Wolford AG — Earnings Release 2006

Jul 25, 2007

News Details

Ad-hoc | 25 July 2007 08:30

Wolford AG: Financial results for fiscal year 2006/07

Wolford AG / Final Results

Release of an Ad hoc announcement, transmitted by DGAP - a company of
EquityStory AG.
The issuer is solely responsible for the content of this announcement.

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Wolford generates highest sales growth in its history

· Sales increase of more than 16% to EUR 141.7 million
· Significant sales growth in all product groups
· Proprietary Retail business expands by over 31%
· Disproportionately strong improvement of 84% in net profit
· Stock price advances by more than 80% in fiscal year

Vienna and Bregenz, July 25, 2007

'With Wolford’s highest-ever absolute growth in sales and a definite
improvement in net profit for the year, we have not only resoundingly
confirmed the lasting turnaround, but also significantly expanded our
strong position in the luxury goods market,' commented Holger Dahmen, Chief
Executive Officer of Wolford AG, on the Group’s completed fiscal year, in
which Wolford delivered a compelling business performance with double-digit
sales growth in almost all markets, strategic distribution channels and
product groups. 'These achievements were made possible especially by the
systematic broadening of our product range by Ready-to-Wear items, our
tight focus on the expansion and quality improvement of our monobrand
distribution, and the continuing brisk roll-out of our new store concept,'
explained Dahmen concerning the key success factors. 'After three years of
hard work and an extensive program of measures implemented in all business
areas, Wolford today stands for the finest quality, comfort and aesthetics
and is superbly positioned as an international luxury brand in the once
again growing global fashion market.' The business success is reflected in
the stock price: With a gain of 80.5 percent in the 2006/07 fiscal year,
Wolford’s stock greatly outperformed the ATX, which rose by 12.3 percent
over the same period.

Largest sales increase in company history – Earnings clearly rising

The Wolford Group’s sales rose by EUR 20.3 million – or 16.7 percent – from
the prior year’s EUR 121.4 million to EUR 141.7 million. As in the previous
fiscal year, the Austrian luxury label achieved continuous year-over-year
sales growth in all four quarters. In the fourth quarter of 2006/07 alone,
revenue was up 18.7 percent from the year-earlier quarter.

Earnings results were also satisfactory. Operating profit (EBIT), at EUR
7.7 million, was
EUR 0.3 million higher than in the prior year. In the 2005/06 fiscal year
the inventory valuation parameters for fashion products had been adjusted
in response to end-of-season-sale policies, with a positive effect of EUR
2.7 million on earnings. Excluding this prior-year one-off effect,
operating profit for the 2006/07 fiscal year was EUR 3.0 million (63.7
percent) higher than in the prior year, EBITDA increased to EUR 13.8
million (up EUR 2.9 million or 26.3 percent) and profit from continuing
operations before taxes was EUR 6.1 million, an improvement compared to the
prior year (excluding the prior-year one-off effect) of
EUR 2.8 million or 85.8 percent.

Wolford’s net profit for the year also grew more rapidly than sales,
increasing by 83.9 percent (EUR 2.9 million) to EUR 6.4 million.

Sound asset and capital structure – Equity ratio climbs to 53%

At the reporting date of April 30, 2007, the Wolford Group had
shareholders’ equity of
EUR 74.4 million. This represented an increase of EUR 10.4 million or 16.4
percent from the level of the previous fiscal year end. The equity ratio
thus rose to 53.0 percent compared to 50.0 percent one year earlier. At the
same time, Wolford improved its net debt by
13.3 percent from EUR 20.2 million to EUR 17.5 million. This was also
reflected in the favorable trend in the debt/equity ratio, which was only
23.5 percent at the balance sheet date of April 30, 2007 (April 30, 2006:
31.5 percent).

Significant sales growth in all product groups

With its balanced product portfolio consisting of the Legwear,
Ready-to-Wear, Lingerie, Swimwear and Accessories lines, in the 2006/07
fiscal year Wolford generated double-digit sales growth in all these
product groups. 'Our re-interpreted Ready-to-Wear products have been so
popular with consumers worldwide that the sales growth of 18 percent in
this product group already accounted for a large portion of our total sales
increase,' said Holger Dahmen, noting that this has validated the strategic
decision to expand the product portfolio by women’s outer clothing. He
added: 'The success of Ready-to-Wear products in the international markets
is all the more telling as, at the Wolford-owned outlets as well, absolute
sales growth in this product group was by far the strongest.' However,
sales also expanded significantly in the other four product areas,
particularly in Legwear, which benefited especially from current fashion
trends such as leggings and capris. The Lingerie product group continues to
have wide appeal with its balanced offering of timeless essentials and
exciting trend items. The Swimwear and Accessories ranges – the latter
including the leather collection newly launched in the last fiscal year –
likewise yielded encouraging sales gains.

Strong brand – Valentino as new co-branding partner

Through the consistently pursued brand strategy, Wolford has evolved from a
vendor of legwear and bodywear into a global luxury brand with a complete
offering across the fashion spectrum, ranging from exclusive outer garments
all the way to elegant accessories. The collaboration with world-class
designers and luxury brands imbues the collections with additional fashion
allure and heightens the brand’s desirability. After working with Zac Posen
and luxury labels Kenzo and Missoni, Wolford won Valentino, the Italian
couture house, as a new collaborator beginning with the fall/winter 2007/08
season. And in the person of Ronald van der Kemp, a new top designer was
brought on board who, from the fall/winter 2008/09 collection onward, will
direct the further creative development of Wolford’s product portfolio.

Sales rise in almost all geographic markets

In 2006/07 the Wolford Group posted revenue growth in the double digits in
nearly all regions. With a sales increase of 28.4 percent in the United
States, Wolford was particularly successful in this highly competitive
market. In the important European markets too, the brand and product range
sold well indeed, with growth rates of 25.7 percent in the United Kingdom,
20.1 percent in the Netherlands, 16.2 percent in Germany, 13.3 percent in
France, 12.8 percent in the Scandinavian markets, 15.7 percent in the
Central and Eastern European countries and 10.7 percent in Italy. In the
Austrian home market as well, Wolford enjoyed sales growth of 12.2 percent
and thus further strengthened its market position. Sales were also up by
6.2 percent in Switzerland. The Wolford Group likewise showed good growth
in Asia and Oceania, where sales climbed by 55.4 percent overall.

Retail as growth driver

Business in the Retail segment was highly dynamic in the fiscal year under
review: The Wolford-operated locations (boutiques, shop-in-shops and
factory outlets) saw combined revenue growth of 31.5 percent from the year
before, representing good like-for-like growth of 13.0 percent.

With double-digit sales gains in all markets, the boutiques in particular
were a key driver of the year’s strong results. The 223 boutiques produced
impressive sales growth of
27.5 percent. Within this total, the 81 Wolford-owned boutiques attained
even higher revenue growth of 33.4 percent, or 16.2 percent on a
like-for-like basis. Yet Wolford’s sales with the 142 partner-operated
boutiques as well were pushed up by a substantial 17.9 percent.

The Wolford Group also realized attractive growth in department stores,
where sales were up 18.3 percent.

The boutiques contributed the largest share of total sales as well, at 45.0
percent. In the other channels, 23.2 percent of total sales were with
multibrand retailers, 22.0 percent came from department stores, 6.6 percent
from factory outlets and 3.2 percent from private label business.

New look already in place at 92 Wolford points of sale

In the 2006/07 fiscal year Wolford also made rapid progress in the roll-out
of the new store concept that was first unveiled in August 2005. As of the
fiscal year’s end, 92 Wolford points of sale in 19 countries had already
opened or been remodeled in the new, bright and feminine look, contributing
strongly to the very good growth in monobrand business.

Outlook

Outlining the strategic direction for the current 2007/08 fiscal year, CEO
Dahmen said: 'The last year’s good results reinforce our determination to
stay the chosen course in the future. In the 2007/08 fiscal year, our top
priority therefore remains to methodically build the brand and further
entrench Wolford in the premium segment. With this in mind, we will
continue to optimize our distribution and expand and qualitatively improve
our monobrand outlets.'

As an important indicator for sales going forward, advance orders for the
fall/winter 2007/08 collection are significantly higher than in the
corresponding period of last year, confirming the positive momentum
currently felt in all of Wolford’s business areas. Against this backdrop,
for this fiscal year the management is optimistic about being able to grow
sales considerably to at least EUR 150 million and achieve a rate of
earnings growth in excess of sales growth.

Key financial data for fiscal year 2006/07
Amounts in thousands of EURexcept per share data 2006/07 2005/06 Changein
EUR ‘000 Changein %
Sales 141,683 121,426 20,257 16.7
EBITDA 13,844 13,695 149 1.1
EBITDA excluding one-time effect* 13,844 10,957 2,887 26.3
EBITDA margin 9.8% 11.3%
EBITDA margin excluding one-time effect* 9.8% 9.0%
Operating profit (EBIT) 7,686 7,433 253 3.4
EBIT excluding one-time effect* 7,686 4,695 2,991 63.7
EBIT margin 5.4% 6.1%
EBIT margin excluding one-time effect* 5.4% 3.9%
Profit from continuing operations before taxes 6,067 6,003 64 1.1
Profit from continuing operations before taxes excluding one-time effect*
6,067 3,265 2,802 85.8
Net profit for the year 6,442 3,504 2,938 83.9
Net profit for the year excluding one-time effects* 6,442 3,420 3,022 88.4
Net cash from operating activities 6,978 4,276 2,702 63.2
Profit from continuing operations before taxes plus amortization,
depreciation and impairment, less reversals of impairment, excluding
one-time effect* 12,225 9,527 2,698 28.3
Net debt 17,492 20,178 -2,686 -13.3
Debt/equity ratio 23.5% 31.5%
Shareholders’ equity 74,442 63,972 10,470 16.4
Equity ratio based on total assets 53.0% 50.0%
Earnings per share in EUR 1.34 0.74 0.60 81.1

* The one-time effects resulted from an adjustment in inventory valuation
parameters carried out in the 2005/06 fiscal year, which had the effect of
a positive contribution of TEUR 2,738 to profit from continuing operations
before taxes, and from back payments totaling TEUR 2,654 as a consequence
of the tax audit of Wolford Aktiengesellschaft (including arrears
interest), which reduced net profit. The net positive effect in 2005/06 on
net profit for the year was TEUR 84.

The Annual Report 2006/07 is available on the Internet at www.wolford.com
under Investor Relations.

Contacts: Holger Dahmen (Chief Executive Officer)
Peter Simma (Deputy Chief Executive Officer)

investor@wolford.com
Wolford AG, Wolfordstraße 1, A-6901 Bregenz, Austria
+43 (0) 5574 690-0
www.wolford.com
DGAP 25.07.2007

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Language: English
Issuer: Wolford AG
Wolfordstraße 1
6901 Bregenz Österreich
Phone: +43/5574/6907434
Fax: +43/5574/6907440
E-mail: investor@wolford.com
Internet: www.wolford.com
ISIN: AT0000834007
WKN: 83400
Indices: ATX
Listed: Amtlicher Markt in Wien; Freiverkehr in Berlin, Stuttgart,
München; Open Market in Frankfurt

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