Ic Group Annual Report 2016/17

IC GROUP ANNUAL REPORT 2016/17 MANAGEMENT COMMENTARY 1 FINANCIAL HIGHLIGHTS AND KEY RATIOS 2 THE GROUP IN SHORT 3 FINANCIAL FACTS 2016/17 4 MANAGEMENT’S LETTER 6 OUTLOOK 7 STRATEGY AND GROUP STRUCTURE 10 BUSINESS SEGMENTS 24 CONSOLIDATED FINANCIAL REVIEW 26 RISK MANAGEMENT 28 CORPORATE RESPONSIBILITY 29 CORPORATE GOVERNANCE 30 EXECUTIVE TEAM AND BOARD OF DIRECTORS 35 SHAREHOLDER INFORMATION

CONSOLIDATED FINANCIAL STATEMENTS 38 CONSOLIDATED INCOME STATEMENT 39 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 40 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 41 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 42 CONSOLIDATED STATEMENT OF CASH FLOWS 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

PARENT COMPANY FINANCIAL STATEMENTS 82 INCOME STATEMENT 82 STATEMENT OF COMPREHENSIVE INCOME 83 STATEMENT OF FINANCIAL POSITION 84 STATEMENT OF CHANGES IN EQUITY 85 STATEMENT OF CASH FLOWS 86 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

STATEMENTS 96 STATEMENT BY THE MANAGEMENT 97 THE INDEPENDENT AUDITOR’S REPORT

GROUP STRUCTURE AND KEY RATIOS 100 GROUP STRUCTURE 101 DEFINITION OF KEY RATIOS FINANCIAL HIGHLIGHTS AND KEY RATIOS

DKK million 2016/17 2015/16 2014/15 2013/14 2012/131)

INCOME STATEMENT Revenue 2,749 2,665 2,638 2,563 2,424 Gross profit 1,519 1,513 1,446 1,470 1,371 Operating profit before depreciation and amortization (EBITDA) 205 306 263 284 255 Operating profit (EBIT) 125 243 207 221 191 Net financials (3) (7) (8) (5) (13) Profit for the year before tax 122 247 201 216 178 Profit for the year of continuing operations 92 192 154 160 138 Profit/loss for the year of discontinued operations - 3 (14) 5 (134) Profit for the year 92 195 140 165 4

STATEMENT OF FINANCIAL POSITION Total assets 1,393 1,444 1,852 1,854 2,022 Average invested capital including goodwill 772 736 659 708 914 Net working capital 318 314 268 314 279 Total equity 723 740 884 833 809 Non-controlling interest 10 7 5 4 4 Net interest-bearing debt, end of year 17 25 82 52 118

STATEMENT OF CASH FLOWS Cash flow from operating activities 175 183 226 264 232 Cash flow from investing activities (88) 55 15 (91) (167) Investments in property, plant and equipment (72) (81) (45) (77) (58) Free cash flow 87 238 241 173 65 Cash flow from financing activities (79) (319) (172) (109) (35) Net cash flow for the year 8 (81) 69 64 30

KEY RATIOS (%) Revenue growth 3.2 1.0 2.9 5.7 5.5 Gross margin 55.3 56.8 54.8 57.3 56.6 Cost ratio 50.7 47.7 47.0 49.3 48.7 EBITDA margin 7.5 11.5 10.0 11.0 10.5 EBIT margin 4.5 9.1 7.8 8.6 7.9 Tax rate 24.0 22.2 23.2 25.8 22.5 Return on equity 12.2 23.5 18.0 19.5 16.9 Equity ratio 51.9 51.2 47.5 45.3 40.0 Return on invested capital, 12 months trailing EBIT2) 16.2 33.0 31.4 31.2 20.9 Net working capital in proportion to 12 months trailing revenue 11.6 11.8 10.2 12.3 11.5 Cash conversion 0.7 1.0 1.2 0.8 0.3 Financial gearing 2.4 3.4 9.3 6.3 14.6

SHARE-BASED RATIOS Average number of shares excluding treasury shares, diluted (thousands) 16,639 16,678 16,550 16,447 16,402 Share price, end of year, DKK 140.0 172.0 187.5 185.5 122.0 Earnings per share, DKK 5.3 11.6 8.5 9.9 0.1 Diluted earnings per share, DKK 5.3 11.6 8.5 9.9 0.1 Diluted cash flow per share, DKK 10.5 11.0 13.7 18.2 14.2 Diluted net asset value per share, DKK 42.9 44.0 53.1 50.3 49.1 Diluted price/earnings, DKK 26.4 14.8 22.1 18.7 1,220.0

EMPLOYEES Number of employees, calculated as FTEs, end of year 1,186 1,146 1,042 1,047 1,264 NUMBER OF STORES (OWN STORES) Retail stores 126 115 95 107 102 Concessions 43 42 42 41 42

The key ratios have been calculated according to the recommendations set out in ”Recommendations & Financial Ratios 2016” issued by the Danish Society of Financial Analysts.

1) Comparative figures in the income statement have been adjusted to reflect that the Mid Market division has been presented as discontinued operations. Other key ratios for 2012/13 have not been adjusted. 2) Return on invested capital is calculated as EBIT’s share of invested capital, cf. definition of key ratios on page 101.

1 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY IC GROUP

THE GROUP IN SHORT AMBITION

IC Group operates in the apparel and fashion industry. As a portfolio company, we The ambition of the Group Premium create value through an active ownership of brands within the Premium segment. brands is to generate revenue growth, We focus on this market segment as it has historically been characterized by strong and thereby also for the Group as a growth rates and high earnings. This segment is also characterized by a conside- whole. Concurrently with the expected rable degree of internationalization which is also the strategic target of all of the higher revenue, it is also our ambition to Group Premium brands. improve the EBIT margin.

PREMIUM BRANDS

Peak Performance was founded in With its strong roots in classic menswear Since its foundation in 2003, By Malene Sweden in 1986 by passionate skiers. confection tradition and proud tailoring skills, Birger has been recognized as a high- Today, Peak Performance is the largest Tiger of Sweden has, since 1903, developed profile design brand with an international brand in Scandinavia developing into the largest confection and fashion brand appeal offering ”affordable luxury” technical, functional sports and in the Nordic region distinguishing itself by to fashion-conscious women. Today, fashion wear. offering modern apparel to men and women the brand is one of the largest female characterized by ”a different cut”. fashion brands in the Nordic region. peakperformance.com tigerofsweden.com bymalenebirger.com

Reenue and EBIT margin Reenue and EBIT margin Reenue and EBIT margin DKK million % DKK million % DKK million % 1,250 15 1,250 15 400 15

1,100 12 1,100 12 350 12

950 9 950 9 300 9

800 6 800 6 250 6

650 3 650 3 200 3

500 0 500 0 150 0 2014/15 2015/16 2016/17 2014/15 2015/16 2016/17 2014/15 2015/16 2016/17

Revenue EBIT margin Revenue EBIT margin Revenue EBIT margin

OTHER BRANDS

BRAND MARKET EQUITY REVENUE EBIT MARGIN SEGMENT INTEREST DKK MILLION SAINT TROPEZ FAST FASHION – FEMALE 100% DESIGNERS REMIX PREMIUM – FEMALE 51% 400 2.5%

2 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY PEAK PERFORMANCE MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • IC GROUP A/S THE GROUP FACTS 2016/17FINANCIAL 4.5% MARGIN EBIT DKK MILLION REVENUE 101 DKK MILLION EBIT 1,035 DKK MILLION REVENUE 125 DKK MILLION E 4.3% LOCAL CURRENCY INGROWTH 2,749 WHOLESALE G BIT Re o e or 3 Nor reon 66

9.8% MARGIN EBIT 11.6% LOCAL CURRENCY INGROWTH Re o Europe 31

RETAIL TIGER OFSWEDEN G 17 DEBT, DKKMILLION NET INTEREST-BEARING WHOLESALE DKK MILLION FREE CASH FLOW 11.6% RELATIVE TOREVENUE NET WORKING CAPITAL 16.2% CAPITALINVESTED RETURN ON 87 DKK MILLION REVENUE 67 DKK MILLION EBIT 963 Re o e or 3 Nor reon 79

Re o Europe 18 7.0% MARGIN EBIT 0.6% LOCAL CURRENCY INGROWTH

RETAIL 37% EIT R B Mene Brer 1 Pe Perorne 56 B Mene Brer 12 Pe Perorne 38 BY MALENEBIRGER WHOLESALE 3 DKK MILLION EBIT 351 DKK MILLION REVENUE G Re o e or 11 Nor reon 64

Oer rn6 Ter o Seen 37 Oer rn 15 Ter o Seen 35 0.9% MARGIN EBIT (0.4)% LOCAL CURRENCY INGROWTH Re o Europe 25

RETAIL

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW MANAGEMENT’S LETTER

Earnings development for the Group lection development process, the effect of the new management The Group’s performance for the financial year 2016/17 was team and the more stringent commercial principles should not be affected by a number of extraordinary factors relating to the expected to materialize until the financial year 2018/19. Revenue structural changes implemented during H2 2016/17 which in Tiger of Sweden for the financial year 2016/17 increased by resulted in significant non-recurring costs. The financial results 0.6% measured in local currency whereas earnings were affected for the Group’s three Premium brands for the financial year by write-downs of inventory and distribution as well as higher 2016/17 were marked by a number of factors identified in con- costs. The EBIT margin amounted to 7.0% compared to 11.1% in nection with the change of the Group’s management structure, 2015/16. in particular in respect of purchase of goods and in-season selling, which needs to be addressed. This has especially been By Malene Birger has implemented a more commercial approach the case in Tiger of Sweden which has also showed a need for a to its business in several areas. The production development strengthened and renewed approach in other arear of the busi- process, collection structure and pricing structure model have ness. We are working on solving these issues with all due care, been improved whereas the wholesale distribution has been but we acknowledge that it will take some time to rectify former strengthened focusing on large key accounts. However, revenue practices and business principles. was reduced by 0.4% measured in local currency, and earnings were significantly impacted by distribution write-downs as well as All three business units have worked on strengthening the busi- non-recurring costs. The EBIT margin amounted to 0.9% compa- ness model, reinforcing the brand and improving the prerequi- red to 7.3% in 2015/16. sites for succeeding with the individual strategies – a process which will continue for the coming financial year. All three In connection with the structural changes of the Group’s central Premium brands hold considerable potentials for international functions, all three Premium brands have been working on expansion, however, the readiness of each of the three brands is improving the operational execution of being a Premium brand. at different stages. Consequently, this has led to a strengthened business model and principles, in particular in respect of purchase of goods, Peak Performance has come far with the revitalization of the inventories and discounted sales. Across all three brands, brand – both in terms of product and distribution – and has challenges have been identified within these areas, and as a experienced a more positive development trend during the consequence hereof, a number of commercial principles have financial year 2016/17. For the financial year under review, Peak become more stringent. This has led to a reduced amount of Performance realized a revenue growth rate of 11.6% measured discounted sales and an increased level of inventory write- in local currency driven by wholesale, new store openings as well downs – especially in Tiger of Sweden – as well as distribution as continued strong e-commerce growth. Earnings also incre- write-downs. In total, these changes had a significantly negative ased, and Peak Performance realized an EBIT margin of 9.8% impact on the realized consolidated profit for 2016/17. which is at the same level as 2015/16. Consolidated revenue for the financial year 2016/17 amounted Following a number of years with pronounced growth rates in Tiger to DKK 2,749 million corresponding to a growth rate of 4.3% of Sweden, the brand reported stagnant growth for the financial measured in local currency compared to last financial year. year 2016/17. We have therefore changed and reinforced the Consolidated operating profit amounted to DKK 125 million brand’s management team through the recruitment of a number corresponding to an EBIT margin of 4.5%. Both results are in line of strong profiles – most recently, a new brand CEO who will take with the most recently announced outlook for 2016/17, however, up his new position on 1 September 2017. Furthermore, Tiger of it is lower than expected at the beginning of the financial year Sweden has been subject to a thorough review in connection with 2016/17. The lower than expected revenue growth is particularly the structural changes of the Group. Consequently, the commer- attributable to the development in physical stores as well as in-sea- cial principles, in particular purchase of goods and sales, have son selling to wholesale customers, partly as a consequence of the become more stringent. This has led to a negative impact on the decision to reduce the amount of discounted sales. The reduced brand’s financial performance for 2016/17 and will also affect the earnings may partly be ascribed the implemented structural chan- financial year 2017/18. Considering the long lead time of the col- ges of the Group’s central functions attributable to non-recurring

4 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S the direction right andataspeed withwhichwe are satisfied. and inthe way ofthe value chain.We we thinkinallparts move in irrespective ofchannel. Thismakes demands on our competences Consequently, the consumer expects the same brandexperience – is on the consumer. The consumer sees abrand–not achannel. was on the actual sale –the transaction –whereas today the focus towards afull integration between allchannels. Previously, the focus we continuously develop our competences andincreasingly move Both order-in-store andthe loyalty programmes are examples of how the average customer. non-identified customers inaverage spend20%moreperorder compared to customers, inaddition, salesdataalsoindicates thatreturning ning customers arenot onlylessexpensive to attract thannew tive andcontents offers personalized online.Loyal and retur advantages andinthelong-term perspec themcertain offering of identifyingandretaining returning customers andinreturn all brandshave implemented aloyalty programme for thepurpose physical stores andminimizestheriskoflostsales.Furthermore, improved possibilitiesofmeeting theconsumerdemandsin an order-in-store functionalityduring2016/17, whichfacilitates and e-commerce. Asanexample, we have, i.e.,implemented as improving theintegration between thephysical channels continuously working onexpanding thefunctionalitiesaswell Premium brandswhichistechnically best-in-class,andwe are The Group operates ane-commerce platform utilizedby allthree online mediaduringthebuyingprocess. consumer isincreasinglypurchasing onlineorisinfluencedby the city, butalsoto alargeextent becausewe know that themodern this development, not onlydueto thegrowth andearningscapa most profitable distributionchannel.We pleasedto arevery see all threePremiumbrandsandiscloseto becomingtheGroup’s number ofyears hasdemonstrated two-digit growth rates across from salesinourown e-commerce channelwhichthrough a number ofstores by twelve. Furthermore, growth alsoderived in Peak Performance andTigerofSweden –increasingthetotal venue growth. Growth was realizedthrough new stores –primarily contributor to6.4%, thusconstitutingtheprimary theGroup’s re Revenue increasedintheGroup’s own distributionchannelsby Revenue growth driven by own channels downs were higher compared to year. lastfinancial and to restructure thedistribution. Inparticular, the inventory write- Group Premium brandsto reduce the amount ofdiscounted sales the initiatives carried out inthe costs of DKK33million andpartly - - - - this potential infull. structure aswell asGroup structure,itisourambitionto realize the potential remainsthesame.Withachangedmanagement flected inouroutlookfor year the financial 2017/18 –however, of eachthethreebrandsisatdifferent stages–whichisre pansion, increaserevenue andimprove earnings.Thereadiness remain unchanged.They mustgrow through international ex- Consequently, thestrategies ofthethreePremiumbrands business. Premium brandsinorder to grow anddevelop theirrespective changes –to create themostoptimumterms for ourGroup at competitive prices.Thisreflectsthepurpose ofthestructural due to thefact thatthesefunctionsdeliver highquality services ber ofinfrastructurefunctionswillremaincentrallyorganized ment inoperationsatcorporate level hasbeenreduced,anum value Even creationofthebrandportfolio. thoughtheinvolve orientedfinancially holdingcompany focusing onmaximizingthe In thefuture,ICGroup A/Swillto alargerextent operate asa still characterized by themulti-brandstrategy years pursued ago. structure oftheGroupunderlying legalandfinancial whichis minimized. Following this,we arenow working onchangingthe and theoperationalinvolvement atcorporate level hasbeen functional areashave beentransferred to thethreePremium As aconsequence ofthestructuralchanges,several central withthemanagementofrespectiveperformance brands. oftheresponsibilitydevelopmenta largerpart andfinancial exploit thepotentials ofthethreePremiumbrandsby placing The purpose ofthesestructuralchangeshasbeento better nagement structurewas determined inMay 2017. the centralfunctionswas implemented whereasthenew ma- central functions.Inthefollowing months,therestructuringof management structureaswell asanew structureoftheGroup’s of Directors resolved 2017 inFebruary to implement anew In accordance withtheGroup’s strategy, portfolio theBoard ofcentral functions restructuring New and managementstructure shareholders. yearin respectofthefinancial 2016/17 to bedistributed to of DKK85millionor92%theconsolidated profit tax after of DKK5.00pereligiblesharecorresponding to atotal dividend Meeting 2017 dividend aresolutionrecommending anordinary The Board ofDirectors willpropose attheAnnual General Dividend for thefinancialyear 2016/17

- - - 5

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW OUTLOOK

Realization of expectations for 2016/17 Outlook for 2017/18 Consolidated revenue for the financial year 2016/17 amounted The outlook for the financial year 2017/18 is marked by a number to DKK 2,749 million corresponding to a growth rate of 4.3% of factors which were identified in connection with the changes to measured in local currency. The most recently announced out- the Group’s management structure during H2 2016/17 relating in look indicated a growth rate of 3-4% measured in local currency. particular to in-season selling, as well as the underlying principles and practices in respect of the purchase of goods forming the Operating profit (EBIT) for the financial year 2016/17 amounted basis for in-season selling. to DKK 125 million corresponding to an EBIT margin of 4.5%. The most recently announced outlook stated an EBIT margin of The business principles in respect of purchase of goods and sales 4-5%. for all three Premium brands have become more stringent which will lead to a negative impact on the development of both revenue When adjusting for non-recurring costs of DKK 33 million and earnings in a continued challenging retail environment. (expected DKK 30 million) attributable to the implementation of the new structure of IC Group’s central functions, the Group In Tiger of Sweden revenue is furthermore expected to decline realized an EBIT margin of 5.7%. The most recently announced as a consequence of lack of focus on innovation and product outlook stated an EBIT margin of 5-6%. renewal over an extended period while the gross margin will be affected negatively due to a more competitive price struc- Investments for the financial year 2016/17 amounted to DKK 89 ture. These factors combined with costs in respect of the new million corresponding to 3% of revenue which is in line with the management team as well as increased marketing will have a most recently announced outlook. significant negative impact on earnings.

A moderate revenue and earnings growth is expected in Peak Performance while we expect a moderate revenue decline but significant earnings improvement in By Malene Birger.

For the Group as a whole, we expect to realize a minor revenue reduction compared to the financial year 2016/17 and an EBIT margin of approx. 5%.

Investments for the financial year 2017/18 are expected to be in the region of 3-4% of annual revenue.

OUTLOOK

Original Most recent outlook outlook Realized Outlook DKK million 2016/17 2016/17 2016/17 2017/18 Revenue growth measured in local currency at least 6% 3-4% 4.3% minor revenue decline Revenue growth in reporting currency (%) at least 5% 2-3% 3.2% n.a. EBIT margin approx. 9% 4-5% 4.5% approx. 5% Adjusted EBIT margin* n.a. 5-6% 5.7% n.a. Investments (% of revenue) 3-5% 3-5% 3.2% 3-4%

* Adjusted for non-recurring costs of DKK 33 million in relation to the implementation of the new structure in IC Group’s central functions.

6 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY for ourGroup Premiumbrandsto exploit theirpotentials ofcontinued growth andinternational expansion. within thefashion industry. Bymeansofoursimple Group structure,we create themostoptimumframework IC Group’s missionisto create shareholdervalue through long-term andactive ownership ofPremium brands ons ofeachPremiumbrand. theoperati andprice-competitive supporting services efficient TheoverallServices. target ofthesefunctionsisto deliver cost- ture functionscountSourcing, Logistics,ITandFinancialShared which aresharedby allGroup Premiumbrands.These infrastruc Furthermore, theGroup structurecomprises centralfunctions responsible oftheirrespective earningsdevelopment. strategicbusiness unitswithclearlydefined plans,andthey are All oftheGroup Premiumbrandsareoperated asindependent Group structure solid revenue growth andhighearnings. operating anddeveloping brands.Historically, we have generated competences withinthissegmentinwhichwe have succeededin target oftheGroup Premiumbrands.AsaGroup, we holdstrong high degreeofinternationalization whichalsoforms thestrategic solid earnings.Furthermore, thissegmentischaracterized by a has historically beencharacterized by strong growth rates and the Premiumsegment.We focus onthismarket segment asit IC Group creates value through active ownership ofbrandsin strategy Premium-focused portfolio MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S STRUCTURE GROUP STRATEGY AND PERFORMANCE PEAK OF SWEDEN TIGER

IC GROUP - - considered asinvestments. above-mentioned infrastructurefunctionsandboth brandsare within thePremiumsegment.Noneoftwo brandsutilizethe is aFast Fashion Remix brandwhereasDesigners operates owned) Remix andDesigners (equity shareof51%). SaintTropez In addition,theGroup owns thetwo brands;SaintTropez (wholly internationalhold significant growth potentials. their Nordic coremarkets considered to andare,furthermore, three brandsalsohave ahighdegreeofbrandawareness in Group generated solidrevenue growth andgoodearnings.The All threePremiumbrandshave ofIC sincethey becameapart creative designerbehindthebrandname. IC Companys) founded ByMaleneBirgerincooperationwiththe acquired in2003,andduringthatsameyear, ICGroup (former was formed through amergerin2001. TigerofSweden was oftheGroupPeak sincetheGroup Performance hasbeenapart which form thestrategic strategy. coreoftheportfolio Peak Performance, TigerofSweden andByMaleneBirger The Group’s comprises portfolio thethreePremiumbrands; Portfolio MALENE BIRGER BY

OTHER BRANDS

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW Strategic focus areas but also very much about the correct amount of purchase of The three Premium brands operate within different areas of the goods, stocking, optimization of product flow through collection Premium segment and have each their brand-specific strategy structure and product depth as well as use of outlet capacity. plans. However, especially three strategic focus areas are identi- Consequently, all three Premium brands work on a number of cal for all three brands. initiatives with one common purpose which is higher full-price selling. Internationalization forms a common corner stone of the growth plans. All three brands hold strong market positions in the Nordic Long-term ambitions for growth and earnings region with a solid revenue and earnings base. The Nordic region The ambition of the Group Premium brands is to continue remains a focus area, and both revenue and earnings should be generating revenue growth, and thereby also for the Group as a increased to the extent possible. However, to continue growth, whole. Concurrently with the expected higher revenue, it is also the international potential of all three brands must be exploited our ambition to improve the EBIT margin. by means of international expansion. To begin with, this should primarily be achieved in focus markets in Europe and in the long- Investments term perspective outside of Europe. The specific focus markets Investments will primarily be carried out for the purpose of vary from brand to brand which is mainly due to the different realizing the growth strategies of each of the three Premium brand characteristics, and thereby the differences of where the brands, especially including expansion and strengthening of largest growth potentials lie. The specific focus markets of each own distribution channels (physical stores and e-commerce). brand are described in the following sections of each Premium Investments in the Group’s infrastructure functions may also be brand, c.f. pages 10-21. necessary in order to retain the optimum support of the three Premium brands. Enhanced distribution control is also a focus area which all three brands share. This area is crucial in order to retain and The Group’s future investment level will depend on the speed strengthen the brand positions and to protect the brand value. of which the strategic plans of each brand are executed. The The distribution channels – own controlled channels as well as investment level may thus vary year on year. wholesale channels – are the place where the consumer meets the brand and experiences the products. A strengthened coopera- Generally, we expect the Group’s investments to attain a level tion with key wholesale customers is vital, but, particularly, own of approx. 3-5% of the annual revenue. For the financial year stores and the e-commerce platform play decisive elements when 2016/17, investments accounted for 3% of the annual revenue. it comes to delivering the best possible consumer experience. All three brands will gradually increase the share of own controlled Working capital distribution and will at the same time work on improved coordina- The Group’s working capital is expected to constitute approx. tion of the brand experience across all distribution and commu- 10-12% of the annual revenue. At 30 June 2017, the working nication channels in order for the consumer to always have a capital constituted 12% of the annual revenue which is elaborated consistent brand experience, irrespective of channel. further in the section Consolidated Financial Review on page 25. However, the expected revenue growth will naturally lead to Full-price selling plays an essential role in respect of maintaining working capital investments, and therefore, during periods of the consumer’s brand perception and thereby the brand’s long- high growth, the working capital may exceed this level. Through term value, and at the same time it contributes to an improved efficiency improvements and strict control of the elements con- gross margin. Higher full-price selling is not only about reducing stituting the net working capital, we are working on continuously discounted sales to the consumers and the wholesale customers minimizing the tied-up working capital.

8 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S CAPITAL ALLOCATION PRIORITIES 2017, the net interest-bearing debt amounted to DKK17 million. fluctuations inthe working capitalduring the year. At 30June credit facilities then primarilybe will employed to fund seasonal bearing debt atzero for year the financial asawhole. The Group’s we have decided to specifically retain thelevel of net interest- To maintainthe highest possible degree of flexibility inthe future, on ICGroup’s equity ratio. standard isexpected reporting financial to have amaterial impact the statement position. Theimplementation offinancial of this requiring thatoperating leases are recognized andmeasured in standard witheffect asat1July 2019 reporting nal financial consolidated statements financial describing anew internatio statements.financial Inthiscontext, please see note 1.1 to the amounted to DKK368million,cf.note 5.6to the consolidated Atficant. year theend of the financial 2016/17, operating leases represent anelement ofoperational gearing whichisnot insigni- economic trends. Furthermore, the Group’s operatingleases since, among other things,we operate inamarket sensitive to The Group aimsto maintainalow level gearing of financial structure Capital Investments 2016/17 (DKKmillion) 1 • INVESTMENTS VALUE-ADDING • • existing assets Maintenance of Retail expansion E-commerce projects

89 Net interest-bearing debt • REDUCTION DEBT 2 targets exceeds thedefined In casethedebt

- 17 performance. policy thatthetotal distributionreflectstheGroup’s earnings When distributingdividendsto itistheGroup’s theshareholders, buy-backs. –eitherthroughthe shareholders dividenddistributionorshare adding investments, thiscashflow willthenbedistributed to To theextent thatthefreecashflows exceed theneedfor value- anddepictedclearly defined inthebelow table. The Group’s prioritiesfor employing itsfreecashflows are allocationanddividendpolicy Capital to 1.8 (1.1). should thisbe required. At 30June 2017, thiskey ratio amounted lated at30June, constitute alevel 3times higher thanEBITDA bearing debt, including the Group’s operating leases, may, calcu To degree of strategic flexibility, maintainacertain the net interest- Ordinary dividend Ordinary 3 • DIVIDEND ORDINARY after tax after consolidated profit At least30%ofthe

Extraordinary dividend Extraordinary 4 • • PAYMENT EXTRAORDINARY Share buy-back dividend Extraordinary

- 0 9

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW A stronger and more explicit brand DNA as well as a more simple collection structure are some of the achievements reached by Peak Performance in connection with the brand revitalization that it has been working on. The product collections appear to a far larger extent coordinated with a more coherent design expression which improves the possibility for cross selling. The markets in the Nordic region continue to be strategically important, and further growth may be generated through both the wholesale distribution and own channels. Markets in the Alps play a central role in respect of the brand’s ambitions of international expansion, and in these markets Peak Performance may develop further on its strong position as a well-known brand within functional and technical sportswear.

REVENUE GROWTH IN EBIT EBIT DKK MILLION LOCAL CURRENCY DKK MILLION MARGIN 1,035 11.6% 101 9.8% MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S PEAK PERFORMANCE –FINANCIALHIGHLIGHTSANDKEYRATIOS and Italy. andcomprise Germany,important Austria, Switzerland,France Outside theNordic region,themarkets intheAlpsregionare position withgoodgrowth inallofthesemarkets. opportunities account for the majority of revenue, and the brand holds a strong Norway Combined, they andFinlandarestrategically important. To Peak Performance, theNordic markets Sweden, Denmark, mance mixed withstyle”. Fashion recognizedby theconsumerby itsclearDNA;“Perfor dynamic andprogressive brand,andapioneerwithinSports unleash itslargepotential. Peak Performance mustbeavibrant, on therevitalization ofthebrandin2014/15, thetarget was to functionality andstyle,whenPeak Performance embarked The strengthofthebrandhasalways beenitscombinationof fashion wear. leading brandswhenitcomesto and technical, functionalsports dern. Sincethen,Peak Performance hasbeenamongtheworld’s functional skiwear whichatthesametimewas stylishandmo and was founded in1986 by passionate whocalledfor skiers andfashion wear.sports Thebrandhasitsorigininalpineskiing Peak Performance isScandinavia’s largestbrandoftechnical Peak Performance PERFORMANCE PEAK 120 R EIT 1100 00 60 00 0 R 201/1 201/16 EIT 2016/17 0 6 12 1 G R N 66 - - this strengthenedcooperation. andshop-in-shops) mustbeincreasedthrough corners (soft strengthened, andthesharesizeofbrandedsalesareas the cooperationwithanumberofkey customers mustbefurther own channelsisexpected to increase. Inthewholesalechannel sequence oftheabove factors, therelative revenue sharefrom the stores –both inphysical stores aswell asonline.Asacon clear andunambiguousacross alldifferent product categories in ence mustbemoreexclusive, and thebrandexperience mustbe ons, own e-commerce aswell asoutlets, theconsumerexperi- the brand’sown channels,comprising physical stores, concessi the samebrandexperience inallmarkets andinallchannels.In essential role inorder to ensurethattheconsumeralways gets including ahighershareofbrandedsalesareas.Thisplays an mance –across allmarkets –isincreaseddistributioncontrol, A key focus areainrelationto thepositioningofPeak Perfor has alower perspective. priorityintheshort-term Performance hasaminorfoothold inCanadawhichstrategically OutsideEurope, Peak regions,citiesandskiresorts. important markets, whichmust beexpanded withfocus onstrategically Peak Performance hasgainedastrong foothold inthese R E 1

peakperformance.com WOESAE Concessions 1 Retail stores Franchise stores Wholesale customers R 1,755 E T A 48 32 I -

- 11 -

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW On 24 November 2016, Peak Performance cel- ebrated its 30-year anniversary. This was marked by an exclusive anniversary collection which in every way illustrated how Peak Performance has always been a pioneer when it comes to technical innovation, functionality and design. The collection consisted of twelve styles (six styles dedicated to men and six styles to women) which were all designed for an active urban life while at the same time still with optimal functionality required for physically demanding skiing – the perfect fusion. And a perfect example of the brand’s cutting-edge skills; “Performance mixed with style”.

Development in 2016/17 The new and more simple collection structure has provided the In respect of distribution, the restructuring implemented consumer with a more clear and coherent impression of Peak by Peak Performance in 2015/16 contributed to a stronger Performance and the five product collections offered by the wholesale customer base which constitutes a solid founda- brand; Ski, Golf, Active, Sportswear and Urban. The brand DNA tion for the desired direction of the brand. Peak Performance – “Performance mixed with style” – is clearly visible across all will continue developing its wholesale distribution through collections, and the design expression is more consistent than a strengthened cooperation with key customers for the pur- previously. Besides the more explicit design expression, this also pose of a wider and better brand positioning on the square contributes to an improved possibility of cross selling across metres available. product collections which sales data from both the wholesale distribution and own sales channels reaffirms. The brand has also worked on adding more fashion-focused wholesale customers to its wholesale distribution which During the financial year under review, Peak Performance has may support the desired direction for particularly the Urban worked on the so-called Top Commercial Winners which are collection. This has primarily been a focus area in the Nordic products meeting the below three criteria; region during the financial year 2016/17, however, in the future the brand will gradually place more focus on nur- • they must be commercially strong and consequently turing the same development in the Alps region which at have the right price points and high gross margins; present has a strong focus on the Ski and Active collections. • they must support the desired brand positioning; and finally, Peak Performance has always been a strong player in the • they must be relevant and attractive for the consumer. outerwear category, and the customers in the Alps region are highly aware of the brand’s quality standards. Therefore, the By selecting a number of products meeting these criteria, the pur- Urban Outerwear category is essential to Peak Performance pose is to boost growth and improve earnings while at the same in order to engage in a more fashion-focused wholesale time strengthen the brand positioning towards the consumers. distribution in the Alps region.

12 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S PEAK PERFORMANCE –EARNINGSOVERVIEW control the distribution of surplus products inthe Alpsregion. respectively, meaningthatthebrandhasimproved itscapacityto two new outlets were opened inSouthern Germany andAustria, in key Furthermore, Oslo, Helsinki locationsin and Stuttgart. the number of retail stores by sixof whichthree stores are located yearDuring the financial 2016/17, Peak Performance expanded brand value inthelong-term perspective. ced –not onlyto improve to protect earnings,butinparticular the bution ofsurplus goods.Overall, discounted salesmustberedu levels have beentoo highwhichposesariskinrelationto distri purchase ofgoodsanddiscounted sales.Ingeneral,theinventory brands, worked onstrengtheningtheprinciplesinrespectof Finally, Peak Performance has,similarto theGroup’s other brands whichemploy the same operational e-commerce platform. initiatives have been implemented inthe two other Group Premium the interaction between physical retail andonline. Bythe way, both – ship-from-store andorder-in-store enhance –whichspecifically nancial year 2016/17, especially two initiatives were implemented order when aconsumer visitsastore- or shops online. During thefi brand experience, andnot least increased the probability of an contributed to improving thisinteraction andproviding acoherent used by the consumer. Several initiatives andmeasures have the modern consumer inthe communication andsales channels a key focus area inorder to ensure thatPeak Performance reaches interaction referred ismost often to asomni-channel, and itplays nel, andnot least the interaction between these two channels. This experience inthe physical stores andinitsown e-commerce chan- its own channels worked onanimproved andmore “Premium” yearDuring the financial under review, Peak Performance hasin EBIT margin(%) andimpairment losses Depreciation, amortization EBITDA margin(%) Operating profit (EBITDA) before depreciationand amortization Revenue growth inlocalcurrency (%) DKK million Operating profit(EBIT) Revenue Retail, e-commerce andoutlets Wholesale andfranchise - - financial year.financial margin of9.8%(10.0%) andwas thusatthesamelevel aslast pared to DKK94 millionfor 2015/16 correspondingto anEBIT The operatingprofit (EBIT)amounted to DKK101 millioncom- a higherlevel ofe-commerce activity. ratio was improved inspite ofincreasedcostsfor new stores and discounts aswell asinventory write-downs. However, thecost lower compared to year lastfinancial asaconsequence ofhigher Despite highermarginsonsoldproducts, thegross marginwas was primarilyrealizedinCanada andJapan. and Switzerlandwhereasrevenue growth from outsideofEurope venue growth from Rest ofEurope primarilyderived from Austria revenue growth rate amounted to 15.2% intheNordic region.Re Nordic markets; Sweden, Denmark, Norway andFinland.The Revenue increasedinallmarkets, inthefour butparticularly commerce growth. same-store revenue increasedby 9.0%driven by thehighe- openings butalsothecontinuedhighe-commerce growth. The retail channelamounted to 15.1% andwas driven by new store thelast-mentionedchannel.Growthnels, particularly inthe yearfinancial driven by both thewholesaleandretail chan of 10.6% (11.6% measuredinlocalcurrency)compared to last (DKK 936million)for 2016/17 correspondingto agrowth rate Peak Performance realizedarevenue ofDKK1,035 million Performance for theyear

2016/17 1,035 11.6 11.5 388 (18) 101 119 647 9.8 2015/16 11.9 10.0 936 599 111 337 (17) 94 Change, % - 10.6 15.1 5.9 8.0 7.4 7.2 13 -

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW

Tiger of Sweden realized a lower revenue for 2016/17 compared to last financial year primarily driven by significantly reduced in-season selling – including discounted sales. The brand has reinforced its management team through new recruitments – including a new brand CEO – which has injected competences and experience from well-known international companies. The store portfolio has been expanded, and the number of stores in the focus market Germany has been increased by two. Finally, Tiger of Sweden has terminated its agency agreement covering England as well as the combined agency agreement for Germany, Austria and Switzer- land; consequently, the brand now operates its own sales set-up in these markets.

REVENUE GROWTH IN EBIT EBIT DKK MILLION LOCAL CURRENCY DKK MILLION MARGIN 963 0.6% 67 7.0% the primary focus isonParisthe primary andanumberoflargecities.On all the Englishmarket, themainfocus isonLondon,andinFrance, crucial elementsofthebrand’sinternationalization strategy. On markets focus continueto beimportant markets andconstitute targets for theexpansion inEnglandandFrance. However, both ring anumberofyears, TigerofSweden hasnot yet reachedits expansion inGermany hasbeenhighlysuccessfulandstabledu revenue, butalsoEnglandandFrance contributed. Whereasthe Germany whichaccountsfor approx. 15% ofthebrand’sannual growth hasbeenrealizedin European markets, inparticular During thepastfew years, anincreasingshareofthebrand’s to TigerofSweden.cally important consequently, themarkets intheNordic regionarestillstrategi- growth and ness withsolidearningsandfurther opportunities, of thebrand’srevenue andform astrong foundation ofthebusi and Finland.Combined,thesemarkets accountfor themajority driven by theNordic coremarkets; Sweden, Denmark, Norway and continuedrevenue growth whichto alargeextent hasbeen During thepastten years, TigerofSweden hasgenerated solid a distinctive design characterized by ”adifferent cut”. thereby offeringawide range of products which alldifferentiate by line. Tiger of Sweden is including ajeans collection and accessory is amodern brandoffering apparel to both men and women, forring skills,refined more than110 years. Today, Tiger of Sweden ndation inthe strong menswear confection traditionandsolid tailo Tiger of Sweden was founded in1903 inSweden and hasitsfou Tiger ofSweden MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S TIGER OFSWEDEN –FINANCIALHIGHLIGHTSANDKEY RATIOS SWEDEN OF TIGER 120 1100 R EIT 00 60 00 0 R 201/1 201/16 EIT 2016/17 0 6 12 1 G R N 7 - - - - with aconsistent brandexperience across allsaleschannels. e-commerce channelinorder for theconsumerto bepresented an even better integration between physical stores andthe other Premiumbrands,TigerofSweden isworking oncreating revenue derivingfrom own e-commerce. Similarto theGroup’s including shop-in-shopsandphysical stores aswell ashigher place through increasingthenumberofbrandedsalesareas, the control ofthebrand’spositioninallmarkets whichmust take At thesametime,for to TigerofSweden increase itisimportant Germany. this combinationhasdemonstrated to successfulin bevery the brandcompared to establishedcompetitors. Up untilnow, flanked edgeto by theTigerJeansconcept whichaddsacertain tegy isbasedonTigerMenasthespearhead oftheexpansion Consequently, inthesemarkets thebrand’sgo-to-market stra markets outsidetheNordic butareof minorimportance region. accessories andshoesarewell-established intheNordic core The remainingconceptsTigerWomen, TigerJeansaswell as Tiger MenisthelargestandleadingconceptinofSweden. consumers. increased growth andstrengthenedbrandawareness withthe physical stores play anincreasinglylargerrole inrespectof channel, however, thebrand’sown e-commerce channeland foreign focus markets, growth plansaredriven by thewholesale R E 1

tigerofsweden.com WOESAE Concessions 19 Retail stores Franchise stores Wholesale customers R E 951 T A 22 I 9 - 15

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW Development in 2016/17 During the financial year 2016/17, Tiger of Sweden has reinforced its management team through new recruitments which has injected competences and experience from established and well- known international brands such as Hugo Boss, Ralph Lauren and Burberry. During the autumn 2016, the brand’s new Chief Commercial Officer commenced work and is, in this newly created role, responsible for all sales channels as well as the strategic development of these channels. In May 2017, the brand announced the appointments of a new Head of Creative and Design and a new Product Management Director. The Head of Creative and Design has the overall responsibility of the brand’s positioning and the creative design expression of the products whereas the Product Management Director has a more commercial role in respect of product development, thus being responsible for ensuring a commercial and competitive collection structure with the right price points in the different product categories.

Finally, in June 2017, it was announced that Hans-Christian Meyer has been appointed as CEO of Tiger of Sweden. With his vast experience from other fashion brands – in particular Ralph Lauren – Hans-Christian Meyer will become a strong character heading Tiger of Sweden in a more international direction in the years to come.

Furthermore, Tiger of Sweden has worked on enhancing the brand definition, its characteristics and competitive strengths during the financial year 2016/17. Tiger of Sweden has embarked on an international expansion where it is not possible to benefit as much from a high brand awareness with the consumer as in the Nordic region, and where the competitor field is different. Therefore, it is crucial to be fully aware of the characteristics of the core consumer of the brand as a whole and of each product concept. These analyses have been carried out, and the targets and sub-targets concluded from these analyses have been clearly defined. To the new management team, these analyses will serve as a solid foundation of the international direction towards which the brands is headed in the future.

During 2016, Tiger of Sweden launched In respect of distribution, the brand has strengthened the com- a new shirt programme which in a vast mercial principles and business model. The procedure for dis- number of parametres is an upgrade counted sales has been subject to more strict measures – both in compared to the brand’s previous shirt own channels but in particular in the wholesale distribution where selection. With more than 110 years in-season selling accounts for a substantial part of revenue. In of experience, Tiger of Sweden has this connection, the principles for purchase of goods have become designed a Premium shirt, perfectly more stringent in order to reduce the risk of too large inventory le- complementary to a suit from which vels leading to higher discounts and write-downs. The commercial the brand has its legacy, but still suitable principles have also led to a certain degree of wholesale distribu- for more informal occasions. A shirt tion clean-up which has had a negative impact on the realized re- with the right combination of the finest venue for the financial year under review. This clean-up has been yarns and style details, fit and silhouette implemented to ensure that Tiger of Sweden has the right size of which is in line with the brand’s unique the wholesale customer base to support its brand positioning and signature “a different cut”. contribute to continued growth and earnings in existing as well as

16 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S * Revenue from Vingåker Factory Outlet AB amounted to DKK 154 million for the financial year 2016/17 (DKK 154 million). TIGER OFSWEDEN –EARNINGSOVERVIEW discounted salesasmentionedearlier. Furthermore, therevenue driven by thetargetselling, partly ofreducingtheamount This revenue reductionisprimarilyattributableto lower in-season of thepreviously mentionedpositive effect ofDKK18 million. Revenue from thewholesalechanneldeclinedby 5.4%inspite 1.3% measuredinlocalcurrency. 2016/17. having After adjustingfor this,revenue declined by deliveries whichhadapositive impact ofDKK18 milliononQ1 in localcurrency. Revenue was affected positively in by ashift lower compared to year, lastfinancial but0.6%highermeasured revenue ofDKK963million(DKK972 million)whichis0.9% yearDuring thefinancial 2016/17, TigerofSweden realizeda Performance for theyear small outlet store intheNordic region. Western Germany. Thebrandclosedtwo retail stores andone Netherlands withalocationwhichalsoto alargeextent covers stores. Inadditionto this,oneoutlet store was openedin the two franchisestores located inSweden were converted into own new stores inGermany, and oneinBerlinandStuttgart, yearDuring thefinancial 2016/17, TigerofSweden openedtwo of these markets willtake place through own sales set-up. and Switzerland inDecember 2016. Inthe future, the development as well asthe combined agency agreement for Germany, Austria Tiger of Sweden terminated itsagency agreement covering England To strengthen the control and reinforce operations initsmarkets, tes substantial revenue andearnings. separately asamulti-brandoutlet. Vingåker Factory Outlet genera- Today, of Tiger ofSweden, but itisoperated the business isapart the future strategy of Vingåker Factory Outlet being considered. new markets. The distribution restructuring hasalso resulted in

Operating profit(EBIT) andimpairment losses Depreciation, amortization EBITDA margin(%) Operating profit (EBITDA) before depreciationand amortization Revenue growth inlocalcurrency (%) DKK million EBIT margin(%) Revenue Wholesale andfranchise Retail, e-commerce andoutlets *

108 million)correspondingto anEBITmarginof7.0% (11.1%). The operatingprofit (EBIT)amounted to DKK67million(DKK during H22016/17. tion withestablishingown salesset-up inEnglandandGermany in France aswell costsinconnec asstore openingsandstart-up to, amongothers, write-downs in respectofdistributionchanges cing discounted salesduringH22016/17. Costsincreaseddue of whichthemajorityisdirectlyrelated to thedecisionofredu which were approx. DKK20millionhighercompared to 2015/16 year.financial Thisismainlyattributableto inventory write-downs Tiger ofSweden realizedalower gross margincompared to last In spite oftheunderlyingmarginimprovement onsoldproducts, inSouthAfrica. franchise partner consequence oftheclean-uporder booksofthebrand’s level. Revenue from outsideofEurope suffered areductionas yearfinancial whereasrevenue from France was atthesame Germany. Revenue from Englandwas lower compared to last driven by ahighgrowth rate inthefocus (28%)reported market Revenue from Rest ofEurope increasedby 22.4%primarily of both SEKandNOKalsocontributed to therevenue reduction. tioned reducedin-seasonselling.However, lower exchange rates markets –which is primarilyattributableto thepreviously men Revenue from theNordic regiondeclinedby 4.6%–across all strong e-commerce growth. revenue (excluding outlets) increasedby 1.4% driven by the new stores aswell ashighe-commerce growth. Thesame-store Revenue from theretail channelincreasedby 6.6%driven by order to improve thedistributionofbrand. affected by aclean-upoftheorder books–especiallyinQ4 from degreenegatively thewholesalechannelwas to acertain

2016/17 963 385 (19) 578 8.9 0.6 7.0 67 86 2015/16 12.7 11.1 123 108 (15) 361 611 972

Change, % (38.0) (26.7) (30.1) (0.9) (5.4) 6.6 - - 17 -

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW By Malene Birger has in a number of areas strengthened the commercial approach to its business. New collection structure principles and a new pricing structure model are some of the implemented initiatives. The markets in the Nordic region continue to be important markets whereas London has top priority outside the Nordic region. The wholesale customer base has been consolidated, and more focus will be placed on large and strategically important customers in order to ensure the right “Premium” distribution in the future.

REVENUE GROWTH IN EBIT EBIT DKK MILLION LOCAL CURRENCY DKK MILLION MARGIN 351 (0.4)% 3 0.9% MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S BY MALENE BIRGER –FINANCIALHIGHLIGHTSANDKEYRATIOS growth –especiallySweden. further opportunities By MaleneBirger’srevenue in2016/17. Allthreemarkets hold and Norway. Combined,these markets accounted for of 64% it alreadyholdsstrong markets positionsinDenmark, Sweden The brandwillstillfocus ongrowth intheNordic regioninwhich to reinforce thebrand’smarket positioning. to meet consumerdemandstoned further alargerextent and categories, suchasfor example outerwear, mustbestrengthe tops. Products underthesecategories other aswell ascertain number ofproduct and categories –includingdresses,shirts By MaleneBirgerhasalways hadastrong market positionina fashion brandsintheNordic region. nal fashion scene.Today, thebrandisoneoflargestfemale continuous progress andachieved recognitionontheinternatio The brandwas founded in2003andsincethen,ithasenjoyed an international to appealoffering affordable women. luxury By MaleneBirgerisaDanishhigh-profile designbrandwith By MaleneBirger BIRGER BY MALENE 200 20 00 0 00 10 R EIT R 201/1 201/16 EIT 2016/17 0 6 12 1 G

R 11 N 6 -

- maintaining thepositive e-commerce development. is to improve ofexisting theperformance stores aswell as selected key accounts.Inthebrand’sown channelsthetarget distribution across allmarkets through atargeted focus on By MaleneBirgerisworking onstrengtheningthewholesale is theonlystrategic focus market outsideofEurope atpresent. lands arealsoconsideredafocus market inEurope whileJapan from stores. England,theNether stores Apart anddepartment base andensuringthatByMaleneBirgerispresented intheright and own e-commerce. The focus willbeondeveloping the customer London willstilltake placethrough both thewholesalechannel global focal pointinterms ofinternational fashion. Growth in one of the world’s largest markets withinfashion wear and isa cally London –rankingwiththe highest priority. London represents to continuetheinternational expansion- inEngland–morespecifi Besides thecontinuedgrowth intheNordic region,thetarget is R E 2

bymalenebirger.com WOESAE Concessions 6 Retail stores Franchise stores Wholesale customers R E 796 T A

I 9 7

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GOVERNANCE PERFORMANCE STRATEGY OVERVIEW By Malene Birger has for a long time had a strong reputation of designing exquisite and elegant theatre coats. However, the outerwear category holds an even larger potential – especially if appealing to the modern woman-on-the-go to a far larger extent. Consequently, for its autumn collection 2017, By Malene Birger has designed a selection of jackets and coats which all have an adequate touch of functionality without compromising the exclusive and elegant look of the products. The bestselling style has been a stylish but functional down jacket which, in line with the defined target, has been a contributing factor to the outerwear category growing considerably and now accounts for a significantly larger part of the total order intake for the autumn collection 2017.

Development in 2016/17 In respect of production, By Malene Birger has furthermore im- During 2016/17, By Malene Birger has implemented a number plemented an improved pricing model which to a far larger extent of initiatives with the aim of contributing to strengthening the than previously combine the strategic price points in the market brand in more competitive international markets where its with the features and quality of the product. The purpose of brand awareness is lower compared to the Nordic region. both the collection structure and the pricing model is to achieve commercially stronger collections and an improved correlation A comprehensive brand and positioning analysis has been between the price and the value experienced by the consumer. carried out from which a large number of focus areas and operational KPIs have arisen. The highly in-depth analysis is In respect of distribution, By Malene Birger has primarily focused based on the definition of By Malene Birger’s core customer. on the Nordic region and London. In the last-mentioned location, The analysis and its outcome have served as a strong input the brand has worked on ensuring a continuously positive to the projects which have been initiated in order to implement development of the store located on Marylebone High Street as a more commercial agenda in the brand. well as the right wholesale distribution in the rest of London. In this respect, a certain degree of clean-up of the customer base During the financial year under review, By Malene Birger has has taken place. implemented new principles for the collection structure meaning that the brand’s collections consist of a number of core products In general, this clean-up has taken place throughout the brand’s which are commercially oriented as well as a smaller part of wholesale distribution, since By Malene Birger has worked on products where design and branding are the principal elements. ensuring the right “Premium” distribution on all markets during In this context, By Malene Birger has appointed a new Creative the financial year under review. In this context, the sales orga- Director with experience from a number of international fashion nization has focused on enhancing the strong relations with By brands, including most recently Mulberry. The new Creative Malene Birger’s largest and most important customers as well Director has the overall responsibility of design and product as generating growth for these customers. This has resulted in development and will thus play an essential role of fulfilling a consolidation of the brand’s total customer base in a man- the ambition of realizing international growth in the future. ner ensuring that large and strategically important customers

20 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S BY MALENE BIRGER –EARNINGSOVERVIEW which was diluted by thedevelopment inthephysical stores. outlets) increasedby 0.6%driven by solide-commerce growth stores duringH12016/17. Thesame-store revenue (excluding channel was negatively impacted by thedevelopment inphysical rily attributableto thelower wholesalerevenue butalsotheretail 0.4% measuredinlocalcurrency).Thereducedrevenue isprima 357 million)correspondingto areductionof1.7% (reductionof By MaleneBirgerrealizedarevenue ofDKK351 million(DKK Performance for theyear growing Swedish andstrategically business segment. important purpose ofcontrolling the distribution of surplus products inthe review, ByMalene Birger opened anoutlet store inSweden for the store inParis year hasbeen closed. During the financial under inexistingperformance stores. Inthisconnection, the brand’s In the brand’sown channels, focus hasbeen on improving the across allmarkets. customers thebrand’slargestandmostimportant is to service International Key Account functionhasbeenestablished which now accountfor alargerrevenue share.To thisend,anew EBITDA margin(%) Operating profit (EBITDA) before depreciationand amortization Revenue growth inlocalcurrency (%) DKK million Depreciation, amortization andimpairment losses Depreciation, amortization Revenue EBIT margin(%) Operating profit(EBIT) Retail, e-commerce andoutlets Wholesale andfranchise

- million) correspondingto anEBITmarginof0.9%(7.3%). Operating profit (EBIT)amounted to DKK3million(DKK26 as well aswrite-downs inthedistributionFrance andEngland. positioning analysis,strengtheningofthemanagementteam which islargelyattributableto thecomprehensive brandand higherin2016/17significantly compared to year lastfinancial year primarilydueto higherdiscountsandreturns. Costswere the realizedgross marginwas lower compared to lastfinancial In spite oftheunderlyingmarginimprovement onsoldproducts, revenue declinedintotal by 13.0% all other markets revenue reported increases,andconsequently Outside ofEurope, revenue Japanreported reduction whereas year,financial however, withvariations from market to market. Revenue from Rest ofEurope was 4.4%lower compared to last revenue inDenmark was atthesamelevel year. aslastfinancial driven by apositive development inSweden andNorway whereas Revenue from theNordic regionincreasedby 2.3%primarily

2016/17 (0.4) (14) 110 351 241 4.8 0.9 17 3 2015/16 112 357 245 9.2 7.3 33 (7) 26

Change, % (100.0) (88.5) (48.5) (1.7) (1.6) (1.8)

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW OTHER BRANDS

The Group portfolio of brands also includes the two brands Saint Tropez and Designers Remix of which Saint Tropez is wholly owned whereas Designers Remix is owned by a 51% equity share. None of the two brands utilize the Group’s central infrastructure functions.

Other brands Performance for the year Besides the three Premium brands, the Group portfolio of brands Revenue from Other brands increased by 0.5% compared to also includes the two brands Saint Tropez and Designers Remix the financial year 2015/16 (0.6% measured in local currency). which both operate exclusively within female fashion. Saint Tro- Growth was driven by Designers Remix which reported a revenue pez is a brand in the Fast Fashion segment whereas Designers increase whereas the revenue development in Saint Tropez was Remix is a Premium brand. unsatisfactory.

Saint Tropez is wholly owned by IC Group whereas the Group Growth was realized in the wholesale channel whereas the has an equity share of 51% in Designers Remix. The remaining development in the retail channel was negative in respect of both 49% equity share is held by Niels and Charlotte Eskildsen, CEO brands. E-commerce revenue increased by almost 10%, however, and Chief Designer of the brand, respectively. None of the two the nominal value of this channel only accounts for a small part brands utilize the Group’s central infrastructure functions, and of the total revenue of Other brands. in all material respects both brands operate independently. The two brands may be divested and are thus considered as Designers Remix reported revenue increases in all markets investments. whereas revenue from Saint Tropez particularly declined in the brand’s domestic market Denmark where most of its physical stores are located. The same-store revenue (excluding outlets) declined by 8.6% compared to 2015/16.

The operating profit (EBIT) amounted to DKK 10 million (DKK 20 million) corresponding to an EBIT margin of 2.5% (5.0%). The reduced margin was driven by Saint Tropez where an improved gross margin was not able to compensate the significantly worse cost ratio caused by the higher capacity costs. The development may be ascribed a combination of new stores, higher staff costs and increased depreciation, amortization and impairment losses.

OTHER BRANDS – EARNINGS OVERVIEW

DKK million 2016/17 2015/16 Change, % Revenue 400 398 0.5 Wholesale and franchise 224 213 5.2 Retail, e-commerce and outlets 176 185 (4.9) Revenue growth in local currency (%) 0.6 Operating profit before depreciation and amortization (EBITDA) 19 27 (29.6) EBITDA margin (%) 4.8 6.8 Depreciation, amortization and impairment losses (9) (7) (28.6) Operating profit (EBIT) 10 20 (50.0) EBIT margin (%) 2.5 5.0

22 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY

CONSOLIDATED FINANCIAL REVIEW

Revenue improved by 4.3% to DKK 2,749 million measured in local currency (DKK 2,665 million). The gross margin was negatively impacted by higher inventory write-downs in Q4 2016/17 as well as higher discounts throughout the financial year under review. Costs increased particularly as a consequence of the implemented restructuring of the Group’s central functions, but also store openings as well as distribution adjustments in certain brands contributed to this cost development. The operating profit (EBIT) amounted to DKK 125 million (DKK 243 million) corresponding to an EBIT margin of 4.5% (9.1%). Profit for the year amounted to DKK 92 million (DKK 195 million).

Revenue declined by 1.5 percentage points to 55.3% (56.8%) in spite Consolidated revenue amounted to DKK 2,749 million of a significant improvement of the underlying margin on sold (DKK 2,665 million) corresponding to an increase of 3.2% products across all brands. Consequently, the development (4.3% measured in local currency). The increased revenue was of the gross margin is attributable to higher discounts and primarily driven by the retail channel where store openings, returns during the financial year under review as well as higher especially in Peak Performance, as well as high e-commerce inventory write-downs – particularly in Tiger of Sweden and growth contributed to the growth rate of 6.4% in this channel. Peak Performance during Q4 2016/17. In total, the Group opened 19 new stores and outlets whereas 7 were closed. The total same-store revenue increased by Capacity costs 1.7% driven by e-commerce growth. The moderate growth rate Capacity cost increased by DKK 124 million to DKK 1,394 reported in the wholesale channel was driven by higher pre- million for 2016/17, and the cost ratio increased by 3.0 order revenue, mainly in Peak Performance, whereas in-season percentage points to 50.7% (47.7%). Non-recurring costs selling was lower compared to last financial year. As described attributable to the structural changes of the Group’s central earlier, the lower in-season selling is primarily attributable to functions amounted to DKK 33 million. Furthermore, costs Tiger of Sweden where a part of the reduction is driven by the attributable to impairment of assets in the distribution, decision to reduce the amount of discounted sales. Revenue primarily in respect of By Malene Birger and Tiger of Sweden, from the wholesale channel increased by 1.3%. amounted to DKK 11 million. In addition to this, a large part of the cost development is attributable to new stores and hig- Gross margin her e-commerce activity while strengthening of management Consolidated gross profit of continuing operations amounted to teams in some of the Group Premium brands also contributed DKK 1,519 million (DKK 1,513 million). The gross margin to this development.

Revenue development (DKK million) Capacity cost development (DKK) million

201/16 P T O U 2016/17 201/16 N O 2016/17 P S M

24 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S yearfinancial 12 months revenue compared to 11.8% for the sameperiod last year.financial The working capitalconstituted 11.6% of the trailing timing differences of payments compared to the same period last level as2015/16 while trade payables mainlydeclined due to Performance. Trade receivables were essentially atthe same write-downstory –primarilydriven by Tiger of Sweden andPeak amount ofthe inventoriescarrying declined due to higher inven- inventories was atthe same level as2015/16, however, the same level year. aslastfinancial The gross value ofthe Group’s The working capitalamounted to DKK318 million whichisatthe Net working capital divested Mid Market division. DKK 3million from discontinued operations inrespect of the in income from investments inassociates aswell asaprofit of DK Company A/Samounting to approx. DKK 9million recognized affected positively by the proceeds from the sale of shares in (DKK 195 million). The consolidated profit for 2015/16 was Consolidated profit for 2016/17 amounted to DKK92million Profit for theyear EBIT marginfor 2016/17 would have been 5.7%. of the structural changes of the Group’s central functions, the above. having After adjusted for the non-recurring costs inrespect attributable to the development ofcapacitycostsasdescribed 4.5% (9.1%). The reduced profit compared to 2015/16 isprimarily million (DKK243 million)corresponding to anEBITmarginof Operating profit ofcontinuing operations amounted to DKK125 Operating profit(EBIT) Operating profitdevelopment (EBIT), DKKmillion 201/16 P . P T S M O U 2016/17

17 million (DKK25million). Following this,the net interest-bearing debt amounted to DKK yearfinancial 2015/16 whichamounted to DKK244 million (net). primarily attributable to extraordinary dividend paid during the of DKK79million(outflow of DKK319 million). Thischange is Cash flow from activities amounted financing to anoutflow information.for further quently atthe same level year. aslastfinancial in new stores, amounted to DKK89million and were conse and property, plantandequipment, primarilyfor investments cash flow in2015/16. Investments inboth intangible assets A/S whichcontributed positively by DKK144 million to the 10,Raffinaderivej Copenhagen, and the shares inDKCompany located as aconsequence ofthe sale of the head office from investing activities declined by DKK143 millionprimarily activities was reduced by DKK8millionwhereas cashflow million (inflow of DKK238million). Cashflow from operating Consolidated free cashflow amounted to aninflow of DKK87 Cash flow debt andnetinterest-bearing June 2017 amounted to 51.9% (51.2%). sive income for the year. Consequently, the equity ratio at30 by the positive offset comprehen- of DKK83million (net) partly million). Thisreduction was driven by dividend payment ordinary Equity at30June 2017 amounted to DKK723million(DKK740 Changes inequityandratio Development innetinterest-bearing debt,DKKmillion 201/16

See chapterSee 4inthe consolidated statements financial O T N O

2016/17

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW RISK MANAGEMENT

Due to the Group’s activities, IC Group is exposed to a number of risks all inherent in the apparel and fashion industry. The Management considers efficient risk management as an integrated part of all Group activities and works continously to minimize uncertainty. Furthermore, the Management regularly assesses the risks in order to determine whether the risks have changed or the risk control measures are adequate or relevant. No significant changes have taken place during the financial year under review compared to the financial year 2015/16.

The Group creates stakeholder value by managing and mini- inherent risks. The Board of Directors reviews the Group’s mizing uncertainty within the core activities. The Group’s pro- insurance annually to ensure that coverage is adequate. cesses are set up in such a manner that risks are controlled efficiently based on the experiences and competences achie- The below risks and uncertainties are those which ved over time by the Group. Where deemed possible, it is the the Management considers to be most significant at Group’s policy to take out insurance coverage to hedge against the present.

RISK OVERVIEW

LARGE 1

2 3 4 CONSIDERABLE 7 6 5 8

Financial impact impact Financial 10 SIGNIFICANT MINIMAL

UNLIKELY MINIMAL POSSIBLE PROBABLE

Probability of occurance

26 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY OVERVIEW

RISKS MONITORING AND COVERAGE

Macroeconomic trends, changed market • Increased internationalization and diversity on different geographical markets contribute conditions or changed consumer behaviour to spreading the risk which have a negative impact on particu- • The development of the Group’s primary supplier markets is monitored closely in order 1 larly raw material prices, production costs to plan relocation of production well in advance as well as the consumer demand • Adjustment of capacity costs to the extent that it is not deemed to have a negative impact on the long-term strategy execution of the Group brands

Risk of loss of brand value through negati- • Strong control of quality level during the collection development process ve publicity in the media or changed brand • Pro-active corporate responsibility policy as well as guidelines and stringent requirements perception with the core customers for the product development process. 2 • Distribution channels are adjusted and developed on an on-going basis to support the brand value in the best possible way

• Significant internal resources are allocated to brand building and marketing STRATEGY

Purchase and sale in own stores, including • All Group brands work with Sales and Operations Planning in order to optimize purchase risk of too high inventory levels and conse- of goods to own sales channels 3 quently the risk of increased discounted • A network of outlets to where surplus products are channelled and are sold continuously sales reduces the need for periods with discounted sales in the stores and capacity in this network is increased or reduced as required

Fashion and collection risks as a • Commercial and facts-based approach to collection development where sales statistics consequence of continuously changing and analyses of market trends are compared to current fashion trends 4 fashion trends • A certain level of diversification at Group level due to the number of different and independent brands in the Group portfolio

Loss of key employees • Through the Group’s work on HR, guidelines, tools, processes and training are being developed 5 and updated, and an annual employee survey is conducted to retain and develop employees

Political risks, including particularly • Continuously monitoring of the political conditions of the global sourcing markets China and Romania which account for • Geographic relocation of sourcing may take place if deemed necessary 6 43% (43%) and 18% (22%) of the

Group’s sourcing, respectively PERFORMANCE Logistics and order handling, including • The Group’s logistics function is continuously working to optimize order handling and 7 the risk of late, faulty or non-delivery enhance the planning systems. Timely delivery to own stores, consumers and wholesale customers is a key focus area

IT risks, including unauthorized access, • The Group’s IT function manages these risks by continuous maintenance of systems, 8 cybercrime and system downtime using IT security technologies and keeping back-up of critical data

Financial risks, including in particular • The Group monitors, hedges and controls all financial risks centrally through the finance foreign currency exposure risk function in the Parent Company in accordance with the Finance Policy as adopted by 9 the Board of Directors. See note 5.3 to the consolidated financial statements for further information on the Group’s financial risks

Suppliers, including risk of errors and • Compliance control of the Group’s business and ethical standards through a systematic omissions of ordered products as well scoring of all suppliers 10 as being dependent of few key suppliers • The Group has a total of 148 (148) suppliers of which the 10 largest suppliers account for 45% (49%) of the total production value. The largest individual supplier accounts for 13% (11%) of the total production value, and the Group is thus not dependent of one individual supplier GOVERNANCE

MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • IC GROUP A/S 27 THE GROUP’S WORK WITH CORPORATE RESPONSIBILITY

As part of the global apparel and fashion industry, IC Group is committed to being a responsible company working with integrity and sustainability. We strive at creating stakeholder value by addressing and solving the different challenges which any company of the apparel and fashion industry faces.

Corporate Responsibility Policy Diversity We are part of an industry with many corporate responsibility IC Group has signed ”Recommendation for more women on super- challenges, and we take these issues seriously. visory boards”, and it is the Group’s policy, over the coming years, to work consistently to recruit more female managers in the Company IC Group has joined the UN Global Compact, and our corporate in general. Pursuant to section 99b of the Danish Financial State- responsibility efforts are grounded in the UN Global Compact’s ment Act, the Group’s gender diversity targets and its actual gender 10 principles which are based on internationally adopted distribution are set out below. declarations and conventions on human rights, labour rights, environmental protection and anti-corruption. Together, the UN The proportionate share of females in IC Group’s Board of Directors Global Compact and the UN Guiding Principles constitute the constituted 14% at 30 June 2017, and the Group works continuous- overall framework to guide corporate responsibility policies and ly to recruit and develop new female managers. The Group’s specific implementation processes in the Group. target is to increase the percentage of female board members to 33% within a time span of not more than 2 years – i.e., by 30 June By joining the UN Global Compact, we have pledged to work pro- 2019 at the latest. This target must be reached through a continues actively internally as well as externally in cooperation with our dialogue within the Board of Directors on how to ensure optimum suppliers to promote compliance with these principles. We strive diversity in the composition of the Board of Directors and in the at making a positive difference and setting up due diligence recruitment pool of new board candidates. In the Annual Report processes to avoid non-compliance issues. 2015/16, it was reported that the target for female board members To read IC Group’s Corporate Responsibility Policy and our was set at 33% within a time span of 3 years. We did not achieve specific policies, go to our corporate website at: icgroup.net/ this which is primarily attributable to the recruitment base not responsibility/our-policy allowing for this target to be fulfilled.

The representation of male and female managers is distributed equally at all other organizational levels in the Group. The complete Statutory Corporate Responsibility Report for the financial year 2016/17, cf. section 99a of the Danish Financial Statements Act, is available on the corporate website at: icgroup.net/responsibility/corporate-responsibility-report/

28 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S need for establishing other adhoccommittees. specific more, theBoard ofDirectors willonanon-goingbasisassessthe Remuneration Committee andaNominationCommittee. Further this, theBoard ofDirectors hasappointed an Audit Committee, a establishing special,permanent board committees. Asaresultof Copenhagen, theBoard ofDirectors hasassessedtheneedfor In compliance withtherecommendations from NASDAQ OMX elected for one-year terms. their tasksinthebestpossibleway. Allboard are members tences to theeffect thattheBoard ofDirectors canperform experience anddocumented strategic andmanagerialcompe- tors collectively hasaprofessional broad spectrum,extensive emphasized thattheBoardindustry. ofDirec Itisfurthermore experience withingeneralmanagement, retail andthefashion The Board ofDirectors iscomposed withemphasis onextensive andboardcommitteesBoard ofDirectors legislation and rules applicable for listed Danish companies. of Association aswellof ICGroup’s asthe prevailing Articles Group. Thisframework hasbeen prepared withinthe scope appropriateensure efficient, and sound management of IC Management’s working procedures whichare intended to governance statement describes the framework for the Board andtheir interaction witheach other. The corporate as well asthetasksofBoard ofDirectors andtheExecutive the Group’s relationship withitsstakeholders andenvironment Governance Statement, theBoard ofDirectors hasreviewed As expressed intheGroup’s AnnualCorporate Statutory engages inanon-goingdialoguewiththeExecutive Board. 5 regularboard meetings ayear, andtheChairmanship Toholders. theBoard thistask, undertake ofDirectors holds the long-term interests oftheGroup –andthusofallshare tasktoThe Board promote ofDirectors ititsprimary considers interests Managing shareholders’ CORPORATEON GOVERNANCE WORK GROUP’S THE governance/articles-of-association/ corporate website at: which isincompliance withtheRecommendations onCorporate Governance. mance isanon-goingprocess appropriate to ensureanefficient, andsoundmanagementoftheCompany targets. Consequently, continuousdevelopment oftheGroup Managementandfollow-up ontheirperfor Corporate governance isconsideredto beaninherentanddecisive factor inachieving theGroup’s strategic

To ofAssociation, goto read ICGroup’s the Articles icgroup.net/investors/corporate-

- - Directors arenot includedintheincentive programmes. based incentive programmes. oftheBoard Members of Group’s targets, ICGroup hasestablished bonusandshare- creating aworking environment wherefocus isonmeeting the theExecutiveshareholders, Board andother executives and With thepurpose ofpromoting commoninterests between Remuneration Policy andincentive pay agreements willbe affected. on page 35.Inthe event ofany takeover bids,nosignificant Informationin thesection Shareholders and Share Performance A description of the Group’s ownership structure isprovided andtakeover structure Ownership bids icgroup.net/investors/corporate-governance/board-committees/ individual board committees, goto thecorporate website at: consolidated statements. financial Board andother executives arepresented innote 6.2to the mance sharesgranted to oftheExecutive anumberofmembers statements,financial whereasdetails onwarrants andperfor the Executive Board ispresented innote 6.1 to theconsolidated investors/corporate-governance/remuneration-policy/ and incentive pay, goto thecorporate website at:icgroup.net/ icgroup.net/investors/corporate-governance/statutory-report/ Financial Statements Act, isavailable onthecorporate website at: ment for year thefinancial 2016/17, cf.section107b oftheDanish on Corporate Governance). (which are based on the Recommendations from the Committee on Corporate Governance issued by NASDAQ OMXCopenhagen With 2exceptions, ICGroup complies withallRecommendations CORPORATE GOVERNANCE RECOMMENDATIONS

For further informationFor ontheBoard further ofDirectors andthe Information on remuneration to the Board ofDirectors and informationFor onICGroup’s further Remuneration Policy

The complete AnnualCorporate Statutory Governance State - -

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW EXECUTIVE TEAM

ALEXANDER

* MARTENSEN-LARSEN CEO, IC Group (2017), (Born 1975)

Alexander Martensen-Larsen holds a BSc in Former Group CFO and member of the Executive International Business from Copenhagen Business Board since 2015. School and has earned an MBA from IMD Business Chairman of the Board of Directors of Designers School. Previously, Alexander Martensen-Larsen Remix A/S. served as Director in Corporate Business Develop- ment at TDC and as a Financial Analyst at Morgan No. of shares: 5,000 (5,000) Stanley Investment Banking in London. No of performance shares: 14,920 (6,575)

NICOLAS WARCHALOWSKI CEO, Peak Performance (2014), (Born 1971)

Nicolas Warchalowski holds a BSc in Business He has lived and worked in the USA and Administration from Jönköping International Austria and is now based in Stockholm. Business School in Sweden and has also lived and studied in the UK. Before Nicolas joined Peak No. of shares: nil (nil) Performance, he served as CEO of the Swedish No of performance shares: 9,999 (4,505) sportswear brand Haglöfs. Previously, Nicolas worked as Managing Director of Red Bull’s Carpe Diem division in North America and as Business Team Leader of Proctor & Gamble Nordic.

HANS-CHRISTIAN MEYER CEO, Tiger of Sweden (2017), (Born 1970), starts 1 September 2017

Since Hans-Christian Meyer completed his edu- Hans-Christian has also worked for the cation in Aarhus, Denmark, he has lived abroad Danish companies Sand and Red//Green. and worked in Germany, Sweden and the UK for a number of years. Most recently in London No. of shares: nil as President Retail, EMEA, as well as part of No of performance shares: nil the Global Management Team in Ralph Lauren. Before this, Hans-Christian Meyer was Senior Vice President and Managing Director of Ralph Lauren in Scandinavia and the Baltic region.

MORTEN LINNET CEO, By Malene Birger (2015), (Born 1970)

Morten has served as Vice President of Corporate No. of shares: nil (nil) HR in IC Group where he has worked on various No of performance shares: 9,988 (4,471) business projects since 2006. Morten holds a B.Com. in Business Finance and has previously held positions with Nordea, GN Store Nord and Mars Inc.

* The Executive Board of IC Group A/S

30 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY

BOARD OF DIRECTORS

HENRIK HEIDEBY A/S. Deputy Chairman of the Board of Directors Chairman (Born 1949) of FIH A/S and TK Development A/S. Member of the Board of Directors of Ahpla ApS Henrik Heideby has acquired extensive national and international management experience and Member of the Board of Directors: 2005 skills in financing, risk management, etc., from his Chairman of the Board of Directors: 2014 previous roles as Group CEO of PFA Pension, Alfred Member of the Audit Commitee: 2009 Berg Bank and FIH Erhvervsbank and as a member Chairman of the Remuneration Committee: 2014 of the Board of Directors of other businesses. Chairman of the Nomination Committee: 2016

Chairman of the Board of Directors of Carlsberg Considered a non-independent member Byen P/S, Kirk & Thorsen Invest A/S, Blue Equity of the Board of Directors Management A/S and Greystone Capital Partners No. of shares: 12,500 (12,500)

PETER THORSEN selskabet af 24. februar 2015 A/S, Droob ApS as well as Sct. Maria Hospice. Member of the Deputy Chairman (Born 1966) Board of Directors of Kirk & Thorsen Invest A/S, CEO, Kirk & Thorsen A/S Kirk & Thorsen A/S as well as ET 1 ApS As former CEO of Louis Poulsen, Chairman of BoConcept as well as a number of other Member of the Board of Directors: 2016 businesses, Peter Thorsen has extensive Deputy Chairman of the Board of Directors: 2017 experience in management, strategy, retail Chairman of the Audit Commitee: 2016 operations, business development and optimization of business models. Considered an independent member of the Board of Directors Chairman of the Board of Directors of TK No. of shares: 191,556 (nil) Development , Genan Holding, Investerings-

ANDERS COLDING FRIIS Committee and Central Board of the Confederation of Danish Industry (DI) Board Member (Born 1963)

CEO, PANDORA A/S Member of the Board of Directors: 2005 Anders Colding Friis has acquired extensive Member of the Remuneration Committee: 2011 national and international management Member of the Nomination Committee: 2016 experience from his current role as CEO of PANDORA A/S (former CEO of Scandinavian Considered a non-independent member Tobacco Group A/S) and as a member of the of the Board of Directors Board of Directors of other businesses No. of shares: 6,925 (6,925)

Deputy Chairman of Industrial Employers in Copenhagen. Member of the Executive

NIELS MARTINSEN Chairman of the Board of Directors of A/S Sa- dolinparken and A/S Rådhusparken. Member of Board Member (Born 1948) the Board of Directors of Friheden Invest A/S CEO of Friheden Invest A/S

As the founder of InWear and long-time CEO Member of the Board of Directors: 2001 of InWear Group A/S, later IC Companys A/S, Member of the Audit Commitee: 2009 Niels Martinsen has acquired extensive national Member of the Remuneration Committee: 2011 and international management experience and Member of the Nomination Committee: 2016 solid knowledge of the international fashion industry. Niels Martinsen also has experience Considered a non-independent member as a member of the Board of Directors of other of the Board of Directors businesses. No. of shares: 7,566,128 (7,191,128) through Friheden Invest A/S controlled by Niels Martinsen

32 IC GROUP A/S • ANNUAL REPORT 2016/17 • MANAGEMENT COMMENTARY MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S Magasin duNord. positions –including,amongothers, CEOof management experience from several executive Furthermore, Jónhasover 20years ofretail optimized operationsaswell ase-commerce. competences withinmerchandizing and experience withinretail thusholdingstrong Jón Björnssonhasacquired longandextensive CEO, Festi Iceland Board Member(Born1968) JÓN BJÖRNSSON and brandstrategies. of implementing thegroup’s globalmarketing she hasdeveloped andhadtheresponsibility tive positionswithintheLEGOGroup where online channels.Conny hasheldseveral execu within brandingandmarketing –inparticular the LEGOGroup acquired strong competences Conny Kalcher has throughout hercareerin Management, LEGOGroup VP, BrandDevelopment andMarketing Board Member(Born1957) CONNY KALCHER international sales,retail andproduction. including product development andmarketing, and knowledge inallareasofthevalue chain, and therefore hasstrong businessknow-how ment experience from acloselyrelated industry extensive nationalandinternational manage Michael HaugeSørensenhasacquired Board Member(Born1973) SØRENSEN MICHAEL HAUGE

- No. ofshares:nil(nil) of the Board of Directors Considered anindependent member Member oftheBoard ofDirectors: 2017 and BooztFashion. Member oftheBoard ofDirectors ofÅhlens No. ofshares:2,857 (nil) of the Board of Directors Considered anindependent member Member oftheBoard ofDirectors: 2017 Group, ConsumerAdvocacy. of Commerce andmemberofBain’sNPSClient Member oftheCouncilDanish-UKChamber No. ofshares:1,350 (1,350) of the Board of Directors Considered anindependent member Member oftheBoard ofDirectors: 2014 Elevate Global Limited and SantaFe Group A/S. rectors of Zebra A/S,Michaso Holdings Limited, TT Holding IIIA/S.Member oftheBoard of Di- Kansas AB,TOP-TOY A/S,TTHolding IIA/Sand Chairman ofthe Board of Directors of Fristad

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW

Treasury shares of issuedsharesandisatthesamelevel asat30June2016. This numberofsharescorrespondsto 2.6%ofthetotal number At 30June2017, theGroup owned 442,572 (442,572) shares. tion ofICGroup amounted to DKK2.4billion. At year theendoffinancial 2016/17, themarket capitaliza- year Highest closing price during the financial yearChange duringthefinancial Closing priceat30June2017 Closing priceat30June2016 Nominal value pershare Share capital the MidCapindex. IC Group islisted on NASDAQ of OMXCopenhagen and forms part andshareperformance Share capital PERFORMANCE SHARE AND SHAREHOLDER INFORMATION MANAGEMENT COMMENTARY • ANNUAL REPORT 2016/17 • ICGROUP A/S SHARE PERFORMANCE (1JULY 2016 =INDEX100) for aneffective pricingoftheICGroup share. investors, analystsandother stakeholders. Bydoingthis,we contribute to providing theoptimumconditions We aimto maintainahighandconsistent information level –andengageinanopenactive dialoguewith 10 100 11 16 I

(23 August 2016) 70 IC G A/S A 16 A O 16 NASA OMMC 16 17 17.1 millionshares NASA OMC20 A 17 DKK 185.0 DKK DKK 140.0 DKK 172.0 (18.6)% DKK 10 17 with individual investors analystsonaregular basis. andfinancial shows andinvestor Furthermore, we seminars. set up meetings inroad and the Management regularly participates annual reports, we hostwebcasts following the announcements ofour interim and and other stakeholders inrespect ofthe Group’s performance, share. To analysts maintainagood dialogue withshareholders, level inorder to contribute to aneffective pricingof the ICGroup The Group aimsto maintainahighandconsistent information Investor relations out inthe table below. of the Group’s The breakdown shareholders. isset of shareholders share class,andthe share of votes isequivalent to the share capital combined held 97.2% of the total share capital.The Group hasone At 30June 2017, IC Group had 6,040registered who shareholders structure Ownership * SHAREHOLDERS AT 30JUNE2017 etc., goto the corporate website at:icgroup.net/investors/ statements,financial company calendar, announcements, financial DKK million ATP (Hillerød,DK) Hanssen Holding(Daugård, DK) Friheden Invest A/S Danish private investorer Other Danishinstitutionalinvestors Non-registered shareholders Treasury shares Foreign private investors Foreign institutionalinvestors Total Board ofDirectors. Friheden Invest A/Siscontrolled memberoftheGroup’s by Niels Martinsen,

For further informationFor on the Group’s further Investor Relations Policy, (Hørsholm, DK) * (Hørsholm, 17,090,858 1,820,230 7,566,128 3,686,378 1,216,795 1,219,973

of shares 442,572 488,341 591,716 Number Share 58,724 capital 44.3% 23.5% 10.7%

100% 2.6% 0.4% 2.8% 1.5% 7.1% 7.1%

GOVERNANCE PERFORMANCE STRATEGY OVERVIEW INTRODUCTION TO THE FINANCIAL STATEMENTS

The consolidated financial statements and the parent company ture, governance as well supplementary notes. Each note financial statements for the financial year 2016/17 have been to the consolidated financial statements provides information prepared in accordance with the International Financial Reporting on accounting policies and any accounting estimates. Standards (IFRS) as adopted by the EU and additional disclosure requirements pursuant to the Danish Financial Statements Act. Furthermore, symbols have been used in the financial statements to provide a clear picture of the interrelation between The consolidated financial statements have been divided into the different chapters of the consolidated financial statements. 8 sections: primary financial statements, basis for preparation, The symbols stated below have been used in the notes as profit for the year, working capital, invested capital, capital struc- reference to the primary financial statements.

INCOME STATEMENT INFORMATION STATEMENT OF FINANCIAL POSITION REFERENCE TO SUPPLEMENTARY STATEMENT OF CASH FLOWS INFORMATION IN THE ANNUAL REPORT ACCOUNTING POLICIES REFERENCE TO WEB PAGE ACCOUNTING ESTIMATES CONSOLIDATED FINANCIAL STATEMENTS

PRIMARY FINANCIAL STATEMENTS CHAPTER 5. CAPITAL STRUCTURE CONSOLIDATED INCOME STATEMENT 38 5.1 EQUITY 64 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 39 5.2 NET INTEREST-BEARING DEBT 65 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 40 5.3 FINANCIAL RISKS AND DERIVATIVE CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 41 FINANCIAL INSTRUMENTS 65 CONSOLIDATED STATEMENT OF CASH FLOWS 42 5.4 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS 69 CHAPTER 1. BASIS FOR PREPARATION 44 5.5 FINANCIAL INCOME AND COSTS 70 5.6 OPERATING LEASES 70 CHAPTER 2. PROFIT FOR THE YEAR 2.1 SEGMENT INFORMATION 48 CHAPTER 6. GOVERNANCE 2.2 STAFF COSTS 50 6.1 REMUNERATION TO THE EXECUTIVE BOARD AND 2.3 TAX 51 BOARD OF DIRECTORS 72 6.2 SHARE-BASED REMUNERATION 73 CHAPTER 3. WORKING CAPITAL 6.3 RELATED PARTIES 75 3.1 INVENTORIES 55 6.4 FEE TO AUDITORS ELECTED AT THE ANNUAL 3.2 TRADE RECEIVABLES 56 GENERAL MEETING 75 3.3 WORKING CAPITAL 56 3.4 OTHER ADJUSTMENTS, CHAPTER 7. SUPPLEMENTARY NOTES STATEMENT OF CASH FLOWS 57 7.1 RETIREMENT BENEFIT OBLIGATIONS 77 7.2 PROVISIONS 78 CHAPTER 4. INVESTED CAPITAL 7.3 CONTINGENT LIABILITIES 79 4.1 INTANGIBLE ASSETS 59 7.4 EVENTS AFTER THE REPORTING PERIOD 79 4.2 PROPERTY, PLANT AND EQUIPMENT 61 CONSOLIDATED INCOME STATEMENT 1 JULY - 30 JUNE

Note DKK million 2016/17 2015/16

2.1 Revenue 2,749 2,665 Cost of sales (1,230) (1,152) Gross profit 1,519 1,513 Other external costs (674) (626) 2.2 Staff costs (640) (587) Other operating income and costs - 6 Operating profit before depreciation and amortization (EBITDA) 205 306 4.1, 4.2 Depreciation, amortization and impairment losses (80) (63) Operating profit (EBIT) 125 243 Income from investments in associates - 11 5.5 Financial income 8 9 5.5 Financial costs (11) (16) Profit before tax 122 247 2.3 Tax on profit for the year of continuing operations (30) (55) Profit for the year of continuing operations 92 192 Profit for the year of discontinued operations* - 3 Profit for the year 92 195

Profit allocation: Shareholders of IC Group A/S 89 193 Non-controlling interests 3 2 Profit for the year 92 195

5.1 Earnings per share, DKK 5.3 11.6 5.1 Diluted earnings per share, DKK 5.3 11.6 5.1 Earnings per share of continuing operations, DKK 5.3 11.4 5.1 Diluted earnings per share of continuing operations, DKK 5.3 11.4

* This figure includes income of DKK nil and costs of DKK nil (2015/16: Income of DKK 4 million and costs of DKK 1 million).

38 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS

Items which cannot to bereclassified theincomestatement: Foreign currencytranslationadjustments: Items to bereclassifiedto theincomestatement conditionsaremet: whencertain FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S Note 1 JULY -30JUNE OF COMPREHENSIVE INCOME STATEMENT CONSOLIDATED Total Non-controlling interests ofICGroupShareholders A/S Fair value adjustments,gains/loss onfinancialinstrumentsrelated to cashflow hedges Hedging transactions: Allocation ofcomprehensive income for theyear: Total comprehensive income tax Other comprehensive income after Actuarial adjustments Foreign currency translationadjustments, foreign subsidiariesandintercompany loans Tax onitems whichmay bereclassified to theincomestatement realizedcashflow hedges Reclassification to theincome statement, gains/lossonfinancialinstruments related to Other comprehensive income from associates OTHER COMPREHENSIVEINCOME Profit for the year DKK million 2016/17 (28) (18) (11) 64 64 (6) 92 61 3 1 6 -

2015/16 (38) 195 155 157 157 (61) (2) (9) 27 2 7 - 39

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE

Note DKK million 2017 2016

ASSETS NON-CURRENT ASSETS 4.1 Intangible assets 246 260 4.2 Property, plant and equipment 149 134 Financial assets 22 24 2.3 Deferred tax 61 58 Total non-current assets 478 476

CURRENT ASSETS 3.1 Inventories 394 425 3.2 Trade receivables 277 284 2.3 Tax receivable 49 57 Other receivables 32 33 Prepayments 94 85 5.2 Cash 69 84 Total current assets 915 968 TOTAL ASSETS 1,393 1,444

Note DKK million 2017 2016

EQUITY AND LIABILITIES EQUITY 5.1 Share capital 171 171 Reserve for hedging transactions (9) 14 Translation reserve (68) (62) Retained earnings 619 610 Equity attributable to shareholders of the Parent Company 713 733

Equity attributable to non-controlling interests 10 7 TOTAL EQUITY 723 740

LIABILITIES 7.1 Retirement benefit obligations 8 9 2.3 Deferred tax 7 12 7.2 Provisions 11 6 Total non-current liabilities 26 27

5.2 Current liabilities to credit institutions 86 109 Trade payables 276 317 2.3 Tax payable 10 52 Other liabilities 223 178 7.2 Provisions 49 21 Total current liabilities 644 677 Total liabilities 670 704 TOTAL EQUITY AND LIABILITIES 1,393 1,444

40 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S 2016 2017 1 JULY -30JUNE EQUITY IN CHANGES OF STATEMENT CONSOLIDATED DKK million DKK million Share-based payments Exercise ofwarrants dividendpaid Extraordinary dividendpaid Ordinary Changes inequityduring2015/16 Total comprehensive income Other comprehensive tax incomeafter Profit for the year Equity at30June2016 shares Dividend ontreasury Transactions with Equity at1July2015 owners:

Exercise ofwarrants dividendpaid Ordinary Other comprehensive tax incomeafter Profit for the year Equity at1July2016

transaction hasnot yet beenrealized,lesstax. lify for recognitionascashflow hedges,andwherethehedged net changeofthe fair value ofhedgingtransactionswhichqua Reserve for hedgingtransactionscomprises the accumulated Reserve for hedgingtransactions

shares Dividend ontreasury Transactions Total comprehensive income with owners: Equity at30June2017 Changes inequityduring2016/17

ACCOUNTING POLICIES

capital capital Share Share 170 171 171 171 1 1 ------hedging- hedging- Reserve Reserve actions actions - trans- trans- (23) (23) (23) (27) (27) (27) 14 14 14 14 (9) 41 for for functional currency into the IC Group’s reporting currency (DKK). functional currency into currency (DKK). the ICGroup’s reporting cial statements aswell asintercompany intheir loans reported in connection withthetranslation offoreign- subsidiaries’ finan rent Company’s share of foreign exchange differences arising comprises of the PaThe the translationreserve shareholders - Translation reserve ------reserve reserve Trans-- Trans-- lation lation (62) (53) (62) (68) (9) (9) (9) (6) (6) (6) ------Retained Retained earnings earnings (128) (128) (244) 525 653 525 534 106 108 (2) 1 7 1 4 4 5 9 2 - - - Proposed Proposed dividend dividend (66) (83) 85 68 85 85 17 (2) 85 (2) 85 85 85 ------

holders of holders of owned by owned by ICG A/S ICG A/S (146) (146) (244) Equity Equity share- share- 155 155 (66) (38) (83) 733 (28) (20) 733 713 193 879 89 61 (2) 1 8 4 -

owned by owned by non-cont. non-cont. interests interests Equity Equity 10 2 2 7 2 5 3 7 3 3 ------(144) (244) equity equity 884 884 (66) (83) 723 195 157 Total Total (17) 740 740 (38) (28) 64 64 92 (2) 1 8 4 - 41

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW CONSOLIDATED STATEMENT OF CASH FLOWS 1 JULY - 30 JUNE

Note DKK million 2016/17 2015/16

CASH FLOW FROM OPERATING ACTIVITIES 2.1 Operating profit, continuing operations 125 243 Operating profit, discontinued operations - 3 Operating profit 125 246

3.4 Other adjustments 124 66 3.3 Change in working capital (9) (61) Cash flow from ordinary operating activities 240 251

Financial income received 4 3 Financial costs paid (5) (6) Cash flow from operating activities 239 248

2.3 Tax paid (64) (65) Total cash flow from operating activities 175 183

CASH FLOW FROM INVESTING ACTIVITIES 4.1 Investments in intangible assets (17) (10) 4.2 Investments in property, plant and equipment (72) (81) Sale of associate and operations - 144 Change in other financial assets 1 2 Total cash flow from investing activities (88) 55

Total free cash flow 87 238

CASH FLOW FROM FINANCING ACTIVITIES Repayment of non-current liabilities - (17) 5.1 Dividends paid (83) (310) Exercise of warrants 4 8 Total cash flow from financing activities (79) (319) Net cash flow for the year 8 (81)

CASH AND CASH EQUIVALENTS Cash and cash equivalents at 1 July (25) 58 Foreign currency translation adjustments of cash and cash equivalents at 1 July - (2) Net cash flow for the year 8 (81) Cash and cash equivalents at 30 June (17) (25)

DKK million 2017 2016

Cash and cash equivalents in the statement of cash flows comprise: Cash 69 84 Current liabilities to credit institutions (86) (109) Cash and cash equivalents, cf. statement of cash flows (17) (25)

42 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S als paid,changeinworking capitalaswell astaxes paid. profit adjusted for non-cashoperatingitems, provisions, financi Cash flow from operatingactivitiesiscalculated asoperating activities indirectlybasedontheoperatingprofit. The statement ofcashflows presentscashflow from operating year.the beginningandatendoffinancial cash flows for theyear aswell ascashandequivalents at ting, investing activitiesfor andfinancing theyear, andthenet The statement ofcashflows shows thecashflows from opera Statement ofcashflows

ACCOUNTING POLICIES - - nagement. oftheGroup’sbank loansthatareanintegral cashma part Cash andcashequivalents comprise cashandnet short-term working capital. loansandother non-currentliabilitiesnot includedin mortgage from aswell shareholders astheraisingandrepayment of Cash flow from activitiesincludespayments financing to and ding investments inbusinesses. acquisition andsaleofnon-currentassets andsecurities,inclu Cash flow from investing activitiesincludespayments regarding - - 43

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW

CHAPTER 1 BASIS FOR PREPARATION

This chapter describes the significant accounting 1.1. SIGNIFICANT ACCOUNTING POLICIES policies for the Group as a whole. Significant accounting The consolidated financial statements and the parent company policies which relate to a primary statement, specific accounting financial statements for the financial year 2016/17 have item or note are described in the relevant note. Furthermore, this been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and additio- chapter contains a description of the new IFRS standards and nal disclosure requirements pursuant to the Danish Financial interpretations, and how these are expected to affect the Group’s Statements Act. financial position and performance. FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S standard for year thefinancial 2018/19. assessing theimpact ofIFRS15. ICGroup willimplement the inventories andprovisions, respectively. ICGroup iscurrently be presented gross inthestatement positionunder offinancial tion, IFRS15 requires thatprovisions for return of products must revenue may restrictedly, inisolated cases,bechanged.Inaddi as risksandrewards aretransferred. Thetimefor recognitionof to theexisting standards whererevenue isrecognizedwhenor whether itistransferred over timeoratapointincontrast recognized whenorascontrol istransferred to thecustomer ofrevenuedefinitions recognitionandrequires thatrevenue is interpretations. Thenew standard provides detailed framework joint project withFASB to replaceIAS18 andIAS11 aswell as 2018. 1January beginning onorafter IFRS15 ofa forms part Contracts withCustomers” whichiseffective for annualperiods IASB hasissuedandtheEUadopted IFRS15 ”Revenue from yearfinancial 2018/19. for assets. financial ICGroup willimplement thestandard for the expected to have any material impact ontheimpairment model dated statements. financial Similarly, theimplementation isnot tion isnot expected to have any material impact ontheconsoli this new standard instruments,andtheimplementa onfinancial quirements will be changed. IC Group has assessed the impact of instrumentsaswellmeasurement offinancial ashedgingre replace IAS39,andwiththisnew standard, and classification 2018. 1January ofIASB’sprojector after IFRS9forms to part Instruments” whichiseffective for annualperiodsbeginningon IASB hasissuedandtheEUadopted IFRS9”Financial New IFRSstandards issued,butnot yet effective statements of ICGroup A/S. 2016, andthese have not hadany material impact on the financial the standards witheffect from year the financial beginning 1July as well asamendment to IAS1. ICGroup A/Shasimplemented standards, including IFRSimprovement projects for 2012–2014 and hasrevised some of the existing (IFRIC) dards, interpretations IASB hasissued, andthe EUhasadopted, anumber of new stan- andinterpretations ofnew Implementation IFRSstandards exceptions. 2015/16the AnnualReport except from thebelow-mentioned unchanged ascompared to theaccountingpoliciesappliedin are The accountingpoliciesappliedinthisAnnualReport havefigures beenmade. andadjustmentsofthecomparativeMinor reclassifications of thesestatements orconsideredirrelevant. to to beinsignificant decision-makingoftheusers thefinancial requirements underIFRS,unless suchinformation isconsidered The disclosurerequirements provide information specific onthe statements orinthenotes. with other items ofauniform natureintheconsolidated financial If anitem initselfisnot deemedmaterial, itwillbeconsolidated accordingtransactions whichareclassified to natureorfunction. The consolidated statements financial comprise many complex -

- - - andstores.operating leases inrespect of cars amount ofDKK368million (DKK324 million) was disclosed as instead of cashflow from operating activities. At 30June 2017, an ascashflowthe lease liabilityisclassified from activities financing The free cashflow willbe positively impacted asthe repayment of and interest payments on the recognized liabilityto costs. financial consequence of rent payments of reclassification to depreciation IC Group’s key EBITDA ratios willbe affected, asa inparticular when lease assets andlease liabilities are recognized. Inaddition, statement, cashflow as well asstatement position of financial thelease terms willhavethat particularly animpact onthe income when implementing thisstandard. However, the Group expects statement of cashflow position andthe classification of financial Group hasnot assessed the impact on theincome statement, the 12 months,except for smallassets withalow value. At present, IC must be recognized for allcontractswithalease term more than toPursuant thisnew standard, alease asset andalease liability is currently assessing the impact of thisnew standard on leases. and measurement of leases willbe changed significantly. ICGroup project to replace IAS17, andwiththisnew standard, recognition not been adopted by the EUyet. IFRS16 ofIASB’s forms part 2019. 1January periods beginning onor after The standard has IASB hasissued IFRS16 ”Leases” iseffective which for annual detailed accountingpolicies. operating leases. 7.3 7.2 7.1 6.2 5.6 5.5 5.3 5.2 5.1 4.2 4.1 3.2 3.1 2.3 2.2 2.1 they aredescribedinmoredetail intherelevant notes: in equity, statement ofcashflows aswell asbelow where statementsfinancial arelisted inthestatement ofchanges to bematerial for oftheconsolidated theunderstanding accountingpoliciesdeemedbyThe significant Management

The listbelow thenotes specifies thatinclude See note information 5.6 for oftheGroup’s further

ACCOUNTING POLICIES Contingent liabilities Provisions Retirement obligations benefit Share-based remuneration Operating leases Financial incomeandcosts Financial risksandderivative instruments financial Net interest-bearing debt Equity Property, plantandequipment Intangible assets Trade receivables Inventories Tax costs Staff Segment information

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW Basis of consolidation Foreign exchange differences arising on the translation of foreign The consolidated financial statements consist of the financial subsidiaries’ opening equity using the exchange rates ruling at statements of IC Group A/S (the Parent Company) and its subsi- the end of the reporting period as well as on the translation of diaries in which the Company’s voting rights directly or indirectly the income statements using average exchange rates at the end exceed 50%, or in which the Company is able to exercise a con- of the reporting period are recognized under other comprehen- trolling interest in any other way. sive income.

The consolidated financial statements are prepared on the Prepayments, assets basis of the parent company financial statements and the indi- Prepayments recognized under assets comprise costs incurred vidual subsidiaries by consolidating items of a uniform nature. relating to the following financial year, including collection samp- Equity interests, intercompany transactions, intercompany les, rent, insurance, etc. Prepayments are measured at cost. balances, unrealized intercompany gains on inventories and dividends are eliminated. 1.2. SIGNIFICANT ACCOUNTING ESTIMATES The items of the financial statements of subsidiaries are fully consolidated in the consolidated financial statements. The In the preparation of the consolidated financial statements of IC proportionate share of the income from non-controlling interests Group A/S, Management makes various significant accounting and associates is recognized in the consolidated income state- estimates and assumptions that may affect the reported values ment for the year. of assets, liabilities, income, costs, cash flow and related information at the reporting date. The proportionate share of associates’ equity is recognized in the statement of financial position under non-current assets. The accounting estimates are based on past experience and other factors deemed reasonable in the circumstances. By their Foreign currency nature, such estimates are subject to some uncertainty and the Functional currency actual results may deviate from these estimates. The estimates For each of the reporting entities in the Group, a functional are continuously evaluated and the effect of any changes is re- currency is determined. The functional currency is the currency cognized in the relevant period. in the primary economic environment in which the individual reporting entity operates. Transactions in currencies other than The significant accounting estimates and assumptions deemed the functional currency are transactions denominated in foreign by Management to be material for the preparation and under- currencies. standing of the consolidated financial statements are listed below and described in more detail in the relevant notes: The consolidated financial statements and the parent company financial statements are reported in Danish Kroner (DKK). DKK is considered the primary currency of the Group’s operations and the functional currency of the Parent Company SIGNIFICANT ACCOUNTING ESTIMATES Foreign currency translation 2.3 Tax On initial recognition, transactions denominated in foreign curren- 3.1 Inventories cies are translated into the functional currency at the exchange 3.2 Trade receivables rate ruling at the transaction date. Foreign exchange differences 4.1 Intangible assets arising between the exchange rates at the transaction date and 4.2 Property, plant and equipment the date of payment are recognized in the income statement 7.2 Provisions under financial income or costs, respectively.

Receivables, payables and other monetary items denominated in foreign currencies are translated into the functional currency at the exchange rates ruling at the end of the reporting period. The difference between the exchange rate ruling at the end of the reporting period and the exchange rate at the date when the receivable or payable arose or was recorded in the most recent annual report is recognized in the income statement under financial income or costs. Property, plant and equipment and intangible assets, inventories and other non-monetary assets acquired in foreign currencies and measured based on historical cost are translated at the exchange rates ruling at the transaction date.

Translation in the consolidated financial statements The statements of financial position of foreign subsidiaries are translated into DKK at the exchange rate ruling at the end of the reporting period, while income statements are translated into DKK at monthly average exchange rates during the year.

46 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS

CHAPTER 2 PROFIT FOR THE YEAR

CONTENTS This chapter provides a specifica- and an operating profit (EBIT) of DKK 125 tion of the consolidated operating million (DKK 243 million) for 2016/17. Com- 2.1 SEGMENT INFORMATION profit. The Group segments are based on the bined, the Group’s three Premium brands ac- 2.2 STAFF COSTS 3 Premium brands; Peak Performance, Tiger counted for 85% of the Group’s revenue and 2.3 TAX of Sweden and By Malene Birger. All three 94% of EBIT of reportable segments which is brands are operated as independent busi- at the same level as last financial year. ness units, each with their own well-defined strategy plan and they are responsible for IC Group operates within a global tax their financial performance. platform due to its international operations. The Group’s tax strategy is to optimize its The financial performance of the indivi- tax practice proactively both in respect of dual segments is presented in note 2.1. payment of indirect and direct taxes while operating at all times in accordance with IC Group generated a consolidated revenue applicable law. The Group’s effective tax of DKK 2,749 million (DKK 2,665 million) rate amounted to 24% for 2016/17 (22%). FINANCIAL KEY RATIOS

REVENUE GROWTH OPERATING Revenue development (DKK million) (local currency) PROFIT DKK million CAGR 4.3% 125 Revenue growth in Corresponding to reported currency an EBIT margin amounted to 3.2% of 4.5%. . 2012/1 201/1 201/1 201/16 2016/17

R EIT

2.1 SEGMENT INFORMATION

Business segments Reporting to the Executive Board, which is considered to be the • income and costs in Group functions which are not allocated Chief Operating Decision Maker, is based on the Group’s three to the Group’s business segments; core business segments; Peak Performance, Tiger of Sweden • intercompany eliminations; and and By Malene Birger. • any differences arising between costs invoiced to Group brands and realized costs in the Group’s Premium service functions. Other brands comprise Saint Tropez and Designers Remix. Geographic information Unallocated items and eliminations Revenue is allocated to the geographic areas based on the custo- In all material respects, unallocated items and eliminations mer’s geographic location. Allocation of assets is made based on include; the geographic location of the assets. In all material aspects, geographic breakdowns of Group revenue and assets are as follows:

Geographic breakdown of revenue (%) Geographic breakdown of reportable assets (DKK million)*

2016/17 2015/16 2016/17 – DKK 395 million 2015/16 – DKK 394 million

N R E N R E S R N R S R N R

* Reportable assets consist of non-current assets excluding financial assets and deferred tax.

48 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S * Includingnon-recurringcostsofDKK33millionattributableto theimplementation ofthenew structureintheGroup’s centralfunctions. Segment information Operating profit(EBIT) segments Operating profit (EBIT),reportable Reconciliation EBIT andimpairment losses Depreciation, amortization EBITDA (EBITDA)Operating profitbefore depreciationandamortization Growth compared to 2015/16 (%) segments Operating profit (EBIT),reportable Reconciliation ofsegmentinformation ofcontinuingoperations EBIT margin(%) Operating profit(EBIT) andimpairment losses Depreciation, amortization EBITDA (EBITDA)Operating profitbefore depreciationandamortization margin (%) DKK Unallocated items andeliminations segments) Segment revenue (reportable Total revenue DKK million Unallocated items andeliminations Unallocated items andeliminations Total revenue DKK million Growth inlocalcurrencycompared to 2015/16 (%) Retail, e-commerce andoutlets Wholesale andfranchise Retail, e-commerce andoutlets Wholesale andfranchise

Total revenue, cf.incomestatement Profit for the year ofcontinuingoperations Tax onprofit for the year tax Profit before Financial costs Financial income Income from investments inassociates Operating profit(EBIT) Profit for the year Tax onprofit for the year tax Profit before Financial costs Financial income Operating profit(EBIT) margin million margin (%) (%) of segment information *

9.8

2016/17 2016/17 2016/17

2015/16

Performance

1,035 1,035 Peak Peak 111 111 119 119 388 599 936 337 647 (18) 101 (17) 11.5 11.9 11.6 10.6 10.0 94

2015/16 Sweden Sweden Tiger of Tiger of 123 123 963 385 972 361 108 (19) (15) 578 611 (0.9) 12.7 11.1 86 67 8.9 0.6 7.0 0.9

By Malene By Malene 2015/16 Birger Birger 351 112 357 245 110 241 (14) (1.7) (0.4) 33 17 (7) 26 9.2 11.8 4.8 7.3 3

2015/16 2016/17 Premium Premium brands brands 2,349 2,265 1.466 1,455 267 222 883 810 (39) 228 (51) 171 10.1 3.7 9.5 5.0 7.3 2.5

2015/16 2016/17 2016/17 2016/17 brands brands Other Other 2,749 2,749 400 398 185 224 213 176 19 20 10 27 (9) (7) 6.8 11.0 5.0 0.5 4.8 0.6 -

2015/16 2015/16 2,663 2,663 2,749 Group Group 2,665 1,690 1,668 1,059 294 241 122 125 181 (55) (30) (60) (46) 995 ( 192 248 243 (11) (16) 248 181 247 5 92 (5) 11 6.6 9.3 3.2 8.8 4.4 6 9 8 2 )

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW ACCOUNTING POLICIES Segment information since the two segments have similarities in the nature of the Segment information has been prepared in accordance with the products, the production processes, the type or class of custo- Group’s applied accounting policies and is consistent with the mers, the methods used to distribute products and the nature Group’s internal reporting to the Executive Board. of the level of earnings.

The Executive Board evaluates operating profits of business Revenue segments separately in order to make decisions in relation to Revenue from the sale of goods is recognized in the income resource allocation and performance measurement. The seg- statement when delivery and transfer of risk to the buyer have ment results are evaluated on the basis of operating results, taken place and if the income can be reliably measured and is which are calculated by the same methods as in the consoli- expected to be received. Revenue is measured excluding VAT, dated financial statements. Financial income, costs and corpo- indirect taxes and less expected returns and discounts related rate taxes are calculated at Group level and are not allocated to to sales. the business segments. See note 7.2 for further information on accounting Segment income and costs comprise income and costs that estimates concerning returns and discounts. are directly attributable to the individual segment and the items that can be allocated to the individual segment on a reliable ba- Revenue is measured at the fair value of the consideration sis. No material trade or other transactions take place between received or receivable. the business segments. Revenue from external customers, which is reported to Management, is measured by the same Cost of sales methods as in the income statement. Cost allocation between Cost of sales includes direct costs incurred when generating business segments is made on an individual basis. No indivi- the revenue for the year. The Company recognizes cost of sales dual customer accounts for more than 10% of revenue. as revenue is earned.

No information has been provided as to the segments’ share Other external costs of items concerning financial position or cash flows as the Other external costs comprise other purchase and selling costs Executive Board does not use this segmentation in the internal and administrative costs, agents’ commissions to external sales reporting. agents, bad debts, etc. Lease costs relating to operating lease agreements are recognized by using the straight-line method Management has concluded that Saint Tropez and Designers over the term of the lease in the income statement under other Remix meet the criteria for aggregation as set out in IFRS 8, external costs.

2.2 STAFF COSTS DKK million 2016/17 2015/16

Total salaries, remuneration, etc. may be specified as follows: Remuneration to the Board of Directors, cf. note 6.1 4 4 Salaries and remuneration 507 464 Defined contribution plans, cf. note 7.1 32 29 Defined benefit plans, cf. note 7.1 - 1 Other social security costs 69 62 Share-based payments - 1 Other staff costs 28 26 Total staff costs 640 587

Average number of Group employees 1,187 1,110

Geographic breakdown of average number of employees

2016/17 – 1,187 employees 2015/16 – 1,110 employees

N R E S R N R

50 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S DKK million * Primarilyrelates to insomeoftheGroup’s thereleaseoftaxallocationreserves Swedish companies. DKK million Tax for theyear 2.3 TAX Foreign currencytranslationadjustments,etc. Tax for theyear Total deferred tax Adjustments regarding changesintaxrates, deferred tax Net tax receivableNet tax at30June Tax onother comprehensive income Recognized asfollows: receivableNet tax at 30June employee Costsrelated therelated renders service. year costsarerecognizedinthefinancial inwhichthe Staff Board andBoard ofDirectors. Group’s employees, includingto oftheExecutive themembers schemes, share-basedpayments coststo andother the staff costsincludesalaries,remuneration,retirement benefit Staff Recognized asfollows: Change indeferred tax Deferred tax Foreign non-incomedependenttaxes Prior-year adjustments,currenttax Current taxfor theyear Current tax Tax payable onprofit for the year receivableNet tax at 1July Tax for theyear Prior-year adjustments,deferred tax Total currenttax

Tax payable Tax receivable Tax paidduringtheyear Tax onprofit for the year ofcontinuingoperations ACCOUNTING POLICIES *

are allocated andrecognizedintheperiodto whichthey relate. to long-term employee e.g.,share-basedpayments, benefits, grammes. grammes. information on the Group’sfurther share-based incentive pro Executive Board and the Board ofDirectors andnote 6.2for

See note 6.1 information for on remuneration to further the 2016/17 2016/17 (10) (10) (31) 64 (8) 39 (6) 49 30 39 30 32 24 24 1 1 1 1 1 5

2015/16 2015/16 - (23) (33) (52) (80) (10) 65 48 (7) 55 53 19 48 81 57 27 5 1 5 1 - 51

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW Breakdown on tax on profit for the year of continuing operations is as follows: DKK million 2016/17 2015/16

Calculated tax on profit before tax, 22% 27 54 Effect of other non-taxable income and other non-deductible costs - (1) Effect of adjustment regarding changes in tax rates, deferred tax 1 - Foreign non-income dependent taxes 1 1 Prior-year adjustments 1 4 Revaluation of tax losses, etc - (3) Total tax on profit for the year 30 55

Effective tax rate for the year (%) 24.0 22.2

Tax on other comprehensive income Fair value adjustment on financial instruments held as cash flow hedges 6 7 Total tax on other comprehensive income 6 7

Deferred tax DKK million 2017 2016

Deferred tax at 1 July 46 13 Prior-year adjustments (1) 23 Adjustments regarding changes in tax rates (1) - Disposal in connection with sale - (2) Deferred tax on other comprehensive income 6 7 Change in deferred tax on profit for the year 3 5 Foreign currency translation adjustments, etc. 1 - Net deferred tax at 30 June 54 46

Recognized as follows: Deferred tax assets 61 58 Deferred tax liabilities (7) (12) Net deferred tax at 30 June 54 46

Breakdown of deferred tax at 30 June is as follows: Gross deferred tax assets and liabilities 97 95 Unrecognized tax assets (43) (49) Net deferred tax at 30 June 54 46

Temporary differences and changes during the year are specified as follows: Recognized Net deferred Recognized Disposal in in other Net deferred tax at in profit for connection comprehensive tax at DKK million 1 July 2016 the year with sale income 30 June 2017

Intangible assets and property, plant and equipment 38 (8) - - 30 Inventories and receivables 7 (2) - - 5 Provisions and other liabilities 4 6 - - 10 Financial instruments (2) - - 6 4 Tax losses 48 - - - 48 Unrecognized tax assets (49) 6 - - (43) Total 46 2 - 6 54

Recognized Net deferred Recognized Disposal in in other Net deferred tax at in profit for connection comprehensive tax at DKK million 1 July 2015 the year with sale income 30 June 2016

Intangible assets and property, plant and equipment 28 12 (2) - 38 Inventories and receivables 7 - - - 7 Provisions and other liabilities (22) 26 - - 4 Financial instruments (10) - - 8 (2) Tax losses 71 (23) - - 48 Unrecognized tax assets (61) 12 - - (49) Total 13 27 (2) 8 46

52 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S likelynot to to besufficiently beutilizedintheforeseeable future. Unrecognized taxassets relate to taxlossesthatareassessed the reporting period,areexpectedthe reporting to applyintherespective based onlegislationinforce orinrealityforce attheendof Deferred taxismeasured usingthetaxrates andtaxrulesthat, oftheadjustmentdeferred taxforas part theyear. currency translationadjustmentsofdeferred taxarerecognized prehensive incomeordirectlyinequity, respectively. Foreign sive incomeordirectlyinequity isrecognizedunderother com the year relatingto items recognizedunderother comprehen for theyear isrecognizedintheincomestatement, andtaxfor ments indeferred tax.Tax for theyear relatingto theprofit/loss Tax for theyear consistsofcurrenttaxfor theyear andadjust Tax for theyear set andsettlement ofeachliability, respectively. Deferred taxiscalculated basedontheplanneduseofeachas zed intheforeseeable future. Tax lossesarerecognizedwhenitislikely thatthesewillbeutili assessment ofthepotential for futurerealization. tax isanasset, itisincludedinnon-currentassets basedonan bilities withinthesamelegalentityandjurisdiction.Ifdeferred against of deferredfuture taxable income and are set off tax lia- losses, arerecognizedattheexpected value oftheirutilization Deferred taxassets, includingthetaxbaseofdeferrable tax

SIGNIFICANT ACCOUNTING ESTIMATES ACCOUNTING POLICIES - - - - - on-account taxscheme. losses). Thejointlytaxed companies pay taxundertheDanish tion to theirtaxableincome(fullabsorption withrefundsfor tax cated amongthecompanies oftheDanishtaxpoolinpropor owned Danishsubsidiaries.Thecurrenttaxexpense isallo The Parent Company istaxed jointlywithallconsolidated wholly or directlyinequity. been recognizedpreviously underother comprehensive income less thedeferred taxisattributableto transactionswhichhave rates ortaxrulesarerecognizedintheincomestatement un current tax.Changesindeferred taxasaresultofchanged countries whenthedeferred taxisexpected as to crystallize positions recognizedinpayable anddeferred taxareadequate. thattheprovisionsnagement considers tax madefor uncertain assessment andreview oftheoutcomependingmatters, Ma- authorities, etc. ariseasaresultofglobalactivity. Basedonan Risks relatingto transfer pricing,disagreement(s)withlocaltax in theindividualcountrieshave beenprovided. statements ofcurrenttax,deferred taxandpendingmatters operates. Any accountingestimates significant relatingto the IC Group issubjectto taxlegislationinthecountrieswhichit limited intime. In allmaterial respects,theunrecognizedtaxlossesarenot - - - 53

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW

CHAPTER 3 WORKING CAPITAL

CONTENTS This chapter specifies the tied-up instruments, which are ensuring the working capital which represents working capital. 3.1 INVENTORIES the assets and liabilities supporting the day- 3.2 TRADE RECEIVABLES to-day operations of the Group. The working It is our ambition that the working capital 3.3 WORKING CAPITAL capital is defined as current assets less constitutes approx. 10-12% of the annual 3.4 OTHER ADJUSTMENTS, current liabilities excluding the net interest- revenue, however, it may during periods STATEMENT OF CASH FLOWS bearing items, provisions and financial with high growth exceed this level. FINANCIAL KEY RATIOS

Change in working capital (DKK million) Working capital in precentage of revenue OVERVIEW

I T S 2012/1 201/1 201/1 201/16 2016/17

201/16 2016/17 PREPARATION FOR BASIS N /

3.1 INVENTORIES

DKK million 2017 2016 PROFIT FOR THE YEAR FOR PROFIT

Raw material and consumables 40 54 Finished goods and goods for resale 346 295 Goods in transit 98 133 Total inventories, gross 484 482

Changes in inventory write-downs: Inventory write-downs at 1 July 57 53 Write-downs for the year, addition (recognized in the income statement) 56 30 CAPITAL WORKING Write-downs for the year, reversal (utilized) (23) (26) Total inventory write-downs 90 57 Total inventories, net 394 425

Write-downs (%) 19 12

Inventories recognized at net realizable value amounted to DKK INVESTED CAPITAL 91 million (DKK 63 million) at 30 June 2017.

ACCOUNTING POLICIES Inventories are measured at cost using the FIFO method. In- of raw materials, consumables, external production costs and ventories are written down to the net realizable value if this is costs to take delivery of the products. The net realizable value

lower than cost. The cost of raw materials and consumables of finished products is determined as the expected selling price STRUCTURE CAPITAL includes the purchase price and direct costs to take delivery of less costs incurred to execute the sale. the products. The cost of finished products includes the cost

SIGNIFICANT ACCOUNTING ESTIMATES GOVERNANCE By nature, product collections have a limited life-span. If the surement of inventories is based on an individual assessment right products are not available in the stores at the right time, of season and age and on the realization risk assessed to exist this may result in lost revenues or a potential higher amount of for individual product items. returned and surplus products leading to write-downs. The mea- SUPPLEMENTARY NOTES SUPPLEMENTARY

FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • IC GROUP A/S 55 3.2 TRADE RECEIVABLES

DKK million 2017 2016

Not yet due 220 226 Due, 1–60 days 37 36 Due, 61–120 days 4 6 Due more than 120 days 16 16 Total trade receivables, net 277 284

Change in write-downs of trade receivables for the year: Trade receivables write-downs at 1 July 26 39 Change in write-downs for the year 11 2 Realized loss for the year (8) (15) Total trade receivables write-downs 29 26

During the financial year 2016/17, a loss of DKK 4 million has In general, the receivables do not carry interest until between been recognized in respect of a wholesale customer in Sweden. 30 and 60 days after the invoice date. After this date, interest is The most significant write-down for bad debt in 2015/16 is at- charged on the outstanding amount. The Group has recognized tributable to a franchise partner in Switzerland. DKK 2 million (DKK 2 million) in connection with interest on over- due trade receivables for 2016/17.

ACCOUNTING POLICIES On initial recognition, receivables are measured at fair value and Receivables are written down to net realizable value correspon- subsequently at amortized cost which usually corresponds to the ding to the amount of expected future net payments received nominal value less provision for bad debts. on the receivables. Write-downs are calculated on the basis of individual assessments of the receivables.

SIGNIFICANT ACCOUNTING ESTIMATES Loss on trade receivables is written down by Management as a customers credit worthiness and any change of customer terms result of expected inability to pay by customers. When assessing and conditions of payment. Credit periods vary according to whether Group write-downs are adequate, Management makes customs of the individual markets. an analysis of the age distribution, past payment behaviour and

3.3 WORKING CAPITAL

DKK million 2017 2016

Inventories 394 425 Trade receivables 277 284 Other receivables excluding derivative financial instruments 11 14 Prepayments 94 85 Total assets 776 808

Trade payables 276 317 Other liabilities excluding derivative financial instruments 182 177 Total liabilities 458 494

Working capital 318 314

Operating working capital* 395 392 Other items (77) (78) Working capital 318 314

* Operating working capital consists of inventories, trade receivables as well as trade payables.

56 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S DKK million STATEMENT3.4 OTHER ADJUSTMENTS, OFCASH FLOWS DKK million Reversed depreciationandimpairment lossesandgains/lossonsaleofnon-currentassets Change ininventories Share-based payments recognizedinprofit andloss Foreign currencytranslationadjustments Change incurrentliabilitiesexcluding derivative financialinstruments Change inreceivables excluding derivative financialinstruments Provisions Other adjustments

Total otheradjustments Total inworking change capital

124

2016/17 2016/17 (36) (9) 80 (5) (4) 33 11 31 1 - 2015/16 2015/16 (75) (46) (25) (61) (15) 66 63 29 27 1 - 57

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW

CHAPTER 4 INVESTED CAPITAL

CONTENTS This chapter describes the opera- Depending on the speed of executing these ting assets forming the basis of the plans, the investment level may vary year on 4.1 INTANGIBLE ASSETS Group’s business. The future investment level year. In the long-term perspective, we expect 4.2 PROPERTY, PLANT AND must support the growth strategies of our that the Group’s investments will attain a EQUIPMENT Premium brands. Investments will primarily level of 3–5% of the annual revenue. For the be prioritized for especially expansion and financial year 2016/17, IC Group A/S invested strengthening of own distribution channels a total of DKK 89 million (3%) (DKK 91 million (e-commerce and physical stores). (3%)) primarily for store openings in the Nordic region. In total, 19 stores were opened in 2016/17 (23 stores). FINANCIAL KEY RATIOS

Development in invested capital Breakdown of property, plant and equipment and intangible assets OVERVIEW (DKK million)

914 772 708 736 659

2012/1 201/1 201/1 201/16 2016/17 2016/17 – DKK 395 million 2015/16 – DKK 394 million BASIS FOR PREPARATION FOR BASIS

A R G L E S L O

4.1 INTANGIBLE ASSETS

2017 THE YEAR FOR PROFIT Software Other Total and IT Leasehold intangible intangible DKK million Goodwill systems rights assets assets

Cost at 1 July 2016 195 94 55 6 350 Foreign currency translation adjustments (3) - (2) - (5) Addition - 1 6 10 17 Disposal - - (1) - (1)

Cost at 30 June 2017 192 95 58 16 361 CAPITAL WORKING

Accumulated amortization and impairment losses at 1 July 2016 - (63) (26) (1) (90) Foreign currency translation adjustments - - (1) - (1) Amortization and impairment losses for the year - (16) (8) (1) (25) Amortization and impairment losses on disposals - - 1 - 1 Accumulated amortization and impairment losses at 30 June 2017 - (79) (34) (2) (115) Carrying amount at 30 June 2017 192 16 24 14 246 INVESTED CAPITAL

2016 Software Other Total and IT Leasehold intangible intangible DKK million Goodwill systems rights assets assets

Cost at 1 July 2015 199 118 49 2 368 Foreign currency translation adjustments (4) - (1) - (5)

Reclassification - (4) - 4 - STRUCTURE CAPITAL Addition - 3 7 - 10 Disposal - (23) - - (23) Cost at 30 June 2016 195 94 55 6 350

Accumulated amortization and impairment losses at 1 July 2015 - (74) (23) - (97) Foreign currency translation adjustments - 2 (1) - 1 GOVERNANCE Amortization and impairment losses for the year - (14) (2) (1) (17) Amortization and impairment losses on disposals - 23 - - 23 Accumulated amortization and impairment losses at 30 June 2016 - (63) (26) (1) (90) Carrying amount at 30 June 2016 195 31 29 5 260 SUPPLEMENTARY NOTES SUPPLEMENTARY

FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • IC GROUP A/S 59 Allocation of goodwill Allocation of goodwill (DKK million) Goodwill on business combinations is allocated at the acquisition date to the cash-generating units expected to achieve economic benefits from the acquisition. The carrying amount of goodwill is allocated to the respective cash-generating units as follows:

2016/17 – DKK 192 million 2015/16 – DKK 195 million

T S S T P P

ACCOUNTING POLICIES Goodwill the fair value of the acquired assets, liabilities and contingent On initial recognition, goodwill is measured and recognized as liabilities is recognized as an asset under intangible assets and described under the section Business combinations (se below). tested annually for impairment each year as a minimum. If the Subsequently, goodwill is measured at cost less accumulated carrying amount of an asset exceeds its recoverable amount, impairment losses. Goodwill is not amortized but tested at least the asset is written down to the lower recoverable amount. once a year for impairment. The carrying amount of goodwill is allocated to the Group’s cash-generating units at the date In case of negative differences (negative goodwill), the calcu- of acquisition. The determination of cash-generating units is lated fair values and the calculated cost of the business, the based on the management structure and the internal financial value of the non-controlling interest in the acquired business management. and the fair value of previously acquired capital interests are reassessed. If the difference is still negative following the reas- Business combinations sessment, the difference is then recognized as income in the Newly acquired or newly established businesses are recognized income statement. in the consolidated financial statements from the acquisition date or incorporation date, respectively. The acquisition date Acquisition of non-controlling interests in subsidiaries is recog- is the date when control of the business actually passes to the nized in the consolidated financial statements as an equity Group. transaction, and the difference between the acquisition price and the carrying amount is allocated to the Parent Company’s Acquisitions are accounted for using the acquisition method, share of equity. under which the identifiable assets, liabilities and contingent liabilities of businesses acquired are measured at fair value at Leasehold rights the acquisition date. Acquired non-current assets held-for-sale Payments to take over leases (”key money”) are classified as are measured at fair value less expected costs to sell, however. leasehold rights. Leasehold rights are amortized over the lease term or the useful life if this is shorter. The basis of amortiza- Restructuring costs are only recognized in the acquisition’s tion is reduced by any write-downs. Leasehold rights with an in- statement of financial position if they represent a liability to the definite useful life are not amortized, but tested for impairment acquired business. The tax effect of revaluations is taken into annually. Leasehold rights with indefinite useful life comprise account. key money in retail stores where the value is not impaired due to the location as well as the general demand of leasehold with The cost of a business is the fair value of the consideration prime locations. paid. If the final determination of the consideration is conditio- nal on one or more future events, these adjustments are recog- Software and IT nized at fair value from the acquisition date. Costs directly at- Software and IT development are amortized over the useful life tributable to acquisitions are recognized directly in the income of 3-7 years. Cost includes the acquisition price as well as costs statement from the date of payment. arising directly in connection with the acquisition and until the point of time where the asset is ready for use. Amortization is Any excess (goodwill) of the cost of an acquired business, the provided on a straight-line basis over the expected useful life. value of the non-controlling interest in the acquired business and the fair value of previously acquired capital interests over

60 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S 2017 4.2 PROPERTY, PLANTANDEQUIPMENT DKK million

• present value areasfollows: tors. parametres Themostsignificant for calculatingthenet business units(segments)andapproved by theBoard ofDirec business initiatives. Theprocess isconducted annuallyfor all onwards takinginto accountthepresentmarket situationand led budget planningandstrategy process for 2017/18 and The estimate ofthenet presentvalue isbasedonadetai- parametres andassumptions areexplained below. ning thatthereisnoneedfor impairment. Themostsignificant amountofallunits,consequentlypared to mea thecarrying impairment test indicated increaseinvalue asignificant com conducted for years thefinancial 2016/17 and2015/16. The Impairment amountofgoodwillhave tests ofthecarrying been amounts. discounted futurecashflows, compared withthecarrying calculated basedontheunit’spresentvalue, i.e.theexpected units to whichthegoodwillamountshave beenallocated are The recoverable amountsoftheindividualcash-generating Goodwill Impairment test Cost at1July2016Cost Foreign currencytranslationadjustments Cost at30June2017Cost Disposal Addition Reclassification Accumulated depreciationandimpairmentlossesat1July2016 Foreign currencytranslationadjustments Depreciation andimpairment lossesfor theyear Accumulated depreciationandimpairmentlossesat30June2017 Depreciation andimpairment lossesondisposals growth rates are applied based on the above. analyzed and of impairment these are further are identified, rate for 2017/18 years financial after is0%.When indications ket trends andinitiated projects ingeneral. The applied growth Management’s expectations for the market development, mar experience, internal aswell external benchmarks andstatistics, tail, outlet and e-commerce). The estimates are based on past store development andgrowth inthe distribution channels (re- of the business units’ collections aswell asthe expected same- Revenue development isbased on the expected order intake

Carrying amountat30June2017Carrying

SIGNIFICANT ACCOUNTING ESTIMATES

- - - and amounted to DKK20million(DKK25million). consistofkeyIntangible assets whicharenot amortized money Intangible assets withindefinite usefullife was lower amount. thanthecarrying by DKK7million(DKK0million)astherecoverable amount tothat itwaswrite necessary down theGroup’s leaseholdrights Impairment tests have beenconducted, anditwas assessed Leasehold rights the needfor impairment ofgoodwill. market conditions orconsumerbehavior whichmay resultin sequently beaffected by changedmacroeconomic trendsand estimates areappropriate. However, theassumptions may sub Management estimates thattheunderlyingassumptions and • • • • improve thetotal earningscapacity. base. Consequently, investments arenot includedinorder to mated inorder to to benecessary retain theexisting capital to thedepreciationofyear underreview whichareesti Expected investments rate was atthesamelevel as2015/16. Company’s businessareashasbeenapplied.Thediscount risk-free interest rate andwithaddedinterest basedonthe A discountrate of10.47% before tax/8.17% taxusinga after evaluations risksofeachcash-generatingunit. ofthespecific Discount rate –Thediscountrate reflectstheactualmarket ratio Cost 2017/18.after A stablegross marginisassumedfor years thefinancial due to changesinthedistributionchannels’salesmix. on both improved aswell aschangingmargins efficiency Gross margin

Land and buildings –assumedto bestable (10) (9) (1) 16 16 6 ------–Theexpected gross marginisbased Leasehold improvements (142) (142) (139) 198 191 (21) (22) 52 (2) 11 22 areset atanamountcorresponding 2 6 furniture ment and Equip- (180) (180) (189) 236 266 (33) (22) (3) 48 77 22 2 7 under construction Assets (13) 14 14 14 14 15 15 (1) 13 ------equipment plant and property,

(331) (338) Total 149 149 465 (55) 487 (45) 72 - 44 (5) 4 - - 61

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW 2016 Total Leasehold Equip- Assets property, Land and improvement and under con- plant and DKK million buildings ments furniture struction equipment

Cost at 1 July 2015 16 177 225 5 423 Foreign currency translation adjustments 1 (4) (5) - (8) Addition - 36 35 10 81 Disposal (1) (11) (19) - (31) Cost at 30 June 2016 16 198 236 15 465

Accumulated depreciation and impairment losses at 1 July 2015 (10) (135) (177) - (322) Foreign currency translation adjustments 1 2 4 - 7 Depreciation and impairment losses for the year - (20) (26) - (46) Depreciation and impairment losses on disposals - 11 19 - 30 Accumulated depreciation and impairment losses at 30 June 2016 (9) (142) (180) - (331) Carrying amount at 30 June 2016 7 56 56 15 134

ACCOUNTING POLICIES Property, plant and equipment primarily consist of leasehold Gains and losses on disposal of property, plant and equipment improvements and equipment, which are measured at cost are computed as the difference between the selling price less less accumulated depreciation and impairment losses. Cost costs to sell and the carrying amount at the date of disposal. comprises the acquisition price and costs directly related to the Gains and losses are recognized in the income statement un- acquisition until the time when the asset is ready for use. The der other operating income or costs. net present value of estimated costs in respect of demounting and disposal of the asset and of restoring the place where the Property, plant and equipment are written down to the recovera- asset was used is added to cost. The difference between cost ble amount if this is lower than the carrying amount. and the expected scrap value is depreciated on a straight-line basis over the expected economic lives of the assets.

SIGNIFICANT ACCOUNTING ESTIMATES The depreciation period is determined on the basis of Manage- The most important parameters in the calculation of the net ment’s experience in the Group’s business area, and Manage- present value are revenue, EBITDA, store investments, the va- ment believes the following estimates to be the best estimate lue of leasehold rights as well as the applied discount rate. The of the economic lives of the assets: business plans are based on Management’s specific assessment of the stores’ expected performance during the strategy Leasehold improvements up to 12 years period. Buildings 25-50 years Equipment and furniture 3-5 years A discount rate of 10.47% before tax/8.17% after tax using a If the depreciation period or the scrap values are changed, the risk-free interest rate and with added interest based on the effect on depreciation going forward is recognized as a change Company’s business areas has been applied. For the financial in accounting estimates. year 2015/16 the applied discount rate was 10.23% before tax/7.98% after tax, which is at the same level as 2016/17. The Impairment test applied growth rate has been 0%. When indications of impair- Property, plant and equipment in stores ment are identified, these are further analyzed and growth ra- The Group’s property, plant and equipment, which are located tes based on growth reported from the stores and the brands in in Group stores, are tested together with any leasehold rights question may be applied. A total amount of DKK 3 million (DKK for impairment when indication of impairment is identified. The 1 million) has been written down for the financial year 2016/17. recoverable amounts of the individual stores (cash-generating units) are calculated based on the store’s net present value. The total carrying amount of property, plant and equipment in Future cash flows are based on the individual store’s budget for respect of own stores amounted to DKK 76 million (DKK 61 a period corresponding to the average expected useful life of million). the store’s assets.

62 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS

CHAPTER 5 CAPITAL STRUCTURE

CONTENTS This chapter specifies the Group’s Premium brands in the best possible way, capital structure, including cash we have specifically decided to retain the 5.1 EQUITY flow and related financial risks. The capital level of net interest-bearing debt at zero for 5.2 NET INTEREST-BEARING DEBT structure forms a solid foundation for the financial year as a whole. 5.3 FINANCIAL RISKS AND executing the corporate strategy which DERIVATIVE FINANCIAL pursues the target of generating growth IC Group is partly financed by equity and INSTRUMENTS and increasing earnings through inter partly by external financing. The ratio 5.4 FAIR VALUE MEASUREMENT national expansion. The Group aims at between these two elements is expressed OF FINANCIAL INSTRUMENTS maintaining low financial gearing, since through the equity ratio which amounted to 5.5 FINANCIAL INCOME AND COSTS we, among others, operate in a market 51.9% at 30 June 2017 (51.2%). Further- 5.6 OPERATING LEASES which is sensitive to economic fluctuations. more, the Group has significant operating leases primarily in respect of store leases. To maintain the highest possible degree of At 30 June 2017, total operating leases flexibility in the future and thereby support amounted to DKK 368 million (DKK 324 the growth strategies pursued in the Group’s million) as specified in note 5.6. FINANCIAL KEY RATIOS

Change in net interest-bearing debt Capital structure target

• Our target is to retain the level of net interest-bearing debt at zero. During a financial year seasonal fluctuations may arise as a consequence of the tied-up working capital • To maintain strategic flexibility, we allow the net interest-bearing debt including

2012/1 201/1 201/1 201/16 2016/17 operating leases to attain a level 3 times higher than EBITDA. At 30 June 2017, N this key ratio amounted to 1.8 (1.1)

Development in dividend payments, gross* Capital allocation and dividend policy

• Value-adding investments – e.g., maintaining assets as well as retail expansion

• Reducing the net interest-bearing debt if the level exceeds the agreed target

• Dividend distribution to the Group’s shareholders 2012/1 201/1 201/1 201/16 2016/17

E O * Dividends are stated under the year of payment

5.1 EQUITY

Number

Share capital at 1 July 2015 17,007,657 Share capital increase 48,590 Share capital at 1 July 2016 17,056,247 Share capital increase 34,611 Share capital at 30 June 2017 17,090,858

The share capital consists of 17,090,858 shares (17,056,247) The Company has not engaged in any share buy-back for the with a nominal value of DKK 10 each. No shares carry any special financial year 2016/17. The number of treasury shares amounts rights. The share capital is fully paid up. to 442,572 corresponding to 2.6% of the share capital. There has been no changes to the number of treasury share during As stated in Company Announcement no. 17/2016, the share ca- 2016/17 and 2015/16. The value of the Company’s treasury pital was increased by 34,611 shares due to exercise of warrants. shares at market price at 30 June 2017 amounted to DKK 62 million (DKK 76 million). Pursuant to a resolution passed by the shareholders at the Company’s general meeting, the Company may acquire treasury Dividend shares equivalent to a maximum of 10% of the share capital. See note 16 to the parent company financial statements.

Earnings per share DKK million/1,000 shares 2016/17 2015/16

Profit for the year: Profit for the year attributable to shareholders of IC Group A/S 89 193 IC Group A/S’ profit share of continuing operations 92 192

Average number of shares Number of issued shares 17,082 17,044 Treasury shares (443) (443) Average number of outstanding shares 16,639 16,601

Diluted effect of share-based remuneration - 77 Number of shares excluding treasury shares, diluted 16,639 16,678

64 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S oftherevenuesand USD-related currencieswhilethe mainpart Group’s sourcing is made inAsiaanddenominated inHKD,USD ofthe and sellingofgoodsinforeign currencies.Themainpart transactionriskrelatesrisks. TheGroup’s to primary thebuying sidiaries arenot exposed to any foreign significant exchange positions aregenerallyhedgedvis-à-vis DKK.TheGroup’s sub Company’s functional currencyisDKK,andforeign exchange led centrallyby TheParent theGroup’s FinanceDepartment. The Group’s foreign exchange risk(transactionrisk)ishand Foreign exchange risk 5.3 FINANCIAL RISKS ANDDERIVATIVE FINANCIALINSTRUMENTS currencies asfollows: liabilities to creditinstitutionsaredenominated inthe amountcorrespondsto thefaircarrying value. Current liabilities arerepayable ondemand,andtherefore the comprise Danishandforeign overdraft facilities. Current The Group’s total currentliabilitiesto creditinstitutions Current liabilitiesto creditinstitutions DKK million 5.2 NETINTEREST-BEARING DEBT * shares DKK million/1,000 Diluted effect Gross interest-bearing debt Gross interest-bearing adoption by attheannualgeneralmeeting. theshareholders Proposed dividendsarerecognizedasaliabilityatthetimeof Dividends plying theeffective interest method, to theeffect thatthedif- cost,ap liabilitiesaremeasuredatamortized periods, financial loans,aremeasuredat fair value. Insubsequentand mortgage liabilities,includingbankloans On initialrecognition,financial Financial liabilities Net interest-bearing debtcomprises: Net interest-bearing Earnings pershare(EPS)

Net interest-bearing debt Net interest-bearing they may, however, dilute earningspershareinthefuture. When calculatingdiluted earningspershare,128,624 sharesandwarrants (129,532),performance have not beenincludedasthey areout-of-the-money, but

Diluted earningspershareofcontinuingoperations,DKK Earnings pershareofcontinuingoperations,DKK Diluted earningspershare,DKK Earnings pershare,DKK Cash Current liabilitiesto creditinstitutions ACCOUNTING POLICIES ACCOUNTING POLICIES *

* - -

- reon aretaken directlyto equity underretained earnings. sharesanddividendsthe The acquisition andsaleoftreasury Treasury shares of theloan. nized intheincomestatement costsover asfinancial theterm ference between theproceeds and thenominalvalue isrecog foreign exchange positions arehedgedat30June2017. sincetheDanish Kronebe insignificant ispegged to EUR.Other and/or options.Theforeign exchange riskofEURisdeemedto of operationalriskstake placeby means offorward contracts transactions isthuslimited. Hedgeaccountingas well ashedging risk ofCNH(sourcing). ThenaturalcurrencyhedgeintheGroup’s the Group to hasalsostarted hedgeagainsttheforeign exchange other European year currencies.Duringthefinancial 2016/17, and capacitycostsaredenominated inDKK,SEK,NOK,EURand Current liabilitiespercurrency(%) 2016/17

EUR 2015/16 2016/17 2017 5.3 5.3 5.3 5.3 86 69 86 17

O 2015/16 2016 11.4 11.4 11.6 11.6 109 109 84 25 - - 65

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW The hedging of the Group’s transaction exposure is made from Foreign exchange contracts only relate to hedging of selling and buy- an estimate of the cash flow demand for the future 15-21 ing of goods as well as costs pursuant to the Group’s policy hereto. months. As a general rule, cash flows in all important currencies are hedged except from EUR. At 30 June 2017, the Group’s risks for the coming 0-21 months may be specified as follows:

Average At 30 June 2017 Expected Expected Hedges Hedges Hedges Hedges hedging Million (local currency) inflow outflow 0-6 m. 7-12 m. 13-18 m. 19-21 m. rate

USD 4 (160) 60 34 56 6 657 HKD - (205) 66 62 66 11 85 CNH 2 (16) - - 12 2 93 SEK 1,012 (5) (370) (257) (335) (45) 77 NOK 548 - (180) (175) (163) (30) 79 GBP 7 - (3) (2) (2) - 862 CHF 17 - (7) (3) (6) (1) 688 CAD 11 - (4) (3) (3) (1) 501

Average At 30 June 2016 Expected Expected Hedges Hedges Hedges Hedges hedging Million (local currency) inflow outflow 0-6 m. 7-12 m. 13-18 m. 19-21 m. rate

USD 7 (131) 57 37 24 6 657 HKD - (165) 60 67 26 12 85 SEK 739 (52) (321) (248) (72) (46) 80 NOK 427 (10) (157) (168) (62) (30) 79 GBP 5 - (1) (2) (1) (1) 985 CHF 14 - (7) (4) (2) (1) 694 CAD 7 - (2) (3) (1) (1) 502

Hedge accounting of future cash flows Parent Company designated and qualifying as hedge Net outstanding foreign exchange contracts of the Group and the accounting of future cash flow are as follows:

2017 2016 fair value fair value adjustments adjustments recognized recognized in statement in statement of other of other Notial compr. Maturity Notial compr. Maturity DKK million principal* income in months principal* income in months

USD 149 (25) 0-21 109 6 0-21 HKD 192 (7) 0-21 149 1 0-21 CNH 14 1 0-21 - - 0-21 SEK (1,007) 3 0-21 (687) 6 0-21 NOK (548) 13 0-21 (417) (1) 0-21 Other currencies (35) 3 0-21 (26) 5 0-21 Total at 30 June (12) 17 Tax 3 (3) Reserve for hedging transactions at 30 June, after tax (9) 14

* Positive principal amounts on foreign exchange contracts indicate a purchase of the currency in question. Negative principal amounts indicate a sale

No net costs relating to ineffective cash flow hedges have been re- Foreign exchange hedges of recognized assets and liabilities cognized in the income statement for 2016/17 (net cost of DKK 2 Open foreign exchange contracts of the Group and the Parent million). Ineffective cash flow hedges are recognized in the income Company qualifying as hedges of recognized assets and liabilities statement under financial income/costs. Ineffective cash flow are as follows: hedges arise when no transactions have taken place.

66 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S Of thisamount,DKK86millionhas beendrawn inrelationto cur DKK 803million(DKK817 million)interms ofwithdrawal rights. At 30June2017, theGroup’s total creditfacilities amounted to see below for maturityprofiles assets onfinancial andliabilities. of liquidity control andnon-guaranteed creditfacilities. Please liquidity byIC Group reserve acombination securesasufficient Liquidity risk DKK million the hedge accounting principles. cash flows andare closed/adjusted during the year according to been treated inaccordance withthe rules for hedging of future The recognized positive/negative market values under equity have or at30June 2016. contracts thatdo not qualify for hedge accounting at30June 2017 Group nor the Parent Company hasany open foreign exchange andforeigncurves exchange rates at30June 2017. Neither the fair values have been calculated based on current interest rate have been recognized inthe consolidated income statement. The Fair value adjustments inrespect of realized hedge transactions * Positive principalamountsonforeign exchange contractsindicate apurchase ofthecurrencyinquestion. Negative principalamountsindicate asale.

DKK million Total HKD Unlisted sharesandbondsrecognizedundernon-currentassets (shares) USD Financial assetsatfair value recognizedintheincomestatement Loans andreceivables Cash Other receivables Trade receivables Deposits (financialassets) Financial assetsfor hedging purposes Derivative financialinstruments for hedgingof Trade payables Total financialassets Total financialliabilities Financial liabilitiesfor hedgingpurposes futurecashflows, recognizedundercurrentliabilities(other liabilities) Derivative financialinstruments for hedgingof cost Financial liabilitiesmeasuredatamortized cost(currentliabilities) Share ofother liabilitiesrecognizedatamortized futurecashflows, recognizedundercurrentassets (other receivables) Derivative financialinstruments for hedgingof Liabilities to creditinstitutions(current liabilities) recognized assets andliabilities,recognized undercurrentassets (other receivables) at 30 June

principal - Notial be sufficient for hedgingoftheGroup’sbe sufficient liquidity risks. creditfacilitiesnotice. to theshort-term Managementconsiders standby creditswhichmay bedrawn andterminated onshort to DKK504million(DKK493million).Allcreditfacilities are guarantees. Accordingly, undrawn creditfacilities thusamounted million hasbeendrawn inrelationto facilities tradefinance and rent andnon-currentliabilitiesto creditinstitutionsandDKK213 follows: The existing categories assets offinancial andliabilitiesareas exchange rate andachangeof10%/(10)% for other currencies. The calculation ismade by using achange of 1%/(1)%inthe EUR 124 million inthe statement of changes inequity (DKK87 million). DKK 3million (DKK15 million) inthe income statement and DKK The net position ofthe Group willasamaximum result inaloss of 13 7 *

adjustments recognized statement in income fair

value 2017 1 1 - in months principal Maturity 0-21 0-21 Notial 15 16 *

adjustments recognized statement in income fair 2017 554 400 586 192 371 277 276 69 32 32 20 86 21 11 14 2016 value 8 8 1

2 2 -

in months Maturity 2016 0-21 0-21 284 604 399 603 426 109 177 317 84 20 18 14 17 7 7 2 1 1 67

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW Re-assessment/maturity profile More than Fixed Effective At 30 June 2017 in DKK million 0-1 year 1-5 years 5 years interest rate interest rate

Trade receivables 277 - - No 2-24% Trade payables 276 - - No - Current liabilities to credit institutions 86 - - No 0.99%

More than Fixed Effective At 30 June 2016 in DKK million 0-1 year 1-5 years 5 years interest rate interest rate

Trade receivables 284 - - No 2-24% Trade payables 317 - - No - Non-current liabilities to credit institutions 109 - - No 1.00%

Interest rate risk Company and its shareholders. The general target is to ensure The Group’s interest rate risk is continuously monitored by the Fi- a capital structure which supports long-term financial growth nance Department in accordance with Group policies. The Group and at the same time increases the return on investment for the employs matching of the maturities of each individual assets/ Group’s stakeholders by optimizing the ratio between equity and liabilities. The typical neutral maturity for the Group is 2 months. debt. The Group’s capital structure consists of debt which inclu- Potential interest rate risks are hedged by means of FRAs and/or des financial liabilities such as bank loans and cash and equity interest rate swaps. The Group did not have any non-current liabi- which includes share capital, other reserves as well as retained lities to credit institutions for 2016/17 and 2015/16 and thereby earnings. no significant interest rate risk on the current liabilities. To maintain the highest possible degree of flexibility in the future Default on loans and thereby support the growth strategies in the Group’s core The Group has not defaulted any loan during the year under re- business in the best possible way, the Group has decided to review or last financial year. tain the level of net interest-bearing debt at zero for the financial year as a whole. The Group’s credit facilities will then primarily be Credit risk employed to fund seasonal fluctuations in the working capital. At The Group solely uses internationally recognized banks with a 30 June 2017, the net interest-bearing debt amounted to DKK 17 high credit rating. The credit risk on forward contracts and bank million (DKK 25 million). deposits is consequently deemed to be low. To maintain a certain degree of strategic flexibility, the Group has In respect of trade receivables, the Group typically uses credit in- decided that the net interest-bearing debt, adjusted for seasonal surance in countries in which the credit risk is deemed to be high fluctuations and including its operating leases, may constitute a and where credit insurance is feasible. This primarily applies to level 3 times higher than EBITDA should such measures be re- export markets in which IC Group is not represented through an quired. At 30 June 2017, this key ratio amounted to 1.8 (1.1). independent sales company. The credit insurance covering trade receivables constituted DKK 37 million at 30 June 2017 (DKK 37 When distributing dividends to the shareholders, it is the million). Group’s policy that the total distribution reflects the Group’s earnings performance. In concrete terms, this means that, as Beyond this, the credit risk regarding trade receivables and other a minimum, 30% of the consolidated profit after tax will be di- receivables is limited since the Group has no material credit risk stributed as an ordinary dividend in connection with the annual as the exposure is spread on a large amount of counter-parties general meeting. Any additional surplus liquidity will then be and customers in many different markets. distributed to the shareholders through share buy-backs or extraordinary dividends during the financial year. During the past Capital structure 4 years, the Group has distributed extraordinary dividends total- The Company’s Management considers on a regular basis ling the amount of approx. DKK 450 million (including dividend whether the Group’s capital structure is in the best interest of the on treasury shares).

68 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S sed onmarket by observables usinggenerallyaccepted methods. The fair value ofderivative instrumentsiscalculated financial ba- Derivative financialinstruments DKK million • below: positionmustbecategorizedof financial inoneofthe3levels Financial instrumentsmeasuredatfair value inthestatement Fair value measurement 5.4 FAIR VALUE MEASUREMENT OFFINANCIAL INSTRUMENTS Unlisted sharesandbonds which are financial assetswhich arefinancial withfixed payments ordefinable and loansandreceivables ofthecategory Deposits etc. arepart Financial assets incomeorcosts. ment underfinancial changes inthefair value arerecognizedintheincomestate For derivative instrumentsnot financial qualifying ashedges, and recognizedinthesamelineitem asthehedgeditem. other comprehensive incomeonrealizationofthehedgeditem losses relatingto suchhedgetransactionsarereclassified from are recognizedunderother comprehensive income.Gainsand signated asandqualifying for recognitionascashflow hedges Changes inthefair value ofderivative instrumentsde financial instruments,respectively.and unrealizedlossonfinancial lities, respectively, instruments asunrealizedgainonfinancial ments arerecognizedunderother receivables andother liabi- Positive andnegative fair values ofderivative instru financial rivative instrumentsaremeasuredattheirfair financial value. On initialrecognitioninthestatement position,de offinancial Derivative financial instruments statement Financial assetsatfair value hedgingpurposes Financial liabilitiesusedfor Financial assets used for ments. Level 1Listed pricesinactive markets for identicalinstru recognized inthe income hedging purposes

ACCOUNTING POLICIES

Financial assets Item

Other liabilities Other receivables -

- - -

Level 1 instruments. ons, other costspayable aswell aslossonderivative financial Other liabilitiesprimarilyrelate to VAT obligati- andduties,staff spect to thefair value oftheliabilities. payable underother liabilitiescorrespondsinallmaterial re cost.Thenominalvalue ofamounts are measuredatamortized value lessany transactioncosts.Subsequently, other liabilities liabilitiesaremeasured atfairOn initialrecognition,financial Other liabilities rily relate to VAT contracts,etc. andduties,financial other receivables areduefor payment within1year andprima sponds to thenominalvalue lesswrite-downs for baddebts.All costwhichusuallycorre value andsubsequently atamortized receivablesOn initialrecognition,financial aremeasuredatfair Other receivables periodifthisislower.fair value attheendofreporting assetsinstruments. Otherfinancial aremeasuredatcostor which arenot listed onanactive market norderivative financial red to externally calculated fair values onamonthlybasis. Internally calculated fair values areusedandthesecompa- • • not be based onmarket observables. Level 3 stantial inputs arebasedonmarket observables. and liabilitiesorother methods ofmeasurementwhereallsub- Level 2Listed pricesinanactive markets for identicalassets - - - - Level 2 2017 Method of measurement where substantial inputs may 32 21 - - Level 3 8 8 - - Level 1 - - - - 2016 Level 2 20 1 - - Level 3 - - 7 7 - - - - 69

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW 5.5 FINANCIAL INCOME AND COSTS

DKK million 2016/17 2015/16

Financial income: Interest on bank deposits 2 1 Interest on receivables 2 2 Other interest income 1 - Interest income from financial assets not measured at fair value 5 3 Fair value adjustments on financial assets - 1 Realized gain on ineffective derivative financial instruments 3 5 Total financial income 8 9

Financial costs: Interest on liabilities to credit institutions (5) (3) Interest on mortgage loans - (1) Other interest costs (1) (3) Interest costs from financial liabilities not measured at fair value (6) (7) Realized loss on ineffective derivative financial instruments (3) (7) Net loss on foreign currency translation (2) (2) Total financial costs (11) (16) Net financials (3) (7)

ACCOUNTING POLICIES Financial income and costs include interest, realized and Interest income and costs are accrued based on the principal unrealized foreign currency translation adjustments, fair value and the effective rate of interest. The effective rate of interest adjustments of derivative financial instruments which do not is the discount rate to be used in discounting expected future qualify for hedge accounting and supplements, deductions and payments in relation to the financial asset or the financial allowances relating to the payment of tax. liability so that their present value corresponds to the carrying amount of the asset or liability, respectively.

5.6 OPERATING LEASES

DKK million 2017 2016

Store leases and other land and buildings: 0–1 year 133 122 1–5 years 209 175 More than 5 years 10 13 Total 352 310

Operating equipment, etc.: 0–1 year 7 7 1–5 years 9 7 Total 16 14 Total operating leases 368 324

An amount of DKK 188 million (DKK 168 million) relating to ope- A number of the store leases contain a rent level based on rating leases has been recognized in the consolidated income turnover amounting to DKK 60 million (DKK 55 million) for statement for 2016/17. 2016/17.

ACCOUNTING POLICIES Lease costs are recognized using the straight-line method over upon expiry. Many of the lease contracts contain terms the term of the lease starting from the date the lease enters regarding revenue -ased lease. into force. The Group leases cars and other operating equipment under The Group leases properties under operating leases. The lease operating leases. The lease term is typically between 3-5 years term is typically between 3-5 years with an option to extend with an option to extend upon expiry.

70 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS

CHAPTER 6 GOVERNANCE

CONTENTS This chapter contains governance-related information, 6.1 REMUNERATION TO THE including remuneration to the Executive EXECUTIVE BOARD AND BOARD Board and the Board of Directors as well OF DIRECTORS as share-based remuneration to Group 6.2 SHARE-BASED REMUNERATION employees. Furthermore, this chapter 6.3 RELATED PARTIES contains information on transactions 6.4 FEE TO AUDITORS ELECTED AT with related parties and fee to auditors THE ANNUAL GENERAL MEETING elected at the annual general meeting. 6.1 REMUNERATION TO THE EXECUTIVE BOARD AND BOARD OF DIRECTORS

Remuneration package for the Executive Board and the Board of Directors

Board of Executive Comments in respect Remuneration Directors Board of top management

Fixed remuneration/annual salary Remuneration in respect of committee work Bonus payments Company car and usual other benefits Severance payment The Executive Board has a Retirement contributions notice period of 12 months Share-based payment

The statement of remuneration to the Executive Board and Other executives comprise members of the Executive Team, Senior the Board of Directors is prepared pursuant to the Company’s Vice Presidents, Vice Presidents and brand CEOs. Other executives Remuneration Policy. The overall composition of the Executive are together with the Executive Board responsible for planning, exe- Board’s remuneration is in general expected to be unchanged for cuting and supervising the operations of the Group. 12 employees 2017/18. were defined as other executives (11 employees) in 2016/17 of which 3 employees resigned during the financial year under review. Please see the Company’s Remuneration Policy on the corporate website: icgroup.net/investors/corporate-governance/ See page 102 for a complete list of other executives. remuneration-policy/

Remuneration to the Board of Directors, Executive Board and other executives is as follows:

Board of Executive Other Board of Executive Other Directors Board Executives Total Directors Board Executives Total DKK 1,000 2016/17 2016/17 2016/17 2016/17 2015/16 2015/16 2015/16 2015/16

Remuneration to the Board of Directors 3,252 - - 3,252 3,200 - - 3,200 Remuneration to the Audit Committee 395 - - 395 395 - - 395 Remuneration to the Remuneration Committee 200 - - 200 200 - - 200 Remuneration to the Operations Committee 320 - - 320 395 - - 395 Remuneration to the Nomination Committee 118 - - 118 - - - - Salaries and remuneration - 8,628 19,232 27,860 - 8,044 20,044 28,088 Severance payments - 8,389 5,386 13,775 - 2,019 5,106 7,125 Bonus payments - - (278) (278) - 271 1,069 1,340 Retirement contributions - - 1,076 1,076 - - 1,669 1,669 Share-based payments - 171 (252) (81) - 885 199 1,084 Total 4,285 17,188 25,164 46,637 4,190 11,219 28,087 43,496

Total remuneration to the Board of Directors

DKK 1,000 2016/17 2015/16

Henrik Heideby (Chairman) 1,236 1,195 Peter Thorsen (Deputy Chairman) (appointed to the Board of Directors on 28 September 2016) 440 - Niels Martinsen 810 795 Anders Colding Friis 701 690 Ole Wengel (resigned from the Board of Directors on 28 September 2016) 165 660 Michael Hauge Sørensen 454 425 Annette Brøndholt Sørensen (resigned from the Board of Directors on 29 March 2017) 319 425 Conny Kalcher (appointed to the Board of Directors on 29 March 2017) 80 - Jón Björnsson (appointed to the Board of Directors on 29 March 2017) 80 - Total remuneration to the Board of Directors 4,285 4,190

The board fees to the Chairman and Deputy Chairman of the Board of Directors have been increased by a factor 3 and a factor 2 compared to the basic fee, respectively.

72 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS DKK 1,000 FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S the average weighted share priceontheexercise date amounted 34,611 warrants have beenexercised in2016/17 (48,590)and Warrants respectively, thewarrant after grantdate. Incase amember of 3,4or5years,Company’s announcement ofitsannual report rants granted. The new shares may be acquired following the subscribe for anumber ofnew shares equivalent to the war rants granted represent theright,againstpayment incash,to determined by the Company’s Board of Directors. The war Board andother executives. grantsis The sizeof the specific The warrant programme isoffered to the Group’s Executive Warrant programme 6.2 SHARE-BASEDREMUNERATION * Former oftheExecutive members Board consistoftheformer Group CEO,MadsRyder. In2015/16, theformer Group CFO, Rud Trabjerg Pedersen, was included. DKK 1,000 Total remunerationto theExecutive Board ** * TheOperationsCommittee was closeddown by theendofApril2017. onCommitteesHereof remunerationdistributed Total Jón Björnsson Conny Kalcher Annette BrøndholtSørensen Michael HaugeSørensen Ole Wengel

Number ofwarrants exercisable at 30June2017 Anders ColdingFriisAnders Outstanding warrants at30 June2017Outstanding Expired/void Exercised Transferred warrants at1July 2016Outstanding Number ofwarrants exercisable at 30June2016 warrants at30 June2016Outstanding Expired/void Exercised Niels Martinsen Niels Martinsen Peter Thorsen Henrik Heideby Transferred warrants at1July2015Outstanding Total

Alexander (CEO,ICGroup) Martensen-Larsen Former oftheExecutive members Board Peter (Interim Thorsen Group CEO) The NominationCommittee was establishedinconnectionwiththeAnnualGeneralMeeting 2016. 2016/17 Audit Com. 200 395 152 112 105 26

- - - - - *

2016/17 Remun. Com. 50 50 13 87 - - - - - 2016/17

Com.* Oper. 320 134 79 46 61 ------2016/17 Board(no.) Com.** Executive (12,649) (25,299) 25,299 25,299 37,948 Nom. 118 38 42 38 for outstanding warrants isapprox. 2.2year (1.0 years). to DKK170 (DKK203).Theaverage weighted term to maturity 2016/17.announcement oftheAnnualReport warrants granted areexercisable for timefollowing thefirst the 2014 to former oftheGroup’s members Executive Board. The The pendingprogramme concernswarrants granted inAugust not exercisable atthe date of resignation. IC Group A/S,thewarrants granted become void ifthey are the Executive Board or anemployee chooses to resign from ------2016/17

1,033 Other executives/ Total former members 134 of theExecutive 197 173 277 79 85 88 - - Board(no.) 2015/16 2015/16 2015/16 2015/16 2015/16 111,865 111,865 124,514 124,514 124,514 (48,590) 245,885 (34,611) (85,430) (77,254) 37,948 12,649 25,299 Audit Com. 395 185 105 105 ------

Remun. Com. 200 50 50 50 50 - - - - - 111,865 111,865 149,813 149,813 149,813 283,833 (85,430) (77,254) (48,590) (34,611) 37,948 Oper. Com. Total 395 185 105 105 2016/17 (no.) 17,188 11,219 12,240 2,848 ------2,100 - - -

Average exercise Nom. Com. warrant (DKK) - 990 ------2015/16 price per 9,119 2,100 149 264 264 155 155 155 128 194 158 155 Total 172 340 235 155 105 105 50

------73

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW Performance shares October 2015 programme October 2016 programme Pursuant to the authorization in the Remuneration Policy as adopted Pursuant to the authorization in the Remuneration Policy as adopted at the Annual General Meeting on 30 September 2015, the Board of at the Annual General Meeting on 28 September 2016, the Board of Directors of IC Group A/S decided to initiate a programme granting Directors of IC Group A/S decided to initiate a programme granting performance shares to members of the Group’s Executive Team as performance shares to members of the Group’s Executive Team as well as other selected executives. The programme was offered to a well as other selected executives. The programme was offered to a total number of 23 participants at the grant date. total number of 29 participants at the grant date.

The participants’ opportunity for receiving performance shares is The participants’ opportunity for receiving performance shares is dependent on the achievement of specific goals in respect of the dependent on the achievement of specific goals in respect of the Group’s financial results achieved in those financial years during Group’s financial results achieved in those financial years during which the programme runs (”Performance Period”). 25% of the which the programme runs (”Performance Period”). 50% of the performance shares granted is calculated based on the realized performance shares granted is calculated based on the realized revenue growth whereas 75% of the performance shares granted is revenue growth whereas 50% of the performance shares granted is calculated based on realized earnings growth (EBIT). calculated based on realized earnings growth (EBIT).

The Performance Period covers the financial years 2015/16, The Performance Period covers the financial years 2016/17, 2016/17, 2017/18, and, consequently, the grant may, at the ear- 2017/18, 2018/19, and, consequently, the grant may, at the ear- liest, take place following the announcement of the Annual Report liest, take place following the announcement of the Annual Report 2017/18. The grant of performance shares is free of charge. 2018/19. The grant of performance shares is free of charge.

The number of shares granted is based on meeting the set criteria. The number of shares granted is based on meeting the set criteria. Therefore, the total number of performance shares granted under Therefore, the total number of performance shares granted under the the programme may vary from 0 to 61,113. The members of the programme may vary from 0 to 79,901. The members of the Group’s Group’s Executive Team may, as a maximum, be granted a number Executive Team may, as a maximum, be granted a number of perfor- of performance shares corresponding to 50% of their fixed annual mance shares corresponding to 50% of their fixed annual salary (ba- salary (based on the monthly salary on 1 October 2015) calculated sed on the monthly salary on 26 October 2016) calculated by using by using the average closing price of the share of the 5 previous tra- the average closing price of the share of the 5 previous trading days ding days before 1 October 2015 deducted expected dividends. The before 26 October 2016 deducted expected dividends. The remaining remaining participants of the programme may, as a maximum, be participants of the programme may, as a maximum, be granted a granted a number of performance shares corresponding to 25% of number of performance shares corresponding to 15% or 25% of their their fixed annual salary calculated by using the same method. fixed annual salary calculated by using the same method.

Other executives / former members of Executive the Executive Total Board (no.) Board (no.) (no.)

Outstanding performance shares at 1 July 2015 - - - Granted 19,725 41,388 61,113 Expired/void - (4,385) (4,385) Outstanding performance shares at 30 June 2016 19,725 37,003 56,728 Number of performance shares exercisable at 30 June 2016 - - -

Outstanding performance shares at 1 July 2016 19,725 37,003 56,728 Granted 24,701 55,200 79,901 Expired/void (29,506) (16,447) (45,953) Outstanding performance shares at 30 June 2017 14,920 75,756 90,676 Number of performance shares exercisable at 30 June 2017 - - -

The average weighted term to maturity for outstanding perfor- The market value of IC Group A/S’ incentive programmes is cal- mance shares is approx. 1.8 years (2.2 years). culated by using the so-called Black-Scholes model for valuation of options. The assumptions applied at the grant date (performance shares) are stated in the table below:

DKK million 2016/17 2015/16

Black-Scholes value 133 165 Share price 158 190 Exercise price - - Expected volatility 32% 25% Expected dividend rate in proportion to the share price 5.7% 4.6% Risk-free interest (based on Danish government bonds in respect of maturity) (0.5)% 0.06% Maturity 3 years 3 years

74 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S DKK million 6.4 FEETOTHEAUDITORS ELECTEDAT THEANNUAL GENERALMEETING yearduring thefinancial 2015/16. million to DKCompany A/Swhichwas consideredanassociate In 2015/16, theGroup provided amountingto DKK1 services tioned above have control orjointcontrol. alsocomprise businessesinwhichtheindividualsmen parties other executives aswell astheirrelated family Related members. boardthe related ofdirectors, executive parties’ boards and influenceinclude IC Group withsignificant A/S’related parties IC Group A/S. Friheden Invest withcontrolling A/Sisarelated influencein party 6.3 RELATED PARTIES • • • the incentive programmes granted onthegrantdate isrecog- The Group to appliesIFRS2,pursuant whichthefair value of mon interest between theemployees andtheshareholders. warrants. Furthermore, theseprogrammes areto ensurecom incentive programmes sharesand consistingofperformance oftheExecutiveand members Board, ICGroup hasestablished With thepurpose ofmotivating andretaining other executives Statutory audit Statutory VAT andtaxconsultancy Other services Total fee to elected theauditors attheannual generalmeeting historical, and extraordinary dividend payments. ordinary The expected dividend rate isestimated on the basisof the the minimum term to maturity of sharesthe granted.performance years.the past3financial Thecalculation term corresponds to The volatility iscalculated based on the dailyclosing prices during the average closingprice of the preceding 5trading days sing price of the ICGroup A/Sshare on the grantdate or The exercise price isdetermined asthe higher of either the clo-

ACCOUNTING POLICIES - -

partly settled by shares. ICGroup’spartly holdingoftreasury The obligationregarding shareprogrammes theperformance is programmes scheme. asanequity-based areclassified An equivalent amountisrecognizedinequity astheincentive programmes granted andarenot to beconsidered cashcosts. riod. Suchcostsrepresentthecalculated value oftheincentive nized ascostsintheincomestatement duringtheearningspe ordinary remuneration. ordinary and other executives have taken placeother thanpayment of no transactionswiththeBoard ofDirectors, theExecutive Board cutives amountingto DKK2million(DKKmillion).Besidesthis, At 30June2017, theGroup accepted aloanfrom oneofitsexe- theExecutiveBoard ofDirectors, Boardandotherexecutives • • amounted to DKK11 million atthe grantdate (DKK10 million). The total fair value shares ofgranted the performance in 2016/17

(4-year) Danishgovernment bonds. The risk-free interest rate isdetermined on the basisof 3-year period, andmaturity istherefore assumed to be 3years (3years). windowbe during the first opening for tradingduring the exercise Based on previous experience, the date of exercise isassumed to Please seenote 6.1 . 2016/17 3 2 1 6 2015/16 4 2 1 7 - 75

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW CHAPTER 7 SUPPLEMENTARY NOTES

CONTENTS

7.1 RETIREMENT BENEFIT Chapter 7 contains other statutory OBLIGATIONS notes considered to be less 7.2 PROVISIONS significant to the overall understanding 7.3 CONTINGENT LIABILITIES of IC Group’s Annual Report. 7.4 EVENTS AFTER THE REPORTING PERIOD FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S DKK million companies hasbeen included whichhasbeen hedged by shares tributable to retirement obligations inone ofthe Group benefit Furthermore, anamount of DKK7million (DKK7million)at- DKK million asfollows:specified The development ofthepresentvalue plansis benefit ofdefined DKK million asfollows:The retirement obligationsarespecified benefit DKK million statement ofretirement obligations. benefit The Group hasusedexternal andindependentactuariesfor the 7.1 RETIREMENT BENEFITOBLIGATIONS Present value ofdefinedbenefitplans Economic changesrecognizedinother comprehensive income Demographic changesrecognizedinother comprehensive income Calculated interest onassets oftheplans Recognized inprofitandloss: Retirement benefitassetsat1July Retirement benefitobligations for the year Recognized inprofitandloss: Retirement benefitobligationsat1July Total netretirementbenefitobligations Fair value oftheassets oftheplans Present value ofdefinedbenefitplans Total recognizedobligationsinprofitandloss Total amountrecognizedfor definedbenefitplans Contributions for definedcontributionsplans Recognized inprofitandloss: Fair value oftheassetsplans Actuarial gains/losses(other comprehensive income) Calculated interest onobligations Other retirement benefitobligations,cf.below Actuarial gains/losses(other comprehensive income):

Total retirementbenefitobligations

value of the assets asfollows: of the plansisspecified assets.recognized under The financial development ofthe fair 2016/17 2017 2017 2017 (54) (49) (49) 50 (5) (3) (2) 56 50 32 32 8 1 1 7 1 7 -

2015/16 2016 2016 2016 (54) (42) (54) (11) 56 (1) 43 56 30 29 11 1 9 1 2 1 7 - 77

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW ACCOUNTING POLICIES Obligations relating to defined contribution plans are recogni- Differences between the expected development of assets and zed in the income statement in the period in which the emplo- liabilities in connection with retirement benefit schemes and yees render the related service, and contributions due are the realized values are termed actuarial gains or losses. Sub- recognized in the statement of financial position under other sequently, all actuarial gains or losses are recognized in the liabilities. For defined benefit plans, an annual actuarial assess- comprehensive income. If a retirement plan represents a net ment is made of the net present value of future benefits to be asset, the asset is only recognized to the extent that it offsets paid under the plan. future contributions from the plan, or it will reduce future contributions to the plan. The net present value is calculated based on assumptions of the future developments of, e.g., salary, interest, inflation and The assumptions used for the actuarial calculations and valua- mortality rates. The net present value is only calculated for tions may vary from country to country due to local, econo- those benefits to which the employees have earned the right mic and social differences. The average assumptions for the through their past service for the Group. The actuarial calcula- actuarial calculations at the end of the reporting period were as tion of the net present value less the fair value of any assets follows: related to the plan is included in the statement of financial position as retirement benefit obligations, however, please see below.

Stated in % 2017 2016

Average discount rate applied 2.2 1.9 Expected future pay increase rate 2.1 2.1

7.2 PROVISIONS

Provisions primarily include provisions for expected discounts, restoration obligations in respect of the Group’s store leases as claims and return of products. Furthermore, provisions for the well as court litigations of various kinds in which the Group is implemented structural changes of the Group’s central functions involved from time to time. Management considers that pending are also included which primarily relates to severance payments litigation poses no significant financial risks. and loss-making contracts. Other provisions primarily relate to

2017 Provisions for expected discounts, claims and Provisions for Other Total DKK million return of products restructurings provisions provisions

Provisions at 1 July 2016 19 - 8 27 Provisions utilized for the year (22) (13) - (35) Provisions for the year 27 37 5 69 Reversed provisions - (1) - (1) Provisions at 30 June 2017 24 23 13 60

Provisions specified in the statement of financial position are as follows: Non-current liabilities - 4 7 11 Current liabilities 24 19 6 49 Provisions at 30 June 2017 24 23 13 60

2016 Provisions for expected discounts, claims and Provisions for Other Total DKK million return of products restructurings provisions provisions

Provisions at 1 July 2015 23 4 25 52 Provisions utilized for the year (22) (4) (15) (41) Provisions for the year 19 - 4 23 Reversed provisions (1) - (6) (7) Provisions at 30 June 2016 19 - 8 27

Provisions specified in the statement of financial position are as follows: Non-current liabilities - - 6 6 Current liabilities 19 - 2 21 Provisions at 30 June 2016 19 - 8 27

78 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • ICGROUP A/S that have not beenrecognizedorincludedinthisAnnualReport. No material events have period taken thereporting placeafter 7.4 AFTERTHEREPORTING PERIOD EVENTS customers. At 30June2017, theGroup was not involved in the majorityistiedto salesorders entered into withwholesale ofcollectionsuntil31on thedelivery December2017 ofwhich The Group hasentered into bindingagreementswithsuppliers DKK million 7.3 CONTINGENT LIABILITIES ges intheseassumptions andjudgmentsapplied. process, theseestimates may beaffected by significantly chan- settled withinoneyear. inthesettlement Dueto uncertainty judgments. Themajorityoftheprovisions areexpected to be based onManagement’sbestestimates ofassumptions and The accountingestimates appliedinrespectofprovisions are quired period. to settle the liabilities attheend of the reporting Provisions are measured asthe best estimate of the costs re resources. the obligationwillrequire anoutflow of the Company’s financial legal or constructive obligation, anditislikely thatsettlement of event year during the financial or previous years, the Group hasa Provisions are recognized when, asaconsequence of apast not yet asto beenconfirmed whether thesewillcauseanout Contingent liabilitiescomprise potential liabilitieswhichhave Guarantees andother collateral security

ACCOUNTING ESTIMATES ACCOUNTING POLICIES ACCOUNTING POLICIES - - to beadequate. the information available, ICGroup theprovisions A/Sconsiders existing contractualobligationsandpastexperience. Basedon claims andreturn ofproducts. Theseestimates arebasedon IC Group A/Smakes provisions to cover expected discounts, overall plan. affected haveperiod andwhere the parties been informed of the have been set planatthe end ofthe reporting out inaspecific sions are only made for liabilities relating to restructurings that In connection withplanned restructurings of the Group, provi- period are measured atpresent value. the reporting Provisions withanexpected term of more thanayear atend of possible to measure with sufficient reliability.possible to measurewithsufficient flow oftheGroup’s resources oractualliabilitieswhicharenot Group’s position. financial any pendinglitigationwhichmay have amaterial effect onthe 2017 576 2016 578 79

SUPPLEMENTARY NOTES GOVERNANCE CAPITAL STRUCTURE INVESTED CAPITAL WORKING CAPITAL PROFIT FOR THE YEAR BASIS FOR PREPARATION OVERVIEW

PARENT COMPANY FINANCIAL STATEMENTS

PRIMARY FINANCIAL STATEMENTS NOTES – STATEMENT OF FINANCIAL POSITION INCOME STATEMENT 82 8 INTANGIBLE ASSETS 89 STATEMENT OF COMPREHENSIVE INCOME 82 9 PROPERTY, PLANT AND EQUIPMENT 90 STATEMENT OF FINANCIAL POSITION 83 10 INVESTMENTS IN SUBSIDIARIES 90 STATEMENT OF CHANGES IN EQUITY 84 11 FINANCIAL ASSETS 91 STATEMENT OF CASH FLOWS 85 12 INVENTORIES 91 13 TRADE RECEIVABLES 92 1 BASIS FOR PREPARATION 86 14 NET INTEREST-BEARING DEBT 92 15 SHARE CAPITAL 92 NOTES – INCOME STATEMENT 16 DIVIDENDS 92 2 REVENUE 86 17 PROVISIONS 92 3 FEE TO AUDITORS ELECTED AT THE 18 OPERATING LEASES 93 ANNUAL GENERAL MEETING 86 19 WORKING CAPITAL 93 4 STAFF COSTS 86 20 OTHER ADJUSTMENTS, 5 OTHER OPERATING INCOME AND COSTS 87 STATEMENT OF CASH FLOWS 94 6 FINANCIAL INCOME AND COSTS 87 7 TAX 88 NOTES – SUPPLEMENTARY INFORMATION 21 CONTINGENT LIABILITIES 94 22 FINANCIAL RISKS AND DERIVATIVE FINANCIAL INSTRUMENTS 94 23 RELATED PARTIES 94 24 EVENT AFTER THE REPORTING PERIOD 94 INCOME STATEMENT 1 JULY – 30 JUNE

Note DKK million 2016/17 2015/16

2 Revenue 1,126 1,070 Cost of sales (978) (956) Gross profit 148 114

Other external costs (89) (70) 4 Staff costs (132) (125) 5 Other operating income and costs 77 96 Operating profit before depreciation and amortization (EBITDA) 4 15

8, 9 Depreciation, amortization and impairment losses (21) (17) Operating loss (EBIT) (17) (2)

10 Income from investments in subsidiaries and associates 264 510 6 Financial income 16 19 6 Financial costs (17) (26) Profit before tax 246 501

7 Tax on profit for the year (6) 4 Profit for the year 240 505

Profit allocation: 16 Proposed dividend 85 85 Retained earnings 155 420 Profit for the year 240 505

STATEMENT OF COMPREHENSIVE INCOME 1 JULY - 30 JUNE

Note DKK million 2016/17 2015/16

Profit for the year 240 505

OTHER COMPREHENSIVE INCOME Items to be reclassified to the income statement when certain conditions are met: Hedging transactions: Fair value adjustments, gains/loss on financial instruments related to cash flow hedges (18) 27 Reclassification to income statement, gains/loss on financial instruments related to realized cash flow hedges (11) (61) Tax on items which may be reclassified to the income statement 6 7 Total other comprehensive income after tax (23) (27) Total comprehensive income 217 478

82 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION AT 30 JUNE

Note DKK million 2017 2016

ASSETS NON-CURRENT ASSETS 8 Intangible assets 15 29 9 Property, plant and equipment 18 18 10 Investments in subsidiaries 1,407 1,417 11 Financial assets 35 35 7 Deferred tax 20 25

Total non-current assets 1,495 1,524 FINANCIAL COMPANY STATEMENTS PARENT

CURRENT ASSETS 12 Inventories 225 251 13 Trade receivables 4 10 Receivables from subsidiaries 238 252 7 Tax receivable 3 30 Other receivables 25 25 Prepayments 9 14 14 Cash 33 28 Total current assets 537 610 TOTAL ASSETS 2,032 2,134

Note DKK million 2017 2016

EQUITY AND LIABILITIES EQUITY 15 Share capital 171 171 Reserve for hedging transactions (12) 11 Retained earnings 1,321 1,162 TOTAL EQUITY 1,480 1,344

LIABILITIES 17 Provisions 4 1 Total non-current liabilities 4 1

14 Current liabilities to credit institutions 90 56 Trade payables 26 33 Payables to subsidiaries 326 655 Other liabilities 86 43 17 Provisions 20 2 Total current liabilities 548 789 Total liabilities 552 790 TOTAL EQUITY AND LIABILITIES 2,032 2,134

FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • IC GROUP A/S 83 STATEMENT OF CHANGES IN EQUITY 1 JULY – 30 JUNE

2017 Reserve for Share hedging Retained Proposed Total DKK million capital transactions earnings dividend equity

Equity at 1 July 2016 171 11 1,077 85 1,344 Profit for the year - - 155 85 240 Other comprehensive income after tax - (23) - - (23)

Total comprehensive income - (23) 155 85 217

Transactions with owners: Dividend on treasury shares - - - (2) (2) Dividend paid - - - (83) (83) Exercise of warrants - - 4 - 4 Changes in equity during 2016/17 - (23) 159 - 136 Equity at 30 June 2017 171 (12) 1,236 85 1,480

2016 Reserve for Share hedging Retained Proposed Total DKK million capital transactions earnings dividend equity

Equity at 1 July 2015 170 38 891 68 1,167 Profit for the year - - 420 85 505 Other comprehensive income after tax - (27) - - (27)

Total comprehensive income - (27) 420 85 478

Transactions with owners: Dividend on treasury shares - - 2 (2) - Dividend paid - - - (66) (66) Extraordinary dividend paid - - (244) - (244) Share-based payments - - 1 - 1 Exercise of warrants 1 - 7 - 8 Changes in equity during 2015/16 1 (27) 186 17 177 Equity at 30 June 2016 171 11 1,077 85 1,344

84 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS 1 JULY – 30 JUNE

Note DKK million 2016/17 2015/16

CASH FLOW FROM OPERATING ACTIVITIES Operating loss (17) (2) 20 Other adjustments 63 (14) 19 Change in working capital (272) (290) Cash flow from ordinary operating activities (226) (306)

Financial income received 1 8 Financial costs paid (5) (10) Cash flow from operating activities (230) (308)

FINANCIAL COMPANY STATEMENTS PARENT 7 Tax paid/recovered 32 (1) Total cash flow from operating activities (198) (309)

CASH FLOW FROM INVESTING ACTIVITIES 8 Investments in intangible assets (1) (3) 9 Investments in property, plant and equipment (6) (14) Sale of subsidiaries and operations 1 156 Dividend received, proceeds in connection with liquidation, etc. 254 513 Total cash flow from investing activities 248 652

Total free cash flow 50 343

CASH FLOW FROM FINANCING ACTIVITIES Repayment of non-current liabilities - (17) Dividend paid (83) (310) Exercise of share options and warrants 4 8 Total cash flow from financing activities (79) (319) Net cash flow for the year (29) 24

CASH AND CASH EQUIVALENTS Cash and cash equivalents at 1 July (28) (52) Net cash flow for the year (29) 24 Cash and cash equivalents at 30 June (57) (28)

DKK million 2017 2016

Cash and cash equivalents in statement of cash flows comprise: Cash 33 28 Current liabilities to credit institutions (90) (56) Cash and cash equivalents, cf. statement of cash flows (57) (28)

FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • IC GROUP A/S 85 NOTES

1. BASIS FOR PREPARATION

Basis for preparation in the consolidated financial statements and in the income state- The parent company financial statements are expressed ment of the parent company financial statements. in Danish Kroner (DKK) which is the functional currency of the Parent Company. New IFRS standards and interpretations IASB has issued amendment to IAS 27 ”Equity Method in Separate Few reclassifications and adjustments of the comparative Financial Statements” which is effective for the financial year begin- figures have been made. ning on or after 1 January 2016. This amendment makes it possible to use the equity method as an accounting option for investments in Changes in accounting policies subsidiaries and associates in the parent company financial state- The accounting policies for the Parent Company are consistent with ments. IC Group’s investments in subsidiaries and associates are those used in the previous financial year. The accounting policies for measured at cost and will continue to be measured at cost. the Parent Company are the same as those applied for the Group with the exception of the items stated in the below notes. As stated in note 1.1 to the consolidated financial statements, the IFRS 9 ”Financial Instruments” is expected to be imple- Please see note 1.1. to the consolidated financial state- mented for the financial year 2018/19. IC Group has assessed ments for further information on accounting policies the impact of this new standard on financial instruments, and the implementation is not expected to have any material impact on Foreign currency the parent financial statements. Foreign exchange adjustments of receivables in foreign subsidiaries that are considered to be part of the overall investment in Significant accounting estimates subsidiaries are recognized under other comprehensive income Please see note 1.2 to the consolidated financial statements.

2. REVENUE

DKK million 2016/17 2015/16

Sale of goods to subsidiaries 941 888 Sale of goods to non-Group related parties 185 182 Total revenue 1,126 1,070

3. FEE TO AUDITORS ELECTED AT THE ANNUAL GENERAL MEETING

DKK million 2016/17 2015/16

Statutory audit 3 3 Tax consultancy 2 2 Other services - 1 Total fee to auditors elected at the annual general meeting 5 6

4. STAFF COSTS

DKK million 2016/17 2015/16

Total salaries, remuneration, etc., may be specified as follows: Remuneration to the Board of Directors 4 4 Salaries and remuneration 115 106 Defined contribution plans 8 6 Share-based payments - 1 Other staff costs 5 8 Total staff costs 132 125

Average number of employees of the Parent Company 128 140

86 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS Remuneration to the Board of Directors and the Executive disclosed in notes 6.1 and 6.2 to the consolidated financial Board of the Parent Company as well as share-based incentive statements. programmes for the Executive Board and other executives are

5. OTHER OPERATING INCOME AND COSTS

DKK million 2016/17 2015/16

Services provided to subsidiaries 76 78 Sales proceeds and other operating income and costs 1 18 Total other operating income and costs 77 96

Administration fees paid by subsidiaries to the Parent Company other operating income under other operating income and costs. covering their share of the Group’s overheads are recognized as

PARENT COMPANY FINANCIAL COMPANY STATEMENTS PARENT

ACCOUNTING POLICIES Other operating income and costs comprise items of a se- and losses on sale of intangible assets and property, plant and condary nature in respect of the main activities, including gains equipment.

6. FINANCIAL INCOME AND COSTS

DKK million 2016/17 2015/16

Financial income: Interest on bank deposits 2 1 Interest on receivables from subsidiaries 11 9 Interest income from financial assets not measured at fair value 13 10

Fair value adjustments on financial assets - 1 Realized gain on ineffective derivative financial instruments 3 5 Net gain on foreign currency translation - 3 Total financial income 16 19

Financial costs: Interest on liabilities to credit institutions (5) (2) Interest on payables to subsidiaries (7) (14) Other interest costs - (3) Interest costs from financial liabilities not measured at fair value (12) (19)

Realized loss on ineffective derivative financial instruments (3) (7) Net loss on foreign currency translation (2) - Total financial costs (17) (26) Net financials (1) (7)

FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • IC GROUP A/S 87 7. TAX

Tax for the year DKK million 2016/17 2015/16 Current tax Current tax for the year (4) (9) Prior-year adjustments, current tax (1) - Total current tax (5) (9)

Deferred tax Change in deferred tax (5) (6) Prior-year adjustments, deferred tax* 4 4 Revaluation of tax losses, etc. 6 - Total deferred tax 5 (2) Tax for the year - (11)

Recognized as follows: Tax on profit for the year 6 (4) Tax on other comprehensive income (6) (7) Tax for the year - (11)

Net tax receivable at 1 July 30 20 Tax payable on profit for the year 5 9 Tax recovered/paid during the financial year (32) 1 Net tax receivable at 30 June 3 30

Recognized as follows: Tax receivable 3 30 Net tax receivable at 30 June 3 30

* Including re-allocation of used losses under joint taxation of Danish entities.

Breakdown of tax on profit for the year of continuing operations is as follows: DKK million 2016/17 2015/16

Calculated tax on profit before tax, 22% 54 110 Effect of other non-taxable income and non-deductible costs (58) (115) Prior-year adjustments 4 4 Revaluation of tax losses, etc. 6 (3) Total 6 (4)

Effective tax rate for the year (%) 2.4% neg.

Deferred tax DKK million 2017 2016

Deferred tax at 1 July 25 23 Prior-year adjustments* (4) (4) Revaluation of tax losses, etc. (6) - Deferred tax on other comprehensive income 6 7 Change in deferred tax on profit for the year (1) (1) Net deferred tax at 30 June 20 25

Recognized as follows: Deferred tax 20 25 Net deferred tax at 30 June 20 25

Breakdown of deferred tax at 30 June is as follows: Gross deferred tax 30 35 Unrecognized tax assets (10) (10) Net deferred tax at 30 June 20 25

* Including re-allocation of used losses under joint taxation of Danish entities.

88 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS Changes to temporary differences during the year are as follows: Recognized Net deferred Recognized in other Net deferred tax at in profit/loss comprehensive tax at DKK million 1 July 2016 for the year income 30 June 2017

Intangible assets and property, plant and equipment 21 (8) - 13 Provisions 2 - - 2 Financial instruments (3) - 6 3 Tax losses 15 (3) - 12 Unrecognized tax assets (10) - - (10) Total 25 (11) 6 20

Recognized Net deferred Recognized in other Net deferred tax at in profit/loss comprehensive tax at DKK million 1 July 2015 for the year income 30 June 2016

Intangible assets and property, plant and equipment 16 5 - 21 FINANCIAL COMPANY STATEMENTS PARENT Provisions 8 (6) - 2 Financial instruments (11) 1 7 (3) Tax losses 23 (8) - 15 Unrecognized tax assets (13) 3 - (10) Total 23 (5) 7 25

Unrecognized tax assets relate to tax losses that are assessed The unrecognized tax losses are not limited in time. not to be sufficiently likely to be utilized in the foreseeable future.

8. INTANGIBLE ASSETS

2017 Total Software and intangible DKK million IT systems assets

Cost at 1 July 2016 90 90 Addition 1 1 Cost at 30 June 2017 91 91

Accumulated amortization and impairment losses at 1 July 2016 (61) (61) Amortization and impairment losses for the year (15) (15) Accumulated amortization and impairment losses at 30 June 2017 (76) (76) Carrying amount at 30 June 2017 15 15

2016 Total Software and intangible DKK million IT systems assets

Cost at 1 July 2015 110 110 Addition 3 3 Disposal (23) (23) Cost at 30 June 2016 90 90

Accumulated amortization and impairment losses at 1 July 2015 (70) (70) Amortization and impairment losses for the year (14) (14) Amortization and impairment losses on disposals 23 23 Accumulated amortization and impairment losses at 30 June 2016 (61) (61) Carrying amount at 30 June 2016 29 29

FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • IC GROUP A/S 89 9. PROPERTY, PLANT AND EQUIPMENT

2017 Total property, Leasehold Equipment Assets under plant and DKK million improvements and furniture construction equipment

Cost at 1 July 2016 2 31 9 42 Reclassification 6 2 (8) - Addition 1 4 1 6 Disposal (1) (1) - (2) Cost at 30 June 2017 8 36 2 46

Accumulated depreciation and impairment losses at 1 July 2016 (2) (22) - (24) Depreciation and impairment losses for the year (1) (5) - (6) Depreciation and impairment losses on disposals 1 1 - 2 Accumulated depreciation and impairment losses at 30 June 2017 (2) (26) - (28) Carrying amount at 30 June 2017 6 10 2 18

2016 Total property, Leasehold Equipment Assets under plant and DKK million improvements and furniture construction equipment

Cost at 1 July 2015 1 31 3 35 Addition 1 7 6 14 Disposal - (7) - (7) Cost at 30 June 2016 2 31 9 42

Accumulated depreciation and impairment losses at 1 July 2015 (1) (27) - (28) Depreciation for the year (1) (2) - (3) Depreciation and impairment losses on disposals - 7 - 7 Accumulated depreciation and impairment losses at 30 June 2016 (2) (22) - (24) Carrying amount at 30 June 2016 - 9 9 18

10. INVESTMENTS IN SUBSIDIARIES

2017 DKK million Subsidiaries

Cost at 1 July 2016 1,707 Disposal (10) Cost at 30 June 2017 1,697

Write-downs at 1 July 2016 (290) Addition - Disposal - Write-downs at 30 June 2017 (290)

Carrying amount at 30 June 2017 1,407

2016 DKK million Subsidiaries

Cost at 1 July 2015 1,725 Reclassification (8) Disposal (10) Cost at 30 June 2016 1,707

Write-downs at 1 July 2015 (299) Reclassification 8 Addition (15) Disposal 16 Write-downs at 30 June 2016 (290)

Carrying amount at 30 June 2016 1,417

90 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS An overview of the Group’s subsidiaries is available on page from subsidiaries deducted write-downs of investments and recei- 100 in this Annual Report. vables for the year. For the financial year 2016/17 an amount of DKK 7 million was recognized in the income statement regarding Income from investments in subsidiaries amounted to net DKK prior-year write-downs of investments and short-term receivables 264 million (income of DKK 499 million) and comprises dividends from subsidiaries (write-downs of DKK 16 million).

ACCOUNTING POLICIES Investments in subsidiaries and associates are measured net assets recognized in the consolidated financial statements. at cost. An impairment test is conducted when the carrying Where the recoverable amount is lower than cost, the invest- amount of the investments exceeds the carrying amount of the ments are written down to such lower value.

11. FINANCIAL ASSETS Long-term Total receivables financial DKK million from subsidiaries Deposits, etc. Other assets FINANCIAL COMPANY STATEMENTS PARENT

Carrying amount at 30 June 2015 31 3 12 46 Net additions, disposals and foreign currency translation adjustments for the year - 1 (12) (11) Carrying amount at 30 June 2016 31 4 - 35 Net additions, disposals and foreign currency translation adjustments for the year - - - - Carrying amount at 30 June 2017 31 4 - 35

All intercompany loans are interest-bearing.

ACCOUNTING POLICIES On initial recognition, receivables from subsidiaries in the parent nominal value less write-downs for bad debts. No security has company financial statements are measured at fair value and been received for the loans. The carrying amount of the financial subsequently at amortized cost which usually corresponds to the assets corresponds to the fair value.

12. INVENTORIES

DKK million 2017 2016

Finished goods and goods for resale 153 133 Goods in transit 96 130 Total inventories, gross 249 263

Changes in inventory write-downs for the year: Inventory write-downs at 1 July 12 14 Write-downs for the year, addition 22 10 Write-downs for the year, reversal (10) (12) Total inventory write-downs 24 12 Total inventories, net 225 251

Write-downs (%) 10 5

Inventories recognized at net realizable value amounted to DKK 33 million at 30 June 2017 (DKK 21 million).

FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • IC GROUP A/S 91 13. TRADE RECEIVABLES

DKK million 2017 2016

Not yet due - - Due, 1-60 days 4 9 Due, 61-120 days - - Due more than 120 days - 1 Total trade receivables, net 4 10

Changes in trade receivables write-downs for the year: Trade receivables write-downs at 1 July 1 2 Change in write-downs for the year (1) (1) Total trade receivables write-downs - 1

In all material respect, the carrying amounts of trade receivables date. After this date, interest is charged on the outstanding correspond to their fair values. In general, trade receivables do amount. not carry interest until between 30 and 60 days after the invoice

14. NET INTEREST-BEARING DEBT

DKK million 2017 2016

Net interest-bearing debt comprises: Current liabilities to credit institutions 90 56 Gross interest-bearing debt 90 56

Cash 33 28 Net interest-bearing debt 57 28

15. SHARE CAPITAL

For information on the share capital distribution on number of shares, etc., please see note 5.1 to the consolidated financial statements

16. DIVIDENDS

Dividends from investments in subsidiaries are recognized in the dend to its shareholders during the financial year 2016/17 (DKK income statement for the financial year in which the dividends 250 million). The Board of Directors has resolved to recommend are declared. a total ordinary dividend of DKK 85 million corresponding to DKK 5.00 per eligible share in respect of the financial year 2016/17 IC Group A/S distributed to its shareholders DKK 85 million (DKK (an ordinary dividend of DKK 85 million was distributed in re- 68 million) in ordinary dividend in respect of the financial year spect of the financial year 2015/16 corresponding to DKK 5.00 2015/16. IC Group A/S did not distributed any extraordinary divi- per ordinary share) pursuant to the Company’s dividend policy.

17. PROVISIONS

2017 Provisions for expected discounts, claims Provisions and return for restruc- Other Total DKK million of products turings provisions provisions

Provisions at 1 July 2016 2 - 1 3 Provisions utilized for the year (2) (13) - (15) Provisions for the year 3 32 2 37 Reversed provisions - (1) - (1) Provisions at 30 June 2017 3 18 3 24

Provisions specified in the statement of financial position are as follows: Non-current liabilities - 4 - 4 Current liabilities 3 14 3 20 Provisions at 30 June 2017 3 18 3 24

92 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS 2016 Provisions for expected discounts, claims Provisions and return for restruc- Other Total DKK million of products turings provisions provisions

Provisions at 1 July 2015 3 3 26 32 Provisions utilized for the year (3) (3) (17) (23) Provisions for the year 2 - 1 3 Reversed provisions - - (9) (9) Provisions at 30 June 2016 2 - 1 3

Provisions specified in the statement of financial position are as follows: Non-current liabilities - - 1 1 Current liabilities 2 - - 2 Provisions at 30 June 2016 2 - 1 3

PARENT COMPANY FINANCIAL COMPANY STATEMENTS PARENT

Please see note 7.2 to the consolidated financial statements.

18. OPERATING LEASES

DKK million 2017 2016

Store leases and other land and buildings 0-1 year 14 14 1-5 years 15 27 Total 29 41

Lease of equipment and furniture, etc. 0-1 year - 1 Total - 1 Total operating leases 29 42

The Parent Company leases properties under operating leases. An amount of DKK 22 million (DKK 16 million) relating to opera- The lease term is typically between 3-5 years with an option to ting leases has been recognized in the income statement of the extend upon expiry. Parent Company for 2016/17.

In addition, the Parent Company leases cars and other operating equipment under operating leases.

19. WORKING CAPITAL

DKK million 2017 2016

Inventories 225 251 Trade receivables 4 10 Receivables from subsidiaries 238 252 Other receivables 4 5 Prepayments 9 14 Total assets 480 532

Trade payables 26 33 Payables to subsidiaries 326 655 Other liabilities 54 42 Total liabilities 406 730

Working capital 74 (198)

Operating working capital* 203 228 Other items (129) (426) Working capital 74 (198)

* Operating working capital consists of inventories, trade receivables as well as trade payables.

FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • IC GROUP A/S 93 DKK million 2016/17 2015/16

Change in inventories 26 (49) Change in net payables to subsidiaries excluding dividends receivable (315) (221) Change in receivables excluding derivative financial instruments 12 3 Change in current liabilities excluding tax and derivative financial instruments 5 (23) Total change in working capital (272) (290)

20. OTHER ADJUSTMENTS, STATEMENT OF CASH FLOWS

DKK million 2016/17 2015/16

Reversed depreciation and impairment losses and gain/loss on sale of non-current assets 21 17 Share-based payments recognized in profit and loss - 1 Provisions 22 (19) Other adjustments 20 (13) Total other adjustments 63 (14)

21. CONTINGENT LIABILITIES

DKK million 2017 2016

Guarantees and other collateral security in respect of subsidiaries 387 383

The Parent Company has issued letters of comfort in respect jointly and severally liable for corporate and witholding taxes of certain subsidiaries. IC Group A/S (administration company) through the joint taxation. is taxed jointly with all Danish subsidiaries and is consequently

22. FINANCIAL RISKS AND DERIVATIVE FINANCIAL INSTRUMENTS

Please see note 5.3 to the consolidated financial statements.

23. RELATED PARTIES

Please see note 6.3 to the consolidated financial statements The Parent Company’s transactions with subsidiaries are disclosed in the relevant notes to the parent company financial statements.

24. EVENTS AFTER THE REPORTING PERIOD

Please see note 7.4 to the consolidated financial statements.

94 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS

STATEMENTS

STATEMENT BY THE MANAGEMENT The Board of Directors and the Executive Board have today con- Company’s operations and cash flows for the financial year sidered and adopted the Annual Report of IC Group A/S for the 1 July 2016 – 30 June 2017. financial year 1 July 2016 – 30 June 2017. In our opinion, the Management Commentary includes a true The Annual Report is prepared in accordance with International and fair account of the development in the operations and finan- Financial Reporting Standards as adopted by the EU and further cial circumstances of the Group and the Parent Company, of the requirements pursuant in Danish Financial Statements Act. results for the year and of the financial position of the Group and the Parent Company as well as a description of the most signifi- In our opinion, the consolidated financial statements and the cant risks and elements of uncertainty facing the Group and the parent company financial statements give a true and fair view Parent Company. of the financial position at 30 June 2017 of the Group and the Parent Company and of the results of the Group and the Parent We recommend that the Annual Report be adopted at the Annual General Meeting.

Copenhagen, 31 August 2017

Executive Board:

ALEXANDER MARTENSEN-LARSEN CEO

Board of Directors:

HENRIK HEIDEBY PETER THORSEN NIELS ERIK MARTINSEN Chairman Deputy Chairman

ANDERS COLDING FRIIS MICHAEL HAUGE SØRENSEN JÓN BJÖRNSSON

CONNY KALCHER

96 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS THE INDEPENDENT AUDITOR’S REPORT Basis for opinion TO THE SHAREHOLDERS OF IC GROUP A/S We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those stan- Our opinion dards and requirements are further described in the Auditor’s In our opinion, the consolidated financial statements and the Responsibilities for the Audit of the Financial Statements section parent company financial statements give a true and fair view of our report. of the Group’s and the Parent Company’s financial position at 30 June 2017 and of the results of the Group’s and the Parent We believe that the audit evidence we have obtained is Company’s operations and cash flows for the financial year 1 July sufficient and appropriate to provide a basis for our opinion. 2016 to 30 June 2017 in accordance with International Financial Reporting Standards as adopted by the EU and further require- Independence ments in the Danish Financial Statements Act. We are independent of the Group in accordance with Internatio- nal Ethics Standards Board for Accountants’ Code of Ethics for Our opinion is consistent with our additional report to the Audit Professional Accountants (IESBA Code) and the ethical require- Committee and the Board of Directors. ments that are relevant to our audit of the financial statements in Denmark. We have also fulfilled our other ethical responsibili- What we have audited ties in accordance with the IESBA Code. IC Group A/S’s consolidated financial statements and parent company financial statements for the financial year 1 July 2016 To the best of our knowledge and belief, we declare that non- to 30 June 2017 comprise income statement and statement of audit services that we have provided to the Group and the comprehensive income, statement of financial position, state- Parent Company are in accordance with the applicable law and ment of changes in equity, cash flow statement and notes to the regulations in Denmark and that we have not provided non-audit financial statements, including summary of significant accounting services that are prohibited under Article 5(1) of Regulation (EU) policies for the Group as well as for the Parent Company. Collec- No 537/2014. tively referred to as the “financial statements”.

KEY AUDIT MATTERS HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTERS

Valuation of inventories The inventories consist of clothing and fashion products which are mea- We discussed the principles for the valuation of inventories with sured at the lower of cost and net realisable value. Clothing and fashion Management. products may be volatile with respect to consumer demands and fashion trends, which increases the risk of impairment. We evaluated relevant internal controls forming the basis of the Group’s inventory valuation, including inventory write-down. The valuation of the inventories across the Group depends on whether adequate procedures and controls have been established to ensure ap- We assessed the principles for write-down of excess and/or obsolete goods propriate valuation. by confirming historical consumption, expected future demand, historical accuracy of write-downs and Management’s future plans for disposing of We focused on the valuation of the inventories as the write-down obsolete goods. for obsolete inventories is subject to material estimation, including expectations in respect of sales and realisable value. We reviewed and challenged material estimates made by Management in accordance with IC Group A/S’s accounting policies for inventory valuation. Please see note 3.1. to the consolidated financial statement.

Valuation of trade receivables The valuation of trade receivables across the Group depends on whether We discussed the principles for the valuation of trade receivables adequate procedures and controls have been established to ensure with Management. appropriate valuation. We evaluated relevant internal controls forming the basis of the Group’s We focused on the valuation of trade receivables as the statement of valuation of trade receivables, including provisions for bad debts. provisions for bad debts is subject to material estimation, including expectations in respect of payments and realisable value. We assessed the principles for provisions for bad debts by checking the debtor days ratio, historical losses, credit ratings and the future Please see note 3.2 to the consolidated financial statement. expectations with respect to the individual customers.

We reviewed and challenged material estimates made by Management in accordance with IC Group A/S’s accounting policies for the valuation of trade receivables.

FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • IC GROUP A/S 97 Appointment Auditor’s responsibilities for the audit We were appointed as auditors of the Group for the first time on of the financial statements 25 September 2013. Our appointment has been renewed an- Our objectives are to obtain reasonable assurance about nually by shareholder resolution representing a total period of whether the financial statements as a whole are free from uninterrupted engagement appointment of 4 years. material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable Key audit matters assurance is a high level of assurance, but is not a guarantee Key audit matters are those matters that, in our professional that an audit conducted in accordance with ISAs and the ad- judgment, were of most significance in our audit of the financial ditional requirements applicable in Denmark will always detect a statements for 2016/17. These matters were addressed in the material misstatement when it exists. Misstatements can arise context of our audit of the financial statements as a whole, and from fraud or error and are considered material if, individually or in forming our opinion thereon, and we do not provide a separate in the aggregate, they could reasonably be expected to influence opinion on these matters. the economic decisions of users taken on the basis of these financial statements. Statement on Management Commentary Management is responsible for Management Commentary. As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional Our opinion on the financial statements does not cover judgment and maintain professional skepticism throughout the Management Commentary, and we do not express any audit. We also: form of assurance conclusion thereon. • Identify and assess the risks of material misstatement of In connection with our audit of the financial statements, our re- the financial statements, whether due to fraud or error, sponsibility is to read Management Commentary and, in doing so, design and perform audit procedures responsive to those consider whether Management Commentary is materially incon risks, and obtain audit evidence that is sufficient and ap- sistent with the financial statements or our knowledge obtained in propriate to provide a basis for our opinion. The risk of not the audit, or otherwise appears to be materially misstated. detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may Moreover, we considered whether Management Commentary involve collusion, forgery, intentional omissions, mis includes the disclosures required by the Danish Financial State- representations, or the override of internal control. ments Act. • Obtain an understanding of internal control relevant to the Based on the work we have performed, in our view, Management audit in order to design audit procedures that are appropri- Commentary is in accordance with the consolidated financial ate in the circumstances, but not for the purpose of expres- statements and the parent company financial statements and sing an opinion on the effectiveness of the Group’s and the has been prepared in accordance with the requirements of Parent Company’s internal control. the Danish Financial Statements Act. We did not identify any material misstatement in Management Commentary. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and re- Management’s responsibility for the financial statements lated disclosures made by Management. Management is responsible for the preparation of consolidated financial statements and parent company financial statements • Conclude on the appropriateness of Management’s use that give a true and fair view in accordance with International of the going concern basis of accounting and based on Financial Reporting Standards as adopted by the EU and further the audit evidence obtained, whether a material uncer- requirements in the Danish Financial Statements Act, and for tainty exists related to events or conditions that may cast such internal control as Management determines is necessary to significant doubt on the Group’s and the Parent Company’s enable the preparation of financial statements that are free from ability to continue as a going concern. If we conclude that a material misstatement, whether due to fraud or error. material uncertainty exists, we are required to draw atten- tion in our auditor’s report to the related disclosures in the In preparing the financial statements, Management is responsi- financial statements or, if such disclosures are inadequate, ble for assessing the Group’s and the Parent Company’s ability to modify our opinion. Our conclusions are based on the to continue as a going concern, disclosing, as applicable, mat- audit evidence obtained up to the date of our auditor’s ters related to going concern and using the going concern basis report. However, future events or conditions may cause the of accounting unless Management either intends to liquidate the Group or the Parent Company to cease to continue as a Group or the Parent Company or to cease operations, or has no going concern. realistic alternative but to do so.

98 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficien- cies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relations- hips and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with gover nance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation preclu- des public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Copenhagen, 31 August 2017

PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab Business Registration No. (CVR): 33771231

Kim Tromholt Jakob Brasted State Authorised Public Accountant State Authorised Public Accountant

FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • IC GROUP A/S 99 GROUP STRUCTURE AT 30 JUNE 2017

Share capital Company Country Currency 1,000 units

Subsidiaries, wholly owned IC Group Denmark A/S Denmark DKK 500 Saint Tropez af 1993 A/S Denmark DKK 500 By Malene Birger A/S Denmark DKK 500 Tiger of Sweden Denmark A/S Denmark DKK 500 IC Group Norway AS Norway NOK 9,450 Tiger of Sweden AB Sweden SEK 501 IC Group Sweden AB Sweden SEK 50,000 Vingåker Factory Outlet AB Sweden SEK 200 Peak Performance Production AB Sweden SEK 400 S T Sweden AB Sweden SEK 100 By Malene Birger AB Sweden SEK 100 IC Group Finland Oy Finland EUR 384 IC Group Netherlands BV Netherlands EUR 2,269 IC Group UK Ltd.* UK GBP 4,350 IC Group Germany G.m.b.H. Germany EUR 26 IC Group Verwaltungs G.m.b.H. Germany EUR 1,432 IC Group Austria G.m.b.H. Austria EUR 413 IC Group Switzerland AG Switzerland CHF 3,101 IC Group Spain S.A. Spain EUR 1,001 IC Group France SARL France EUR 457 IC Group Poland Sp. Z o.o. Poland PLN 126 IC Group Hong Kong Ltd. Hong Kong HKD 10,000 IC Companys (Shanghai) Ltd. (in liquidation) China CNY 24,828 IC Group Romania Sourcing SRL Romania ROL 650 Peak Performance Italy SRL (in liquidation) Italy EUR 10 IC Group Belgium N.V. Belgium EUR 63 IC Group Canada INC. Canada CAD 750

Subsidiary, equity share of 51% Designers Remix A/S Denmark DKK 500

* The company is qualified for audit exemption in the UK, cf. the clauses regarding exemption set out in section 479A of the British Companies Act 2006. In addition, the Company has a branch office in Ireland (IC Group Ireland).

100 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS DEFINITION OF KEY RATIOS

Revenue for the year less revenue last financial year Revenue growth (%) = Revenue last financial year

Gross profit Gross margin (%) = Revenue

Capacity costs including other operating income Cost ratio (%) = Revenue

Operating profit before depreciation and amortization EBITDA margin (%) = Revenue

Operating profit EBIT margin (%) = Revenue

Profit for the year of continuing operations excluding non-controlling interests Return on equity (%) = Average equity excluding non-controlling interests

Equity year-end Equity ratio (%) = Total assets year-end

Net average working capital plus intangible assets and property, plant and equipment less provisions. Average invested capital = Goodwill included represents total purchased goodwill after write-down for impairment.

Operating profit Return on invested capital (%) = Average invested capital including goodwill

Net working capital in proportion to Net working capital year-end 12 months trailing revenue = Revenue

Free cash flow Cash conversion = Operating profit (EBIT)

Current and non-current liabilities to credit institutions Net interest-bearing debt = and lease debt less cash and cash equivalents

Net interest-bearing debt Financial gearing (%) = Equity year-end

Profit attributable to shareholders of the Parent Company Earnings per share = Average number of shares excluding treasury shares

Profit attributable to shareholders of the Parent Company Diluted earnings per share = Average number of shares excluding treasury shares, diluted

Cash flow from operating activities Diluted cash flow per share = Average number of shares excluding treasury shares, diluted

Equity at year-end excluding non-controlling interests Diluted net asset value per share = Number of shares at year-end excluding treasury shares, diluted

Market price per share at year-end Diluted price/earnings = Diluted earnings per share

A store measured on same-store data has an unchanged location, sales area Same-store definition = and name on shop for a full financial year of comparable sales data.

FINANCIAL STATEMENTS • ANNUAL REPORT 2016/17 • IC GROUP A/S 101 INFORMATION ON THE GROUP

OTHER EXECUTIVES

Hans-Christian Meyer CEO, Tiger of Sweden (as at 1 September 2017) Nicolas Warchalowski CEO, Peak Performance Morten Linnet CEO, By Malene Birger Hans-Peter Henriksen CEO, Saint Tropez Niels Eskildsen CEO, Designers Remix Anders Boelskift Senior Vice President, Group Finance Martin Christiansen Vice President, Group General Counsel & HR Andrea Niess Vice President, Global Sourcing Anders Rahr Vice President, IT & Logistics

AUDITOR

PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab

ACCOUNTING PERIOD

The accounting period of the Group and the Parent Company runs from 1 July to 30 June.

FINANCIAL CALENDAR

AGM Q1 Q2 Q3 AR

27 September 14 November 6 February 8 May 28 August 2017 2017 2018 2018 2018

IC GROUP A/S’ CORPORATE INFORMATION

Share capital 170,908,580 Address IC Group A/S Number of shares 17,090,858 12D Adelgade Share class one class 1304 Copenhagen K ISIN code DK0010221803 Denmark Business Reg. No. (CVR) 62816414 Phone: +45 32 66 77 88 Fax: +45 32 66 77 03 Reuter ticker IC.CO E-mail: [email protected] Bloomberg ticker IC DC Homepage: icgroup.net

INVESTOR RELATIONS CONTACT

Jens Bak-Holder Phone: +45 21 28 58 32 Head of Investor Relations E-mail: [email protected]

102 IC GROUP A/S • ANNUAL REPORT 2016/17 • FINANCIAL STATEMENTS LIST OF PHOTOS Table of contents: Tiger of Sweden, Autumn Collection 2017, Jacket RUMA, Page 36-37: Peak Performance, Autumn Collection 2017, Coat MEN’S Shirt MERE, Trouser LOVANN, Shoes VIVIENNE, Available online and in the DAGGAR COAT, Down jacket MEN’S FROST DOWN JACKET, Available online stores now and in the stores now

Page 10: Peak Performance, Summer/Autumn Collection 2017, Page 44: Tiger of Sweden, Autumn Collection 2017, Pullover GWYNN, Jacket WOMAN’S BLACK LIGHT WIND JACKET, Available online now Pullover ZALI, Trouser MIRZ, Shoes EARLEY, Available online and in the stores now Page 12: Peak Performance, Anniversary Collection, Winter Collection 2016, Not available online or in the stores anymore Page 47: By Malene Birger, Autumn Collection 2017, Coat ZAVIA, Available online and in the stores now Page 14: Tiger of Sweden, Autumn Collection 2017, Jacket IRWAN, Shirt FARRELL 5, Shirt KLORIN, Trouser MATTE, Available online and in the stores in Page 54: Peak Performance, Autumn Collection 2017, Sweater WOMAN’S September LAINE CREW NECK, Coat TWIDGET COAT, Available online and in the stores September/October Page 16: Tiger of Sweden, Autumn Collection 2017, Shirt FARRELL 5, Available online and in the stores now Page 58: Peak Performance, Summer/Autumn Collection 2017, Running jacket MEN’S COMPLETE ZIPPED RUNNING JACKET, Available online now Page 18: By Malene Birger, Autumn Collection 2017, Sweatshirt LUULI, Trouser VEDA, Boots GINASO, Available online and in the stores now Page 63: By Malene Birger, Autumn Collection 2017, Bomber jacket POLLAMI, Available online and in the stores now Page 20: By Malene Birger, Autumn Collection 2017, Jacket TUMELO, Available online and in the stores in September Page 71: By Malene Birger, Autumn Collection 2017, Trouser KALPANA, Top PAULINO, Jacket SEKAI, Available online and in the stores now/September Page 23: Peak Performance, Autumn Collection 2017, Jakke VOLCAN ANORAK, Available online and in the stores in October/November Page 76: Tiger of Sweden, Spring/Summer Collection 2017, Jacket NIRVANA, Hoodie MONK, Trouser MOURN, Available online now Page 31: Tiger of Sweden, Autumn Collection 2017, Jacket REFUSION 3, Shirt FARRELL 4, Shirt KLORIN, Trouser HERRIS, Available online and in the Page 80-81: Peak Performance, Spring Collection 2017, Golf Jacket stores in October MEN’S GOLF HOWICK 3-LAYER JACKET, Available online now

Page 34: By Malene Birger, Autumn Collection 2017, Jacket JAVIERA, Page 95: Tiger of Sweden, Autumn Collection 2017, Jacket CALIX, Dress Trouser BRUNALA, Available online and in the stores now DESME, Shoes VIVIENNE, Available online and in the stores now/September

FORWARD-LOOKING STATEMENTS This Annual Report contains forward-looking statements, including statements regarding the Group’s future operating profit, financial position, inventory, cash flows, Group and brand strategies as well as plans for the future. Forward-looking statements include, without limitation, any statement that may predict, indicate or imply future results, performance or achievements, and may contain the words ”believes”, ”expects”, ”estimates”, ”projects”, ”plans”, ”anticipates”, ”continues” and ”intends” or any variations of such words or other words with similar meaning. The statements are based on Management’s reasonable expectations and forecasts at the time of disclosure of this Annual Report. Any such statements are subject to risks and uncertainties and a number of different factors, of which many are beyond IC Group A/S’ control, can mean that the actual development and actual result will differ significantly from the expectations contained in this Annual Report. Without being exhaustive, such factors include general economics and commercial factors, including market and competitive matters, supplier issues and financial issues. Accordingly, forward-looking statements should not be relied on as a prediction of actual results.

The English version of the Annual Report 2016/17 is a translation from the Danish language. In the event of any discrepancy between the Danish and English versions, the Danish version shall prevail.

EDITOR: INVESTOR RELATIONS · ANNOUNCEMENT DATE: 31 AUGUST 2017 · DESIGN: AMO DESIGN · PRINT: KAILOW A/S