Interim Report 1st quarter 2018/19 (1 June – 31 August 2018)
Company announcement No 18.10
“Despite unfavorable impact from the ongoing transformation of our sales and distribution network, revenue was up by 2 per cent. We significantly improved both EBIT and free cash flow, and our ability to generate profitable growth in what is traditionally a seasonally small quarter for Bang & Olufsen is a testament to the strength of our revised operating model,” says CEO Henrik Clausen and continues: “The results were driven by higher gross margins, lower capacity costs and strong sales in China, while revenue, as expected, was adversely impacted by the transformation of our sales and distribution network in especially Europe and North America.”
First quarter 2018/19
• The Group generated 2 per cent revenue growth (2 per cent in local currencies).
• Revenue in EMEA declined by 9 per cent (8 per cent decline in local currencies), primarily due to the ongoing transformation of the sales and distribution network in Europe. The transition of our multibrand channel to focus on luxury-lifestyle and ensure consistency in customer experience has had the expected short-term negative impact on revenue.
• In Americas, revenue declined by 29 per cent (29 per cent decline in local currencies). Revenue was, to some extent, still adversely affected by the transformation process in the region.
• Revenue in Asia grew by 26 per cent (26 per cent in local currencies), driven by a continued strong performance in the Greater China Region. The onboarding of five new retail partners has strengthened the sales and distribution network in the region. All company-owned and company-operated stores in mainland China have been divested.
• Other, which includes income from Brand Partnering, aluminum production and other activities, increased DKK 8 million, mainly due to higher license income.
• The gross margin increased to 43.8 per cent from 39.9 per cent last year driven by improved product profitability, changes in exchange rates, and higher income from brand partnerships.
• Capacity costs decreased by 7 per cent due to lower development costs while distribution and marketing costs increased.
• EBIT improved by DKK 70 million, from last year’s DKK 65 million EBIT loss to an EBIT profit of DKK 5 million. This was an improvement of 12 percentage points. The strong EBIT performance in what is traditionally a seasonally small quarter was driven by improved gross margins and controlled capacity costs.
• The free cash flow was negative DKK 105 million against negative DKK 159 million last year. The negative cash flow was due to an increase in net working capital driven by lower trade payables.
• The Group started to execute the share buyback programme of DKK 485 million approved at the Annual General Meeting in August.
Full year 2018/19
The outlook for 2018/19 remains unchanged. The Group expects revenue growth for 2018/19 to be above 10 per cent compared to 2017/18 and the EBIT margin to be in the 7-9 percent range.
Please address any enquiries about this announcement to:
Investor contact, Malene Richter, tel.: +45 2974 1609
Press contact, Jens Gamborg, tel.: +45 2496 9371
Bang & Olufsen will host a webcast on 4 October 2018 at 10:00 CET. The webcast can be accessed through our website www.bang-olufsen.com