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2016-10-26

TOKMANNI GROUP CORPORATION: THIRD QUARTER: PROFITABILITY IMPROVED - REVENUE AT LAST YEAR'S LEVEL, FULL-YEAR GUIDANCE UNCHANGED

TOKMANNI GROUP CORPORATION Business Review January-September
2016 Unaudited

TOKMANNI GROUP THIRD QUARTER: PROFITABILITY IMPROVED - REVENUE AT LAST YEAR'S
LEVEL, FULL-YEAR GUIDANCE UNCHANGED

Numbers in brackets refer to the corresponding period previous year if nothing
else is mentioned.

THIRD QUARTER HIGHLIGHTS

* Revenue at last year's level, EUR 187.0 million (187.8), -0.4%
* Like-for-Like revenue decreased by 3.2% due to the bankruptcy clearance
sale of department store Anttila and the exceptionally warm autumn which
postponed the autumn season affecting particularly clothing sales
* Four new stores to be opened in 2016 in store space released by Anttila.
Discussions continue for approximately ten additional Anttila stores, with
the target to open several additional new stores in store space released by
Anttila in 2017
* Adjusted gross profit improved to EUR 64.8 million (63.2), an adjusted
gross margin of 34.7% (33.6%)
* Adjusted EBITDA totaled EUR 18.1 million (17.3), 9.7% of revenue (9.2%)
* Adjusted EBIT totaled EUR 14.4 million (13.7), 7.7% of revenue (7.3%)
* Cash flow from operating activities totaled EUR 6.7 million (-1.7)
* Earnings per Share totaled 0.18 euros (0.27)

HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-SEPTEMBER 2016

* Revenue grew 2.7% to EUR 537.6 million (523.6)
* Like-for-Like revenue at last year's level, -0,2%
* Adjusted gross profit totaled EUR 184.4 million (177.6), an adjusted gross
margin of 34.3% (33.9%)
* Adjusted EBITDA totaled EUR 35.5 million (32.1), 6.6% of revenue (6.1%)
* Adjusted EBIT totaled EUR 24.1 million (21.2), 4.5% of revenue (4.0%)
* Cash flow from operating activities totaled EUR 15.0 million (-7.0)
* Earnings per share totaled 0.18 euros (0.05)

TOKMANNI'S SHORT TERM OUTLOOK 2016 UNCHANGED

Tokmanni estimates its revenue to grow based on the revenue from new and
relocated stores opened in 2015 and 2016, and on revenue of like-for-like
stores, which is expected to remain at the level of the previous year.

TOKMANNI'S CEO HEIKKI VÄÄNÄNEN ABOUT THE THIRD QUARTER: PROFITABILITY
IMPROVED, NET SALES AT LAST YEAR'S LEVEL, NEGOTIATIONS ABOUT ANTTILA STORE
SPACE PROCEEDING

"During the third quarter our profitability developed well which was mainly
attributable to a better gross margin and good cost control. The favorable
gross margin development was a result of our focused efforts to increase the
share of direct import and better campaign management in accordance with our
strategy.

As expected, Anttila's bankruptcy clearance sale caused market turbulence as
the price competition increased in the third quarter. We made a conscious
decision not to participate in this price competition which was the most
significant reason for weak like-for-like sales development. Another reason
was the exceptionally warm autumn, which postponed the autumn season and
affected Tokmanni's third quarter clothing sales. The market disruption
created by Anttila is temporary and we maintain our full-year guidance
unchanged.

Anttila's market pullout also creates many opportunities for Tokmanni both
when it comes to the redistribution of the customer base as well as to store
space released by Anttila. We have signed four leases for new stores to be
opened in 2016 in store space released by Anttila and negotiations are
on-going for approximately ten additional stores, with the target to open
several additional new stores in store space released by Anttila in 2017.
These stores would bring a good addition to Tokmanni's 2017 new store plan
which, without the Anttila stores includes ten new or relocated stores,
corresponding to approximately 20,000 square meters of new store space.
Opening new stores is one of the main drivers for Tokmanni's market shares,
revenue and earnings growth."

KEY FIGURES

---------------------------------------------------------------------------------------------------------------
| 7-9/2016 7-9/2015 Change 1-9/2016 1-9/2015 Change 1-12/2015 |
| Revenue, MEUR 187.0 187.8 -0.4% 537.6 523.6 2.7% 755.3 |
| Like-for-Like growth, % -3.2% -0.2% -0.2% -1.7% -0.6% |
| Number of baskets, M 11.1 11.0 1.2% 31.9 30.9 3.4% 43.3 |
| Gross profit, MEUR 64.7 63.3 2.3% 184.2 176.8 4.2% 257.5 |
| Gross margin, % 34.6 33.7 0.9 34.3 33.8 0.5 34.1 |
| Adjusted* gross profit, (MEUR) 64.8 63.2 2.6% 184.4 177.6 3.8% 258.1 |
| Adjusted* gross margin, % 34.7 33.6 1.0 34.3 33.9 0.4 34.2 |
| OPEX -47.1 -48.0 -2.0% -150.6 -151.7 -0.7% -207.7 |
| Adjusted* OPEX -47.5 -46.9 1.4% -151.3 -148.3 2.0% -203.7 |
| EBITDA, MEUR 18.4 16.4 12.7% 36.0 27.9 29.1% 53.9 |
| EBITDA% 9.9 8.7 1.1 6.7 5.3 1.4 7.1 |
| Adjusted* EBITDA, MEUR 18.1 17.3 4.2% 35.5 32.1 10.5% 58.5 |
| Adjusted* EBITDA, % 9.7 9.2 0.4 6.6 6.1 0.5 7.7 |
| EBIT, MEUR 14.8 12.8 15.7% 24.6 16.9 45.6% 39.1 |
| EBIT, % 7.9 6.8 1.1 4.6 3.2 1.4 5.2 |
| Adjusted* EBIT, MEUR 14.4 13.7 4.7% 24.1 21.2 14.1% 43.7 |
| Adjusted* EBIT, % 7.7 7.3 0.4 4.5 4.0 0.4 5.8 |
| Net financial costs, MEUR -1.5 -5.3 -71.6% -13.8 -15.8 -12.7% -20.9 |
| Capital expenditure, MEUR 2.4 -3.9** 5.3 3.9 9.0 |
| Net debt / adjusted EBITDA 2.5 3.4 2.5 3.4 2.7 |
| Net cash from operating activities, MEUR 6.7 -1.7 15.0 -7.0 35.0 |
| Average nr. of shares 58 869 22 274 47 554 22 274 22 274 |
| |
|during the period (1 000) |
| Earnings Per Share, EUR 0.18 0.27 0.18 0.05 0.67 |
| Personnel at the 3 133 1 164 3133 3164 3 293 |
| |
|end of the quarter |
---------------------------------------------------------------------------------------------------------------
*Adjustments affecting comparability are presented at the end of this review

** In the third quarter of 2015 the construction projects financed by Tokmanni
were sold which affected capital expenditure by EUR -6,6 million.

MARKET DEVELOPMENT

The total sales of the Finnish Grocery Trade Association's FTGA (www.pty.fi)
member department stores and hypermarket chains increased by 4.5% in the
third quarter of 2016 and 2.2% during the January-September 2016 period. The
non-grocery market, the market closest comparable to Tokmanni, grew 6.0%
during the third quarter and 1.2% in January-September 2016. The strong
growth in the third quarter was mainly attributable to Anttila's clearance
sale.

The liberalization of opening hours has had a slight positive effect on larger
store sales and especially hypermarkets have taken market shares from smaller
actors. Price competition has remained strong in the grocery retail market.

OPERATIONAL DEVELOPMENT

Store network development

Based on efficient roll-out and short ramp up, opening new stores is one of
the drivers for Tokmanni's revenue and earnings growth. Tokmanni has 158
stores across Finland and has identified several additional locations
suitable for new stores across Finland.

During the third quarter 2016, Tokmanni opened a new store in Ruoholahti in
Helsinki and its Kirkkonummi store moved to new and bigger premises. In
addition, Tokmanni has agreed to open four new stores in store space released
by Anttila. In 2016, Tokmanni's selling space will increase by approximately
8,000 square meters, slightly lower than the target for 2016. The number
includes the selling space reduction of the Tammisto store, which is
currently undergoing renovations and where the selling space will decrease by
2,500 square meters. During 2017, Tokmanni plans to open approximately ten
new or relocated stores, corresponding to approximately 20,000 square meters
of additional selling space. In addition, Tokmanni is in negotiations
regarding approximately ten stores released by Anttila with the target to
open several additional new stores. These stores would bring a good addition
to Tokmanni's 2017 new store plan and would speed up the plan to grow the
store network to approximately 200 stores.

FINANCIAL DEVELOPMENT

Revenue at last year's level

Tokmanni's revenue for the third quarter 2016 was at last year's level, EUR
187.0 million (187.8). Tokmanni continues to see good results of the
strategic measures taken with the target to improve like-for-like revenue.
However, third quarter conditions were exceptional due to the market
disruption caused by the Anttila clearance sale, as well as the exceptionally
warm autumn which postponed the autumn season affecting clothing sales all
over the Nordics. According to Tokmanni's calculations, Anttila's impact on
like-for-like revenue was approximately -2% and the weather impact on
clothing sales was more than -1%. As a consequence Tokmanni's like-for-like
revenue decreased by 3.2%. The price competition in groceries remained
strong.

Tokmanni's revenue for January-September 2016 totaled EUR 537.6 million
(523.6), a growth of 2.7%. Growth was driven by growth from new and relocated
stores opened in 2015 and 2016. Like-for-like revenue remained at last year's
level, -0.2%.

Profitability developed favorably

The third quarter 2016 gross profit improved to EUR 64.7 million (63.3), 34.6%
(33.7%) of revenue. Adjusted gross profit totaled EUR 64.8 million (63.7),
corresponding to a gross margin of 34.7% (33.6%). The favorable development
of the gross margin was attributable to the increas...

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