DGAP-News: Adler Modemärkte AG: Store Optimisation Programme to Help Boost Profitability

Press Release from Adler Modemärkte AG

Outlook for 2019: Solid Revenue and Earnings Growth Despite Non-recurring Items

Store Optimisation Programme to Help Boost Profitability

Further Development of "Strategy 2020" Drives Sustained Profitable Growth

Haibach (near Aschaffenburg), 14 March 2019: Adler Modemärkte AG is looking ahead with confidence to 2019 and 2020, despite the persistently difficult environment. Compared to its industry peers, ADLER's liquidity situation (EUR54.9 million) is excellent. It will leverage this strength to systematically push ahead with the "Strategy 2020" launched in the previous year and also expand it to include a store optimisation programme. This includes closing up to 17 loss-making stores, the majority in 2019, which will have a corresponding effect on the outlook for the new financial year. After an encouraging start to the year, the Executive Board forecasts revenue of just under EUR500 million due to the store closures. Operating earnings before interest, taxes, depreciation and amortisation (EBITDA) of between EUR27 million and EUR30 million are expected on the back of the efficiency measures successfully implemented in previous years. One-off expenses ranging from EUR8 million to EUR10 million are anticipated in connection with the changes to the store network and other steps taken to boost efficiency. Accordingly, reported EBITDA will likely amount to between EUR18 million and EUR21 million.

In financial year 2019, the first-time application of new accounting standard IFRS 16 will bring mandatory changes to the way lease liabilities are accounted for. This will boost EBITDA by an additional EUR46-48 million in the new financial year (for details please see the 2018 Annual Report).

Strategy 2020 puts ADLER on course for sustained profitable growth

ADLER will systematically implement its "Strategy 2020", putting a wide range of measures in place to adapt its product strategy (e.g. increasing the share of own brands from 75% to 85%) as well as channel and communication strategies (e.g. making better use of the data generated from the 3.2 million active customer loyalty card programme members). Coupled with the store optimisation programme, which also envisages opening up to six new outlets in lucrative locations, the aim is to generate further revenue and earnings growth going forward.

This should provide a significant boost to free cash flow. Based on unchanged high levels of liquidity, ADLER will continue to adhere to its conservative and sound accounting and financing strategy going forward, which will enable the Company to finance its planned profitable growth on its own.

Targets for 2018 achieved

ADLER's performance in the 2018 financial year was in line with the forecast as adjusted in November 2018. Consolidated revenue amounted to EUR507.1 million, down 3.6% on the previous year (EUR525.8 million), while EBITDA of EUR20.7 million was reported (2017: EUR32.0 million). Adjusted for non-recurring items, however, EBITDA increased from EUR25.4 million to EUR26.2 million: the prior-year figure had been influenced by non-recurring income of EUR6.6 million, while non-recurring expenses of EUR5.5 million in connection with the strategic realignment were incurred in the reporting period.

The gross profit margin amounted to 54.7% for the full year, up 110 basis points on the prior-year figure (53.6%) due to efficiency improvements. The figure for Q4 was up as much as 160 basis points (58.9% following 57.3% in 2017). As expected, the one-off expenses meant that the Company did not make it into the profit zone despite another strong final quarter, and it reported a net loss after taxes of EUR2.5 million (2017: net profit of EUR3.9 million). By contrast, profit after tax for Q4 rose from EUR10.9 million to EUR12.2 million.

ADLER boasts a very solid financial position not just thanks to its high levels of liquidity (well in excess of EUR50 million), but also its healthy balance sheet structure. The equity ratio increased from 41.5% to 42.5% in 2018. Despite the negative effects outlined above, free cash flow was positive in the past year, at EUR3.9 million.

The 2018 Annual Report can be downloaded at https://www.adlermode-unternehmen.com/en/investor-relations/reports-and-publications/annual-reports/2018/.

ADLER Group's key performance indicators

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

Adler Modemärkte AG press enquiries and investor relations
Jasmin Dentz
Investor Relations
Tel.: +49 6021 633 1828
E-mail: investorrelations@adler.de

About Adler Modemärkte AG:
Adler Modemärkte AG, headquartered in Haibach near Aschaffenburg, Germany, is one of Germany's largest and most important textile retailers. In 2018, the Group earned EUR507.1 million in revenue and generated EUR20.7 million in EBITDA (adjusted: EUR26.2 million). As at 31 December 2018, ADLER has approximately 3,800 employees and currently operates 178 stores, 150 of which are located in Germany, 23 in Austria, three in Luxembourg, two in Switzerland, plus an online shop. The Company focuses on large-space concepts offering in excess of 1,400 m² of retail space. With its many own brands and select external brands, ADLER offers a highly diverse product range. Thanks to 70 years of tradition and strong customer loyalty, ADLER considers itself to be the market leader within its target group of affluent customers aged 55 and over.
For more information: www.adlermode-unternehmen.com; www.adlermode.com