Stockmann Oyj : Group's Financial Statements Bulletin 2019

Stockmann Group's adjusted operating result improved in the fourth quarter

STOCKMANN plc, Financial Statement Release 13.2.2020 at 8:00 EET

October-December 2019, continuing operations
- Consolidated revenue was EUR 285.7 million (304.5), down 5.1% in comparable currency rates.
- Gross margin was 56.6% (55.6).
- Operating result was EUR 22.4 million (-2.8).
- Adjusted operating result was EUR 28.0 million (23.5, or 19.1 excluding Nevsky Centre).
- Earnings per share were EUR -0.01 (-0.12)
- Adjusted earnings per share were EUR 0.07 (0.25).

January-December 2019, continuing operations
- Consolidated revenue was EUR 960.4 million (1 018.8), down 4.5% in comparable currency rates.
- Gross margin was 56.3% (56.9).
- Operating result was EUR 13.3 million (-5.0).
- Adjusted operating result was EUR 29.0 million (28.4, or 10.4 excluding Nevsky Centre).
- Earnings per share were EUR -0.84 (-0.68).
- Adjusted earnings per share were EUR -0.63 (-0.22).

The Board of Directors will propose that no dividend be paid for the financial year 2019.

The Group's 2019 figures include changes due to IFRS 16. Comparison figures for 2018 are not restated. The IFRS 16 items are presented in the table "Impact of IFRS 16".

Guidance for 2020:
Stockmann expects the Group's operating profit to improve clearly in 2020 (2019: EUR 13.3 million).

CEO Jari Latvanen:
In 2019 major changes took place in Stockmann's businesses. We renewed our strategy and launched a new clarified vision, mission and values towards the end of the year. The first effects of our strategic actions and ongoing transformation are emerging in our financial results.

Revenue in 2019 was EUR 960 million. Adjusted operating profit was EUR 29 million. The positive operating result was achieved through the rejuvenation program and ongoing savings and the improved performance of both Lindex and Stockmann. Due to seasonality, most of the year's earnings were achieved in the fourth quarter.

Lindex had a strong full-year result with increased profitability in all markets, sales channels and business areas. During the fourth quarter, Lindex's adjusted operating profit improved due to good gross margin development and cost control. In August, Stockmann announded that the Board of Director's decided to investigate strategic alternatives for Lindex ownership. The process is developing as planned.

In 2019 we made several significant organisational and business decisions that contributed to lower revenue. The Stockmann division's business remained loss-making for the full-year, however the last quarter was profitable.

In 2020 we will work decisively towards our main target of returning our department store business to a sustainable level by 2021. There are several ongoing projects and reforms to improve the trend and we are proceeding according to plans. Our target is to improve the Group's operating result in 2020. All steps taken will drive us towards this goal.

KEY FIGURES

Continuing operations 10-12/ 10-12/ 1-12/ 1-12/
2019 2018 2019 2018
Revenue, EUR mill. 285.7 304.5 960.4 1 018.8
Gross margin, % 56.6 55.6 56.3 56.9
EBITDA, EUR mill. 57.2 36.2 153.0 76.0
Adjusted EBITDA, EUR mill. 62.8 37.5 168.6 84.3
Operating result (EBIT), EUR 22.4 -2.8 13.3 -5.0
mill.
Adjusted operating result (EBIT), 28.0 23.5 29.0 28.4
EUR mill.
Net financial items, EUR mill. -12.3 -9.2 -52.7 -34.6
Result before tax, EUR mill. 10.1 -12.0 -39.3 -39.6
Result for the period, EUR mill. 1.9 -7.0 -54.3 -43.7
Earnings per share, -0.01 -0.12 -0.84 -0.68
undiluted and diluted, EUR
Personnel, average 6 924 7 191 7 002 7 241
         
Continuing and discontinued 10-12/ 10-12/ 1-12/ 1-12/
operations 2019 2018 2019 2018
Net earnings per share, -0.01 -0.14 -0.84 -0.70
undiluted and diluted, EUR
Cash flow from operating 69.9 82.1 102.3 82.9
activities, EUR mill.
Capital expenditure, EUR mill. 9.6 8.2 33.8 29.3
Equity per share, EUR     11.12 11.71
Net gearing, %     112.4 64.5
Equity ratio, %     38.1 46.2
Number of shares, undiluted and     72 049 72 049
diluted, weighted average, 1 000
pc
Return on capital employed,     0.9 -0.4
rolling 12 months, %

ITEMS AFFECTING COMPARABILITY

EUR million 10-12/ 10-12/ 1-12/ 1-12/
2019 2018 2019 2018
EBITDA 57.2 36.2 153.0 76.0
Adjustments to EBITDA        
  Restructuring and transformation measures 5.8 0.1 15.2 3.3
  Gain or loss on sale of properties -0.3 0.1 0.4 -6.8
  Value adjustment to assets held for sale   1.1   11.9
Adjustments total 5.5 1.3 15.6 8.4
Adjusted EBITDA 62.8 37.5 168.6 84.3
         
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2019 2018 2019 2018
Operating result (EBIT) 22.4 -2.8 13.3 -5.0
Adjustments to EBIT        
  Goodwill impairment   25.0   25.0
  Restructuring and transformation measures 5.8 0.1 15.2 3.3
  Gain or loss on sale of properties -0.3 0.1 0.4 -6.8
  Value adjustment to assets held for sale   1.1   11.9
Adjustments total 5.5 26.3 15.6 33.4
Adjusted operating result (EBIT) 28.0 23.5 29.0 28.4

IMPACT OF IFRS 16

EUR million, Reported IFRS Excluding IFRS 16 items Reported
quarterly 10-12/201 16 10-12/2019 10-12/2018
9 items
10-12/2
019
Revenue 285.7 -0.5 286.2 304.5
EBITDA 57.2 24.5 32.8 36.2
Adjusted EBITDA 62.8 24.5 38.3 37.5
Depreciation 34.8 20.3 14.5 13.9
Operating result 22.4 4.2 18.3 -2.8
(EBIT)
Adjusted 28.0 4.2 23.8 23.5
operating result
(EBIT)
Net financial -12.3 -6.2 -6.0 -9.2
items
Net result 1.9 -1.6 3.5 -8.4
Cash flow from 69.9 18.2 51.7 82.1
operating
activities

EUR million, YTD Reported IFRS 16 Excluding IFRS Reported
1-12/2019 items 16 items 1-12/2018
1-12/2019 1-12/2019
Revenue 960.4 -2.1 962.6 1 018.8
EBITDA 153.0 100.0 53.0 76.0
Adjusted EBITDA 168.6 100.0 68.6 84.3
Depreciation 139.6 83.9 55.7 55.9
Operating result 13.3 16.1 -2.8 -5.0
(EBIT)
Adjusted 29.0 16.1 12.9 28.4
operating result
(EBIT)
Net financial -52.7 -26.1 -26.6 -34.6
items
Net result -54.3 -7.9 -46.4 -45.2
Assets 2 103.2 505.5 1 597.7 1 827.9
Interest-bearing 900.2 512.8 387.4 543.6
net debt
Cash flow from 102.3 73.9 28.4 82.9
operating
activities

Stockmann uses Alternative Performance Measures according to the guidelines of the European Securities and Market Authority (ESMA) to better reflect the operational business performance and to facilitate comparisons between financial periods. Gross profit is calculated by deducting the costs of goods sold from the revenue, and gross margin is calculated by dividing gross profit by the revenue as a percentage. EBITDA is calculated from the operating result excluding depreciation, amortisation and impairment losses. Adjusted EBITDA and adjusted operating result (EBIT) are measures which exclude non-recurring items and other adjustments affecting comparability from the reported EBITDA and the reported operating result (EBIT).

STRATEGY

Lindex's aim is to further strengthen international growth and in particular digital transformation. Lindex has a strong market position in the Nordics, with a rapidly growing e-commerce business through its own channels and together with global online partners, well-performing flexible store network, and improving profitability. As stated earlier Stockmann continues to investigate strategic alternatives for Lindex's ownership.

The Stockmann division's two-year rejuvenation process progresses well. The target is to make Stockmann a marketplace for good life that offers the best and most inspiring products in fashion, beauty and home. Focus is strongly on excellent customer service and qualitative customer experiences. The offering is renewed and the range of sustainable brands is increasing to better meet the needs of our customers.

Both Stockmann and Lindex continue to systematically develop digital services and technology solutions to strengthen their multichannel approach. Stockmann is renewing its department stores in Helsinki and Jumbo and launching a new online store during the summer 2020.

The Stockmann division's rejuvenation programme which includes cost savings and other efficiency measures continues as planned. To turn Stockmann's result into profit, the business requires significant renewal and reduction of costs.

As of 1 July 2019 a new operating model and new structure was introduced, and approximately 150 positions were ended. As of 1 February 2020, the Stockmann division simplified its organisation further and launched a new customer and category based organisation. Savings emerged towards the end of 2019, and will be clearly evident in the 2020 results. Roughly one third of the targeted savings was achieved during 2019.

In 2019 Stockmann renegotiated its contracts with several ICT partners and achieved cost savings. Also a new loyal customer programme was introduced in October, and marketing efforts are targeted in a new focused way.

OUTLOOK FOR 2020

We expect that the uncertainties in the global economy will remain during 2020. In 2020, the GDP in Stockmann's main markets is expected to show moderate growth. We expect the retail market to remain challenging due changes in consumer behavior and increasing competition, and moderate consumer confidence indicator.

The rejuvenation programme in Stockmann will continue throughout 2020. Lindex will continue to drive efficiencies and explore new growth opportunities. Stockmann expects the Group's operating profit to improve clearly in 2020 (2019: EUR 13.3 million).

Capital investment projects will be reviewed and decided throughout the year, the total planned capital expenditure amounts to approximately EUR 45 million.

CORPORATE GOVERNANCE STATEMENT

Stockmann will publish a separate Corporate Governance Statement for 2019 in line with the recommendation by the Finnish Corporate Governance Code. The statement will be published during the week starting on 24 February 2020 (week 9).

Financial Statements Bulletin 2019
This company announcement is a summary of the Stockmann's Financial Statements Bulletin 2019 and includes the most relevant information of the report. The complete report is attached to this release as a pdf file and is also available on the company's website at stockmanngroup.com (http://www.stockmanngroup.com).

Annual General Meeting 2020
The Annual General Meeting of Stockmann plc will be held on Wednesday 18 March 2020 at 2 p.m. at Finlandia Hall in Helsinki, Finland (address: Mannerheimintie 13). Notice of the Annual General Meeting which includes proposals to the meeting is published as a separate stock exchange release on 13 February 2020.

Press and analyst briefing and webcast
A press and analyst briefing will be held today, on 13 February 2020 at 10:00 a.m. EET in the Fazer À la Carte restaurant on the 8th floor of Stockmann's Helsinki city centre department store, Aleksanterinkatu 52 B. The event can be followed as a live webcast by this link (https://stockmann.videosync.fi/2020-02-13-full-year-results/register) or on the address stockmanngroup.com. (http://www.stockmanngroup.com) The recording and presentation material are available on the company's website after the event.

Further information:
Jari Latvanen, CEO, tel. [phone]
Pekka Vähähyyppä, CFO, tel. [phone]

www.stockmanngroup.com

STOCKMANN plc

Jari Latvanen
CEO

Distribution:
Nasdaq Helsinki
Principal media

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