Orchestra Premaman : Financial information at 30 November 2016

Financial information at 30 November 2016 H1 2016/2017 Results (1 March to 31 August 2016)

• Revenue: €297.4 million (up +9.9%)
• Gross Operating Income: €20.3 million (6.8% of revenue)

Substantial enhancement of capital in the second half (capital increase and disposal of treasury stock) Major international partnership agreement entered into with CFAO Group 2019 guidance reiterated

INCOMESTATEMENT FROM1 MARCH2016 TO31 AUGUST2016

Financial data under IFRS (*) in millions of euros	First half 2015/2016, reported (1)	First half 2015/2016, restated and corrected(1) (5)	First half 2015/2016 like-for-like (1) (5) (6)	First half 2016/2017 (2)	Change (7)
Revenues	273,0	270,6	270,6	297,4	9,9%
Gross margin (3)	142,4	145,1	142,9	146,9	2,8%
As a % of sales	52,2%	53,6%	52,8%	49,4%
Current Gross Operating Income (4)	24,7	28,8	26,6	20,3	-23,7%
As a % of sales	9,0%	10,7%	9,8%	6,8%
Net provisions	-15,7	-15,6	-15,6	-17,9	14,7%
Current Operating Income	9,0	13,2	11,0	2,4	-78,3%
As a % of sales	3,3%	4,9%	4,1%	0,8%
Other income and expenses	-0,4	-0,4	-0,4	-5,8
Operating income	8,5	12,7	10,6	-3,5
As a % of sales	3,1%	%	3,9%	-1,2%
Financial profit (loss)	1,1	1,1	-1,0	-5,5
Net income from continuing operations	7,3	10,1	7,3	-6,0
As a % of sales	2,7%	3,7%	2,7%	-2,0%
Net income from discontinued operations	-3,0	-3,4	-3,4	-1,6
Net income, Group share	3,6	6,1	3,2	-7,7
As a % of sales	1,3%	2,3%	1,2%	-2,6%

* Level of Statutory Auditor diligence: audit procedures are conducted and the audit report related to certification is currently being prepared.

1. Period from 1 March 2015 to 31 August 2015

2. Period from 1 March 2016 to 31 August 2016

3. Revenue, less consumables

4. Current operating income, restated for net depreciation, amortisation and provisions

5. Restated and corrected for discontinued operations and translation differences (details below)

6. Restated and corrected for discontinued operations, translation differences and currency hedges (details below) (7) H1 2016/2017 vs. H1 2015/2016 like-for-like

Comparative data for the H1 2015/2016 financial statements (presented in the "First half 2015/2016, restated and corrected" and "First half 2015/2016 like-for-like" columns) have been restated and corrected from the data in the financial statements published on 3 November 2015 (presented in the "First half 2015/2016 reported data" column) to take into account the items described below:

In thousands of euros	Reported data 31/08/2015	Discontinued operations (1)	Translation differences (2)	Restated 31/08/2015	Hedges (3)	Like-for- like 31/08/2015
OPERATING INCOME	273 022	(2,394)	270,628	270,628
Operating expenses	(248 314)	2,790	3729	(241,795)	(2,212)	(244,007)
CURRENT GROSS OPERATING INCOME	24 708	0,396	3729	28,832	(2,212)	26,620
9,0%	10.7%	9.8%
Net provisions	(15 725)	107	(15,619)	(15,619)
CURRENT OPERATING INCOME	8 982	502	3729	13,214	(2,212)	11,002
Other operating income and expenses	(446)	(1)	(447)	(447)
OPERATING PROFIT (LOSS)	8 536	501	3729	12,767	(2,212)	10,555
Share in net income of associates	681	0	681	(2,212)	681
OPERATING PROFIT (LOSS) after share in net income of associates	9 217	501	3,729		13,448	11,236
Net cost of financial debt	(3 593)	(3,593)	(2,076)	(3,593)
Other financial income and expenses	4 682	4,682		2,606
FINANCIAL PROFIT (LOSS)	1 088	1,088	(2,076)	(988)
Income tax	(2 992)	(167)	(1,243)	(4,402)	1,429	(2,973)
NET INCOME FROM CONTINUING OPERATIONS	7 314	334	2,486	10,134	(2,859)	7,275
Net income from discontinued operations	(3 036)	(334)	(3,371)	(3,371)
CONSOLIDATED INCOME	4 277	0	2,486	6,763	(2,859)	3,905
Group share	3 606	0	2,486	6,092	(2,859)	3,234
Share of minority interests	671	671	671

1. Discontinued operations: the application of IFRS 5 on continuing operations requires income from discontinued operations for all periods presented to be declared in a separate line.

2. Translation differences: after the end of the financial year on 28 February 2015 and the half year on 31 August 2015, an error in the recognition of foreign exchange adjustments on accounts payable in foreign currencies during the valuation of said accounts at the hedged rate. Income before tax on 31 August 2015 was therefore adjusted downward by €3,729 thousand, resulting in a negative impact of €2,486 thousand on net income. In accordance with IAS 8, the impact of this adjustment was recognised retrospectively in income on 31 August 2015 and consequently in shareholders' equity on 1 September 2015.

3. Hedges: on 29 February 2016 the Group increased its estimates on its currency hedging contracts. This approach meant reclassifying the contracts as trading products and evaluating the ineffective portion of the hedges in question as financial income. In order to present two sets of like-for-like half-year financial statements, the table below presents the data at 31 August 2015, using the same methodology to estimate the value of hedging contracts as was used at the end of the financial year on 29 February 2016.

ENVIRONMENT AND HIGHLIGHTS

The Orchestra-Prémaman Group generated consolidated revenue of €297.4m in the first half of fiscal year 2016-2017, an improvement of +9.9% on revenue earned in H1 2015-2016.

The application of IFRS 5 on continuing operations requires income from discontinued operations for all periods presented to be declared in a separate line.

First-half highlights included:

• a cold, rainy spring in Europe, which adversely impacted sales, coupled with strikes in France,

• a heat wave that plagued Europe in August, causing back-to-school clothes purchases to be postponed.

  The Group nonetheless maintained its capacity for growth thanks to:

• the increase in the number of m² operated under the Orchestra brand run as branches or under commission-affiliation (286,000 m² at 31 August 2016 versus 260,000 m² at 29 February 2016);

• strong growth in the childcare business: +62.6% over the first half of 2016/2017; revenue from the childcare business totalled €54.1m and now accounts for 18.1% of total business (versus 12.3% in the first half of 2015).

Business was up 6.2% in France (where the Group generated 62.8% of its revenue for the period) and up 16.7% abroad, driven by a strong increase in Belux which now enjoys an entirely restructured and refurbished network.

At 31 August 2016, nearly 1.750 million customers owned a Club card, up 8.2%compared to 31 August 2015. The Group continues to generate almost 91% of its revenue with customers who are members of the Club.

Internet business progressed well over the first half, with revenue climbing +22.9% (excluding baby registries).

Business was driven by the first Large Format stores ("mixed and megastores" stores of more than 500 m²) which sell children's' clothes, maternity and childcare items under the same roof, and opened in peri-urban out-of-town areas by the Group since 2013, reaching full capacity. First half revenue generated by these stores totalled €114.4 m, up 42.7% compared with the previous half year.

The textile store network (300 m² to 500 m²) generated revenue of €176.5 m (including the Internet business) during the first half, i.e., a drop of 5.1%, reflecting the transformation of our network towards the large format approach.

OPERATING INCOME AT31 AUGUST2016

The decrease in the gross margin is explained by:

• in large part, the appreciation of the dollar (USD) for the textile business,

• the shift towards large-format stores (including the acquisition of the Autour de Bébé Suisse network), and the robust growth of the childcare business, which earns a lower profit margin than the textile business,

Operating expenses included a comparable level of advertising and communication expenditures compared to the previous half-year, with logistics costs stabilising thanks to the strong development of the Arras warehouse.

Gross operating income amounted to €20.3m, i.e. 6.8% of revenue, versus €26.6m and 9.8%, respectively in H1 2015.

With allowances up 14.7% (mainly investment amortisation), current operating income came out at €2.4m.

"Other operating income and expenses" primarily recorded the following expenses: supplier disputes for €2.3m, restructuring plan for the Prémaman head office in Belgium for €1.6m, impairments and asset disposals for €1.0m, fees and expenses related to acquisitions for €0.6m.

Operating income posted a decline in income of €3.5m.

Financial income posted a net expense of €5.5m (vs. €1.0m in the first half of last year), including:

• an increase in cost of debt, up from €3.6m to €4.0m, stemming from the higher average level of debt and an increase in the financial cost of debt due to the extension of its maturity (6 and 7 year bonds),

• the adverse impact of the fair value of hedging derivatives,

while the previous six months posted a positive impact for the same item, as well as dividends and gains on the sale of investments, for a total of €2.6m.

Net income from discontinued operations stood at -€1.6m (vs. -€3.4m last year). Group net income posted a decrease in income of €7.7m.

BALANCE SHEET ITEMS

Growth was robust in H1 2016/2017, with the net creation of some 26,000 m² in additional retail space in France and abroad.

Investments totalled €27.5m in the first half, predominantly including:

• €9.1m in intangible fixed assets (development costs €5.1m, leasehold rights and franchises

  €0.3m, licences and software €2.4m, and structure-building IT projects €1.3m),

• €16.0m in property, plant and equipment (mainly new stores and renovations),

• €2.5m for changes in scope (acquisition of Autour de Bébé Suisse).

Growth in inventory, amounting to €261.1m at 31 August 2016 vs. €225.8m at 31 August 2015, was partially attributable to the transformation of the network of stores, and partially to the postponement of back-to-school sales; it was funded in part by an increase in supplier credit, which rose from €130.7m at 31 August 2015 to €161.1m at 31 August 2016.

Group consolidated capital totalled €100.0m at 31 August 2017, i.e. 18% of the balance sheet total.

Consolidated net financial debt amounted to €191.8m at 31 August 2016, on a par with 31 August 2015 (€184.2m).

CAPITAL TRANSACTIONS

Orchestra-Prémaman carried out a capital increase in September and October 2016 via a public OPF (firm price offer) in France and the placement predominantly offered to institutional investors in France and outside France.