2016 amounted to about SEK 1.6 billion, excluding VAT, at the consumer level. Group net sales amounted to SEK 631.6 million in 2016, with an average of 133 employees. The Björn Borg share has been listed on Nasdaq Stockholm since 2007.
The images in the interim report are from Björn Borg's spring/summer 2017 collection.
Björn Borg AB Tulegatan 11 SE-113 53 Stockholm, Sweden www.bjornborg.com
Björn Borg is required to make public the information in this interim report according to the EU's Market Abuse Regulation. The information was released for publication on May 11, 2017 at 5:30 pm (CET).
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