Adler Modemärkte AG: Annual Targets in Sight - Earnings and Free Cash Flow Significantly Improved

Nine-Month EBITDA up EUR14.3 Million to EUR 6.6 Million:
Annual Targets in Sight - Earnings and Free Cash Flow Significantly Improved
Free Cash Flow up EUR 26.6 Million to EUR 6.4 Million
 

Haibach (near Aschaffenburg), 9 November 2017: Nine months into the financial year, Adler Modemärkte AG remains firmly on track to achieve its annual targets for 2017 after a healthy third quarter in which earnings and free cash flow improved considerably. Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose significantly to EUR 6.6 million in the first three quarters from EUR -7.7 million in 2016. The improvements were due to sustainable increases in efficiency and a non-recurring gain on the sale of real estate.

Revenue up 2% in Q3
Revenue amounted to EUR 374.2 million at the end of the first nine months of 2017, almost exactly level with the prior-year figure of EUR 375.0 million. Like-for-like revenue declined by 1.9%, which is roughly in line with the general trend among German retailers according to TW-Testclub, Textilwirtschaft magazine's survey panel. ADLER reported a 1.9% improvement in revenue to EUR 120.2 million in the third quarter of 2017 (Q3 2016: EUR 117.9 million).

In the first nine months of the year, cost of materials decreased by 2.3% from EUR 183.5 million to EUR 179.2 million due to an adjustment in purchasing volumes. Gross profit increased accordingly, rising from EUR 191.5 million to EUR 194.9 million, the gross profit on goods went up from 51.1% to 52.1%. The process optimisation measures implemented in recent quarters resulted in an almost 6% reduction in personnel expenses to EUR 73.1 million (9M 2016: EUR 77.7 million), even though the costs for staff restructuring measures rose by EUR 1.4 million year on year.

EBITDA excluding non-recurring items increases by more than EUR 8 million
Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose significantly in the reporting period from EUR -7.7 million to EUR 6.6 million. Earnings were also affected by two non-recurring items in addition to the above efficiency measures. The sale of two buildings in Austria in the second quarter generated a non-recurring gain of EUR 7.5 million; by contrast, the costs for personnel restructuring measures, which were up EUR 1.4 million, had an offsetting effect on earnings. Excluding these non-recurring items, nine-month EBITDA amounted to EUR 0.4 million (9M 2016: EUR -7.7 million). As a reflection of the operating improvement in profitability, EBITDA amounted to EUR -3.6 million in the third quarter of 2017, well in excess of the prior year quarter (EUR -8.4 million). A loss in Q3 is normal under ADLER's seasonal, cyclical business model. By contrast, the majority of profit is generated in the final quarter of the year (see forecast).

Given the stable depreciation, amortisation and write-downs, ADLER reported earnings before interest and taxes (EBIT) of EUR -5.7 million for the first nine months, following EUR -20.1 million in the previous year. Earnings before taxes (EBT) also improved significantly, rising from EUR -23.8 million to EUR -9.7 million. At EUR -7.0 million, a net loss was likewise generated after taxes (9M 2016: EUR -18.4 million). This figure is expected to be well in the black for the full year.

Free cash flow rises by EUR 26.6 million to EUR 6.4 million
One of the core targets for 2017 - a substantial improvement in cash flow - remained on track at the end of the first nine months. Net cash flows from operating activities rose by more than EUR 20 million to EUR 8.3 million. Cash flows from investing activities increased as expected from EUR -8.4 million to EUR -1.9 million due to the non-recurring items stemming from the real estate transactions. This enabled ADLER to increase its free cash flow significantly to EUR 6.4 million in the first three quarters of 2017 (9M 2016: EUR -20.2 million).

As announced, the cash outflow typically seen in the reporting period saw a very significant year-on-year reduction, with cash and cash equivalents decreasing by just EUR 6.2 million as against the end of 2016 to EUR 36.6 million. In the comparable period of 2016, that figure had decreased by EUR 38.1 million to EUR 14.0 million. In addition to this very solid liquidity buffer, ADLER's balance sheet structure remains extremely sound. Despite the net loss, the equity ratio amounted to 35.7% as at 30 September 2017 (30 September 2016: 33.5%), and is expected to return to well above the 40% mark by the end of 2017.

Forecast for full year 2017 confirmed: operating EBITDA expected to climb to EUR 27-30 million
Given its positive performance over the first nine months of the year, ADLER confirms the forecast for its operating business for the current year, as given in the 2016 Annual Report. Despite what continues to be a challenging environment for the textile retail industry, ADLER's Executive Board expects operating EBITDA to improve as against 2016 from EUR 23.3 million to EUR 27-30 million. The net profit actually reported will far exceed this figure, however, due to the non-recurring gains on the real estate transactions, particularly given that ADLER expects additional positive non-recurring items from further real estate sales to boost the bottom line in the fourth quarter of 2017. However, it is not presently possible to quantify these positive effects. The forecast for operating earnings is based on continuing expectations of a slight drop in revenue as against the 2016 financial year (EUR 544.6 million). It is expected that revenue generated by the online shop will once again significantly exceed the 2016 figure.

The full report on the first nine months of 2017 is available for download at http://www.adlermode-unternehmen.com/en/investor-relations/reports-and-publications/financial-reports/2017/

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^* based on 18,510,000 no-par value shares.

Contact:
Adler Modemärkte AG
Investor Relations
Katrin Schreyer
Tel.: +49 6021 633 1828
Email: investorrelations@adler.de