Montpellier, 16 March, 2017

Partnership contract signed with Reunion Island group LOCATE Corrections subsequent to PCAOB audit of consolidated annual accounts (financial years ending 28 February, 2015 and 29 February, 2016) 1/ Partnership contract with LOCATE Orchestra-Prémaman Group has signed a partnership contract with LOCATE, the Reunion Island's leading selective retailer. The commission-affiliation agreement is aimed at building a network of multi-format stores across the island.

The partnership provides for:

  • LOCATE's acquisition of the three stores already being operated on a commission-affiliation basis under the Orchestra banner on the Reunion Island (generating €9m in sales incl. tax), in the first half of 2017,

  • The subsequent opening of a number of variety stores and megastores over the next three to five years, with a target to deliver sales of €25m incl. tax.

This transaction is consistent with the group's stated aim of expanding through franchising and partnerships, thereby lowering its CAPEX while keeping to its projected growth path.

2/ PCAOB audit of consolidated annual accounts

Orchestra Prémaman S.A. (ENXTPA: KAZI) and Destination Maternity (NASDAQ: DEST) are pushing ahead with efforts to implement the final merger agreement (the "Agreement") reached between the two parties on 19 December, 2016.

The parties are still expecting all of the conditions provided for in the Agreement to be waived and for the transaction to go ahead at the end of H1 2017.

Under the terms of the Agreement, Destination Maternity's shareholders are to receive American Depositary Shares ("ADSs") representing shares in Orchestra-Prémaman in exchange for their ordinary shares in Destination Maternity. As part of the required procedure for the distribution of ADSs to Destination Maternity shareholders and their admission to trading on the NASDAQ stock exchange, Orchestra-Prémaman S.A. had to submit its consolidated annual accounts for the financial years ending 29th February, 2016 and 28th February, 2015 to a statutory audit, in accordance with the standards set out by the American Public Company Accounting Oversight Board (PCAOB). The audit concluded that a certain number of corrections needed to be made to both the group's consolidated annual accounts (FY ending 28 February, 2015 and 29 February, 2016) and interim accounts (periods ending 31 August, 2015 and 31 August, 2016), as detailed below.

Please note that these corrections, which had a negative impact on consolidated group earnings and earnings per share, in no way undermined group's reported Gross Operating Profit, and only affected Group equity in a positive manner, with the latter increasing to €102.3m at 31 August 2016 (up from the €100m originally "reported").

Description of corrections

Fair value of acquired Destination Maternity (DM) shares and recognition of derivatives (year ending 29 February 2016 and interim period ending 31 August 2016)

  1. Explanation

    During the financial year ending 29 February, 2016, Orchestra-Prémaman acquired a 13.7% stake in DM's capital for €16.4m (including transaction costs), which it subsequently sold to the company Yeled Invest on 2 May 2016 for the same price. Yeled Invest had paid a down payment of €16.2m for this transaction on 29 February, 2016 (to compensate the Yeled Invest current account).

    DM's shares were therefore booked at historical cost in the financial statements on 29 February 2016.

    The equity sale agreement pertaining to Orchestra-Prémaman's sale of DM shares to Yeled Invest, concluded on 2 May, 2016, gives Orchestra-Prémaman the right to buy the divested shares back at the purchase price paid by Yeled Invest within a period of 24 months, with a provision for a top-up price to be paid in the event of a rise in DM's share price.

    Orchestra-Prémaman is hedged against risks of a decline in DM's share price and could potentially be paid a top-up amount by Yeled Invest (in the event of a rise in DM's share price) equivalent to the difference in the price of the share at the time the transaction was concluded and the historical price of DM shares.

    Consequently, this agreement includes two derivative instruments, which are considered to be advantages offered to Orchestra- Prémaman by its parent company, Yeled Invest, the value of which must be booked to the accounts.

  2. Impact on annual accounts for FY ending 29th February, 2016

  • Balance sheet assets were marked up by €3.9m, which corresponds to the fair value of the derivatives and the decline in value of the investment in DM, net of tax,

  • Shareholders' equity was marked up by €3.9m, net of tax.

    3) Impact on interim earnings, for the period ending 31 August, 2016

  • Financial result: - €4.6m

    - Tax: €1.5m

  • Net profit: -€3.1m

    Cash flow statement for financial years ending 28 February, 2015 and 29 February, 2016 and for the interim period ending 31 August, 2016

  • Explanation

    The cash flow statement, which accurately reflects the company's cash position at the opening and closing of the accounts for the periods concerned, wrongly included a number of transactions that were not settled in cash.

    Accounting transactions such as these, which have not been disbursed or paid for, must be excluded from the cash flow statement.

  • Impact on annual accounts for FY ending 28 February, 2015

    These transactions concern the purchase of IT equipment via leasing contracts (€3.3 million) and also the variation in vendor liabilities with respect to the acquisition of fixed assets (€4.2 million).

  • Impact on annual accounts for FY ending 29 February, 2016

    These transactions concern:

  • the sale of shares in Karina: offsetting of the sale booked under net cash flows generated by financing activities (€20 million), and of the repayment to Yeled Invest, via current account netting booked under cash flows generated by financing activities (€8 million) and WCR cash flows, resulting from the residual receivable due to Yeled Invest (€12 million),

  • the interim payment (via netting of the Yeled Invest current account) on the sale of DM shares.: offsetting the effects of current account netting between cash flows generated by financing activities and the WCR (€16.2 million).

  • Impact on interim accounts for the period ending 31 August, 2016

  • These transactions concern:

  • payment of the second tranche of the selling price of shares in Karina via netting of the Yeled Invest current account (€6 million),

  • the sale of shares in DM (€16.4 million) with no cash flows generated by investing activities, in the amount of the interim payment (€16.2 million) that was offset via the Yeled Invest current account in February 2016,

  • the purchase of IT equipment via leasing contracts (€3.6 million).

Removals from the scope of consolidation during FY ending 29 February, 2016

  1. Explanation

    The disposal of the 50% stake in the company Karina generated a capital gain of €19.4m, which was booked to the financial statements.

    The difference in the value of the Karina shares booked to the financial statements and that booked to the consolidated company accounts, which came to €1.2m, was wrongly recorded under shareholders' equity, when it should have been deducted from capital gains on disposals.

  2. Impact on annual accounts for FY ending 29 February, 2016

Operating profit was reduced by €1.2m ("Other Operating Income and Expenses" line).

On the respective accounts closing dates (28 February, 2015, 31 August, 2015, 29 February, 2016 and 31 August, 2016), Yeled Invest held a 90.55% stake in Orchestra-Prémaman's capital. The capital increases launched in September and October 2016 subsequently lowered Yeled Invest's stake in Orchestra-Prémaman to 68% (and gave it around 79% of its voting rights).

Yeled Invest currently owns around 13.7% of DM. These shares were acquired from Orchestra-Prémaman on 2 May, 2016, the latter having acquired them on the market in September and December 2015. In the event of a merger, Yeled Invest stands to receive Orchestra-Prémaman shares in exchange for its DM shares.

Payment of intragroup dividend (interim period ending 31 August, 2015 and FY ending 29 February, 2016)

  1. Explanation

    The dividend paid by the company Fimitobel, before being withdrawn from the scope of consolidation, was not properly eliminated from the accounts.

  2. Impact on interim accounts for the period ending 31 August, 2015

    Financial Result reduced by €1.9m.

  3. Impact on annual accounts for FY ending 29 February, 2016

Operating profit reduced by €1.9m ("Other Operating Income and Expenses" line). Earnings per share

  1. Explanation

    The number of shares in circulation used to calculate EPS wrongly included treasury stock.

  2. Impact on annual accounts for financial years ending 28 February, 2015 and 29 February, 2016 and on interim periods ending 31 August, 2015 and 31 August, 2016

The table below shows the group's earnings per share as reported in the aforementioned accounts, as well as the earnings per share after correction and the variation between these two figures.

28/02/2015

Earnings per share

Reported

Adjusted

Variation

€7.01

€7.52

7.3%

31/08/2015

€2.11

€2.27

7.3%

29/02/2016

€7.25

€7.81

7.8%

31/08/2016 *

-€0.47

-€0.51

-8.2%

* after five-for-one stock split (3 August, 2016)

Summary of corrections to the consolidated P&L account and consolidated balance sheet position

28/02/15

No further corrections other than to EPS as detailed above

31/08/15

Reported

Fimitobel Dividends

Earnings per share

Adjust ed

Gross operating profit

28 832

-

-

28 832

Financial result

1 088

-

1 853

-

-

7 65

Consolidated net profit

6 7 63

-

1 853

-

4 910

Earnings per share

2,11

(0,62)

0,16

1 ,65

A

B

C

A +B +C

Balancesheet,inK

Shareholders' equity *

97 090

-

-

97 090

Total assets

529 951

-

-

529 951

PR O FIT & LO S S , i n € K

*no impact on shareholders' equity at 31 August 2015 as the adjustment of consolidated reserves offset the adjustment in earnings

PRO FIT & LO SS, i n €K

29/02/16

Reported

Deconsolidation of Karina*

Fimitobel dividends *

DM share valuation

Reclassifications**

Earnings per share

Adjusted

Gross operating profit

50 631

-

-

-

-

-

50 631

Other operating income and expenses

14 393

- 1 256

- 1 853

-

-

-

11 284

Financial result

- 3 239

-

-

-

-

-

- 3 239

Consolidated net profit

23 204

- 1 256

- 1 853

-

-

-

20 095

Earnings per share

7,25

(0,42)

(0,62)

0,00

0,00

0,56

6,77

BALANCE SHE ET, i n €K

A

B

C

D

E

F

A+B+C+D+E+F

Shareholders' equity

111 676

-

-

3 902

-

-

115 578

Total assets

557 438

-

-

3 902

7 976

-

569 316

* no impact on shareholders' equity as of 29 February 2016 because the adjustment of consolidated reserves offset the adjustment in earnings

** line item reclassification for balance sheet assets/liabilities (clients and change derivatives instruments). No impact on earnings or shareholders' equity

PROFIT & L OSS, in €K

31/08/16

Reported

DM shares and derivatives

Reclassifications*

Earnings per share

Adjusted

Gross operating profit

20 301

-

-

-

20 301

Financial result

- 5 484

- 4 617

-

-

- 10 101

Taxes

- 2 972

1 540

-

-

4512

Consolidated net profit

- 7 554

- 3 077

-

-

- 10 631

Earnings per share

(0,47)

(0,21)

0,00

(0,04)

(0,72)

BALANC E SHEET, in €K

A

B

C

D

A+B+C+D

Shareholders' equity

100 012

2 257

-

-

102 269

Total assets

565 290

2 257

2 883

-

570 430

* line item reclassification for balance sheet assets/liabilities (change derivatives instuments). No impact on earnings or shareholders' equity

** after five-for-one stock split (3 August, 2016)

Upcoming dates:

Annual sales figures for 2016/2017 - 10 April 2017 after close of trade

Contacts:

ACTIFIN - Stéphane RUIZ - 01 56 88 11 15 -sruiz@actifin.fr

ACTIFIN - Edouard de MAISSIN - 01 56 88 11 14 -edemaissin@actifin.fr

ORCHESTRA-PREMAMAN

Public limited company with capital of €22,245,732 Headquarters: 200 avenue des Tamaris, Zac Saint Antoine, 34130 Saint-Aunès.

398 471 565 R.C.S. MONTPELLIER

Orchestra-Prémaman SA published this content on 16 March 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 17 March 2017 09:53:09 UTC.

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