Stockmann Group's Financial Statements Bulletin 2017

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Stockmann Retail and Real Estate improved their operating results in 2017, Lindex’s operating profit declined

 STOCKMANN plc, Stock Exchange Release 14.2.2018 at 8:00 EET

October-December 2017, continuing operations:
– Consolidated revenue was EUR 315.7 million (348.0).
– Revenue in comparable businesses was down by 0.2%.
– Gross margin was 56.8% (55.8).
– Adjusted operating result was EUR 24.2 million (34.9).

January-December 2017, continuing operations:
– Consolidated revenue was EUR 1 055.9 million (1 175.7).
– Revenue in comparable businesses was down by 1.5%.
– Gross margin was 55.8% (55.7).
– Adjusted operating result was EUR 12.3 million (30.9).
– Reported operating result was EUR -148.4 million (28.3),
including an impairment charge of EUR 150 million in Lindex’s goodwill.
– Adjusted earnings per share were EUR -0.59 (-0.14).

The food operations in Finland, which were divested on 31 December 2017, have been classified as discontinued operations. The comparison figures have been adjusted accordingly. The comments in the Financial Statement Bulletin refer only to continuing operations.

The Board of Directors will propose no dividend to be paid for the financial year 2017.

Guidance for 2018:
Stockmann expects the Group’s revenue for 2018 to be on a par with the previous year. Adjusted operating profit is expected to improve in 2018.

CEO Lauri Veijalainen:
Stockmann achieved a positive operating result in 2017, but the result declined from the previous year. Lindex’s performance was not satisfactory, so we have initiated firm measures to ensure its turnaround. Susanne Ehnbåge will start as the new CEO of Lindex at the latest in August. Stockmann Retail and Real Estate both continue to head in the right direction with visibly improved results in 2017. We must however increase the speed of the transformation.

Stockmann Retail's operating result improved by EUR 18.5 million, thanks to increased comparable revenue and significantly decreased costs. The best development was achieved in the online store and in the Baltic department stores. However, in the fourth quarter we didn’t maintain the good progress of the first three quarters of the year, and the outcome was lower than expected. The result for the whole year remained at a loss. Our main target in 2018 is for Stockmann Retail’s adjusted operating result (EBIT) to be positive.

Real Estate continued its good growth in revenue and operating profit in 2017. Also the fair value of Stockmann’s properties improved. Lindex's operating profit fell significantly in 2017 as the revenue declined in the main markets. Its performance did, however, improve towards the end of the year, with an operating profit of EUR 10 million in the last quarter.

We are entering 2018 from a somewhat more challenging starting point, and the first-quarter operating result will still remain on a low level. The past year shows that our operations must be able to respond more quickly to rapid changes both in the market and in customer behaviour. We will invest more heavily in digitalisation, secure sales, and boost the implementation of efficiency measures in order to improve our results.

KEY FIGURES

Continuing operations
10-12/
2017
Restated
10-12/
2016

1-12/
2017
Restated
1-12/
2016
Revenue, EUR mill. 315.7 348.0 1 055.9 1 175.7
Gross margin, % 56.8 55.8 55.8 55.7
EBITDA, EUR mill. 34.1 47.5 67.6 85.6
Adjusted EBITDA, EUR mill. 39.8 50.1 73.2 88.2
Operating result (EBIT), EUR mill. 13.6 32.3 -148.4 28.3
Adjusted operating result (EBIT), EUR mill. 24.2 34.9 12.3 30.9
Net financial items, EUR mill.* -10.9 -9.1 -31.1 -23.1
Result before tax, EUR mill. 2.6 23.2 -179.5 5.2
Result for the period, EUR mill. -12.2 20.9 -198.1 -7.5
Earnings per share,
undiluted and diluted, EUR
-0.19 0.27 -2.82 -0.18
Personnel, average 7 329 7 660 7 360 8 164
Continuing and discontinued operations** 10-12/
2017
10-12/
2016
1-12/
2017
1-12/
2016
Net earnings per share,
undiluted and diluted, EUR
-0.20 0.36 -2.98 -0.12
Cash flow from operating activities, EUR mill. 85.7 96.1 25.9 41.5
Capital expenditure, EUR mill. 10.5 14.7 34.7 44.2
Equity per share, EUR 12.29 14.99
Net gearing, % 83.8 68.3
Equity ratio, % 43.0 48.3
Number of shares, undiluted and diluted, weighted average, 1 000 pc 72 049 72 049
Return on capital employed, rolling 12 months, % -9.1 1.8

* In 2017 includes in 2017 a write-off of EUR 3.8 million related to Stockmann’s investment in Tuko Logistics Cooperative (Q2 2017), EUR 2.0 million related to Seppälä (Q3 2017), EUR 1.5 million related to Hobby Hall (Q4 2017) and in 2016, a write-off of EUR 5.0 million related to Seppälä (Q4 2016).
** Discontinued operations include department store operations in Russia (Q1 2016), and Stockmann Delicatessen food operations in Finland (Q1 2016-Q4 2017).

Items affecting comparability

EUR million 10-12/
2017
Restated 10-12/2016 1-12/
2017
Restated
1-12/2016
Adjusted EBITDA 39.8 50.1 73.2 88.2
Adjustments to EBITDA
Onerous contracts related to restructuring -6.9 -6.9
Lindex's restructuring arrangements -2.7 -2.7
Fair value gains and losses on
investment properties
4.0 4.0
ICT outsourcing -2.6 -2.6
Adjustments total -5.6 -2.6 -5.6 -2.6
EBITDA 34.1 47.5 67.6 85.6
EUR million 10-12/
2017
Restated 10-12/2016 1-12/
2017
Restated
1-12/2016
Adjusted operating result (EBIT) 24.2 34.9 12.3 30.9
Adjustments to EBIT
Lindex goodwill impairment -150.0
Write-down of ICT investments related to restructuring -5.0 -5.0
Onerous contracts related to restructuring -6.9 -6.9
Lindex's restructuring arrangements -2.7 -2.7
Fair value gains and losses on
investment properties
4.0 4.0
ICT outsourcing -2.6 -2.6
Adjustments total -10.6 -2.6 -160.6 -2.6
Operating result (EBIT) 13.6 32.3 -148.4 28.3

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 reported operating result (EBIT). Stockmann also uses the term “revenue in comparable businesses� which refers to revenue excluding Hobby Hall, which was divested on 31 December 2016, the Oulu department store, which was closed on 31 January 2017, and the Lindex stores in Russia, which were closed in 2016. See further information in the notes to the Financial Statements.

OUTLOOK FOR 2018

In the Stockmann Group’s largest operating countries, Finland and Sweden, the general economic situations have improved and according to forecasts by the national central banks, the GDP growth is expected to continue in 2018. Also consumer confidence is estimated to continue its positive development.

However, purchasing behaviour is changing due to digitalisation and increasing competition. This is reflected in the outlook for the fashion market, which according to Stockmann’s management estimate is not increasing as rapidly as the economy in general.

In the Baltic countries, the outlook for the retail trade is, according to the management estimate, expected to be better than that for the Stockmann Group’s other market areas.

Stockmann will continue improving the Group’s long-term competitiveness and profitability. The efficiency measures launched in Lindex at the end of 2017 and at Stockmann in the beginning of 2018 will be mostly implemented during the spring and they will be fully visible in the 2019 operating costs. As the efficiency measures will not bring significant cost savings during the first quarter of 2018, the Group’s operating result in the first quarter is not likely to improve from the previous year’s level.

As a result of the profitability improvement programme, Lindex’s operating profit for the full year is expected to increase from 2017. The Stockmann Retail division, which is still loss-making, is targeting to achieve a positive adjusted operating result in 2018. Real Estate is expected to continue its stable profitable performance.

Capital expenditure for 2018 is estimated to be approximately EUR 40-45 million, which is less than the estimated depreciation for the year.

GUIDANCE FOR 2018

Stockmann expects the Group’s revenue for 2018 to be on a par with the previous year. Adjusted operating profit is expected to improve in 2018.

CORPORATE GOVERNANCE STATEMENT

Stockmann will publish a separate Corporate Governance Statement for 2017 in line with the recommendation by the Finnish Corporate Governance Code. The statement will be published during the week starting 26 February 2018 (week 9).

Financial Statements Bulletin 2017
This company announcement is a summary of Stockmann's Financial Statements Bulletin 2017 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.

Annual General Meeting 2018
The Annual General Meeting of Stockmann plc will be held on Thursday 22 March 2018 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 14 February 2018.

Press and analyst briefing and webcast
A press and analyst briefing will be held today, on 14 February 2018 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 webcast by this link or on the address stockmanngroup.com. To participate in the webcast, please dial one of the numbers below 5–10 minutes before the webcast begins. The recording and presentation material are available on the company's website after the event.

Finland: +358 (0)9 7479 0360
Sweden: +46 (0)8 5033 6573
United Kingdom: +44 (0)330 336 9104
United States of America: +1 323 794 2095

Confirmation code: 917814

Further information:
Lauri Veijalainen, CEO, tel. +358 9 121 5062
Kai Laitinen, CFO, tel. +358 9 121 5800

www.stockmanngroup.com

STOCKMANN plc

Lauri Veijalainen
CEO

Distribution:
Nasdaq Helsinki
Principal media

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Marcus Clinker

Marcus Clinker

Marcus is a reporter on the Political Capital team focusing on money in politics. Before joining Daily Telescope, he worked as a researcher and writer for the Institute for Northern Studies at Ohio State University and as a freelance journalist in Portalnd, having been published by over 20 outlets including NPR, the Center for Media and Democracy,The Huffington Post, Salon, Truthout and VICE.com.
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