Interim report – H1 2014/15: Increased earnings, adjustment of growth forecast and initiation of a share buyback programme

Matas A/S
Half Year financial report

Interim report – H1 2014/15: Increased earnings, adjustment of growth forecast
and initiation of a share buyback programme

Announcement 13 2014/15

Allerød, 2014-11-18 08:00 CET (GLOBE NEWSWIRE) -- Q2 2014/15 revenue grew 1.7%
year on year to DKK 793 million. H1 2014/15 revenue was DKK 1,620 million (H1
2013/14: DKK 1,582 million). Like-for-like revenue grew 0.5% in Q2 2014/15
following an adverse effect of approximately 1 percentage point from a product
recall of Depend GelLack. Despite the low growth rate, EBITA increased by 8.2%
in Q2 2014/15 to DKK 125 million due to an improvement of the EBITA margin to
15.8% from 14.9% in the year-earlier period. The guidance for revenue for the
full year 2014/15 is changed to just short of DKK 3.5 billion from the earlier
guidance of around DKK 3.5 billion, and a share buyback programme of DKK 100
million will be started up in line with the company's policy of distributing
surplus cash to its shareholders. 

Terje List, Chief Executive Officer, said in connection with the release of the
interim report: "Private consumption has remained at a low level, and we now
expect the current low level to persist for the rest of the financial year.
Based on this, we are pleased that we have sustained our earnings and defended
our competitive position in our key product areas in the first 6 months of the
year. We are continuously adapting our business model to the economic
environment and will continue to generate substantial cash flows. For this
reason, we are initiating a DKK 100 million share buyback programme, equivalent
to approximately 2% of our share capital." 

Highlights of Q2 2014/15

  -- Q2 2014/15 revenue grew 1.7% year on year to DKK 793 million. Like-for-like
     growth was 0.5% and was adversely affected by an extraordinarily large
     product recall of Depend GelLack by the supplier. Adjusted for this product
     recall, which reduced the growth rate by approximately 1 percentage point,
     the like-for-like growth rate was still slightly lower than expected.
  -- Q2 2014/15 gross profit was DKK 373 million, equivalent to a gross margin
     of 47.0%, up from 44.7% in Q2 2013/14. The improvement was due to the
     consolidation of acquired stores and normal quarter-on-quarter
     fluctuations. The product recall had no effect on the gross margin for the
  -- EBITA was DKK 125 million in Q2 2014/15, up from DKK 116 million in the
     year-earlier period, equivalent to an EBITA margin improvement to 15.8%
     from 14.9%. The EBITA margin for H1 2014/15 of 15.8% was largely unchanged
     from the 15.9% achieved in H1 2013/14.
  -- Profit after tax for Q2 2014/15 was DKK 66 million, and adjusted profit
     after tax net of amortisation of trademarks was DKK 80 million (Q2 2013/14:
     DKK 81 million).
  -- Cash generated from operations dropped to an outflow of DKK 1 million in Q2
     2014/15 (Q2 2013/14: an inflow of DKK 96 million). The free cash flow in Q2
     2014/15 was an outflow of DKK 34 million (Q2 2013/14: an inflow of DKK 71
     million). The negative trend in cash flows in Q2 2014/15 was caused by an
     increase in working capital that was primarily driven by a temporary
     increase in inventories.
  -- Net interest-bearing debt was DKK 1,726 million at 30 September 2014,
     equivalent to 2.7x LTM EBITDA before exceptional items as compared to 2.8x
     at the end of Q2 2013/14.
  -- Club Matas reported continued membership growth in Q2 2014/15, retaining
     its position as the largest customer club in Denmark with a total of 1.5
     million members.
  -- Two associated Matas stores were acquired in Q2 2014/15, and one Matas
     chain retail store was closed down. It was decided to close down all
     operations in Sweden, and the two remaining stores there will either be
     closed down or divested. This does not affect the full-year profit

Updated outlook for 2014/15
The Danish retail market was challenging in the first half of the financial
year with continuing weak demand among consumers despite a continuing high
level of consumer confidence. We now expect that there will be no noticeable
improvement of private consumption in the remaining part of the financial year,
and as a result, we now expect revenue for 2014/15 of just short of DKK 3.5
billion as compared with our previous guidance of revenue of around DKK 3.5
billion. This guidance is based on aggregate estimated like-for-like growth in
the 2014/15 financial year of 1-2%. 

The EBITA margin is still expected to be on a level with the 2013/14 EBITA
margin, which was 17.1%. 

(DKK millions)                   18 November 2014                 21 August 2014
Guidance for                                                                    
Like-for-like                                1-2%                           2-3%
Revenue             Just short of DKK 3.5 billion         Around DKK 3.5 billion
EBITA margin          On a level with the 2013/14    On a level with the 2013/14
                                            EBITA                          EBITA
                          margin, which was 17.1%        margin, which was 17.1%

Update on capital structure policy
Based on an expectation of the company's continued ability to generate a high
cash flow, it is assessed that a currently suitable level of the company's
gross debt would be DKK 1,600-1,800 million. The Group's policy will
continuously be to distribute surplus capital to its shareholders through a
combination of dividends and regular share buybacks. Dividends declared will
continue to be at least 60% of adjusted net profit. 

As at 30 September 2014, the company's gross debt was DKK 1,939 million. As a
strong cash flow is expected in H2 2014/15, a DKK 100 million share buyback
programme will be effective as of today and will run until the day before the
release of the 2014/15 annual report on 28 May 2015, at the latest. Our
intention is to cancel shares bought back. 

Conference call
Matas will host a conference call for investors and analysts on Tuesday, 18
November at 10:00 a.m. The conference call and presentation will be available
on our investor website: 

Conference call access numbers for investors and analysts:

DK:                                  +45 3272 8018
UK (international):           +44 (0) 1452 555 131
US:                                  +1 866 682 8490

Matas A/S