Bang & Olufsen a/s Annual Report 2017/18 and interim report 4th quarter 2017/18
Company Announcement No 18.01
“Bang & Olufsen achieved 11 per cent growth, improved profitability, and generated a positive free cash flow for 2017/18. We are satisfied with the result and the overall progress made this financial year. The results reflect our continued effort to transform the operating model, launch innovative and progressive products and strengthen our brand and distribution setup,” says CEO Henrik Clausen.
Fourth quarter 2017/18
The Group realised revenue growth of 6 percent (8 percent in local currencies).
The B&O PLAY business unit maintained its growth momentum, increasing revenue by 26 percent (28 percent in local currencies). Growth was driven by Greater China and Rest of World. B&O PLAY revenue in the European TPR distribution declined. To address this and build for future growth, the company has taken steps to refocus its distribution structure.
Revenue for the Bang & Olufsen business unit declined by 8 percent (5 percent decline in local currencies). Revenue was adversely impacted by the divestiture and closure of underperforming company-owned stores in Greater China and North America. When adjusted for the resulting adverse impact, revenue for the business unit was flat compared to the same quarter of last year.
The gross margin for the Group increased to 41.2 percent from 38.6 percent in the underlying business last year. The gross margin for the B&O PLAY business unit was 34.9 percent against 33.7 percent last year, as positive effects of improved product profitability were offset by a negative product mix and the continuing channel clean-up in Europe. The gross margin for the Bang & Olufsen business unit was 47.2 percent against 41.9 percent in the underlying business last year, mainly due to improved margins on TVs and increased income from brand partnering.
Capacity costs in the underlying business decreased by 5 percent. The changed operating model led to a significant reduction in development costs compared to the same quarter of last year. Distribution and marketing costs increased due to the high level of campaign activities to promote Bang & Olufsen and B&O PLAY products.
EBITDAC increased by DKK 72 million in the underlying business and was DKK 87 million against DKK 15 million last year, corresponding to an EBITDAC margin of 10 percent.
EBIT for the underlying business was DKK 56 million compared to DKK 2 million last year, corresponding to an EBIT margin of 7 percent.
The free cash flow was DKK 165 million against a 12 million outflow last year when adjusted for the impact from the sale of the Czech production facility. The change was largely due to a decrease in net working capital and positive earnings in the quarter.
Full year 2017/18
The Group generated total revenue for 2017/18 of DKK 3,285 million, corresponding to an increase of 11 percent (14 percent in local currencies). The performance was driven by 25 percent growth in B&O PLAY (28 percent in local currencies) and 1 percent growth in the Bang & Olufsen business unit (4 percent in local currencies).
EBITDAC for the underlying business was DKK 281 million, an improvement of DKK 200 million compared to last year, while EBIT for the underlying business amounted to DKK 110 million compared to a negative DKK 32 million EBIT loss last year.
The free cash flow was DKK 85 million against DKK 307 million last year. Last year was impacted by the release of the final escrow payment from HARMAN of DKK 93 million and DKK 123 million from the sale of the Czech production facility. Adjusted for this, the free cash flow in 2016/17 was a DKK 91 million inflow.
The Group expects revenue growth to be above 10 per cent compared to 2017/18 and the EBIT margin to be in the range of 7-9 per cent for 2018/19. For further details regarding to the outlook for 2018/19 and the updated 3-year financial targets, please see page 10 and the 2017/18 Annual Report.
Please address any enquiries about this announcement to:
Investor contact, Claus Højmark Jensen, tel.: +45 2325 1067
Press contact, Jens Bjørnkjær Gamborg, tel.: +45 2496 9371
Bang & Olufsen will host a webcast on 12 July 2018 at 10:00 CET. Access to the webcast can be obtained through the company’s website www.bang-olufsen.com