Striving for Excellence Investor Presentation December 2011 Contents
Introduction
Striving for excellence
Our financial perspective
2 2 – One of the Top 5 Largest Sports and Fashion Companies in the North
“““11 Scandinavian sports and fashion brandsbrands””””
“““Sourcing“Sourcing offices in China, Hong Kong, Bangladesh, Vietnam, India, and Romania ”””
“““Distribution“Distribution through own retail, outlets, ee----commerce,commerce, franchise and wholesale ”””
“““Revenue“Revenue of DKK 3.9b *** and 2,344 employees ”””
“““More than 450 stores and 11,000 wholesale selling points around the worldworld”””” *) FY 2010/11
3 3 We Have a Proud Heritage in Scandinavian Fashion
InWear Group 1974: First 1986: Part Two is launched subsidiaries in 1980: First own 1973: Matinique is 1996: Copenhagen Sweden and Norway retail store in launched Stock Exchange 1973: First Danish Copenhagen 1969 .: InWear is fashion brand to set up founded production in Asia
2001: IC Companys is formed through merger Carli Gry 1973: Klaus 1974: Jackpot is 1948 : Carli Gry Helmersen launched founded takes over the 1986: Cottonfield company 1976: First is launched subsidiary in 1996: 1998: Peak Copenhagen Performance Norway Stock Exchange acquisition
4 4 Our Portfolio Was Since Strengthened by Acquisitions and Start-ups
2001/2002 2002/2003 2003/2004
ACQUISITION
SAINT TROPEZ TIGER OF SWEDEN
STARTSTART----UPSUPS
** * DESIGNERS REMIX SOAKED IN LUXURY BY MALENE BIRGER
5 5 IC Companys Has an Experienced Management Team with High Execution Power
IC Companys Executive Management
Niels Mikkelsen, CEO Chris Bigler, CFO Anders Cleemann, EVP Peter Fabrin, EVP Industry experience of more than 60 years in total – sports, fashion and fast moving consumer goods Growth creation through frames and principles Cash flow management giving stability and risk reduction Crisis management securing profitability and strength
6 6 Two Economic Crises but with Very Different Impact – Stronger, Transparent, Flexible and Efficient
IC Companys share price development AugAug----08080808 282 New SepSep----09090909 JanJanJan-Jan ---10101010 JulJulJul-Jul ---11111111 management Building Debt crisis 210 growth JulJulJul-Jul ---08080808 SepSep----08080808 Financial crisis foundation
NovNov----10101010 New structure 115 FebFeb----09090909 NovNov----11111111 Crisis AugAug----11111111 40 management New sourcing DecDec----08080808
7 7 Contents
Introduction
Striving for excellence
Our financial perspective
8 8 Our Vision: “To Be Among the Best Developers of Sports and Fashion Brands ”
Freedom Within the Framework:
Respect of each individual brand entrusting it with full ownership of the value chain
Best practice sharing in key areas of the value chain
Corporate Shared Services with targeted operational responsibilities
9 9 Our Mission: “To Build Successful Brands by Uniting Business Excellence with Creativity and Innovation ”
Knowledge center Retail/franchise Wholesale E-commerce New markets Sourcing Collection development Marketing/brand building
Corporate Shared Services IT, HR, Legal Corporate Finance, Financial Shared Service Corporate Responsibility, Sourcing, Logistics
10 10 IC Companys Is Represented in Multiple Segments, Particularly Affordable Luxury and Mid Market
Clothing type only has limited effect
CONTEMPORARY FORMAL CASUAL JEANS SPORT/LIFESTYLE
LUXURY (HIGH PRICE)
AFFORDABLE LUXURY (UPPER MID PRICE)
MID MARKET (MID PRICE)
FAST FASHION (LOW PRICE)
The price dimension is the primary driver
11 11 Having the Right Key Capabilities is Essential to Comparative rating 111 Very important Succeeding Within a Segment 222 Important
LUXURY AFFORDABLE LUXURY MID MARKET FAST FASHION
BRAND Heritage Mass media 111 Distinctness 111 222 Drive traffic 222 Celebrities PR PRODUCT Fast design DESIGN 111 Innovative 111 111 Merchandise 222 collections flow Accessories Quality Speed SOURCING 222 222 111 Flexibility 111 Standardi- sation Cost LOGISTICS 222 222 222 111 Selective Retail distribution excellence Own Vertical environment principles DISTRIBUTION 111 111 111 111 Global Geographic footprint conc.
12 12 Our Knowledge Centre Facilitates a Systematic and Iterative Knowledge Sharing Process
Knowledge center Defining best Knowledge practice sharing and innovation
Implementation and adaptation of Brand best practices
13 13 ‘Frames and Principles’ Is Our Catalogue of Best Practice Guidelines Implemented Throughout the Organisation
‘Frames and Principles’ Definition A catalogue of best practice Marketing Vision Vision principles for each of the 7 Build a strong brand with loyal end-consumers and support high sales performance Sourcing Vision KEY LEVERS Vision The marketing strategy is clearly defined and reflects the brands strategic priorities Build aThere strong is a detailed brand understanding with loyal of the end-consumers marketing spend and a and clear rationalesupport for the high sales performance STRATEGIC APPROACH disciplines Collectionallocation Development Vision Marketing is an integrated part of the ongoing business planning process KEY LEVERS Vision TARGETS Marketing initiatives are coordinated across channels to achieve maximum impact CROSS CHANNEL ThereDevelop is a structured, The collections marketing operational strategy marketing that is clearly reflect planni definedng theprocess and brandrefle andcts plans the DNA brandsare known and strategic positioning, priorities Not applicable meet end-consumer needs OPERATIONAL DEFINEDPLANNING STRATEGY and understood There by all is relevant a detailed parties understanding of the marketing spend and a clear rationaleto for marketing the AND OPERATING MODEL We andknowNew thesupports expected allocationMarkets effect the of business all initiativesVision andand follow financial up on the actual objectives impact of the brand Marketing is an integrated part of the ongoing business planning process All catalogues have a KEY LEVERSThe brand DNA Visionis clearly defined and executed consistently over time and across TARGETS CONSISTENT BRAND channels and consumerMarketing touch initiatives points are coordinated across channels to achieve maximum impact EXECUTION CROSS CHANNEL Marketing is consultedThereBuild is ain structured, all a decisionsCollections strong operational relating are brand aligned to marketing external with with the communication planniloyal brandng strategyend-consumers process and and and takes theyplans are are continuously known and s upportoptimized Not applicabletohigh sales performance OPERATIONALSTRATEGIC PLANNINGan active AND role inand identifying understoodWholesale andsupport by correcting all relevant the short- commun partiesVision and icationlong term that financial is not ‘on targets brand’ to marketing COMMERCIAL APPROACH We know the expectedCollections effect reflect of all the initiatives brand DNA and and follow there up is on a theclear actual understanding impact of the target group and their needs ConsumerKEY insights LEVERS are collectedVision in a structured approach on a continuous basis TARGETS LEVERAGING CONSUMER Insights are usedThe actively brand DNA to manage isVision clearly the defined brand andand optimizeexecuted consumerconsistently over time and across standardized structure: Collection structure takes into consideration consumer buying behavior and gives INSIGHTSINSIGHTS CONSISTENT BRANDSTRUCTURED communication COLLECTIONchannels and messaging and consumer touch points STRUCTURED COLLECTION designers and sourcersThe marketing a clear strategy frame and is clearly direction defined for the and creative reflects development the brands strategic prioritiesNot defined EXECUTION PLANNING Marketing is consultedTo inbe all decisionsa profitable relating to externaland preferred communication wholesale and takes partner through simplification, DEFINEDan STRATEGYactive role inPrice identifying and gross andThere margin correcting is atargets detailed commun are understanding differentiatedication that is ofa cross notthe ‘onmarketing product brand’ groups spend and and styles a clear rationale for the (before)(before) AND OPERATING MODEL innovationE-Commerceallocation and effectiveness Vision for collection Competitor insights are collectedwhere in appropriatea structured approach on a continuous basis Marketing is an integrated part of the ongoing business planning process development Competitor insights are used in the business planning process COMPETITOR INSIGHTS ConsumerKEY insights LEVERS are collectedVision in a structured approach on a continuous basis TARGETS LEVERAGING CONSUMER Insights are usedThe actively collection to manage developmentVision the brand process and is optimize optimized consumer to support the brands business model Marketing initiatives are coordinated across channels to achieve maximum impact INSIGHTSINSIGHTS EFFICIENT PROCESS communication and messaging CROSS CHANNEL We choose new markets based on growth potential, competitor analysis and theNot overall applicable market attractive ness (during)(during) CROSS CHANNEL The process is standardizedThere is a structured, to ensure operational consistent marketingexecution overplanni timeng process and plans are known Discipline vision OPERATIONAL DEFINEDPLANNING STRATEGYand AND Profitable,understood We by haveall highrelevant an ambitious performance parties growth plan wheree-Commerce goals and objectives stores are based whic onh the todrive potentialmarketing multi-channel in each market along expansion with OPERATING MODEL We knowRetail/Franchise the expecteda road map effect for of execution all initiatives Vision and follow up on the actual impact Competitor insights are collected in a structured Our aorganizationalpproach on a continuousset-up, roles basis and responsibilities effectively contribute to our profitability Competitor insightsThe brand are used priorities in the are business clear and planni giveng direction process to individuals decision making COMPETITOR INSIGHTSUNDERSTANDING COST AND KEY2 LEVERS All functions areThe trained brand to- DNA and isVision have clearly the defined necessary and information executed consi to makestently over time and across SALES DRIVERS CONSISTENT BRAND informed decisionschannels during and the consumer collectionWe develop touch developmen and points expandt process our distribution by taking a strategic approach in our customer selection and drive growth (during)(during) EXECUTION OUTSTANDING CUSTOMER Marketing is consultedthrough ineffective all decisionsWe Key have Account relatinga clearly management to defined external value communication discipline propositions forand the takes online store and have defined how the ACQUISITION DEFINED& an activeSTRATEGY role inANDOur identifying Outstanding innovative and onlinebusiness correcting channel models andcommun fits offer into highlyication a our clear overall that value profitable is business not proposition ‘on brand’ strat inspiringegy retail our conceptscustomers to engage with long potential term partnerships for expansion RETENTION OPERATING MODEL We optimize ourThe distribution objectives based and goals on detailed, are based str onuctured the potential mapping in & each segmentation market along with a road Collection performance is systematically analyzedmap, torganisationo understand and performance processes andto get there Key Levers FACT BASED FOLLOW-FOLLOW -UPUP FACT BASED FOLLOW --UP to identify the driversConsumer of success insights We and areprioritize failure collected our timein a structured and resources approach based on on a custo continuousmers potential basis and profitability AND EVALUATION KEY LEVERS AND EVALUATIONLEVERAGING CONSUMER Facts and figures Insights and key are1 learning’s used actively are usedto manage in future the collection brand and developments optimize consumer (after)(after) The customer acquisition investment is optimised across channels and we have INSIGHTSINSIGHTS communication We and work messaging efficiently by making detailedNew markets action are plans chosen that webased are onaccountable growth potential, for and cfollowompetitor up regularl analysisy and the overall market OUTSTANDING CUSTOMER detailed understanding of the economics to deliver to the objectives EXCELLENT ACQUISITION AND We develop existing customers byattractiveness challenging and coaching them in frequent meetings and yearly appraisals ACQUISITION AND There is a defined programme aligned to the customer lifecycle along with tactics We have an ambitious growth plan where goals and objectives are based on the potential in each OPERATIONS RETENTION DEFINED We engageSTRATEGY withto our engage customers each customer on an ongoing type based basis toon playcustomer an active insi ghtrole in optimizing their sales performance Competitor insights are collected in a structuredmarket approach along on with a continuous a road map basis for execution AND OPERATING MODEL Competitor insights are used in the business planniWe haveng process a clear perspective on as well as rationale for which locatons should be retail and franchise COMPETITOR INSIGHTS 2 Our Buying & Replenishment are based on the brand strategy and aligned to the Our shopping environmentcustomers online embodies Our purchase organizational all aspects behaviour of set-up, the brand roles identity. and responsibiliti The showrooms,es are aligned with our strategy and effectively Focus Areas the dialogue, theWe presentation closely monitor etc.contribute our inventory to our position profitability and react quickly to changes in demand ENGAGING CUSTOMEREXCELLENT OPERATIONS We inspire our Wecustomer plan and to buyexecute through promotions a innovative which approach deliver to the objective and serve up high- EXPERIENCE OUTSTANDING CUSTOMER OUTSTANDING We make CUSTOMERit easyquality to do content business whichOur with stores isus relevant through are well and mult known on-brandiple sales and highlypoints active in the local community ACQUISITION & RETENTION We focus on building strong customer relationships through a defined retention programme The look & feel embodies all aspects of the brand identity. The site planning and feature selection1 helps and inspires the customer to buy and complete the tasks ENGAGING CUSTOMER Our marketing and merchandising efforts are integrated across channels to ensure the user wants toOur perform operational principles for store operation, buying, VM and staff planning are WORLDWORLD----CLASSCLASSEXPERIENCE MULTI-MULTI --- consistent messaging, enforcing a unique and engaging experience defined and based on best practice CHANNEL INTEGRATION Our offline and We online are propositionsactively updating are aligned and maintaining and we serve our theproduc customert categories, across landing/category EXCELLENT OPERATIONSpages to keep theOur store ability fresh to and implement relevant is effective at all levels (HQ, Area management, Store) Frames and Principles channels, contributing to an engaging experience and profitable business Our marketing andWe merchandising monitor our cost efforts base are closely integra andted take across correctiv channelse actions to ensure to ensure maximum profitability at all times WORLD-WORLD -CLASSCLASS MULTI-MULTI - consistent messaging, enforcing a unique and engaging experience WORLD --CLASS MULTI -- 2 CHANNEL INTEGRATION Our offline and onlineOur customers propositions see are our aligned stores andas an we experience serve the customerstanding out across in the retail landscape ENGAGING CUSTOMER channels, contributing The customer to an engaging experience experience captures an thed profitable brand identity business through an inspiring approach to EXPERIENCE assortment, store design and customer service
Our marketing and merchandising efforts are integrated across channels to ensure consistent WORLDWORLD----CLASSCLASS MULTI-MULTI --- messaging, enforcing2 a unique and engaging experience CHANNEL INTEGRATION Our offline and online propositions are aligned and we serve the customer across channels, contributing to an engaging experience and profitable business
2
14 14 We Have Defined a Hierarchy of Synergies to Prioritize Our Efforts
Hierarchy of Synergies:
Knowledge and best practice sharing through execution of the 7 disciplines
Targeted operational synergies based on brands needs
General operational cost synergies across all brands
15 15 Our Corporate Platform Have Been Reduced Significantly
From 55 % of total cost and 1,800 employees…
…to 15 % of total cost and 400 employees
16 16 Corporate Shared Services Only Hold Functions Based on Value Creation and Deliver Services Based on BrandsBrands’’’’Needs
One size fits all Brands’ needs Franchise Collection development Affordable Luxury Outlet 80 million DKK Wholesale MidMid----marketmarket E-commerce Retail New Business Models Fast Fashion 1 billion DKK Merchandising planning
17 17 Contents
Introduction
Striving for excellence
Our financial perspective
18 18 Financial Guidelines to Secure Steady High Cash Flows
Guideline Underlying principle
Assets “““An“An asset light approach maximises our strategic manoeuvrability and secure a steady high cash flow ”””
Profitability “““Converting“Converting fixed to variable costs secures stable profitability in a volatile economic environment ”””
Return on “““Prioritising investments to where returns are maximised investment at a satisfactory level secures future access to capital ”””
Inventory “““High“High stock turnover reduces costs by freeing up capital for turnover other purposes and ensuring fresh goods ”””
Credit “““Strict“Strict credit control frees up capital for other purposes and control ensure a healthy customer base ”””
19 19 Top Priority in 2011/12: Secure Group Profitability Despite Significant Change in Economic Environment
Revenue, DKKb and gross margin, % EBITEBIT,, DKKm and EBIT margin, %
3.9 3.9-4.0 3.7 3.6 3.5 3.4 349 323 340 321 3.0 60.4% 60.8% 283 250-300 10.7% 10.1% 59.6% 9.3% 59.1% 59.1% 8.1% 8.2% 58.5% 162 6.4-7.5% 4.5%
2005/06 2007/08 2009/10 2011/12 2005/06 2007/08 2009/10 2011/12
Expected revenue growth in the range Expected EBIT growth in the range 0-2% in 2011/12 12-28% in 2011/12 Gross margin under pressure from Expected EBIT margin of 6.4-7.5% external factors and market conditions One-offs 2011/12 of DKK 23m
20 20 Stable Cash Flow Generation and Debt Reduction Expected to Continue
Operating cash flow, DKKm NIBDNIBD,, DKKm and NIBDNIBD/EBITDA/EBITDA *Working capital project 639
558 533
424* 402 326 340 335 291 316 311 1.7 243 1.4 180* 1.3 1.0 0.6 0.7 0 debt target
2005/06 2007/08 2009/10 2011/12 2005/06 2007/08 2009/10 2011/12
Cyclic earnings but steady cash flow Capital structure with long term NIBD- generation in the Group target of 0 DKK Working capital to be freed up in NIBD/EBITDA limit of 3 2011/12
21 21 Financial highlights The Brand Portfolio of IC Companys 111 Revenue, mDKK (growth, %) 222 Wholesale / retail – No Loss Making Brands in 2011/12 333 Selling points / stores
Development in Group brand portfolio 111 977 (+7%) 111 563 (+18%) 40% 222 70% / 30% 222 55% / 45% By Malene Birger 333 2,300 / 84 333 1,200 / 34
30% Saint Tropez 111 264 (+35%) 111 91 (+23%) 222 78% / 22% 222 65% / 35% Designers Remix 333 900 / 24 333 400 / 15 20% Tiger of Sweden Group Inwear Matinique 10% Part Two 111 404 (+13%) 111 289 (+11%) 222 58% / 42% 222 57% / 43% Cottonfield Jackpot Peak Performance 333 1,200 / 57 333 1,200 / 36 Latest year growth Latest year
(10%) (5%) 5% 10% 15% 20% 111 272 (+7%) 222 69% / 31% (10%) 333 1,100 / 12 Soaked in Luxury 111 426 (+7%) 111 203 (+5%) (20%) 222 41% / 59% 222 41% / 59% 5-yr compound annual growth rate 333 1,300 / 94 333 500 / 58
Different strategy for different brands 111 320 (+31%) 111 74 (-14%) 222 68% / 32% 222 75% / 25% Focus on core markets vs. focus on internationalisation 333 1,000 / 51 333 500 / 1
22 22 The Group Has Suffered from a Sudden Drop in Consumer Spending Due to Weather and the Current Debt Crisis
Symptomatic retail development in Germany
Positive same-store figures in Sharp decline in consumer most markets confidence and traffic Trajectory set on growth
23 23 IC Companys Gains Market Share due to Effective Campaign Activities
35% Development in Denmark, YoY Revenue growth, IC Companys 25% Growth in retail trade, clothing Flat development in 15% revenue FY 2011/12 5% Significant drop in consumer (5%) (15%) confidence Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Increased campaign activity 35% Development in Sweden, YoY Revenue growth, IC Companys to secure revenue 25% Growth in retail trade, clothing
15% Group performance in 5% main markets above (5%) (15%) development in retail Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 35% Development in Norway, YoY Revenue growth, IC Companys trade 25% Growth in retail trade, clothing
IC Companys continues to 15%
gain market share 5%
(5%)
(15%) Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11
24 24 Guidance FY 2011/12
Challenging markets and high uncertainty expected to continue Significant change in consumer spending Continuation of campaign activities to secure revenue
Further structural changes following corporate strategy expedited Full year effect on EBIT of DKK 50m Non-recurring costs of DKK 23m after proceeds
Revenue in the range of DKK 3.9 –––4.04.04.0 b
EBIT in the range of DKK 250 –––300 m after non-recurring costs
Investments in the range of DKK 90 –––110 m
25 25 Channel Split of Floor of Revenue Guidance FY 2011/12
20-22% 3.925 (0-2)% 3.900 (8-10)% (1-3)%
SameSame----storestore as in Q1 GTNas in GTN as in EEE-E---commercecommerce as in Q1 2010/11
2010/11 Wholesale Franchise Retail Outlet Currencies 2011/12
26 26 Distribution Split of Floor of Revenue Guidance FY 2011/12
60-70 4-6% 3.925 3.900 (1)-1% (40-50) 6-7% GTN as in 2010/11 SameSame----storestore as in Q1 EEE-E---commercecommerce as in Q1
2010/11 Pre-order OTB Same-store New stores Closed Currencies 2011/12 & Other Wholesale & Franchise Retail
27 27 28 28